Document:

exhibit10-11.htm

 

EXHIBIT 10.11

Employment Agreement

This Employment Agreement (the “Agreement”) is entered into this 5th day of July, 2011 (the “Execution Date”) by and between Globe Specialty Metals, Inc. (the “Company”) and Jeff Bradley (“Executive”).

WHEREAS, the Company desires to continue the employment of Executive on the terms and conditions set forth herein; and

WHEREAS, Executive has agreed to continue to perform services for the Company as set forth below.

NOW THEREFORE, in consideration of the mutual covenants set forth herein, the parties agree as follows:

1. Position. Executive shall continue to serve as the Company’s Chief Executive Officer, reporting to the Company’s Chairman and the Board of Directors (the “Board”). Executive shall continue to perform such responsibilities that are normally associated with the Chief Executive Officer position, and as otherwise may be assigned to Executive from time to time by the Board.  This Agreement shall be effective as of May 25, 2011 (the “Commencement Date”).

2. Term.

(a) Executive’s employment will be for a term of four (4) years from the Commencement Date (the “Initial Term”) with automatic one (1)-year renewal terms thereafter (the Initial Term, together with any such renewal term, the “Term”), unless Executive or the Company give written notice to the other at least ninety (90) days prior to the expiration of the Term of such party’s election not to further extend this Agreement or unless sooner terminated as provided herein. Any termination of Executive’s employment will be governed by the terms set forth in this Agreement.

(b)  Unless the Company provides Executive with notice of nonrenewal of the Term pursuant to Section 2(a) accompanied by a timely written notice of termination for Cause (as defined in Section 4(h)(iii) of this Agreement) in accordance with the procedures set forth in Section 4(e), the expiration of the Initial Term or the Term will be have the results specified in Section 4(l).

(c) If requested by the Company or Executive, the parties, at least 120 days prior to the expiration of the Term, shall commence good faith negotiations with respect to the renewal of this Agreement.  The election of either party not to further extend this Agreement shall not constitute a termination of Executive’s employment for the purposes of Section 4 of  this Agreement, and upon such expiration the Company shall have no further obligation to Executive other than payment of the Accrued Obligations and the Pro Rata Bonus (as hereinafter defined).

3. Compensation and Benefits.

(a) Executive’s base pay shall be at an annual rate of no less than $700,000.00, which shall be payable twice monthly in accordance with the Company’s customary payroll practices, subject to applicable withholding (the “Base Pay”).  The Base Pay shall be subject to annual upward adjustments (but not decreases) at the discretion of the Board.

(b) Executive has received awards under the Company’s 2010 Annual Executive Bonus Plan (as in effect as of the date hereof, the “Bonus Plan”) and has received or shall be awarded other bonuses, stock options and/or other stock benefits (including under the Bonus Plan) at the discretion of the Board (collectively, “Incentive Awards”), provided that Executive’s participation in the Bonus Plan and any other incentive plan or equity plan shall be in accordance with the terms of such plans.  Unless otherwise required by law or plan documents, the vesting of Executive’s unvested Incentive Awards shall accelerate and vest in full (along with any accrued but unvested benefits under any supplemental retirement plan, excess retirement plan and deferred compensation plan maintained or contributed to by the Company or any of its Affiliates) upon (i) Executive’s termination of employment by reason of death, (ii) Executive’s termination of employment by reason of Disability (as provided in Section 4(b)), (iii) Executive’s termination of employment for Good Reason (as provided in Section 4(c)), (iv) Executive’s termination of employment by the Company other than for Cause (as provided in Section 4(f)), (v) Executive’s termination of employment by the Company during the Protection Period, other than for Cause (as provided in Section 4(g)), or (vi) Executive’s termination of employment during the Protection Period for Good Reason (as provided in Section 4(g)).  Any award or benefit the vesting of which is accelerated under this Section 3(b) shall be paid in accordance with the terms of the applicable plan unless otherwise provided in this Agreement.

 

(c) Executive shall be offered the various benefits currently offered by the Company generally to its senior executives including, without limitation, life and health insurance (“Benefits”). Subject to the preceding sentence, any such Benefits may be modified or terminated from time to time at the sole discretion of the Company. Where a particular Benefit is subject to a formal plan (for example, medical insurance), eligibility to participate in and receive any particular Benefit is governed solely by the applicable formal plan document.

(d) Executive shall be fully reimbursed for all reasonable and necessary business expenses upon presentation of adequate documentation to the Company demonstrating same, including Executive’s reasonable legal fees and expenses in connection with negotiating and entering into this Agreement.  Reimbursement payments due to Executive hereunder shall be paid to Executive as soon as administratively practicable, and in any event within twenty (20) days after being properly submitted.  If Executive becomes entitled to taxable reimbursements or the provision of in-kind benefits, such reimbursements and benefits shall not be subject to liquidation or exchange for another benefit and the amount of such reimbursements and benefits that Executive receives in one taxable year shall not affect the amount of such reimbursements and benefits that Executive receives in any other taxable year.

(e) Executive annually will be granted twenty (20) days plus all federal holidays as paid time off days (“PTO” days) for Executive’s use for vacation, personal or sick leave. Executive’s accrued but unused PTO days shall not carry over from year to year and shall not be paid to Executive upon termination of employment.

4. Termination of Employment and Effect of Termination.

(a)  By Company for Death. Executive’s employment hereunder shall terminate upon his death, in which event the Company shall have no further obligation to Executive or his estate other than (i) the payment of accrued but unpaid Base Pay, (ii) the payment of the Incentive Awards to the extent then vested (after taking into account the accelerated vesting provisions under Section 3(b)); for the avoidance of doubt, all Incentive Awards shall vest in full upon Executive’s death, and (iii) a pro rata payment of the Incentive Awards (including under the Bonus Plan or any successor thereto) that would have been awarded had the employment termination not occurred for service in the then current plan year through the date of employment termination.  The amounts described in clause (i)  shall be paid upon employment termination, the Incentive Awards described in clause (ii) shall be paid in accordance with the applicable plan terms (except that all such amounts shall be paid upon Executive’s death), and the amounts described in clause (iii) shall be awarded when such Incentive Awards would have been awarded had Executive’s employment continued and shall be paid at the time awarded.  The amounts described in such clauses (i) and (ii) and the associated payment terms are referred to herein as the “Accrued Obligations” and the amounts described in such clause (iii) and the associated payment terms are referred to herein as the “Pro Rata Bonus.”

(b)  By Company for Disability. If Executive incurs a Disability and such Disability continues for a period of twelve (12) consecutive months, then the Company may, to the extent permitted by applicable law, terminate Executive’s employment upon written notice to Executive, in which event the Company shall have no further obligation to Executive other than payment of the Accrued Obligations and the Pro Rata Bonus.

(c)  By Executive for Good Reason. Executive may terminate his employment for Good Reason, provided Executive has first given written notice to the Company of such alleged Good Reason and the Company has failed to cure such Good Reason within thirty (30) days of receipt of such notice. The date of such termination must be no more than 90 days from the date of the occurrence giving rise to the Good Reason. In the event that Executive elects to terminate this Agreement for Good Reason, Executive shall be entitled to:

(i) payment of the Accrued Obligations and the Pro Rata Bonus; and

(ii) a lump sum severance payment (which shall be paid upon effectiveness of the Release, as defined below) comprised of the following cash amounts:

(x) the product of one and one half (1.5) and the annual Base Pay,

(y) the product of one and one half (1.5) and the value of the Incentive Awards granted or vested during the calendar year that ended immediately before (or, if applicable, coincident with) the date of termination of employment, with the value of any shares subject to such Incentive Awards valued as of the date of employment termination (with the Incentive Awards granted within such period valued without regard to time vesting conditions and treated as if any performance vesting conditions that remained open at the time of employment termination were attained at target level), and

(z) an amount that, after payment of taxes, is equal to the cost of eighteen months COBRA coverage for Executive and his dependents under the Company’s health, dental and vision plans, at such rates as are in effect as of the date of employment termination.

Executive’s entitlement to the payments described in clause (ii) (the “Severance Payments”) is conditioned on his execution of the release in the form attached hereto as Exhibit A (the “Release”) within 32 days after his employment termination (and, if the 40th day after his employment termination falls in the calendar year following the year that includes his employment termination date, the amounts described in clause (ii) shall be paid on such 40th day even if the Release is effective before such date).  In addition to the foregoing provisions, the provisions of Section 6(d) and Section 6(e) of this Agreement shall terminate upon the date of termination of employment pursuant to this Section 4(c).

(d)  By Executive without Good Reason. Executive may terminate his employment without Good Reason upon ninety (90) days’ prior written notice to the Company. In the event Executive terminates his employment without Good Reason, Executive shall be entitled to payment of the Accrued Obligations. In the event Executive’s employment is terminated pursuant to this Section 4(d), the Company may in its discretion relieve Executive of his duties and provide him with Base Pay, Incentive Awards and Benefits through the date of termination specified by Executive in his notice of resignation.

(e)  By Company for Cause. The Board may terminate Executive’s employment for Cause upon written notice to Executive. Executive’s employment shall not be deemed to have been terminated for “Cause” unless the Company shall have given Executive (i) written notice setting forth the reasons for the Company’s intention to terminate Executive’s employment for Cause within 90 days after the Company has knowledge of the occurrence giving rise to such notice; (ii) a reasonable opportunity, at any time during the thirty-five (35) day period after Executive’s receipt of such notice, for Executive, together with his counsel, to appear and be heard before the Board; and (iii) a notice of termination stating that, in the good faith opinion of not less than a majority of the entire membership of the Board, Executive was guilty of conduct set forth in the definition of Cause, which conduct, if described in clause (B) of the definition of Cause, was not remediated within the 30-day period commencing on the date of notice setting forth the reasons for the Company's intention to terminate Executive's employment for Cause. In the event Executive is terminated for Cause, the Company’s only obligation to Executive will be the payment of the Accrued Obligations.

(f)  By the Company for Other than Cause. The Board may terminate Executive’s employment for reasons other than Cause after giving at least sixty (60) days’ prior written notice of such termination to Executive. In the event the Company terminates Executive pursuant to this Section 4(f), Executive shall be entitled to  payment of the Accrued Obligations, the Pro Rata Bonus and the Severance Payments, pursuant to the Release provisions and payment terms provided in Section 4(c).  In addition to the foregoing provisions, the provisions of Section 6(d) and Section 6(e) of this Agreement shall terminate upon the date of termination of employment pursuant to this Section 4(f).

(g)  In Connection with a Change of Control. If Executive’s employment is terminated  during the Protection Period by the Company other than for Cause, Disability or as a result of Executive’s death, or if Executive terminates his employment during the Protection Period for Good Reason, the Company shall pay Executive the amounts provided in Section 4(c), except that “two times the Average Annual Compensation” shall replace clauses (ii)(x) and (y) of the definition of “Severance Payments” contained therein.  Such amounts shall be paid pursuant to the Release provisions and payment terms provided in Section 4(c).  If, after the date of Executive’s employment termination, his employment termination is determined to have occurred during the Protection Period, any amounts payable pursuant to this Section 4(g) as a result of such employment termination shall be without duplication of (and shall be offset by) amounts previously paid to Executive (if any) pursuant to Section 4(c) or 4(f), as applicable.

(h) Definitions.  For the purposes of this Agreement, the following terms have the following meanings:

(i)  “Affiliate” means (a) any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the determination, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or (b) any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the determination, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 (ii)  “Average Annual Compensation” shall mean an amount equal to the annual average of the sums of (x) Executive’s annual Base Pay (and any other salary) from the Company and its Affiliates, plus (y) the value, as of the date of employment termination, of the Incentive Awards granted or vested, in each case during the five calendar years that ended immediately before (or, if applicable, coincident with) the date of termination of employment (with the Incentive Awards granted during such five-year period valued without regard to time vesting conditions and treated as if any performance vesting conditions that remained open at the time of employment termination were attained at target level).

(iii)  “Cause” shall mean termination for:

(A) Executive’s conviction or entry of nolo contendere to any felony (excluding a felony arising on account of vicarious liability or a moving violation) or any crime involving material fraud or embezzlement; or

(B) Executive’s breach of any of the terms of this Agreement, including the confidentiality, non-competition or non-solicitation obligations set forth herein, that causes material harm to the Company (other than any such breach resulting from Executive’s incapacity due to physical or mental illness), after written notice to Executive and thirty (30) days’ opportunity to cure.

(iv)  “Change of Control” means the occurrence of any of the following events:

 

 

(A) Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person or any securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (1) or (2) of paragraph (C) below; or

 

 

(B) individuals who, on the Execution Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least a majority of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended, cease to constitute a majority of the number of directors then serving in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company; or

 

 

(C) a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 50% or more of the combined voting power of the Company’s then outstanding securities; or

 

 

(D) approval by the stockholders of a sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, more than 50% of the combined voting power of the voting securities of which is owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

 (v) “Disability” shall have the meaning provided in Section 409A(a)(2)(C) of the Internal Revenue Code of 1986, as amended (the “Code”).

(vi) “Good Reason” shall mean Executive’s resignation following any of:

(A) a material reduction of Executive’s aggregate annual (1) compensation (comprised of Base Pay and Bonus Plan award) as in effect on the date hereof or as the same may be increased from time to time, or (2) Base Pay, Bonus Plan award, other bonuses (if any) and Benefits as in effect on the date hereof or as the same may be increased from time to time; provided, that for purposes of this clause (A), a Bonus Plan award, if smaller than the Bonus Plan award made in an earlier year, shall not be deemed to have been reduced if it is determined in accordance with the provisions of the Bonus Plan as applied to Executive and the Company’s executive chairman then in office;

(B) Executive is assigned duties substantially inconsistent with his responsibilities as then in effect, or Executive’s authorities, duties, or responsibilities are diminished in any material respect;

 

 

(C) a requirement that Executive report to a person or entity other than the Chairman or the Board; or

(D) a material breach by the Company of any of the terms of this Agreement (including, without limitation, Section 3).

(vii) “Protection Period” means the period beginning six months before the date of a Change of Control and ending on the last day of the 24th calendar month following the date of the Change of Control.

(i) Section 280G.

 

(i) Anything in this Agreement to the contrary notwithstanding, in the event the Accounting Firm (as defined below) shall determine that receipt of all Payments (as defined below) would subject Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) so that the Parachute Value (as defined below) of all Payments, in the aggregate, equals the Safe Harbor Amount (as defined below). The Agreement Payments shall be so reduced only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if the Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if the Agreement Payments were so reduced, Executive shall receive all Agreement Payments to which Executive is entitled hereunder.

 

(ii) If the Accounting Firm determines that the aggregate Agreement Payments should be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 4(i) shall be binding upon the Company and Executive and shall be made as soon as reasonably practicable and in no event later than thirty (30) days following the date of termination. For purposes of reducing the Agreement Payments so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If a reduction in the Payments is necessary so that the Parachute Value of all Payments equals the Safe Harbor Amount and none of the Payments constitutes a “deferral of compensation” within the meaning of and subject to Section 409A (“Nonqualified Deferred Compensation”), then the reduction shall occur in the manner Executive elects in writing prior to the date of payment.  If any Payment constitutes Nonqualified Deferred Compensation, then the Payments to be reduced will be determined by the Accounting Firm in a manner that enables Executive to retain the greatest aggregate economic benefit as of the day following the Release effective date, and to the extent the economic benefit of Payments is determined to be equivalent, the Payments will be reduced in the reverse order of when they are scheduled to be paid (and, in the case of Payments of equity securities, transferable). All fees and expenses of the Accounting Firm shall be borne solely by the Company.

 

(iii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement that should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Safe Harbor Amount hereunder. In the event that the Accounting Firm, based upon the actual assertion of a deficiency by the Internal Revenue Service against either the Company or Executive that the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, Executive shall promptly (and in no event later than sixty (60) days following the date on which the Overpayment is determined) pay any such Overpayment to the Company; provided, however, that no amount shall be payable by Executive to the Company if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Sections 1 and 4999 of the Code or generate a refund of such taxes. If the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than sixty (60) days following the date on which the Underpayment is determined) by the Company to or for the benefit of Executive.

 

(iv) To the extent requested by Executive, the Company shall cooperate with Executive in good faith in valuing, and the Accounting Firm shall take into account the value of, services provided or to be provided by Executive (including without limitation Executive’s agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant, including that set forth in Section 6 of this Agreement) before, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) of the final regulations under Section 280G of the Code), such that payments in respect of such services may be considered reasonable compensation within the meaning of Q&A-9 and Q&A-40 to Q&A-44 of the regulations under Section 280G of the Code and/or exempt from the definition of the term “parachute payment” within the meaning of Q&A-2(a) of the regulations under Section 280G of the Code in accordance with Q&A-5(a) of the regulations under Section 280G of the Code.

 

(v) Section 4(i) definitions. The following terms shall have the following meanings for purposes of this Section 4(i):

 

“Accounting Firm” shall mean a nationally recognized certified public accounting firm that is selected by the Company for purposes of making the applicable determinations under Section 4(i) and is reasonably acceptable to Executive, which firm shall not, without Executive’s consent, be a firm serving as accountant or auditor for the individual, entity or group effecting the Change of Control.

 

“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to Executive in the relevant tax year(s).

 

“Parachute Value” of a Payment means the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the excise tax under Section 4999 of the Code will apply to such Payment.

 

“Payment” means any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of Executive, whether paid or payable pursuant to this Agreement or otherwise.

 

“Safe Harbor Amount” means (A) 3.0 times Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code, minus (B) $1.00.

 

(j) Additional Limitation.  Notwithstanding any other provision with respect to the timing of payments under this Section, if, at the time of Executive’s separation from service, within the meaning of Section 409A of the Code (without regard to the alternative definitions thereunder) (the “Separation Date”), Executive is deemed to be a “specified employee” of the Company within the meaning of Section 409A of the Code, then only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which Executive may become entitled under Section 4 that are subject to Section 409A of the Code (and not otherwise exempt from its application) will be withheld until the first (1st) business day of the seventh (7th) month following Executive’s termination of employment, at which time Executive shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to Executive under the terms of Section 4.  For purposes of determining the timing of payments to Executive following termination of employment, all references to such termination shall mean the Separation Date.

(k) Tax Treatment.  This Agreement is intended to comply with (or be exempt from) Section 409A of the Code. The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit set forth in this Agreement, including but not limited to consequences related to Code Section 280G or Code Section 409A. Executive and the Company agree to both negotiate in good faith and jointly execute an amendment to modify this Agreement to the extent necessary to comply with the requirements of Code Section 409A; provided that no such amendment shall be required that would increase the total financial obligation of the Company or the total after-tax cost to Executive under this Agreement.

(l)  Expiration of Term.  If Executive’s employment hereunder shall terminate upon expiration of this Agreement (other than if accompanied by accompanied by a timely written notice of termination for Cause in accordance with the procedures set forth in Section 4(e)), the Company shall have no further obligation to Executive other than (i) the payment of accrued but unpaid Base Pay, (ii) the payment of the Incentive Awards to the extent then vested, (iii) the subsequent payment of the unvested Incentive Awards as their time vesting schedules are completed and (iv) a pro rata payment of the Incentive Awards (including under the Bonus Plan or any successor thereto) that would have been awarded had the employment termination not occurred for service in the then current plan year through the date of employment termination.  The amounts described in clause (i) shall be paid upon employment termination, the Incentive Awards described in clause (ii) and clause (iii) shall be paid in accordance with the applicable plan terms (except that amounts payable pursuant to clause (ii) shall be paid upon Executive’s termination), and the amounts described in clause (iv) shall be awarded when such Incentive Awards would have been awarded had Executive’s employment continued and shall be paid at the time awarded.

5. Indemnity. The Company hereby covenants and agrees to indemnify Executive and hold Executive harmless from any and all claims arising from or relating to Executive’s performance of Executive’s duties hereunder to the fullest extent permitted by law and/or the Company’s Directors and Officers Liability Insurance or applicable certificate of incorporation or bylaws or other applicable document in respect to any and all actions, suits, proceedings, claims, demands, judgments, losses, damages and reasonable out-of-pocket costs and expenses (including reasonable out-of-pocket attorney’s fees and expenses) resulting from Executive’s good faith performance of his duties and obligations with the Company or any of its affiliates or as the fiduciary of any benefit plan of the Company or its affiliates.  To the extent permitted by applicable laws, the Company, within 30 days of presentation of invoices, shall reimburse Executive for all reasonable out-of-pocket legal fees and disbursements reasonably incurred by Executive in connection with any such indemnifiable matter.  In addition, the Company shall cover Executive under its directors and officers liability insurance policy both during the term of this Agreement and during the six-year period thereafter in the same amount and to the same extent as the Company covers its other officers and directors during any such period of time.

6. Confidentiality; Non-Competition and Non-Solicitation.

(a) Duty Not to Disclose Confidential Information. Executive will be exposed to and have access to Confidential Information. Executive agree to hold all Confidential Information in strict confidence and trust for the sole benefit of the Company, and he will not disclose, use, copy, publish, summarize or remove any Confidential Information from the Company’s premises, except as specifically authorized in writing by the Company or in connection with the usual course of Executive’s employment, except that it will not be a violation of this Agreement if, in enforcement of Executive’s rights under this Agreement or another arrangement between Executive and the Company or any of its Affiliates, Executive makes use of information reasonably necessary to such enforcement.

(b) Definition. “Confidential Information” means all Company proprietary information, technical data, trade secrets, know-how and any idea in whatever form, tangible or intangible, including without limitation, research, product plans, customer and client lists, developments, inventions, processes, technology, designs, drawings, marketing and other plans, business strategies and financial data and information. “Confidential Information” shall also mean information received by the Company from customers or clients or other third parties subject to a duty to keep confidential but, notwithstanding anything to the contrary contained herein, shall exclude Executive’s personal rolodex and contacts list.  Notwithstanding the foregoing, “Confidential Information” shall not include (i) information that, at the time of disclosure, is in the public domain other than as a result of the breach by Executive of any obligation of confidentiality or non-disclosure owed to the Company or any of its affiliates, and (ii) information required to be disclosed by any judicial or administrative proceedings or applicable laws so long as, to the extent legal and practicable, reasonable prior notice is given of such disclosure and, to the extent legal and practicable, a reasonable opportunity is afforded to the Company, at its sole expense, to contest such disclosure.

(c) Documents and Materials. Executive further agrees that Executive will return all Confidential Information, including all copies and versions of such Confidential Information (including but not limited to information maintained on paper, disk, CD-ROM, network server, or any other retention device whatsoever) and other property of the Company, to the Company immediately upon cessation of Executive’s employment with the Company. These terms are in addition to any statutory or common law obligations that Executive may have relating to the protection of the Company’s Confidential Information or its property. These restrictions shall survive the termination of employment.

(d) Non-Competition. Unless previously terminated pursuant to Section 4(c) or 4(f) of this Agreement, during the Term and for a period of two years thereafter (the “Noncompete Period”), Executive shall not, directly or indirectly, either alone or in association with others, own, manage, operate, sell, control or participate in the ownership, management, operation, sales or control of, be involved with the development efforts of, serve as a technical advisor to, license intellectual property to, provide services to or in any manner engage in any business that directly competes with any specific business (1) in which the Company and its Affiliates (taken as a whole) are materially engaged as of the date of Executive’s termination or resignation or (2) for which the Company or any of its Affiliates has, within one year prior to Executive’s termination or resignation, taken substantial, demonstrable steps to become materially engaged, in which the Company and its Affiliates (taken as a whole), within one year after Executive’s termination or resignation, would reasonably be expected to be materially engaged; provided, however, that Executive may own as a passive investor up to 5.0% of any class of an issuer’s publicly traded securities (as used in this sentence, “material” shall mean material to the aggregate results of the Company and its Affiliates taken as a whole). The Noncompete Period shall be extended by the length of any period during which Executive is found by a court or arbitrator to be in breach of the terms of this Section 6(d).  Executive acknowledges (i) that the business of the Company and its Affiliates is, and is expected to remain, international in scope and without geographical limitation; (ii) notwithstanding the state of incorporation or principal office of the Company or any of its Affiliates, or any of their respective executives or employees (including Executive), it is expected that the Company and its Affiliates will have business activities and have valuable business relationships within its industry throughout the world; and (iii) as part of his responsibilities, Executive will travel around the world in furtherance of the Company’s and its Affiliates’ businesses and their relationships. Accordingly, the restrictions set forth in this Section 6 shall be effective in all cities, counties and states of the United States and all countries in which the Company or any of its Affiliates has an office or has made commercial sales within 12 months prior to the date of Executive’s termination or resignation.

            (e) Non-Solicitation; Non-Hire. During the Noncompete Period, Executive will not, directly or indirectly, (i) recruit, solicit or induce, or attempt to recruit, solicit or induce any employee or employees of the Company or any of its Affiliates to terminate their employment with, or otherwise cease their relationship with, the Company or (ii) hire any person who was an employee of the Company or any of its Affiliates within six (6) months prior to the time such employee is proposed to be hired by Executive; (iii) solicit, divert or take away, or attempt to solicit, divert or take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company or any of its Affiliates for similar products that the Company produces.

(f) Saving Clause.  If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(g) Acknowledgement.  The restrictions contained in this Section are necessary for the protection of the business and goodwill of the Company and are considered by Executive to be reasonable for such purpose. Executive agrees that any breach of this Section will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief.

(h) Representations.  Executive represents that his performance of all the terms of this Agreement as an employee of the Company does not and will not breach any existing (i) agreement to keep in confidence proprietary information, knowledge or data acquired by him in confidence or in trust prior to his employment with the Company or (ii) agreement to refrain from competing, directly or indirectly, with the business of any previous employer or any other party.

(i) Exclusivity.  The restrictive covenants set forth in this Section 6 replace and supersede any similar restrictive covenants in any other agreements or plans to which Executive has or shall become subject in connection with Executive’s service to the Company and its Affiliates.  Other than these restrictive covenants and any obligations imposed by applicable law or regulation, absent Executive’s written consent there shall be no other restrictions imposed by the Company or any Affiliate on Executive’s activities following the Term, and no Incentive Award or other compensation or Benefit shall be conditioned on Executive’s assent to any restrictive covenant that imposes limitations greater than those set forth in this Section 6, and any such restrictive covenant shall be void to the extent it conflicts with a provision contained in this Agreement.

7. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon (a) the date of receipt, if sent by personal delivery (including delivery by reputable overnight courier), or (b) the date of receipt or refusal, if deposited in the United States Post Office, by registered or certified mail, postage prepaid and return receipt requested, (c) the next business day, if sent by reputable overnight courier for delivery on such business day, or (d) the date of receipt, if transmitted by facsimile, in each case at the address of record of Executive or the Company, as applicable, or at such other place as may from time to time be designated by either party in writing.

8. Assignment. This Agreement is not assignable by Executive but may be assigned by the Company to an Affiliate of the Company (provided such Affiliate has financial resources substantially comparable to those of the Company prior to such assignment or to any transactions made by the Company in connection with such assignment) without Executive’s prior consent.

9. Merger Clause/Governing Law/Arbitration.

(a)  Entire Agreement.  This Agreement constitutes the entire agreement regarding the terms and conditions of Executive’s employment with the Company and its Affiliates.  This Agreement supersedes any prior agreements, or other promises or statements (whether oral or written) regarding the terms of employment with the Company and its Affiliates.  This Agreement may only be amended in a writing that is executed by both Executive and the Company.

(b)  Governing Law; Arbitration.  This Agreement shall be governed by the law of the State of New York without regard to conflicts of laws. If any dispute arises out of or relates to this Agreement, or the breach thereof (a “Dispute”), such Dispute shall be finally resolved by arbitration administered by the American Arbitration Association under its Employment Dispute Rules, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction.  The arbitration will be conducted in New York County, New York, before a sole arbitrator named in accordance with such rules, and shall be conducted in accordance with the United States Arbitration Act.  The parties agree that the existence of any Dispute subject to this provision, any proceedings to resolve such Dispute, and all submissions received by any party from any other party in connection with such Dispute or proceedings shall be treated as confidential.  At the discretion of the arbitrator, the non-prevailing party in such arbitration may be ordered to pay the reasonable out-of-pocket costs and legal fees and disbursements incurred by the prevailing party in such arbitration and in preparation therefor.  Nothing in this Section shall be construed to derogate the Company’s right to seek legal and equitable relief in a court of competent jurisdiction for breaches of Section 6 as contemplated by Section 6(g).

10. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not be deemed to affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. A court or arbitrator shall modify any invalid or unenforceable provision to make it valid and enforceable to the maximum extent permitted by law.

11. Successors. This Agreement shall be binding upon the Company, its successors and assigns, including any corporation or other business entity which may acquire all or substantially all of the Company’s assets or business, or within which the Company may be consolidated or merged, or any surviving corporation in a merger involving the Company.

12. No Mitigation.  Executive shall not be required to mitigate the amount of any payments or benefits provided for under this Agreement by seeking other employment, nor shall any amounts to be received by Executive under this Agreement be reduced by any other compensation earned from a subsequent employer (including self-employment).

13. Headings. The headings in this Agreement are inserted for convenience only and shall not affect its construction.

14. Counterparts. This Agreement may be executed in one or more counterparts, each of which and together will constitute one and the same instrument.

[signature page follows]

  

  

  

In witness whereof, the parties hereto have signed this Agreement as of the date first set forth above.

Globe Specialty Metals, Inc.

By: /s/ Alan Kestenbaum

Name: Alan Kestenbaum

Title: Executive Chairman

/s/ Jeff Bradley_______

Jeff Bradley

  

  

  

EXHIBIT A

Agreement and Release

Agreement and Release (“Agreement”), by Jeff Bradley (“Executive” and referred to herein as “you”) and Globe Specialty Metals, Inc., a Delaware corporation (the “Company”).

1.           In exchange for your waiver of claims against the Released Persons (as defined below) and compliance with the other terms and conditions of this Agreement, following the effectiveness of this Agreement, the Company shall provide you with the payments and benefits provided in your employment agreement with the Company, effective as of May 25, 2011 (the “Employment Agreement”), in accordance with the terms and conditions of the Employment Agreement.

2.           (a)  In consideration for the payments and benefits to be provided to you pursuant to Section 1 above, which you acknowledge are more than to which you would otherwise be entitled, you hereby waive any claim you may have for employment by the Company and agree not to seek such employment or reemployment by the Company in the future.  You further agree to and do forever release and discharge the Company and its subsidiaries, divisions, affiliates and related business entities, successors and assigns, and any of its or their respective directors and officers, shareholders, employees and agents (in their capacity as such) (collectively, the “Released Persons”) from any and all claims, suits, demands, causes of action, covenants, obligations, debts, costs, expenses  fees and liabilities of any kind whatsoever (including, without limitation, back pay, front pay, compensatory damages, punitive damages, exemplary damages, attorneys’ fees and costs actually incurred), in law or equity, by statute or otherwise, whether known or unknown, vested or contingent, suspected or unsuspected and whether or not concealed or hidden (collectively, the “Claims”), arising out of or related to your employment with the Company or the termination thereof, which you have had, now have, or may have against any of the Released Persons by reason of any act, omission, transaction, practice, plan, policy, procedure, conduct, occurrence, or other matter arising up to and including the date on which you sign this Agreement, except as provided in subsection (c) below.

(b)           Without limiting the generality of the foregoing, this Agreement is intended to and shall release the Released Persons from any and all such claims and causes of action arising out of or related to your employment with the Company or the termination thereof, including, but not limited to: (i) any and all rights or claims under the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974 (excluding claims for accrued, vested benefits under any employee benefit or incentive plan of the Released Persons, subject to the terms and conditions of such plan and applicable law), the Family and Medical Leave Act, the Worker Adjustment and Retraining Notification Act of 1988, the Fair Labor Standards Act of 1938; (ii) any and all other rights or claims whether based on federal, state, or local law (statutory or decisional), rule, regulation or ordinance, including, but not limited to, breach of contract (express or implied), wrongful discharge, tort, fraud, detrimental reliance, defamation, emotional distress or compensatory or punitive damages; and (iii) any claim for attorneys’ fees, costs, disbursements and/or the like.

(c)           Notwithstanding the foregoing, nothing in this Agreement shall be a waiver of Claims: (i) that arise after the date on which you sign this Agreement, (ii) for the payments, benefits or rights required to be provided under the Employment Agreement or under any Incentive Award; (iii) related to any equity award, equity interest, or incentive program in which you may have received grants or allocations at or before the date of your employment termination; (iv) regarding rights of indemnification under the Employment Agreement or otherwise; or (v) relating to any accrued, vested benefits under any employee benefit plan or incentive plan of the Released Persons, subject to the terms and conditions of such plan and applicable law.

(d)           In signing this Agreement, you acknowledge that you intend that this Agreement shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied.  You expressly consent that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown, unsuspected or unanticipated Claims, if any, as well as those relating to any other Claims hereinabove mentioned or implied.

3.           (a)  This Agreement is not intended, and shall not be construed, as an admission that any of the Released Persons has violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract or committed any wrong whatsoever against you.

(b)           Should any provision of this Agreement require interpretation or construction, it is agreed by the parties that the entity interpreting or constructing this Agreement shall not apply a presumption against one party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document.

(c)           You represent and warrant that you have not assigned or transferred to any person or entity any of my rights which are or could be covered by this Agreement, including but not limited to the waivers and releases contained in this Agreement.

4.           This Agreement is binding upon, and shall inure to the benefit of, the parties and their respective heirs, executors, administrators, successors and assigns.

5.           This Agreement shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State.

6.           You acknowledge that you: (a) have carefully read this Agreement in its entirety and understand all of its terms, including the waiver and release of claims set forth in paragraph 2 above; (b) have had an opportunity to consider for at least twenty-one (21) days the terms of this Agreement; (c) are hereby advised by the Company in writing to consult with an attorney or other advisor of your choice in connection with this Agreement; (d) have had answered to your satisfaction by your independent legal counsel any questions you have asked with regard to the meaning and significance of any of the provisions of this Agreement; (e) are signing this Agreement voluntarily and of your own free will, and no promises or representations have been made to you by any person to induce you to enter into this Agreement other than the express terms set forth herein; and (f) agree to abide by all the terms and conditions contained herein.

7.           You understand that you will have at least twenty-one (21) days from the date of receipt of this Agreement to consider, sign and return this Agreement.  You may accept this Agreement by signing it and returning it to the Company’s General Counsel at the address specified pursuant to Section 7 of the Employment Agreement on or before _________.  After executing this Agreement, you shall have seven (7) days (the “Revocation Period”) to revoke this Agreement by indicating your desire to do so in writing delivered to the General Counsel at the address above by no later than the seventh (7th) day after the date you sign this Agreement.  The effective date of this Agreement shall be the eighth (8th) day after you sign the Agreement (irrespective of whether the Company has countersigned the Agreement) (the “Agreement Effective Date”), provided that you have not revoked the Agreement.  If the last day of the Revocation Period falls on a Saturday, Sunday or holiday, the last day of the Revocation Period will be deemed to be the next business day.  In the event you do not accept this Agreement as set forth above, or in the event you revoke this Agreement during the Revocation Period, this Agreement shall be deemed automatically null and void.

8.           Any dispute regarding this Agreement shall be subject to the dispute resolution provisions contained in the Employment Agreement.

EXECUTIVE

____________________________________

Jeff Bradley

GLOBE SPECIALTY METALS, INC.

 

____________________________________

[      Name           ]

[      Title           ]kntc_ex10-1.htm

PROPERTY OPTION AGREEMENT

BETWEEN

AMERICAN MINING CORPORATION

AND

KRC EXPLORATION LLC.

YAM  CLAIM GROUP

STEVENS COUNTY

THE STATE OF WASHINGTON

  

1

  

TABLE OF CONTENTS

	
DEFINITIONS

	
3

	  	  
	
REPRESENTATIONS AND WARRANTIES OF AMC

	
4

	
 

	  
	
REPRESENTATIONS AND WARRANTIES OF KRC

	
5

	  	  
	
GRANT AND EXERCISE OF OPTION

	
6

	  	  
	
RIGHT OF ENTRY

	
7

	  	  
	
OBLIGATIONS OF KRC DURING PROPERTY OPTION PERIOD

	
7

	  	  
	
OBLIGATIONS OF AMC DURING PROPERTY OPTION PERIOD

	
8

	  	  
	
TERMINATION OF OPTION

	
8

	  	  
	
FORCE MAJEURE

	
8

	  	  
	
CONFIDENTIAL INFORMATION

	
8

	  	  
	
DEFAULT AND TERMINATION

	
9

	  	  
	
NOTICES

	
9

	  	  
	
GENERAL

	
9

APPENDIX “A”

DESCRIPTION OF PROPERTY AND ACCESS

APPENDIX “B”

OPERATOR AGREEMENT

  

2

  

OPTION AGREEMENT

THIS AGREEMENT made effective as of the 28th  day of July, 2010.

BETWEEN:

AMERICAN MINING CORPORATION, Inc., a body corporate under the laws of the State of Idaho and having offices at 1028 E. Larch Ave., Osburn Idaho.

(hereafter “AMC”)

- and -

KRC EXPLORATION LLC.., a limited liability corporation, organized under the laws of the State of Nevada and having offices located at 50 West Liberty Street, Suite 880, Reno, Nevada.

(hereafter “KRC”)

WHEREAS:

A. AMC is the holder of or is entitled to become the holder of all Property Rights related to the Property; and

B. AMC has agreed to grant an Option to KRC to acquire an interest in and to the Property Rights and the Property, on the terms and conditions hereinafter set forth;

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of $10.00 now paid by KRC to AMC (the receipt of which is hereby acknowledged), the parties agree as follows:

DEFINITIONS

1.1 For the purposes of this Agreement the following words and phrases shall have the following meanings, namely:

	
  

	
a)“Agreement” means this agreement and any amendments thereto from time to time;

	
  

	
b) “AMC” means AMC American Mining Corporation, Inc.

	
  

	
c)“Commencement Date” means the date of this Agreement;

	
  

	
d)“Completion Date” means the date on which KRC fulfills all of its obligations with respect to proper exercise of the Option as contemplated in paragraph  4 hereof;

	
  

	
e)“Exploration Expenditures” means the sum of all costs of acquisition and maintenance of the Property, all exploration and development expenditures and all other costs and expenses of whatsoever kind or nature including those of a capital nature, incurred or chargeable by KRC with respect to the exploration and development of the Property and the placing of the Property into Commercial Production.

  

3

  

	
  

	
f)“Feasibility Report” means a detailed written report of the results of a comprehensive study on the economic feasibility of placing the Property or a portion thereof into Commercial Production and shall include a reasonable assessment of the mineral ore reserves and their amenability to metallurgical treatment, a description of the work, equipment and supplies required to bring the Property or a portion thereof into Commercial Production and the estimated cost thereof, a description of the mining methods to be employed and a financial appraisal of the proposed operations supported by an explanation of the data used therein.

	
  

	
g)“KRC” means KRC Exploration LLC.

	
  

	
h)“Mine” means the workings established and assets acquired, including, without limiting the generality of the foregoing, development headings, plant and concentrator installations, infrastructure, housing, airport and other facilities in order to bring the Property into Commercial Production.

	
  

	
i)“Mineral Products” means the end products derived from operating the Property as a Mine.

	
  

	
j)“Mining Operations” means every kind of work done on or in respect of the Property in accordance with a Feasibility Report; or if not provided for in a Feasibility Report, unilaterally and in good faith prevent waste, or to otherwise discharge any obligation which is imposed upon the Operator pursuant to this Agreement, including, without limiting the generality of the foregoing, investigating, prospecting, exploring, developing, property maintenance, preparing reports, estimates and studies, designing, equipping, improving, surveying, construction and mining, milling, concentrating, rehabilitation, reclamation, and environmental protection.

	
  

	
k)“Operator” means KRC whose duties commence upon the execution of this agreement and shall terminate upon the resignation of KRC as the Operator or upon the Completion Date and whose duties are described in Appendix B to this agreement;

	
  

	
l)“Option” means the irrevocable option for KRC to earn in and acquire a net undivided interest in and to the Property as provided in this Agreement;

	
  

	
m)“Option Period” means the period commencing on the Commencement Date to and including August 31, 2014

	
  

	
n)“Property” means the exploration properties and lands located in the State of Washington all as more particularly described in Appendix “A” hereto;

	
  

	
o)“Property Rights” means all applications for permits for general reconnaissance, permit for general reconnaissance, interim approvals, applications for contracts of work, contracts of work, licenses, permits, easements, rights-of-way, certificates and other approvals obtained by either of the parties either before or after the date of this Agreement and necessary for the exploration and development of the Property, or for the purpose of placing the Property into production or continuing production therefrom.

REPRESENTATIONS AND WARRANTIES OF AMC

2.1           AMC hereby acknowledges and confirms that it holds the Property Rights related to an undivided one hundred (100%) percent interest in the Property as at the date hereof.

  

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2.2

	
AMC represents and warrants to KRC that:

	
a)

	
AMC is lawfully authorized to hold his interest in the Property and will remain so entitled until 100% of the interests of AMC in the Property have been duly transferred to KRC as contemplated by the terms hereof;

	
b)

	
as at the date hereof and at the time of transfer to KRC of an interest in the mineral claims and/or exploration licenses comprising the Property AMC is and will be the beneficial owner of its interest in the Property free and clear of all liens, charges, claims, royalties or net profit interests of whatsoever nature, and no taxes or rentals will be due in respect of any thereof;

	
c)

	
AMC has the right and capacity to deal with the Property and the right to enter into this Agreement and to dispose of his right, title and interest in the Property as herein contemplated;

	
d)

	
there is no adverse claim or challenge against or to AMC’s interest in the Property, nor to the knowledge of AMC is there any basis therefor, and there are no outstanding agreements or options to acquire or purchase such interest in the Property or any portion thereof other than this Agreement;

	
e)

	
no person has any royalty, net profit interests or other interest whatsoever in the Property;

	
f)

	
AMC is duly authorized to execute  this Agreement and for the performance of this Agreement by him, and the consummation of the transactions herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of its articles or constating documents or any indenture, agreement or other instrument whatsoever to which AMC is a party or by which he is bound or to which he or the Property may be subject;

	
g)

	
no proceedings are pending for, and it is unaware of any basis for the institution of any proceedings leading to, the placing of AMC in bankruptcy or subject to any other laws governing the affairs of and insolvent person;

	
h)

	
there are no claims, proceedings, actions or lawsuits in existence and to the best of AMC’s information and belief none are contemplated or threatened against or with respect to the right, title, estate and interest of AMC in the Property;

	
i)

	
to the best of his information and belief, all laws, regulations and orders of all governmental agencies having jurisdiction over the Property have been complied with by AMC;

	
j)

	
to the best of his information and belief AMC is in good standing under all agreements and instruments affecting the Property to which he is a party or is bound.

2.3 The representations and warranties contained in this section are provided for the exclusive benefit of KRC, and a breach of any one or more thereof may be waived by KRC in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty, and the representations and warranties contained in this section shall survive the execution hereof.

2.4 The representations and warranties contained in this section shall be deemed to apply to all assignments, transfers, conveyances or other documents transferring to KRC the interest to be acquired hereunder and there shall not be any merger of any covenant, representation or warranty in such assignments, transfers, conveyance or documents, any rule or law, in equity or statute to the contrary notwithstanding.

REPRESENTATIONS AND WARRANTIES OF KRC

3.1  KRC represents and warrants to AMC that:

	
a)

	
it has been duly incorporated and validly exists as a Limited Liability Company in good standing under the laws of its jurisdiction of its formation;

	
b)

	
it is or will be prior to acquiring any undivided interest in the Property hereunder, lawfully authorized to hold mineral claims and real property under the laws of the jurisdiction in which the Property is situate;

  

5

  

	
c)

	
it has duly obtained all authorizations for the execution of this Agreement and for the performance of this Agreement by it, and the consummation of the transaction herein contemplated by it will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance under the provisions of the articles or the constating documents of it or any shareholders' or directors' resolution, indenture, agreement or other instrument whatsoever to which it is a party or by which they are bound or to which it or the Property may be subject; and,

	
d)

	
no proceedings are pending for, and it is unaware of any basis for the institution of any proceedings leading to, the dissolution or winding up of KRC or the placing of KRC in bankruptcy or subject to any other laws governing the affairs of insolvent Limied Liability Corporations.

3.2 The representations and warranties contained in this section are provided for the exclusive benefit of AMC and a breach of any one or more thereof may be waived by AMC in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty, and the representations and warranties contained in this section shall survive the execution hereof.

3.3 The representations and warranties contained in this section shall be deemed to apply to all assignments, transfers, conveyances or other documents transferring to AMC the interest to be acquired hereunder and there shall not be any merger of any covenant, representation or warranty in such assignments, transfers, conveyance or documents, any rule or law, in equity or statute to the contrary notwithstanding.

GRANT AND EXERCISE OF OPTION

4.1 AMC hereby irrevocably grants to KRC the sole and exclusive right and Option to acquire a one hundred percent (100%) right, title, estate and interest of AMC’s one hundred (100%) percent net undivided interest) in and to the Property Rights and Property, free and clear of all charges, encumbrances, claims, royalties and net profit interests of whatsoever nature.

  

4.2 If at any time after the date hereof KRC determines in its sole discretion to commission a Feasibility Report recommending the Construction of a Mine, KRC shall give written notice thereof to AMC

. 

4.3 The Option may be exercised at any time (subject to the terms as stated herein) by KRC: 

	
  

	
a)paying AMC four thousand dollars ($4,000) upon the execution of this agreement

	
  

	
b)paying AMC four thousand dollars ($4,000) on or before August 31, 2011

	
  

	
c)paying AMC twenty thousand dollars ($20,000) on or before August 31, 2012

	
  

	
d)paying AMC one hundred thousand dollars ($100,000) on or before August 31. 2013

	
  

	
e)incurring Exploration Expenditures on the Property as follows:

	
  

	
(i)Exploration Expenditures of not less than fifteen thousand dollars ($15,000) on or before August 31, 2012;

	
  

	
(ii)aggregate Exploration Expenditures (including Exploration Expenditures as described in paragraph 4.3(e)(i) above) of not less fifty thousand dollars ($50,000) on or before August 31, 2013

	
  

	
(iii)aggregate Exploration Expenditures (including Exploration Expenditures as contemplated in paragraph 4.3e) (i) and (ii) above) of not less than one hundred and eighty six thousand dollars ($180,000) on or before August 31, 2014, and;

.

  

6

  

4.4 Prior to the exercise of the Option as herein provided, KRC  is hereby appointed the initial operator of the Property and shall have the exclusive right to resign as operator without notice to AMC and to name a subsequent operator upon giving notice to AMC. The operator and shall carry out exploration and development programs on the Property on the following terms:

a) The operator shall have the same powers, duties and obligations in carrying out such programs as set out in the Operator Agreement attached hereto as Schedule “B”.

b) For income tax purposes, all Exploration Expenditures incurred by the operator pursuant to such programs shall be incurred for the benefit of KRC; and

c) Until such time as the Option is exercised in accordance with the terms hereof, KRC shall have no interest of whatsoever nature in the Property Rights or the Property.

4.5 If and when the Option has been exercised in accordance with Section 4.3 and commencing on the

Completion Date:

a) The undivided right, title and interest of the parties in the Property shall be as follows:

Before Completion Date (net)After Completion Date (net)

AMC 100% AMC   0%

KRC        0%KRC     100%

Total    100% Total  100%

b) the undivided right, title and interest in and to the Property Rights and the Property acquired by KRC upon the Completion Date shall vest in KRC free and clear of all charges, encumbrances, claims, royalties or net profit interests of whatsoever nature. 

4.6 Within 30 days after the Completion Date, AMC shall deliver to KRC such number of duly executed transfers which in the aggregate convey AMC's interest to be acquired hereunder in the Property in favour of KRC. In the event that AMC shall deliver notice to KRC that it has exercised the Option pursuant to the terms hereof, KRC shall be entitled to receive and to record such of the transfers contemplated hereby at its own cost with the appropriate governmental office to effect legal transfer of such interest in the Property into the name of KRC.

RIGHT OF ENTRY

5.1 During the term of this Agreement, the directors and officers of KRC and its servants, agents and independent contractors, shall have the sole and exclusive right in respect of the Property to:

a) enter thereon at their sole risk and expense;

b) do such prospecting, exploration, development and other mining work thereon and thereunder as KRC,  in its sole discretion may determine advisable;

c) bring upon and erect upon the Property such buildings, plant, machinery and equipment as KRC may deem advisable and for a period of six months following the termination of this Agreement, to remove such buildings, plant, machinery and equipment; and

d) remove  therefrom and dispose of reasonable quantities of ores, minerals and metals for the purposes of obtaining assays or making other tests. 

OBLIGATIONS OF KRC DURING OPTION PERIOD

6.1 During the term of this Agreement, KRC shall:

a) permit the directors, officers, employees and designated consultants of AMC, at their own risk and expense, access to the Property at all reasonable times, and AMC agrees to indemnify KRC against and to save it harmless from all costs, claims, liabilities and expenses that AMC may incur or suffer as a result of any injury (including injury causing death) to any director, officer, employee or designated consultant of AMC while on the Property;

b) permit AMC, at its own expense, reasonable access to the results of the work done on the Property during the last completed calendar year;

  

7

  

c) do all work on the Property in a good and workmanlike fashion and in accordance with all applicable laws, regulations, orders and ordinances of any governmental authority;

d) indemnify and save AMC harmless in respect of any and all costs, claims, liabilities and expenses arising out of KRC’s activities on the Property.

OBLIGATIONS OF AMC DURING OPTION PERIOD

6.1 During the term of this Agreement, AMC shall:

a) maintain in good standing those mineral claims and/or exploration licenses comprised in the Property by the making of annual mineral claim lease payments to the US Department of the Interior, Burreau of Land Management, and to agencies of the State of  Washington as the case may be, and to perform of all other actions which may be necessary in that regard in order to keep such mineral claims free and clear of all liens and other charges arising from KRC’s activities thereon. 

TERMINATION OF OPTION

7.1 Provided that KRC is not in default pursuant to the provisions hereof, KRC shall have the right at any time during the term of this Agreement to terminate the Option by providing not less than forty five (45) days written notice to AMC.

7.2 Notwithstanding the termination of the Option, KRC shall have the right, within a period of one hundred and eighty (180) days following the end of the Option Period, to remove from the Property all buildings, plant, equipment, machinery, tools, appliances and supplies which have been brought upon the Property by or on behalf of KRC, and any such property not removed within such 180 day period shall thereafter become the property of AMC.

FORCE MAJEURE

9.1 If KRC is at any time either during the term of this Agreement or thereafter prevented or delayed in complying with any provisions of this Agreement by reason of strikes, lock-outs, labour shortages, power shortages, fuel shortages, fires, wars, acts of God, governmental regulations restricting normal operations, shipping delays or any other reason or reasons, other than lack of funds, beyond the control of KRC, the time limits for the performance by KRC of its obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay, but nothing herein shall discharge KRC from its obligations hereunder to maintain the Property in good standing.

9.2 KRC shall give prompt notice to AMC of each event of force majeure under Section 9.1 and upon cessation of such event shall furnish to AMC with notice to that effect together with particulars of the number of days by which the obligations of AMC hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure.

CONFIDENTIAL INFORMATION

10.1 The parties to this Agreement shall keep confidential all books, records, files and other information supplied by any party to the other party or to their employees, agents or representative in connection with this Agreement or in respect of the activities carried out on the Property by a party, or related to the sale of minerals, or other products derived from the Property, including all analyses, reports, studies or other documents prepared by a party or its employees, agents or representatives, which contain information from, or otherwise reflects such books, records, files or other information. The parties shall not and shall ensure that their employees, agents or representatives do not disclose, divulge, publish, transcribe, or transfer such information, all or in part, without the prior written consent of the other parties, which may not be arbitrarily withheld and which shall not apply to such information or any part thereof to the extent that: 

  

8

  

a) prior to its receipt by a party such information was already in the possession of such party or its employees, agents or representatives; or

b) in respect of such information required to be publicly disclosed pursuant to applicable securities or corporate laws.

DEFAULT AND TERMINATION

12.1 If at any time during the term of this Agreement KRC fails to perform any obligation required to be performed by it hereunder or is in breach of a warranty given by it hereunder, which failure or breach materially interferes with the implementation of this Agreement, AMC  may terminate this Agreement but only if:

a) it shall have first given to the defaulting KRC a notice of default containing particulars of the obligation which the defaulting KRC has not performed, or the warranty breached; and

b) the defaulting KRC has not, within forty-five (45) days following delivery of such notice of default, cured such default or commenced proceedings to cure such default by appropriate payment or performance, the defaulting KRC hereby agreeing that should it so commence to cure any default it will prosecute the same to completion without undue delay, provided however, that this paragraph shall not be extended to a default by KRC to exercise an Option pursuant to Article 4 thereof.

12.2 Notwithstanding Section 12.1 hereof, if at any time KRC fails to perform a condition precedent to the exercise of the Option, AMC shall be entitled to forthwith terminate this Agreement.

NOTICES

13.1 Each notice, demand or other communication required or permitted to be given under this Agreement shall be in writing and shall be sent by prepaid registered mail deposited in a Post Office in the United States of America addressed to the party entitled to receive the same, or delivered, telexed, telegraphed or telecopied to such party at the address for such party specified on the face page hereof. The date of receipt of such notice, demand or other communication shall be the date of delivery thereof if delivered, telexed, telegraphed or telecopied, or, if given by registered mail as aforesaid, shall be deemed conclusively to be the third business day after the same shall have been so mailed except in the case of interruption of postal services for any reason whatever, in which case the date of receipt shall be the date on which the notice, demand or other communication is actually received by the addressee.

13.2 Either party may at any time and from time to time notify the other party in writing of a change or address and the new address to which notice shall be given to it thereafter until further change.

GENERAL

14.1 This Agreement shall supersede and replace any other agreement or arrangement, whether oral or written, heretofore existing between the parties in respect of the subject matter of this Agreement. 

14.2 No consent or waiver expressed or implied by any party in respect of any breach or default by any other party in the performance by such other of its obligations hereunder shall be deemed or construed to be a consent to or a waiver of any other breach of default.

14.3 The parties shall promptly execute or cause to be executed all documents, deeds, conveyances and other instruments of further assurance and do such further and other acts which may be reasonably necessary or advisable to carry out fully and effectively the intent and purpose of this Agreement or to record wherever appropriate the respective interest from time to time of the parties in the Property.

14.4 This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

14.5 This Agreement shall, (i) be governed by and construed in accordance with the laws of the State of Nevada and the parties hereby irrevocably attorn to the jurisdiction of the said province and (ii) be subject to the approval of all securities regulatory authorities having jurisdiction, such approvals will be sought in a timely and diligent manner.

14.6 Time shall be of the essence in this Agreement.

14.7 Wherever the neuter and singular is used in this Agreement it shall be deemed to include the plural, masculine and feminine, as the case may be.

14.8 The rights and obligations of each party shall be in every case several and not joint or joint and several.

14.9  This Agreement may be executed in any number of identical counterparts which shall constitute an original and collectively and separately constitute a single instrument or agreement.

  

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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written.

AMERICAN MINING COMPANY, INC.

Per /s/ Gary MacDonald

      Gary MacDonald, CEO, CFO

KRC EXPLORATION LLC.

Per /s/ Luis Antonio Delgado Gonzalez

     Luis Antonio Delgado Gonzalez, Manager

  

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APPENDIX “A”

DESCRIPTION OF PROPERTY AND ACCESS

Description of Property and Access

 

 

Young America Mining (YAM) Mineral Claims

 

The Young American property is a block of 4 contiguous unpatented claims which were originally located in 1886. In 2008 American Mining Corporation of Osburn, Idaho staked the four original unpatented claims. These claims are managed by the Bureau of Land Management (BLM) of the United States Department of the Interior.

 

 

The four claims are located at approximately SW1⁄4 Section 28, and NW1⁄4 Section 33. Both sections T38N and R33E are located in Stevens County, Washington. The claims are located about 15 miles north of the town of Kettle Falls, Washington.

 

 

Access to the property is north from Kettle Falls along Highway 25, then by way of a half mile of gravel road that crosses private property.

 

  

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APPENDIX “B”

OPERATOR AGREEMENT

OPERATOR AGREEMENT

between

 KRC EXPLORATION LLC.

And

____________________________

YAM CLAIM GROUP

STEPHENS COUNTY

THE STATE OF WASHINGTON

  

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TABLE OF CONTENTS

	
DEFINITIONS

	
3

	  	  
	
REPRESENTATIONS AND WARRANTIES

	
4

	  	  
	
OPERATOR

	
5

	  	  
	
POWER, DUTIES AND OBLIGATIONS OF OPERATOR

	
6

	  	  
	
PROGRAMS

	
8

	  	  
	
FORCE MAJEURE

	
8

	  	  
	
NOTICE

	
8

	  	  
	
WAIVER

	
8

	  	  
	
FURTHER ASSURANCES

	
9

	  	  
	
USE OF NAME

	
9

	  	  
	
ENTIRE AGREEMENT

	
9

	  	  
	
AMENDMENT

	
9

	  	  
	
TIME

	
9

	  	  
	
RULE AGAINST PERPETUITIES

	
9

	  	  
	
ENUREMENT

	
9

	  	  
	
GOVERNING LAW

	
9

	  	  
	
SEVERABILITY

	
9

	  	  
	
NUMBER AND GENDER

	
10

	  	  
	
HEADINGS

	
10

	  	  
	
TIME OF THE ESSENCE

	
10

	  	  
	
COUNTERPARTS

	
10

  

2

  

OPERATOR AGREEMENT

THIS AGREEMENT made as of the_____________ day of________________ , 2010_.

BETWEEN:

KRC EXPLORATION LLC., a limited liability corporation, organized under the laws of the State of Nevada and having offices located at 50 West Liberty Street, Suite 880, Reno, Nevada.(hereafter “KRC”)

OF THE FIRST PART

AND:

__________________________________________________________________________________________________________________________________________________________________________

OF THE SECOND PART

WHEREAS:

A. KRC has the right to acquire a 100% interest in and to the Property, and;

B. The parties wish to create an operator agreement to carry out the continued operation of the Property on the terms and subject to the conditions hereinafter set forth.

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises, and of the mutual covenants and agreements herein contained, the parties hereto have agreed and do hereby agree as follows:

DEFINITIONS

1.1 In this Agreement, including the Recitals and Schedules hereto the following words and expressions shall have the following meanings: 

	
  

	
a)“Agreement” means this Operator Agreement as amended from time to time; 

	
  

	
b) “Commercial Production” means the operation of the Property as a producing mine and the production of Mineral Products therefrom (excluding bulk sampling, pilot plant or test

operations);

	
  

	
c)“Completion Date” means the date on which it is demonstrated to the satisfaction of KRC that the preparing and equipping of a Mine for Commercial Production is complete;

	
  

	
d)“Construction” means every kind of work carried out during the Construction Period by the Operator in accordance with a Feasibility Report.;

	
  

	
e)“Construction Period” means the period beginning on the date of a Feasibility Report and ending on the Completion Date;

	
  

	
f)“Costs” means all items of outlay and expense whatsoever, direct or indirect, with respect to Mining Operations in accordance with this Agreement, without limiting the generality of the foregoing, the following categories of Costs shall have the following meanings

	
  

	
i)“Mine Construction Costs” means those Costs incurred during the Construction

	
  

	
      Period;

	
  

	
ii)“Mine Costs” means Mine Construction Costs and Operating Costs; and

	
  

	
iii)“Operating Costs” means those Costs incurred subsequent to the Completion Date;

  

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g)“Feasibility Report” means a detailed written report of the results of a comprehensive study on the economic feasibility of placing the Property or a portion thereof into Commercial Production and shall include a reasonable assessment of the mineral ore reserves and their amenability to metallurgical treatment, a description of the work, equipment and supplies required to bring the Property or a portion thereof into Commercial Production and the estimated cost thereof, a description of the mining methods to be employed and a financial appraisal of the proposed operations supported by an explanation of the data used therein; 

	
  

	
h)“KRC” means KRC Exploration LLC.. 

	
  

	
i)“Mine” means the workings established and assets acquired, including, without limiting the generality of the foregoing, development headings, plant and concentrator installations, infrastructure, housing, airport and other facilities in order to bring the Property into Commercial Production;

	
  

	
j)“Mine Construction Costs” means those Costs incurred during the Construction Period;

	
  

	
k)“Mine Costs” means Mine Construction Costs and Operating Costs; and

	
  

	
l)“Mineral Products” means the end products derived from operating the Property as a Mine, and;

	
  

	
m)“Mining Operations” means every kind of work done by the Operator on or in respect of the Property in accordance with a Feasibility Report; or if not provided for in a Feasibility Report, unilaterally and in good faith, to prevent waste or to otherwise discharge any obligation which is imposed upon it pursuant to this Agreement and in respect of which KRC has not given it directions; including, without limiting the generality of the foregoing, investigating, prospecting, exploring, developing, property maintenance, preparing reports, estimates and studies, designing, equipping, improving, surveying, Construction and mining, milling, concentrating, rehabilitation, reclamation, and environmental protection.

	
  

	
n) “Option Agreement” means the option agreement, made as of the 28th day of July, 2010,  between American Mining Corporation, Inc., Inc and KRC.

	
  

	
o)” Operator” means the operator appointed pursuant to paragraph 3;

	
  

	
p)Other Tenements” means 

	
  

	
i)all surface rights of and to any lands within or outside the Property including surface held in fee or under lease, license, easement, right of way or other rights of any kind  (and all renewals, extensions and amendments thereof or substitutions therefore) acquired by or on behalf of KRC with respect to the Property, 

	
  

	
ii) all information obtained from Mining Operations, and 

	
  

	
iii)those rights and benefits appurtenant to the Property that are acquired for the purpose of conducting Mining Operations;

	
  

	
q)“Party” or “Parties” means the parties to this Agreement and their respective successors and permitted assigns which become parties to this Agreement;

	
  

	
r) “Program” means a plan, including budgets, for the Project or any part thereof as approved by  KRC pursuant to this Agreement;

	
  

	
s)“Project” means the exploration and development of the Property, preparation and delivery of a Feasibility Report and the Construction and operation of facilities to put the Property into Commercial Production;

	
  

	
t)“Property” means those certain mining claims and related rights and interests set out and more particularly described in Appendix “A” hereto and Other Tenements and shall include any renewal thereof and any form of substitute or successor title thereto;

REPRESENTATIONS AND WARRANTIES

2.1 Each of the parties represents each to the other that:

a) it is the legal and beneficial owner of the right to earn an Interest as set forth and described in the recitals hereto free and clear of all liens, charges and encumbrances except as set forth in Appendix “A” attached hereto and the Option Agreement; and

b) save and except as set out herein, there is no adverse claim or challenge against or to the ownership of or title to its Interest or any portion thereof, nor is there any basis therefor, and there are no outstanding agreements or options to acquire or purchase its Interest or any portion thereof.

  

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2.2 Each of the parties represents each to the other that:

a) it is a incorporation or Limited Liability Company, organized and validly subsisting under the laws of its jurisdiction of its organization, and; 

b) it has full power and authority to carry on its business and enter into this Agreement and any agreement or instrument referred to or contemplated by this Agreement and to carry out and perform all of its obligations hereunder; and

c) it has duly obtained all corporate authorizations for the execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in any breach of any covenants or agreements contained in, or constitute a default under, or result in the creation of any encumbrance, lien or charge under the provisions of its constating documents or any indenture, agreement or other instrument whatsoever to which it is a party or by which it is bound or to which it may be subject and will not contravene any applicable laws.

2.3 The representations and warranties hereinbefore set out are conditions on which the parties have relied in entering into this Agreement, are to be construed as both conditions and warranties and shall, regardless of any investigation which may have been made by or on behalf of any party as to the accuracy of such representations and warranties, survive the closing of the transactions contemplated hereby and each of the parties will indemnify and save the other harmless from all loss, damage, costs, actions and suits arising out of or in connection with any breach of any representation or warranty contained in this Agreement and each party shall be entitled, in addition to any other remedy to which it may be entitled, to set off any such loss, damage or costs suffered by it as a result of any such breach against any payment required to be made by it to the other party hereunder.

OPERATOR

3.1 The Operator of the Property shall be ___________________________.  An Operator shall continue as Operator until changed pursuant to the terms hereof or by a decision of KRC or if the Operator has failed to perform in a manner that is consistent with good mining practice or has failed to perform in a manner consistent with its duties and responsibilities under this Agreement, and KRC has given to the Operator written notice setting forth particulars of the Operator's default and the Operator has not within 30 days of receipt of such notice commenced to remedy the default and thereafter to proceed continuously and diligently to complete all required remedial action.

 

3.2 The Operator may at any time on sixty (60) days notice to KRC resign as Operator, in which event KRC shall select another party or person to be Operator (hereinafter called the “new Operator”) upon the thirtieth (30th) day after receipt of the Operator's notice of resignation or such sooner date as KRC may establish and give notice of to the resigning Operator. The resigning Operator shall thereupon be released and discharged from all its duties and obligations as Operator upon the appointment of the new Operator except those duties and obligations that it theretofore should have performed.

3.3 Upon the Operator making a voluntary or involuntary assignment into bankruptcy or taking advantage of any legislation for the winding-up or liquidation of the affairs of insolvent or bankrupt companies the Operator shall automatically be terminated as operator and the other party or its nominee appointed as Operator.

3.4 The new Operator shall assume all of the rights, duties, obligations and status of the Operator as provided in this Agreement, other than the previous Operator's Interest, if any, without obligation to retain or hire any of the employees of the former Operator or to indemnify the former Operator for any costs or expenses which the previous Operator will incur as a result of the termination of employment of any of its employees resulting from this change of Operator, and shall continue to act as Operator until its replacement or resignation.

  

5

  

3.5 Upon the effective time of a resignation, removal or cessation, the departing Operator shall within sixty (60) days of such resignation, removal or cessation, turn over to its successor, or if no successor has been designated, to KRC, control and possession of the Property together with (i) all documents, books, records and accounts (or copies thereof) pertaining to the performance of its functions as Operator and (ii) all monies held by it in its capacity as the Operator. Upon transfer and delivery thereof, the departing Operator shall be released and discharged from, and the successor Operator shall assume, all duties and obligations of Operator except the unsatisfied duties and obligations of the departing Operator accrued prior to the effective date of the change of Operator and for which the departing Operator shall, notwithstanding its release or discharge, continue to remain liable, it being understood and agreed that the departing and successor Operators respectively shall co-operate in finalizing all outstanding matters and completing the transition. If the title to any real or personal property included in the Property is held in the name of the departing Operator, it shall transfer such property to the successor Operator in trust for the parties hereto unless otherwise directed by KRC

3.6 Within sixty (60) days of the effective time of an Operator's resignation, removal or cessation as Operator, KRC may cause an audit to be made of the records maintained by the departing Operator and the cost of such audit shall be for the joint account of the parties hereto.

3.7 Except as authorized by KRC or as otherwise herein provided, the Operator shall not assign its operating rights or obligations under this Agreement.

POWER, DUTIES AND OBLIGATIONS OF OPERATOR

4.1 Subject to the control and direction of KRC, the Operator shall have full right, power and authority to do everything necessary or desirable to carry out a Program and the Project and to determine the manner of exploration and development of the Property and, without limiting the generality of the foregoing, the right, power and authority to:

	
a)

	
regulate access to the Property subject only to the right of representatives of the parties to have access to the Property at all reasonable times for the purpose of inspecting work being done thereon but at their own risk and expense;

	
b)

	
employ and engage such employees, agents and independent contractors as it may consider necessary or advisable to carry out its duties and obligations hereunder and in this connection to delegate any of its powers and rights to perform its duties and obligations hereunder, but the Operator shall not enter into contractual relationships with another person except on terms which are commercially competitive;

	
c)

	
execute all documents, deeds and instruments, do or cause to be done all such acts and things;

	
d)

	
To give all such assurances as may be necessary to maintain good and valid title  to the Property. Each party hereby irrevocably constitutes the Operator its true and lawful attorney to give effect to the foregoing and hereby agrees to indemnify and save the Operator harmless from any and all costs, loss or damage sustained or incurred without gross negligence or bad faith by the Operator directly or indirectly as a result of its exercise of its powers pursuant to this subsection; and

	
e)

	
conduct such title examination and cure such title defects as may be advisable in the reasonable judgment of the Operator.

4.2 The Operator shall have the following duties and obligations during the term hereof:

	
a)

	
to diligently manage, direct and control all exploration, development and producing operations in and under the Property in a prudent and workmanlike manner and in compliance with all applicable laws, rules, orders and regulations;

	
b)

	
to prepare and deliver to each of the parties during the periods of active field work, monthly progress and expense reports of the work in progress, on or before the day which is forty-five (45) days following each calendar month with respect to work done in such month and on or before the first day of every calendar year, comprehensive annual reports covering the activities and expenses hereunder and such report shall include the results obtained during the twelve (12) month period ending on  immediately preceding;

  

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c)

	
to provide and deliver to each of the parties, together with the reports referred to in subparagraph (b), copies of all assays, maps and drill logs;

	
d)

	
to maintain true and correct books, accounts and records of operations hereunder in accordance with the Accounting Procedure, separate and apart from any other books, accounts and records maintained by the Operator, provided that the judgment of the Operator as to matters related to accounting, for which provision is not made in the Accounting Procedure shall govern if the Operator's accounting practices are in accordance with accounting principles generally accepted in the mining industry in  the United States of America;

	
e)

	
to permit one representative of the parties appointed in writing at all reasonable times and at their expense to inspect, audit and copy the Operator's accounts and records relating to the accounting for production or to the determination of the proceeds from the sale thereof for any fiscal year of the Operator within 9 months following the end of such fiscal year. The Operator shall maintain its accounts and records for a period of at least two (2) years or such longer period as required by the laws of the United States or its States. The parties shall be entitled to inspect, audit and copy the accounts and records upon giving the Operator ten (10) days notice of their intention to do so;

	
f)

	
to obtain and maintain or cause any contractor engaged hereunder to obtain and maintain during any period in which active work is carried out hereunder such insurance coverage as KRC deems advisable;

	
g)

	
to permit the parties or their representatives appointed in writing, at all reasonable times, at their own expense and risk, reasonable access to the Property and all data derived from carrying out work thereon;

	
h)

	
to prosecute and defend, but not to initiate without the consent of KRC, all litigation or administrative proceedings arising out of the Property, or Project;

	
i)

	
to transact, undertake and perform all transactions, contracts, employments, purchases, operations, negotiations with third parties and any other matter or thing undertaken by or on behalf of the operation of the property hereunder in the Operator's name and to pay all expenditures incurred in connection therewith promptly when due;

	
j)

	
to transact, undertake and perform all transactions, contracts, employments, purchases, operations, negotiations with third parties and any other matter or thing undertaken on behalf of the parties in the Operators name;

	
k)

	
to take all proper and reasonable steps for the protection of rights of surface owners against damage occasioned by operations to be conducted hereunder and pay such damages as may lawfully be determined as resulting from such operations.

4.3 Subject to any specific provisions of this Agreement, the Operator, in carrying out its duties and obligations hereunder, shall at all times be subject to the direction and control of KRC and shall perform its duties hereunder in accordance with the instructions and directions as from time to time communicated to it by KRC and shall make all reports to KRC except where otherwise specifically provided herein.

4.4 The Operator shall commence and diligently complete the Project and without limiting the generality of the foregoing, may retain an independent consulting geologist acceptable to KRC to prepare a report in respect of the Project, the results thereof, the conclusions derived therefrom and the recommendation as to whether or not further work should be conducted on the Property.

4.5 The Operator may charge the following sums in return for its head office overhead functions which are not charged directly as provided in the Accounting Procedure: a) with respect to Mine Construction, an amount equal to 5.0% of all Construction Costs; and b) subsequent to the Completion Date, an amount equal to 2.5% of all Operating Costs.

4.6 If a party gives notice in writing to KRC that the party holds a bona fide belief that the sums charged under Section 4.5 are either excessive or insufficient then KRC shall call a meeting to be held within ninety (90) days of receipt of such notice for the purpose of amending or ratifying the amounts charged under Section 4.5 hereof.

  

7

  

PROGRAMS

5.1 Expenditures shall only be incurred under and pursuant to Programs prepared by the Operator and approved by KRC. Any Feasibility Report shall be prepared pursuant to a separate Program.

5.2 The Operator shall prepare and submit to KRC a Program within 90 days of the completion of the previous Program.

5.3 If it appears that Costs will exceed by greater than ten (10%) percent those estimated under a program the Operator shall immediately give written notice to KRC outlining the nature and extent of the additional costs and expenses (hereinafter called “Program overruns”). If Program Overruns are approved by KRC, then within thirty (30) days after the receipt of a written request from the Operator, KRC shall provide the Operator with funding for the overruns. If Program Overruns are not approved by KRC the Operator shall have a right to curtail or abandon such Program. Any costs incurred by the Operator due to a curtailment or abandonment of the Program shall be paid by KRC.

FORCE MAJEURE

6.1 Neither  party will be liable for its failure to perform any of its obligations under this Agreement due to a cause beyond its reasonable control (except those caused by its own lack of funds) including, but not limited to acts of God, fire, flood, explosion, strikes, lockouts or other industrial disturbances, laws, rules and regulations or orders of any duly constituted governmental authority or non-availability of materials or transportation (each an “Intervening Event”).

6.2 All time limits imposed by this Agreement will be extended by a period equivalent to the period of delay resulting from an Intervening Event.

6.3 A party relying on the provisions of Section 20.1 will take all reasonable steps to eliminate any Intervening Event and, if possible, will perform its obligations under this Agreement as far as practical, but nothing herein will require such party to settle or adjust any labour dispute or to question or to test the validity of any law, rule, regulation or order of any duly constituted governmental authority or to complete its obligations under this Agreement if an Intervening Event renders completion impossible.

NOTICE

7.1 Any notice, direction, cheque or other instrument required or permitted to be given under this Agreement shall be in writing and may be given by the delivery of the same or by mailing the same by prepaid registered or certified mail to the address of each Party specified on the first page hereof or by sending the same by telegram, telex, telecommunication or other similar form of communication, in each case addressed to the intended recipient at the address of the respective party set out on the front page hereof.

7.2 Any notice, direction, cheque or other instrument aforesaid will, if delivered, be deemed to have been given and received on the day it was delivered, and if mailed, be deemed to have been given and received on the third business day following the day of mailing, except in the event of disruption of the postal service in which event notice will be deemed to be received only when actually received and, if sent by telegram, telex, telecommunication or other similar form of communication, be deemed to have been given or received on the day it was so sent.

7.3 Any party may at any time give to the other notice in writing of any change of address of the party giving such notice and from and after the giving of such notice the address or addresses therein specified will be deemed to be the address of such party for the purposes of giving notice hereunder.

WAIVER

8.1 If any provision of this Agreement shall fail to be strictly enforced or any party shall consent to any action by any other party or shall waive any provision as set out herein, such action by such party shall not be construed as a waiver thereof other than at the specific time that such waiver or failure to enforce takes place and shall at no time be construed as a consent, waiver or excuse for any failure to perform and act in accordance with this Agreement at any past or future occasion.

  

8

  

FURTHER ASSURANCES

9.1 Each of the parties hereto shall form time to time and at all times do all such further acts and execute and deliver all further deeds and documents as shall be reasonably required in order to fully perform and carry out the terms of this Agreement. For greater certainty, this section shall not be construed as imposing any obligation on any party to provide guarantees.

USE OF NAME

10.1 No party shall, except when required by this Agreement or by any law, by-law, ordinance, rule, order or regulation, use, suffer or permit to be used, directly or indirectly, the name of any other party for any purpose related to the Property or the Project.

ENTIRE AGREEMENT

11.1 This Agreement embodies the entire agreement and understanding among the parties hereto and supersedes all prior agreements and undertakings, whether oral or written, relative to the subject matter hereof.

AMENDMENT

12.1 This Agreement may not be changed orally but only by an agreement in writing, by the party or parties against which enforcement, waiver, change, modification or discharge is sought.

TIME

13.1 Unless earlier terminated by agreement of all parties this Agreement shall remain in full force and effect for so long as any part of the Property or Project is held in accordance with this Agreement. Termination of the Agreement shall not, however, relieve any party from any obligations theretofore accrued but unsatisfied.

RULE AGAINST PERPETUITIES

14.1 If any right, power or interest of any party in any Property under this Agreement would violate the rule against perpetuities, then such right, power or interest shall terminate at the expiration of 20 years after the death of the survivor of all the lineal descendants of her Majesty, Queen Elizabeth II of the United Kingdom, living on the date of execution of this Agreement.

ENUREMENT

15.1 This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

GOVERNING LAW

16.1 This Agreement shall be governed by and interpreted in accordance with the laws of the State of Nevada and the parties irrevocably attorn to the jurisdiction of the said State.

SEVERABILITY

17.1 If any one or more of the provisions contained herein should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

  

9

  

NUMBER AND GENDER

18.1 Words used herein importing the singular number only shall include the plural, and vice versa, and words importing the masculine gender shall include the feminine and neuter genders, and vice versa, and words importing persons shall include firms and corporations.

HEADINGS

19.1 The division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

TIME OF THE ESSENCE

20.1 Time shall be of the essence in the performance of this Agreement.

 

COUNTERPARTS

21.1 This Agreement may be executed in any number of identical counterparts which shall constitute an original and collectively and separately constitute a single instrument or agreement.

IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day, month and year first above written.

KRC EXPLORATION LLC

Per /s/ Luis Antonio Delgado Gonzalez

     Luis Antonio Delgado Gonzalez, Manager

_________________________________________

per______________________________________

      

  

10

  

APPENDIX “A”

to the

Operator Agreement

Dated ______________, _________, 20_____

DESCRIPTION OF PROPERTY

(Attached hereto)

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