PROCESSING
AGREEMENT
This Processing Agreement (the "Agreement") is made this 31st
day of October, 2008, by and between Nord Resources Corporation, a
Delaware corporation (hereinafter, "Nord"), and Texas Canyon Rock
& Sand, Inc., an Arizona corporation (hereinafter, "Texas
Canyon").
BACKGROUND
INFORMATION
A.
At its Johnson Camp Mine (the "Mine Site"), Nord mines for copper
and other minerals. As a byproduct of the mining process, Nord also
produces certain rock with no mineral value (the "Waste Rock").
B.
Nord is willing to grant to Texas Canyon the exclusive right to
process the Waste Rock into decorative rock (the "Decorative Rock")
and other rock products, including aggregate.
C.
This Agreement sets forth the terms and conditions under which
Texas Canyon will process the Waste Rock, return the Decorative
Rock to Nord and enter into agreements with others for the sale of
the other rock products.
AGREEMENT
NOW, THEREFORE , in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1.
Exclusive Agreement . Nord hereby grants to Texas Canyon the
exclusive right to crush and process the Waste Rock at a designated
area at the Mine Site. No other company will be allowed to screen
or crush Waste Rock at the Mine Site.
2.
Term; Production .
(a)
The term of this Agreement shall be five (5) years.
(b)
If Texas Canyon fails to produce the amount of Decorative Rock
required by Section 7 of this Agreement or if Texas Canyon
otherwise fails to comply with this Agreement, Nord may cancel this
Agreement after giving to Texas Canyon at least thirty (30) days
written notice of the deficiencies in performance. Texas Canyon may
cure said breach within said thirty-day period. Texas Canyon will
be excused from complying with these minimum requirements if Nord
in unable to comply with Section 2(c) of this Agreement.
(c)
Nord agrees to keep a suitable amount of quality Decorative Rock
available for processing by Texas Canyon.
(d)
Nord may, in its sole discretion, cancel this Agreement without
cause after giving to Texas Canyon at least thirty (30) days
written notice. In the event of termination of this Agreement
without cause, Texas Canyon may continue to process and sell
Decorative Rock and all aggregate products to any party and pay a
fee of $1.50 per ton to Nord.
(e)
Nord agrees to keep a suitable amount of quality Decorative Rock
available for processing by Texas Canyon.
(f)
Following termination of this Agreement, Texas Canyon shall:
(i)
Retain ownership of all material processed during the term of this
Agreement for a period of two (2) years
(ii)
Restore the designated area of the Mine Site to good condition
generally acceptable under industry practices and in compliance
with applicable Environmental Laws.
(iii) Be
responsible for the remediation or removal of any spills or
releases of hazardous materials or other violations of
Environmental Laws which are the responsibility of Texas Canyon
under Section 11 of this Agreement.
3.
Processing Fee .
(a)
All Decorative Rock processed by Texas Canyon shall be the property
of Nord. Nord will pay Texas Canyon a processing fee of $6.25 per
ton of Decorative Rock (the "Processing Fee") at the time the
Decorative Rock is sold by Nord. The Processing Fee is based upon
the price of diesel fuel at $4.00 per gallon.
(b)
The Processing Fee will be adjusted each calendar quarter based on
the average price of a gallon of diesel fuel during the previous
quarter.
(i)
The Processing Fee will be adjusted up or down at the rate of $0.25
per ton for each $1.00 per gallon change in the cost of diesel
fuel. For example, if the price of diesel fuel falls to $3.00 per
gallon, the Processing Fee will fall to $6.00 per ton and if the
price of diesel fuel rises to $5.00 per gallon, the Processing Fee
will rise to $6.50 per ton.
(ii)
Pro rata adjustments of less than $0.25 will be made to
account for adjustments of less than $1.00.
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(c)
The average price of diesel fuel during the prior quarter shall be
determined based upon the wholesale price of diesel fuel in Tucson,
Arizona, on the first (1st) and fifteenth (15th) day of each month
during the quarter with the six (6) prices averaged to determine
the price.
4.
Waste Rock . Texas Canyon will purchase a minimum of 1,200
tons of Waste Rock per month for purposes of crushing into
aggregate. All Waste Rock will be sold "as is" and "where is"
without warranty and without any expressed or implied
representations or promises of any kind. Purchasers will assume all
responsibilities and costs for collecting, producing and handling
all Waste Rock used for aggregates.
5.
Aggregate . Texas Canyon will control and sell all
non-decorative aggregate to third parties. Texas Canyon shall pay
Nord a fee of $1.50 per ton for aggregate sold from the Mine
Site.
6.
Other Contractors . Texas Canyon may agree to allow other
companies to manufacture aggregate from the Waste Rock or the one
and one-half inch (1½") to four inch (4") rock pile located at
the Mine Site. Proceeds from these arrangements will be split
evenly between Nord and Texas Canyon.
7.
Minimum Production .
(a)
Commencing three (3) months after the execution of this Agreement,
Nord shall purchase a minimum amount of Decorative Rock from Texas
Canyon, averaged and calculated on a quarterly basis as
follows:
(i)
A minimum of 6,000 tons per month or 18,000 tons in the first
quarter;
(ii)
A minimum of 8,000 tons per month or 24,000 tons in the second
quarter; and
(iii) A
minimum of 10,000 tons per month or 30,000 tons in each quarter
thereafter.
(b)
Texas Canyon shall produce such amounts of Decorative Rock as Nord
may request, provided that Texas Canyon shall have a three (3)
month ramp-up period if Nord requests more than 15,000 tons per
month.
8.
Dust Control . Nord will furnish to Texas Canyon a
reasonable amount of water for dust control purposes.
9.
Insurance . Texas Canyon w/ill be required to provide
insurance for its operations at the Mine Site, naming Nord as an
insurer. Below are listed the minimum requirements for insurance
coverages, terms and limits (the "Required Insurance").
(a)
Texas Canyon shall carry commercial general liability as
follows:
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(i)
Limits:
(1)
$1,000,000 each occurrence;
(2)
$1,000,000 personal and advertising injury;
(3)
$2,000,000 general aggregate; and
(4)
$2,000,000 products-completed operations aggregate or equivalent
approved by Nord, or current limit carried, whichever is
greater.
(ii)
Defense costs:
(1)
Defense costs shall be paid in addition to and shall not deplete
any policy limits.
(2)
If defense costs deplete policy limits, then the limits required
above shall be increased by $1,000,000 in each category and may be
satisfied with an umbrella or excess liability policy.
(iii) No
exclusions shall be allowed for:
(1)
Bodily injury;
(2)
Property damage;
(3)
Products liability/completed operations coverage;
(4)
Premises operations;
(5)
Blanket contract liability (for this Agreement);
(6)
Broad-form property damage;
(7)
Personal injury;
(8)
Independent contractor's liability;
(9)
Mobile equipment;
(10)
Elevators;
(11) Damage from
explosion, collapse and underground hazards; or
(12)
Cross-liability, cross-suits or severability of interest.
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(iv) No
exclusionary language or limitations shall be allowed, unless
agreed to in writing by Nord, for:
(1)
Punitive or exemplary damages, fines or penalties (if insurable by
law);
(2)
Soils or earth movement; or
(3)
Any additional insured that are not applicable to the named
insured.
(v)
There shall be endorsements to the policy for:
(1)
Thirty (30) days prior notice to Nord in the event of
cancellation;
(2)
Ten (10) days notice to Nord for non-payment of premium,
non-renewal or modification or reduction in coverage;
(vi) Only
occurrence forms shall be used. "Claims made" forms shall not be
acceptable.
(vii) There shall
be a deductible or self-insured retention of not more than $25,000
as to Texas Canyon, unless approved in writing by Nord.
(viii) The
insurance afforded by the policy for the benefit of Nord will be
primary and no contributions shall be permitted from any insurance
or self insurance maintained by Nord.
(b)
Texas Canyon shall carry automobile liability as follows:
(i)
Limits:
(1)
$2,000,000 combined single limit for bodily injury and property
damage; or
(2)
$500,000 bodily injury per person, $1,000,000 bodily injury per
accident and $300,000 property damage.
(ii)
Such coverage may be in the form of:
(1)
Personal liability policy for vehicles owned by Texas Canyon plus
evidence of hired and non-owned liability coverage under a separate
policy;
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(2)
Commercial auto liability policy with any of the following covered
vehicles combinations of any auto; owned, hired, and non-owned or
scheduled, hired and non-owned autos; or
(3)
If a commercial automobile policy is provided, then an endorsement
affording thirty (30) days notice of cancellation, with ten (10)
days for non-payment of premium, shall be given to Nord.
(c)
Texas Canyon shall carry workers' compensation/employer's liability
as follows:
(i)
Limits:
(1)
Bodily injury by accident of $1,000,000 each accident;
(2)
Bodily injury by disease of $100,000 each employee; and
(3)
Bodily injury by disease of $1,000,000 policy limits.
(ii)
Workers' compensation benefits shall be provided as required by
statute.
(iii) There
shall be a waiver of subrogation for Nord in each case to the full
extent permitted by law.
(iv) There
shall be endorsements to the policy for:
(1)
Thirty (30) days prior notice to Nord in the event of
cancellation;
(2)
Ten (10) days if cancellation to Nord for non-payment of premium;
and
(3)
Alternate Employer's Endorsement, if leased employees are used.
(d)
The following provisions shall be applicable to all insurance
coverages:
(i)
Unless otherwise approved in writing by Nord, none of the
provisions contained in Sections 9(a), (b) or (c) of this Agreement
may be changed.
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(ii)
Insurance carriers must have a "Best's Rating" and a "Financial
Size Category" acceptable to Nord. Insurance carriers must be
admitted in the state in which the processing activities are being
performed, unless approved in writing by Nord.
(iii) The
Required Insurance will cover Texas Canyon, its authorized
representatives, employees, agents and any other person (including
its authorized representatives, employees and agents) performing
any processing activities under any agreement with Texas
Canyon.
(iv) Texas
Canyon, for itself and on behalf of its insurers, to the full
extent permitted by law without voiding the insurance required
under this Agreement, hereby waives and releases the additional
insured's from liability for loss, damage or loss of property at
the Mine Site, which loss or damage is covered by such insurance,
to the extent such damages are covered by Texas Canyon's policies
of insurance or are required to be covered by the Required
Insurance. This provision is intended to waive fully for the
benefit of Nord and any other additional insureds any rights and/or
claims which might give rise to a right of subrogation in favor of
any insurance carrier issuing the Required Insurance or any other
insurance (including any first party coverage) maintained by Texas
Canyon. Texas Canyon will obtain a waiver of any subrogation right
that its insurers may acquire against the additional insured's by
virtue of payment of any such loss covered by such insurance.
(v)
Concurrently with the execution of the Agreement, Texas Canyon will
file with Nord original certificates of insurance and endorsements
showing the Required Insurance to be in force. Certificates of
insurance alone, without the requisite endorsements, shall not be
acceptable to satisfy the provisions of the Required Insurance.
(vi) Upon
the request of Nord, Texas Canyon will provide Nord with:
(1)
All insurance documentation evidencing the Required Insurance;
(2)
Certified copies of all policies as well as any subsequent policies
and endorsements that Texas Canyon is required to procure and
maintain; and
(3)
Renewal certificates and endorsements for commercial general
liability, at no expense to Nord, prior to expiration of such
insurance, for a period of one (1
