JOINT VENTURE AGREEMENT
THIS AGREEMENT made the 28th day of December, 2001
BETWEEN:
XXXX X.MIRKO, of 000 Xxxxxxx Xxxxxx, Xxxxx
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Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
(hereinafter referred to as "Mirko")
OF THE FIRST PART
AND:
DELBROOK MINING CORP., having its registered office at Suite 1880,
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0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, XX X0X 0X0
(hereinafter referred to as "Delbrook")
OF THE SECOND PART
1. INTERPRETATION
1.01 In this Agreement the following words, phrases and expressions shall
have the following meanings:
(a) "Accounting Procedure" means the procedure attached to this Agreement as
Appendix I.
(b) "Affiliate" shall have the meaning attributed to it in the Canada
Business Corporations Act, as amended.
(c) "Assets" means all tangible and intangible goods, chattels, improvements
or other items including, without limiting generality, land, buildings, and
equipment but excluding the Property, acquired for or made to the Property under
the Head Agreement in connection with the Mining Operations.
(d) "Completion Date" means the date determined by the Management Committee
on which it is demonstrated to the satisfaction of the Management Committee that
the preparing and equipping of the Mine is complete and is the date on which
commercial production commences.
(e) "Construction" means every kind of work carried out during the
Construction Period by the Operator in accordance with the Feasibility Report
and Production Notice related thereto, as approved by the Management Committee.
(f) "Construction Period" means, unless the Production Notice is
subsequently withdrawn, the period beginning on the date a Production Notice is
given and ending on the Completion Date.
(g) "Costs" means, except as to Prior Exploration Costs, all items of outlay
and expense whatsoever, direct or indirect, with respect to Mining Operations,
recorded by the Operator in accordance with this Agreement and shall include all
obligations and liabilities incurred or to be incurred with respect to the
protection of the environment such as future decommissioning, reclamation and
long-term care and monitoring, even if not then due and payable so long as the
amounts can be estimated with reasonable accuracy, and whether or not a mine
reclamation trust fund has been established. Without limiting generality, the
following categories of Costs shall have the following meanings:
(i) "Construction Costs" means those Costs recorded by the Operator during
the Construction Period, including, without limiting generality, the Operator's
fee contemplated in article 11;
(ii) "Exploration Costs" means those Costs recorded by the Operator during
the Exploration Period, including, without limiting generality, the Operator's
fee contemplated in article 11;
(iii) "Mine Costs" means Construction Costs and Operating Costs;
(iv) "Operating Costs" means those Costs recorded by the Operator subsequent
to the Completion Date, including, without limiting generality, the Operator's
fee contemplated in article 11 and the royalty payable to the Royalty Holders
pursuant to the Underlying Agreement; and
(v) "Prior Exploration Costs" means the deemed Expenditures of the parties
under paragraph 7.09.
(h) "Exploration Period" means the period beginning the Operative Date and
ending the date a Production Notice is given and Construction Costs are fully
committed.
(i) "Feasibility Report" means a detailed report, in form and substance
sufficient for presentation to arm's length institutional lenders considering
project financing, showing the feasibility of placing any part of the Property
into commercial production as a Mine and shall include a reasonable
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assessment of the various categories of ore reserves and their amenability to
metallurgical treatment, a complete description of the work, equipment and
supplies required to bring such part of the Property 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 and including at
least the following:
(i) a description of that part of the Property to be covered by the proposed
Mine;
(ii) the estimated recoverable reserves of Minerals and the estimated
composition and content thereof;
(iii) the proposed procedure for development, mining and production;
(iv) results of ore amenability treatment tests (if any);
(v) the nature and extent of the facilities proposed to be acquired, which
may include mill facilities if the size, extent and location of the ore body
makes such mill facilities feasible, in which event the study shall also include
a preliminary design for such mill;
(vi) the total costs, including capital budget, which are reasonably
required to purchase, construct and install all structures, machinery and
equipment required for the proposed Mine, including a schedule of timing of such
requirements;
(vii) all environmental impact studies and costs of implementation;
(viii) the period in which it is proposed the Property shall be brought to
commercial production; and
(ix) such other data and information as are reasonably necessary to
substantiate the existence of an ore deposit of sufficient size and grade to
justify development of a mine, taking into account all relevant business, tax
and other economic considerations including a cost comparison between purchasing
or leasing and renting of facilities and equipment required for the operation of
the Property as a Mine.
(j) "Head Agreement" means the agreement between Mirko and Delbrook
dated December 28, 2001 .
(k) "Interest" means an undivided beneficial percentage interest in the
Property, the Assets and any Mine, calculated, during the Exploration Period,
according to article 7 and subsequent to the Exploration Period
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according to article 10.
(l) "Joint Operation" shall have the meaning attributed to it in
paragraph 2.01.
(m) "Management Committee" means the committee established pursuant to
article 4.
(n) "Mine" means the workings established and Assets acquired,
including, without limiting generality, development headings, plant and
concentrator installations, infrastructure, housing, airport and other
facilities in order to bring the Property into commercial production in
accordance with the Production Notice.
(o) "Minerals" means any and all ores (and concentrates derived
therefrom) and minerals, precious and base, metallic and nonmetallic, in, on or
under the Property which may lawfully be explored for, mined and sold.
(p) "Mining Operations" means every kind of work done by the Operator:
(i) on or in respect of the Property in accordance with a Program or
Production Notice or Operating Plan; or
(ii) if not provided for in a Program or Production Notice or Operating
Plan, unilaterally and in good faith to maintain the Property in good standing,
to prevent waste or to otherwise discharge any obligation which is imposed upon
it pursuant to this Agreement and in respect of which the Management Committee
has not given it directions;
including, without limiting generality, 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.
(q) "Net Proceeds of Production" shall have the meaning attributed to it
in Appendix II.
(r) "Operating Plan" means the annual plan of Mining Operations submitted
pursuant to paragraph 14.02.
(s) "Operative Date" means the date upon which this Agreement becomes
effective.
(t) "Operator" means the party appointed as the Operator in accordance
with article 5.
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(u) "Participant" means a party that is contributing to Exploration
Costs or Mine Costs, as the case may be.
(v) "party" or "parties" means the parties to this Agreement and their
respective successors and permitted assigns which become parties pursuant
to this Agreement.
(w) "Prime Rate" means the rate of interest stated by the Toronto Dominion
Bank, at its main branch in Vancouver, British Columbia, as being
charged by it on Canadian Dollar demand loans to its most creditworthy domestic
commercial customers.
(x) "Production Notice" means a notice which is given to each of the parties
pursuant to paragraph 9.02.
(y) "Program" means the work plan and budget of Mining Operations conducted
during the Exploration Period and adopted pursuant to paragraph 7.02.
(z) "Property" means the mineral properties that become subject to this
Agreement on the Operative Date, any additional mineral properties that
become part of the Property pursuant to this Agreement, the Minerals thereon,
all information obtained from Mining Operations and those rights and benefits
appurtenant to the Property that are acquired for the purpose of conducting
Mining Operations.
(aa) "Proportionate Share" means that share which is equal to a party's
percentage Interest.
(bb) "Simple Majority" means a decision made by the Management Committee
by more than 50 percent of the votes represented and entitled to be
cast at a meeting thereof.
(cc) "Special Majority" means a decision made by the Management
Committee by more than 662/3% of the votes represented and entitled to be cast
at a meeting thereof.
(dd) "$" means Canadian Dollars.
1.02 The words "article", "paragraph", "subparagraph", "herein" and
"hereunder" refer to this Agreement. The words "this Agreement" include every
Schedule or Appendix attached hereto but exclude the Head Agreement.
1.03 The captions and the emphases of the defined terms have been
inserted for convenience and do not define the scope of any provision.
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2. FORMATION OF THE JOINT VENTURE
2.01 The parties hereby agree to associate and participate in a joint
operation (herein called the "Joint Operation") for the purpose of exploring the
Property and, if deemed warranted, bringing the Property or a portion thereof
into commercial production by establishing and operating a Mine.
2.02 Except as expressly provided in this Agreement, each party shall
have the right independently to engage in and receive full benefits from
business activities, whether or not competitive with the Joint Operation,
without consulting any other party. The doctrines of "corporate opportunity" or
"business opportunity" shall not be applied to any other activity, venture or
operation of any party and no party shall have any obligation to another party
with respect to any opportunity to acquire any assets outside of the Property at
any time, or within the Property after the termination of this Agreement.
Unless otherwise agreed in writing, no party shall have any obligation to mill,
beneficiate or otherwise treat any Minerals or any other party's share of
Minerals in any facility owned or controlled by such party.
3. INTERESTS
3.01 Except as otherwise provided herein, the parties shall bear all
Costs and all liabilities arising under this Agreement and shall own the
Property, the Assets and any Mine all in proportion to their respective
Interests.
3.02 On the Operative Date the respective Interests of the parties
shall be as follows:
Mirko 25%
Delbrook 75%
4. MANAGEMENT COMMITTEE
4.01 A Management Committee shall be established on or forthwith after
the Operative Date. Except as herein otherwise provided, the Management
Committee shall make all decisions in respect of Mining Operations.
4.02 Each party owning an Interest shall forthwith appoint one
representative and one alternate representative to the Management Committee.
The alternate representative may act for a party's representative in his
absence.
4.03 The Operator shall call a Management Committee meeting at least
once every 12 months, and, in any event within 14 days of being requested to do
so by any
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representative.
4.04 The Operator shall give notice, specifying the time and place of,
and the agenda for, the meeting to all representatives at least seven days
before the time appointed for the meeting. Unless otherwise agreed to by the
Management Committee, all meetings of the Management Committee shall be held in
Vancouver, British Columbia. Each agenda for a meeting shall include the
consideration and approval of the minutes of the immediately preceding meeting
of the Management Committee.
4.05 Notice of a meeting shall not be required if representatives of
all of the parties are present and unanimously agree upon the agenda.
4.06 A quorum for any Management Committee meeting shall be present if
a representative of each of the parties holding an Interest is present. If a
quorum is present at the meeting, the Management Committee shall be competent to
exercise all of the authorities, powers and discretions herein bestowed upon it
hereunder. The Management Committee shall not transact any business at a
meeting unless a quorum is present at the commencement of the meeting. If a
quorum is not present within 30 minutes following the time appointed for the
commencement of the Management Committee meeting, the meeting shall be
automatically re-scheduled for the same time of day and at the same place five
business days later, and the Operator shall be under no obligation to give any
party notice thereof. A quorum shall be deemed to be present at such
re-scheduled meeting for all purposes under this Agreement if at least one
representative is present, and a party or parties holding not less than 25% in
Interest is or are represented. A representative may attend and vote at a
meeting of the Management Committee by telephone conference call in which each
representative may hear, and be heard by, the other representatives.
4.07 The Management Committee shall decide every question submitted to
it by a vote with each representative being entitled to cast that number of
votes which is equal to its party's Interest percentage. Other than as is
expressly set out herein to the contrary, the Management Committee shall make
decisions by Simple Majority. In the event of a tied vote, the chairman shall
have a casting vote in addition to the votes to which the chairman is entitled
to cast as the representative of a party.
4.08 The representative and alternate representative of the Operator
shall be the chairman and secretary, respectively, of the Management Committee
meeting.
4.09 The secretary of the Management Committee meeting shall take
minutes of that meeting and circulate copies thereof to each representative
within a reasonable time following the termination of the meeting, and in any
event no later than the time of delivery of the notice of the next following
meeting of the Management Committee.
4.10 The Management Committee may make decisions by obtaining the
consent in writing of the representatives of all parties. Any decision so made
shall be as valid as a decision made at a duly called and held meeting of the
Management
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Committee.
4.11 Management Committee decisions made in accordance with this
Agreement shall be binding upon all of the parties.
4.12 Each party shall bear the expenses incurred by its representative
and alternate representative in attending meetings of the Management Committee.
4.13 The Management Committee may, by agreement of the representatives
of all the parties, establish such other rules of procedure, not inconsistent
with this Agreement, as the Management Committee deems fit.
4.14 Reference in this section to the "parties" shall apply during the
Exploration Period. After the date of a Production Notice this section shall be
read as if the word "Participant" appeared wherever the word "party" appears.
5. OPERATOR
5.01 Mirko shall act as Operator for the initial Program after which
Delbrook may elect to act as Operator for so long as its Interest is 50% or
more. If Delbrook's Interest is less than 50%, the Management Committee shall
select a party, if it so consents, to be the Operator.
5.02 The party acting as Operator may resign as Operator on at least 90
days' notice to all the parties.
5.03 The Management Committee may, by Special Majority (with the
Operator not being entitled to vote on such resolution), remove the party acting
as Operator, effective the date designated by the Management Committee if:
(a) that party makes an assignment for the benefit of its creditors, or
consents to the appointment of a receiver for all or substantially all of its
property, or files a petition in bankruptcy or is adjudicated bankrupt or
insolvent; or
(b) a court order is entered without that party's consent:
(i) appointing a receiver or trustee for all or substantially all
of its property; or
(ii) approving a petition in bankruptcy or for a reorganization
pursuant to the applicable bankruptcy legislation or for any other judicial
modification or alteration of the rights of creditors; or
(c) the Operator is in default under this Agreement and fails to cure
such default, or to commence bona fide curative measures, within 30 days of
receiving notice of the default from a non-Operator;
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(d) the Operator fails to meet any of its obligations pursuant to
paragraph 6.04; or
(e) the Operator undergoes a change in "Control" (as hereinafter
defined).
5.04 In paragraph 5.03, "Control" means the ability, directly or
indirectly through one or more intermediaries, to direct or cause the direction
of the management and policies of the Operator through (i) the legal or
beneficial ownership of voting securities; (ii) the right to appoint managers,
directors or corporate management; (iii) contract; (iv) operating agreement; (v)
voting trust; or otherwise.
5.05 If a party resigns or is removed as Operator, the Management
Committee (the representative of the former Operator not being entitled to vote
on the resolution) shall thereupon select another party to become the Operator
effective the date established by the Management Committee.
5.06 The new Operator shall assume all of the rights, duties,
liabilities and status of the previous Operator as provided in this Agreement.
The new Operator shall have no obligation to hire any employees of the former
Operator resulting from this change of Operator.
5.07 Upon ceasing to be Operator, the former Operator shall forthwith
deliver to the new Operator custody of all Assets, Property, books, records, and
other property both real and personal which it prepared or maintained in its
capacity as Operator.
5.08 If the Operator resigns or is removed and no other party consents
to act as Operator, the Joint Operation shall be terminated and the party which
was the Operator may, if it consents to act, continue to act as Operator to
effect the termination and the other parties shall be obligated to fund their
respective Proportionate Shares of the Costs incurred.
6. RIGHTS, DUTIES AND STATUS OF OPERATOR
6.01 The Operator in its operations hereunder shall be deemed to be an
independent contractor. The Operator shall not act or hold itself out as agent
for any of the parties nor make any commitments on behalf of any of the parties
unless specifically permitted by this Agreement or directed in writing by a
party.
6.02 Subject to any specific provision of this Agreement and subject to
it having the right to reject any direction on reasonable grounds by virtue of
its status as an independent contractor, the Operator shall perform its duties
hereunder in accordance with the directions of the Management Committee and in
accordance with this Agreement.
6.03 The Operator shall manage and carry out Mining Operations
substantially
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in accordance with Programs, Feasibility Reports and Production Notices,
Operating Plans, Mine Maintenance Plans and Mine Closure Plans adopted by the
Management Committee and in connection therewith shall, in advance if reasonably
possible, notify the Management Committee of any change in Mining Operations
which the Operator considers material and if it is not reasonably possible, the
Operator shall notify the Management Committee so soon thereafter as is
reasonably possible.
6.04 The Operator shall have the sole and exclusive right and authority
to manage and carry out all Mining Operations in accordance herewith and to
incur the Costs required for that purpose. In so doing the Operator shall:
(a) comply with the provisions of all agreements or instruments of
title under which the Property or Assets are held;
(b) pay all Costs properly incurred promptly as and when due;
(c) keep the Property and Assets free of all liens and
encumbrances (other than those, if any, in effect on the Operative Date, those
the creation of which is permitted pursuant to this Agreement, or builder's or
mechanic's liens) arising out of the Mining Operations and, in the event of any
lien being filed as aforesaid, proceed with diligence to contest or discharge
the same;
(d) with the approval of the Management Committee prosecute claims
and, where a defence is available, defend litigation arising out of the Mining
Operations, provided that any Participant may join in the prosecution or defence
at its own expense;
(e) subject to paragraph 20.06, perform such assessment work or
make payments in lieu thereof and pay such rentals, taxes or other payments and
do all such other things as may be necessary to maintain the Property in good
standing, including, without limiting generality, staking and restaking mining
claims, and applying for licenses, leases, grants, concessions, permits, patents
and other rights to and interests in the Minerals;
(f) maintain books of account in accordance with the Accounting
Procedure, provided that the judgment of the Operator as to matters related to
the 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 Canada;
(g) perform its duties and obligations hereunder in a sound and
workmanlike manner, in accordance with sound mining and engineering practices
and other practices customary in the Canadian mining industry, and in
substantial compliance with all applicable federal, provincial, Territorial
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and municipal laws, by-laws, ordinances, rules and regulations and this
Agreement;
(h) prepare and deliver the reports provided for in paragraph
21.02; and
(i) have such additional duties and obligations as the Management
Committee may from time to time determine.
7. EXPLORATION PROGRAMS
7.01 The Operator shall prepare draft Programs for consideration by the
Management Committee. Unless otherwise agreed to by a Special Majority, each
Program shall cover a calendar year. The draft Program shall contain a
statement in reasonable detail of the proposed Mining Operations, estimates of
all Exploration Costs to be incurred and an estimate of the time when they will
be incurred, and shall be delivered to each Participant by no later than 60 days
prior to the period to which the draft Program relates. Each draft Program
shall be accompanied by such reports and data as are reasonably necessary for
each party to evaluate and assess the results from the Program for the then
current year and, to the extent not previously delivered, from earlier Programs.
7.02 The Management Committee shall review the draft Program prepared
and, if it deems fit, adopt the Program with such modifications, if any, as the
Management Committee deems necessary. The Operator shall be entitled to an
allowance for a Cost overrun of 10 percent in addition to any budgeted
Exploration Costs and any Costs so incurred shall be deemed to be included in
the Program, as adopted.
7.03 The Operator shall forthwith submit the adopted Program to the
parties. Subject to sub-paragraph 7.04, each party may, within 30 days of
receipt of the Program, give notice to the Operator committing to contribute its
Proportionate Share of the Exploration Costs for that Program. A party which
fails to give that notice within the 30 day period shall be deemed to have
elected not to contribute to that Program.
7.04 Mirko shall not be required to contribute to the initial Program
until Delbrook has expended Exploration costs of $20,000 CDN. on the Property,
which expenditure shall be made on or before December 31, 2002. This $20,000
CDN. expenditure by Delbrook shall not be included in the calculation of
Delbrook's Proportionate Share of the initial or any Program.
7.05 If any party elected not to contribute to a Program, the amounts
to be contributed by the parties who elected to contribute shall be increased
pro rata, subject to the right of any of them to elect, prior to the
commencement of the Program, not to contribute more than its Proportionate
Share. If one or more party so elects to contribute no more than its
Proportionate Share and the other parties do not elect to
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contribute pro rata to the resulting shortfall, the Operator shall in good faith
revise the Program and Budget such that the technical objectives of the original
Program are retained to the extent that is reasonably practicable given the
reduced contributions to Costs. The Operator shall, within 15 days following the
end of the 30-day period set out in paragraph 7.03, deliver to each party a copy
of the said revised Program which, if the budget contemplates Costs of at least
80% of those contemplated in the original adopted Program, shall then be deemed
for all purposes under this Agreement to be the adopted Program. If the budget
for the revised Program contemplates Costs of less than 80% of those
contemplated in the original adopted Program, the revised Program shall be
re-submitted to the Management Committee as a draft Program pursuant to
paragraph 7.01, and the procedure set out in paragraph 7.01 to 7.04 inclusive
shall be repeated.
7.06 The Operator shall be entitled to invoice each Participant:
(a) no more frequently than monthly, for its Proportionate Share
of Exploration Costs incurred and paid by the Operator in carrying out a
Program; or
(b) not more than 60 days in advance of requirements, for an
advance of that Participant's Proportionate Share of Exploration Costs estimated
to be incurred and paid by the Operator in carrying out a Program.
Each invoice shall be signed by a financial officer of the Operator. Each
Participant shall pay to the Operator the amount invoiced within 30 days of
receipt of the invoice. If a Participant protests the correctness of an invoice
it shall nevertheless be required to make the payment.
7.07 If any Participant, after having committed to contribute pursuant
to paragraph 7.03, fails to pay an invoice within the 30-day period referred to
in paragraph 7.06 the Operator may by notice demand payment. If no payment is
made within the period of 30 days next succeeding the receipt of the demand
notice, that Participant shall be deemed to have forfeited its right to
contribute to any further Costs under this Agreement and it shall be deemed to
have elected not to contribute to each Program subsequently conducted and to any
Production Notice, and accordingly, shall have its Interest reduced in the
manner contemplated in paragraphs 7.10 and 10.02(b).
7.08 The Operator shall expend all monies advanced by a Participant
ratably with the advances of the other Participants. If the Operator suspends
or prematurely terminates a Program, any funds advanced by a Participant in
excess of that Participant's Proportionate Share of Exploration Costs incurred
prior to the suspension or premature termination shall be refunded within 60
days of the suspension or premature termination. Unless approved unanimously by
the Management Committee, the Operator shall be exclusively liable for the
payment of all Costs incurred in excess of 110 percent of any budgeted
Exploration Costs.
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7.09 Unless otherwise directed by the Management Committee, the
Operator may suspend or terminate prematurely any Program when the Operator, in
good faith, considers that conditions are not suitable for the proper
continuation or completion of the Program or the results obtained to that time
eliminate or substantially impair the technical rationale on which the Program
was based. If any Program is altered, suspended or terminated prematurely so
that the Exploration Costs incurred on that Program as altered, suspended or
terminated are less than 80 percent of the Exploration Costs set out in the
adopted Program, any party which elected not to contribute to that Program shall
be given notice of the alteration, suspension or termination by the Operator and
shall be entitled to contribute its Proportionate Share of the Exploration Costs
incurred on that Program by payment thereof to the Operator within 30 days after
receipt of the notice, but shall not be entitled to review the results of the
Program until it has made full payment. If payment is not made by that party
within the 30 days aforesaid it shall forfeit its right to contribute to that
Program without a demand for payment being required to be made thereafter by the
Management Committee. If payment is made by that party within the 30 days as
aforesaid, the Operator shall distribute the payment to the original
Participants pro rata according to their respective contributions to the
Program, and shall deliver to the new Participant copies of all data previously
delivered to the other Participants with respect to that Program
7.10 If a party elected not to contribute to the Exploration Costs of
any Program the Interest of that party shall be decreased and the Interest of
each Participant contributing in excess of its Proportionate Share of the
Exploration Costs shall be increased so that, subject to paragraph 7.11, at all
times during the Exploration Period the Interest of each party will be that
percentage which is equivalent to its Exploration Costs and Prior Exploration
Costs expressed as a percentage of the Exploration Costs and Prior Exploration
Costs of all parties. Notwithstanding the foregoing but subject to paragraph
7.11 hereof, the party whose Interest has been reduced (other than a party who
has forfeited the right to contribute pursuant to paragraph 7.07) shall be
entitled to receive details of and to contribute to future Programs to the
extent of its then Interest. On the Operative Date, the parties' respective
Interests and Prior Exploration Costs shall be deemed to be as follows:
Prior Exploration Costs Interest
Mirko Nil 25 %
Delbrook Nil 75 %
7.11 If the effect of the application of paragraph 7.10 is to reduce
the Interest of any party to less than 15%, such party shall then be deemed to
have assigned and conveyed its Interest to the Participants, if more than one
then in proportion to their respective Interests, and shall be entitled to
receive as its sole remuneration and benefit in consideration of that assignment
and conveyance, by way of royalty, 5% of Net Proceeds of Production, subject to
adjustment as provided in paragraph 7.13.
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7.12 If the Operator fails to submit a draft Program or a revised
Program by the date set out in this Agreement, the following shall apply:
(a) the Operator shall not be entitled to submit a draft Program
or revised Program for the subject period;
(b) any Participant other than the Operator whose Interest is not
less than 20% may, within 15 days following the date by which the Operator's
draft Program or revised Program was due, submit a draft Program (the
"Non-Operator's Program") for the subject period for consideration by the
Management Committee;
(c) the Management Committee shall review the Non-Operator's
Program and, if it deems fit (the Operator not being entitled to vote with
respect thereto), adopt the Non-Operator's Program with such modifications, if
any, as the Management Committee deems necessary; the adopted Program shall then
be submitted to the parties pursuant to paragraph 7.03;
(d) If the Operator is a party and elects to contribute to the
Non-Operator's Program, it shall remain as the Operator for the duration of the
Non-Operator's Program.
(e) if the Operator is a party and elects not to contribute to the
Non-Operator's Program, it shall cease to be the Operator for the duration of
the Non-Operator's Program, and the Management Committee shall appoint another
party as Operator (the former Operator not being entitled to vote with respect
thereto);
(f) following the completion of the Non-Operator's Program the
former Operator shall, subject to the provisions of paragraph 5.01,
automatically become the Operator.
7.13 Each of Delbrook and Mirko hereby agree that the maximum royalty
to which it and its assigns shall be collectively entitled pursuant to this
Agreement is 5% of Net Proceeds of Production. For example, if:
(a) Mirko assigns a part of its Interest to a third party pursuant
to this Agreement, and
(b) Mirko then becomes entitled to receive 5% of Net Proceeds of
Production pursuant to paragraph 7.11 or subparagraph 10.02(b); and
(c) the said third party then also becomes entitled to receive Net
Proceeds of Production pursuant to paragraph 7.11 or subparagraph 10.02(b),
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then Mirko and such third party shall collectively be entitled to receive 5% of
Net Proceeds of Production, allocated between them on a proportionate basis
based upon the respective Prior Exploration Costs and Exploration Costs of each
of Mirko and such third party at the time that the assignment and conveyance of
its Interest took place.
8. FEASIBILITY REPORT
8.01 Except as provided in paragraph 8.02, a Feasibility Report shall
only be prepared with the approval of the Management Committee. The Operator
shall provide copies of the completed Feasibility Report to each of the parties
forthwith upon receipt, together with copies of all of the latest technical data
and information generated or received by the Operator from the immediately
preceding Program and not contained in the Feasibility Report.
8.02 Notwithstanding the provisions of paragraph 8.01, if a party (the
"Proponent") is of the view that a Feasibility Report should be prepared, such
party shall give notice thereof to the Operator and the Operator shall call a
Management Committee meeting to consider the matter. If the Management
Committee fails to approve the preparation of the Feasibility Report supported
by the Proponent, the Proponent may, either alone or with other parties, at its
or their sole cost, prepare a Feasibility Report. If such Feasibility Report
indicates that production from the Property would be profitable to the
Proponent, the Proponent shall deliver the Feasibility Report to the Operator
who shall then call a Management Committee meeting to consider the Proponent's
Feasibility Report. If the Management Committee adopts the Feasibility Report,
the non-contributing parties may either pay the Proponent an amount equal to
150% of their respective proportionate costs of the preparation of the
Feasibility Report, or shall suffer reduction of their respective Interests
pursuant to paragraph 7.11 Upon the adoption by the Management Committee of the
Proponent's Feasibility Report, it shall become a Feasibility Report for all
purposes hereunder.
8.03 The parties shall meet at reasonable intervals and times to review
the Feasibility Report and discuss whether the establishing and bringing of a
Mine into commercial production in conformity with the Feasibility Report is
feasible or desirable.
9. PRODUCTION NOTICE
9.01 The Operator shall call a Management Committee meeting to consider
the Feasibility Report for a date no sooner than three months and no later than
six months after the Feasibility Report was provided to each of the parties.
9.02 The Management Committee shall consider the Feasibility Report
prepared and by Special Majority, may approve the Feasibility Report, with such
modifications, if any, as it considers necessary or desirable, together with an
estimate of
15
Construction Costs. If a Feasibility Report is approved as aforesaid the
Management Committee shall forthwith cause a Production Notice to be given to
each of the parties by the Operator stating that the Management Committee has
approved that a Mine be established and brought into production in conformity
with the Feasibility Report and estimated Construction Costs as so approved.
10. ELECTION TO CONTRIBUTE
10.01 Each party with an Interest may, within 60 days of the receipt of
the Production Notice, give the Operator notice committing to contribute its
Proportionate Share of Construction Costs. A party which fails to give that
notice within the 60-day period shall be deemed to have elected not to
contribute to Construction Costs.
10.02 If any party elects not to contribute to Construction Costs that
party, subject to its rights under paragraph 10.04, shall forfeit the right to
contribute to any further Costs under this Agreement, and those parties which
elected to contribute as aforesaid may thereupon elect to increase their
contribution to Construction Costs, if more than one party then in proportion to
their respective Interests, by the amount which any party has declined to
contribute. If elections are made so that Construction Costs are fully
committed:
(a) the Interest of each Participant shall be increased and that
of each non-Participant shall be decreased as Costs are incurred so that the
Interest of each party at all times is that percentage which is equivalent to
(i) the sum of its Exploration Costs, its Prior Exploration
Costs and its contribution to Construction Costs;
divided by
(ii) the sum of the total Exploration Costs, total Prior
Exploration Costs and the total Construction Costs
of all the parties;
multiplied by
(iii) 100;
(b) then, at the Completion Date, each non-Participant shall be
deemed to have assigned and conveyed its Interest to the Participants, if more
than one then in proportion to their respective Interests, and shall be entitled
to receive as its sole remuneration and benefit in consideration of that
assignment and conveyance, by way of royalty, subject to adjustment as provided
in paragraph 7.13, that percent of the Net Proceeds of Production, as and when
available, which is equivalent to the Interest, calculated at the Completion
Date.
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(c) each Participant shall severally calculate and cause to be
paid to each non-Participant any Net Proceeds of Production derived from the
Property in the manner provided in Appendix II; and
(d) notwithstanding the provisions of subparagraphs 10.02(b) and
(c), if the effect of the application of subparagraph 10.02(a) reduces any
party's Interest to less than one percent it shall forfeit its Interest to the
Participants, if more than one then in proportion to their respective Interests,
and that party shall have no further right or interest under this Agreement.
10.03 If, after the operation of paragraph 10.02, Construction Costs
are not fully committed the Production Notice shall be deemed to be withdrawn,
and shall not be resubmitted, either in the same or a revised form, for a period
of at least six months following such withdrawal.
10.04 If, after the operation of paragraph 10.02, Construction Costs
are fully committed, the Participants shall diligently proceed with bringing a
Mine into production in substantial conformity with the Feasibility Report. If
the Participants fail to commence the implementation of the Feasibility Report
within twelve months of Construction Costs being fully committed, for reasons
other than general economic conditions in the mining industry, any party which
forfeited the right to contribute to Construction Costs pursuant to paragraph
10.02 shall have the right, exercisable in the 30 days following the expiration
of such twelve month period, to reacquire from the Participants not less than
all of its Interest as last held, by paying its Proportionate Share of
Construction Costs incurred to the end of such twelve month period (together
with interest at the Prime Rate plus 3%) to the Participants in proportion to
their respective Interests.
10.05 During the twelve-month period referred to in paragraph 10.04,
neither the Operator nor any Participant shall be obliged to provide any
non-Participant with the results of any work carried out on the Property, the
Participants' sole obligation during such period being to provide any
non-Participant, on the written request of such non-Participant made only once
during the said twelve months, with a summary of the nature of the work carried
out and the total Costs thereof.
11. OPERATOR'S FEE
11.01 The Operator may charge the following sums in return for its head
office overhead functions which are not charged directly:
(a) with respect to Programs:
(i) 2% for each individual contract which expressly includes
an overhead charge by the party contracted;
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(ii) 5% for each individual contract which exceeds $50,000
and is not subject to clause 11.01(a)(i) hereof;
(iii) 10% of all other Costs not included in clauses
11.01(a)(i) and 11.01(a)(ii).
(b) with respect to Construction: 1% of all other such Costs;
(c) subsequent to the Completion Date: 3.5% of all Operating
Costs.
12. MINE FINANCING
12.01 The contributions of the Participants toward the Mine Costs shall
be individually and separately provided by them.
12.02 Any party may pledge, mortgage, charge or otherwise encumber its
Interest in order to secure moneys borrowed and used by that party for the sole
purpose of enabling it to finance its participation under this Agreement or in
order to secure by way of floating charge as a part of the general corporate
assets of that party moneys borrowed for its general corporate purposes,
provided that the pledgee, mortgagee, holder of the charge or encumbrance (in
this subsection called the "Chargee") shall hold the same subject to the
provisions of this Agreement and that if the Chargee realizes upon any of its
security it will comply with this Agreement. The Agreement between the party
hereto, as borrower, and the Chargee shall contain specific provisions to the
same effect as the provisions of this paragraph.
13. CONSTRUCTION
13.01 Subject to paragraphs 10.02 and 10.03, the Management Committee
shall cause the Operator to, and the Operator shall, proceed with Construction
with all reasonable dispatch after a Production Notice has been given.
Construction shall be substantially in accordance with the Feasibility Report
subject to any variations proposed in the Production Notice, and subject also to
the right of the Management Committee to cause such other reasonable variations
in Construction to be made as the Management Committee, by Special Majority,
deems necessary and advisable.
14. OPERATION OF THE MINE
14.01 Commencing on the Completion Date, all Mining Operations shall be
planned and conducted and all estimates, reports and statements shall be
prepared and made on the basis of a calendar year.
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14.02 With the exception of the year in which the Completion Date
occurs, an Operating Plan for each calendar year shall be submitted by the
Operator to the Participants not later than November 1 in the year immediately
preceding the calendar year to which the Operating Plan relates. Each Operating
Plan shall contain the following:
(a) a description of the proposed Mining Operations;
(b) a detailed estimate of all Mine Costs plus a reasonable
allowance for contingencies;
(c) an estimate of the quantity and quality of the ore to be mined
and the concentrates or metals or other products and by-products to be produced;
and
(d) such other facts as may be necessary to reasonably illustrate
the results intended to be achieved by the Operating Plan.
Upon request of any Participant the Operator shall meet with that Participant to
discuss the Operating Plan and shall provide such additional or supplemental
information as that Participant may reasonably require with respect thereto.
14.03 The Management Committee shall adopt each Operating Plan, with
such changes as it deems necessary, by November 30 in the year immediately
preceding the calendar year to which the Operating Plan relates; provided,
however, that the Management Committee, by Special Majority, may from time to
time and any time amend any Operating Plan.
14.04 The Operator shall include in the estimate of Mine Costs referred
to in subparagraph 14.02(b) hereof the establishment of a trust or escrow fund
providing for the reasonably estimated costs of satisfying continuing
obligations that may remain after the permanent termination of Mining
Operations, in excess of amounts actually expended. Such continuing obligations
are or will be incurred as a result of the Joint Operation and shall include
such things as monitoring, stabilization, reclamation or restoration
obligations, severance and other employee benefit costs and all other
obligations incurred or imposed as a result of the Joint Operation which
continue or arise after the permanent termination of Mining Operations and the
termination of this Agreement and settlement of all accounts. The payment of
such continuing obligations shall be made on the basis of units of production,
and shall be in amounts reasonably estimated to provide over the lifetime of
proven and probable reserves funds adequate to pay for such reclamation and long
term care and monitoring. The Participants shall contribute to the trust or
escrow fund cash (or provide letters of credit or other forms of security
readily convertible to cash in form approved by the Management Committee). The
amount contributed from time to time for the satisfaction of such continuing
obligations shall be classified as Costs hereunder but shall be segregated into
a separate account.
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15. PAYMENT OF MINE COSTS
15.01 The Operator may invoice each Participant, from time to time, for
that Participant's Proportionate Share of Construction Costs or Operating Costs
incurred to the date of the invoice, or at the beginning of each month for an
advance equal to that Participant's Proportionate Share of the estimated cash
disbursements to be made during the month. Each Participant shall pay its
Proportionate Share of the Construction Costs or Operating Costs or the
estimated cash disbursements aforesaid to the Operator within 30 days after
receipt of the invoice. If the payment or advance requested is not so made, the
amount of the payment or advance shall bear interest calculated monthly not in
advance from the 30th day after the date of receipt of the invoice thereof by
that Participant at a rate equivalent to the weighted average Prime Rate for the
month plus 3% until paid. The Operator shall have a lien on each Participant's
Interest in order to secure that payment or advance together with interest which
has accrued thereon.
15.02 If any Participant fails to pay an invoice contemplated in
paragraph 15.01 within the 30-day period aforesaid, the Operator may, by notice,
demand payment. If no payment is made within 30 days of the Operator's demand
notice, the Operator may, without limiting its other rights at law, enforce the
lien created by paragraph 15.01 by taking possession of all or any part of that
Participant's Interest. The Operator may sell and dispose of the Interest which
it has so taken into its possession by:
(a) first offering that Interest to the other Participants, if
more than one then in proportion to the respective Interests of the Participants
who wish to accept that offer, for that price which is the fair market value
stated in the lower of two appraisals obtained by the Operator from independent,
well recognized appraisers competent in the appraisal of mining properties; and
(b) if the Participants have not purchased all or part of that
Interest as aforesaid, then by selling the balance, if any, either in whole or
in part or in separate parcels at public auction or by private tender (the
Participants being entitled to bid) at a time and on whatever terms the Operator
shall arrange, having first given notice to the defaulting Participant of the
time and place of the sale.
As a condition of the sale as contemplated in subparagraph 15.02(b), the
purchaser shall agree to be bound by this Agreement and, prior to acquiring the
Interest, shall deliver notice to that effect to the parties, in form acceptable
to the Operator. The proceeds of the sale shall be applied by the Operator in
payment of the amount due from the defaulting Participant and interest as
aforesaid, and the balance remaining, if any, shall be paid to the defaulting
Participant after deducting reasonable costs of the
20
sale. Any sale or disposal made as aforesaid shall be a perpetual bar both at
law and in equity by the defaulting Participant and its successors and assigns
against all other Participants.
16. DISTRIBUTION IN KIND
16.01 It is expressly intended that, upon implementation of any
Production Notice hereunder, the association of the parties hereto shall be
limited to the efficient production of Minerals from the Property and related
activities, and that each of the parties shall be entitled to use, dispose of or
otherwise deal with its Proportionate Share of Minerals as it sees fit. Each
Participant shall take in kind, f.o.b. truck or railcar on the Property, and
separately dispose of its Proportionate Share of the Minerals produced from the
Mine. From the time of delivery, each Participant shall have ownership of and
title to its Proportionate Share of Minerals separate from, and not as tenant in
common with, the other Participants, and shall bear all risk of loss of
Minerals. Extra costs and expenses incurred by reason of the Participants
taking in kind and making separate dispositions shall be paid by each
Participant directly and not through the Operator or Management Committee.
16.02 Each Participant shall construct, operate and maintain, all at
its own cost and expense, any and all facilities which may be necessary to
receive and store and dispose of its Proportionate Share of the Minerals at the
rate the same are produced.
16.03 If a Participant has not made the necessary arrangements to take
in kind and store its share of production as aforesaid the Operator shall, at
the sole cost and risk of that Participant store, in any location where it will
not interfere with Mining Operations, the production owned by that Participant.
The Operator and the other parties shall be under no responsibility with respect
thereto. All of the Costs involved in arranging and providing storage shall be
billed directly to, and be the sole responsibility of the Participant whose
share of production is so stored. The Operator's charges for such assistance
and any other related matters shall be billed directly to and be the sole
responsibility of the Participant. All such xxxxxxxx shall be subject to the
provisions of paragraphs 15.01 and 15.02 hereof.
17. SURRENDER OF INTEREST
17.01 Any party not in default hereunder may, at any time upon notice,
surrender its entire Interest to the other parties by giving those parties
notice of surrender.
The notice of surrender shall:
(a) indicate a date for surrender not less than three months after
the date on which the notice is given; and
21
(b) contain an undertaking that the surrendering party will:
(i) satisfy its Proportionate Share, based on its then
Interest, of all obligations and liabilities which arose at any time prior to
the date of surrender;
(ii) if the Operator has not included in Mine Costs the costs
of continuing obligations as set out in paragraph 14.04 hereof, pay on the date
of surrender its reasonably estimated Proportionate Share, based on the
surrendering party's then Interest, of the Costs of rehabilitating the Mine site
and of reclamation based on the Mining Operations completed as at the date of
surrender; and
(iii) will hold in confidence, for a period of two years from
the date of surrender, all information and data which it acquired pursuant to
this Agreement.
17.02 Upon the surrender of its entire Interest as contemplated in
paragraph 17.01 and upon delivery of a release in writing, in form acceptable to
counsel for the Operator, releasing the other parties from all claims and
demands hereunder, the surrendering party shall be relieved of all obligations
or liabilities hereunder except for those which arose or accrued or were
accruing due on or before the date of the surrender.
17.03 A party to whom a notice of surrender has been given as
contemplated in paragraph 17.01 may elect, by notice within 90 days to the party
which first gave the notice to accept the surrender, in which case paragraphs
17.01 and 17.02 shall apply, or to join in the surrender. If all of the parties
join in the surrender the Joint Operation shall be terminated in accordance with
article 18.
18. TERMINATION OF MINING OPERATIONS
18.01 The Operator may, at any time subsequent to the Completion Date,
on at least 30 days notice to all Participants, recommend that the Management
Committee approve that the Mining Operations be suspended. The Operator's
recommendation shall include a plan and budget (in this article 18 called the
"Mine Maintenance Plan"), in reasonable detail, of the activities to be
performed to maintain the Assets and Property during the period of suspension
and the Costs to be incurred. The Management Committee may, by Special
Majority, at any time subsequent to the Completion Date, cause the Operator to
suspend Mining Operations in accordance with the Operator's recommendation with
such changes to the Mine Maintenance Plan as the Management Committee deems
necessary. The Participants shall be committed to contribute their
Proportionate Share of the Costs incurred in connection with the Mine
Maintenance Plan. The Management Committee, by Special Majority, may cause
Mining Operations to be resumed at any time.
22
18.02 The Operator may, at any time following a period of at least 90
days during which Mining Operations have been suspended, upon at least 30 days
notice to all Participants, or in the events described in paragraph 18.01,
recommend that the Management Committee approve the permanent termination of
Mining Operations. The Operator's recommendation shall include a plan and
budget (in this article 18 called the "Mine Closure Plan"), in reasonable
detail, of the activities to be performed to close the Mine and reclaim and
rehabilitate the Property, as required by applicable law, regulation or contract
by reason of this Agreement. The Management Committee may, by unanimous
approval of the representatives of all Participants, approve the Operator's
recommendation with such changes to the Mine Closure Plan as the Management
Committee deems necessary.
18.03 If the Management Committee approves the Operator's
recommendation as aforesaid, it shall cause the Operator to:
(a) implement the Mine Closure Plan, whereupon the Participants
shall be committed to pay, in proportion to their respective Interests, such
Costs as may be required to implement that Mine Closure Plan;
(b) remove, sell and dispose of such Assets as may reasonably be
removed and disposed of profitably and such other Assets as the Operator may be
required to remove pursuant to applicable environmental and mining laws; and
(c) sell, abandon or otherwise dispose of the Assets and the
Property.
The disposal price for the Assets and the Property shall be the best price
reasonably obtainable and the net revenues, if any, from the removal and sale
shall be credited to the Participants in proportion to their respective
Interests.
18.04 If the Management Committee does not approve the Operator's
recommendation contemplated in paragraph 18.02, the Operator shall maintain
Mining Operations in accordance with the Mine Maintenance Plan as pursuant to
paragraph 18.01.
19. THE PROPERTY
19.01 Title to the Property shall be held in the name of the Operator
in trust for the parties in proportion to their respective Interests as adjusted
from time to time. Each of the parties shall have the right to receive,
forthwith upon making demand therefor from the Operator, such documents as it
may reasonably require to confirm its Interest.
19.02 This Agreement, or a memorandum of this Agreement, shall, upon
the
23
written request of any party, be recorded in the office of any governmental
agency so requested, in order to give notice to third parties of the respective
interests of the parties in the Property and this Agreement. Each party hereby
covenants and agrees with the requesting party to execute such documents as may
be necessary to perfect such recording.
20. AREA OF COMMON INTEREST
20.01 The area of common interest shall be deemed to comprise that area
which is included within the outermost boundary of the mineral properties which
constitute the Property as at the Operative Date.
20.02 If at any time during the subsistence of this Agreement any party
or the Affiliate of any party (in this section only called in each case the
"Acquiring Party") stakes or otherwise acquires, directly or indirectly, any
right to or interest in any mining claim, licence, lease, grant, concession,
permit, patent, or other mineral property located wholly or partly within the
area of interest referred to in subparagraph 20.01, the Acquiring Party shall
forthwith give notice to the other parties of that staking or acquisition, the
total cost thereof and all details in the possession of that party with respect
to the details of the acquisition, the nature of the property and the known
mineralization.
20.03 The Management Committee (the representative of the Acquiring
Party not being entitled to vote with respect thereto) may, within 30 days of
receipt of the Acquiring Party's notice, elect, by notice to the Acquiring
Party, to require that the mineral properties and the right or interest acquired
be included in and thereafter form part of the Property for all purposes of this
Agreement.
20.04 If the election aforesaid is made, all the other parties shall
reimburse the Acquiring Party for that portion of the cost of acquisition, which
is equivalent to their respective Interests.
20.05 If the Management Committee does not make the election aforesaid
within that period of 30 days, the right or interest acquired shall not form
part of the Property and the Acquiring Party shall be solely entitled thereto.
20.06 Notwithstanding subparagraph 6.04(e), the Operator shall be
entitled, at any time and from time to time to surrender all or any part of the
Property or to permit the same to lapse, but only upon first either obtaining
the unanimous consent of the Management Committee, or giving 60 days notice of
its intention to do so to the other parties. In this latter event, the parties,
other than the Operator, shall be entitled to receive from the Operator, on
request prior to the date of the surrender or lapse, pro rata in accordance with
their respective Interests, a conveyance of that portion of the Property
intended for surrender or lapse, together with copies of any plans, assay maps,
diamond drill records and factual engineering data in the Operator's possession
24
and relevant thereto. Any part of the Property so acquired shall cease to be
subject to this Agreement and shall not be subject to paragraph 20.02. Any part
of the Property which has not been so acquired by any of the parties shall
remain subject to paragraph 20.02.
21. INFORMATION AND DATA
21.01 At all times during the subsistence of this Agreement the duly
authorized representatives of each Participant shall, at its and their sole risk
and expense and at reasonable intervals and times, have access to the Property
and to all technical records and other factual engineering data and information
relating to the Property which is in the possession of the Operator.
21.02 During the Exploration Period while Programs are being carried
out, the Operator shall furnish the Participants with monthly progress reports
and with a final report within 60 days following the conclusion of each Program.
The final report shall show the Mining Operations performed and the results
obtained and shall be accompanied by a statement of Costs and copies of
pertinent plans, assay maps, diamond drill records and other factual engineering
data. During the Construction Period and during the implementation of an
Operating Plan the Operator shall provide monthly progress reports to the
Participants, which report shall include information on any changes or
developments affecting the Mine that the Operator considers are material.
21.03 All information and data concerning or derived from the Mining
Operations shall be kept confidential and, except to the extent required by law
or by regulation of any Securities Commission or Stock Exchange, shall not be
disclosed to any person other than an Affiliate without the prior consent of all
the Participants, which consent shall not unreasonably be withheld.
21.04 The text of any news releases or other public statements which a
party intends to make with respect to the Property or this Agreement shall, to
the extent practicable, be made available to the other parties prior to
publication and the other parties shall have the right to make suggestions for
changes therein.
22. LIABILITY OF THE OPERATOR
22.01 Subject to paragraph 22.02, each party shall indemnify and save
the Operator harmless from and against any loss, liability, claim, demand,
damage, expense, injury or death (including, without limiting the generality of
the foregoing, legal fees) resulting from any acts or omissions of the Operator
or its officers, employees or agents.
22.02 Notwithstanding paragraph 22.01, the Operator shall not be
indemnified
25
nor held harmless by any of the parties for any loss, liability, claim, damage,
expense, injury or death, (including, without limiting the generality of the
foregoing, legal fees) resulting from the negligence or willful misconduct of
the Operator or its officers, employees or agents.
22.03 An act or omission of the Operator or its officers, employees or
agents done or omitted to be done:
(a) at the direction of, or with the concurrence of, the
Management Committee; or
(b) unilaterally and in good faith by the Operator to protect life
or property
shall be deemed not to be negligence or willful misconduct.
22.04 The obligation of each party to indemnify and save the Operator
harmless pursuant to paragraph 22.01 shall be in proportion to its Interest as
at the date that the loss, liability, claim, demand, damage, expense, injury or
death occurred or arose.
22.05 The Operator shall not be liable to any other party nor shall any
party be liable to the Operator in contract, tort or otherwise for special or
consequential damages, including, without limiting the generality of the
foregoing, loss of profits or revenues.
23. INSURANCE
23.01 Commencing on the Operative Date, the Management Committee shall
cause the Operator to place and maintain with a reputable insurer or insurers
such insurance, if any, as the Management Committee in its discretion deems
advisable in order to protect the parties together with such other insurance as
any Participant may by notice reasonably request. The Operator shall, upon the
written request of any Participant, provide it with evidence of that insurance.
23.02 Paragraph 23.01 shall not preclude any party from placing, for
its own account insurance for greater or other coverage than that placed by the
Operator.
24. RELATIONSHIP OF PARTIES
24.01 The rights, duties, obligations and liabilities of the parties
shall be several and not joint nor joint and several, it being the express
purpose and intention of the parties that their respective Interests shall be
held as tenants in common.
24.02 Nothing herein contained shall be construed as creating a
partnership of any kind or as imposing upon any party any partnership duty,
obligation or liability to
26
any other party hereto.
24.03 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 this Agreement.
25. PARTITION
25.01 Each of the parties hereto waives, during the term of this
Agreement, any right to partition of the Property or the Assets or any part
thereof and no party shall seek to be entitled to partition of the Property or
the Assets whether by way of physical partition, judicial sale or otherwise
during the term of this Agreement.
26. TAXATION
26.01 All Costs incurred hereunder shall be for the account of the
party or parties making or incurring the same, if more than one then in
proportion to their respective Interests, and each party on whose behalf any
Costs have been incurred shall be entitled to claim all tax benefits,
write-offs, and deductions with respect thereto.
27. FORCE MAJEURE
27.01 Notwithstanding anything herein contained to the contrary, if any
Participant is prevented from or delayed in performing any obligation under this
Agreement, and such failure is occasioned by any cause beyond its reasonable
control, excluding only lack of finances, then, subject to paragraph 27.02, the
time for the observance of the condition or performance of the obligation in
question shall be extended for a period equivalent to the total period the cause
of the prevention or delay persists or remains in effect regardless of the
length of such total period.
27.02 Any party hereto claiming suspension of its obligations as
aforesaid shall promptly notify the other parties to that effect and shall take
all reasonable steps to remove or remedy the cause and effect of the force
majeure described in the said notice insofar as it is reasonably able so to do
and as soon as possible; provided that the terms of settlement of any labour
disturbance or dispute, strike or lockout shall be wholly in the discretion of
the party claiming suspension of its obligations by reason thereof, and that
party shall not be required to accede to the demands of its opponents in any
such labour disturbance or dispute, strike, or lockout solely to remedy or
remove the force majeure thereby constituted. The party claiming suspension of
its obligations shall promptly notify the other parties when the cause of the
Force Majeure has been removed.
27
27.03 The extension of time for the observance of conditions or
performance of obligations as a result of force majeure shall not relieve the
Operator from its obligations to keep the Property in good standing pursuant to
sub-paragraphs 6.04(a) and 6.04(e).
28. NOTICE
28.01 All invoices, notices, consents and demands under this Agreement
shall be in writing and may be delivered personally, transmitted by fax (with
transmission confirmed in writing), or may be forwarded by first class prepaid
registered mail to the address for each party specified in this Agreement or to
such addresses as each party may from time to time specify by notice. Any
notice delivered or sent by fax shall be deemed to have been given and received
on the business day next following the date of delivery or transmission. Any
notice mailed as aforesaid shall be deemed to have been given and received on
the fifth business day following the date it is posted, provided that if between
the time of mailing and the actual receipt of the notice there shall be a mail
strike, slowdown or other labour dispute which affects delivery of the notice by
mails, then the notice shall be effective only if actually delivered.
29. WAIVER
29.01 No waiver of any breach of this Agreement shall be binding unless
evidenced in writing executed by the party against whom charged. Any waiver
shall extend only to the particular breach so waived and shall not limit any
rights with respect to any future breach.
30. AMENDMENTS
30.01 Except for those provisions, if any, of the Head Agreement
specifically incorporated herein by reference, this Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof. An amendment or variation of this Agreement shall only be binding upon
a party if evidenced in writing executed by that party.
28
31. TERM
31.01 Unless earlier terminated by agreement of all parties having an
Interest or as a result of one party acquiring both a 100% Interest and a 100%
interest in the Net Proceeds of Production, the Joint Operation and this
Agreement shall remain in full force and effect for so long as any party has any
right, title or interest in the Property. Termination of this Agreement shall
not, however, relieve any party from any obligations theretofore accrued but
unsatisfied, nor from its obligations with respect to rehabilitation of the Mine
site and reclamation.
32. TIME OF ESSENCE
32.01 Time is of the essence of this Agreement.
33. ASSIGNMENT - RIGHT OF FIRST REFUSAL
33.01 If a party (hereinafter in this paragraph referred to as the
"Owner"):
(a) receives a bona fide offer from an independent third
party (the "Proposed Purchaser") dealing at arm's length with the Owner to
purchase all or any part all of the Owner's Interest or its interest in this
Agreement (which for certainty shall include the Owner's right to receive
Net Proceeds of Production, which offer the Owner desires to accept;
(b) or if the Owner intends to sell all or any part of its
interest or its interest in this Agreement;
(c) or if the Owner is a body corporate, if there is a
change in the ownership of the shares of the Owner such that the new
shareholder(s) of the Owner hold a sufficient number of voting shares of
the Owner to affect materially the control of the Owner;
then the Owner shall first offer (the "Offer") such interest in writing to the
other party upon terms no less favourable than those offered by the Proposed
Purchaser or intended to be offered by the Owner, as the case may be. The Offer
shall specify the price and terms and conditions of such sale, the name of the
Proposed Purchaser (which term shall, in the case of an intended offer by the
Owner, mean the person or persons to whom the Owner intends to offer its
interest) and, if the offer received by the Owner from the Proposed Purchaser
provides for any consideration payable to the Owner otherwise than in cash, the
Offer shall include the Owner's good faith estimate of the cash equivalent of
the non-cash
29
consideration. If within a period of 60 days of the receipt of the Offer, the
other party notifies the Owner in writing that it will accept the same, the
Owner shall be bound to sell such interest to the other party (subject as
hereinafter provided with respect to price) on the terms and conditions of the
Offer. If the Offer so accepted by the other party contains the Owner's good
faith estimate of the cash equivalent consideration as aforesaid, and if the
other party disagrees with the Owner's best estimate, the other party shall so
notify the Owner at the time of acceptance and the other party shall, in such
notice, specify what it considers, in good faith, the fair cash equivalent to be
and the resulting total purchase price. If the other party so notifies the
Owner, the acceptance by the other party shall be effective and binding upon the
Owner and the other party and the cash equivalent of any such non-cash
consideration shall be determined by binding arbitration under the Commercial
Arbitration Act (British Columbia) and shall be payable by the other party,
subject to prepayment as hereinafter provided, within 60 days following its
determination by arbitration. The other party shall in such case pay to the
Owner, against receipt of an absolute transfer of clear and unencumbered title
to the interest of the Owner being sold, the total purchase price which it
specified in its notice to the Owner and such amount shall be credited to the
amount determined following arbitration of the cash equivalent of any non-cash
consideration. If the other party fails to notify the Owner before the
expiration of the time limited therefor that it will purchase the interest
offered, the Owner may sell and transfer such interest to the Proposed Purchaser
at the price and on the terms and conditions specified in the Offer for a period
of 60 days, provided that the terms of this paragraph shall again apply to such
interest if the sale to the Proposed Purchaser is not completed within the said
60 days. Any sale hereunder shall be conditional upon the Proposed Purchaser
delivering a written undertaking to the other party, in form and content
satisfactory to its counsel, to be bound by the terms and conditions of this
Agreement.
34. SUCCESSORS AND ASSIGNS
34.01 This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
30
35. GOVERNING LAW
35.01 This Agreement shall be governed by and interpreted in accordance
with the laws of the Province of British Columbia.
IN WITNESS WHEREOF the parties hereto have executed this
agreement as of the day and year first above written.
SIGNED, SEALED AND DELIVERED by )
XXXX X. MIRKO in the presence of: )
)
/s/ X. X'Xxxxx )
------------------------ )
[signature of witness] ) /s/ Xxxx X. Mirko
) -----------------------
X. X'Xxxxx )
------------------------ )
[print name] )
)
Xxxxx 0000-0000 X. Xxxxxxx Xx. )
Xxxxxxxxx, XX, X0X BP3 )
------------------------ )
[print address] )
The COMMON SEAL of DELBROOK MINING CORP. )
was hereunto affixed in the presence of: )
)
/s/ Xxxxx Xxxxxxxx ) c/s
------------------------ )
[signature of authorized signatory] )
)
Xxxxx Xxxxxxxx )
------------------------ )
[print name of authorized signatory] )
)
)
------------------------ )
[print title of authorized signatory] )
This is page 31 to an agreement made the 28th day of December, 2001 between
Xxxx X. Mirko. of the first part and Delbrook Mining Corp. of the second
part
31
APPENDIX I
TO THAT CERTAIN JOINT VENTURE AGREEMENT BETWEEN XXXX X. MIRKO. AND DELBROOK
MINING CORP. MADE AS OF THE 28th DAY OF DECEMBER, 2001 TO THAT CERTAIN JOINT
VENTURE AGREEMENT BETWEEN XXXX X. MIRKO. AND DELBROOK MINING CORP. MADE AS OF
THE 28th DAY OF DECEMBER, 2001
ACCOUNTING PROCEDURE
--------------------
1. INTERPRETATION
1.01 Terms defined in the Agreement shall, subject to any contrary
intention, have the same meanings herein. In this Appendix the following words,
phrases and expressions shall have the following meanings:
(a) "Agreement" means the Agreement to which this Accounting
Procedure is attached as Appendix I.
(b) "Count" means a physical inventory count.
(c) "Employee" means those employees of the Operator who are
assigned to and directly engaged in the conduct of Mining Operations, whether on
a full-time or part-time basis.
(d) "Employee Benefits" means the Operator's cost of holiday,
vacation, sickness, disability benefits, field bonuses, amounts paid to and the
Operator's costs of established plans for employee's group life insurance,
hospitalisation, pension, retirement and other customary plans maintained for
the benefit of Employees and Personnel, as the case may be, which costs may be
charged as a percentage assessment on the salaries and wages of Employees or
Personnel, as the case may be, on a basis consistent with the Operator's cost
experience.
(e) "Field Offices" means the necessary sub-office or sub-offices
in each place where a Program or Construction is being conducted or a Mine is
being operated.
(f) "Government Contributions" means the cost or contributions
made by the Operator pursuant to assessments imposed by governmental authority
which are applicable to the salaries or wages of Employees or Personnel, as the
case may be.
(g) "Joint Account" means the books of account maintained by the
Operator to record all assets, liabilities, costs, expenses, credits and other
transactions arising out of or in connection with the Mining Operations.
(h) "Material" means the personal property, equipment and supplies
acquired or held, at the direction or with the approval of the Management
Committee, for use in the Mining Operations and, without limiting the
generality, more particularly "Controllable Material" means such Material which
is ordinarily classified as Controllable Material, as that classification is
determined or approved by the Management Committee, and controlled in mining
operations.
(i) "Personnel" means those management, supervisory,
administrative, clerical or other personnel of the Operator normally associated
with the Supervision Offices whose salaries and wages are charged directly to
the Supervision Office in question.
(j) "Reasonable Expenses" means the reasonable expenses of
Employees or Personnel, as the case may be, for which those Employees or
Personnel may be reimbursed under the Operator's usual expense account practice,
as accepted by the Management Committee; including without limiting generality,
any relocation expenses necessarily incurred in order to properly staff the
Mining Operations if the relocation is approved by the Management Committee.
(k) "Supervision Offices" means the Operator's offices or
department within the Operator's offices from which the Mining Operations are
generally supervised.
2. STATEMENTS AND XXXXXXXX
2.01 The Operator shall, by invoice, charge each Participant with its
Proportionate Share of Exploration Costs and Mine Costs in the manner provided
in sections 7 and 15 of the Agreement respectively.
2.02 The Operator shall deliver, with each invoice rendered for Costs
incurred a statement indicating:
(a) all charges or credits to the Joint Account relating to
Controllable Material ; and
(b) all other charges and credits to the Joint Account summarised
by appropriate classification indicative of the nature of the charges and
credits.
2.03 The Operator shall deliver with each invoice for an advance of
Costs a statement indicating:
(a) the estimated Exploration Costs or, in the case of Mine Costs
the estimated cash disbursements, to be made during the next succeeding
2
month;
(b) the addition thereto or subtraction therefrom, as the case may
be, made in respect of Exploration Costs or Mine Costs actually having been
incurred in an amount greater or lesser than the advance which was made by each
Participant for the penultimate month preceding the month of the invoice; and
(c) the advances made by each Participant to date and the
Exploration Costs or Mine Costs incurred to the end of the penultimate month
preceding the month of the invoice.
3. DIRECT CHARGES
3.01 The Operator shall charge the Joint Account with the following
items:
(a) Contractor's Charges:
---------------------
All costs directly relating to the Mining Operations incurred
under contracts entered into by the Operator with third parties.
(b) Labour Charges:
----------------
(i) The salaries and wages of Employees in an amount
calculated by taking the full salary or wage of each Employee multiplied by that
fraction which has as its numerator the total time for the month that the
Employees were directly engaged in the conduct of Mining Operations and
as its denominator the total normal working time for the month of the
Employee;
(ii) the Reasonable Expenses of the Employees; and
(iii) Employee Benefits and Government Contributions in respect
of the Employees in an amount proportionate to the charge made to the
Joint Account in respect to their salaries and wages.
(c) Office Maintenance:
-------------------
(i) The cost or a pro rata portion of the costs, as the case
may be, of maintaining and operating the Field Offices and the Supervision
Offices. The basis for charging the Joint Account for such maintenance costs
shall be as follows:
(A) the expense of maintaining and operating Field Offices,
less any revenue therefrom; and
3
(B) that portion of maintaining and operating the Supervision
Offices which is equal to
(1) the anticipated total operating expenses of the
Supervision Offices
divided by
(2) the anticipated total staff man days for the
Employees whether in connection with the Mining Operations or
not;
multiplied by
(3) the actual total time spent on the Mining
Operations by the Employee expressed in man days.
(ii) Without limiting generality, the anticipated total
operating expenses of the Supervision Offices shall include:
(A) the salaries and wages of the Operator's Personnel
which have been directly charged to the Supervision Offices;
(B) the Reasonable Expense of the Personnel; and
(C) Employee Benefits.
(iii) The Operator shall make an adjustment in respect
of the Office Maintenance cost forthwith after the end of each Operating
Year upon having determined the actual operating expenses and actual total
staff man days referred to in clause 3.01(c)(i)(B) of this Appendix I.
(d) Material:
--------
Material purchased or furnished by the Operator for
use on the Property as provided under section 4 of this Appendix I.
(e) Transportation Charges:
-----------------------
The cost of transporting Employees and Material necessary
for the Mining Operations.
4
(f) Service Charges:
----------------
(i) The cost of services and utilities procured from
outside sources other than services covered by paragraph 3.01(h). The cost
of consultant services shall not be charged to the Joint Account unless the
retaining of the consultant is approved in advance by the Management
Committee; and
(ii) Use and service of equipment and facilities furnished
by the Operator as provided in subsection 4.04 of this Appendix I.
(g) Damages and Losses to Joint Property:
-----------------------------------------
All costs necessary for the repair or replacement of Assets made
necessary because of damages or losses by fire, flood, storms, theft,
accident or other cause. If the damage or loss is estimated by the Operator
to exceed $10,000, the Operator shall furnish each Participant with written
particulars of the damages or losses incurred as soon as practicable after the
damage or loss has been discovered. The proceeds, if any, received on claims
against any policies of insurance in respect of those damages or losses
shall be credited to the Joint Account.
(h) Legal Expense:
--------------
All costs of handling, investigating and settling litigation or
recovering the Assets, including, without limiting generality, attorney's
fees, court costs, costs of investigation or procuring evidence and
amounts paid in settlement or satisfaction of any litigation or claims;
provided, however, that, unless otherwise approved in advance by the
Management Committee, no charge shall be made for the services of the Operator's
legal staff or the fees and expenses of outside solicitors.
(i) Taxes:
-----
All taxes, duties or assessments of every kind and nature (except
income taxes) assessed or levied upon or in connection with the Property, the
Mining Operations thereon, or the production therefrom, which have been paid
by the Operator for the benefit of the parties.
(j) Insurance:
---------
Net premiums paid for
(i) such policies of insurance on or in connection with
Mining Operations as may be required to be carried by law; and
5
(ii) such other policies of insurance as the Operator may
carry for the protection of the parties in accordance with the Agreement; and
the applicable deductibles in event of an insured loss.
(k) Rentals:
--------
Fees, rentals and other similar charges required to be paid for
acquiring, recording and maintaining permits, mineral claims and mining leases
and rentals and royalties which are paid as a consequence of the Mining
Operations.
(l) Permits:
-------
Permit costs, fees and other similar charges which are assessed by
various governmental agencies.
(m) Other Expenditures:
-------------------
Such other costs and expenses which are not covered or dealt
with in the foregoing provisions of this subsection 3.01 of this Appendix I as
are incurred with the approval of the Management Committee for Mining Operations
or as may be contemplated in the Agreement.
4. PURCHASE OF MATERIAL
4.01 Subject to subsection 4.04 of this Appendix I the Operator shall
purchase all Materials and procure all services required in the Mining
Operations.
4.02 Materials purchased and services procured by the Operator directly
for the Mining Operations shall be charged to the Joint Account at the price
paid by the Operator less all discounts actually received.
4.03 Any Participant may sell Material or services required in the
Mining Operations to the Operator for such price and upon such terms and
conditions as the Management Committee may approve.
4.04 Notwithstanding the foregoing provisions of this section 4, the
Operator, after having obtained the prior approval of the Management Committee,
shall be entitled to supply for use in connection with the Mining Operations
equipment and facilities which are owned by the Operator and to charge the Joint
Account with such reasonable costs as are commensurate with the ownership and
use thereof.
6
5. DISPOSAL OF MATERIAL
5.01 The Operator, with the approval of the Management Committee may,
from time to time, sell any Material which has become surplus to the foreseeable
needs of the Mining Operations for the best price and upon the most favourable
terms and conditions available.
5.02 Any Participant may purchase from the Operator any Material which
may from time to time become surplus to the foreseeable need of the Mining
Operations for such price and upon such terms and conditions as the Management
Committee may approve.
5.03 Upon termination of the Agreement, the Management Committee may
approve the division of any Material held by the Operator at that date, which
Material may be taken by the Participants in kind or be taken by a Participant
in lieu of a portion of its Proportionate Share of the net revenues received
from the disposal of the Assets and Property. If the division to a Participant
be in lieu, it shall be for such price and on such terms and conditions as the
Management Committee may approve.
5.04 The net revenues received from the sale of any Material to third
parties or to a Participant shall be credited to the Joint Account.
6. INVENTORIES
6.01 The Operator shall maintain records of Material in reasonable
detail and records of Controllable Material in detail.
6.02 The Operator shall perform Counts from time to time at reasonable
intervals, and in any event at the end of each calendar year. The independent
external auditor of the Operator shall be given reasonable notice of each Count,
and shall be given the opportunity to attend the Count.
6.03 Forthwith after performing a Count, the Operator shall reconcile
the inventory with the Joint Account. The Operator shall not be held
accountable for any shortages of inventory except such shortages as may have
arisen due to a lack of diligence on the part of the Operator.
7. ADJUSTMENTS
7.01 Payment of any invoice by a Participant shall not prejudice the
right of that Participant to protest the correctness of the statement supporting
the payment; provided, however, that all invoices and statements presented to
each Participant by the Operator during any calendar year shall conclusively be
presumed to be true and correct upon the expiration of 12 months following the
end of the calendar year to which
7
the invoice or statement relates, unless within that 12 month period that
Participant gives notice to the Operator making claim on the Operator for an
adjustment to the invoice or statement.
7.02 The Operator shall not adjust any invoice or statement in favour
of itself after the expiration of 12 months following the end of the calendar
year to which the invoice or statement relates.
7.03 Notwithstanding subsections 7.01 and 7.02 of this Appendix I, the
Operator may make adjustments to an invoice or statement which arise out of a
Count of Material or Assets within 60 days of the completion of the Count.
7.04 A Participant shall be entitled upon notice to the Operator to
request that the independent external auditor of the Operator provide that
Participant with its opinion that any invoice or statement delivered pursuant to
the Agreement in respect of the period referred to in subsection 7.01 of this
Appendix I has been prepared in accordance with this Agreement.
7.05 The time for giving the audit opinion contemplated in subsection
7.04 of this Appendix I shall not extend the time for the taking of exception to
and making claims on the Operator for adjustment as provided in subsection 7.01
of this Appendix I.
7.06 The cost of the auditor's opinion referred to in subsection 7.04
of this Appendix I shall be solely for the account of the Participant requesting
the auditor's opinion, unless the audit disclosed a material error adverse to
that Participant, in which case the cost shall be solely for the account of the
Operator.
7.07 Upon not less than 10 business days' notice to the Operator, and
no more frequently than twice during the currency of each Operating Plan, a
Participant shall be entitled to inspect the Joint Account , at the location(s)
where such records are normally kept. All costs incurred in carrying out such
inspection shall be borne by the Participant. All disagreements or
discrepancies identified by the Participant shall be referred to the independent
external auditor for final resolution.
8
APPENDIX II
TO THAT CERTAIN JOINT VENTURE AGREEMENT BETWEEN XXXX X. MIRKO. AND DELBROOK
MINING CORP. MADE AS OF THE 28th DAY OF DECEMBER, 2001
TO THAT CERTAIN JOINT VENTURE AGREEMENT BETWEEN XXXX X. MIRKO. AND DELBROOK
MINING CORP. MADE AS OF THE 28th DAY OF DECEMBER, 2001
NET PROCEEDS OF PRODUCTION
--------------------------
1. OBLIGATION
1.01 If any non-Participant becomes entitled to a royalty pursuant to
paragraph 7.11or subparagraph 10.02(b) of the Agreement, each Participant shall
separately calculate, as at the end of each calendar quarter subsequent to the
Completion Date, the Net Proceeds of Production.
1.02 Each Participant shall within 60 days of the end of each calendar
quarter, as and when any Net Proceeds of Production are available for
distribution:
(a) severally pay or cause to be paid to each non-Participant that
percentage of the Net Proceeds of Production to which that non-Participant is
entitled under paragraph 7.11or subparagraph 10.02(b) of the Agreement;
(b) deliver to each non-Participant a statement indicating:
(i) the Gross Receipts during the calendar quarter;
(ii) the deductions therefrom made in the order itemized in
subsection 3.01 of this Appendix II;
(iii) the amount of Net Proceeds of Production remaining; and
(iv) the amount of those Net Proceeds of Production to which
that non-Participant is entitled;
provided, however, that until such time as there are Net Proceeds of Production
available, each Participant shall deliver to each non-Participant, within 60
days of the end of each calendar quarter commencing with the first calendar
quarter following the Completion Date, a statement indicating the Gross
Receipts during the calendar quarter less the deductions therefrom made in the
order itemized in subsection 3.01 of this Appendix II.
1.03 Nothing contained in the Agreement or this Appendix II shall be
construed as:
(a) imposing on a Participant any obligation with respect to the
payments of royalty due hereunder to a non-Participant from any other
Participant; or
(b) conferring on any non-Participant any right to or interest in
any Property or Assets except the right to receive royalty payments from each
Participant as and when due.
1.04 The Participants agree that on the request of any non-Participant
they will execute and deliver such documents as may be necessary to permit that
non-Participant to record its royalty right against the Property.
2. DEFINITIONS
2.01 Terms defined in the Agreement shall, subject to any contrary
intention, bear the same meaning herein.
2.02 In addition to the definitions of the classes of Costs provided in
paragraph 1.01(g) of the Agreement and without limiting the generality thereof:
(a) "Distribution Costs" means all costs of:
(i) transporting ore or concentrates from a Mine or a
concentrating plant to a smelter, refinery or other place of delivery
designated by the purchaser and, in the case of concentrates tolled, of
transporting the concentrate or metal from a smelter or refinery to the place of
delivery designated by the purchaser;
(ii) handling, warehousing and insuring the concentrates
and metal; and
(iii) in the case of concentrates tolled, of smelting
and refining, including any penalties thereon or in connection therewith.
(b) "Interest Costs" means interest computed each calendar quarter
and calculated as follows:
(i) the average of the opening and closing monthly
outstanding balances for each month during the quarter of the net unrecovered
amounts of all costs in the classes enumerated in subparagraphs 1.01(g)(i),
(ii), (iv) and (v) of the Agreement, and in paragraphs 2.02 (a), (b), (c) and
(d) of this Appendix II;
multiplied by:
(ii) the Prime Rate plus two percent;
multiplied by:
2
(iii) the number of days in the quarter;
divided by:
(iv) the number of days in the Year;
(c) "Marketing Costs" means such reasonable charge for marketing
of diamonds, ores and concentrates sold or of concentrates tolled as is
consistent with generally accepted industry marketing practices including,
without limitation, costs of market analysis, preparation of diamonds for sale,
collection of sale proceeds and the costs of all associated activities; and
(d) "Taxes and Royalties" means all taxes (other than income
taxes), royalties or other charges or imposts provided for pursuant to any law
or legal obligation imposed by any government in connection with a Participant's
involvement in the Joint Operation if paid by the Participant.
2.03 Wherever used in this Appendix II, "Gross Receipts" means the
aggregate of all receipts, recoveries or amounts received by or credited to a
Participant in connection with its participation under the Agreement including,
without limiting the generality of the foregoing:
(a) the receipts from the sale of that Participant's proportionate
share of the concentrates derived from the Mineral produced from the
Mine;
(b) all proceeds received from the sale of the Property
or Assets subsequent to the Operative Date;
(c) all insurance recoveries (including amounts received to settle
claims) in respect of loss of, or damage to any portion of the Property
or Assets subsequent to the Operative Date;
(d) all amounts received as compensation for the expropriation or
forceable taking of any portion of the Property or Assets subsequent to the
Operative Date;
(e) the fair market value, at the Property, of those Assets,
if any, purchased for the Joint Account, that are transferred from the Property
for use by a Participant elsewhere subsequent to the Operative Date;
and
(f) the amount of any negative balance remaining after the
reallocation of negative balances pursuant to subsection 3.03 of this
Appendix II;
to the extent that those receipts, recoveries or amounts have not been applied
by the
3
Participant as a recovery of any of the classes of Costs itemized in subsection
3.01 of this Appendix II.
3. NET PROCEEDS OF PRODUCTION
3.01 "Net Proceeds of Production" means the Gross Receipts minus
deductions therefrom, to the extent of but not exceeding the amount of those
Gross Receipts, of the then net unrecovered amounts of the following classes of
Costs made in the following itemized order:
(a) Marketing Costs;
(b) Distribution Costs;
(c) Operating Costs;
(d) Taxes and Royalties;
(e) Interest Costs;
(f) Construction Costs;
(g) Exploration Costs; and
(h) Prior Exploration Costs;
it being understood that the deductions in respect of the Costs referred to in
paragraphs 3.01(a), (b), (d) and (e) of this Appendix II shall be based on those
Costs as recorded by that Participant and the deductions in respect of the Costs
referred to in paragraphs 3.01(c), (f), (g) and (h) of this Appendix II shall be
based on that Participant's Proportionate Share of those Costs as recorded by
the Operator.
3.02 Any amount by which the aggregate of the Costs set out in
paragraphs 3.01(a) to (h) inclusive in any quarter exceeds Gross Receipts for
such quarter shall, together with any negative balance carried forward from the
previous quarter, be carried forward for deduction from Gross Receipts in the
immediately succeeding quarter.
4. ADJUSTMENTS AND VERIFICATION
4.01 Payment of any Net Proceeds of Production by a Participant shall
not prejudice the right of that Participant to adjust its own statement
supporting the payment; provided, however, that all statements presented to the
non-Participant by that Participant for any quarter shall conclusively be
presumed to be true and correct upon the expiration of 12 months following the
end of the quarter to which the statement
4
relates, unless within that 12 month period that Participant gives notice to the
non-Participant making claim on the non-Participant for an adjustment to the
statement which will be reflected in subsequent payment of Net Proceeds of
Production.
4.02 The Participant shall not adjust any statement in favour of itself
after the expiration of 12 months following the end of the quarter to which the
statement relates.
4.03 The non-Participant shall be entitled upon notice to any
Participant to request that the auditor of that Participant provide the
non-Participant with its opinion that any statement delivered pursuant to
subsection 1.01 of this Appendix II in respect of any quarterly period falling
within the 12 month period immediately preceding the date of the
non-Participant's notice has been prepared in accordance with this Agreement.
4.04 The time for giving the audit opinion contemplated in subsection
4.03 of this Appendix II shall not extend the time for the taking of exception
to and making claim on the non-Participant for adjustment as provided in
subsection 4.01 of this Appendix II.
4.05 The cost of the auditor's opinion referred to in subsection 4.03
of this Appendix II shall be solely for the account of the non-Participant
requesting the auditor's opinion, except where the said opinion is to the effect
that the statement has not been prepared substantially in accordance with this
Agreement, in which case the cost shall be solely for the account of the
Participant.
5
