<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
-----------
FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported): February 8, 1994
Hecla Mining Company
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-8491 82-0126240
------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(208) 769-4100
------------------------------------------------------------------
(Registrant's Telephone Number)
1
<PAGE> 2
Item 5. Other Events.
On February 8, 1994, Great Lakes Minerals Inc. of Toronto ("Great
Lakes"), purchased for $13,280,857 a 20% undivided interest in the Grouse Creek
Gold Project from Hecla Mining Company ("Hecla") pursuant the Acquisition
Agreement - Grouse Creek Project, dated January 21, 1994, among Hecla, Great
Lakes Idaho Inc. (a wholly-owned subsidiary of Great Lakes) and Great Lakes,
and the Mining Venture Agreement dated as of February 8, 1994, between Hecla
and Great Lakes Idaho Inc. (collectively, the "Grouse Agreements"). Pursuant
to the Grouse Agreements, Great Lakes is required to fund its 20% pro rata
portion of capital expenditures required to bring the Grouse Creek Gold Project
to commercial production (including its portion of capital expenditures
incurred to date). In addition, the Grouse Agreements provide that Great Lakes
has the option at any time prior to 12 months following the commencement of
commercial production at the Grouse Creek Gold Project to purchase up to an
additional 10% undivided interest in the Grouse Creek Gold Project. Under the
Grouse Agreements, Great Lakes would pay Hecla an amount estimated at
approximately U.S. $277,000 for each additional one percent (1%) undivided
interest in the Project, and would in addition thereto fund its increased share
of capital expenditures.
2
<PAGE> 3
Great Lakes funded the purchase of its interest in the Grouse Creek
Gold Project from the sale in an underwritten public offering of 17,500,000
Great Lakes Common Shares at a price of Cdn. $2.00 per Common share for gross
proceeds of Cdn. $35,000,000. Great Lakes is required to fund its portion of
the capital expenditure requirements for the Grouse Creek Gold Project with the
net proceeds of this offering. Pursuant to the Grouse Agreements, Hecla
purchased 825,000 Great Lakes Common Shares at the offering price of Cdn. $2.00
per Common Share, using $1,229,875 of the proceeds received by Hecla from Great
Lakes for the purchase of its interest in the Grouse Creek Gold Project. In
addition, Great Lakes issued Hecla a warrant certificate entitling Hecla to
acquire up to 500,000 additional Common Shares of Great Lakes at Cdn. $2.50 per
share, which price is subject to adjustment in the event of any
recapitalization or distribution of dividends other than cash by Great Lakes.
Item 7. Financial Statements, Proforma Financial Information and Exhibits.
(c) 1. Acquisition Agreement - Grouse Creek Project, dated January
21, 1994, among Hecla Mining Company, Great Lakes Idaho Inc. and Great Lakes
Minerals Inc.
3
<PAGE> 4
(c) 2. Mining Venture Agreement dated as of February 8, 1994,
between Hecla and Great Lakes Idaho Inc.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HECLA MINING COMPANY
By /s/ Nathaniel K. Adams
----------------------------------------
Name: Nathaniel K. Adams
Title: Attorney and Assistant Secretary
Dated: February 10, 1994
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Description Pages
- ----------- -----
<S> <C> <C>
(c) 1. Acquisition Agreement - Grouse 6 - 56
Creek Project, dated January 21,
1994, among Hecla Mining Company,
Great Lakes Idaho Inc. and Great
Lakes Minerals Inc.
(c) 2. Mining Venture Agreement dated as 57-147
of February 8, 1994, between Hecla
and Great Lakes Idaho Inc.
</TABLE>
5
<PAGE> 1
HECLA MINING COMPANY
-AND-
GREAT LAKES IDAHO INC.
-AND-
GREAT LAKES MINERALS INC.
________________________________________________________________________________
ACQUISITION AGREEMENT - GROUSE CREEK PROJECT
JANUARY 21, 1994
________________________________________________________________________________
HOLDEN DAY WILSON
SUITE 2400
TORONTO DOMINION BANK TOWER
TORONTO-DOMINION CENTRE
TORONTO, ONTARIO
M5K 1E7
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - INTERPRETATION AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Sections and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Gender, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2 - PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Determination of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 - CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Joint Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Enforceability of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Representations of the Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Mining Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Underlying Mineral Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
No Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Absence of Unusual Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 3
- 2 -
<TABLE>
<S> <C>
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
No Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Mining Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Workers' Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Representations of Great Lakes and Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 5 - COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Joint Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Preparing for Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Press Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Vendor's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
No Other Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Purchaser's and Great Lakes Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 6 - CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Purchaser's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
No Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
No Adverse Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Joint Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Vendor's Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
No Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
No Adverse Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
<PAGE> 4
- 3 -
<TABLE>
<S> <C>
No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Joint Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Lluvia de Oro Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Notice of Unfulfilled Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7 - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Transfer Documents and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Joint Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Certificate of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Certificate of Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 8 - INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 9 - OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Option to Increase Percentage Under Joint Venture Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 10 - COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 11 - GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
<PAGE> 5
ACQUISITION AGREEMENT
THIS AGREEMENT made this 21st day of January, 1994.
B E T W E E N:
HECLA MINING COMPANY, a corporation incorporated
under the laws of Delaware,
(the "Vendor"),
-and-
GREAT LAKES IDAHO INC., a corporation incorporated
under the laws of Idaho,
(the "Purchaser"),
-and-
GREAT LAKES MINERALS INC., a corporation incorporated
under the laws of Ontario,
("Great Lakes").
RECITALS
A. The Vendor currently owns the Purchased Assets (which term
and all other terms used herein with initial capital letters, unless defined
where first used, are defined in Article 1 of this Agreement);
B. The Vendor wishes to sell to the Purchaser and the Purchaser
wishes to purchase from the Vendor the Purchased Assets;
C. The Purchaser is a wholly-owned subsidiary of Great Lakes.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration
of the mutual covenants and agreements contained herein and of other good
<PAGE> 6
- 2 -
and valuable consideration (the receipt and sufficiency of which is hereby
mutually acknowledged) the Parties hereto agree as follows:
ARTICLE 1
INTERPRETATION AND DEFINITIONS
1.1 Definitions. In this Agreement and the schedules attached
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words, phrases and expressions shall have the
following meanings:
(a) "Business Day" means any day except a Saturday, a
Sunday, a legal holiday for Canadian chartered
banks in Ontario, Canada or a legal holiday for
banks in Idaho or New York, U.S.A.;
(b) "CERCLA" means the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C.
Section 9601 et. seq., and its implementing
regulations and amendments;
(c) "Closing" means the completion of the transactions
contemplated hereby as provided in Article 3;
(d) "Controlled Group" means all members of a control
group of corporations and all trades or businesses
(whether or not incorporated) under common control
which, together with the Vendor, are treated as a
single employer under Section 414 of the Internal
Revenue Code;
(e) "Closing Date" means the date and time determined
in accordance with Article 3 which Closing Date
shall be the effective date of the Closing unless
otherwise agreed in writing by the Parties;
<PAGE> 7
- 3 -
(f) "Commercial Production" means the point in time
that begins after the throughput of the
concentrator to be built as part of the Grouse
Creek Project is sustained at 60% of rated capacity
for a 30-day period or such other period agreed to
by the Parties;
(g) "Contaminants" means any substance, waste, solid,
liquid or gaseous matter, fuel, micro-organism,
sound, vibration, ray, heat, odour, radiation,
energy vector, plasma, organic or inorganic matter,
whether animate or inanimate, container, transient
reaction, or any combination of the above, which is
or is deemed to be in concentrations or at exposure
levels constituting a hazardous material or
substance or toxic substance including, without
limitation, polychlorinated biphenyl, isomer of
dioxin, asbestos, urea formaldehyde, transformers,
a pollutant or a contaminant or a source of
pollution or contamination, a hazardous waste or
hazardous chemical, under any laws, regulations,
ordinances, guidelines, directives or policies or
other requirement, whether local, state or federal
including, without limitation, any material or
substance which is in concentrations or at exposure
levels designated as a "hazardous substance"
pursuant to section 311 of the Clean Water Act,
defined as "hazardous waste" pursuant to section
1004 of the Resource Conservation and Recovery Act,
defined as a "hazardous substance", "pollutant" or
"contaminant" pursuant to CERCLA, defined as
"chemical substances" or "mixtures" pursuant to the
Toxic Substances Control Act of 1976, or defined as
"pesticides" pursuant to the Federal Insecticide,
Fungicide and Rodenticide Act of 1975; any other
substance which is in concentrations or at exposure
levels subject to any past or present environmental
law, regulation, ordinance, guideline, directive,
policy or other requirement including, without
limitation, the Clean Air Act; natural synthetic
gas usable for fuel, any oil, flammable substance,
explosives, radioactive materials, petroleum,
including crude oil and any fraction thereof;
<PAGE> 8
- 4 -
(h) "Deposit" means the $100,000 paid by the Purchaser
to the Vendor upon acceptance by the Vendor of the
offer to purchase the Purchased Assets by the
Purchaser pursuant to the terms of a letter of
agreement between the Vendor and Great Lakes dated
October 14, 1993;
(i) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time,
or any successor law. Any reference to any
provision of ERISA shall also be deemed to be a
reference to any successor provision or provisions
thereof;
(j) "Encumbrance" means any mortgage, lien, charge,
pledge, security interest and encumbrance of any
kind and nature whatsoever;
(k) "Escrowed Amount" means the amount equal to the
Purchased Percentage multiplied by the estimated
amount to be incurred, excluding capitalized
interest, on the exploration, development and
construction of the Grouse Creek Project from the
Closing Date to Commercial Production;
(l) "Estimated Development Costs" means the estimated
amount of the Pre-Closing Development Costs
calculated on the Closing Date;
(m) "Estimated Purchase Price" means the estimated
amount of the Purchase Price calculated on the
Closing Date;
(n) "Financial Statements" means the audited financial
statements of the Vendor for the three year period
ending December 31, 1992 and the unaudited
financial statements of the Vendor for the
nine-month period ending September 30, 1993;
<PAGE> 9
- 5 -
(o) "Financing" means the raising by the Purchaser
through the primary distribution under the Public
Offering, on terms and conditions satisfactory to
the Purchaser, of an amount no less than the
Purchase Price plus the Purchaser's Joint Venture
Share;
(p) "Financing Deposit" means the $250,000 which the
Purchaser must pay to the Vendor pursuant to
Section 5.3(b) if the Purchaser wishes to extend
the date by which it is required to obtain
$25,000,000 in financing;
(q) "Grouse Creek Assets" means:
(i) the Underlying Mineral Properties;
(ii) all related assets, including, without
limitation:
(A) all Permits, including, without
limitation, those specified in
Schedule "A";
(B) all chattels, tools, equipment
and machinery, fixtures,
computers, computer software,
furniture, vehicles located at
or relating to the Grouse Creek
Project;
(C) all technology, proprietary and
intangible rights and
intellectual property relating
to the Grouse Creek Project;
(D) all property or mineral right
leases relating to the Grouse
Creek Assets, including,
without limitation, the leases
listed in Schedule "B" hereto;
<PAGE> 10
- 6 -
(E) all contracts, agreements and
commitments and other binding
agreements relating to the
Grouse Creek Assets;
(r) "Grouse Creek Project" means the gold and silver
property known as the Grouse Creek Project,
covering approximately 24 square miles and located
approximately 27 miles west of the Town of Challis
in the Yankee Fork mining district in south-central
Idaho;
(s) "Interim Period" means the period between execution
of this Agreement and the Closing Date;
(t) "Joint Venture Agreement" means the joint venture
agreement to be entered into between the Purchaser
and the Vendor governing their relationship in
respect of the Grouse Creek Project, which
agreement shall be substantially in the form
attached hereto as Schedule "C";
(u) "Maximum Purchase Price" means $9,570,500;
(v) "Multiemployer Plan" shall have the meaning set
forth in Section 4001(a)(3) of ERISA;
(w) "Option Amount" means the amount equal to: (i) the
amount incurred, excluding capitalized interest, on
the exploration, development and construction of
the Grouse Creek Project from July 1, 1993 up to
Commercial Production; plus (ii) the amount of
capital expenditures of the Grouse Creek Project
from the date of Commercial Production to the date
the Purchaser's election to increase its interest
pursuant to Article 9 is effective; plus (iii) the
amount of working capital on the books of the
Grouse Creek Project joint venture at the date the
Purchaser's election to increase its interest
pursuant to Article 9 is effective. For the sake
of clarity, it
<PAGE> 11
- 7 -
is intended that no cost be counted more than once
in the calculation of the Option Amount;
(x) "PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all
of its functions under ERISA;
(y) "Party" means a party to this Agreement and
"Parties" means the parties to this Agreement;
(z) "Permits" means all permits, directions,
instructions, consents, licences, registrations,
orders, certificates, or approvals required by all
applicable governmental and regulatory authorities
whether foreign, federal, state, local or regional,
in respect of the Purchased Assets, including,
without limitation, those required pursuant to
relevant environmental laws, those relating to the
mining lands and leases, those relating to
construction and those relating to the operation
and eventual abandonment of the Grouse Creek
Assets;
(aa) "Permitted Encumbrances" means the encumbrances
listed in Schedule "D" hereto;
(ab) "Pre-Closing Development Costs" means the amount
equal to the Purchased Percentage multiplied by the
amount incurred by the Vendor, excluding
capitalized interest on the exploration,
development and construction of the Grouse Creek
Project from July 1, 1993, up to and including the
Closing Date;
(ac) "Plan" means at any time an employee pension
benefit plan which is covered by Title IV of ERISA
or subject to the minimum funding standards under
Section 412 of the code enacted thereunder and is
either (i) maintained by a member of the Controlled
Group for employees of any member of the Controlled
Group or (ii)
<PAGE> 12
- 8 -
maintained pursuant to a collective bargaining
agreement or any other arrangement under which
more than one employer makes contributions and to
which a member of the Controlled Group is then
making or accruing an obligation to make
contributions or has within the preceding five
plan years made contributions;
(ad) "Public Offering" means the public offering of
common shares in the capital of Great Lakes during
the Interim Period;
(ae) "Purchase Price" means the amount equal to (i) the
Purchased Percentage multiplied by the Sunk Costs
plus (ii) a premium payment of $1,250,000, provided
however that the Purchase Price shall in no event
be greater than the Maximum Purchase Price;
(af) "Purchased Assets" means the Purchased Percentage
of the Grouse Creek Assets;
(ag) "Purchased Percentage" means that undivided
interest in the Grouse Creek Assets the Purchaser
elects to purchase in accordance with Section 2.1,
which shall be a minimum of 20% and a maximum of
30%;
(ah) "Regulatory Approvals" means the approvals,
consents and authorizations identified in Schedule
"E" and such other approvals, consents and
authorizations as are required for the completion
of the transactions contemplated hereby;
(ai) "Sunk Costs" means the amount incurred by the
Vendor, excluding capitalized interest, on the
acquisition, exploration and development of the
Grouse Creek Project up to and including June 30,
1993, which is estimated to be $27,735,000;
<PAGE> 13
- 9 -
(aj) "Underlying Mineral Properties" means all patented
and unpatented mining claims, concessions, mining
and surface leases, mineral rights and similar
rights and interests relating to the Grouse Creek
Project, as more particularly set out in Schedules
"B" and "F" hereto;
(ak) "Warrants" means the non-transferable common share
warrants issued to the Vendor permitting the Vendor
to purchase up to 500,000 common shares in the
capital of Great Lakes at an exercise price per
share equal to 125% of the offering price per share
pursuant to the Public Offering which warrants
shall be exercisable by the Vendor at any time on
or before the earlier of the day which is (i) 12
months after Commercial Production of the Grouse
Creek Project; and (ii) five years following the
date of issuance of such warrants. The form of
Warrant shall be substantially in the form attached
hereto as Schedule "K".
1.2 Agreement References. Unless the context otherwise requires,
the term "this Agreement", "hereof", "herein", "hereunder" and similar
expressions refer to this Agreement and the schedules hereto as a whole and not
to any particular article, section or other portion hereof, and include any
agreement, schedule or instrument supplementing or amending this Agreement.
References herein to an article or section shall mean a reference to an entire
article or section within the body of this Agreement. Reference herein to a
subsection without identifying the section of which the subsection referred to
is a part shall mean a reference to such subsection in the same section as is
the subsection in which such reference is made.
1.3 Sections and Headings. The index to this Agreement and
headings of articles, sections and subsections herein and in the schedules are
inserted for convenience of reference only and shall not affect or be
considered to affect the construction of the provisions hereof.
<PAGE> 14
- 10 -
1.4 Person. The word "person" includes an individual, sole
proprietorship, partnership, joint venture, unincorporated association, trust,
body corporate, governmental department or agency and a natural person in his
capacity as trustee, executor, administrator or other legal representative.
1.5 Currency. Unless otherwise indicated, all dollar amounts
referred to in this Agreement are in United States funds.
1.6 Gender, Etc. Unless the context otherwise requires, words
importing the singular shall include the plural and vice versa and words
importing gender shall include the masculine, feminine and neuter genders.
1.7 Entire Agreement. This Agreement, including all Schedules,
together with the agreements and other documents to be delivered pursuant
hereto, and the Confidentiality Agreement between Great Lakes and the Vendor
dated August 16, 1992, constitutes the entire agreement between the Parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties with respect to the sale of the Purchased Assets by the Vendor to the
Purchaser, including that certain letter agreement dated October 14, 1993,
executed by John D. McBride on behalf of Great Lakes and Arthur Brown on behalf
of the Vendor, and there are no warranties, representations, conditions or
other agreements between the Parties in connection with the subject matter
hereof except as specifically set forth herein and therein.
1.8 Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws from time to time in force
in Idaho and the federal laws of the United Sates of America applicable therein
and shall be treated in all respects as an Idaho contract.
1.9 Schedules. Attached to and forming part of this Agreement
are the following Schedules:
<PAGE> 15
- 11 -
Schedule "A" - Permits
Schedule "B" - Leases
Schedule "C" - Joint Venture Agreement
Schedule "D" - Permitted Encumbrances
Schedule "E" - Regulatory Approvals
Schedule "F" - Underlying Mineral Properties
Schedule "G" - Litigation
Schedule "H" - Salaried Employees
Schedule "I" - Lluvia de Oro Agreement
Schedule "J" - Preliminary Prospectus
Schedule "K" - Warrant
Reference herein to a schedule shall mean a reference to a
schedule to this Agreement. References in any schedule to "the Agreement"
shall mean a reference to this Agreement. References in any schedule to
another schedule shall mean a reference to a schedule to this Agreement.
ARTICLE 2
PURCHASE AND SALE
2.1 Determination of Interest. The Purchaser shall purchase a
20% undivided interest in the Grouse Creek Assets. Prior to Closing, the
Purchaser shall be entitled to elect to purchase up to an additional 10%
undivided interest for a total maximum 30% undivided interest in the Grouse
Creek Assets by notifying the Vendor in writing of its desire to purchase more
than a 20% undivided interest. The percentage from 20% to and including 30%
that the Purchaser decides to purchase shall be the Purchased Percentage.
After Closing, in the event that the Purchased Percentage is less than 30%, the
Purchaser
<PAGE> 16
- 12 -
shall have the right to increase its undivided interest pursuant to the terms
of Article 9 hereto.
2.2 Transfer. At Closing, on and subject to the terms and
conditions set out in this Agreement, the Vendor shall convey, transfer, assign
and sell and the Purchaser shall acquire, accept and purchase all the right,
title and interest of the Vendor in and to the Purchased Assets and the Vendor
shall deliver documentation necessary to register, file or record the
Purchaser's interest in the Purchased Assets, as provided in Section 7.2
hereto.
2.3 Payment. At Closing, on and subject to the terms and
conditions set out in this Agreement, in consideration of the sale to the
Purchaser of the Purchased Assets, the Purchaser shall:
(a) pay the Estimated Purchase Price, less the Deposit
and less the Financing Deposit, if any, to the
Vendor;
(b) issue the Warrants to the Vendor;
(c) pay the Estimated Development Costs to the Vendor.
2.4 Adjustment. Notwithstanding that on the Closing Date, the
Purchaser shall pay to the Vendor the Estimated Purchase Price less the Deposit
and the Financing Deposit, if any, and the Estimated Development Costs, within
30 days of the Closing Date, or such other reasonable time mutually agreed to
by the Parties, the Parties shall determine the Purchase Price and the
Pre-Closing Development Costs.
In the event that either the Estimated Purchase Price or
Estimated Development Costs are more than the Purchase Price or Pre-Closing
Development Costs, the Vendor shall forthwith pay to the Purchaser the
difference, if any, between the Estimated Purchase Price and the Purchase Price
and the difference, if any, between the Estimated Development Costs and the
Pre- Closing Development Costs.
<PAGE> 17
- 13 -
In the event that either the Estimated Purchase Price or the
Estimated Development Costs are less than the Purchase Price or Pre-Closing
Development Costs, the Purchaser shall forthwith pay to the Vendor the
difference, if any, between the Estimated Purchase Price and the Purchase Price
and the difference, if any, between the Estimated Development Costs and the
Development Costs provided, however, that the Purchase Price shall in no event
be greater than the Maximum Purchase Price.
2.5 Arbitration. If there is a dispute between the Vendor and
the Purchaser as to the appropriate adjustment to be made pursuant to Section
2.4 hereof, then the matter shall be submitted to arbitration by a single
arbitrator, if the Parties agree upon one arbitrator, or otherwise by three
arbitrators, of whom one shall be appointed by each of the Vendor and the
Purchaser and the third shall be chosen by the first two named before the
arbitration. Unless the Vendor and the Purchaser agree otherwise, the
arbitrator or arbitrators, as the case may be, shall each be an independent
Chartered Accountant from a firm of at least 100 Chartered Accountants. The
arbitration and the appointment of the arbitrator shall, unless expressly
provided for herein, be conducted in accordance with the Arbitrations Act
(Ontario). The determination of such arbitrator, arbitrators or any two of
such three arbitrators, which shall be made within 30 days of the date upon
which the dispute was referred to him or them, shall be binding upon the Vendor
and the Purchaser and their respective successors and permitted assigns. The
Vendor and the Purchaser shall co-operate in completing any arbitration as
expeditiously as possible and the arbitrator or arbitrators may engage such
experts to assist him or them as may appear to him or them appropriate. Each
of the Vendor and Purchaser shall bear its costs and expenses incurred in
connection with the arbitration and other costs and expenses incurred in
connection with the arbitration shall be borne equally by the Vendor and
Purchaser.
2.6 Deposits. In the event that the Purchaser fails to proceed
with the purchase of the Grouse Creek Assets contemplated hereby other than as
a result of a material misrepresentation of the condition of the Grouse Creek
Project by the Vendor, the Vendor shall be entitled to retain the Deposit and
the Financing Deposit, if any, as an estimate of liquidated damages to the
Vendor which the Purchaser stipulates is not a penalty. In the
<PAGE> 18
- 14 -
event the Purchaser proceeds with the Closing, the Deposit and Financing
Deposit, if any, shall be applied against the Purchaser's payment obligations
specified above.
2.7 Taxes. The Purchaser shall be liable for and shall pay all
land transfer taxes and sales and related taxes, duties or like charges
properly payable whether under United States or Canadian federal, state,
provincial, municipal or local laws upon or in connection with the sale,
transfer or conveyance of the Purchased Assets excluding, for greater
certainty, income taxes payable by the Vendor as a result of the foregoing.
The Vendor shall do all things as are reasonably requested by the Purchaser to
enable the Purchaser to comply with its obligations hereunder in a timely and
efficient manner.
ARTICLE 3
CLOSING DATE
3.1 The Closing Date shall occur as soon as possible after the
Financing has been arranged, but in no event later than March 11, 1994, unless
otherwise agreed to in writing by the Parties.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Joint Representation. Each Party, acknowledging that the
other Parties are relying thereon in entering into this Agreement and will rely
thereon in concluding the transactions contemplated hereby, represents and
warrants to the other Parties in respect of itself as follows:
(a) Incorporation - it is a corporation duly
incorporated and organized, subsisting and
up-to-date in all of the filings and registrations
required under the laws of the jurisdiction of its
incorporation and under the laws of the
jurisdiction in which the Purchased Assets are
situated and, in the case of the Vendor, Great
Lakes and the
<PAGE> 19
- 15 -
Purchaser, is in good standing under the laws of the
jurisdiction of its incorporation;
(b) Qualification - it has the requisite corporate
power and capacity to enter into this Agreement and
to perform its obligations hereunder;
(c) Due Authorization - all requisite corporate acts
and proceedings have been done and taken by it with
respect to authorizing the execution and delivery
of this Agreement and the performance of its
obligations hereunder;
(d) Validity of Agreement - the execution and delivery
of this Agreement and the performance of its
obligations hereunder do not conflict with or cause
a default under any indenture, mortgage, deed of
trust, loan agreement or any other agreement or
instrument to which it is a party or by which it or
any of its property or assets is bound and do not
conflict with nor result in any violation of the
provisions of its articles, by-laws or other
constating documents or any resolutions of its
shareholders or directors or any laws of any
province or territory of Canada or the laws of
Canada applicable therein, any state of the United
States of America or the federal laws applicable
therein, or the laws of its jurisdiction of
incorporation or any order, rule or regulation of
any court or governmental agency or body having
jurisdiction over it or any of its property or
assets; and
(e) Enforceability of Agreement - this Agreement and
each other agreement or instrument executed by it
and delivered on the Closing Date constitutes and
will constitute a legal, valid and binding
obligation of such Party enforceable in accordance
with their respective terms, subject with respect
to enforcement to all bankruptcy, insolvency and
other laws affecting creditors' rights generally
and to general principles of equity.
<PAGE> 20
- 16 -
4.2 Representations of the Vendor. The Vendor, acknowledging
that the Purchaser is relying thereon in entering into this Agreement and will
rely thereon in concluding the transactions contemplated hereby, represents and
warrants to the Purchaser that:
(a) Title to Assets - The Vendor or its wholly-owned
subsidiaries are the registered and beneficial
owners of, and have the exclusive right to dispose
of good and marketable title to all of the
Purchased Assets free and clear of all Encumbrances
subject to Permitted Encumbrances, such title to be
registered, filed or recorded, where appropriate to
evidence the Purchaser's interest in the Purchased
Assets, and the Purchased Assets are not subject to
any contractual rights of persons other than the
Vendor, including, without limitation, any
contracts or options to grant or convey any
interest in the Underlying Mineral Properties or to
pay any royalties with respect thereto and the
Vendor has not done or omitted to do anything which
has resulted or could result in an Encumbrance on,
or which could permit any third party to claim an
interest in, the Purchased Assets except as
otherwise disclosed in this Agreement;
(b) Mining Rights - With respect to the Underlying
Mineral Properties, all mining and mineral rights
of whatsoever nature and kind, including all mining
claims, both patented and unpatented, licences,
leases, concessions, licenses of occupation,
easements, privileges and other rights relating
thereto have been property staked, tagged and
recorded, as applicable, and are in good standing
under all applicable legislation relating thereto.
All rents and payments due to the date hereof on
each such mineral right have been paid; the Vendor
has been in peaceable possession since it acquired
such rights and is not in default thereunder and no
waiver, indulgence or postponement of the rights of
the Vendor thereunder has been granted; and there
exists no event of default or event, occurrence,
condition or act
<PAGE> 21
- 17 -
which, with the giving of notice, the lapse of time or both,
or the happening of any further event or condition, would
become a default under such right. The Vendor is not in
breach of any reclamation obligation currently outstanding
and unsatisfied in respect of such rights;
(c) Underlying Mineral Properties
(i) There are no matters affecting the right,
title and interest of the Vendor in the
Underlying Mineral Properties which, in
the aggregate, would materially impair
the ability to carry on business at the
Grouse Creek Project substantially in the
manner in which the business is currently
being carried on or contemplated at the
Grouse Creek Project except as is
disclosed in this Agreement;
(ii) The Vendor has not received any notice
of:
(A) any non-compliance of the
Underlying Mineral Properties
or the improvements or fixtures
located thereon, or the
operation or maintenance
thereof, with municipal,
building or zoning by-laws or
regulations; or
(B) any work orders relating to, or
notices from any government
authorities advising of any
defects in, the construction or
state of repair of any
improvements or fixtures on
such property;
which notices have not been complied with
and which, in the aggregate, would
materially impair the ability to carry on
the business upon the property
substantially in the manner in
<PAGE> 22
- 18 -
which the business is currently being
carried on or contemplated at the Grouse
Creek Project;
(iii) The unpatented mining claims were
properly laid out and monumented; all
required location and validation work was
properly performed; location notices and
certificates were properly recorded and
filed with appropriate governmental
agencies; all assessment work or mining
claim rental fees in lieu thereof
required to hold the unpatented mining
claims has been performed in a manner
consistent with good, engineering,
metallurgical and mining practices; all
affidavits of assessment work and other
filings required to maintain the claims
in good standing have been properly and
timely recorded or filed with appropriate
governmental agencies; the claims are
free and clear of any and all defects,
liens and encumbrances; all fees have
been paid to maintain the claims;
(d) No Liabilities - There are no liabilities of the
Vendor, the existence of which would have a
material adverse effect on the Purchased Assets,
for which the Purchaser may be liable on or after
the completion of the transactions contemplated by
this Agreement other than liabilities disclosed in
this Agreement;
(e) Financial Statements - The Financial Statements
were prepared in accordance with United States
generally accepted accounting principles throughout
the period indicated and present fairly the
financial conditions of the Vendor and the
Purchased Assets for the financial periods covered
thereby and, except to the extent reflected or
reserved against or noted in the Financial
Statements, the Vendor does not have any material
liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise which,
in the
<PAGE> 23
- 19 -
aggregate, would have a material adverse effect on
the Vendor and its subsidiaries;
(f) Books and Records - All accounts, books, ledgers
and official and other records of whatsoever kind,
including, without limitation, employment records,
material to the Grouse Creek Assets have been
fully, properly and accurately kept and completed
and there are no material inaccuracies or
discrepancies of any kind contained or reflected
therein. All financial transactions of the Vendor
relating to the Grouse Creek Assets have been
properly recorded in such books and records;
(g) Absence of Changes - Since the date of the most
recent Financial Statements, except as disclosed to
Great Lakes, there has not been any change in the
condition or operations of the business, assets,
management or financial condition of the Grouse
Creek Project other than changes in the ordinary
and normal course of business none of which has
been materially adverse to the Grouse Creek
Project;
(h) Absence of Unusual Transactions - Since the date of
the most recent Financial Statements, other than as
disclosed in this Agreement, the Vendor has not:
(i) transferred, assigned, sold or otherwise
disposed of any significant assets
comprising a part of the Grouse Creek
Assets;
(ii) incurred, assumed or paid any obligation
or liability (fixed or contingent) other
than obligations or liabilities incurred
in the ordinary and normal course of
business;
<PAGE> 24
- 20 -
(iii) mortgaged, pledged, subjected to lien,
granted a security interest in or
otherwise encumbered any of its assets or
property;
(iv) suffered any damage, destruction or loss,
or waived any rights, or entered into any
commitment or transaction where such
loss, rights, commitment or transaction
is or would be material in relation to
the Grouse Creek Project except
commitments or transactions in the
ordinary course of business;
(v) authorized or agreed or otherwise become
committed to any of the foregoing;
(i) Condition of Assets - All tangible assets used in
or in connection with the Grouse Creek Project are
in good condition, repair and proper working order,
subject to normal wear and tear, and are fit and
appropriate for use for the purpose for which they
were intended;
(j) Capital Expenditures - Since the date of the most
recent Financial Statements the Vendor has not made
any capital expenditures in respect of the Grouse
Creek Project except in the ordinary course of
business or as disclosed to Great Lakes;
(k) Intellectual Property Rights - Any and all patents,
trade marks, copyrights and other industrial and
intellectual property rights used in whole or in
part in connection with the Grouse Creek Project
are owned by or validly licensed to the Vendor and
are in good standing. To the best of the Vendor's
knowledge, the conduct of the Grouse Creek Project
does not infringe upon the patents, trade marks,
trade names, service marks or copyrights, domestic
or foreign, of any other person;
<PAGE> 25
- 21 -
(l) Litigation - Except as described in Schedule "G",
there is no judgment, decree or other outstanding
order and no action, suit, litigation, arbitration,
proceeding, administrative or governmental or
quasi- governmental proceeding or enquiry, claim,
complaint or grievance in progress pending or, to
the best of the Vendor's knowledge, threatened
against or relating to, in whole or in part, the
Purchased Assets which could have a material
adverse effect on the Purchased Assets, including,
without limitation, in respect of the environment;
(m) Taxes - All federal, state, local and foreign tax
returns and all withholding and unemployment tax
returns and reports of every nature required to be
filed by the Vendor with respect to the Grouse
Creek Project, including but not limited to payroll
deductions, have been filed or will be filed in due
course and such returns have been materially
complete and accurate. There are no agreements,
waivers, ruling requests or other arrangements
providing for an extension of time with respect to
the assessment of any tax or deficiency against the
Grouse Creek Project, nor are there any actions,
suits, proceedings, investigations or claims now
pending against the Grouse Creek Project in respect
of any tax or assessment or any matters under
discussion with any authority relating to any taxes
or assessments asserted by any such authority.
Adequate provision has been made for taxes payable
for the current period for which tax returns are
not yet required to be filed and all instalments
for taxes in the current period have been paid in
accordance with applicable legislation;
(n) No Options - No person other than under this
Agreement has any agreement or option or any right
capable of becoming an agreement or option for the
purchase from the Vendor of any of the Purchased
Assets;
<PAGE> 26
- 22 -
(o) Environmental Matters
(i) the Grouse Creek Project is and has at
all times been in compliance with the
terms and conditions of all Permits, and
in compliance with all applicable laws,
regulations, orders, ordinances,
judgments, decrees, schedules,
obligations, timetables and other
requirements except where the failure to
be in such compliance would not have a
material adverse effect on the Purchaser
or its interest in the Grouse Creek
Project and there are no expropriation,
condemnation or similar proceedings,
actual or threatened, of which the Vendor
has received notice against any part or
parts of the Purchased Assets;
(ii) all Permits are in full force and effect
and there are no judicial or
administrative proceedings pending or
threatened to revoke or change such
Permits;
(iii) except for matters which the Vendor has
abated or has contested in good faith, no
notice, citation, summons, or order has
been issued, no complaint has been filed,
no penalty has been assessed and no
investigation or review is pending or
threatened by any authority with respect
to:
(A) any alleged violation of any
applicable environmental law or
regulation in respect of the
Purchased Assets; or
(B) any alleged failure to have any
Permit required in connection
with the Purchased Assets; or
<PAGE> 27
- 23 -
(C) any alleged violation to comply
with any Permits, any
generation, treatment, storage,
recycling, transportation or
disposal of any Contaminant in
connection with the Purchased
Assets;
(iv) the Vendor has not received any request
for information, notice or claim, demand
or other notification that it is or may
be potentially responsible with respect
to any investigation or clean-up of any
threatened or actual release of any
Contaminant in connection with the
Purchased Assets;
(v) no Contaminant has been released,
spilled, leaked, discharged, disposed of,
pumped, poured, emitted, emptied,
injected, leached, dumped or allowed to
escape ("Release") at, on or under the
Grouse Creek Project contrary to any
applicable environmental law and no oral
or written notification of the Release of
a Contaminant has been filed by or on
behalf of the Vendor in connection with
the Purchased Assets which would subject
the Purchaser to corrective or response
action or any other liability under any
applicable laws, including, but not
limited to, environmental laws;
(vi) there are no environmental charges,
privileges or encumbrances
("Environmental Liens") relating to the
Purchased Assets and no actions have been
taken or are in process or pending which
could subject the Purchased Assets to
such Environmental Liens;
(vii) the Vendor knows of no facts or
circumstances related to environmental
matters relating to the Purchased Assets
that could lead to any further
environmental claims, liabilities or
<PAGE> 28
- 24 -
responsibilities except as disclosed to
Great Lakes and except for the
reclamation obligations set forth in the
Permits;
(viii) the Vendor has kept records and made all
filings required to be kept or made by it
by all applicable environmental laws in
respect of the Purchased Assets;
(ix) except for reclamation obligations set
forth in the Permits, the Vendor is not
aware of any such release, emission,
discharge, deposit, issuance, spraying,
injection, inoculation, abandonment,
burial, spilling, incineration, disposal,
leaking, seeping, pouring, emptying,
throwing, dumping, placing or exhausting
of any Contaminant which may subject the
Vendor or the Purchaser to corrective or
response action or any other liability
under any applicable laws, including, but
not limited to, environmental laws;
(x) to the best of the Vendor's knowledge,
information and belief, the Vendor has
complied with all regulations, orders,
directives and notices received by it
from and all requests for information
made by the relevant environmental
protection authorities;
(xi) the Vendor has not received any notice of
or is otherwise aware that any site is
listed, or proposed for listing, on a
registry of inventory of inactive
hazardous waste sites maintained by any
relevant jurisdiction or on the National
Priority List or on the Comprehensive
Environmental Response, Compensation,
Liability Information System List
promulgated pursuant to CERCLA, or any
comparable list maintained by any
government authority;
<PAGE> 29
- 25 -
(p) Mining Practices - The exploration work, processes,
undertaking and other operations carried on or
conducted by or on behalf of the Vendor in respect
of the Grouse Creek Project have been carried on or
conducted in a sound and workmanlike manner and in
compliance with sound geological and geophysical
exploration and mining, engineering and
metallurgical practices; and all such work,
process, undertaking and other operations are in
compliance with all federal, state and other laws,
by-laws, ordinances, permits, rules, regulations
and orders or decisions rendered by any
governmental or quasi-governmental ministry,
department or administrative or regulatory agency
including, without limitation, applicable laws
relating to environmental protection except where
the failure to comply would not have a material
adverse effect on the Grouse Creek Project;
(q) Insurance - The Vendor has maintained, and is in
good standing in respect of all customary classes
of insurance covering the Grouse Creek Assets,
which insurance is in the amount at least equal to
the replacement value of the Grouse Creek Assets;
(r) Fees - No fees to brokers, promoters or finders
shall be owed by the Purchaser to the Vendor;
(s) Leases - Schedule "B" sets out a full and complete
list of all real property and mineral interest
leases or agreements in the nature of a lease to
which the Vendor is a party in respect of the
Purchased Assets. The Vendor is not a party to any
such lease or agreement in the nature of a lease,
whether as lessor or lessee, except those leases
set forth and described in Schedule "B" in which is
specified the parties to each of the leases, copies
of which have been given to the Purchaser. The
Vendor is not in default under or in breach of any
of the material covenants, conditions or agreements
contained in any lease;
<PAGE> 30
- 26 -
(t) Contracts - The Vendor is not in breach of any of
the material covenants, conditions or agreements
contained in any agreement, contract or commitment
whether written or oral, of any nature or kind
whatsoever in connection with the Purchased Assets;
(u) Employment - In connection with the Grouse Creek
Project:
(i) the Vendor is not a party to any written
or oral employment, service, union,
pension, supplemental retirement, group
insurance, deferred profit sharing,
benefit or other similar agreement except
as set forth and described in Schedule
"H";
(ii) the names of all salaried employees
employed by the Vendor in connection with
the Purchased Assets, their date of hire,
and titles are set out in Schedule "H";
(iii) all obligations of the Vendor under all
contracts of employment have been
fulfilled;
(iv) the Vendor is in compliance with all
applicable laws respecting employment and
employment practices, terms and
conditions of employment and wages and
hours, retirement plans, deferred
compensation plans, health and welfare
benefit plans, health, safety and
occupational laws with respect to its
employees and has not engaged in any
unfair labour practice;
(v) no unfair labour practice, complaint,
claim or grievance with respect to any
employees at the Grouse Creek Project is
pending before any labour relations
board, workers' compensation board or
similar government tribunal or agency;
<PAGE> 31
- 27 -
(vi) there is no collective agreement in place
and the Vendor is not aware of any
attempts to organize or establish any
labour union or employee association
involving employees at the Grouse Creek
Project;
(v) Workers' Compensation - All obligations of the
Vendor under applicable workers' compensation
legislation in respect of employees relating to the
Purchased Assets have been fulfilled including,
without limitation, the payment of all levies and
assessments as required in a timely manner;
(w) ERISA - In connection with the Grouse Creek Project:
(i) the Vendor and the Controlled Group have
fulfilled their obligations under the
minimum funding standards of ERISA and
the code enacted thereunder with respect
to each Plan and are in compliance in all
material respects with the presently
applicable provisions of ERISA and the
code, and have not incurred any liability
to the PBGC (other than premiums due and
not delinquent under Section 4007 of
ERISA) or a Plan under Title IV of ERISA;
(ii) the Vendor and the Controlled Group have
incurred any withdrawal liability with
respect to any Multiemployer Plan under
Title IV of ERISA, and no such liability
is expected to be incurred;
(x) Consents and Approvals - Except as disclosed in
Schedules "A" and "E", there are no consents,
approvals, orders or authorizations of any person
or governmental authorities in Canada, the United
States or elsewhere or registrations, declarations,
filings or recordings with any authorities required
to be obtained by the Vendor in connection with
<PAGE> 32
- 28 -
the completion of any of the transactions
contemplated by this Agreement, the execution and
delivery of this Agreement, the Closing or
performance of any of the terms and conditions
of this Agreement;
(y) Disclosure
(i) The Vendor has disclosed, granted access
to or made available to the Purchaser for
inspection and review all information,
data and files relevant to the Purchased
Assets, including, without limitation,
the information in the Vendor's data room
(the "Disclosed Data");
(ii) There is no material information in
respect of the Purchased Assets which has
not been disclosed to the Purchaser;
(iii) The Disclosed Data is not inaccurate or
untrue in any material respect; and
(iv) The representations and warranties
contained in this Agreement and the
information contained in the schedules
and the documents listed therein or
otherwise delivered by the Vendor to the
Purchaser constitute full, true and plain
disclosure of all material facts relating
to the Grouse Creek Project and the
Purchased Assets and do not omit to state
any material fact.
4.3 Representations of Great Lakes and Purchaser. Great Lakes
and the Purchaser, acknowledging that the Vendor is relying thereon in entering
into this Agreement and will rely thereon in concluding the transactions
contemplated hereby, represents and warrants to the Vendor that:
<PAGE> 33
- 29 -
(a) Disclosure - The information contained in the
preliminary prospectus attached hereto as Schedule
"J" represents a complete and accurate description
of all material facts relating to Great Lakes at
the date thereof and represents full, true and
plain disclosure of all material facts relating to
the securities offered thereunder and does not
contain any misrepresentation likely to affect the
value of the market price of the securities to be
distributed;
(b) Consents and Approvals - Except as disclosed in
this Agreement or otherwise by Great Lakes and the
Purchaser to the Vendor, there are no consents,
approvals, orders or authorizations of any person
or governmental authorities in Canada, the United
States or elsewhere or registrations, declarations,
filings or recordings with any authorities required
to be obtained by the Great Lakes or the Purchaser
in connection with the completion of any of the
transactions contemplated by this Agreement, the
execution and delivery of this Agreement, the
Closing or performance of any of the terms and
conditions of this Agreement.
4.4 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement and in any
instruments or certificates delivered at the Closing in connection with the
transactions contemplated hereby shall be true and accurate at Closing and
shall survive the Closing and the purchase and sale contemplated herein.
ARTICLE 5
COVENANTS
5.1 Joint Covenants
(a) Preparing for Closing. During the Interim Period,
each of the Parties shall diligently take or cause to be taken in a timely
manner all proper steps, actions and
<PAGE> 34
- 30 -
proceedings to enable the Parties to complete the sale of the Purchased Assets
to the Purchaser as contemplated herein and to satisfy or cause to be satisfied
the conditions precedent to the obligations of the Parties hereunder to the
extent that their respective actions or inactions can control or influence the
satisfaction of these conditions, including, without limitation, obtaining
Regulatory Approvals.
(b) Press Release. No Party shall make any press
release or other public disclosure (including, without limitation, disclosures
in a prospectus or other similar document) of the transaction contemplated
hereunder or concerning the Grouse Creek Project without first having made a
copy of such release or disclosure document available to the other Parties and
having received the other Parties' consent to such release or disclosure,
provided, however, that this provision shall not restrict a Party from making
any disclosure which is required by law or regulation.
5.2 Vendor's Covenants
(a) Access. During the Interim Period, the Vendor
shall:
(i) provide to the Purchaser and its directors,
officers, auditors, counsel and other authorized
representatives ("Representatives") access during
regular business hours at the Vendor's corporate
office and the Grouse Creek Project office and mine
site to all records, books, contracts, agreements
and other materials relating to the Purchased
Assets, including, without limitation, access to
the Grouse Creek Project site (including, without
limitation for the purpose of an environmental
audit) and to all exploration, development,
environmental and operating results and information
relating to the Grouse Creek Project, including,
without limitation, copies of any letters provided
to the Vendor's auditors by the Vendor's lawyers
with respect to the Grouse Creek Project;
<PAGE> 35
- 31 -
(ii) provide to the Purchaser and its Representatives
copies of the most recent 10-Ks, 10-Qs, 8-Ks, proxy
material, information circulars and similar
material filed by the Vendor with relevant
securities authorities;
(iii) if reasonably requested, provide copies of any
written materials relating to the Grouse Creek
Project to the Purchaser and its Representatives;
and
(iv) co-operate in making its officers and personnel
available to the Purchaser and its Representatives
on reasonable prior notice.
(b) Conduct of Operations. During the Interim Period,
the Vendor shall:
(i) use the Purchased Assets only in the usual and
ordinary course of business and in conformity with
all applicable laws, ordinances, regulations and
rules;
(ii) not assign, sell, lease or otherwise transfer or
dispose of any of the Purchased Assets, except
sales from inventories and minor assets in the
normal and ordinary course of business;
(iii) maintain the Purchased Assets in the same condition
as they exist on the date of this Agreement,
ordinary wear and tear excepted;
(iv) perform or cause to be performed all customary
maintenance and repair to the portions of the
Purchased Assets that are tangible personal
property;
(v) maintain in full force and effect all existing
policies of insurance including, without limitation,
<PAGE> 36
- 32 -
(A) insurance covering the Purchased Assets
(including, without limitation, fire and
casualty with extended coverage);
(B) liability insurance;
(C) personal injury insurance;
(vi) use its reasonable efforts, without making any
commitments on behalf of the Purchaser, to preserve
the business and its present relationships with
employees, suppliers, customers and others having
business relationships with the Vendor;
(vii) not create or suffer any lien or encumbrance on any
of the Purchased Assets, other than those which the
Vendor is contesting in good faith;
(viii) consult with the Purchaser on a regular basis with
respect to all decisions which might have a
material adverse effect on the Vendor's ability to
operate the Grouse Creek Project or the Purchased
Assets; and
(ix) except as the Purchaser may otherwise agree,
operate the Grouse Creek Project as currently
operated and only in the ordinary course of
business.
(c) No Other Negotiations. During the Interim Period,
the Vendor shall not sell or negotiate, in any manner, the sale of an interest
in the Grouse Creek Assets or hold any discussions in respect thereof with any
other potential purchaser whether or not such discussions had commenced or are
unsolicited, prior to February 10, 1994 (or March 12, 1994, if the Purchaser
extends the date by which it is required to satisfy itself as to financing in
accordance with Section 5.3(b)(i)).
<PAGE> 37
- 33 -
(d) Financial Statements. As soon as such statements
are available to the public, the Vendor shall deliver to the Purchaser its
audited financial statements for the year ending December 31, 1993.
5.3 Purchaser's and Great Lakes Covenants
(a) Public Offering. Great Lakes shall retain Wood
Gundy Inc. as its financial adviser with respect to the Public Offering and
shall take such steps as are necessary to proceed with the Public Offering.
(b) Financing
(i) The Purchaser shall have, on or before the close of
business (Toronto time) on February 10, 1994, satisfied itself and provided the
Vendor with evidence satisfactory to the Vendor, acting reasonably, that the
Purchaser has obtained financing in an amount equal to at least $25,000,000.
The Purchaser shall be entitled to extend the date by which it is required to
satisfy itself and the Vendor that the Purchaser has obtained financing in an
amount equal to at least $25,000,000 from February 10, 1994, to March 11, 1994
by paying the Vendor the sum of $250,000 by wire transfer funds prior to the
close of business (Toronto time) on February 10, 1994, which $250,000 would be
the Financing Deposit.
(ii) The Purchaser shall use at least 85% of the net
proceeds raised by Great Lakes from the Financing towards the Purchase Price
and the Pre-Closing Development Costs. In the event that 85% of the net
proceeds received by Great Lakes from the Financing exceeds the amount required
by the Purchaser to purchase a 20% undivided interest in the Grouse Creek
Assets, the Purchaser shall amend the Purchased Percentage so as to use at
least 85% of the net proceeds received by the Financing towards the Purchase
Price and the Pre-Closing Development Costs, thereby increasing the Purchaser's
undivided interest in the Grouse Creek Assets to be purchased hereunder to a
maximum of 30%. In the event that the Purchaser elects to purchase only a 20%
undivided interest in the Grouse Creek Assets, and is not otherwise required to
increase its Purchased
<PAGE> 38
- 34 -
Percentage as a result of this section, the Purchaser shall use up to 100% of
the net proceeds raised by the Purchaser from the Financing to pay the Purchase
Price and the Pre-Closing Development Costs.
(iii) On or prior to Closing, the Purchaser shall arrange
for that portion of the proceeds from the Financing equal to the Escrowed
Amount to be held by an escrow agent on terms and conditions satisfactory to
the Purchaser and the Vendor, acting reasonably.
(c) Approvals. Great Lakes shall use best efforts to
obtain all listing and regulatory approvals required so that the common shares
of Great Lakes underlying the Warrants shall be listed for trading on The
Toronto Stock Exchange.
ARTICLE 6
CONDITIONS
6.1 Purchaser's Conditions. The obligations of the Purchaser to
complete the purchase of the Purchased Assets on the Closing Date shall be
subject to the satisfaction of, or compliance with, at or before the Closing,
of each of the following conditions:
(a) Representations and Warranties - all the
representations and warranties of the Vendor set
forth in this Agreement shall be true and correct
as at the Closing Date as if made on and at the
Closing Date, and the Vendor shall have delivered
to the Purchaser a certificate of a senior officer
of the Vendor to that effect dated as at the
Closing Date;
(b) No Proceeding - no action or proceeding shall be
pending or threatened by any person to enjoin,
prohibit or materially restrict the Purchaser from
consummating any of the transactions contemplated
herein;
<PAGE> 39
- 35 -
(c) No Adverse Law - no new law, statute, by-law,
regulation, order, decree or other action shall
have been enacted or introduced whether federal,
provincial, state, municipal or otherwise, which in
the reasonable opinion of the Purchaser materially
impairs or may materially impair the ownership or
operation of the Purchased Assets or the ability of
the Purchaser to own the Purchased Assets as
contemplated by this Agreement;
(d) No Adverse Change - no material adverse change
shall have occurred to any of the Purchased Assets;
(e) Financing - the Purchaser shall have obtained the
Financing or otherwise have obtained the funds
necessary to complete the transaction contemplated
hereby;
(f) Performance of Covenants - the Vendor shall have
fully performed, observed and complied in all
material respects with all of its covenants and
agreements to be performed, observed or complied
with by it on or before the Closing Date;
(g) Approvals - all Regulatory Approvals shall have
been obtained upon terms and conditions
satisfactory to the Purchaser;
(h) Closing Documents - all documentation relating to
the due authorization and completion of the
transactions contemplated hereby shall be
satisfactory to the Purchaser and Purchaser's
counsel, acting reasonably;
(i) Purchase of Shares - the Vendor shall have
purchased $1,250,000 of common shares in the
capital of Great Lakes at the offering price under
the Public Offering;
<PAGE> 40
- 36 -
(j) Joint Venture Agreement - the Parties shall have
entered into the Joint Venture Agreement;
The foregoing conditions are for the exclusive benefit of the
Purchaser, and the Purchaser shall be entitled to waive compliance with same in
whole or in part in its sole discretion without prejudice to any of its rights
under this Agreement in the event of non-performance of any other condition in
while or in part. If any condition set forth in this section is not satisfied
on or before the Closing Date, the Purchaser may terminate this Agreement by
notice in writing to the Vendor and in such event the Purchaser shall be
released from all of its obligations hereunder and unless the Purchaser can
show that the condition or conditions which have not been satisfied and for
which the Purchaser terminated this Agreement have not been satisfied owing to
the fault of the Vendor or are reasonably capable of being performed or caused
to be performed by the Vendor, then the Vendor shall also be released from all
of its obligations and liabilities hereunder.
6.2 Vendor's Conditions. The obligation of the Vendor to
complete the sale of the Purchased Assets to be transferred on the Closing Date
shall be subject to the satisfaction of, or compliance with, at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties - all the
representations and warranties of Great Lakes and
the Purchaser set forth in this Agreement shall be
true and correct as at the Closing Date as if made
on and at the Closing Date, and each of the
Purchaser and Great Lakes shall have delivered to
the Vendor a certificate of a senior officer of the
Purchaser and Great Lakes to that effect dated as
at the Closing Date;
(b) No Proceeding - no action or proceeding shall be
pending or threatened by any person to enjoin,
prohibit or materially restrict the Vendor from
consummating any of the transactions contemplated
herein;
<PAGE> 41
- 37 -
(c) No Adverse Law - no new law, statute, by-law,
regulation, order, decree or other action shall
have been enacted or introduced whether federal,
provincial, state, municipal or otherwise, which in
the reasonable opinion of the Vendor materially
impairs or may materially impair the ownership or
operation of the Purchased Assets or the ability of
the Vendor to own the Purchased Assets as
contemplated by this Agreement;
(d) No Adverse Change - no material adverse change
shall have occurred to any of the Purchased Assets;
(e) Performance of Covenants - the Purchaser and Great
Lakes shall have fully performed, observed and
complied in all material respects with all of its
covenants and agreements to be performed, observed
or complied with by it on or before the Closing
Date;
(f) Financing - the Purchaser shall have obtained the
Financing or otherwise have obtained the funds
necessary to complete the transaction contemplated
hereby;
(g) Approvals - all Regulatory Approvals and Material
Third Party Consents shall have been obtained upon
terms and conditions satisfactory to the Vendor;
(h) Prospectus - Great Lakes shall have delivered to
the Vendor a copy of the final prospectus relating
to the Public Offering and shall make a
representation respecting such prospectus
substantially like Section 4.3(a) as at Closing;
(i) Joint Venture Agreement - the Parties shall have
entered into the Joint Venture Agreement;
<PAGE> 42
- 38 -
(j) Lluvia de Oro Agreement - Great Lakes and the
Vendor shall have entered into an agreement
substantially in the form attached hereto as
Schedule "I" pursuant to which Great Lakes shall
grant the Vendor a right of first refusal to
participate as a joint venture partner or to farm
into Great Lakes' Lluvia de Oro gold project in
Mexico.
The foregoing conditions are for the exclusive benefit of the Vendor, and the
Vendor shall be entitled to waive compliance with same in whole or in part in
its sole discretion without prejudice to any of its rights under this Agreement
in the event of non- performance of any other condition in while or in part.
If any condition set forth in this section is not satisfied on or before the
Closing Date, the Vendor may terminate this Agreement by notice in writing to
the Purchaser and in such event the Vendor shall be released from all of its
obligations hereunder and unless the Purchaser can show that the condition or
conditions which have not been satisfied and for which the Purchaser terminated
this Agreement have not been satisfied owing to the fault of the Vendor or are
reasonably capable of being performed or caused to be performed by the Vendor,
then the Vendor shall also be released from all of its obligations and
liabilities hereunder.
6.3 Waiver. The waiver by any Party of a condition for its
exclusive benefit contained in this Agreement shall also act as a waiver of
that Party's right to assert any claim in respect of the breach of any
representation, warranty or covenant to which the condition pertained, provided
the Party giving such representation, warranty or covenant was not in wilful
breach of this Agreement with respect to such representation, warranty or
covenant at or before Closing.
6.4 Notice of Unfulfilled Condition. If any Party shall
determine at any time prior to the Closing Date that it intends to refuse to
consummate the transactions contemplated hereunder because of an unfulfilled or
unperformed condition precedent contained herein on the part of any other Party
to be fulfilled or performed, such Party shall so notify the other Party
forthwith upon making such determination to the end that such other Party shall
<PAGE> 43
- 39 -
have the right and opportunity to take such steps as its own expense as may be
necessary for the purpose of fulfilling or performing such condition precedent
within a reasonable time.
ARTICLE 7
CLOSING
7.1 Location. The Closing shall, unless otherwise agreed in
writing, take place on the Closing Date at the offices of Holden Day Wilson,
Suite 2400, P.O. Box 52, Toronto Dominion Bank Tower, Toronto-Dominion Centre,
Toronto, Ontario, M5K 1E7, commencing at 10:00 a.m.
7.2 Transfer Documents and Payment. At the Closing,
(a) the Vendor shall deliver to the Purchaser the
memorandum of the Grouse Creek Joint Venture
Agreement in a form recordable in the real property
records of Custer County, Idaho, which document
will be registered, recorded and filed, as
required, on the Closing Date or as soon thereafter
as practicable as part of the Closing process and
such other documentation reasonably required to
record the Purchaser's interest in the Purchased
Assets;
(b) the Purchaser shall pay for the Purchased Assets by
delivering to the Vendor a wire transfer of
immediately available funds in the amount of the
Estimated Purchase Price less Deposit, less
Financing Deposit, if any, plus the Estimated
Pre-Closing Development Costs;
(c) the Purchaser shall deliver to the Vendor the
Warrants.
7.3 Joint Venture Agreement. The Parties shall execute and
deliver the joint venture agreement respecting the Grouse Creek Project and the
right of first refusal agreement respecting Lluvia de Oro.
<PAGE> 44
- 40 -
7.4 Certificate of Representations and Warranties. Each Party
shall deliver to the other a certificate signed by a senior officer of such
Party certifying that at and as of the Closing Date the representations and
warranties of such Party contained in this Agreement are true and correct as if
made at the Closing except to the extent otherwise disclosed in the
certificate.
7.5 Certificate of Performance of Covenants. Each Party shall
deliver to the other a certificate signed by a senior officer of such Party
certifying that all covenants, agreements and conditions required by this
Agreement to be performed or complied with by such Party prior to or at Closing
have been performed and complied with, except as otherwise disclosed in the
certificate.
7.6 Opinions
(a) The Vendor shall deliver on the Closing Date to the
Purchaser an opinion or opinions of its General Counsel subject to standard
legal opinion qualifications, to the effect:
(i) that the Vendor is incorporated and subsisting
under the laws of its jurisdiction of incorporation;
(ii) that the Vendor has the corporate power and
capacity to enter into this Agreement and perform
its obligations hereunder;
(iii) that this Agreement and each other agreement or
instrument of transfer executed by it and delivered
on the Closing Date has been duly authorized,
executed and delivered by the Vendor and
constitutes a legal, valid and binding obligation
of the Vendor enforceable in accordance with its
terms;
<PAGE> 45
- 41 -
(iv) that the execution, delivery and fulfilment of the
terms of this Agreement are not in contravention of
any charter documents, by-laws or resolutions of
the Vendor;
(v) that the Vendor has good and marketable title to
the Purchased Assets subject to Permitted
Encumbrances;
(b) The Purchaser shall deliver on the Closing Date to
the Vendor an opinion of counsel to the effect that Great Lakes and the
Purchaser is incorporated and subsisting under the laws of its jurisdiction of
incorporation; that Great Lakes and the Purchaser has the corporate power and
capacity to enter into this Agreement and perform its obligations hereunder;
that this Agreement and each other agreement or instrument of transfer executed
by it and delivered on the Closing Date has been duly authorized, executed and
delivered by Great Lakes and the Purchaser and constitutes a legal, valid and
binding obligation of Great Lakes and the Purchaser enforceable in accordance
with its terms, subject to standard legal opinion qualifications and that the
execution, delivery and fulfilment of the terms of this Agreement are not in
contravention of any charter documents, by-laws or resolutions of the Vendor.
7.7 Additional Documents. On the Closing Date or as soon
thereafter as is practicable, each of the Parties shall execute and deliver
such further and additional documents as the other Parties or their counsel may
reasonably request to give effect to the provisions of this Agreement.
ARTICLE 8
INDEMNITY
8.1 If the transactions contemplated by this Agreement are
consummated, the Vendor shall indemnify and hold the Purchaser and Great Lakes,
and their officers and directors harmless from, against and in respect of any
loss, obligation, liability, damage, claim, action, suit, proceeding,
deficiency or expense of every kind and nature, known or unknown, contingent or
otherwise, including any and all out-of-pocket costs and including,
<PAGE> 46
- 42 -
without limitation, all legal and accounting fees relating to, arising from or
in connection with:
(a) any misrepresentation or breach of any covenant,
obligation, representation or warranty of the
Vendor made in this Agreement or in any certificate
or other document by the Vendor pursuant hereto;
(b) the assertion against the Purchaser or Great Lakes
of any liability of the Vendor;
(c) the failure by the Vendor to discharge any
liability of the Vendor;
(d) the following liabilities to the extent that any
such liability was not incurred by the Vendor,
acting prudently, in the ordinary course of
acquiring, exploring, developing and constructing
the Grouse Creek Project:
(i) any liability for federal, state, local
or other taxes existing at the Closing
Date or in respect of any reassessment
therefor for any period prior to the
Closing Date;
(ii) any liability which arose, accrued or was
accruing on or prior to the Closing Date
including any underfunding, assessment or
reassessment, non-payment or
non-fulfilment of obligations in
connection with, related to or in respect
of matters prior to the Closing Date,
including, without limitation, respecting
workers' compensation and other employee
obligations;
(iii) any act or thing done or omitted to be
done by the Vendor in relation to the
exploration, construction and development
<PAGE> 47
- 43 -
of the Grouse Creek Project and in
connection with the Purchased Assets
prior to the Closing Date including,
without limitation, relating to or
arising out of any matter relating
to the environment, including, without
limitation, relating to or arising out
of:
(A) the protection, clean-up,
remediation, reclamation and
eradication of the Grouse Creek
Project including but not
limited to obligations and
liabilities arising out of or
related to:
(1) the disturbance or
contamination of land or the
environment by exploration,
construction, development,
mining or processing
activities;
(2) any failure to comply with
governmental or regulatory
authorizations, licences,
permits and orders and all
non-governmental
prohibitions, covenants,
contracts and indemnities;
(3) any act or omission causing or
resulting in the spill,
discharge, leak, emission,
ejection, escape, dumping or
release of hazardous or toxic
substances, materials or
wastes as defined in any
federal, state or local law
or regulation;
(4) the long-term care and
monitoring of the Grouse
Creek Project, and the
posting and
<PAGE> 48
- 44 -
maintaining of bonds or other
financial assurances required in
connection therewith.
8.2 This indemnity shall survive the Closing and the purchase and
sale contemplated herein.
ARTICLE 9
OPTION
9.1 Option to Increase Percentage Under Joint Venture Agreement.
The Purchaser shall have the right to elect at any time prior to the date which
is 12 months following Commercial Production to increase its interest in the
Grouse Creek Project to a maximum 30% undivided interest by paying to the
Vendor an amount equal to (i) the percentage the Purchaser's participating
interest is being increased multiplied by the Sunk Costs plus (ii) the
percentage the Purchaser's participating interest is being increased multiplied
by the Option Amount.
ARTICLE 10
COSTS
10.1 Except as otherwise expressly provided in this Agreement, all
legal, tax and other costs and expenses incurred in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated by it shall be paid by the Party incurring such expenses.
ARTICLE 11
GENERAL
11.1 Notice. Any notice (including any invoice, statement or
request or other communication) herein required or permitted to be given by
either party to the other shall be in writing in the English language and shall
be delivered or sent by telex or facsimile
<PAGE> 49
- 45 -
transmissions or other means of prepaid recorded communication to the
applicable address set forth below:
(a) in the case of the Purchaser and Great Lakes, to
the following:
320 Bay Street
Suite 1600
Toronto, Ontario
M5H 4A6
Attention: President
Telecopier: (416) 864-1364
with a copy to:
Holden Day Wilson
Suite 2400, P.O. Box 52
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1E7
Attention: Paul M. Stein
Telecopier: (416) 361-1258
(b) in the case of the Vendor, to the following:
Hecla Mining Company
6500 Mineral Drive
Box C-8000
Coeur d'Alene, Idaho
83814-1931
Attention: General Counsel
Telecopier: (208) 769-4159
Any notice delivered shall be deemed to have been validly and effectively given
on the day of such delivery. If, however, the day of delivery is not a
business day, notice shall be deemed to have been given and received on the
next business day following such date. Any
<PAGE> 50
- 46 -
notice sent by telex or facsimile transmissions or other means of prepaid
recorded communication shall be deemed to have been validly and effectively
given on the business day next following the day on which it was sent. All
payments shall be made to the Parties at such of the respective offices as the
parties may respectively designate in writing.
11.2 Waiver. The failure of a Party in any one or more instances
to insist upon strict performance of any of the terms of this Agreement or to
exercise any right or privilege arising under it shall not preclude it from
requiring by reasonable notice that any other Party duly perform its
obligations or preclude it from exercising such a right or privilege under
reasonable circumstances, nor shall waiver in any one instance of a breach be
construed as an amendment to this Agreement or waiver of any later breach. No
amendment to or waiver of any provision of this Agreement shall be effective
unless embodied in writing duly signed by a duly authorized representative of
each Party.
11.3 Severability. If any of the terms or conditions set forth in
this Agreement are not enforceable, in whole or in part, the remaining terms
and conditions hereof may be enforced by the parties notwithstanding the
unenforceable term or condition. Any term or condition not enforceable in part
may be enforced to the extent that it is valid and enforceable. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise hereof or the exercise of any right,
power or privilege hereunder.
11.4 Assignment. Neither this Agreement nor any of the rights and
obligations of a Party hereunder may be assigned by such Party in whole or in
part without the prior written consent of the other Party, which consent may
not be withheld unreasonably. This Agreement shall enure to the benefit of and
be binding upon the Parties hereto and their respective successors and
permitted assigns.
11.5 Further Assurances. The Parties agree that they and each of
them will execute all documents and do all acts and things as may be necessary
or desirable within their respective powers to carry out and give effect to the
true intents and purposes of this
<PAGE> 51
- 47 -
Agreement including the execution after the Closing Date of such further
assignments, conveyances or assurances in law as the Purchaser deems necessary
or desirable to vest, perfect, confirm or record in the Purchaser the title or
other appropriate right to any of the Purchased Assets or to perfect the
completion of any of the transactions referred to in this Agreement.
11.6 Time of Essence. Time is of the essence of this Agreement.
11.7 Counterparts. This Agreement may be executed in one or more
counterparts each of which, when so executed, shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF the Parties hereto have duly executed this
Agreement effective as of the date first above written.
HECLA MINING COMPANY
Per: /s/ Michael B. White
Michael B. White,
Vice-President - General Counsel
GREAT LAKES IDAHO INC.
Per: /s/ Nicholas Tintor
/s/ John D. McBride
GREAT LAKES MINERALS INC.
Per: /s/ Nicholas Tintor
/s/ John D. McBride
<PAGE> 1
EXHIBIT (c) 2
MINING VENTURE AGREEMENT
THIS AGREEMENT is made this 8th day of February, 1994 between
HECLA MINING COMPANY, a Delaware corporation, whose address is 6500
Mineral Drive, Coeur d'Alene, Idaho 83814-8788 ("Hecla") and GREAT
LAKES IDAHO INC., an Idaho corporation, whose address is c/o First
Interstate Center, 877 Main Street, Suite 1000, Boise, Idaho 83702
(the "Company").
RECITALS
A. Hecla and the Company entered into an Acquisition Agreement
dated January 21, 1994, pursuant to which the Company agreed to
acquire a minimum of 20% up to a maximum of a 30% undivided
interest in certain Properties held by Hecla located in Custer
County, State of Idaho, which Properties are described in Exhibit
A and defined in Article 1.21 ("Acquisition Agreement").
B. Concurrently with the execution of this Agreement, Hecla
and the Company closed the acquisition transaction provided for in
the Acquisition Agreement and, as a result thereof, as of the date
of this Agreement Hecla holds an 80% undivided interest in the
Properties and the Company holds a 20% undivided interest in the
Properties.
C. Hecla and the Company wish to jointly participate in the
further exploration, evaluation, development and mining of mineral
<PAGE> 2
resources within the Properties and any other properties acquired
pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the covenants and agree-
ments contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Accounting Procedure" means the procedures set forth in
Exhibit B.
1.2 "Affiliate" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or
indirectly controls, is controlled by, or is under common control
with, a Participant. For purposes of the preceding sentence,
"control" means possession, directly or indirectly, of the power to
direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust or
otherwise.
1.3 "Agreement" means this Mining Venture Agreement, including
all amendments and modifications thereof, and all exhibits, which
are incorporated herein by this reference.
-2-
<PAGE> 3
1.4 "Area of Interest" means the area described in Part 2 of
Exhibit A.
1.5 "Assets" means the Properties, Products and all other real
and personal property, tangible and intangible, held for the
benefit of the Participants hereunder.
1.6 "Budget" means a detailed estimate of all costs to be in-
curred by the Participants with respect to a Program and a schedule
of cash advances to be made by the Participants.
1.7 "Capital Expenditures" means those items presented in
Programs and Budgets approved by the Management Committee and which
may qualify as capital expenditures under U.S. Generally Accepted
Accounting Principles consistently applied.
1.8 "Development" means all preparation for the removal and
recovery of Products, including the construction or installation of
a mill, processing plant, leach pads, or any other improvements to
be used for the mining, handling, milling, treatment, processing or
other beneficiation of Products, and the preparation of feasibility
studies and financing plans.
1.9 "Exploration" means all activities directed toward ascer-
taining the existence, location, quantity, quality or commercial
value of deposits of Products.
-3-
<PAGE> 4
1.10 "Inflationary Adjustments" means an adjustment to reflect
any changes in the United States Producer Price Index, finished
goods, excluding consumer foods (hereinafter referred to as "PPI")
as follows:
Beginning with the calendar year after the Effective Date of
this Agreement and continuing thereafter for so long as this
Agreement is in effect, the amounts contemplated as requiring
inflationary adjustments for the calendar year shall be determined
by multiplying such amounts by the sum of 1 and the percentage
change between the PPI (1982 base) for the second preceding
calendar year and the PPI (1982 base) for the preceding year. The
actual amounts, as adjusted, shall be rounded to the nearest cent,
and said adjustment shall be made for each calendar year within
forty-five (45) days after the final PPI for the previous calendar
year is published. The adjusted amounts shall apply only during
the calendar year for which the adjustment is made and shall,
therefore, be retroactive to January 1 of that year.
The PPI is determined and published by the Bureau of Labor
Statistics of the United States Department of Labor. In the event
that the Bureau of Labor Statistics should shift the PPI to a new
reference base period, the PPI for the new reference base period
will be converted from the 1982 base period to the new base before
adjusting the amounts contemplated as requiring inflationary
adjustments. The conversion procedure for changing from one base
-4-
<PAGE> 5
to another will be that published or recommended by the Bureau of
Labor Statistics. In the event that the PPI is discontinued, all
subsequent adjustments for inflation shall be made on a basis
proportional to fluctuations in the value of the U.S. dollar as
determined by the nearest comparable commodity price index that is
then available. The United States Bureau of Labor Statistics shall
be construed to mean any successor agency that shall be empowered
by the United States government to collect and publish statistics
comparable to the PPI.
1.11 "Initial Contribution" means the initial contribution of
each Participant as set forth in Article 5.1
1.12 "Initial Participating Interests" means the Participating
Interest of each Participant as set forth in Article 6.1.
1.13 "Joint Account" means the account maintained in
accordance with the Accounting Procedure showing the charges and
credits accruing to the Participants.
1.14 "Management Committee" means the committee established
under Article 7.
1.15 "Manager" means the person or entity appointed under
Article 8 to manage Operations, or any successor Manager.
-5-
<PAGE> 6
1.16 "Mining" means the mining, extracting, producing,
treating, handling, milling or other processing of Products.
1.17 "Net Proceeds" means certain amounts calculated as
provided in Exhibit C, which may be payable to a Participant under
Article 6.4 or 6.5.
1.18 "Operations" means Exploration, Development, Mining, and
all other activities carried out under this Agreement.
1.19 "Participant" and "Participants" mean the persons or en-
tities that from time to time have Participating Interests.
1.20 "Participating Interest" means the percentage interest
representing the operating ownership interest of a Participant in
the Assets, and all other rights and obligations arising under this
Agreement, as such interest may from time to time be adjusted
hereunder. Participating Interests shall be calculated to three
decimal places and rounded to two (e.g., 1.519% rounded to 1.52%).
Decimals of .005 or more shall be rounded up to .01, decimals of
less than .005 shall be rounded down. The Initial Participating
Interests of the Participants are set forth in Article 6.1.
1.21 "Prime Rate" means the interest rate quoted as "Prime"
by the Chase Manhattan Bank, at its head office, as said rate may
-6-
<PAGE> 7
change from day to day (which quoted rate may not be the lowest
rate at which the Bank loans funds).
1.22 "Products" means all ores, minerals and mineral resources
produced from the Properties and all products produced therefrom
under this Agreement.
1.23 "Program" means a description in reasonable detail of
Operations to be conducted and objectives to be accomplished by the
Manager on behalf of the Venture for a year or any longer period.
1.24 "Properties" means those interests in real property de-
scribed in Part 1 of Exhibit A and all other interests in real
property within the Area of Interest which are acquired and held
subject to this Agreement.
1.25 "Transfer" means, when used as a verb, to sell, grant,
assign, encumber, pledge or otherwise commit or dispose of,
directly or indirectly, including through mergers, consolidations
or asset purchases; and, when used as a noun, means a sale, grant,
assignment, pledge, or disposal, or the commitment to do any of the
foregoing, directly or indirectly, including through mergers,
consolidation or asset purchase.
1.26 "Venture" means the business arrangement of the Partici-
pants under this Agreement.
-7-
<PAGE> 8
-8-
<PAGE> 9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Capacity of Participants. Each of the Participants repre-
sents and warrants to the other Participant as follows:
(a) that it is a corporation duly incorporated and in good
standing in its state of incorporation and that it is qualified
to do business and is in good standing in those states where
necessary in order to carry out the purposes of this Agreement;
(b) that it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
corporate and other actions required to authorize it to enter
into and perform this Agreement have been properly taken;
(c) that it will not breach any other agreement or arrangement
by entering into or performing this Agreement; and
(d) that this Agreement has been duly executed and delivered
by it and is valid and binding upon it in accordance with its
terms.
The representations and warranties set forth above shall
survive the execution and delivery of any documents of Transfer
provided under this Agreement.
-9-
<PAGE> 10
2.2 Disclosures. Each of the Participants represents and
warrants that it is unaware of any material facts or circumstances
which have not been disclosed in this Agreement, which should be
disclosed to the other Participant in order to prevent the
representations in this Article II from being materially misleading
or which would individually or in the aggregate, have a material
adverse impact on or impede the operation of the Grouse Creek
Project.
2.3 Joint Loss of Title. Any failure or loss of title to the
Assets, and all costs of defending title, shall be charged to the
Joint Account, except that all costs and losses arising out of or
resulting from breach of the representations and warranties of
Hecla.
ARTICLE 3
NAME, PURPOSES AND TERM
3.1 General. The parties hereby enter into this Agreement for
the purposes hereinafter stated. All of their rights and all of
the Operations on or in connection with the Properties or the Area
of Interest shall be subject to and governed by this Agreement.
3.2 Name. The name of this Venture shall be the Grouse Creek
Venture. The Manager shall accomplish any registration required by
-10-
<PAGE> 11
applicable assumed or fictitious name statutes and similar
statutes.
3.3 Purposes. This Agreement is entered into for the
following purposes and for no others, and shall serve as the exclu-
sive means by which the Participants, or either of them, accomplish
such purposes:
(a) to engage in Development and Mining Operations on the
Properties,
(b) to conduct Exploration within the Properties and any
Property Interests acquired within the Area of Interests,
(c) to evaluate the possible further Development of the
Properties,
(d) to engage in marketing Products, to the extent permitted
by Article 11,
(e) to acquire additional Property Interests within the Area
of Interest, and
(f) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
-11-
<PAGE> 12
3.4 Limitation. Unless the Participants otherwise agree in
writing, Operations shall be limited to the purposes described in
Article 3.3, and nothing in this Agreement shall be construed to
enlarge such purposes.
3.5 Effective Date and Term. The effective date of this
Agreement shall be the date first recited above. The term of this
Agreement shall be for twenty (20) years from the effective date
and for so long thereafter as Products are produced from the
Properties, unless the Agreement is earlier terminated as herein
provided.
ARTICLE 4
RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership. Nothing contained in this Agreement shall
be deemed to constitute either Participant the partner of the
other, nor, except as otherwise herein expressly provided, to
constitute either Participant the agent or legal representative of
the other, nor to create any fiduciary relationship between them.
It is not the intention of the Participants to create, nor shall
this Agreement be construed to create, any Mining, commercial or
other partnership. Neither Participant shall have any authority to
act for or to assume any obligation or responsibility on behalf of
the other Participant, except as otherwise expressly provided
herein. The rights, duties, obligations and liabilities of the
-12-
<PAGE> 13
Participants shall be several and not joint or collective. Each
Participant shall be responsible only for its obligations as herein
set out and shall be liable only for its share of the costs and
expenses as provided herein, it being the express purpose and
intention of the Participants that their ownership of Assets and
the rights acquired hereunder shall be as tenants in common. Each
Participant shall indemnify, defend and hold harmless the other
Participant, its directors, officers, employees, agents and
attorneys from and against any and all losses, claims, damages and
liabilities arising out of any act or any assumption of liability
by the indemnifying Participant, or any of its directors, officers,
employees, agents and attorneys done or undertaken, or apparently
done or undertaken, on behalf of the other Participant, except pur-
suant to the authority expressly granted herein or as otherwise
agreed in writing between the Participants.
4.2 Federal Tax Elections. The Participants hereby agree to
elect that this Agreement and all Operations hereunder be excluded
from the applications of the provisions of Subchapter K of Chapter
1 of Subtitle A of the United States Internal Revenue Code of 1954,
as amended, and the similar provisions of applicable state law.
Each Participant agrees to effect this election pursuant to Section
761(a) of the Code. Subject to the written approval of the
Participants, the Manager shall prepare and file the proper
documents to insure the Participant's exclusion from Subchapter K
and from similar provisions of applicable state law, and shall
-13-
<PAGE> 14
provide a copy of such documents forthwith thereafter to each of
the Participants.
4.3 State Income Tax. The Participants also agree that, to
the extent permissible under applicable law, their relationship
shall be treated for state income tax purposes in the same manner
as it is for federal income tax purposes.
4.4 Tax Returns. The Manager shall prepare and shall file,
after approval of the Management Committee, any tax returns or
other tax forms required on behalf of the Venture.
4.5 Other Business Opportunities. Except as expressly
provided in this Agreement, each Participant shall have the right
independently to engage in and receive full benefits from business
activities, whether or not competitive with the Operations, without
consulting the other. The doctrines of "corporate opportunity" or
"business opportunity" shall not be applied to any other activity,
venture, or operation of either Participant, and neither
Participant shall have any obligation to the other with respect to
any opportunity to acquire any property outside the Area of
Interest at any time or, except as otherwise provided in Article
12.5, within the Area of Interest after the termination of this
Agreement. Unless otherwise agreed in writing, no Participant
shall have any obligation to mill, beneficiate or otherwise treat
-14-
<PAGE> 15
any Products or any other Participant's share of Products in any
facility owned or controlled by such Participants.
4.6 Record Title. Title to the Properties shall be held in
the name of the Manager for the benefit of the Participants in
accordance with their Participating Interests. A memorandum of the
Agreement shall be recorded in the applicable real property
records. Title to all other Assets shall be held in the name of
the Manager for the benefit of the Participants in the Venture
provided however that the Company shall be entitled to require the
Manager to execute, file and record documents as may be required by
the Company to document or provide notice of the Company's
Participating Interest in any or all of the Assets. Such filings
or recordings may include, but are not limited to, Uniform
Commercial Code filings, memoranda of real property interests,
filings with the Bureau of Land Management and filings with other
government agencies. Notwithstanding that any such filing or
recording may indicate that the Company has a "security" or other
interest in the Assets, the Company's Participating Interest in the
Assets is an ownership interest as contemplated by this Agreement.
4.7 Waiver of Right to Partition. The Participants hereby
waive and release all rights of partition, or of sale in lieu
thereof, or other division of Assets, including any such rights
provided by statute.
-15-
<PAGE> 16
4.8 Transfer or Termination of Rights to Properties. Except
as otherwise provided in this Agreement, neither Participant shall
Transfer all or any part of its interest in the Assets or this
Agreement or otherwise permit or cause such interests to terminate.
4.9 Implied Covenants. There are no implied covenants con-
tained in this Agreement other than those of good faith and fair
dealing.
ARTICLE 5
CONTRIBUTIONS BY PARTICIPANTS
5.1 Participants' Initial Contributions. Hecla, as its
Initial Contribution, hereby contributes its 80% interest in the
Assets to the purposes of this Agreement. The agreed value of
Hecla's Initial Contribution is $48,523,432. The Company, as its
Initial Contribution, hereby contributes its 20% interest in the
Assets to the purposes of this Agreement. The agreed value of the
Company's Initial Contribution is $12,120,858.
5.2 Additional Cash Contributions. The Participants, subject
to any election permitted by Article 6.3, shall be obligated to
contribute funds to approved Programs and Budgets in proportion to
their respective Participating Interest.
-16-
<PAGE> 17
5.3 Funding of Reclamation and Closure Costs. The
Participants agree that funds regularly shall be set aside by the
Venture during the term of this Agreement in an amount sufficient
to meet reclamation and other closure costs which are reasonably
estimated to be required for reclamation and closure for all
Operations conducted pursuant to this Agreement. The Management
Committee will periodically, but not less frequently than once
every one (1) year, estimate the amount of funds which will be
required for such purposes and will establish the amount of annual
funding required which, together with interest thereon, will
accumulate to such estimate. The estimated annual required funding
will be made part of the Program and Budget and shall be satisfied
by cash contributions from the Participants or the posting of a
letter of credit or other form of surety. Provided, however, that
if a Participant posts a letter of credit or other form of surety,
that Participant shall be obligated to make additional
contributions on an annual basis so that the value of the letter of
credit or other surety equals the value of a cash contribution plus
interest at the rate of return realized by investment of the cash
contribution as provided in this Article 5.3. Funds will be
deposited in an interest-bearing escrow account or such other
revenue generating investment account as the Management Committee
shall direct. Withdrawals from such accounts will be restricted to
the specified purpose of paying end of mine life reclamation and
closure costs; provided, however, that the Management Committee
may, from time-to-time, use such funds to perform reclamation that
-17-
<PAGE> 18
would otherwise have to be undertaken at the end of Operations so
long as the ability to fund all such reclamation is not impaired.
If any escrow funds remain after reclamation and closure
obligations have been fulfilled, they shall be distributed to the
Participants in proportion to the Participants' Participating
Interests at the time of distribution.
ARTICLE 6
INTERESTS OF PARTICIPANTS
6.1 Initial Participating Interests. The Participants shall
have the following Initial Participating Interests:
Hecla - 80%
The Company - 20%
6.2 Changes in Participating Interests. A Participant's Par-
ticipating Interest shall be changed as follows:
(a) As provided in Article 6.5; or
(b) As provided in Article 9 of the Acquisition Agreement; or
(c) Upon an election by a Participant pursuant to Article 6.3
to contribute less to Capitalized Expenditures which are a part
of an approved Program and Budget than the percentage reflected
by its Participating Interest; or
-18-
<PAGE> 19
(d) In the event of default by a Participant in making its
agreed-upon contribution to an approved Program and Budget,
followed by an election by the other Participant to invoke
Article 6.4(c); or
(e) Transfer by a Participant of less than all its Parti-
cipating Interest in accordance with Article 15; or
(f) Acquisition of less than all of the Participating Interest
of the other Participant, however arising.
6.3 Voluntary Reduction in Participation. Except with respect
to a Participant's obligation to make its Initial Contribution and
contributions toward the Venture's operating cost requirements
under the most recent approved Program and Budget, as to which no
election is permitted, a Participant may elect, as provided in
Article 9.5, to limit its contributions toward the Venture's
Capitalized Expenditures which are a part of an approved Program
and Budget as follows:
(a) To some lesser amount than its respective Participating
Interest; or
(b) Not at all.
-19-
<PAGE> 20
If a Participant elects to contribute to an approved Program
and Budget some lesser amount toward Capitalized Expenditures than
its respective Participating Interest, or not at all, the
Participating Interest of that Participant shall be recalculated at
the time of election by dividing: (A) the sum of (a) the agreed
value of the Participant's Initial Contribution under Article 5.1,
(b) the total of all of the Participant's contributions toward the
Venture's Capitalized Expenditures under Article 5.2, and (c) the
amount, if any, the Participant elects to contribute toward the
Venture's Capitalized Expenditures in the approved Program and
Budget; by (B) the sum of (a), (b) and (c) above for all
Participants; and then multiplying the result by one hundred (100).
The Participating Interest of the other Participant shall thereupon
become the difference between one hundred percent (100%) and the
recalculated Participating Interest.
6.4 Default in Meeting Cash Calls
(a) If a Participant defaults in paying a cash call pursuant
to section 10.2, the non-defaulting Participant may, in its
sole discretion, advance the defaulted amount on behalf of the
defaulting Participant and treat the same, together with any
accrued interest, as a demand loan bearing interest from the
date of the advance at the rate provided in Article 10.3. The
failure to repay the loan upon demand shall be a default. Each
Participant hereby grants to the other a lien upon its interest
-20-
<PAGE> 21
in the Properties and a security interest in its rights under
this Agreement and in its Participating Interest in other
Assets, and the proceeds therefrom, to secure any loan made
hereunder, including interest thereon, reasonable attorneys'
fees and all other reasonable costs and expenses incurred in
recovering the loan with interest and in enforcing such lien
or security interest, or both. A non-defaulting Participant
may elect the applicable remedy under 6.4(a), 6.4(b), or
6.4(c), or, to the extent a Participant has a lien or security
interest under applicable law, it shall be entitled to its
rights and remedies at law and in equity. All such rights and
remedies shall be cumulative. The election of one or more
remedies shall not waive the election of any other remedies.
Each Participant hereby irrevocably appoints the other its
attorney-in-fact to execute, file and record all instruments
necessary to perfect or effect the provisions hereof.
(b) If a default in paying a cash call or loan is not cured within
sixty (60) days after notice to the defaulting Participant of
such default, the defaulting party shall have until six (6)
months after the date of the cash call pursuant to section 10.2
to cure the default by paying to the non-defaulting Participant
an amount equal to the amount of the cash call for which the
Participant is in default multiplied by 1.75 (the "Damages
Amount"). During the period of default commencing after the
initial 60-day period, the non-defaulting Participant shall be
-21-
<PAGE> 22
entitled to the proceeds from the Participant's share of
Products to fund the required cash call, up to a maximum of the
Damages Amount. If such proceeds are sufficient to pay the
entire Damages Amount, the defaulting Participant shall be
deemed to have cured the default and shall owe nothing further
to the non-defaulting Participant. If such proceeds are
insufficient to pay the entire Damages Amount, the defaulting
Participant may cure the default by paying to the non-
defaulting Participant the difference between the Damages
Amount and the amount received from such proceeds within the
six (6) month period by the non-defaulting Participant.
(c) The Participants acknowledge that if a Participant defaults
in paying a cash call, or in repaying a loan, or paying the
Damages Amount, as required hereunder, it will be difficult to
measure the damages resulting from any such default. In the
event of any such default, as reasonable liquidated damages,
the non-defaulting Participant may, with respect to any such
default not cured within six (6) months after the date of the
cash call pursuant to section 10.2, elect to treat such default
as a deemed withdrawal from the Venture, in which event the
defaulting Participant's Participating Interest shall terminate
and shall be automatically relinquished to the non-defaulting
Participant; provided, however, subject to section 6.7, the
defaulting Participant shall have the right to receive only
from 10% of Net Proceeds (calculated as provided in Exhibit C),
-22-
<PAGE> 23
if any, and not from any other source, an amount equal to the
defaulting Participant's aggregate contributions pursuant to
Articles 5.1 and 5.2 less the value of all Products or proceeds
therefrom previously received from the Venture by the
defaulting Participant. Upon receipt of such amount the
defaulting Participant shall thereafter have no further right,
title or interest in Assets or under this Agreement.
6.5 Elimination of Minority Interest. Upon the reduction of
its Participating Interest to less than ten percent (10%), a Parti-
cipant shall be deemed to have withdrawn from this Agreement and
shall relinquish its entire Participating Interest. Provided,
however, subject to section 6.7, the withdrawing Participant shall
have the right to receive only from 5% of Net Proceeds (calculated
as provided in Exhibit C), if any, and not from any other source,
an amount equal to the withdrawing Participant's aggregate
contributions pursuant to Articles 5.1 and 5.2. Upon receipt of
such amount, the withdrawing Participant shall thereafter have no
further right, title or interest in the Assets or under this
Agreement. Such relinquished Participating Interest shall be
deemed to have accrued automatically to the other Participant.
6.6 Continuing Liabilities Upon Adjustments of Participating
Interests. Any reduction of a Participant's Participating Interest
under this Article 6 shall not relieve such Participant of its
share of any liability, cost, penalty or fine, whether it accrues
-23-
<PAGE> 24
before or after such reduction, arising out of Operations conducted
prior to such reduction. For purposes of this Article 6, such
Participant's share of such liability shall be equal to its
Participating Interest at the time such liability was incurred.
The increased Participating Interest accruing to a Participant as
a result of the reduction of the other Participant's Participating
Interest shall be free of royalties, liens or other encumbrances
arising by, through or under such other Participant, other than
those existing at the time the Properties were acquired or those to
which both Participants have given their written consent. An
adjustment to a Participating Interest need not be evidenced during
the term of this Agreement by the execution and recording of
appropriate instruments, but each Participant's Participating
Interest shall be shown in the books of the Manager. However,
either Participant, at any time upon the request of the other
Participant, shall execute and acknowledge instruments necessary to
evidence such adjustment in form sufficient for recording in the
jurisdiction where the Properties are located.
6.7 Maximum Net Proceeds. If at any time more than one
Participant is entitled to receive an amount from Net Proceeds
under section 6.4 or 6.5, the maximum amount available from Net
Proceeds shall be 10%, allocated among the Participants pro rata.
ARTICLE 7
MANAGEMENT COMMITTEE
-24-
<PAGE> 25
7.1 Organization and Composition. The Participants hereby
establish a Management Committee to determine overall policies,
objectives, procedures, methods and actions under this Agreement.
The Management Committee shall consist of two (2) members appointed
by Hecla and two (2) members appointed by the Company. Each
Participant may appoint one (1) or more alternates to act in the
absence of a regular member. Any alternate so acting shall be
deemed a member. Appointments shall be made or changed by notice
to the other Participant.
7.2 Decision. Each Participant, acting through its appointed
members, shall have the number of votes on the Management Committee
equal to its Participating Interest. Unless otherwise provided in
this Agreement, decisions of the Management Committee shall be
determined by a majority vote. If a proposed Program and Budget
receives the approval of no more than fifty percent (50%) of the
Participating Interests, the resolution of such a deadlock shall be
governed by the terms of Article 9.4. If any matters other than
the approval of Programs and Budgets receive the approval of no
more than fifty percent (50%) of the Participating Interests, the
Manager shall cast the deciding vote on such matters.
7.3 Meeting. The Management Committee shall hold regular
meetings at least quarterly in Coeur d'Alene, Idaho, or at other
locations specified by the Manager. The Manager shall give thirty
(30) days' notice to the Participants of such regular meetings.
-25-
<PAGE> 26
Additionally, either Participant may call a special meeting upon
fifteen (15) days' notice to the Manager and the other Participant.
In case of emergency, reasonable notice of a special meeting shall
suffice. There shall be a quorum if at least one (1) member
representing each Participant is present. Each notice of a meeting
shall include an itemized agenda prepared by the Manager in the
case of a regular meeting, or by the Participant calling the
meeting in the case of a special meeting, but any matters may be
considered with the consent of all Participants. The Manager shall
prepare minutes of all meetings and shall distribute copies of such
minutes to the Participants within thirty (30) days after the
meeting. Failure by a Participant to sign or furnish written
detailed notice of objection to the minutes within twenty (20) days
after receipt from the Manager, shall be deemed acceptance of such
minutes by the Participant. The minutes, when signed or deemed
accepted by all Participants, shall be the official record of the
decisions made by the Management Committee and shall be binding on
the Manager and the Participants. If personnel employed in
Operations are required to attend a Management Committee meeting,
reasonable costs incurred in connection with such attendance shall
be a Venture cost. All other costs shall be paid by the
Participants individually.
7.4 Action Without Meeting. In lieu of meetings, the Manage-
ment Committee may hold telephone conferences, so long as all
-26-
<PAGE> 27
decisions are immediately confirmed in writing by the Participants.
7.5 Matters Requiring Approval. Except as otherwise provided
by this Agreement, the Management Committee shall have exclusive
authority to determine all management matters related to this
Agreement.
ARTICLE 8
MANAGER
8.1 Appointment. So long as Hecla holds a majority
Participating Interest in the Venture, Hecla shall be entitled to
be and is hereby appointed to be the Manager with overall
management responsibility for Operations. Hecla hereby agrees to
serve until it elects, in its sole discretion, to resign or is
otherwise deemed to have offered to resign as provided in Article
8.4.
8.2 Powers and Duties of Manager. Subject to the general
oversight and direction of the Management Committee, the Manager is
vested with the full authority to manage and carry out the day to
day management of the Venture and to conduct all Operations
pursuant to the terms of this Agreement and the last approved
Program and Budget. The Manager agrees, by itself, or through its
employees, agents or contractors, to carry out its duties in
accordance with the terms and intent of this Agreement, on behalf
-27-
<PAGE> 28
of and for the account of the Participants according to their
Participating Interests. Without limiting the generality of the
foregoing, the Manager shall have the following powers and duties:
(a) The Manager shall manage, direct and control Operations.
(b) The Manager shall implement the decisions of the Management
Committee, shall make all expenditures necessary to carry out
approved Programs, and shall promptly advise the Management
Committee if it lacks sufficient funds to carry out its
responsibilities under this Agreement.
(c) The Manager shall: (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and
transportation services required for Operations, such purchases
and acquisitions to be made on the best terms available, taking
into account all of the circumstances; (ii) obtain such
customary warranties and guarantees as are available in
connection with such purchases and acquisitions; and (iii) keep
the Assets free and clear of all liens and encumbrances, except
for those existing at the time of, or created concurrent with,
the acquisition of such Assets, or mechanic's or materialmen's
liens which shall be released or discharged in a diligent
manner, or liens and encumbrances specifically approved by the
Management Committee.
-28-
<PAGE> 29
(d) The Manager shall conduct such title examinations and cure
such title defects as may be advisable in the reasonable
judgment of the Manager.
(e) The Manager shall: (i) make or arrange for all payments
required by leases, licenses, permits, contracts and other
agreements related to the Assets; (ii) pay all taxes,
assessments and like charges on Operations and Assets except
taxes determined or measured by a Participant's sales revenue
or net income. If authorized by the Management Committee, the
Manager shall have the right to contest in the courts or
otherwise, the validity or amount of any taxes, assessments or
charges if the Manager deems them to be unlawful, unjust,
unequal or excessive, or to undertake such other steps or
proceedings as the Manager may deem reasonably necessary to
secure a cancellation, reduction, readjustment or equalization
thereof before the Manager shall be required to pay them, but
in no event shall the Manager permit or allow title to the
Assets to be lost as the result of the nonpayment of any taxes,
assessments or like charges; and (iii) do all other acts
reasonably necessary to maintain the Assets.
(f) The Manager shall: (i) apply for all necessary permits,
licenses and approvals; (ii) use reasonable best efforts to
comply with applicable federal, state and local laws and
regulations; (iii) notify promptly the Management Committee of
-29-
<PAGE> 30
any allegations of substantial violation thereof; and (iv)
prepare and file all reports or notices required for
Operations.
(g) The Manager shall prosecute and defend, but shall not
initiate without consent of the Management Committee, all
litigation or administrative proceedings arising out of
Operations. The non-managing Participant shall have the right
to participate, at its own expense, in such litigation or
administrative proceedings. The non-managing Participant shall
approve in advance any settlement involving payments,
commitments or obligations in excess of two hundred and fifty
thousand dollars ($250,000) in cash or value, subject to
Inflationary Adjustment.
(h) The Manager shall provide insurance for the benefit of the
Participants or self insure as provided in Exhibit D.
(i) The Manager may dispose of Assets, whether by abandonment,
surrender or Transfer in the ordinary course of business,
except that Properties may be abandoned or surrendered only as
provided in Article 14. However, without prior authorization
from the Management Committee, the Manager shall not: (i)
dispose of Assets in any one transaction having a value in
excess of two hundred fifty thousand dollars ($250,000) subject
to Inflationary Adjustment; (ii) enter into any sales contracts
-30-
<PAGE> 31
or commitments for Product, except as permitted in Article
11.2; (iii) begin a liquidation of the Venture; or (iv) dispose
of all or a substantial part of the Assets necessary to achieve
the purposes of the Venture.
(j) The Manager shall have the right to carry out its
responsibilities hereunder through agents, Affiliates or
independent contractors.
(k) The Manager shall perform or cause to be performed during
the term of this Agreement all assessment and other work
required by law and pay all rental fees or other charges
required by law in order to maintain the unpatented mining
claims included within the Properties. The Manager shall have
the right to perform the assessment work or pay the fees
required in lieu thereof required hereunder pursuant to a
common plan of Exploration, and continued actual occupancy of
such claims and sites shall not be required. The Manager shall
not be liable on account of any determination by any court or
governmental agency that the work performed by Manager does not
constitute the required annual assessment work or occupancy for
the purposes of preserving or maintaining ownership of the
claims, provided that the work done is in accordance with the
adopted Program and Budget. The Manager shall timely record
with the appropriate county and file with the appropriate
United States agency, affidavits in proper form attesting to
-31-
<PAGE> 32
the performance of assessment work or notices of intent to hold
in proper form, or notice of payment of annual rental fees, and
allocating therein, to or for the benefit of each claim, at
least the minimum amount of assessment work or rental fee
required by law to maintain such claim or site.
(l) The Manager may: (i) locate, amend or relocate any
unpatented mining claim or mill site or tunnel site; (ii)
locate any fractions resulting from such amendment or
relocation; (iii) apply for patents or mining leases or other
forms of mineral tenure for any such unpatented claims or
sites; (iv) abandon any unpatented mining claims for the
purpose of locating mill sites or otherwise acquiring from the
United States rights to the ground covered thereby; (v) abandon
any unpatented mill sites for the purpose of locating mining
claims or otherwise acquiring from the United States rights to
the ground covered thereby; (vi) exchange with or convey to the
United States or other parties any of the Properties for the
purpose of acquiring rights to the ground covered thereby or
other adjacent ground; and (vii) convert any unpatented claims
or mill sites into one or more leases or other forms of mineral
tenure pursuant to any federal law hereafter enacted.
(m) The Manager shall keep and maintain all required accounting
and financial records pursuant to the Accounting Procedure and
-32-
<PAGE> 33
in accordance with customary cost accounting practices in the
mining industry.
(n) The Manager shall keep the Management Committee advised of
all Operations by submitting in writing to the Management
Committee: (i) monthly progress reports which include
statements of expenditures and comparisons of such expenditures
to the adopted Budget; (ii) periodic summaries of data
required; (iii) copies of reports concerning Operations; (iv)
a detailed final report within ninety (90) days after
completion of each Program and Budget, which shall include
comparisons between actual and budgeted expenditures and
comparisons between the objectives and results of Programs; (v)
any activities undertaken pursuant to Section 8.2(l); and (vi)
such other reports as the Management Committee may reasonably
request. At all reasonable times the Manager shall provide the
Management Committee or the representative of any Participant,
upon the request of any member of the Management Committee,
access to, and the right to inspect and copy all maps, drill
logs, core tests, reports, surveys, assays, analyses,
production reports, operations, technical, accounting and
financial records, and other information acquired in
Operations. In addition, the Manager shall allow the
non-managing Participant, at the latter's sole risk and
expense, and subject to reasonable safety regulations, to
inspect the Assets and Operations at all reasonable times, so
-33-
<PAGE> 34
long as the inspecting Participant does not unreasonably
interfere with Operations.
(o) The Manager shall undertake all other activities reasonably
necessary to fulfill the foregoing enumerated powers, and shall
undertake and is hereby empowered on behalf of the Venture to
take all such other actions and do all such other things as are
reasonably necessary to advance and foster the business of the
Venture.
(p) The Manager shall cause to be paid from the Joint Account
all workmen and wage earners employed by it or its contractors
in connection with the Grouse Creek Project, and for all
materials and services purchased in connection therewith,
except for claims for, without limitation, wages or materials
which the Manager is contesting in good faith. Operations
generally will be carried out by employees of the Manager
appointed pursuant to Article 8. Expenses related to employees
of the Manger directly engaged in Operations shall be charged
to the Joint Account as provided in Exhibit B. The Manager
shall not enter into any collective bargaining agreement, or
other agreement with a labor union, or engage in any other
conduct that might require the Manger to make Contributions on
behalf of employees directly engaged in Operations to a multi-
employer plan, as defined in Section 4001(a)(3) of the Employee
Retirement Income Security Act of 1974, without the written
-34-
<PAGE> 35
consent of the Company, which consent shall not be unreasonably
withheld.
The Manager shall not be in default of any duty under this Article
8.2 if its failure to perform results from the failure of the
non-managing Participant to perform acts or to contribute amounts
required of it by this Agreement.
8.3 Standard of Care. The Manager shall conduct all
Operations in a good, workmanlike and efficient manner, in
accordance with sound mining and other applicable industry
standards and practices, and in material compliance with the terms
and provisions of leases, licenses, permits, contracts and other
agreements pertaining to Assets. The Manager shall not be liable
to the non-managing Participant for any act or omission resulting
in damage, loss, cost, penalty or fine, except to the extent caused
by the Manager's willful misconduct or gross negligence.
8.4 Resignation; Deemed Offer to Resign. The Manager may
resign upon two (2) months' prior written notice to the other
Participant, in which case the other Participant may elect to
become the new Manager by notice to the resigning Participant
within thirty (30) days after the notice of resignation. If any of
the following shall occur, the Manager shall be deemed to have
offered to resign, which offer shall be accepted by the other
Participant, if at all, within ninety (90) days following such
-35-
<PAGE> 36
deemed offer, and, in the absence of written acceptance by the
other Participant, the Manager shall continue to be Manager:
(a) The Participating Interest of the Manager becomes less than
fifty percent (50%) and any other Participant holds a
Participating Interest greater than the Manager; or
(b) The Manager fails to perform a material obligation imposed
upon the Manager under this Agreement and fails to commence
curing or contest the default within thirty (30) days after
notice from the other Participant demanding performance; or
(c) If the Manager becomes insolvent, bankrupt or is placed in
receivership, it shall be deemed to have resigned without any
action by the other Participant. If a petition for relief
under federal bankruptcy laws is filed by or against the
Manager, and the removal of the Manager is prevented by the
federal bankruptcy court or laws, all Participants shall
comprise an interim operating committee to serve until the
Manager has elected to reject or to assume this Agreement
pursuant to the federal bankruptcy laws, and an election to
reject this Agreement by the Manager as a debtor in possession,
or by a trustee in bankruptcy, shall be deemed a resignation
of the Manager without any action by the other Participant.
During the period of time the operating committee controls
activities under this Agreement, a third party acceptable to
-36-
<PAGE> 37
the non-Manager Participant, the Manager and the federal
bankruptcy court shall be selected as a member of the operating
committee, and all actions of the operating committee shall
require the approval of two (2) members of the operating
committee without regard to the Participating Interests of the
Participants.
8.5 Payments to Manager. The Manager shall be compensated for
its services and reimbursed for its costs hereunder in accordance
with the Accounting Procedure.
8.6 Transactions with Affiliates. If the Manager engages
Affiliates to provide services hereunder, it shall do so on terms
no less favorable to the Venture than would be the case with unre-
lated persons in arm's-length transactions.
8.7 Activities Pending Adoption of New Program and Budget.
If the Management Committee for any reason fails to adopt a Program
and Budget, subject to the contrary direction of the Management
Committee and to the receipt of necessary funds, the Manager shall
continue Operations at levels comparable with the last adopted
Program and Budget. For purposes of determining the required
contributions of the Participants and their respective
Participating Interests, the last adopted Program and Budget shall
be deemed extended.
-37-
<PAGE> 38
ARTICLE 9
PROGRAMS AND BUDGETS
9.1 Initial Program and Budget. The initial Program and
Budget, which has been adopted by the Participants, is attached as
Exhibit E.
9.2 Operations Pursuant to Programs and Budgets. Except as
otherwise provided in Article 9.7 and Article 13, Operations shall
be conducted, expenses shall be incurred, and Assets shall be
acquired only pursuant to approved Programs and Budgets.
9.3 Presentation of Programs and Budgets. Proposed Programs
and Budgets shall be prepared by the Manager for a period of one
year unless a longer period is agreed to by all Participants. Each
approved Program and Budget, regardless of length of time, shall be
reviewed at least once a year at a regular meeting of the
Management Committee. During the period encompassed by any Program
and Budget, and at least two (2) months prior to its expiration, a
proposed Program and Budget for the succeeding period shall be
prepared by the Manager and submitted to the Participants. Each
such proposed Program and Budget shall be in a form and degree of
detail substantially similar to Exhibit E.
9.4 Review and Approval of Proposed Programs and Budgets.
Within thirty (30) days after submission of a proposed Program and
-38-
<PAGE> 39
Budget, each Participant shall submit to the Management Committee:
(a) Notice that the Participant approves the proposed Program
and Budget; or
(b) Proposed modifications of the proposed Program and Budget;
or
(c) Notice that the Participant rejects the proposed Program
and Budget.
If a Participant fails to give any of the foregoing responses
within the allotted time, the failure shall be deemed to be an
approval by the Participant of the Manager's proposed Program
and Budget. If a Participant makes a timely submission to the
Management Committee pursuant to Article 9.4(b) or (c), then
the Management Committee shall meet to consider and develop a
Program and Budget acceptable to the Participants. If the
Management Committee does not unanimously approve a proposed
Program and Budget within thirty (30) days after the Manager's
receipt of a notice pursuant to Section 9.4(b) or (c), a
proposed Program and Budget may be approved by a majority vote
of the Management Committee.
If the Program and Budget is subsequently modified to
decrease expenditures by fifteen percent (15%) or more from the
-39-
<PAGE> 40
Program and Budget as originally approved, the non-contributing
or partially-contributing Participant, as the case may be,
shall have the right to contribute the difference between the
amount, if any, already contributed and its full share, based
on its Participating Interest prior to the reduction, of the
modified Program and Budget, and thereby avoid any reduction
in its Participating Interest. The Manager shall, at such time
as it becomes aware that expenditures for the Budget will be
eighty-five percent (85%) or less than that as originally
adopted, notify the non-contributing or partially-contributing
Participants. The non-contributing or partially-contributing
Participant may within thirty (30) days thereafter notify the
Manager of its election to contribute to its full share of the
modified Program and Budget. Such notice shall include full
payment of the non-contributing or partially-contributing
Participant's share of the modified Program and Budget to the
date of the payment.
Notwithstanding any other provision of this Agreement, the
following shall require the unanimous approval of the
Management Committee:
(a) any Program and Budget proposing Capital Expenditures of
more than five million dollars ($5,000,000), subject to
Inflationary Adjustments;
-40-
<PAGE> 41
(b) any proposal by the Manager to shutdown Operations when the
forecasted losses of the Venture for the one year period
following the proposed shutdown are less than the closure and
holding costs of the Venture for the same period;
(c) any Program and Budget proposing an increase in operating
costs of more than fifteen percent (15%) over the previous
approved Program and Budget, subject to Inflationary
Adjustments.
9.5 Election to Participate. By notice to the Management
Committee within twenty (20) days after the final vote approving a
Program and Budget, a participant may elect to contribute to
Capitalized Expenditures which are a part of such Program and
Budget in some lesser amount than its respective Participating
Interest, or not at all, in which case its Participating Interest
shall be recalculated as provided in Article 6. If a Participant
fails to so notify the Management Committee, the Participant shall
be deemed to have elected to contribute to such Program and Budget
in proportion to its respective Participating Interest as of the
beginning of the period covered by the Program and Budget.
9.6 Budget Overruns; Program Changes. The Manager shall
immediately notify the Management Committee of any material
departure from an adopted Program and Budget. The Manager may not
exceed an approved Program and Budget by more than fifteen percent
-41-
<PAGE> 42
(15%) without the unanimous approval of the Management Committee.
If the Manager does exceed an approved Program and Budget by more
than fifteen percent (15%) without the unanimous approval of the
Management Committee, the Manager shall be solely responsible for
the costs associated with exceeding the approved Program and Budget
by more than fifteen percent (15%).
9.7 Emergency or Unexpected Expenditures. In case of emer-
gency, the Manager may take any reasonable action it deems
necessary to protect life, limb or property, to protect the Assets
or to comply with law or government regulation. The Manager may
also make reasonable expenditures for unexpected events which are
beyond its reasonable control and which do not result from a breach
by it of its standard of care. The Manager shall promptly notify
the Participants of the emergency or unexpected expenditure, and
the Manager shall be reimbursed for all resulting costs by the
Participants in proportion to their respective Participating
Interests at the time the emergency or unexpected expenditures are
incurred.
-42-
<PAGE> 43
ARTICLE 10
ACCOUNTS AND SETTLEMENTS
10.1 Monthly Statements. The Manager shall promptly submit
to the Management Committee monthly statements of account re-
flecting in reasonable detail the charges and credits to the Joint
Account during the preceding month.
10.2 Cash Calls. On the basis of the approved Program and
Budget, the Manager shall submit to each Participant prior to the
last day of each month, a billing for estimated cash requirements
for the next month. Within ten (10) days after receipt of each
billing, each Participant shall advance to the Manager its
proportionate share of the estimated amount. The Manager shall
promptly submit to each Participant billings for all other
authorized expenditures as they are incurred. Time is of the
essence in payment of such billings. The Manager shall at all
times maintain a cash balance approximately equal to the estimated
disbursements for the next ninety (90) days.
10.3 Failure to Meet Cash Calls. A Participant that fails to
meet cash calls in the amount and at the times specified in Article
10.2 shall deemed to be in default of its obligations under this
Agreement, and the amounts of the defaulted cash call shall bear
interest from the date due at an annual rate equal to two (2)
percentage points over the Prime Rate, but in no event shall the
-43-
<PAGE> 44
rate of interest exceed the maximum permitted by law. The
non-defaulting Participant shall have those rights, remedies and
elections specified in Article 6.4.
10.4 Audits. Upon request made by any Participant within
twelve (12) months following the end of the calendar year (or, if
the Management Committee has adopted an accounting period other
than the calendar year, within twelve (12) months after the end of
such period), the Manager shall order an audit of the accounting
and financial records for such calendar year (or other accounting
period). The cost of such audit shall be charged to the Joint
Account. All written exceptions to and claims upon the Manager for
discrepancies disclosed by such audit shall be made not more than
three (3) months after receipt of the audit report. Failure to
make any such exception or claim within the three-month period
shall mean the audit is correct and binding upon the Participants.
The audits shall be conducted by a firm of certified public
accountants selected by unanimous vote of the Management Committee.
ARTICLE 11
DISPOSITION OF PRODUCTION
11.1 Taking in Kind. Each Participant shall take in kind or
separately dispose of its share of all Products in accordance with
its Participating Interest. Any extra expenditure incurred in the
taking in kind or separate disposition by any Participant of its
-44-
<PAGE> 45
proportionate share of Products shall be borne by such Participant.
Nothing in this Agreement shall be construed as providing, directly
or indirectly, for any joint or cooperative marketing or selling of
Products or permitting the processing of Products of any parties
other than the Participants at any processing facilities
constructed by the Participants pursuant to this Agreement. The
Manager shall give the Participants notice at least ten (10) days
in advance of the delivery date upon which their respective share
of Products will be available.
11.2 Failure of Participant to Take in Kind. If a Participant
fails to take in kind, the Manager shall have the right, but not
the obligation, for a period of time consistent with the minimum
needs of the industry, but not to exceed one (1) year, to purchase
the Participant's share for its own account or to sell such share
as agent for the Participant at not less than the prevailing market
price in the area. Subject to the terms of any such contracts of
sale then outstanding, during any period that the Manager is pur-
chasing or selling a Participant's share of production, the
Participant may elect by notice to the Manager to take in kind.
The Manager shall be entitled to deduct from proceeds of any sale
by it for the account of a Participant reasonable expenses incurred
in such a sale.
-45-
<PAGE> 46
ARTICLE 12
WITHDRAWAL AND TERMINATION
12.1 Termination by Expiration or Agreement. This Agreement
shall terminate as expressly provided in this Agreement, unless
earlier terminated by written agreement of all Participants.
12.2 Withdrawal. A Participant may elect to withdraw as a
Participant from this Agreement by giving notice to the other
Participant of the effective date of withdrawal, which shall be the
later of the end of the then current Program and Budget or at least
thirty (30) days after the date of the notice. Upon such
withdrawal, this Agreement shall terminate, and the withdrawing
Participant shall be deemed to have transferred to the remaining
Participant, without cost and free and clear of royalties, liens or
other encumbrances arising by, through or under such withdrawing
Participant, except those exceptions to title described in Part 1
of Exhibit A and those to which both Participants have given their
written consent after the date of this Agreement, all of its
Participating Interest in the Assets and in this Agreement. No
withdrawal under this Article 12.2 shall relieve the withdrawing
Participant of its share of liabilities, costs, penalties or fines
to federal, state or local government or to third persons (whether
such accrues before or after such withdrawal) arising out of
Operations conducted prior to such withdrawal. For purposes of
this Article 12.2, the withdrawing Participant's share of such
-46-
<PAGE> 47
liabilities shall be equal to its Participating Interest at the
time such liability, cost, penalty or fine was incurred.
12.3 Continuing Obligations. On termination of this Agreement
under Article 12.1, the Participants shall each remain liable for
continuing obligations hereunder until final settlement of all
accounts and for any liability, whether it accrues before or after
termination, if it arises out of Operations during the term of the
Agreement.
12.4 Disposition of Assets on Termination. Promptly after
termination under Article 12.1, the Manager shall take all action
necessary to wind up the activities of the Venture, and all costs
and expenses incurred in connection with the termination of the
Venture shall be expenses chargeable to the Venture. Any
Participant that has a negative capital account balance when the
Venture is terminated for any reason shall contribute to the Assets
of the Venture an amount sufficient to raise such balance to zero.
The Assets shall first be paid, applied, or distributed in
satisfaction of all liabilities of the Venture to third parties and
then to satisfy any debts, obligations, or liabilities owed to the
Participants. Before distributing any funds or Assets to
Participants, the Manager shall have the right to segregate amounts
which, in the Manager's reasonable judgment, are necessary to
discharge continuing obligations or to purchase for the account of
Participants, bonds or other securities for the performance of such
-47-
<PAGE> 48
obligations. The foregoing shall not be construed to include the
repayment of any Participant's capital contributions. Thereafter,
any remaining cash and all other Assets shall be distributed (in
undivided interests unless otherwise agreed) to the Participants in
proportion to their respective Participating Interest, first in the
ratio and to the extent of their respective capital accounts and
then in proportion to their respective Participating Interests,
subject to any dilution, reduction, or termination of such
Participating Interests as may have occurred pursuant to the terms
of this Agreement. No Participant shall receive a distribution of
any interest in Products or proceeds from the sale thereof if such
Participant's Participating Interest therein has been terminated
pursuant to this Agreement.
12.5 Non-Compete Covenants. Neither a Participant that
withdraws pursuant to Article 12.2, or is deemed to have withdrawn
pursuant to Article 6.4(c) or 6.5 nor an Affiliate of such a
Participant shall directly or indirectly acquire any interest in
property within the Area of Interest for twenty-four (24) months
after the effective date of withdrawal. If a withdrawing
Participant, or an Affiliate of a withdrawing Participant, breaches
the terms of this Article 12.5, such Participant or Affiliate shall
be obligated to offer to convey to the non-withdrawing Participant,
without cost, any such property or interest so acquired. Such
offer shall be made in writing and can be accepted by the
non-withdrawing Participant at any time within forty-five (45) days
-48-
<PAGE> 49
after it is received by such non-withdrawing Participant. The
provisions of this Article 12.5 shall not apply to any property
interests which are acquired by a Participant pursuant to Article
13.4 of this Agreement.
12.6 Right to Data After Termination. After termination of
this Agreement pursuant to Article 12.1, each Participant shall be
entitled to copies of all information acquired hereunder before the
effective date of termination not previously furnished to it, but
a terminating or withdrawing Participant shall not be entitled to
any such copies after any other termination or any withdrawal.
12.7 Continuing Authority. On termination of this Agreement
under Article 12.1 or the deemed withdrawal of a Participant
pursuant to Article 6.4(c) or 6.5 or the withdrawal of a
Participant pursuant to Article 12.2, the Manager shall have the
power and authority, subject to control of the Management
Committee, if any, to do all things on behalf of the Participants
which are reasonably necessary or convenient to: (a) wind up
Operations and (b) complete any transaction and satisfy any
obligation, unfinished or unsatisfied, at the time of such
termination or withdrawal, if the transaction or obligation arises
out of Operations prior to such termination or withdrawal. The
Manager shall have the power and authority to grant or receive
extensions of time or change the method of payment of an already
existing liability or obligation, prosecute and defend actions on
-49-
<PAGE> 50
behalf of the Participants and the Venture, mortgage Assets, and
take any other reasonable action in any matter with respect to
which the former Participants continue to have, or appear or are
alleged to have, a common interest or a common liability.
ARTICLE 13
ACQUISITIONS WITHIN AREA OF INTEREST
13.1 General. Any interest or right to acquire any interest
in real property, water, water rights or a royalty interest (a
"Property Interest") wholly or partially within the Area of
Interest acquired during the term of this Agreement by or on behalf
of a Participant or any Affiliate shall be subject to the terms and
provisions of this Agreement.
13.2 Notice to Nonacquiring Participant. Within twenty (20)
days after the acquisition of any interest or the right to acquire
any Property Interest wholly or partially within the Area of
Interest (except real property acquired by the Manager pursuant to
a Program), the acquiring Participant shall notify the other
Participant of such acquisition. The acquiring Participant's
notice shall describe in detail the terms of the acquisition, the
lands and minerals covered thereby, and the cost thereof. The
acquiring Participant shall make available for inspection all
factual data in the possession or control of the acquiring
Participant concerning the Property Interest. In addition to such
- -50-
<PAGE> 51
notice, the acquiring Participant shall make any and all
information concerning the acquired interest available for
inspection by the other Participant.
13.3 Option Exercised. If, within twenty (20) days after re-
ceiving the acquiring Participant's notice, the other Participant
notifies the acquiring Participant of its election to accept a
proportionate interest in the Property Interest equal to its
Participating Interest, the acquiring Participant shall convey to
the other Participant, by quitclaim deed, such a proportionate
undivided interest therein. The Property Interest shall become a
part of the Properties for all purposes of this Agreement
immediately upon the notice of such other Participant's election to
accept the proportionate interest therein. Such other Participant
shall promptly pay to the acquiring Participant its proportionate
share of the latter's actual out-of-pocket acquisition costs,
including title examination and curative costs and attorney fees.
13.4 Option Not Exercised. If the other Participant does not
give such notice within the twenty (20) day period set forth in
Article 13.3, it shall have no interest in the Property Interest,
and the Property Interest shall not be a part of the Properties or
be subject to this Agreement.
-51-
<PAGE> 52
ARTICLE 14
ABANDONMENT AND SURRENDER OF PROPERTIES
14.1 Surrender or Abandonment of Property. The Management
Committee may authorize the Manager to surrender or abandon part or
all of the Properties consistent with the terms and conditions of
any agreement under which such portion or portions of the Property
were acquired. If the Management Committee authorizes any such
surrender or abandonment over the objection of a Participant, the
Participant that desires to abandon or surrender shall assign to
the objecting Participant, by quitclaim deed and without cost to
the surrendering Participant, all of the surrendering Participant's
interest in the property to be abandoned or surrendered, and the
abandoned or surrendered property shall cease to be part of the
Properties.
14.2 Reacquisition. If any Properties are abandoned or sur-
rendered under the provisions of this Article 14, then, unless this
Agreement is earlier terminated, neither Participant nor any
Affiliate thereof shall acquire any interest in such Properties or
a right to acquire such Properties for a period of three (3) years
following the date of such abandonment or surrender. If a
Participant reacquires any Properties in violation of this Article
14.2, the other Participant may elect by notice to the reacquiring
Participant within forty-five (45) days after it has actual notice
of such reacquisition, to have such Properties made subject to the
-52-
<PAGE> 53
terms of this Agreement. In the event such an election is made,
the reacquired Properties shall thereafter be treated as
Properties, and the costs of reacquisition shall be borne solely by
the reacquiring Participant and shall not be included for purposes
of calculating the Participants' respective Participating
Interests.
ARTICLE 15
TRANSFER OF INTEREST
15.1 General. A Participant shall have the right to Transfer
to any third party all or any part of its interest in or to this
Agreement, its Participating Interest, or the Assets solely as
provided in this Article 15.
15.2 Limitations on Free Transferability. The Transfer right
of a Participant in Article 15.1 shall be subject to the following
terms and conditions:
(a) No transferee of all or any part of the interest of a
Participant in this Agreement, any Participating Interest, or
the Assets shall have the rights of a Participant unless and
until the transferring Participant has provided to the other
Participant notice of the Transfer, and except as provided in
Articles 15.2(f) and 15.2(g), the transferee, as of the
effective date of the Transfer, has committed in writing to be
-53-
<PAGE> 54
bound by this Agreement to the same extent as the transferring
Participant.
(b) No Transfer permitted by this Article 15 shall relieve the
transferring Participant of its share of any liability, cost,
penalty or fine whether accruing before or after such Transfer,
which arises out of Operations conducted prior to such
Transfer.
(c) The transferring Participant and the transferee shall bear
all tax consequences of the Transfer.
(d) In the event of a Transfer of less than all of a Par-
ticipating Interest, the transferring Participant and its
transferee shall act and be treated as one Participant.
(e) No Participant shall Transfer any interest in this
Agreement or the Assets except as contemplated by Sections
15.2(f), 15.2(g) or by Transfer of part or all of its
Participating Interest.
(f) If the Transfer is the grant of a security interest by
mortgage, deed of trust, pledge, lien or other encumbrance of
any interest in this Agreement, any Participating Interest or
the Assets to secure a loan or other indebtedness of a
Participant in a bona fide transaction, such security interest
-54-
<PAGE> 55
shall be subordinate to the terms of this Agreement and the
rights and interests of the other Participant hereunder. Upon
any foreclosure or other enforcement of rights in the security
interest, the acquiring third party shall be deemed to have
assumed the position of the encumbering Participant with
respect to this Agreement and the other Participant, and it
shall comply with and be bound by the terms and conditions of
this Agreement.
(g) If a sale or other commitment or disposition of Products
or proceeds from the sale of Products by a Participant upon
distribution to it pursuant to Article 11 creates in a third
party a security interest in Products or proceeds therefrom
prior to such distribution, such sale, commitment or disposi-
tion shall be subject to the terms and conditions of this
Agreement.
(h) Only United States currency shall be used for Transfers for
consideration.
15.3 Preemptive Right. Except as otherwise provided in
Article 15.4, if a Participant desires to Transfer all or any part
of its interest in this Agreement, any Participating Interest, or
the Assets, the other Participant shall have a preemptive right to
acquire such interests as provided in this Article 15.3.
-55-
<PAGE> 56
(a) A Participant wishing to Transfer all or any part of its
interest in this Agreement, any Participating Interest, or the
Assets shall promptly notify the other Participant of its
intentions. The notice shall state the price and all other
pertinent terms and conditions upon which the Participant
wishes to complete the Transfer. The other Participant shall
have twenty (20) days from the date such notice is delivered
to notify the transferring Participant whether it elects to
acquire the offered interest at the price and on the terms and
conditions set forth in the notice. If it does so elect, the
Transfer shall be consummated promptly after notice of such
election is delivered to the transferring Participant.
(b) If the other Participant fails to so elect within the
period provided for in Article 15.3(a), the transferring
Participant shall have One Hundred and Eighty (180) days
following the expiration of such period to consummate the
Transfer to a third party at a price and on terms no less
favorable than those offered by the transferring Participant
to the other Participant in the notice required in Article
15.3(a).
(c) If the transferring Participant fails to consummate the
Transfer to a third party within the period set forth in
Article 15.3(b), the preemptive right of the other Participant
in such offered interest shall be deemed to be revived. Any
-56-
<PAGE> 57
subsequent proposal to Transfer such interest shall be
conducted in accordance with all of the procedures set forth
in this Article 15.3.
It is understood that in the event that the Participant's
Participating Interest constitutes all or substantially all of
the assets of the Participant, the preemptive right granted
hereunder shall also apply to any sale of the capital stock of
the Participant, other than to an Affiliate or as part of a
corporate reorganization.
15.4 Exceptions to Preemptive Right. Article 15.3 shall not
apply to the following:
(a) Transfer by a Participant of all or any part of its
interest in its Participating Interest to an Affiliate;
(b) Incorporation of a Participant, or corporate merger,
consolidation, amalgamation or reorganization of a Participant
by which the surviving entity shall possess substantially all
of the stock, or all of the property rights and interests and
be subject to substantially all of the liabilities and
obligations of that Participant;
(c) The grant by a Participant of a security interest in any
interest in this Agreement, any Participating Interest, or the
-57-
<PAGE> 58
Assets by mortgage, deed of trust, pledge, lien or other
encumbrance; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant upon
distribution to it pursuant to Article 11.
ARTICLE 16
CONFIDENTIALITY
16.1 General. The financial terms of this Agreement and all
information obtained in connection with the performance of this
Agreement shall be the confidential, exclusive property of the Par-
ticipants and, except as provided in Article 16.2, shall not be
disclosed by parties to this Agreement or their affiliates to any
third party or the public without the prior written consent of the
other Participant, which consent shall not be unreasonably
withheld.
16.2 Exceptions. The consent required by Article 16.1 shall
not apply to a disclosure:
(a) To an Affiliate, consultant, contractor or subcontractor
that has a bona fide need to be informed;
-58-
<PAGE> 59
(b) To any third party to whom the disclosing Participant
contemplates a Transfer of all or any part of its interest in
or to this Agreement, its Participating Interest, or the
Assets; or
(c) To a governmental agency or to the public which the
disclosing Participant believes in good faith is required by
pertinent law or regulation or the rules of any stock exchange;
In any case to which this Article 16.2 is applicable, the
disclosing Participant shall give notice to the other Participant
concurrently with the making of such disclosure. As to any
disclosure pursuant to Article 16.2(a) or (b), only such
confidential information as such third party shall have a
legitimate business need to know shall be disclosed, and such third
party shall first agree in writing to protect the confidential
information from further disclosure to the same extent as the
Participants are obligated under this Article 16.
16.3 Duration of Confidentiality. The provisions of this
Article 16 shall apply during the term of this Agreement and for
two (2) years following termination of this Agreement pursuant to
Article 12.1 and shall continue to apply to any Participant who
withdraws, who is deemed to have withdrawn, or who Transfers its
Participating Interest, for three (3) years following the date of
such occurrence.
-59-
<PAGE> 60
ARTICLE 17
GENERAL PROVISIONS
17.1 Notices. All notices, payments and other required
communications ("Notices") to the Participants shall be in writing,
and shall be addressed respectively as follows:
If to Hecla: 6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
(208) 769-4159 - Fax
Attn: General Counsel
If to the Company: 320 Bay Street, Suite 1600
Toronto, Ontario M5H 4A6
(416) 864-1364 - Fax
Attn: President
All Notices shall be given (i) by personal delivery to the
Participant, or (ii) by electronic communication, with a
confirmation sent by registered or certified mail return receipt
requested, or (iii) by registered or certified mail return receipt
requested. All Notices shall be effective and shall be deemed
delivered (i) if by personal delivery on the date of delivery if
delivered during normal business hours, and, if not delivered
during normal business hours, on the next business day following
delivery, (ii) if by electronic communication on the next business
day following receipt of the electronic communication, and (iii) if
solely by mail on the next business day after actual receipt. A
Participant may change its address by Notice to the other
Participant.
-60-
<PAGE> 61
17.2 Waiver. The failure of a Participant to insist on the
strict performance of any provision of this Agreement or to
exercise any right, power or remedy upon a breach hereof shall not
constitute a waiver of any provision of this Agreement or limit the
Participant's right thereafter to enforce any provision or exercise
any right.
17.3 Modification. No modification of this Agreement shall
be valid unless made in writing and duly executed by the Par-
ticipants.
17.4 Force Majeure. Except for the obligation to make
payments when due hereunder, the obligations of a Participant shall
be suspended to the extent and for the period that performance is
prevented or delayed by any cause, whether foreseeable or
unforeseeable, beyond its reasonable control, including, without
limitation, lack of access to the Property, labor disputes (however
arising and whether or not employee demands are reasonable or
within the power of the Participant to grant); acts of God; laws,
regulations, orders, proclamations, instructions or requests of any
government or governmental entity, judgments or orders of any
court; inability to obtain on reasonably acceptable terms any
public or private license, permit or other authorization;
curtailment or suspension of activities to remedy or avoid an
actual or alleged, present or prospective violation of federal,
state or local environmental standards; acts of war or conditions
-61-
<PAGE> 62
arising out of or attributable to war, whether declared or
undeclared; riot, civil strife, insurrection or rebellion; fire,
explosion, earthquake, storm, flood, sink holes, drought or other
adverse weather condition; delay or failure by suppliers or
transporters of materials, parts, supplies, services or equipment
or by contractors' or subcontractors' shortage of, or inability to
obtain, labor, transportation, materials, machinery, equipment,
supplies, utilities or services; accidents; breakdown of equipment,
machinery or facilities; or any other cause whether similar or dis-
similar to the foregoing. The affected Participant shall promptly
give notice to the other Participant of the suspension of
performance, stating therein the nature of the suspension, the
reasons therefor, and the expected duration thereof. The affected
Participant shall resume performance as soon as reasonably
possible. During the period of suspension, the obligations of the
Participants to advance funds pursuant to Article 10.2 shall be
reduced to levels consistent with Operations.
17.5 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Idaho.
17.6 Rule Against Perpetuities. Any right or option to
acquire any interest in real or personal property under this Agree-
ment must be exercised, if at all, so as to vest such interest in
the acquirer within twenty-one (21) years after the effective date
of this Agreement.
-62-
<PAGE> 63
17.7 Further Assurances. Each of the Participants agrees to
take from time to time such actions and execute such additional
instruments as may be reasonably necessary or convenient to
implement and carry out the intent and purpose of this Agreement.
17.8 Survival of Terms and Conditions. The following Articles
shall survive the termination of this Agreement to the full extent
necessary for their enforcement and the protection of the
Participant in whose favor they run: Articles 2.1, 2.2, 4.5, 6.4,
6.6, 10.3, 12.2, 12.3, 12.4, 12.5, 12.6 and 12.7.
17.9 Entire Agreement; Successors and Assigns. This Agreement
together with the Acquisition Agreement contains the entire
understanding of the Participants and supersedes all prior
agreements and understandings between the Participants relating to
the subject matter hereof. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted
assigns of the Participants. In the event of any conflict between
this Agreement and any Exhibit attached hereto, the terms of this
Agreement shall be controlling.
17.10 Memorandum. At the request of either Participant, a
Memorandum or short form of this Agreement, as appropriate, which
shall not disclose financial information contained herein, shall be
prepared and recorded by the Manager. This Agreement shall not be
recorded.
-63-
<PAGE> 64
17.11 Attorney's Fees. The substantially prevailing party in
any dispute under this Agreement shall be entitled to an award of
its reasonable attorneys fees and costs of litigation.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first hereinabove written.
HECLA MINING COMPANY
By /s/ Ralph Noyes
GREAT LAKES IDAHO INC.
By /s/ Nicholas Tintor
-64-
<PAGE> 65
EXHIBIT B
ACCOUNTING PROCEDURE
The financial and accounting procedures to be followed by the Manager
and the Participants under the Agreement are set forth below. References in
this Accounting Procedure to Sections and Articles are to those located in this
Accounting Procedure unless it is expressly stated that they are references to
the Venture Agreement.
ARTICLE I
GENERAL PROVISIONS
1.1 General Accounting Records. The Manager shall maintain detailed
and comprehensive cost accounting records in accordance with this Accounting
Procedure, including general ledgers, supporting and subsidiary journals,
invoices, checks and other customary documentation, sufficient to provide a
record of revenues and expenditures and periodic statements of financial
position and the results of operations for managerial, tax, regulatory or other
financial reporting purposes. Such records shall be retained for the duration
of the period allowed the Participants for audit or the period necessary to
comply with tax or other regulatory requirements. The records shall reflect
all obligations, advances and credits of the Participants.
EXHIBIT B - ACCOUNTING PROCEDURE - Page 1 of 16
<PAGE> 66
1.2 Bank Accounts. The Manager shall maintain one or more separate
bank accounts for the payment of all expenses and the deposit of all cash
receipts for the Venture.
1.3 Statement and Billings. The Manager shall prepare statements and
bill the Participants as provided in Article 10 of the Agreement. Payment of
any such billings by any Participant, including the Manager, shall not
prejudice such Participant's right to protest or question the correctness
thereof for a period not to exceed twelve (12) months following the year end
adopted by the Management Committee during which such billings were received by
the Participant. All written exceptions to and claims upon the Manager for
incorrect charges, billings or statements shall be made upon the Manager within
such twelve (12) month period. The time period permitted for adjustments
hereunder shall not apply to adjustments resulting from periodic inventories as
provided in Article V.
ARTICLE II
CHARGES TO JOINT ACCOUNT
Subject to the limitations hereinafter set forth, the Manager shall
charge the Joint Account with the following:
2.1 Rentals, Royalties and Other Payments. All property acquisition
and holding costs, including filing fees, license fees, costs of permits and
assessment work, delay rent-
EXHIBIT B - ACCOUNTING PROCEDURE - Page 2 of 16
<PAGE> 67
als, production royalties, including any required advances, and all other
payments made by the Manager which are necessary to acquire or maintain title
to the Assets.
2.2 Labor and Employee Benefits.
(a) Salaries and wages of the Manager's employees directly engaged in
Operations, including salaries or wages of employees who are temporarily
assigned to and directly employed by same.
(b) The Manager's cost of holiday, vacation, sickness and disability
benefits and other customary allowances applicable to the salaries and
wages chargeable under Sections 2.2(a) and 2.12. Such costs may be
charged on a "when and as paid basis" or by "percentage assessment" on the
amount of salaries and wages. If percentage assessment is used, the rate
shall be applied to wages or salaries excluding overtime and bonuses.
Such rate shall be based on the Manager's cost experience and it shall be
periodically adjusted at least annually to ensure that the total of such
charges does not exceed the actual cost thereof to the Manager.
(c) The Manager's actual cost of established plans for employees'
group life insurance, hospitalization, pension, retirement, stock
purchase, thrift, bonus (except
EXHIBIT B - ACCOUNTING PROCEDURE - Page 3 of 16
<PAGE> 68
production or incentive bonus plans under a union contract based on actual
rates of production, cost savings and other production factors, and
similar non-union bonus plans customary in the industry or necessary to
attract competent employees, which bonus payments shall be considered
salaries and wages under Sections 2.2(a) and 2.12; rather than employees'
benefit plans) and other benefit plans of a like nature applicable to
salaries and wages chargeable under Sections 2.2(a) or 2.12, provided that
the plans are limited to the extend feasible to those customary in the
industry.
(d) Cost of assessments imposed by governmental authority which are
applicable to salaries and wages chargeable under Section 2.2(a) and 2.12,
including all penalties except those resulting from the willful misconduct
or gross negligence of the Manager.
2.3 Materials, Equipment and Supplies. The cost of materials,
equipment and supplies (herein called "Material") purchased from unaffiliated
third parties or furnished by the Manager or any Participant as provided in
Article III. The Manager shall purchase or furnish only so much Material as
may be required for immediate use in efficient and economical Operations. The
Manager shall also maintain inventory levels
EXHIBIT B - ACCOUNTING PROCEDURE - Page 4 of 16
<PAGE> 69
of Material at reasonable levels to avoid unnecessary accumulation of surplus
in stock.
2.4 Equipment and Facilities Furnished by Manager. The cost of
machinery, equipment and facilities owned by the Manager and used in Operations
or used to provide support or utility services to Operations charged at rates
commensurate with the actual costs of ownership and operation of such
machinery, equipment and facilities. Such rates shall include costs of
maintenance, repairs, other operating expenses, insurance, taxes, depreciation
and interest at a rate not to exceed two percent (2%) per annum above the prime
rate as determined by Chase Manhattan Bank. Such rates shall not exceed the
average commercial rates currently prevailing in the vicinity of the
Operations.
2.5 Transportation. Reasonable transportation costs incurred in
connection with the transportation of employees and material necessary for the
Operation.
2.6 Contract Services and Utilities. The cost of contract services
and utilities procured from outside sources, other than services described in
Sections 2.9 and 2.13. If contract services are performed by the Manager or an
Affiliate thereof, the cost charged to the Joint Account shall not be greater
than that for which comparable services and utilities
EXHIBIT B - ACCOUNTING PROCEDURE - Page 5 of 16
<PAGE> 70
are available in the open market within the vicinity of the Operations.
2.7 Insurance Premiums. Net premiums paid for insurance required to
be carried for Operations for the protection of the Participants. When the
Operations are conducted in an area where the Manager may self-insure for
Workmen's Compensation and/or Employer's Liability under state law, the Manager
may elect to include such risks in its self-insurance program and shall charge
its costs of self-insuring such risks to the Joint Account Provided that such
charges shall not exceed published manual rates.
2.8 Damages and Losses. All costs in excess of insurance proceeds
necessary to repair or replace damage or losses to any Assets resulting from
any cause other than the willful misconduct or gross negligence of the Manager.
The Manager shall furnish the Management Committee with written notice of
damages or losses as soon as practicable after a report thereof has been
received by the Manager.
2.9 Legal and Regulatory Expenses. Except as otherwise provided in
Section 2.13, all legal and regulatory costs and expenses incurred in or
resulting from the Operations or necessary to protect or recover the Assets of
the Venture.
EXHIBIT B - ACCOUNTING PROCEDURE - Page 6 of 16
<PAGE> 71
2.10 Audit. Cost of annual audits under Section 10.4 of the Venture
Agreement.
2.11 Taxes. All taxes (except income taxes) of every kind and
nature assessed or levied upon or in connection with the Assets, the production
of Products or Operations, which have been paid by the Manager for the benefit
of the Participants. Each Participant is separately responsible for income
taxes which are attributable to its respective Participating Interest.
2.12 District and Camp Expenses (Field Supervision and Camp Expenses).
A pro rata portion of (i) the salaries and expenses of the Manager's
superintendent and other employees serving Operations whose time is not
allocated directly to such Operations, (ii) the costs of maintaining and
operating an office (herein called "the Manager's Project Office") and any
necessary suboffice, and (iii) all necessary camps, including housing
facilities for employees, used for Operations. The expense of those
facilities, less any revenue therefrom, shall include depreciation or a fair
monthly rental in lieu of depreciation of the investment. The total of such
charges for all properties served by the Manager's employees and facilities
shall be apportioned to the Joint Account on the basis of a ratio, the
numerator of which is the direct labor costs of the
EXHIBIT B - ACCOUNTING PROCEDURE - Page 7 of 16
<PAGE> 72
Operations and denominator of which is the total direct labor costs incurred
for all activities served by the Manager.
2.13 Administrative Charge.
(a) Each month, the Manager shall charge the Joint Account a sum to
reimburse the Manager for its home office overhead and general and
administrative expenses to conduct each phase of the Operation, and which
shall be in lieu of any management fee. From the date of this Agreement
to Commercial Production the administrative charge to the Company will be
$12,000.00 per month. From Commercial Production on, the charge to the
Joint Account shall be three percent (3%) of the Allowable Costs for all
charges to the Joint Account.
(b) The term "Commercial Production" means the point in time that
begins after the throughput of the concentrator to be built as part of the
Grouse Creek Project is sustained at 60% of rated capacity for a 30-day
period or such other period agreed to by the Parties;
(c) The term "Allowable Costs" as used in this Section 2.13 shall
mean all charges to the Joint Account excluding (i) the administrative
charge referred to herein; (ii) depreciation, depletion or amortization of
tangible or intangible assets; (iii) amounts respecting
EXHIBIT B - ACCOUNTING PROCEDURE - Page 8 of 16
<PAGE> 73
Capital Expenditures; (iv) amounts charged in accordance with Section 2.1.
(d) The monthly administrative charge shall be equitably apportioned
among all of the properties served during such monthly period on the basis
of a ratio, the numerator of which is the direct labor costs charged to a
particular property and the denominator of which is the total direct labor
costs incurred for all properties served by the Manager.
(e) The following is a representative list of items comprising the
Manager's principal business office expenses that are expressly covered by
the administrative charge provided in this Section 2.13:
(1) Administrative supervision, which includes services rendered
by managers, department supervisors, officers and directors of the
Manager for Operations, except to the extent that such services
represent a direct charge to the Joint Account, as provided for in
Section 2.2;
(2) Accounting, data processing, personnel administration,
billing and record keeping in accor-
EXHIBIT B - ACCOUNTING PROCEDURE - Page 9 of 16
<PAGE> 74
dance with governmental regulations and the provisions of the Venture
Agreement, and preparation of reports;
(3) The services of tax counsel and tax administration employees
for all tax matters, including any protests, except any outside
professional fees which the Management Committee may approve as a
direct charge to the Joint Account;
(4) Routine legal services rendered by outside sources and the
Manager's legal staff not otherwise charged to the Joint Account under
Section 2.9; and
(5) Rentals and other charges for office and records storage
space, telephone service, office equipment and supplies.
(f) The Management Committee shall annually review the
administration charges and shall amend the methodology or rates used to
determine such charges if they are found to be insufficient or excessive.
2.14 Other Expenditures. Any reasonable direct expenditure, other than
expenditures which are covered by the foregoing provisions, incurred by the
Manager for the necessary and proper conduct of Operations.
EXHIBIT B - ACCOUNTING PROCEDURE - Page 10 of 16
<PAGE> 75
ARTICLE III
BASIS OF CHARGES TO JOINT ACCOUNT
3.1 Purchases. Material purchased and services procured from third
parties shall be charged to the Joint Account by the Manager at invoiced cost,
including applicable transfer taxes, less all discounts taken. If any Material
is determined to be defective or is returned to a vendor for any other reason,
the Manager shall credit the Joint Account when an adjustment is received from
the vendor.
3.2 Material Furnished by or Transferred to the Manager or a
Participant. Any Material furnished by the Manager or Participant from its
stocks or transferred to the Manager or Participant shall be priced on the
following basis:
(a) New Material. New Material transferred from the Manager or
Participant shall be priced F.O.B. the nearest reputable supply store or
railway receiving point, at which like Material is available, at the
current replacement cost of the same kind of Material, exclusive of any
available cash discounts, at the time of the transfer (herein called, "New
Price").
EXHIBIT B - ACCOUNTING PROCEDURE - Page 11 of 16
<PAGE> 76
(b) Used Material.
(1) Used Material in sound and serviceable condition and suitable
for reuse without reconditioning shall be priced as follows:
(a) Used Material transferred by the Manager or Participant
shall be priced at seventy-five percent (75%) of the New Price;
(b) Used Material transferred to the Manager or Participant shall
be priced (i) at seventy-five Percent (75%) of the New Price if such
Material was originally charged to the Joint Account as new Material,
or (ii) at sixty-five percent (65%) of the New Price if such Material
was originally charged to the Joint Account as good used Material at
seventy-five percent (75%) of the New Price.
(2) Other used Material which, after reconditioning will be further
serviceable for original function as good secondhand Material, or which
is serviceable for original function but not substantially suitable for
reconditioning shall be priced at fifty percent (50%) of New Price. The
cost of any reconditioning shall be borne by the transferee.
EXHIBIT B - ACCOUNTING PROCEDURE - Page 12 of 16
<PAGE> 77
(3) All other Material, including junk, shall be priced at a value
commensurate with its use or at prevailing prices. Material no longer
suitable for its original purpose but usable for some other purpose
shall be priced on a basis comparable with items normally used for such
other purposes.
(c) Obsolete Material. Any Material which is serviceable and usable
for its original function, but its condition is not equivalent to that
which would justify a price as provided above shall be priced by the
Management Committee. Such price shall be set at a level which will
result in a charge to the Joint Account equal to the value of the
service to be rendered by such Material.
3.3 Premium Prices. Whenever Material is not readily obtainable at
published or listed prices because of national emergencies, strikes or other
unusual circumstances over which the Manager has no control, the Manager may
charge the Joint Account for the required Material on the basis of the
Manager's direct cost and expenses incurred in procuring such Material and
making it suitable for use. The Manager shall give written notice of the
proposed charge to the Participants prior to the time when such charge is to be
billed, whereupon any Participant shall have the right, by notifying the
Manager within ten (10) days of the delivery of the notice from the Manager, to
EXHIBIT B - ACCOUNTING PROCEDURE - Page 13 of 16
<PAGE> 78
furnish at the usual receiving point all or part of its share of Material
suitable for use and acceptable to the Manager.
3.4 Warranty of Material Furnished by the Manager or Participants.
Neither the Manager nor any Participant warrants the Material furnished beyond
the dealer's or manufacturer's warranty and no credits shall be made to the
Joint Account for defective Material until adjustments are received by the
Manager from the dealer, manufacturer or their respective agents.
ARTICLE IV
DISPOSAL OF MATERIAL
4.1 Disposition Generally. The Manager shall have no obligation to
purchase a Participant's interest in Material. The Management Committee shall
determine the disposition of major items of surplus Material, provided the
Manager shall have the right to dispose of normal accumulations of junk and
scrap Material either by sale or by transfer to the Participants as provided in
Section 4.2.
4.2 Distribution to Participants. Any Material to be distributed to
the Participants shall be made in proportion to their respective Participant
Interests, and corresponding credits shall be made to the Joint Account on the
basis provided in Section 3.2.
EXHIBIT B - ACCOUNTING PROCEDURE - Page 14 of 16
<PAGE> 79
4.3 Sales. Sales of Material to third parties shall be credited to
the Joint Account as the net amount received. Any damages or claims by the
Purchaser shall be charged back to the Joint Account if and when paid.
ARTICLE V
INVENTORIES
5.1 Periodic Inventories, Notice and Representations. At reasonable
intervals, inventories shall be taken by the Manager, which shall include all
such Material as is ordinarily considered controllable by operators of mining
properties and the expense of conducting such periodic inventories shall be
charged to the Joint Account. The Manager shall give written notice to the
Participants of its intent to take any inventory at least thirty (30) days
before such inventory is scheduled to take place. A Participant shall be
deemed to have accepted the results of any inventory taken by the Manager if
the Participant fails to be represented at such inventory.
5.2 Reconciliation and Adjustment of Inventories. Reconciliation of
inventory with charges to the Joint Account shall be made, and a list of
overages and shortages shall be furnished to the Management Committee within
three (3) months after the inventory is taken. Inventory adjustments shall be
made by the Manager to the Joint Account for overages and
EXHIBIT B - ACCOUNTING PROCEDURE - Page 15 of 16
<PAGE> 80
shortages, but the Manager shall be held accountable to the Venture only for
shortages due to lack of reasonable diligence.
EXHIBIT B - ACCOUNTING PROCEDURE - Page 16 of 16
<PAGE> 81
EXHIBIT C
Attached to and made a part of that certain Mining Venture Agreement dated
February 8, 1994, by and between Hecla Mining Company and Great Lakes Idaho
Inc.
NET PROCEEDS DEFINITION
A. NET PROCEEDS
If any Participant is entitled to receive an interest based on a Net
proceeds interest pursuant to the Agreement, such Participant being hereinafter
referred to as the "Royalty Holder," then the Royalty Holder shall promptly
deliver a conveyance confirming the transfer of all of its Participating
Interest without reservation or restriction to the remaining party or parties
to the Agreement, as the case may be, such remaining party or parties being
hereinafter referred to as the "Royalty Payor." Thereafter the Royalty Payor
shall promptly deliver a conveyance confirming that the Royalty Holder retains
a royalty the rate of which shall be determined in accordance with the
provisions of the Agreement calculated and paid in accordance with the terms of
this Exhibit. The Royalty Holder and the Royalty Payor shall execute an
agreement which shall confirm the royalty rate.
EXHIBIT C - Page 1 of 11
<PAGE> 82
B. CALCULATION OF NET PROCEEDS
1. Definition of Net Proceeds.
"Net proceeds" shall be any excess of Receipts over Disbursements
for any calendar quarter. To compute Net Proceeds, the receipts for the
calendar quarter are compared to all prior unrecovered Disbursements (including
Disbursements for the present quarter). If Receipts exceed all prior
unrecovered Disbursements (including Disbursements for the present quarter),
Net Proceeds will be paid. If Receipts are less than all prior unrecovered
Disbursements (including Disbursements for the present quarter), the amount by
which Disbursements exceed Receipts will be carried forward and added to the
Disbursements made in the ensuing calendar quarter and the process will be
repeated.
2. Computation of Net Proceeds.
Net Proceeds shall be computed as of the end of each calendar
quarter. On or before the 45th day following the end of each calendar quarter
a statement shall be furnished setting forth in reasonable detail the
computation of Net Proceeds for the previous calendar quarter. Payment of any
Net Proceeds due shall be enclosed with the statement.
EXHIBIT C - Page 2 of 11
<PAGE> 83
3. Calculation of Receipts.
"Receipts" shall be all revenues received during the calendar
quarter from the sale or other disposal of Product from a Mine on the Property
(the "Mine"). Revenue received from the sale, use or other disposition of
Product shall be determined as follows:
(a) If the Product is fine gold or silver or dore bullion
produced from the Properties, the value is the amount of fine gold or silver
produced or the amount of gold or silver contained in dore bullion produced
from the Properties during any calendar quarter times the average New York
Commodity Exchange ("COMEX") Settlement Price for the calendar quarter shall be
determined by dividing the sum of all daily Settlement Prices posted during the
calendar quarter by the number of days that prices were posted. The posted
price shall be obtained from the COMEX Daily Market Report listing of the COMEX
Settlement price. If the COMEX Daily Market Report or the Settlement Price for
the COMEX ceases to be published, the parties shall agree upon a similar
alternative method for determining the average daily spot market price for gold
or silver, as the case may be.
(b) If Product is ore, concentrate, precipitate, leach solution,
or any mineral substance other than dore bullion or fine gold or silver
produced from the Properties, the value is
EXHIBIT C - Page 3 of 11
<PAGE> 84
the amount of earned revenues paid by a smelter, refiner or other purchaser,
plus any bonuses and subsidies, less all penalties, assaying and sampling
charges whether deducted by the purchaser or paid or incurred by the Royalty
Payor. Any written contract for sale to an Affiliate or any sale to an
Affiliate on a basis not involving such a contract shall not, without the prior
written consent of the Royalty Holder, be on a basis less favorable (including
the terms thereof with respect to delivery and inventory), at the time of such
contract or sale, as the case may be, than that which would have been
applicable with respect to a comparable contract or sale, as the case may be,
to or by an unaffiliated third party.
4. Calculation of Disbursements.
"Disbursements" shall mean Capital Expenditures and Operating
Expenses incurred at or on behalf of a Mine or the Property by the Royalty
Payor determined in accordance with the Accounting Procedure.
(a) "Capital Expenditures" shall mean the aggregate of costs
incurred relating to the development of a Mine, as follows:
(i) all costs of or related to the construction of any mine
or mill or building, crushing, grinding, washing,
concentrating and/or other treatment facility,
including mining equipment;
EXHIBIT C - Page 4 of 11
<PAGE> 85
(ii) all costs of or related to the construction of storage
and warehouse facilities for the ore or Product derived
from a Mine;
(iii) all costs of or related to the transportation
facilities for moving ore or concentrates derived from
a Mine and/or any Products derived from such ore or
concentrates;
(iv) all costs of or related to the provision of housing for
employees, medical and recreational facilities and
similar infrastructure costs and expenses;
(v) all costs of or related to Exploration;
(vi) all costs of or related to pre-development drilling and
stripping of overburden to expose and gain access to
the ore;
reduced by all proceeds from insurance for items charged as Capital
Expenditures.
(b) "Operating Expenses" shall mean the following costs,
obligations, liabilities and expenses relating to a Mine or
the Properties:
EXHIBIT C - Page 5 of 11
<PAGE> 86
(i) all mining (including dewatering costs, if any),
milling, processing, treatment, and refining smelting
costs including custom milling and custom smelter costs
(with respect to the milling and smelting of the
Product of a Mine) and transportation costs of such
Products to the mill and/or the smelter or refiner
and/or to the purchaser thereof;
(ii) all maintenance, repair and replacement costs;
(iii) all costs of or related to marketing any Products
including insurance and transportation;
(iv) all costs resulting from or in connection with the
preparation, equipping or expansion of a Mine;
(v) all taxes, assessments, fees, rentals, advance
royalties, royalties and duties payable to either
relevant third parties or to any governmental body,
charged, levied or imposed on a Mine, or payable on or
in respect of or measured by the Products of a Mine,
including all governmental royalties relating thereto
and mining duties or mining taxes even though
EXHIBIT C - Page 6 of 11
<PAGE> 87
based on profits but excluding state, local and federal
income and franchise taxes;
(vi) interest related to debt financing arrangements for a
Mine;
(vii) all other costs of or related to the conduct of
producing operations at a Mine;
(viii)an allowance for overhead and administrative charges in
accordance with the Accounting Procedure;
(ix) a reserve account (which account may or may not be
funded during the operating life of the project) for
reclamation costs which shall be a fair and reasonable
estimate of costs to be incurred to reclaim the
Properties and any balance not used after reclamation
is completed shall be paid out; but
(x) excluding any charges for depreciation, amortization,
or depletion; and
(xi) reduced by all proceeds from insurance for items
charged as Operating Expense and all proceeds from the
lease, sale, rental or other use of items charged as
Operating Expenses.
EXHIBIT C - Page 7 of 11
<PAGE> 88
All Receipts and Disbursements shall be determined in accordance with generally
accepted United States accounting principles consistently applied. Receipts
and Disbursements shall be determined by the accrual method. All
non-armslength contracts must be at competitive rates based on price and
quality of work or assets purchased as the case may be.
C. AUDIT AND DISPUTES
1. Audits.
The Royalty Holder, upon written notice and at the Royalty Holder's
sole expense, shall have the right to have an independent firm of public
accountants audit the records that relate to the calculation of the Net
Proceeds interest within twelve (12) months after the end of a calendar year.
The Royalty Holder shall be deemed to have waived any right it may have had to
object to a statement made for any calendar quarter, unless it provides notice
in writing of such objection within six (6) months after the end of a calendar
year in which such statement was given. If the Parties are unable to resolve
the dispute within sixty (60) days after the receipt of such notice, the
dispute shall be resolved by arbitration.
2. Disputes.
Any dispute arising under this Exhibit shall be resolved by
arbitration in Coeur d'Alene, Idaho, pursuant to
EXHIBIT C - Page 8 of 11
<PAGE> 89
the commercial arbitration rules of the American Arbitration Association.
Alternatively, the parties may elect to submit the dispute to a mutually
acceptable certified pubic accountant, or firm of certified public accountants,
for a binding resolution thereof. Unless the parties agree to share the costs
of arbitration, the arbitrator shall determine what part of the costs and
expenses incurred in any such proceeding shall be borne by each party
participating in the arbitration.
D. COSTS OF COMMON FACILITIES
Where any operating costs are incurred with respect to the mining,
milling, or processing of Product from the Properties, or selling or delivering
of Products produced from the Properties in conjunction with the mining,
milling, processing, selling or delivering of minerals produced from the other
properties controlled by the Royalty Payor, such operating costs shall be
fairly allocated and apportioned in accordance with generally accepted
practices in the mining industry.
E. GENERAL
1. Capitalized Terms.
Unless otherwise specified in this Exhibit D, capitalized terms used
herein shall have the same meaning as given to them in the Agreement.
EXHIBIT C - Page 9 of 11
<PAGE> 90
2. Records.
Accurate records of tonnage, volume of products, analyses of
products, weight, moisture, assays of pay metal content, and other records
related to saleable Products or to the computation of Net Proceeds hereunder
shall be kept by the Royalty Payor and shall be open to the inspection of, and
the copying by the Royalty Holder or its designated representative, during
normal business hours.
3. Inspections.
The Royalty Holder or its designated representative, at its own risk
and expense and subject to reasonable safety regulations, shall have the right
to enter upon the Properties, after giving at least one week's notice to the
Royalty Payor of the time for such visit, for the purpose of inspecting and
observing the conduct of Operations, provided that such inspections and
observations do not interfere with Operations.
4. Notices.
All notices or communication required or authorized to be given
hereunder shall be given or transmitted as specified in Article 17.1 of the
Agreement.
EXHIBIT C - Page 10 of 11
<PAGE> 91
5. Inurement.
The Net Proceeds interest shall attach to any amendments,
relocations, or conversions of any mining claims or leases comprising the
Property, or to any renewals or extensions of leases, and to any mineral rights
acquired by the Royalty Payor and any Affiliates in lands embraced within any
mining claims or leases comprising the Properties within one (1) year after the
loss or relinquishment of any mining claim or lease comprising the Properties.
The Net Proceeds interest shall be a real property interest that runs with the
Properties and shall be applicable to any person who produces and sells Product
from the Properties.
6. Confidentiality.
All information and data provided to Royalty Holder shall be subject
to the confidentiality provisions of Article 16 of the Mining Venture Agreement.
EXHIBIT C - Page 11 of 11
<PAGE> 92
EXHIBIT D
INSURANCE
The Manager shall, at all times while conducting Operations, comply fully
with the applicable worker's compensation laws and shall maintain insurance
coverage for the Participants comparable to that provided under standard form
insurance policies for (i) comprehensive public liability and property damage
with combined limits of Ten Million Dollars ($10,000,000) for bodily injury and
property damage; (ii) automobile insurance with combined limits of Five Million
Dollars ($5,000,000); and (iii) adequate and reasonable property insurance
against risk of fire and other risks ordinarily insured against in similar
operations. If the Manager elects to self-insure for worker's compensation, it
shall charge to the Joint Account an amount equal to the premium it would have
paid had it secured and maintained a policy or policies of insurance in the
amount of such coverage. Each Participant shall self-insure or purchase for
its own account such additional insurance as it deems necessary.
EXHIBIT D - INSURANCE - Page 1 of 1
