Exhibit 10.12
EXECUTION COPY
NET OPERATING CASH FLOW ROYALTY AGREEMENT
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(Mesquite Xxxxx Facility)
THIS NET OPERATING CASH FLOW ROYALTY AGREEMENT (this "NOCF Royalty
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Agreement") is dated November 7, 2003 (the "Effective Date")
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BETWEEN:
WESTERN MESQUITE MINES, INC.
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a corporation incorporated under the laws of Nevada
0000 Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000 #000
Xxxxx, Xxxxx 00000 XXX
Facsimile: 000-000-0000
Phone: 000-000-0000
("Operator")
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and
HOSPAH COAL COMPANY
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a corporation incorporated under the laws of Delaware
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
Phone: 000-000-0000
("Hospah")
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RECITALS
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Pursuant to the terms and conditions of that certain Asset Purchase
Agreement dated November 7, 2003 (the "Purchase Agreement") among Operator,
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Hospah and Hospah's affiliate Newmont USA Limited dba Newmont Mining Corporation
("Newmont") with respect to those certain properties more particularly described
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in attached Schedule "A" (the "Xxxxx Facility"): (1) Newmont and Hospah have
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conveyed to Operator all of their right, title, interest and obligations in and
to the Xxxxx Facility; and (2) subject to certain limitations, Hospah and
Operator have agreed to share on a 50% / 50% basis the net operating cash flow
generated from the operation of the Xxxxx Facility based on the ore existing on
the Xxxxx Facility as of the Effective Date.
AGREEMENTS
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In consideration of Ten Dollars ($10.00) in lawful money of the United
States of America, the premises, and other good and valuable consideration, the
sufficiency of which is acknowledged by each Party, the Parties agree as
follows:
A. DEFINITIONS
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1. Meaning of Terms. All terms capitalized in this NOCF Royalty
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Agreement shall have the meanings assigned to them when used anywhere in this
NOCF Royalty Agreement.
"Capital Costs" shall mean those categories of cost amounts expended in
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conducting Operations on or for the benefit of the Xxxxx Facility described in
Sections C.2 and C.3 of this NOCF Royalty Agreement.
"Capital Items" are those items set forth in Sections C.2(a) through C.2(b)
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and described in Section C.2.
"Effective Date" means the date specified on the top of page one of this
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NOCF Royalty Agreement.
"Exisiting Ore" means gold ore on the Xxxxx Facility as of the Effective
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Date. All ore on the Xxxxx Facility shall be deemed to be Existing Ore except
only ore that is added to any pad of the Xxxxx Facility following condemnation
thereof in accordance with the procedures described on Schedule "B" to this NOCF
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Royalty Agreement.
"Gross Revenues" shall mean (a) for gold produced from the Existing Ore by
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the Xxxxx Facility and shipped in the form of dore, bullion or some other
semi-refined or refined gold product, the Spot Price for gold multiplied by the
contained ounces of gold in the dore, bullion or other semi-refined or refined
gold product; or (b) for any other product produced from the Existing Ore by the
Xxxxx Facility and shipped in the form of a crude, intermediate or final
product, such as ore, concentrates, precipitates, or xxxxx solutions, or for
silver or any other mineral product (including but not limited to aggregates)
produced from the Existing Ore by the Xxxxx Facility and shipped, the gross
revenues actually received by Operator from the purchaser from the sale or from
the recipient from the other disposal of such other mineral product produced;
provided, however, if the crude or intermediate mineral product produced is
shipped from the Xxxxx Facility for further refinement by or for the benefit of
Operator under an arrangement whereby gold dore, bullion or any other
semi-refined or refined gold product is produced and Operator retains title to
such product following refinement, Gross Revenues shall be determined by
multiplying the Spot Price for gold by the contained ounces in the dore, bullion
or other semi-refined or refined gold product on the date such product is
shipped from the point of further refinement.
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"Hedging Transactions" means as described in Section B.3.
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"Xxxxx Facility" shall mean the Xxxxx Facility described in attached
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Schedule A.
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"Materials" means as described in Section C.3.
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"Net Operating Cash Flow" means as described in Section B.1.
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"Net Operating Cash Flow Share" means as defined in Section B.2.
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"Hospah" shall include Hospah and its successors-in-interest.
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"Operating Costs" shall mean those categories of cost amounts expended in
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conducting Operations on or for the benefit of the Existing Ore on the Xxxxx
Facility described in Sections C.1 and C.3 of this NOCF Royalty Agreement.
"Operations" shall mean Operator's activities in leaching, refining and
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selling gold or other products produced from the Existing Ore by the Xxxxx
Facility, including direct and indirect costs related to permitting the xxxxx
processing facilities, whether such activities are performed on or off of the
Xxxxx Facility, but specifically excluding general administration and other
activities of Operator which are not attributable to such activities.
"Operator" shall include Western Mesquite Mines, Inc. and its
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successors-in-interest.
"Precious Metals" means gold, silver, and platinum group metals.
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"Parties" shall mean Hospah and Operator.
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"Party" shall mean Hospah or Operator.
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"Spot Price" shall mean the price of gold, in U.S. dollars per xxxx ounce,
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as the London Bullion Market Afternoon Fix on the day on which gold dore,
bullion or other semi-refined or refined gold product is shipped from Operator's
mill or refinery on or with respect to the Xxxxx Facility. If Operator produces
gold dore or bullion or some other semi-refined or refined gold product at
another facility, the Spot Price shall be determined on the day such gold dore,
bullion or other semi-refined or refined gold product is shipped from such
facility.
"Tailings" means as described in Section F.1.
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B. CALCULATION AND PAYMENT OF NET OPERATING CASH FLOW
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1. Calculation of Net Operating Cash Flow. "Net Operating Cash Flow"
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shall mean the entire proceeds received from the production and sale of ores,
minerals, precipitates, concentrates, and other values from Existing Ore on the
Xxxxx Facility following the Effective Date, less only direct Operating Costs
and Capital Costs incurred in processing the Existing Ore on the Xxxxx Facility.
Net Operating Cash Flow shall be calculated as of the end of each
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calendar month by deducting, on a monthly basis commencing at the Effective
Date, cumulative monthly Operating Costs and cumulative monthly Capital Costs
from cumulative monthly Gross Revenues.
2. Payment of Net Operating Cash Flow. Net Operating Cash Flow from the
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Existing Ore shall be carried forward, retained, or distributed as follows: (a)
If Net Operating Cash Flow is negative, there shall be no retention or
distribution of Net Operating Cash Flow and the negative balance shall be
carried forward to be included in the subsequent month's calculation; or (b) If
Net Operating Cash Flow is positive, Operator shall pay to Hospah a royalty
("Net Operating Cash Flow Share" or the "Royalty") determined by (i) multiplying
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the positive amount of cumulative Net Operating Cash Flow by fifty percent
(50%); and (ii) deducting (A) the cumulative amount of all Net Operating Cash
Flow payments previously made to Hospah with respect to the Existing Ore on the
Xxxxx Facility after the Effective Date from the amount determined by Section
B.2(b)(i), plus (B) with respect only to each of the three twelve month periods
ending on the first three anniversaries of the Effective Date, the sum of
$350,000 (the amount thereof that is not fully deducted in any such twelve month
period not being available for deduction in any later period). Hospah's Net
Operating Cash Flow Share shall be distributed to Hospah pursuant to Section D
of this NOCF Royalty Agreement.
3. Hedging Transactions. All profits and losses resulting from
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Operator's sales of gold or other minerals, or Operator's engaging in any
commodity futures trading, option trading, or metals trading, or any combination
thereof, and any other hedging transactions including trading transactions
designed to avoid losses and obtain possible gains due to metal price
fluctuations (collectively, "Hedging Transactions") are specifically excluded
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from calculations pursuant to this NOCF Royalty Agreement. All Hedging
Transactions by Operator and all profits or losses associated therewith, if any,
shall be solely for Operator's account. Hospah shall have no right to
participate in Operator's hedging transactions. Operator shall have absolute
discretion as to how it adds to, modifies, closes out or delivers against its
hedged positions. Net Operating Cash Flow shall in all cases be calculated
based upon the Spot Price as defined in this NOCF Royalty Agreement without
regard to when or whether Operator actually sells Precious Metals or other
minerals produced from the Xxxxx Facility.
4. Credit for Payments Received from a Third Party. If Operator
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receives payments or other reimbursement from any other third party pursuant to
any arrangement whereby Operator is paid or reimbursed for operating or other
costs and such costs have been deducted from Gross Revenues in determining Net
Operating Cash Flow, Operator shall credit to Capital Costs or to Operating
Costs, as appropriate, any amounts received to the extent deductions were taken.
5. Credit for Insurance Proceeds. If Operator receives proceeds from
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insurance coverage, the cost of which was charged to Operations, such proceeds
shall be credited as follows: (a) if the proceeds result from the loss or theft
of gold or other mineral product produced, the amount of proceeds shall be added
to Gross Revenues in the calendar month in which received; or (b) if the
proceeds result from the loss of an asset that has been charged to Operations as
a Capital Cost or an Operating Cost, to the extent the proceeds are not used to
repair or replace the asset, any excess (or the entire amount of such proceeds,
if the asset is not
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repaired or replaced) shall be credited, in the calendar month in which
received, to Capital Costs or Operating Costs, as appropriate, at the net amount
received to the extent such asset has been charged as an Operating Cost or
Capital Cost.
6. Credit for Disposition of Materials. Revenues received for assets
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sold or disposed of by Operator or returned to vendors for credit shall be
credited, in the calendar month in which received, to Operating Costs or Capital
Costs, as appropriate, at the net amount received to the extent such asset has
been charged as an Operating Cost or Capital Cost.
C. DETERMINATION OF OPERATING COST AND CAPITAL COST DEDUCTIONS
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1. Operating Costs. Operating Costs are those items set forth in
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Sections C.1(a) through C.1(n), which follow, together with costs for Materials
set forth in Section C.3 which are not charged as Capital Costs pursuant to
Section C.3, but specifically excluding amortization, depreciation, depletion or
other reduction in the cost of Capital Items.
(a) Title, License and Permit Costs. All holding costs for the
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Xxxxx Facility, including filing fees, license fees, costs of permitting the
xxxxx processing facilities and assessment work, holding fees and all other
payments made by Operator to maintain or improve title to the Xxxxx Facility
including any rentals, royalties or holding costs presently payable to a third
party under any underlying agreement, or its successors, or payable in the
future to any governmental entity as a result of a conversion of the Xxxxx
Facility to another form of possession by virtue of a change in United States
mining law.
(b) Labor and Employee Benefits. (i) Direct salaries and wages -
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salaries and wages of Operator's employees directly engaged in Operations,
including salaries or wages, or the applicable portion thereof, of employees who
are temporarily or partially assigned to and directly employed by Operator in
Operations; (ii) Direct holiday and other benefits - Operator's actual cost of
holiday, vacation, sickness, and disability benefits, and other customary
allowances applicable to the salaries and wages chargeable hereunder; (iii)
Direct Benefit Plans - Operator's actual cost of plans for employees' group life
insurance, hospitalization, pension, retirement, stock purchase, thrift, bonus
and other benefit plans of like nature applicable to salaries and wages
chargeable hereunder; and (iv) Governmental assessments - cost of assessments
imposed by governmental authorities, which are applicable to salaries and wages
chargeable hereunder, including all penalties except those resulting from the
willful misconduct or gross negligence of Operator.
(c) Equipment and Facilities Furnished by Operator from Other
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Projects. The cost of machinery, equipment, and facilities owned by Operator
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that are brought from other projects and used temporarily in Operations or used
to provide support or utility services to Operations shall be charged at rates
commensurate with the actual costs of ownership and operation of such machinery,
equipment, and facilities for the period of use in Operations. Such rates shall
include costs of maintenance, repairs, other operating expenses, insurance,
taxes, and depreciation applicable to the period of such temporary or other use
in Operations. Such rates shall not exceed the average rates then prevailing in
the vicinity of the Xxxxx Facility for similar machinery, equipment and
facilities.
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(d) Transportation. Reasonable transportation costs actually
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incurred in connection with the transportation of Materials necessary for
Operations.
(e) Contract Services and Utilities; Rentals and Operating Leases.
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The cost of independent contractors who perform services, the cost of utilities,
and the actual cost of Materials rented or leased under an operating lease for
use in Operations. If contract services are performed by, or utilities or
rentals are provided by, an affiliate of Operator, the cost charged shall be the
actual cost but shall not exceed the cost for comparable, leased items,
services, facilities, utilities and rentals available in the open market within
the vicinity of the Xxxxx Facility; provided, however, that such cost shall not
include any amount charged as or attributable to interest for leased items or
rentals provided by an affiliate of Operator.
(f) Insurance Premiums paid for Insurance Carried for Operations.
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If Operator self-insures for Workmen's Compensation or Employer's Liability
Insurance under state law, Operator may elect to include such risks in its
self-insurance program and may deduct from Gross Revenues its actual costs,
excluding premiums or premium-type costs, of self-insuring such risks, including
the dollar amount of claims paid under such programs, but specifically excluding
insurance premiums related to reclamation, remediation and closure.
(g) Damages and Losses. All costs in excess of insurance proceeds
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necessary to repair or replace damage or losses to any Materials, improvements,
structures or other capital or non-capital assets used in Operations resulting
from any cause other than the willful misconduct, bad faith or gross negligence
of Operator.
(h) Legal and Regulatory Expense. All legal and regulatory costs
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and expenses incurred in or resulting from Operations or necessary to protect or
recover the Xxxxx Facility, or Materials or other assets used in Operations, but
excluding any legal cost or expense incurred in representing Operator adversely
to Hospah in any matter relating to this NOCF Royalty Agreement.
(i) Taxes. All taxes (except income taxes and net proceeds taxes)
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of every kind and nature directly levied upon or in connection with (i)
Operations, (ii) production from the Xxxxx Facility, or (iii) Materials or other
assets used in Operations. With respect to any tax for which each Party is
separately responsible, including income and net proceeds taxes, each Party
shall separately pay its share of such taxes and such taxes shall not be
deducted from Gross Revenues to determine Net Operating Cash Flow.
(j) General and Administrative Expenses. Direct general and
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administrative expenses related to the existing Xxxxx Facility not to exceed Ten
percent (10%) of Operating Costs as defined in Section C.1(a) through C.1(i) on
an annualized basis; provided, however, that no costs and expenses of any of
Operator's offices not directly related to Operations may be deducted from Gross
Revenues in determining Net Operating Cash Flow.
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(k) Reclamation, Remediation and Closure Costs. Reclamation,
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remediation and closure costs are specifically excluded from Operating Costs in
determining Net Operating Cash Flow.
(l) Project Financing Costs. Actual and imputed interest paid or
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payable by Operator in any financing obtained for the development or for the
purchase, bonding, reclamation, remediation or closure of the Xxxxx Facility are
specifically excluded from Operating Costs in determining Net Operating Cash
Flow.
(m) Other Operating Costs. Other operating costs not specifically
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identified in Sections C.1 or C.3 which are not specifically excluded by
Sections C.1, C.2 or C.3, and which are not included in Capital Costs. Any
income or other consideration received from the use of the Xxxxx Facility shall
be included as a credit against Operating Costs in determining Net Operating
Cash Flow to the extent that deductions were taken for such Xxxxx Facility
acquisition costs.
(n) Rentals or Royalties. Except for third party production
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royalties existing as of the Effective Date, all rentals or royalties of any
kind whatsoever that are paid or may become payable are specifically excluded
from Operating Costs in determining Net Operating Cash Flow.
2. Capital Costs. Capital Costs are those items set forth in Sections
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C.2 (a) through C.2(b) ("Capital Items"), together with costs for Materials set
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forth in Section C.3, which are not charged as Operating Costs. Capital Costs
shall not include amortization, depreciation, depletion or other reduction in
cost of Capital Items.
(a) Processing Costs. (i) xxxxx processing costs - carbon,
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electro-winning or other processing facility xxxxx systems; equipment and tools,
only if purchased subsequent to the Effective Date; and (ii) common processing -
lab; technical; general processing equipment and tools; and power distribution,
only if purchased subsequent to the Effective date.
(b) Other Capital Costs. Other capital costs not specifically
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identified in Sections C.2 or C.3 which are not specifically excluded by
Sections C.1, C.2 or C.3, and which are not included in Operating Costs.
3. Capital and Non-Capital Materials, Equipment, and Supplies. In
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addition to those expenditures identified as Operating Costs or Capital Costs in
Sections C.1 and C.2, the cost of materials, equipment, and supplies used in
Operations (herein called "Materials") purchased from unaffiliated third parties
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or furnished by Operator shall be included in Capital Costs or Operating Costs,
as appropriate, using generally accepted accounting principles customarily
employed by Operator. If Materials are purchased by Operator from Operator's
inventory, the cost of such Materials shall only be included in Operating Costs
or Capital Costs at the time the Materials are removed from inventory for use in
Operations.
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(a) Purchases. Materials purchased and services procured from
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third parties shall be charged by Operator at invoiced cost, including
applicable taxes, less all discounts of whatsoever nature and kind taken.
(b) Premium Prices. Whenever Materials are not readily obtainable
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at published or listed prices, Operator may charge prices actually paid to third
parties for the required Materials on the basis of Operator's direct cost and
expenses incurred in procuring such Materials and making them suitable for use.
(c) Warrant of Materials. Operator does not warrant the Materials
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furnished beyond any vendor's or manufacturer's warranty and no credit against
Operating Costs or Capital Costs shall be given for defective Materials until
adjustments are received by Operator from the vendor or manufacturer.
(d) Capital Leases. If Operator leases any Materials under a
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capital lease, such Materials shall be treated for all purposes under this NOCF
Royalty Agreement as though they had been purchased outright by Operator,
provided, that the cost of such Materials shall not include any amount charged
as or attributable to interest for Materials leased from an affiliate of
Operator.
4. Accruals. Notwithstanding whether costs identified in this Section
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C are accounted for by Operator on the cash or accrual basis, such costs shall
be included in Capital Costs or Operating Costs to the extent such costs are
actually incurred; provided, however, that supplies inventory or prepaid
expenses shall not be charged in determining Net Operating Cash Flow until used
in or written off to Operations.
D. TIME AND MANNER OF PAYMENT
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1. Time of Payment. The Royalty shall be payable on or before the
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later of ten (10) days after Operator receives payment from the Payor or the
twenty-fifth (25th) day of the month following the calendar month in which the
minerals subject to the Royalty were shipped to the refinery or mint by
Operator, but in any event Hospah shall be paid no less frequently than when
Operator is paid. Hospah shall have the right in its sole discretion to receive
payment "in cash" or "in kind" directly from the refinery or mint. If Hospah
elects to receive payment in cash or "in kind" directly from the refinery or
mint, Operator shall instruct the refinery or mint (on a monthly basis) to pay
Hospah a percentage of Gross Revenues as an estimate of Net Operating Cash Flow
as estimated by Operator's 5 year business plan described in Section E.3(d),
such percentage shall have been previously agreed to between Hospah and
Operator. Such payment shall be reconciled and settled between Operator and
Hospah on a monthly basis with the actual reconciled percentage to be the basis
for the following payments to be made by the refinery or mint.
2. Interim Payments. In the event that all information necessary to
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accurately calculate Net Operating Cash Flow for a calendar month is not
available on the date payment is due, Operator shall nonetheless make an interim
payment which shall approximate as closely as possible the Royalty payment due
based upon the then available information. Operator shall
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promptly thereafter determine the actual Royalty payment and, if Hospah has been
underpaid, make the appropriate payment. If Hospah has been overpaid, the amount
of overpayment shall be deducted from the Net Operating Cash Flow payment for
the following month.
3. Payments of Net Operating Cash Flow In Kind. Hospah may elect to
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receive its Royalty for Precious Metals from Existing Ore on the Xxxxx Facility
"in cash" or "in kind" as refined bullion. The elections may be exercised once
per year on a calendar year basis during the life of production from Existing
Ore on the Xxxxx Facility. Notice of election to receive the following year's
Royalty for Precious Metals "in cash" or "in kind" shall be made in writing by
Hospah and delivered to Operator on or before November 1 of each year. In the
event no written election is made, the Royalty for Precious Metals will continue
to be paid to Hospah as it is then being paid. As of the Effective Date of this
Agreement, Hospah elects to receive its Royalty "in kind." Royalties on other
minerals shall not be payable "in kind." If Hospah elects to receive its Royalty
for Precious Metals in "in kind," Hospah shall open a bullion storage account at
each refinery or mint designated by Operator as a possible recipient of refined
bullion in which Hospah owns an interest, and Operator shall pay the Royalty by
the deposit of refined bullion into Hospah's account. Hospah shall be solely
responsible for all costs and liabilities associated with maintenance of such
account or accounts, and Operator shall not be required to bear any additional
expense with respect to such "in-kind" payments. On or before the 25th day of
each calendar month following a calendar month during which production and sale
or other disposition occurred, Operator shall deliver written instructions to
the mint or refinery, with a copy to Hospah directing the mint or refinery to
deliver refined bullion due to Hospah in respect of the Royalty, by crediting to
Hospah's account the number of ounces of refined bullion for which Royalty is
due; provided, however, that the words "other disposition" as used in this
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Agreement shall not include processing, milling, beneficiation or refining
losses of Precious Metals. The Royalty payable "in kind" on silver or platinum
group metals shall be converted to the gold equivalent of such silver or
platinum group metals by using the average monthly Spot Price for Precious
Metals.
4. Account for Payment. Unless Hospah elects to receive distribution
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of its Net Operating Cash Flow "in kind," payments shall be made by check, draft
pursuant to Section F.5 or by wire transfer to:
JPMorgan Chase Bank
New York, New York
Federal ABA No.: 000000000
SWIFT Code: XXXXXX00
Beneficiary: Hospah USA Limited
Account No.: 135054284
5. Late Payments. If Operator fails to make a payment of Royalty
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within the time set forth in Section D.1, except in those cases where Operator,
in good faith, makes an interim payment as provided in Section D.2, the payment
owed shall bear interest at the rate of fifteen percent (15%) per annum
commencing from and after such payment due date until paid. The payment of
interest shall not apply to Hospah or to Operator for overpayments or
underpayments received or made which are discovered as part of a review or audit
of an otherwise timely interim
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or final payment, except in the event of gross negligence or willful misconduct.
In the event the retroactive recalculation of Net Operating Cash Flow for each
calendar month since the Effective Date shall determine that Hospah is entitled
to a payment of Royalty, such payment shall not begin to accrue interest until
60 days after such recalculation is completed.
E. BOOKS; RECORDS; AUDITS; ETC.
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1. Books and Records. Operator shall maintain detailed and
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comprehensive cost accounting records and other records pertaining to
Operations, including, without limitation, general ledgers, supporting and
subsidiary journals, invoices, checks, and other customary documentation
sufficient to provide a record of revenues and expenditures, and the results of
Operations for reporting purposes. Such records shall be retained for the
duration of the period allowed Hospah for audit or the period necessary to
comply with tax or other regulatory requirements. Books and records, as well as
all accounting, shall be in accordance with generally accepted accounting
principles customarily employed by Operator.
2. Audits. Not more frequently than quarterly and within 24 months
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after the date of receipt of the monthly statement required by Section E.3(c)
below, Hospah may, through its representatives and agents and at Hospah's sole
expense, perform an audit or other examination of such of Operator's books and
records kept as required by this NOCF Royalty Agreement, as amended, as are
necessary to verify Operator's calculation of Net Operating Cash Flow. The
right to audit shall specifically include any information received or obtained
by Operator from third parties with respect to costs and revenues. All financial
information shall conclusively be deemed correct for purposes of this NOCF
Royalty Agreement unless Hospah has given timely notice that it desires to audit
or examine Operator's books and records in the manner and within such 24 month
period. Hospah shall promptly commence any such audits and shall diligently
prosecute the same to conclusion. Audits shall be conducted so as not to
interfere unreasonably with Operations. Operator shall have the same amount of
time in which to review and audit its own books and records and to revise any
prior calculation of Net Operating Cash Flow that was calculated incorrectly.
As to any revisions so made by Operator, and without abrogating Hospah's 24
month period audit rights, Hospah shall have 12 months from the date of notice
of revision to exercise the rights set forth in this Section E.2.
3. Reports and Statements. Operator shall provide to Hospah the
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following reports and statements:
(a) Annual Report. Not later than March 1 of each year Operator
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shall provide to Hospah an annual report of all Operations during the preceding
calendar year. Such annual report shall consist of a summary of the preceding
year's activities with respect to the Xxxxx Facility.
(b) Annual Report Supplement. Not later than March 31 of each
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year, Operator shall provide to Hospah a supplement to the annual report that
provides a nonbinding estimate of the production from the Xxxxx Facility for the
current calendar year.
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(c) Monthly Statement. Within 30 days after the end of each
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calendar month (or at the time a Royalty payment is made pursuant to Section D.1
if a payment is due), Operator shall provide to Hospah a detailed statement
explaining the manner in which Net Operating Cash Flow was calculated. The
statement shall include a monthly metallurgical accounting summary that includes
a tabulation of daily gold production for the month, beginning and ending gold
in inventory, actual gold production, and the metallurgical accounting summary
between indicated and actual gold production. Each statement shall be deemed
conclusively correct unless Hospah or Operator notifies the other in writing
within 24 months of the date of receipt by Hospah of a statement of any
objections to or errors in such statement.
(d) Budget and Business Plan. Not later than September 30 each
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year, Operator shall provide to Hospah its preliminary budget for the following
calendar year and its updated 5-year business plan.
(e) Inspections. Hospah, or its authorized agents or
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representatives, on not less than two business days notice to Operator, may
enter upon all surface and subsurface portions of the Xxxxx Facility under the
supervision of Operator for the purpose of inspecting the Xxxxx Facility, all
improvements thereto and Operations thereon as well as inspecting and copying
records and data pertaining to Operations (including without limitation any
records and data that are maintained electronically) insofar as such records and
data are relevant to the calculation of Net Operating Cash Flow and Hospah's
rights under this NOCF Royalty Agreement. Hospah, or its authorized agents or
representatives, shall enter the Xxxxx Facility at Hospah's own risk and expense
and shall not unreasonably interfere with Operator's activities and Operations.
Hospah shall indemnify and hold Operator harmless from any liability, damage,
claim or demand by reason of injury to Hospah or any of its agents or
representatives incurred in Hospah's exercise of its rights under this Section.
(f) Confidentiality. Hospah shall not, without the express
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written consent of Operator, which consent shall not be unreasonably withheld,
disclose to any third party any information obtained pursuant to this NOCF
Royalty Agreement which is not generally available to the public; provided,
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however, Hospah may disclose data or information obtained under this NOCF
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Royalty Agreement without the consent of Operator: (i) if required for
compliance with applicable laws, rules, regulations or orders of a governmental
agency or stock exchange having jurisdiction over Hospah or its parent or
affiliated corporations or companies; (ii) to such of Hospah's consultants as
have a need to know such information; (iii) to any third party to whom Hospah,
in good faith, anticipates selling or assigning Hospah's interests under this
NOCF Royalty Agreement; or (iv) to a prospective lender; provided that Operator
shall first have been provided with a confidentiality agreement executed by such
consultant, third party or lender, which agreement shall include the
confidentiality provisions of this Section.
F. GENERAL PROVISIONS
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1. Ownership of Tailings. All tailings or other residues from the
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processing of ores ("Tailings") resulting from Operations on the Xxxxx Facility
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shall be the sole property of Operator, but shall remain subject to this NOCF
Royalty Agreement should the Tailings be processed or reprocessed, as the case
may be, by Operator in the future and result in the
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production of gold or other mineral product produced. Notwithstanding the
foregoing, Operator shall have the right to dispose of Tailings from the Xxxxx
Facility on or off of the Xxxxx Facility.
2. Entire Agreement; Continuing Effect. This NOCF Royalty Agreement
-----------------------------------
contains the entire agreement between Operator and Hospah related to the Xxxxx
Facility, and no oral agreement, promise, statement or representation which is
not contained therein shall be binding on the Parties unless subsequently
reduced to writing and signed by the Parties. Subject to the provisions of this
Section, the provisions of this NOCF Royalty Agreement shall supersede all
previous oral or written agreements between the Parties pertaining to the
subject matter hereof.
3. Additional Documents. The Parties shall execute such further
--------------------
instruments and documents and take and complete such further actions as may be
necessary to effectuate the purposes of this NOCF Royalty Agreement.
4. Binding Effect. All covenants, conditions, and terms of this NOCF
--------------
Royalty Agreement shall be binding upon Operator and Hospah, and shall be of
benefit to the Xxxxx Facility and the ground covered thereby including any
amendment, relocation or patent of the Xxxxx Facility. If the Xxxxx Facility is
converted to another form of possession by virtue of a change in United States
mining law, the Net Operating Cash Flow Interest shall attach to such possessory
right.
5. Notices. All notices, designations or other documents required or
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authorized by the terms of this NOCF Royalty Agreement shall be in writing and
shall be personally delivered, or mailed by registered or certified mail, first
class postage prepaid, return receipt requested, or transmitted by facsimile
machine in a manner which confirms transmission to the recipient, addressed as
follows:
If to Hospah: If to Operator:
------------ --------------
Hospah Coal Company Western Mesquite Mines, Inc.
0000 Xxxxxxx Xxxxxx 0000 Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000 #000
Xxxxxx, Xxxxxxxx 00000 Xxxxx, Xxxxx 00000 XXX
Attn: Land Dept. Facsimile: 000-000-0000
Facsimile: 000-000-0000 Phone: 000-000-0000
Phone: 000-000-0000
Either Party may change its address for notice by giving the other Party notice
of such change in the manner provided in this Section. Notices personally
delivered shall be deemed received on the date of such delivery. Notices given
by mail in the manner specified in this Section shall be deemed received on the
fifth day after the date of mailing. Notices given by facsimile transmission in
the manner specified in this Section shall be deemed received on the first
business day following the day on which the transmission was made.
6. Performance of Obligations. Each Party shall perform its
--------------------------
obligations under this NOCF Royalty Agreement in a timely manner.
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7. Term. The term of this NOCF Royalty Agreement shall be perpetual.
----
The Net Operating Cash Flow shall be deemed to be a covenant running with the
land which shall attach to any amendment, relocation or patent of the Xxxxx
Facility and to any new claims or similar interests that result from a
conversion of the Xxxxx Facility in connection with a revision of the general
mining law.
8. Dispute Resolution. Disputes resulting from, arising out of, or in
------------------
connection with this NOCF Royalty Agreement or the construction or enforcement
thereof may be resolved by a court of competent jurisdiction. In any litigation
between the Parties or any person claiming under them, resulting from, arising
out of, or in connection with this NOCF Royalty Agreement or the construction or
enforcement thereof, the substantially prevailing party shall be entitled to
recover all reasonable costs, expenses, legal and expert witness fees and other
costs of suit incurred by it in connection with such litigation, including such
costs, expenses and fees incurred prior to the commencement of the litigation,
in connection with any appeals, and in collecting or otherwise enforcing any
final judgment entered therein. If a party substantially prevails on some
aspects of such action, but not on others, the court may apportion any award of
costs and legal fees in such manner as it deems equitable.
9. Further Assurances. The Parties promptly shall execute all such
------------------
further instruments and documents and do all such further actions as may be
necessary to effectuate the purposes of this Agreement.
10. Governing Law. This NOCF Royalty Agreement is to be governed by
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and construed under the laws of the State of Colorado.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF the Parties hereto have duly executed this NOCF Royalty
Agreement effective as of the date first written above.
OPERATOR HOSPAH
Western Mesquite Mines, Inc. Hospah Coal Company
By: /s/ Xxxx X. Xxxx By: /s/ Xxxxx X. Xxxxx
--------------------------- -------------------------------
Name: Xxxx X. Xxxx Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer Title: Vice President and Secretary
Its Authorized Representative Its Authorized Representative
