This Royalty Agreement involves
Title: NET SMELTER RETURNS ROYALTY AGREEMENT
Governing Law: Nevada Date: 6/28/2013
Industry: Gold and Silver Sector: Basic Materials
Assessor’s Parcel Number N/S – not a deed.
Recorded at the request of
and when recorded return to:
Rye Patch Gold US Inc.
c/o Thomas P. Erwin
Erwin & Thompson LLP
P.O. Box 40187
Reno, Nevada 89504
The undersigned affirm that this document does not
contain the personal information of any person.
NET SMELTER RETURNS ROYALTY AGREEMENT
This Net Smelter Returns Royalty Agreement (“Agreement”), dated June 27, 2013 (“Effective Date”), is between Coeur Rochester, Inc. a Delaware corporation (“CRI”) and Rye Patch Gold US Inc., a Nevada corporation (“RPG”). CRI and RPG may be referred to herein individually as a “Party” or collectively as the “Parties.” Capitalized words not defined above are defined in various sections of this Agreement or in “Definitions” below.
A. CRI and RPG have entered into that certain Settlement Agreement and Mutual Release dated June 24, 2013 (the “Settlement Agreement”) in which CRI agreed to grant to RPG a production royalty equal to 3.4% of the Net Smelter Returns from the sale of silver and gold processed and sold from the Rochester Mine.
B. CRI and RPG desire to enter into this Agreement to define and establish the terms and conditions governing the production royalty.
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ROYALTY TERM; CALCULATION; AND PAYMENT
1.1 Grant of Royalty . On the terms and subject to the conditions of this Agreement, CRI hereby grants, bargains, sells, transfers, conveys, and agrees to pay to RPG the NSR.
1.2 Term . The NSR shall be paid only with respect to silver and gold produced and sold from the Rochester Mine on or after January 1, 2014 and shall terminate after 39.4 million silver equivalent ounces have been produced and sold from the Rochester Mine (the “Royalty Limit”). Silver equivalent ounces will be determined by converting sales of gold to the
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equivalent number of ounces of silver based on actual prices of gold and silver at the time of sale. When the Royalty Limit has been reached, the NSR will automatically terminate and CRI will have no further obligations to RPG under this Agreement, except for payment or delivery of the NSR and performance of any other obligations under this Agreement which are accrued, but unpaid or not performed, as of the termination date.
CRI will notify RPG when the NSR has terminated. Within thirty (30) business days after receiving notice from CRI that the NSR has terminated RPG shall execute and deliver to CRI an executed original of a “Notice of Termination” of the NSR in form acceptable for recording under Nevada law.
1.3 Calculation and Payment of NSR . CRI will calculate the NSR payment due, if any, during each calendar quarter by multiplying 3.4% by the Net Smelter Returns for that calendar quarter. Upon determination by CRI that an NSR payment is due and owing to RPG in a calendar quarter, CRI shall deliver to RPG a payment by wire transfer in immediately available funds, within fifteen (15) days after the end of the calendar quarter in which such payment is due, together with a copy of the CRI accounting, sales data and the refinery and smelter outturn statements related to such payment. The first payment will be due by April 15, 2014 in respect of the quarter ending March 31, 2014. At least fifteen (15) days prior to the date of the first payment, RPG will provide wiring instructions to CRI for payment. CRI shall be entitled to rely on RPG’s wiring instructions until such time as RPG notifies CRI in writing of different wiring instructions. CRI will not be deemed to be in default under this Agreement and the time for making such payment shall be extended, if, at the time such payment is otherwise due, wire transfer facilities are not available for any reason, so long as CRI makes payment as soon as practicable after wire transfer facilities become available.
If it is subsequently determined that an overpayment or underpayment was made, neither CRI nor RPG will be required to make an additional payment or a refund, as applicable, but the overpayment or underpayment shall be corrected in the next calendar quarter following determination that an adjustment is required. No NSR shall be due regarding ore stockpiles or Merrill Crowe precipitates unless and until such stockpiled ores or Merrill Crowe precipitates are processed to produce Products and are actually sold and CRI has received from the refinery or smelter confirmation of the Net Smelter Returns realized from the sale of Products from such stockpiled ore or Merrill Crowe precipitates.
1.4 Trading Activities . The profits and losses from any Trading Activities undertaken by CRI or its Affiliates with respect to final Products will not be included in any manner in the calculation of the NSR. RPG acknowledges that CRI may realize from time to time lesser or greater profit or losses from the sale of Products than does RPG as a result of such activities and RPG shall not participate in such profits nor share in such losses.
The Net Smelter Returns payable on Products subject to hedging transactions shall be determined in the manner prescribed in the definition of “Revenues.”
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INFORMATION; AUDITS; DISPUTES
2.1 Information . CRI shall keep accurate records of tonnage, volume of Products, analyses of Products, weight, moisture, assays of payable metal content, and any other information or data relevant to the calculation of Net Smelter Returns (including, but not limited to, settlement sheets, receipts, invoices or other information provided by purchasers of Products from CRI).
2.2 Audits . RPG has the right to audit the records related to the calculation of the NSR. The audit may only be performed once during any calendar year for the immediately preceding calendar year, by a licensed certified public accounting firm selected by mutual consent of the Parties and performed according to standards of the American Institute of Certified Public Accountants. Any audit under this Section may be conducted only after providing CRI ten (10) days’ advance written notice that RPG intends to conduct an audit and shall be completed within ninety days (90) days after the end of the calendar year for which the audit is being conducted.
Each audit shall be conducted during CRI’s regular business hours and in a manner that does not materially interfere with CRI’s operations. RPG shall pay all costs of any such audit, unless an audit reveals an underpayment of a royalty payment in an amount that is ten percent (10%) or more than the amount that RPG was actually due. In that case, CRI shall pay the costs of the audit. Any CRI NSR calculation which RPG does not audit in accordance with this Section will be deemed final and will not thereafter be subject to audit or challenge.
2.3 Disputes . Any controversy or claim, whether based on contract, tort, statute or other legal or equitable theory (including, but not limited to, any claim of fraud, misrepresentation or fraudulent inducement or any question of validity or effect of this Agreement, including this clause) arising out of or related to this Agreement (including amendments or extensions), or the breach or termination of this Agreement shall be settled by arbitration in accordance with the then current Rules of the American Arbitration Association (“AAA”) for Commercial Arbitration. The arbitration shall be held in Reno, Nevada and there shall be a single arbitrator. The arbitrator shall be chosen subject to the rules and procedures as provided by the AAA and shall have a minimum of ten (10) years’ experience in mining matters generally and in the subject matter of the dispute specifically. No person having a prior or existing attorney-client, business or family relationship with either of the Parties or their principal representatives or a financial interest in the dispute shall be qualified to act as arbitrator in accordance with this Agreement absent the express prior written consent of the Parties to this Agreement. The arbitrator shall determine the claims of the Parties and render a final award in accordance with the substantive law of the State of Nevada, excluding Nevada law regarding conflicts of laws. The arbitrator shall state the reasons for the award in writing. Except as required by applicable laws and regulations and the rules of any exchange on which the shares of the capital stock of CRI, RPG and their affiliates are listed for trading (and then only after prior notice to the other Party), a Party shall not disclose the facts of the underlying dispute or the contents or results of the arbitration without the prior consent of the Parties. A judgment on the award may be entered by a court having jurisdiction, located in the Sixth Judicial District Court of the State of Nevada in and for Pershing County, Nevada.
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TRANSFER OF INTEREST; RIGHT OF FIRST REFUSAL
3.1 Transfer of Interest .
CRI may Transfer all or any portion of its interest in this Agreement or in the Rochester Mine; provided, however, that CRI shall assure that any instrument of Transfer shall provide for the transferee’s express agreement to assume, perform and be bound by CRI’s obligations under this Agreement. If CRI Transfers the whole of or an undivided interest in this Agreement, each transferee of an undivided interest shall separately pay to RPG the NSR and perform the obligations under this Agreement accruing with respect to such transferee’s interest in and to the Rochester Mine. If CRI Transfers the whole of or an undivided interest in this Agreement, liability for any default under or breach of any obligation under this Agreement shall rest exclusively upon the transferee of such interest in this Agreement which commits the default or breach; provided, however, that no Transfer shall relieve CRI, or its successors and assigns, of any liability or obligation under this Agreement with respect to the interest subject to such Transfer which accrues or arises before the effective date of the Transfer. If CRI Transfers ownership of a segregated portion of the Rochester Mine, any default or breach by the transferee of such segregated portion of the Rochester Mine shall not affect the rights of CRI in the segregated portion of the Rochester Mine retained by it or the rights of the holders or owners of any other segregated portion of the Rochester Mine. Except as provided below, RPG shall not Transfer or create an Encumbrance on all or any part of its interest in the NSR. Any attempted Transfer of or creation of an Encumbrance on all or any portion of RPG’s interest in the NSR not in accordance with the terms of this Agreement shall be null and void. Subject to CRI’s Right of First Refusal granted in Section 3.2, on or after January 1, 2014, RPG may Transfer its entire interest in the NSR if such interest is transferred (i) in a single-asset transaction of all of RPG’s ownership interest in the NSR; (ii) for cash consideration; (iii) upon at least thirty (30) days’ advance written notice to CRI; and (iv) to a company unrelated to RPG whose principal business is the acquisition, holding, or management of precious metals production royalties and streams.
No Transfer of the NSR, however accomplished, will enlarge the obligations or diminish the rights of CRI or RPG except as specifically provided in this Agreement. RPG covenants that any change in ownership of the NSR will be accomplished in such a manner that CRI will be required to make payments and give notice to no more than one Person, and upon breach of this covenant, CRI and its Affiliates may retain all payments otherwise due until the breach has been cured. No Transfer in or to this Agreement or NSR, however accomplished, shall be binding on CRI until sixty (60) days after CRI receives from RPG written notice of a Transfer, supported by either originals or certified copies of the instruments evidencing such Transfer, and any court records and proceedings, transcripts, or other documents necessary, in the opinion of CRI, to establish the validity of such Transfer, accompanied by a notarized agreement, duly executed by the transferee, successor or assign, consenting to be bound by this Agreement.
3.2 Right of First Refusal . RPG may not transfer its interest in the NSR to any person (the “Proposed Transferee”) unless (i) RPG receives a bona fide binding written definitive offer from the Proposed Transferee specifying the purchase consideration and all other material terms and conditions of such proposed Transfer (the “Proposed Terms”); and (ii) RPG provides written notice (the “Offer Notice”) to CRI (A) of RPG’s receipt of such offer from the Proposed Transferee together with a copy of such offer; and (B) offering to sell such interest to CRI on the Proposed Terms.
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CRI shall have the right, but not the obligation, for a period of thirty (30) business days after its receipt of the Offer Notice (the “Election Period”) to elect to purchase the NSR on the Proposed Terms, in which event the consideration payable by CRI shall have a value equal to the amount of consideration included in the Proposed Terms and, subject to the following paragraph, may be payable in cash, shares of common stock of CRI’s parent, Coeur Mining, Inc. (“CRI Parent”), or a combination of both. Any such election shall be made by providing irrevocable written notice to RPG within such Election Period (an “Election Notice”). If CRI does not deliver an Election Notice within the Election Period, CRI shall be deemed irrevocably to have elected to not purchase the NSR and the right of first refusal granted in this Section shall terminate.
If CRI timely elects to purchase the NSR, the Parties shall close such transaction on the later of (i) thirty (30) business days after RPG provides the Offer Notice or (ii) five (5) business days after the receipt from all applicable governmental authorities of all required consents and approvals, if any, with respect to such Transfer. At the closing, CRI shall pay to RPG consideration having a value equal to the amount of consideration included in the Proposed Terms and may be payable by CRI in cash, shares of common stock of CRI’s parent, Coeur Mining, Inc., or a combination of both. In the event CRI determines to pay all or a portion of the consideration in the form of shares of common stock of CRI Parent (the “Stock Consideration”), CRI shall include such determination in its Election Notice (together with the proposed terms for the payment of such consideration) and RPG shall have the right to reject receipt of the Stock Consideration by delivering written notice thereof to CRI no later than five (5) business days prior to the closing, in which event CRI shall pay the full consideration amount in the form of cash. Any failure by RPG to deliver such notice to CRI shall be deemed an acceptance by RPG of receipt of the Stock Consideration at the closing. If CRI does not elect or is deemed to not elect to purchase the NSR, then RPG may Transfer the NSR to the Proposed Transferee, but only on the Proposed Terms. If RPG does not Transfer the NSR to the Proposed Transferee on the Proposed Terms within the time specified in the Proposed Terms for closing, then CRI’s right of first refusal granted under this Section shall be renewed, and RPG shall be obligated to afford CRI the right of first refusal in this Section with respect to any proposed Transfer of its interest in the NSR.
4.1 Right to Inspect . Once during each calendar year, RPG or its authorized representative may, upon providing ten (10) days’ advance written notice to CRI and subject to the confidentiality obligations described in this Agreement, inspect CRI’s records and data pertaining to the production and sale of gold and silver from the Rochester Mine and the computation of the NSR for the calendar year in which the inspection is completed. Any such inspection shall be at RPG’s own cost and risk and shall be conducted in a manner that will not materially interfere with CRI’s operations. If RPG elects to exercise its rights under section 2.2 of this Agreement to conduct an audit, then the inspection permitted pursuant to this section 4.1 shall be conducted simultaneously, in order to minimize disruption to CRI’s operations. RPG
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shall indemnify and hold harmless CRI and its Affiliates (including without limitation direct and indirect parent companies), and its or their respective directors, officers, shareholders, employees, agents, and attorneys, from and against any losses and liabilities which may be imposed upon, asserted against, or incurred by, any of them by reason of injury to RPG or its authorized representatives resulting from the exercise of the rights given herein.
4.2 No Development Covenant . CRI has no obligation to mine, to continue mining, or to mine any particular quantities of gold-bearing or silver-bearing ores for processing at the Rochester Mine or to recover gold or silver therefrom. CRI’s only obligation is to pay the NSR to RPG on any gold or silver that is processed and sold from the Rochester Mine subject to the terms and conditions in this Agreement. RPG’s interest in the Rochester Mine shall be solely that of a non-participating royalty holder and it shall have no rights to participate or influence management or decision-making regarding operations on the Rochester Mine. RPG expressly disclaims any implied covenants of diligence with respect to operations on the Rochester Mine, including without limitation all exploration, development, mining, and processing operations.
4.3 Notices . All notices shall be in writing to the applicable address set forth below and shall be given (i) by personal delivery or recognized international overnight courier, (ii) by electronic communication, with a hard copy confirmation sent simultaneously 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 (a) if by