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Royalty Termination Agreement

Royalty Agreement

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ROYAL GOLD INC | Denver, CO | Operator and Royal Gold, Inc

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Title: ROYALTY TERMINATION AGREEMENT
Date: 11/5/2015
Industry: Gold and Silver     Sector: Basic Materials

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Exhibit 10.2

 

ROYALTY TERMINATION AGREEMENT

 

This ROYALTY TERMINATION AGREEMENT dated the 9 th  day of July, 2015,

 

BETWEEN:

 

COMPAÑÍA MINERA TECK CARMEN DE ANDACOLLO , a contractual mining company organized under the laws of Chile (“ Operator ”),

 

AND:

 

ROYAL GOLD CHILE LIMITADA , a limited liability company organized under the laws of Chile (“ RG Chile ”),

 

(collectively, the “ Parties ”)

 

WHEREAS:

 

A.                                     The Operator (formerly known as Compañía Minera Carmen de Andacollo) and Royal Gold, Inc. are parties to that certain Master Agreement dated April 3, 2009, amended by Amendment No. 1 to the Master Agreement dated August 12, 2009 and further amended and restated by the Amended and Restated Master Agreement dated January 12, 2010 (together, the “ Master Agreement ”);

 

B.                                     The Operator and Royal Gold, Inc. were parties to that certain Royalty Agreement (the “ Original Royalty Agreement ”) and granted an Irrevocable Mandate (the “ Irrevocable Mandate ”), both dated January 12, 2010;

 

C.                                     Pursuant to the Cesión de Derechos y Asunción de Posición Contractual (the “ Cesión ”) between Royal Gold, Inc. and RG Chile dated January 25, 2010, Royal Gold, Inc. sold, assigned and transferred all the rights that Royal Gold, Inc. had under the Original Royalty Agreement to RG Chile;

 

D.                                     Pursuant to the Primera Modificación y Complementación de Contrato de Regalía between the Operator and RG Chile dated December 29, 2011, the Original Royalty Agreement was amended to include some mining concessions to the Original Royalty Agreement (the “ Royalty Agreement Amendment ”, and together with the Original Royalty Agreement, the “ Royalty Agreement ”);

 

E.                                      The Operator and Royal Gold, Inc. are in compliance with the Master Agreement, and the Operator and RG Chile are in compliance with the Royalty Agreement and no penalties or payments are owing by any Party to another Party in respect of any breach or waiver of the Master Agreement or the Royalty Agreement;

 

F.                                       Concurrently with the execution of this Agreement, the Operator and Royal Gold, Inc. will enter into an agreement terminating the Master Agreement (the “ Master Agreement Termination Agreement ”); and

 

G.                                     In consideration for the Royalty Termination Payment (as defined below) RG Chile have agreed with the Operator to terminate the Royalty Agreement and the Irrevocable Mandate, subject to the terms and conditions set forth herein.

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the respective covenants, agreements, representations, warranties and indemnities contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties covenant and agree as follows:

 

ARTICLE ONE
 CERTAIN DEFINED TERMS AND CONSTRUCTION

 

1.1                                Capitalized Terms .

 

Capitalized terms as used, but not defined, in this Agreement, shall have the meanings assigned to them in the Original Royalty Agreement.

 

1.2                                Construction .

 

In this Agreement:

 

[Signature Page to Royalty Termination Agreement]

 



 

(a)                                  unless the context otherwise clearly requires: (A) references to the plural include the singular, and references to the singular include the plural; (B) the words “ include ,” “ includes ,” and “ including ” do not limit the preceding terms or words and shall be deemed to be followed by the words “ without limitation ”; (C) the terms  “ Agreement ,” “ hereof ,” “ herein ,” “ hereunder ,” “ hereto ,” and similar terms refer to this entire Agreement and not to any particular provision of this Agreement; (D) “ or ” is used in the inclusive sense of “ and/or ”; (E) if a word or phrase is defined, then its other grammatical or derivative forms have a corresponding meaning; (F) unless otherwise specified, the terms “ day ” and “ days ” mean and refer to calendar day(s); (G) the terms “ business day ” and “ business days ” mean and refer to any day other than a Saturday, Sunday, or federal statutory holiday in the United States of America, provincial statutory holiday in British Columbia or statutory holiday in Chile; and (H) if any action, including a payment hereunder, is required to be taken pursuant to this Agreement on or by a specified date that is not a business day, the action is valid if taken on or by the next business day.

 

(b)                                  unless otherwise specified, all references to articles, sections, and exhibits are to the Articles, Sections, and Exhibits of this Agreement;

 

(c)                                   the headings of the Sections and Subsections of this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; and

 

(d)                                  except where otherwise expressly provided, all monetary amounts are stated and shall be paid in the currency of United States of America;

 

1.3                                Fair Meaning .

 

This Agreement shall be construed according to its fair meaning, taken as a whole, as if the Parties had prepared it jointly, not as if prepared by one of the Parties.

 

ARTICLE TWO
 TERMINATION

 

2.1                                Termination

 

The Operator and RG Chile hereby confirm and agree that, effective as of June 30, 2015 (the “ Termination Effective Date ”) the Royalty Agreement, as well as certain documents ancillary to the Royalty Agreement, being (i) the Irrevocable Mandate, and (ii) any registration, guarantee, security interest ( caución ), or annotation related thereto, including those relating to the mortgage and prohibitions referred to in sections 6(j)(iii), 6(p) and 6(q) of the Original Royalty Agreement, registered at page 1 number 1 of the Mortgages and Encumbrances Registry and at page 1 number 1 of the Prohibition Registry, respectively, both of the Mining Registry of Andacollo corresponding to 2010; and in sections 3 and 4 of the Royalty Agreement Amendment, registered at page 1 number 1; page 3 number 2; page 5 number 3; page 7 number 4 and page 9 number 5 all of the Mortgages and Encumbrances Registry, and at page 4 number 4; page 7 number 5; page 10 number 6; page 13 number 7 and page 16 number 8 all of the Prohibition Registry, respectively, all of the Mining Registry of Andacollo corresponding to 2012 (together the “ Mortgages and Prohibitions ”), be terminated without the need of any declaration, judicial or otherwise, further action from, or document executed by, any of the Parties, and the Royalty Agreement shall thereafter in all respects be terminated and all interests, rights, obligations or liabilities created under the Royalty Agreement and the Irrevocable Mandate shall be extinguished.

 

2.2                                Royalty Termination Payment .

 

As consideration for the termination of the Royalty Agreement, the Operator shall on the date first written above pay to RG Chile $345,000,000.00 in cash or other immediately available funds (the “ Royalty Termination Payment ”).

 

2.3                                Other Payments .

 

The Operator and RG Chile covenant and agree that, notwithstanding the termination of the Royalty Agreement and Irrevocable Mandate pursuant to Section 2.1,

 

(a)                                  the following payments, without duplication, shall be made in cash or other immediately available funds within 15 days of the Termination Effective Date:

 

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(i)                                      the Operator shall pay to RG Chile an amount equal to the Royalty that would have been payable in respect of Operator’s sale or disposition of Subject Minerals for which it has received or been credited with payment under the relevant Metal Sales Contract during the calendar month of June 2015, had the Royalty Agreement not been terminated; and

 

(ii)                                   with respect to any copper concentrate produced from the Subject Properties that was shipped prior to the Termination Effective Date, but for which the Operator has not received or been credited with all provisional and final payments for the sale or disposition of such Subject Minerals under the relevant Metal Sales Contract, the Operator shall pay to RG Chile an amount equal to result of (A) the product obtained by multiplying (i) the Payable Subject Minerals in such copper concentrate, as determined solely by the weighing, sampling and assaying conducted by the Operator by (ii) 75% and then multiplying the resulting product by (iii) the Net Reference Price, minus , (B) the amount of any Royalty payment previously made by the Operator in respect of such copper concentrate.

 

(b)                                  the Operator will reconcile, on an aggregate basis, any adjustments to the Royalty Statements as may be necessary for the calendar quarter ended June 30, 2015, in accordance with Section 4(c) of the Original Royalty Agreement.  In the event such an adjustment reflects:

 

(i)                                      a balance owing to RG Chile, the Operator shall provide written notice to RG Chile of the amount of such underpayment and will pay such underpayment to RG Chile in cash or other immediately available funds, within 10 days of the date in which the adjustment has been determined; and

 

(ii)                                   an overpayment to RG Chile, the Operator shall provide notice to RG Chile of the amount of such overpayment and RG Chile will pay such overpayment to the Operator in cash or other immediately available funds within 10 days of the date in which the adjustment has been determined.

 

(c)                                   For the avoidance of doubt, any payment that may be necessary by the Operator due to the fact that the average Payable Factor with respect to copper concentrate referred to in Section 2.3(a)(ii) is less than 90.6% is payable under Section 2.3(b) only, and not both Section 2.3(a)(ii) and (b).  Furthermore, there shall be no duplication of amounts payable under Section 2.3(a) and (b).

 

ARTICLE THREE
 REPRESENTATIONS AND WARRANTIES

 

3.1                                Representations and Warranties of Operator .

 

The Operator hereby represents and warrants to RG Chile, and acknowledges that RG Chile is relying on such representations and warranties in entering this Agreement, that:

 

(a)                                  Organization .  The Operator is a contractual mining company duly incorporated, validly existing and in good standing under the laws of Chile and has all requisite corporate power and capacity to enter into this Agreement and to carry out the transactions contemplated hereby;

 

(b)                                  Authorization; No Conflict .  The execution, delivery and performance by the Operator of this Agreement have been duly authorized by all necessary shareholder and corporate action on the part of the Operator and do not and will not: (i) contravene the Operator’s constating documents; (ii) materially violate any provision of any Governmental Requirement, order, judgment, injunction, decree, determination or award presently in effect; or (iii) result in a material breach of or constitute a material default under or require the consent of any Person pursuant to any indenture or loan, credit agreement, debenture or any other agreement, lease or instrument to which the Operator is a party or by which it or its properties may be bound or affected;

 

(c)                                   Governmental and Other Approvals .  No Approval of any Governmental Authority or other third party is required for the due execution and delivery of, and the due performance of all obligations of, the Operator under this Agreement, except for Approvals as have been obtained or for which application has been made, and registration of the termination and cancellation of the Mortgages and Prohibitions;

 

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(d)                                  Binding Obligations .  This Agreement is a legal, valid and binding obligation of the Operator, enforceable against the Operator in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws or equitable principles affecting enforcement of creditors’ rights generally;

 

(e)                                   Litigation .  There is no claim, action, lawsuit, proceeding, arbitration, mediation or investigation pending or, to the knowledge of the Operator, threatened against or involving the Operator or the Project to restrain, prohibit, materially limit or impose material adverse conditions on this Agreement or the transactions contemplated by this Agreement;

 

(f)                                    No Judgments or Decrees .  The Operator is not bound by any judgment, order, writ, injunction or decree which prohibits, restrains, materially limits or imposes material adverse conditions on, this Agreement or the transactions contemplated by this Agreement; and

 

(g)                                   Compliance .  The Operator and, to the knowledge of the Operator, RG Chile are in compliance with the Royalty Agreement and no penalties or payments are owing by either the Operator or, to the knowledge of the Operator, RG Chile to the other in respect of any breach or waiver of the Royalty Agreement.

 

3.2                                Representations and Warranties of RG Chile .

 

RG Chile hereby represents and warrants to the Operator, and acknowledges that the Operator is relying on such representations and warranties in entering this Agreement, that:

 

(a)                                  Organization and Qualification . RG Chile is a limited liability company duly incorporated, validly existing and in good standing under the laws of Chile and has all requisite corporate power and capacity to enter into this Agreement and to carry out the transactions contemplated hereby;

 

(b)                                  Authorization; No Conflict .  The execution, delivery and performance by RG Chile of this Agreement have been duly authorized by all necessary corporate action on the part of RG Chile and do not and will not: (i) contravene RG Chile’s constating documents; (ii) materially violate any provision of any Governmental Requirement, order, writ, judgment, injunction, decree, determination or award presently in effect; (iii) result in a material breach of or constitute a material default under or require the consent of any Person pursuant to any indenture or loan, credit agreement, debenture or any other agreement, lease or instrument to which RG Chile is a party or by which it or its properties may be bound or affected; or (iv) result in, or require, the creation or imposition of any Lien upon or with respect to the Royalty Agreement or any right or interest therein;

 

(c)                                   Governmental and Other Approvals .  No Approval of any Governmental Authority or other third party is required for the due execution and delivery of, and the due performance of all obligations of RG Chile under this Agreement except for Approvals as have been obtained or for which application has been made, and registration of the termination and cancellation of the Mortgages and Prohibitions;

 

(d)                                  Binding Obligations .  This Agreement is a legal, valid and binding obligation of RG Chile, enforceable against RG Chile in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws or equitable principles affecting enforcement of creditors’ rights generally;

 

(e)                                   Litigation .  There is no claim, action, lawsuit, proceeding, arbitration, mediation or investigation pending or to the knowledge of RG Chile, threatened against or involving RG Chile or the Royalty Agreement to restrain, prohibit, materially limit or impose material adverse conditions on the transactions contemplated by this Agreement;

 

(f)                                    No Transfer or Assignment . RG Chile has not transferred or assigned any interest or obligation under the Royalty Agreement to any Person;

 

(g)                                   Full Title and Interest in Royalty Agreement .  RG Chile is the exclusive owner of the Royalty Agreement and no Person has any agreement, option, right of first refusal or right, title or interest

 

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or right capable of becoming an agreement, option, right of first refusal or right, title or interest, in or to all or any part of the Royalty Agreement or any right or interest therein; and

 

(h)                                  No Liens .  RG Chile’s right, title and interest in and to the Royalty Agreement and any Royalty thereunder is not subject to any Lien.  RG Chile has not granted or agreed to grant, any Lien affecting or in the Royalty Agreement or any right or interest therein other than a Lien in favour of HSBC Bank USA, National Association, as agent (the “ HSBC Charge ”).  The HSBC Charge has been released and is not valid or enforceable on the date of this Agreement.

 

ARTICLE FOUR
COVENANTS

 

4.1                                Appropriate Action; Consents; Filings; Registrations .

 

(a)                                  Upon the terms and subject to the conditions set forth in this Agreement, the Parties shall use their commercially reasonable efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things required under applicable Governmental Requirements or otherwise to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including: (A) executing and delivering any additional instruments necessary, proper or advisable to consummate the transactions contemplated by, and to carry out fully the purposes of, this Agreement, and (B)  making all necessary filings, and thereafter making any other required submissions, with respect to this Agreement under any applicable Governmental Requirement; provided , however that each Party shall cooperate with the other in connection with the making of all such filings, including providing copies of all such documents to the non-filing Party and their advisors prior to filing and discussing all reasonable additions, deletions or changes suggested in connection therewith.  Each Party shall furnish to each other all information reasonably required for any application or other filing to be made pursuant to any applicable Governmental Requirement in connection with the transactions contemplated by this Agreement.

 

(b)                                  The Parties covenant and agree, promptly following the date first written above, to grant or execute all such further agreements, deeds, public or private instruments, or documents and do all such further actions as may be necessary to:

 

(i)                                      evidence the termination of the Royalty Agreement and the Irrevocable Mandate as of the Termination Effective Date; and

 

(ii)                                   release and cancel the Mortgages and Prohibitions;

 

(c)                                   The Parties covenant and agree that, promptly following the date first written above, the Parties shall each use their commercially reasonable efforts to request the notes and registrations applicable at the public notary where the Royalty Agreement and the Irrevocable Mandate was executed or at the relevant Mining Register to (I) evidence the termination of the Royalty Agreement as of the Termination Effective Date, and (II) the release and cancellation of the Mortgages and Prohibitions.  Following such notes and registrations:

 

(i)                                      the Parties shall request that the relevant Mining Register issue for each of the Subject Properties the following certificates: (I) mortgages and encumbrances; (II) interdictions and prohibitions; and (III) ownership;

 

(ii)                                   RG Chile will deliver to the Operator a legalized copy of the notes and registrations made evidencing the termination of the Royalty Agreement, the Irrevocable Mandate and the Mortgages and Prohibitions evidencing the cancellation of the mortgages and prohibitions, and marginal notes made under the Royalty Agreement; and

 

(iii)                                RG Chile will deliver to the Operator mortgages and encumbrances, and interdictions and prohibitions certificates issued by the relevant Mining Register for each of the Subject Properties, evidencing that the Subject Properties are free of mortgages, encumbrances, interdictions or prohibitions registered under the Royalty Agreement;

 

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4.2                                Publicity .

 

Each Party agrees that the terms of this Agreement shall not be disclosed or otherwise made available to the public and that copies of this Agreement shall not be publicly filed or otherwise made available to the public, except where such disclosure, availability or filing is required by this Agreement, any Governmental Requirement or by the applicable requirements of any securities exchange or marketplace and then only to the extent required by such Governmental Requirement or applicable requirements.

 

4.3                                Confidentiality.

 

Each of RG Chile and Operator agree to comply with the covenants and restrictions set out in Section 6(f) (Confidentiality) of the Original Royalty Agreement applicable to it regarding non-public data or information concerning Operator’s operations or Subject Properties or otherwise obtained under the Royalty Agreement, as if the provisions of Section 6(f) were set out in this Agreement.

 

4.4                                Releases .

 

Effective upon the Termination Effective Date, each of the Operator and RG Chile hereby releases, remises and forever discharges the other from its obligations under the Royalty Agreement, and from all manner of actions, causes of action, proceedings, suits, liabilities, debts, dues, sums of money, claims, demands or interests whatsoever, at law or in equity, that either of them now have or hereafter may have against the other arising out of or relati


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