1993-10-05_GENERAL DOCUMENTS - C1981017 (3)

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approximately $150, 000 per month. Mothballing costs included, among other things, payment of monthly utility services necessary to pump and ventilate the Mine, property insurance premiums, casualty insurance premiums, costs of labor and costs such as health and dental attributable to the Mine crews performing maintenance. The Debtor's officers and directors received no compensation. The Debtor sought and obtained Court approval to obtain post-petition financing secured by a senior lien. Repayment of the post-petition financing from Crystal Springs occurred only under limited circumstances: (i) if the Debtor breached its obligations under the anticipated sale agreement, Crystal Springs would be entitled to recover all advances; and (ii) if the sale and lease to Crystal Springs was not approved by the Bankruptcy Court, Crystal Springs would be entitled to repayment of one-third of its advances. If the transaction failed to close for any other reason, Crystal Springs would have a claim for its mothball advances but that claim would not be secured by a senior lien and would be accorded the status of a general unsecured claim in the Debtor's bankruptcy. Finally, if the transaction closed, Crystal Springs was to receive no repayment of its mothball advances. The remaining 25% of the mothball expenses were advanced by Minerals, secured by a post-petition lien immediately junior tb the lien granted to Crystal Springs. Funds advanced by Mid- Continent Mineral were due and payable without interest on the earliest of certain specified dates including the effective date of a plan confirmed in the Debtor's Chapter 11 bankruptcy case. Despite the Court's approval of post-petition financing on the above terms, the Plan provides that Mid-Continent Minerals shall receive or retain nothing under the Plan on account of its post- petition loans to the Debtor. The Terms Sheet originally required Crystal Springs and the Debtor to execute a formal agreement no later than April 10, 1992 . By mutual agreement the parties extended the deadline numerous times and continued negotiations. The last agreed upon deadline was July 15, 1992 . Geneva reported that it had concluded that the economics of operating the Mine did not justify continuing the sale process, and on July 17, 1992, Crystal Springs provided written notification to the Debtor that it was terminating negotiations. Because negotiations were terminated by Crystal Springs, the Debtor is not obligated to repay Crystal Springs' advances on a senior lien or priority basis. Termination of negotiations with Geneva, the absence of other prospective purchasers, and the inability of the Debtor and its affiliates to continue funding mothball expenses signaled a close to the sale process begun in early 1991. The Debtor C:\WP51\JBB\MZDCON\D1SCLOS.STN October 6, 1993 9