Exhibit 10.1
CONDOR YACU GOLD PROJECT
JOINT VENTURE AGREEMENT
BETWEEN
XXXXXX XXXXXXX
AND
SOUTHERN ENERGY COMPANY INC.
JOINT VENTURE AGREEMENT
THIS AGREEMENT is dated for reference and is effective May 31, 2009.
BETWEEN:
XXXXXX XXXXXXX
("Xxxxxxx")
AND:
SOUTHERN ENERGY COMPANY INC.
("Southern")
WHEREAS:
X. Xxxxxxx and Southern have agreed to form a joint venture called the CONDOR
YACU JOINT VENTURE (the "Joint Venture") with respect to the exploitation of
interest in certain mineral properties (the "Property") located in Salta
Province, Argentina; and
X. Xxxxxxx and Southern now wish to form this Joint Venture to finance, explore,
develop, and bring into commercial production, the Property.
NOW THEREFORE in consideration of the covenants and agreements contained herein,
Xxxxxxx and Southern agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:
1.1 "ACCOUNTING PROCEDURE" means the procedures set forth in Exhibit B.
1.2 "AFFILIATE" means any person, partnership, joint venture, corporation or
other form of enterprise which directly or indirectly controls, is
controlled by, or is under common control with, a Participant. For purposes
of the preceding sentence, "control" means possession, directly or
indirectly, of the power to direct or cause direction of management and
policies through ownership of voting securities, contract, voting trust or
otherwise.
1.3 "AGREEMENT" means this Joint Venture Agreement, including all amendments
and modifications thereof, and all schedules and exhibits, which are
incorporated herein by this reference.
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1.4 "ASSETS" means the Properties, Products and all other real and personal
property, tangible and intangible, held for the benefit of the Participants
hereunder.
1.5 "BUDGET" means a detailed estimate of all costs to be incurred by the
Participants with respect to a Program and a schedule of cash advances to
be made by the Participants.
1.6 "DEVELOPMENT" means all preparation for the removal and recovery of
Products, including the construction or installation of a mill or any other
improvements to be used for the mining, handling, milling, processing or
other beneficiation of Products, and all Exploration work conducted
subsequent to a decision to commence Development as contemplated by the
Feasibility Study.
1.7 "EXPLORATION" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products.
1.8 "FEASIBILITY STUDY" means a detailed study compiled by Manager or an
independent third party conducted to determine commercial feasibility and
viability of placing a prospective ore body or deposit into production and
may include, but not be limited to:
(a) such geophysical, geochemical, geological, aerial or other survey as
may be necessary to provide a reasonable estimate of the quality and
extent of the deposit;
(b) such technical or assay reports as may be necessary to evaluate any
proposed method of extraction and processing;
(c) the area required for optimum development of the ore body or
deposit;
(d) a mine construction program setting forth the descriptions of the
work, permits, equipment, facilities, supplies and mines required to
bring the prospective ore body or deposits of Products into
commercial production, and the estimated costs thereof or a schedule
of expenditures by year of the costs necessary to bring the project
into production;
(e) details of a proposed annual program for initial, development of the
deposit;
(f) a plan for such reclamation of the Properties as is required by law
and the estimated costs thereof;
(g) conclusions and recommendations regarding the economic feasibility
and timing for bringing the prospective ore body or deposits of
Products into commercial production, taking into account items (a)
through (e) above;
(h) such other information as the Management Committee may deem
appropriate to allow banking or other financial institutions
familiar with the mining business to make a decision about loaning
funds sufficient to construct the proposed mine with security based
solely on the reserves and mine described in the Feasibility Study.
1.9 "INITIAL CONTRIBUTION" means that contribution each Participant has made
or agrees to make pursuant to Section 5.1.
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1.10 "JOINT ACCOUNT" means the account maintained in accordance with the
Accounting Procedure showing the charges and credits accruing to the
Participants.
1.11 "MANAGEMENT COMMITTEE" means the committee established under Article 7.
1.12 "MANAGER" means the person or entity appointed under Article 8 to manage
Operations, or any successor Manager.
1.13 "MINING" means the mining, extracting, producing, handling, milling or
other processing of Products.
1.14 "OPERATIONS" means the activities carried out under this Agreement.
1.15 "PARTICIPANT" and "PARTICIPANTS" means the persons or entities that have a
Participating Interest.
1.16 "PARTICIPATING INTEREST" means the percentage interest representing the
operating ownership interest of a Participant in Assets, and all other
rights and obligations arising under this Agreement, as such interest may
from time to time be adjusted hereunder. The initial Participating
Interests of the Participants are set forth in Section 6.1.
1.17 "PRODUCTION DECISION" means a decision by the Management Committee to
commence Development and put the Properties into production.
1.18 "PRODUCTS" means all ores, minerals, and mineral resources produced from
the Properties under this Agreement.
1.19 "PROGRAM" means a description in reasonable detail of the activities which
are to be conducted by the Manager during a period.
1.20 "PROPERTY" OR "PROPERTIES" means those interests in mining claims
described in Exhibit A.
1.21 "SIMPLE MAJORITY" means a decision by the Management Committee by greater
than 50% of the votes being entitled to be cast.
1.22.1"TRANSFER" means sell, grant, assign, encumber, pledge or otherwise
commit or dispose of.
In addition, For the purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) "this Agreement" means this Joint Venture agreement and all Exhibits
attached hereto;
(b) any reference in this Agreement to a designated "Section",
"Subsection", "paragraph", "Exhibit" or other subdivision refers to
the designated section, subsection, paragraph, exhibit or other
subdivision of this Agreement;
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(c) the words "herein" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular section
or other subdivision of this Agreement, unless the context clearly
otherwise provides;
(d) the word "including", when following any general statement, term or
matter, is not to be construed to limit such general statement, term
or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not
non-limiting language (such as "without limitation" or "but not
limited to" or words of similar import) is used with reference
thereto but rather refers to all other items or matters that could
reasonably fall within the broadest possible scope of such general
statement, term or matter;
(e) any reference to a statute includes and, unless otherwise specified
herein, is a reference to such statute and to the regulations made
pursuant thereto, with all amendments made thereto and in force from
time to time, and to any statute or regulations that may be passed
which has the effect of supplementing or superseding such statute or
such regulation;
(f) any reference to "party" or "parties" means, singly or collectively,
the Participants as the context requires;
(g) the headings in this Agreement are for convenience of reference only
and do not affect the interpretation of this Agreement;
(h) words importing the masculine gender include the feminine or neuter
gender, and vice versa, and words in the singular include the
plural, and vice versa; and
(i) all references to currency refer to US dollars.
1.2 EXHIBITS
The following are the Exhibits to this Agreement, and are incorporated into this
Agreement by reference:
Exhibit A Property Description, Purchase Agreement, Power of Attorney
Exhibit B Accounting Procedure
Wherever any term or condition, expressed or implied, in any of the Schedules
conflicts or is at variance with any term or condition of this Agreement, the
terms or conditions of this Agreement will prevail but shall not affect any
difference of definition or terms internal to and specific to the Exhibits where
such are internally consistent and do not offend the import of the Agreement.
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2. REPRESENTATIONS AND WARRANTIES
2.1 MUTUAL REPRESENTATIONS AND WARRANTIES OF PARTICIPANTS
Each of the Participants represents and warrants to each other that:
(a) it has the capacity and authority to enter into and perform this
Agreement and all transactions (other than present general financial
capacity for the Property Development which will require the
Participants to engage future debt or equity financing) contemplated
under this Agreement and that all necessary corporate and other
actions required to authorize it to enter into and perform this
Agreement have been properly taken;
(b) it is unaware of any material facts or circumstances which have not
been disclosed in this Agreement, which should be disclosed to the
other Participant in order to prevent the representations in this
Section 2 from being materially misleading;
(c) it will not breach its constating documents or any other agreement
or arrangement by entering into or performing this Agreement;
(d) this Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms; and
(e) the parties will duly, in good faith, and with reasonable best
efforts punctually comply with the terms of this Agreement in
accordance with the terms and spirit of this Agreement.
3. THE JOINT VENTURE
3.1 GENERAL TERMS
Xxxxxxx and Southern hereby enter into this Agreement for the purposes stated in
this Agreement, and they agree that all of their rights and all of the
Operations on or in connection with the Property shall be subject to and
governed by this Agreement. Pursuant to the terms of the Purchase Agreement,
Xxxxxxx has agreed to transfer all interests of the Property into the name of
the Joint Venture as outlined below. The ownership of the interests on the
Property shall revert back to Xxxxxxx one year after commercial production has
ceased on the Property, but may be extended upon mutual agreement of the
parties.
3.2 NAME
The name of this Joint Venture shall be the "Condor Yacu Joint Venture". The
Operator shall accomplish any registration required by applicable legislation in
the name of the Joint Venture.
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3.3 TITLE
Except as otherwise provided herein or by the Participants, title to the
Property shall be held in trust (with such notations on title as shall place
third parties on notice) in the name of the Joint Venture for the parties hereto
according to their Participating Interests or in such commonly held corporation
or other entity as the Management Committee may recommend and the parties
accept.
3.4 PURPOSES
This Agreement is entered into for the following purposes and for no others, and
shall serve as the exclusive means by which the Participants, or either of them,
shall accomplish such purposes:
(a) to conduct Exploration on the Property;
(b) to evaluate the possible Development of the Property;
(c) to engage in Development of the Property;
(d) to carry on the Operating Mine;
(e) to engage in Property financing;
(f) to engage in marketing Products; and
(g) to perform any other activity necessary, appropriate, or incidental
to any of the foregoing.
3.5 LIMITATION
Unless the Participants otherwise agree in writing, the Operations shall be
limited to the purposes described in Subsection 3.4, and nothing in this
Agreement shall be construed to enlarge or expand such purposes.
3.6 DISTRIBUTION OF NET PROFIT
To the extent permitted by law, the Net Profit of the Joint Venture from the
sale of Assets and/or Products (for the purposes of this section not including
taking in kind, as provided for in Part 14) available for distribution, after
making such provisions for any Program or Budget as are required in the opinion
(expressed by resolution) of the Management Committee, will be distributed
quarterly within 60 days of the end of each calendar quarter unless otherwise
agreed to in writing by the Participants.
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3.7 TAKING IN KIND
Unless otherwise agreed by the Participants, each Participant shall take its
Proportionate Share of Product in kind in accordance with the provisions set
forth elsewhere in this Agreement, subject to the most favorable tax situation
available to Xxxxxxx under the tax laws of Argentina.
3.8 LOSS OF TITLE
Any failure or loss of title to the Assets or the Property, and all costs of
recovering or defending title, shall be charged to the Joint Account but if
caused or allowed to occur by negligence by a party then such costs shall be
paid by such party or otherwise recovered from such party.
3.9 EFFECTIVE DATE AND TERM
The effective date of the Joint Venture shall be the date of this Agreement.
This Agreement shall continue from the effective date for so long as two or more
parties to this Agreement hold a Participating Interest.
4. RELATIONSHIP OF THE PARTICIPANTS
4.1 NO PARTNERSHIP
Nothing contained in this Agreement shall be deemed to render either Participant
the partner of the other, nor, except as otherwise herein expressly provided, to
render either Participant the agent or legal representative of the other, nor to
create any fiduciary relationship between them. It is not the intention of the
Participants to create, nor shall this Agreement be construed to create, any
mining, commercial or other partnership. Neither Participant shall have any
authority to act for or to assume any obligation or responsibility on behalf of
the other Participant, except as otherwise expressly provided herein. The
rights, duties, obligations and liabilities of the Participants shall be several
and not joint or collective. Each Participant shall be responsible only for its
obligations as herein set out and shall be liable only for its share of the
costs and expenses as provided herein, it being the express purpose and
intention of the Participants that their ownership of Assets and the Property
and the rights acquired hereunder shall be as tenants in common. Each
Participant shall indemnify, defend and hold harmless the other Participant, its
directors, officers, employees, agents and attorneys from and against any and
all losses, claims, damages and liabilities arising out of any act or any
assumption of liability by the indemnifying Participant, or any of its
directors, officers, employees, agents and attorneys done or undertaken, or
apparently done or undertaken, on behalf of the other Participant, except
pursuant to the authority expressly granted herein or as otherwise agreed in
writing between the Participants.
4.2 OTHER BUSINESS OPPORTUNITIES
Except as expressly provided in this Agreement, each Participant shall have the
right independently to engage in and receive full benefits from business
activities, whether or not competitive with the Operations, without consulting
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the other. The doctrines of "corporate opportunity" or "business opportunity"
shall not be applied to any other activity, joint venture, or operation of
either Participant, and neither Participant shall have any obligation to the
other with respect to any opportunity to acquire any property outside the Area
of Interest at any time, or within the Area of Interest after the termination of
this Agreement. Unless otherwise agreed to in writing, no Participant shall have
any obligation to mill, beneficiate or otherwise treat any Products or any other
Participant's share of Products in any facility owned or controlled by such
Participant.
4.3 WAIVER OF RIGHT TO PARTITION
The Participants hereby waive and release all rights of partition, or of sale in
lieu thereof; or other division of Assets or the Property, including any such
rights provided by statute.
4.4 TRANSFER OR TERMINATION OF RIGHTS TO THE PROPERTY
Except as otherwise provided in this Agreement, neither Participant shall
Transfer all or any part of its interest in the Assets, the Property or this
Agreement.
4.5 IMPLIED COVENANTS
There are no implied covenants contained in this Agreement other than those of
good faith and fair dealing.
5. CONTRIBUTIONS BY PARTICIPANTS
5.1 PARTICIPANTS' INITIAL CONTRIBUTION
At the time of this Agreement, Each Participant is deemed to have made the
following Initial Contribution to the Joint Venture:
(a) Southern: Payment of $500,000 (payable to Xxxxxxx as per the
attached Purchase Agreement) plus the further funding of $4,500,000
for the work program on the Property. These two payments shall
together constitute 100% of Southern's total required contribution
to the Joint Venture; and
(b) Xxxxxxx: Deemed payment of $750,000 (reflecting an initial
contribution of $500,000, which has been revalued at current rates
to equal $750,000) plus the transfer of title to the Property. This
payment and transfer of title shall together constitute 100% of
Xxxxxxx'x total required contribution to the Joint Venture.
5.2 ADDITIONAL CASH CONTRIBUTIONS
In addition to the Initial Contribution, Southern shall be responsible for the
cost of putting the Property into production. In exchange, Southern shall be
granted 80% of all proceeds of net revenue until they have recovered 115% of the
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total costs of putting the Property into production. Thereafter, the parties
shall each receive 50% of the net proceeds of the Joint Venture.
5.3 PRIORITY OF THIRD PARTY FUNDING
The parties agree that wherever feasible, priority will be given to funding
Operations by negotiated joint ventures with third parties, in particular major
mining companies, or debt, or other appropriate mechanisms which may be
recommended by investment counsel. All parties shall be involved in any
negotiations and shall adopt reasonable positions in good faith.
5.4 THIRD PARTY CONTRACTS
The parties agree that third party contracts, whether entered into with majors
or otherwise, shall not alter, or be deemed to alter, the parties' rights and
interests herein as between the parties hereto unless such shall be specifically
provided in such third party agreement or would be an unavoidable implication
thereof and would occur if the event occurred under this Agreement (for example,
a dilution provision of a third party agreement would operate to dilute a party
to this Agreement but would not extinguish any carried interests provided for
hereunder, as between the parties hereto, unless the third party agreement
specifically stated that it supersedes such provision of this Agreement). If
additional rights or property are acquired or made available under third party
agreements then such rights and property shall accrue to the parties in
accordance with their rights and interests, as they may be from time to time, of
this Agreement (for example, if a property is available to the parties under a
third party agreement, then the parties shall have the right to participate
therein in accordance with their Participating Interest herein, as adjusted for
the third party interest under the third party agreement).
6. INTERESTS OF PARTICIPANTS
6.1 INITIAL PARTICIPATING INTEREST
Per section 5.2 above, the initial Participating Interests of the Participants
in the Joint Venture is as follows:
(a) Southern as to 80% Participating Interest until it has been repaid
115% of the cost of putting the Property into production; and
(b) Xxxxxxx as to 20% Participating Interest.
Thereafter, the parties shall each receive 50% of the net proceeds of the Joint
Venture.
6.2 CHANGES IN PARTICIPATING INTERESTS
Southern's Participating Interest in the Joint Venture shall be changed as
follows:
(a) transfer by Southern of less than all its Participating Interest in
accordance with Section 14;
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(b) acquisition of less than all of the Participating Interest of the
other Participant, however arising; or
(c) in the event of default by Southern in making its agreed-upon
contribution to an adopted Program and Budget, followed by an
election by the other Participant to invoke paragraph 6.5(b).
6.3 Not Applicable
6.4 Not Applicable
6.5 DEFAULT IN MAKING COMMITTED CONTRIBUTIONS
If Southern, having committed to making a contribution to a Program or Budget,
defaults in making a contribution or cash call or paying an invoiced amount (the
Defaulted Contribution") required by an approved Program and Budget to which
Southern had committed to contribute its Proportionate Share, or some part
thereof, Xxxxxxx may elect, within thirty days of notice of the default, one of
the following:
(a) to pay the Defaulted Contribution and treat the Defaulted
Contribution, together with any accrued interest calculated and
compounded on a quarterly basis from advance, as a demand loan
bearing interest at a rate of 10% per annum. The failure to repay
said loan upon demand shall be a default of the deemed loan and
Xxxxxxx may effect execution proceedings and take all steps it deems
advisable to recover the loan and interest, including auctioning
Southern's Interest. Southern hereby grants to Xxxxxxx a lien upon
and a security interest in its Participating Interest in the Assets
and the Property, and the Products and Net Profit therefrom, to
secure any loan made hereunder, including interest thereon,
reasonable legal fees and all other reasonable costs and expenses
incurred in recovering the loan with interest and in enforcing such
lien or security interest, or both; or
(b) to have Southern's Participating Interest in the Property reduced.
Each Participant hereby irrevocably appoints the other its attorney-in-fact to
execute, file and record all instruments necessary to perfect or effectuate the
provisions hereof.
6.6 REASONABLE TIME FOR FINANCING
Southern shall be required to meet the following minimum finance periods:
(a) $500,000 (the payment to Xxxxxxx) on or before 60 days from the date
of this Agreement; and
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(b) $4,500,000 on or before 120 days from the date of this Agreement.
The parties agree that an extension of up to 60 days shall be granted to
Southern to meet either of the above funding timelines, if, at the sole
discretion of Xxxxxxx, Southern has shown a reasonable plan to meet the funding
requirement within this extended 60 day timeline.
6.7 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING INTERESTS
Any reduction of Southern's Participating Interest in the Joint Venture under
this Section 6 shall not relieve Southern of its share of any liability, whether
it accrues before or after such reduction, arising out of Operations conducted
prior to such reduction. For purposes of this Section 6, Southern's share of
such liability shall be equal to its Participating Interest at the time such
liability was incurred. The increased Participating Interest accruing to Xxxxxxx
as a result of the reduction of Southern's Participating Interest shall be free
of royalties, liens or other encumbrances, other than those existing at the time
the Property was acquired, those to which both Participants have given their
written consent, or the Net Profits Interest of Xxxxxxx. An adjustment to a
Participating Interest need not be evidenced during the term of this Agreement
by the execution and recording of appropriate instruments, but each
Participant's Participating Interest shall be shown in the books of the
Operator. However, either Participant, at any time upon the request of the other
Participant, shall execute and acknowledge instruments necessary to evidence
such adjustment in form sufficient for recording in the jurisdiction where the
Property is located.
7. MANAGEMENT COMMITTEE
7.1 ORGANIZATION AND COMPOSITION
The Participants hereby establish a Management Committee to determine overall
policies, objectives, procedures, methods and actions under this Agreement and
to supervise Operations and approve Budgets and Programs. The Management
Committee shall consist of two members appointed by Xxxxxxx and two members
appointed by Southern. Each Participant may appoint one or more alternates to
act in the absence of a regular member. Any alternate so acting shall be deemed
a member. Appointments shall be made or changed by notice to the other
Participant.
7.2 DECISIONS
Each Participant, acting through its appointed member(s) shall have one equal
vote on the Management Committee for each appointed member.
7.3 MEETINGS
The Management Committee shall hold regular meetings at least annually at a
mutually agreed place. The Operator shall give 15 days notice to the
Participants of such regular meetings. Additionally, either Participant may call
a special meeting upon 30 days' notice to the Operator and the other
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Participant. In case of emergency, reasonable notice of a special meeting shall
suffice. There shall be a quorum of at least one member representing each
Participant present. In the event that a quorum is not present then the meeting
may be adjourned to the fifth business day, with notice to the absent members,
and the members present at an adjourned meeting shall constitute a quorum which
shall only have the power to deal with the matters of the agenda circulated for
the adjourned meeting. Each notice of a meeting shall include an itemized agenda
prepared by the Operator in the case of a regular meeting, or by the Participant
calling the meeting in the case of a special meeting, but any matters may be
considered with the consent of the Participants. The Management Committee shall
establish its own procedural rules, which shall be modeled upon corporate
precedent. The Operator shall prepare minutes of all meetings and shall
distribute copies of such minutes to the Participants within 15 days after the
meeting. The minutes, when signed by the members of the meeting, shall be the
official record of the decisions made by the Management Committee and shall be
binding on the Operator and the Participants, except as otherwise provided in
this Agreement or where inconsistent with this Agreement. If personnel employed
in operations are required to attend a Management Committee meeting, reasonable
costs incurred in connection with such attendance shall be a Joint Venture cost.
All other costs shall be paid by the Participants individually.
7.4 ACTION WITHOUT MEETING
In lieu of meetings, the Management Committee may hold telephone conferences, so
long as all decisions are immediately confirmed in writing by the Participants.
7.5 PROCEDURE FOR DEADLOCK
In the event of a dead-lock of the Management Committee respecting the approval
of or operation of Programs, Feasibility Reports, Operating plans, mine
maintenance plans, mine closure plans, or any other matters respecting the
exploration, development, operation, maintenance, production, or sale of
Products of or from the Property, then the matter in dispute shall be referred
to a recognized engineering or geological consultant (the "CONSULTANT") selected
by the Operator. A dead-lock shall be irrevocably deemed to occur upon the
Management Committee having failed to agree on a matter in two (2) successive
meetings. Upon a dead-lock occurring:
(a) any party (the "SENDING PARTY") may forthwith give notice (the
"NOTICE") in writing to the other parties (the "RECEIVING PARTIES")
declaring a dead-lock, specifying the issue (or issues) in
contention;
(b) the Operator shall, within ten (10) days of receipt or issuance of
the written notice, select a Consultant to examine and give an
opinion on the matter, and thereupon give written notice to the
parties naming the Consultant and giving the Consultant's estimate
of the cost to have the Consultant determine the issue;
(c) within thirty (30) days (or such longer period as the Consultant may
allow, but it shall not be required to give any extension) of the
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written notice of the Operator naming the Consultant, the parties
shall submit to the Consultant such materials as they deem
advisable, in respect to the issue or issues, for consideration by
the Consultant and, if a party fails to submit such materials, then
the Consultant shall conduct its inquiries from the submitted
materials of the other parties and from its own resources and
researchers;
(d) the parties and the Management Committee shall allow the Consultant
complete access to all records and files regarding the Property,
whether on the premises of the parties or the Management Committee
or elsewhere, and the Consultant shall have access to all other
persons having knowledge of the Property and shall have complete
access to the Property and shall have the right to conduct all such
tests and researches as it may determine including sampling,
trenching, drilling or other activities as it may deem advisable;
(e) upon having familiarized itself with the materials, the Consultant
shall hold a meeting with the parties to hear their representations
and to query the parties as to their opinions and to attempt to seek
majority consensus of the parties with the Consultant's assistance;
(f) if the parties cannot reach majority consensus, the Consultant shall
submit its reports and recommendations to the parties in respect to
the issue or issues submitted to it and such report and
recommendations shall be final and binding upon the parties unless
modified by majority vote of the parties; and
(g) the cost of the Consultant shall be a cost charged to the Joint
Venture Account.
7.6 MATTERS REQUIRING APPROVAL
Except as otherwise delegated to the Operator in Subsection 8.2, the Management
Committee shall have exclusive authority to determine all management matters
related to this Agreement.
8. OPERATOR
8.1 APPOINTMENT
The Joint Venture shall be the Operator until such time as it resigns or is
required to resign by the terms of this Agreement. The Joint Venture or its
successor hereby agrees to serve as such until it resigns or is deemed to resign
as provided in Subsection 8.5 or it is removed, as provided in Subsection 8.6.
The Joint Venture or its successor shall, at all times, appoint an individual
employed on its staff as having primary responsibility to direct the Joint
Venture's activities as Operator. Any proposed change in the individual
appointed under this Subsection 8.1 will be communicated by notice in writing to
the Participants in advance of the appointment.
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8.2 POWERS AND DUTIES OF OPERATOR
Subject to the terms and provisions of this Agreement and subject to such
variations as may be prescribed by the Management Committee from time to time,
the Operator shall have the following powers and duties, subject to the
provision of adequate funding, which shall be discharged in accordance with
adopted Programs and Budgets:
(a) The Operator shall manage, direct and control Operations;
(b) The Operator shall implement the decisions of the Management
Committee, shall make all expenditures necessary to carry out
adopted Programs, and shall promptly advise the Management Committee
if it lacks sufficient funds to carry out its responsibilities under
this Agreement;
(c) The Operator shall:
(i) purchase or otherwise acquire all material, supplies,
equipment, water, utility and transportation services
required for Operations, such purchases and acquisitions to
be made on the best terms available, taking into account all
of the circumstances;
(ii) obtain such customary warranties and guarantees as are
available in connection with such purchases and acquisitions;
and
(iii) keep the Assets and the Property free and clear of all liens
and encumbrances, except for those liens and encumbrances
existing at the time of, or created concurrent with, the
acquisition of the Assets, or mechanic's or material men's
liens which shall be released or discharged in a diligent
manner, or liens and encumbrances specifically approved by
the Management Committee.
(iv) make or arrange for all payments required by leases,
licenses, permits, contracts and other agreements related to
the Assets and the Property;
(v) pay all taxes, assessments and like charges on Operations,
Assets and the Property except taxes determined or measured
by a Participant's sales revenue or net income. If authorized
by the Management Committee, the Operator shall have the
right to contest in the courts or otherwise, the validity or
amount of any taxes, assessments or charges if the Operator
deems them to be unlawful, unjust, inequitable or excessive,
or to undertake such other steps or proceedings as the
Operator may deem reasonably necessary to secure a
cancellation, reduction, readjustment or equalization thereof
before the Operator shall be required to pay them, but in no
event shall the Operator permit or allow title to the Assets
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or the Property to be lost as the result of the nonpayment of
any taxes, assessments or like charges;
(vi) apply for all necessary permits, licenses and approvals;
(vii) comply with applicable federal, provincial and local laws and
regulations;
(viii) notify promptly the Management Committee of any allegations
of violation of any license, regulation, agreement or other
matter which may result in a dispute, fine, prosecution, or
other liability or investigation or proceeding ;
(ix) prepare and file all reports or notices required for
Operations. The Operator shall not be in breach of this
provision if a violation has occurred in spite of the
Operator's good faith efforts to comply and the Operator has,
or has attempted to, timely cured or disposed of such
violation through performance, or payment of fines and
penalties; and
(x) shall do all other acts reasonably necessary to maintain the
Assets and the Property.
(d) The Operator shall conduct such title examinations and cure such
title defects as may be advisable in the reasonable judgment of the
Operator.
(e) The Operator shall prosecute and defend, but shall not initiate
without consent of the Management Committee, all litigation or
administrative proceedings arising out of Operations. Any settlement
involving payments, commitments or obligations in excess of $50,000
in cash or value shall be subject to the advance approval of the
non-managing Participant.
(f) The Operator shall provide insurance for the benefit of the
Participants as stipulated by the Management Committee.
(g) The Operator may dispose of Assets, whether by abandonment,
surrender or Transfer in the ordinary course of business, except
that the Property may be abandoned or surrendered only as provided
in Section 13. However, without prior authorization from the
Participants, the Operator shall not:
(i) dispose of Assets in any one transaction having a value in
excess of $50,000;
(ii) enter into any sales contracts or commitments for Product,
except as permitted in Subsection 11.2;
17
(iii) begin a liquidation of the Joint Venture; or
(iv) dispose of all or a substantial part of the Assets necessary
to achieve the purposes of the Joint Venture.
(h) The Operator shall have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent contractors or,
with the written consent of the Participants, to an unrelated third
party.
(i) The Operator shall perform or cause to be performed during the term
of this Agreement all assessment and other work required by law in
order to maintain in good standing the mining claims or concessions
included within the Property. The Operator shall not be liable on
account of any determination by any court or governmental agency
that the work performed by Operator does not constitute the required
annual assessment work or occupancy for the purposes of preserving
or maintaining ownership of the claims, provided that the work done
is in accordance with the adopted Program and Budget and such error
does not occur due to negligence of reporting of the Operator to the
Management Committee or in the carrying out of the Programs or
Budgets. The Operator shall timely record and file with the
appropriate governmental agency, records in proper form attesting to
the performance of assessment work, and allocating therein, to or
for the benefit of each claim, at least the minimum amount required
by law to maintain such claim or site in good standing.
(j) If authorized by the Management Committee, the Operator may:
(i) locate, amend or relocate any mining claim or mill site or
tunnel site;
(ii) locate any fractions resulting from such amendment or
relocation;
(iii) apply for patents or mining leases or other forms of mineral
tenure for any such claims or sites;
(iv) abandon any mining claims for the purpose of locating mill
sites or otherwise;
(v) abandon any mill sites for the purpose of locating mining
claims or otherwise;
(vi) exchange with or convey to the government of Argentina any of
the Property for the purpose of acquiring rights to the
ground covered thereby or other adjacent ground; and
(vii) convert any claims or mill sites into one or more leases or
other forms of mineral tenure pursuant to any law hereafter
enacted.
18
(k) The Operator shall keep and maintain all required accounting and
financial records pursuant to the Accounting Procedure and in
accordance with customary cost accounting practices in the mining
industry.
(l) The Operator shall keep the Management Committee advised of all
Operations by submitting in writing to the Management Committee:
(i) monthly summary progress reports within 15 days of month end
which include programs in progress and completed during the
month, number of samples collected, and estimated statements
of expenditures;
(ii) immediately provide Participants with notice of and written
details of all material changes, as such would reasonably be
defined pursuant to relevant securities laws;
(iii) quarterly progress reports which include statements of
expenditures and comparisons of such expenditures to be the
adopted Budget, within 30 days of the end of the calendar
quarter;
(iv) copies of reports concerning Operations;
(v) a detailed final report within 60 days after completion of
each Program and Budget, and no less frequently than one such
report every twelve months, which shall include comparisons
between actual and budgeted expenditures and comparisons
between the objectives and results of Programs, together with
the following information:
(A) introduction;
(B) project or property location and access;
(C) physiography, vegetation and climate;
(D) historical background and current exploration program;
(E) description of properties, including claims with expiry
dates and assessment requirements;
(F) regional geology;
(G) property geology;
19
(H) mineralization;
(I) geochemistry-- rock and/or soil with interpretation;
(J) description of individual mineralized zones;
(K) geophysics;
(L) conclusions on exploration potential and interpretative
models;
(M) maps of various scales, including location maps, claim
maps, geology maps, geochemical sample location maps,
detailed maps of showings with all location of surface
samples, trenches and drill holes;
(N) appendices including a list of all samples, description
of these samples and the assays and analytical results
(on sheets as received from the lab); and
(v) such other reports as the Management Committee may reasonably
request.
At all reasonable times the Operator shall provide the
Management Committee or the representative of any Participant,
upon the request of any member of the Management Committee,
access to, and the right to inspect and copy all maps, drill
logs, core tests, reports, surveys, assays, analyses,
production reports, operations, technical, accounting and
financial records, and other information acquired in
operations. In addition, the Operator shall allow the
Non-Operating Participant, at the latter's sole risk and
expense, and subject to reasonable safety regulations, to
inspect the Assets, Operations and the Property at all
reasonable times, so long as the inspecting Participant does
not unreasonably interfere with Operations.
(m) The Operator shall undertake all other activities reasonably
necessary to fulfill the foregoing and as directed by the Management
Committee.
The Operator shall not be in default of any duty under this Subsection 8.2 if
its failure to perform results from the failure of the Non-Operating Participant
to perform acts or to contribute amounts required of it by this Agreement.
8.3 STANDARD OF CARE
The Operator shall conduct all operations in a good, workmanlike and efficient
manner, in accordance with sound mining and other applicable industry standards
and practices, and in accordance with the terms and provisions of leases,
licenses, permits, contracts and other agreements pertaining to Assets and the
20
Property. The Operator shall not be liable to the Non-Operating Participant for
any act or omission resulting in damage or loss except to the extent caused by
or attributable to the Operator's willful misconduct or gross negligence.
8.4 Not Applicable
8.5 Not Applicable
8.6 Not Applicable
8.7 Not Applicable
8.8 Not Applicable
8.9 PAYMENTS TO OPERATOR
The Operator shall be compensated for its services and reimbursed for its costs
hereunder in accordance with the Accounting Procedure.
8.10 TRANSACTIONS WITH AFFILIATES
If the Operator engages Affiliates to provide services hereunder, it shall do so
on terms no less favorable than would be the case with unrelated persons in
arm's length transactions.
8.11 ACTIVITIES DURING DEADLOCK
If the Management Committee for any reason fails to adopt a Program and Budget
as a consequence of a dead-lock, subject to the contrary direction by majority
of the Management Committee and to the receipt of necessary finds, the Operator
shall continue Operations at levels necessary to maintain the Property and
Assets but shall not commence or extend any Programs until the dead-lock is
resolved. Financial contributions to such necessary maintenance shall be
obligatory on all Participating Interests.
9. PROGRAMS AND BUDGETS
9.1 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS
Except as otherwise provided herein, Operations shall be conducted, expenses
shall be incurred, and Assets shall be acquired only pursuant to approved
Programs and Budgets.
9.2 PRESENTATION OF PROGRAMS AND BUDGETS
Proposed Programs and Budgets for the Property shall be prepared by the Operator
for a period of one year, or any shorter period, or a longer period if approved
21
by the Management Committee. Each adopted Program and Budget for the Property,
regardless of length, shall be reviewed at least once a year or at the end of
the Program, whichever is earlier, at the annual meeting of the Management
Committee. During the period encompassed by any Program and Budget, and at least
three months prior to its expiration, a proposed Program and Budget for the
succeeding period shall be prepared by the Operator and submitted to the
Participants.
9.3 REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS
Within 30 days after submission of a proposed Program and Budget, each
Participant shall submit to the Management Committee:
(a) notice that the Participant approves the proposed Program and
Budget; or
(b) proposed modifications of the proposed Program and Budget; or
(c) notice that the Participant rejects the proposed Program and Budget.
If a Participant fails to give any of the foregoing responses within the
allotted time the Operator shall give the party notice that reply is required
and if response is not forthcoming within 15 days of delivery of such second
notice the failure shall be deemed to be an approval by the Participant of the
Operator's proposed Program and Budget and if, upon another 15 days of notice by
the Operator to such Participant that the Program is approved and the said
Participant must respond that it will consider providing its Proportionate
Share, such Participant does not respond then it will be deemed to have elected
not to participate. If a Participant makes a timely submission to the Management
Committee pursuant to paragraph 9.3(b) or (c), then the Management Committee
shall seek, in a bona fide attempt, to develop a Program and Budget acceptable
to the Participants otherwise it shall initiate the provisions of subsection
7.5.
9.4 ELECTION TO PARTICIPATE
By notice to the Management Committee within the time provided by section 6.6,
after the final vote adopting a Program and Budget, a Participant may elect to
contribute to such Program and Budget in some lesser amount than its respective
Participating Interest, or not at all, in which cases its Participating Interest
shall be recalculated as provided in Section 6. If a Participant fails to so
notify the Management Committee, the Participant shall be deemed to have elected
not to contribute to such Program and Budget in proportion to its respective
Participating Interest as of the beginning of the period covered by the Program
and Budget.
9.5 DEADLOCK ON PROPOSED PROGRAMS AND BUDGETS
If the Participants, acting through the Management Committee, fail to approve a
Program and Budget for the Property by the beginning of the period to which the
proposed Program and Budget applies, the provisions of Subsections 7.5 and 8.11
shall apply.
22
9.6 BUDGET OVERRUNS; PROGRAM CHANGES
The Operator shall immediately notify the Management Committee of any material
departure from an adopted Program and Budget for the Property. If the Operator
exceeds an adopted Budget by more than 10%, then the excess over 110%, unless
directly caused by an emergency or unexpected expenditure made pursuant to
subsection 9.7 or unless otherwise authorized by the Management Committee, shall
be for the sole account of the Operator and such excess shall not be included in
the calculations of the Participating Interests for the Property. Budget
overruns of 110% or less shall be borne by the Participants in proportion to
their respective Participating Interests as of the time the overrun occurs.
9.7 EMERGENCY OR UNEXPECTED EXPENDITURES
In case of emergency or events outside the control of the Operator, the Operator
may take any reasonable action it deems necessary to protect life, limb or
property, to protect the Assets, the Property or to comply with law or
government regulation. The Operator may also make reasonable expenditures for
unexpected events which are beyond its reasonable control and which do not
result from a breach by it of its standard of care. The Operator shall promptly
notify the Participants of the emergency or unexpected expenditure, and the
Operator shall be reimbursed for all resulting costs by the Participants in
proportion to their respective Participating Interests at the time the emergency
or unexpected expenditures are incurred.
10. PRODUCTION NOTICE
10.1 PRODUCTION RECOMMENDATION
Within 60 days of the production of the Feasibility Report, the Operator shall
call a Management Committee meeting to consider the Feasibility Report. The
Management Committee shall consider such Feasibility Report prepared and may,
subject to the resolution of any outstanding issues contemplated in Section 10
herein, approve the Feasibility Report, with such modifications, if any, as it
considers necessary or desirable. Forthwith after approval of the Feasibility
Report, the Management Committee shall cause the Operator to give notice (in
this Agreement called the "PRODUCTION RECOMMENDATION") to each of the
Participants stating that the Management Committee recommends that a Mining be
established and brought into production in conformity with the Feasibility
Report as so approved.
11. NOT APPLICABLE
12. CONSTRUCTION OF MINE
12.1 FACILITIES COMPLETION DATE
The Management Committee shall cause the Operator to, and the Operator shall,
proceed with construction of the Mining facilities with all reasonable dispatch
after a Production Notice has been given. Construction shall be substantially in
23
accordance with the Production Notice, subject to the right of the Management
Committee to cause such reasonable variations in construction to be made as the
Management Committee deems advisable from time to time. The Operator may of its
own initiative, and shall forthwith upon request by a Participant, call a
Management Committee meeting to consider recommending that the Mining facilities
are complete and are ready to commence Operations for the production and
processing of Product as of a date determined by the Management Committee (
called the "Completion Date"). Forthwith upon the Completion Date being
established, the Operator shall give notice of that date to the parties.
13. OPERATION OF THE MINE
13.1 MINE OPERATING PLAN
Commencing with the Completion Date, all Mining Operations shall be planned and
conducted (such plans called the "Operating Plan") and all estimates, reports
and statements shall be prepared and made on the basis of an operating year (the
"Operating Year") as determined by the Management Committee. The Operator shall
submit an Operating Plan for each Operating Year to the Participants not less
than 90 days prior to the Operating Year to which the Operating Plan relates.
Each Operating Plan shall contain the following:
(a) a plan of the proposed Mining Operations;
(b) a detailed estimate of all construction costs, production costs,
operating capital costs, administrative costs and any other 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 metal 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 the Participant to
discuss the Operating Plan. The Management Committee shall adopt each Operating
Plan, with such changes as it deems necessary, not less than 30 days immediately
preceding the Operating Year to which the Operating Plan relates; provided,
however, that the Management Committee may approve amendments to the Operating
Plan.
24
14. DISTRIBUTION IN KIND
14.1 PRESUMPTION OF TAKING IN KIND
Unless otherwise agreed by the Participants, each Participant shall take
delivery in kind of Product and separately dispose of its Proportionate Share of
the Products produced from the mine. Unless otherwise unanimously agreed by the
representatives of all parties, the terms of delivery to the Participants shall
be f.o.b. transport carrier at the concentrator, as Products are produced. Any
costs and expenses incurred by reason of the Participants taking in kind and
making separate dispositions shall be paid by each Participant directly.
However, unless otherwise instructed by a Participant, the Operator shall
receive and sell on each Participant's behalf, as agent, that Participant's
Product and shall remit the proceeds thereof to the Participants but that the
Operator shall be at liberty to deduct all such invoiced amounts to the
Participant for its share of Operations costs and NS Royalties or Net Profits
Interests which are due and unpaid. Nothing in this Agreement shall be construed
as providing, directly or indirectly, for any joint or cooperative marketing or
selling of Products or permitting the processing of Products of any parties,
other than the Participants, at any processing facilities constructed by the
Participants pursuant to this Agreement. The Operator shall give the
Participants notice at least ten days in advance of the delivery date upon which
their Proportionate Share of Products will be available.
14.2 RECORDS BY OPERATOR
The Operator shall weigh (or calculate by volume), sample and assay, all in
accordance with sound mining and metallurgical practices, all Products produced
from the mine prior to delivery of those Products to the Participants. The
Operator shall keep records of weights (or calculations, as the case may be) and
sample and assay results.
14.3 PARTICIPANT FACILITIES
Each Participant shall be entitled to use, dispose of or otherwise deal with its
Proportionate Share of Products as it sees fit. From the time of delivery, each
Participant shall have ownership of and title to its Proportionate Share of
Products separate from, and not as tenant in common with, the other parties. If
a Participant has instructed the Operator that it will take delivery of Product
then each Participant shall construct, operate and maintain, all at its own
costs and risk, any and all facilities which may be necessary to receive and
store and dispose of its Proportionate Share of the Products at the rate the
same are produced.
14.4 PARTICIPANT'S FAILURE TO STORE
If a Participant has not made the necessary arrangements to take in kind and
store its share of production 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. All of the costs and
expenses involved in arranging and providing storage shall be billed directly
25
to, and be the sole responsibility of, the Participant whose share of production
is so stored.
14.5 FAILURE OF PARTICIPANT TO TAKE IN KIND
If a Participant fails to take in kind, the Operator shall have the right, but
not the obligation, for a period of time consistent with the minimum needs of
the industry, but not to exceed six months, to purchase the Participant's share
for its own account or to sell such share as agent for the Participant on
reasonable efforts to sell at the prevailing market price in the area; any
deficiency for which the Operator shall bear no responsibility, absent bad faith
.. Subject to the terms of any such contracts of sale then outstanding, during
any period that the Operator is purchasing or selling a Participant's
Proportionate Share of Products, the Participant may elect by notice to the
Operator to take in kind. The Operator shall be entitled to deduct from proceeds
of any sale by it for the account of a Participant reasonable expenses incurred
in such a sale and any other unpaid costs of the Participant in respect to the
Joint Venture and the Property.
14.6 PARTICIPANT'S RESPONSIBILITY FOR COSTS
Each Participant shall be responsible to pay all charges and costs of its
Proportionate Share of the Joint Venture and all of its Proportionate Share of
Net Profit Interests and neither the Operator nor any other party shall be
responsible for the same.
15. SUSPENSION AND TERMINATION OF OPERATIONS
15.1 MINE MAINTENANCE PLAN
The Operator may, at any time subsequent to the Completion Date, on at least
sixty (60) days' notice to all Participants, recommend that the Management
Committee approve that Mining Operations be suspended. The Operator's
recommendation shall include a plan and budget (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, 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 Management Committee may cause Mining
Operations to be resumed at any time.
15.2 MINE CLOSURE PLAN
The Operator or any Participant may, at any time following a period of at least
ninety (90) days during which Mining Operations have been suspended, upon at
least thirty (30) days notice to all Participants, recommend that the Management
Committee approve the permanent termination of Mining Operations. The Operator's
recommendation shall include a plan and budget (called the "Mine Closure Plan"),
in reasonable detail, of the activities to be performed to close the mine and
reclaim the Property and the estimated cost to implement the Mine Closure Plan.
The Management Committee may, by approval of the representatives of all
Participants, approve the Operator's recommendation with such changes to the
26
Mine Closure Plan as the Management Committee deems necessary. If the Management
Committee does not approve the Operator's recommendation the Operator shall
maintain Mining Operations in accordance with the Mine Maintenance Plan as
approved pursuant to subsection 15.1 herein. Upon Mine Closure, the title shall
revert back to Xxxxxxx and/or his assigns.
15.3 IMPLEMENTATION OF MINE CLOSURE PLAN
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 Participating
Interests, the costs 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;
(c) perform all site remediation as required by law; and
(d) sell, abandon or otherwise dispose of the Property.
The disposal price for the Assets and the Property shall be
the best price obtainable, and the net revenues, if any, from the removal and
sale shall be credited to the Participants in proportion to their respective
Participating Interests.
16. ACCOUNTS AND SETTLEMENTS
16.1 MONTHLY STATEMENTS
The Operator shall promptly submit to the Management Committee monthly
statements of account reflecting in reasonable detail the charges and credits to
the Joint Account during the preceding month.
16.2 AUDITS
Upon request made by Southern or Xxxxxxx within 24 months following the end of
any Operating Year (or, if the Management Committee has adopted an accounting
period other than the calendar year, within 24 months after the end of such
period), the Operator shall order an audit of the accounting and financial
records for such calendar year (or other accounting period). All written
exceptions to and claims upon the Operator for discrepancies disclosed by such
audit shall be made not more than 3 months after receipt of the audit report.
Failure to make any such exception or claim within the 3 month period shall mean
the audit is correct and binding upon the Participants. The audits shall be
27
conducted by an international firm of chartered accountants selected by the
Operator, unless otherwise agreed by the Management Committee.
17. WITHDRAWAL AND TERMINATION
17.1 TERMINATION BY EXPIRATION OR AGREEMENT
This Agreement shall terminate as expressly provided in this Agreement, unless
earlier terminated by written agreement.
17.2 NOT APPLICABLE
17.3 NOT APPLICABLE
17.4 CONTINUING OBLIGATIONS
On termination of this Agreement under sections 17.1 to 17.3, the Participants
shall remain liable for continuing obligations hereunder until final settlement
of all accounts and for any liability, whether it accrues before or after
termination, if it arises out of Operations during the term of the Agreement.
17.5 DISPOSITION OF ASSETS ON TERMINATION
Promptly after an event requiring termination has occurred, the Operator shall
take all action necessary to wind up the activities of the Joint Venture, and
all costs and expenses incurred in connection with the termination of the Joint
Venture shall be expenses chargeable to the Participants. In accordance with
Exhibit B any Participant that has a negative Capital Account balance when the
Joint Venture is terminated for any reason shall contribute to the Assets of the
Joint Venture an amount sufficient to raise such balance to zero. The Assets and
the Property shall first be paid, applied, or distributed in satisfaction of all
liabilities of the Joint Venture to third parties and then to satisfy any debts,
obligations, or liabilities owed to the Participants. Before distributing any
finds or Assets or Property to Participants, the Operator shall have the right
to segregate amounts which, in the Operator's reasonable judgment, are necessary
to discharge continuing obligations or to purchase for the account of
Participants, bonds or other securities for the performance of such obligations.
The foregoing shall not be construed to include the repayment of any
Participant's capital contributions or Capital Account balance. Thereafter, any
remaining cash and all other Assets and Property shall be distributed (in
undivided interests unless otherwise agreed) to the Participants, first in the
ratio and to the extent of their respective Capital Accounts and then in
proportion to their respective Participating Interests, subject to any dilution,
reduction, or termination of such Participating Interests as may have occurred
pursuant to the terms of this Agreement. No Participant shall receive a
distribution of any interest in Products or proceeds from the sale thereof if
such Participant's Participating Interest therein has been terminated pursuant
to this Agreement.
28
17.6 NON-COMPETITION COVENANTS
A Participant, its successor or Affiliate, that withdraws from this Joint
Venture shall not, directly or indirectly, acquire any interest in property
within a 1.5 kilometers distance from the perimeter of the Property, for 12
months after the effective date of withdrawal. If such a withdrawing
Participant, its successor or Affiliate, acquires property subject to this
section 17.6, such party, its successor or Affiliate shall be obligated to offer
to convey to the non-withdrawing Participant, at its proportionate acquisition
cost and geologic and other expenditures, a Proportionate Share of any such
property or interest so acquired as if such party were still a Participating
party at the interest immediately prior to the withdrawal. Such offer shall be
made in writing and can be accepted by the non-withdrawing Participant at any
time within 45 days after it is received by such non-withdrawing Participant.
17.7 RIGHT TO DATA AFTER TERMINATION
After termination of this Agreement, each Participant shall be entitled to
copies of all information of the Joint Venture before the effective date of
termination not previously furnished to it, but a terminating or withdrawing
Participant shall not be entitled to any such copies after any other termination
or any withdrawal.
17.8 CONTINUING AUTHORITY
On termination of this Agreement, the Operator shall have the power and
authority, subject to control of the Management Committee, if any, to do all
things on behalf of the Participants which are reasonably necessary or
convenient to: (a) wind up Operations (either of the Joint Venture or the
Property) and (b) complete any transaction and satisfy any obligation,
unfinished or unsatisfied, at the time of such termination or withdrawal, if the
transaction or obligation arises out of Operations prior to such termination or
withdrawal. The Operator shall have the power and authority to grant or receive
extensions of time or change the method of payment of an already existing
liability or obligation, prosecute and defend actions on behalf of the
Participants and the Joint Venture, mortgage Assets or the Property, and take
any other reasonable action in any matter with respect to which the former
Participants continue to have, or appear or are alleged to have, a common
interest or a common liability.
18. ABANDONMENT AND SURRENDER OF THE PROPERTY
18.1 SURRENDER OR ABANDONMENT OF THE PROPERTY
The Management Committee may authorize the Operator to surrender or abandon part
or all of the Property. If the Management Committee authorizes any such
surrender or abandonment over the objection of a Participant, the Participant
that desires to abandon or surrender shall assign to the objecting Participant,
without cost to the surrendering Participant, all of the surrendering
Participant's interest in the property to be abandoned or surrendered, and the
abandoned or surrendered property shall cease to be part of the Property.
29
18.2 REACQUISITION
If any part or all the Property is abandoned or surrendered under the provisions
of this Section 18, then, unless this Agreement is earlier terminated, neither
Participant nor any successor nor Affiliate thereof shall acquire any interest
in or a right to acquire that part of the Property for a period of 12 months
following the date of such abandonment or surrender. If such Participant
reacquires any of the Property in violation of this Subsection 18.2, then the
other Participant, its successor or Affiliate as the case may be may elect by
notice to the reacquiring Participant within 45 days after it has actual notice
of such reacquisition, to have such part of the Property made subject to the
terms of this Agreement. In the event such an election is made, the reacquired
part of the Property shall thereafter be treated as the Property hereunder, and
the costs of reacquisition shall be borne solely by the reacquiring Participant
and shall not be included for purposes of calculating the Participants'
respective Participating Interests.
19. TRANSFER OF INTEREST
19.1 GENERAL
A Participant shall not have the right to Transfer all or any part of its
Participating Interest, or any other interest, except on the following terms and
conditions:
(a) a Transfer to a subsidiary or Affiliate, so long as the same are
controlled by the Participant, may be effected by the parties
subject to such entering into this Agreement but, unless approved by
the other Participant, the transferring Participant shall not be
relieved of its obligations under this Agreement;
(b) each Participant shall have a right of first refusal to acquire the
interest of the other Participant which it wishes to sell or for
which it has received an offer. The other Participant must exercise
its right of first refusal within 30 days of receipt of notice of
all material terms of the Transfer by notifying the Participant that
it will acquire such offered interest on the terms set out in the
notice. An offer shall be priced and offered in Canadian dollars. If
the offer is not accepted by the other Participant, then the
offering Participant shall be free to sell such offered interest for
a period of 120 days but not at a more favourable price;
(c) no transferee of all or any part of the Participating Interest of a
Participant shall have the rights of a Participant unless and until
the transferring Participant has provided to the other Participant
notice of the Transfer, and except as provided in paragraphs 19.1(h)
and 19.l(i), the transferee, as of the effective date of the
Transfer, has committed in writing to be bound by this Agreement to
the same extent as the transferring Participant;
(d) no Transfer permitted by this Section 19 shall relieve the
transferring Participant of its share of any liability, whether
30
accruing before or after such Transfer, which arises out of
Operations conducted prior to such Transfer;
(e) the transferring Participant and the transferee shall bear all tax
consequences of the Transfer;
(f) in the event of a Transfer of less than all of a Participating
Interest, the transferring Participant and its transferee shall act
and be treated as one Participant;
(g) no Participant shall Transfer any interest in this Agreement or the
Assets or the Property except by Transfer of part or all of its
Participating Interest;
(h) if the Transfer is the grant of a security interest by mortgage,
deed of trust, pledge, lien or other encumbrance of any interest in
this Agreement, any Participating Interest or the Assets or the
Property to secure a loan or other indebtedness of a Participant in
a bona fide transaction, such security interest shall be subordinate
to the terms of this Agreement and the rights and interests of the
other Participant hereunder. Upon any foreclosure or other
enforcement of rights in the security interest the acquiring third
party shall be deemed to have assumed the position of the
encumbering Participant with respect to this Agreement and the other
Participant, and it shall comply with and be bound by the terms and
conditions of this Agreement; and
(i) if a sale or other commitment or disposition of Products or proceeds
from the sale of Products by a Participant creates in a third party
a security interest in Products or proceeds therefrom prior to such
distribution, such sales, commitment or disposition shall be subject
to the terms and conditions of this Agreement.
20. DISPUTES
20.1 ARBITRATION OF DISPUTES
All disputes between the Participants, their successors and assigns, arising
under this Agreement, which the parties are unable to resolve within 20 days,
may at any time thereafter be submitted to arbitration by written demand of any
party. To demand arbitration, any Participant (the "demanding party") shall give
written notice to the other Participant (the "responding party"). Such notice
shall specify the nature of the issues in dispute, the amount involved, and the
remedy requested and the names of at least three qualified, disinterested
arbitrators acceptable to it. Within fifteen days of the receipt of the notice,
the responding party shall answer the demand in writing, specifying the issues
that party disputes and advising whether it accepts as arbitrator any of the
arbitrators named in the notice. If the responding party accepts an arbitrator
named in the notice, that person will act as sole arbitrator of the dispute. If
the responding party does not accept any of the arbitrators named, each
Participant shall select one qualified arbitrator within ten days of responding
31
party's answer. Each of the arbitrators shall be a disinterested person
qualified by experience to hear and determine the issues to be arbitrated. The
arbitrators so chosen shall select a neutral arbitrator within five days of
their selection.
21. CONFIDENTIALITY
21.1 GENERAL
The financial terms of this Agreement and all information obtained in connection
with the performance of this Agreement shall be the exclusive property of the
Participants and, except as provided elsewhere, shall not be disclosed to any
third party or the public without the prior written consent of the other
Participant, which consent shall not be unreasonably withheld.
21.2 EXCEPTIONS
The consent required by Subsection 21.1 shall not apply to a disclosure:
(a) to an Affiliate, consultant, contractor or subcontractor that has a
bona fide need to be informed;
(b) to any third party to whom the disclosing Participant contemplates a
Transfer of all or any part of its interest in or to this Agreement,
its Participating Interest, or the Assets;
(c) to a governmental agency or to the public which the disclosing
Participant believes in good faith is required by pertinent law or
regulation or the rules of any stock exchange; or
(d) to an investment dealer, broker, bank or similar financial
institution, in confidence if required, as part of a due diligence
investigation by such financial institution in connection with a
financing required by a Participant or its shareholders or
Affiliates to meet, in part, its obligations under this Agreement.
In any case to which this Subsection 21.2 is applicable, the disclosing
Participant shall give notice to the other Participant concurrently with the
MAKING of such disclosure. As to any disclosure pursuant to paragraph 21.2(a),
(b), or (d), only such confidential information as such third party shall have a
legitimate business need to know shall be disclosed and such third party shall
first agree in writing to protect the confidential information from further
disclosure to the same extent as the Participants are obligated under this
Section 21.
21.3 PUBLIC STATEMENTS
When either of the Participants wishes to issue a public statement relating to
this Agreement or the Property notice of and a draft copy of any release shall
32
first be submitted to the other Participant who will have 24 hours to approve of
or produce suggested revisions to the content of such release.
21.4 DURATION OF CONFIDENTIALITY
The provisions of this Section 21 shall apply during the term of this Agreement
and for two years following termination of this Agreement and shall continue to
apply to any Participant who withdraws, who is deemed to have withdrawn, or who
Transfers its Participating Interest, for two years following the date of such
occurrence.
22. GENERAL PROVISIONS
22.1 NOTICES
All notices, payments and other required communications ("Notices") to the
Participants shall be in writing, and shall be addressed to the parties as
follows or at such other address as the parties may specify from time to time
Notices must be delivered, sent by telex, telegram or telecopier or mailed by
pre-paid post and addressed to the party to which notice is to be given. If
notice is sent by telex, telegram or telecopier or is delivered, it will be
deemed to have been given and received on the next business day from the day of
transmission or delivery. If notice is mailed, it will be deemed to have been
received ten business days following the date of the mailing of the notice. If
there is an interruption in normal mail service due to strike, labour unrest or
other cause at or prior to or during the time a notice is mailed the notice must
be sent by telex, telegram or telecopier or will be delivered.
22.2 ADDITIONAL LAND INTERESTS WITHIN AREA OF INFLUENCE
In the event that either Xxxxxxx or Southern should acquire any additional
interest in mineral claims within a 1.5 kilometer distance from the perimeter of
the Property. it will deliver details of the acquisition to the other party
within 30 days of such acquisition and thereafter that party may, within 30 days
of receiving such notice, require either Xxxxxxx or Southern, as applicable, to
cause such interest to be made a part of the Joint Venture and subject to this
Agreement as between Southern and Xxxxxxx and such interest shall be transferred
at cost.
22.3 N/A
22.4 WAIVER
The failure of a Participant to insist on the strict performance of any
provision of this Agreement or to exercise any right, power or remedy upon a
breach thereof shall not constitute a waiver of any provision of this Agreement
or limit the Participant's right thereafter to enforce any provision or exercise
any right.
33
22.5 MODIFICATION
No modification of this Agreement shall be valid unless made in writing and duly
executed by the Participants.
22.6 FORCE MAJEURE
Except for the obligation to make payments when due hereunder, the obligations
of a Participant shall be suspended to the extent and for the period that
performance is prevented by any cause, whether foreseeable or unforeseeable,
beyond its reasonable control, including, without limitation, labour disputes
(however arising and whether or not employee demands are reasonable or within
the power of the participant to grant); acts of God; laws, regulations, orders,
proclamations, instructions or requests of any government or governmental
entity; judgments or orders of any court; inability to obtain on reasonably
acceptable terms any public or private license, permit or other authorization;
curtailment or suspension of activities to remedy or avoid an actual or alleged,
present or prospective violation of national, state or local environmental
standards; acts of war or conditions arising out of or attributable to war,
whether declared or undeclared; riot, civil strife, insurrection or rebellion;
fire, explosion, earthquake, storm, flood, sink holes, drought or other adverse
weather condition; delay or failure by suppliers or transporters of materials,
parts, supplies, services or equipment or by contractors' or subcontractors'
shortage of, or inability to obtain, labour, transportation, materials,
machinery, equipment, supplies, utilities or services; accidents; breakdown of
equipment, machinery or facilities; or any other cause whether similar or
dissimilar to the foregoing. The affected Participant shall promptly give notice
to the other Participant of the suspension of performance, stating therein the
nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected Participant shall resume performance as soon as reasonably
possible. During the period of suspension the obligations of the Participants to
advance funds shall be reduced to levels consistent with essential maintenance
of Operations.
22.7 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Nevada, and all Operations of the Joint Venture in respect to
the Property will be carried out in compliance with the applicable laws of
Argentina.
22.8 N/A
22.9 FURTHER ASSURANCES
Each of the Participants agrees to take from time to time such actions and
execute such additional instruments as may be reasonably necessary or convenient
to implement and carry out the intent and purpose of this Agreement.
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22.10 SURVIVAL OF TERMS AND CONDITIONS
The following Subsections shall survive the termination of this Agreement to the
full extent necessary for their enforcement and the protection of the
Participant in whose favour they run: Subsections 2.1, 4.5,6.7, 7.1 to 7.6, 8.1
to 8.11, 9.7, 15.1 to 15.3, 17.4, 17.5, 17.7, 17.8, 20.1, 21.1 to 21.4, and such
other provisions as specifically or by necessary implication survive the
termination of this Agreement.
22.11 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS
This Agreement contains the entire understanding of the Participants and
supersedes all prior agreements and understandings between the Participants
relating to the subject matter hereof. This Agreement shall be binding upon and
enure to the benefit of the respective successors and permitted assigns of the
Participants. In the event of any conflict between this Agreement and any
Exhibit attached hereto, the terms of this Agreement shall be controlling.
IN WITNESS WHEREOF the parties have hereunto set their hands and seals by their
duly authorized signatories effective the date first herein set forth.
/s/ Xxxxxx Xxxxxxx
------------------------------------
XXXXXX XXXXXXX
THE COMMON SEAL of SOUTHERN ENERGY)
COMPANY INC. was hereunto affixed )
in the presence of )
)
)
/s/ Xxxxxxx Xxxxx )
------------------------------------ ) c/s
Authorized Signatory )
35
EXHIBIT A
DETAILS OF THE PROPERTY, PURCHASE AGREEMENT,
AND POWER OF ATTORNEY
36
EXHIBIT B
ACCOUNTING PROCEDURE
The financial and accounting procedures to be followed by the Operator and the
Participants under the Agreement are set forth below. References in this
Accounting Procedure to subsections and paragraphs are to those located in this
Accounting Procedure unless it is expressly stated that they are references to
the Agreement. In the event of any conflict between this Exhibit "B" and the
main body of the Agreement, the terms of the main body of the Agreement shall
prevail.
1. GENERAL PROVISIONS
1.1 GENERAL ACCOUNTING RECORDS
The Operator shall maintain detailed and comprehensive cost accounting records
in accordance with this Accounting Procedure, including general ledgers,
supporting and subsidiary journals, invoices, checks and other customary
documentation, sufficient to provide a record of revenues and expenditures and
periodic statements of financial position and the results of operations for
managerial, tax, regulatory or other financial reporting purposes. Such records
shall be retained for the duration of the period allowed the Participants for
audit or the period necessary to comply with tax or other regulatory
requirements. The records shall reflect all obligations, advances and credits of
the Participants.
1.2 BANK ACCOUNTS
The Operator shall maintain one or more separate bank accounts for the payment
of all expenses and the deposit of all cash receipts for the Joint Venture.
1.3 STATEMENTS AND XXXXXXXX
The Operator shall prepare statements and xxxx the Participants as provided in
Section 16.2 of the Agreement. Payment of any such xxxxxxxx by any Participant,
including the Operator, shall not prejudice such Participant's right to protest
or question the correctness thereof for a period not to exceed 24 months
following the calendar year during which such xxxxxxxx are received by the
Participant. All written exceptions to and claims upon the Operator for
incorrect charges, xxxxxxxx or statements shall be made upon the Operator within
such 24 month period.
2. CHARGES TO JOINT ACCOUNT
Subject to the limitations hereinafter set forth, the Operator shall charge the
Joint Account with the following:
37
2.1 RENTALS, ROYALTIES AND OTHER PAYMENTS
All property acquisition and holding costs, including filing fees, license fees,
costs of permits and assessment work, delay rentals, production royalties,
including any required advances, and all other payments made by the Operator
which are necessary to acquire or maintain title to the Assets and the Property.
2.2 LABOUR AND EMPLOYEE BENEFITS
(a) Salaries and wages of the Operator's employees directly engaged in
Operations, including salaries or wages of employees who are
temporarily assigned to and directly employed by same.
(b) The Operator's cost of holiday, vacation, sickness and disability
benefits, and other customary allowances applicable to the salaries
and wages chargeable under paragraph 2.2(a) and Subsection 2.12.
Such costs may be charged on a "when and as paid basis" or by
"percentage assessment" on the amount of salaries and wages. If
percentage assessment is used, the rate shall the applied to wages
or salaries excluding overtime and bonuses. Such rate shall be based
on the Operator's cost experience and it shall be periodically
adjusted at least annually to ensure that the total of such charges
does not exceed the actual cost thereof to the Operator.
(c) The Operator's actual cost of established plans for employees' group
life insurance, hospitalization, pension, retirement, stock
purchase, thrift, bonus (except production or incentive bonus plans
under a union contract based on actual rates of production, cost
savings and other production factors, and similar non-union bonus
plans customary in the industry or necessary to attract competent
employees, which bonus payments shall be considered salaries and
wages under paragraph 2.2(a) or Subsection 2.12; rather than
employees' benefit plans) and other benefit plans of a like nature
applicable to salaries and wages chargeable under paragraph 2.2(a)
or Subsection 2.12, provided that the plans are limited to the
extent feasible to those customary in the industry.
(d) Cost of assessments imposed by governmental authority which are
applicable to salaries and wages chargeable under paragraph 2.2(a)
and Subsection 2.12, including all penalties except those resulting
from the willful misconduct or gross negligence of the Operator.
2.3 MATERIALS, EQUIPMENT AND SUPPLIES
The cost of materials, equipment and supplies (herein called "Material")
purchased from unaffiliated third parties or furnished by the Operator or any
Participant as provided in Section 3. The Operator shall purchase or furnish
only so much Material as may be required for immediate use in efficient and
economical operations. The Operator shall also maintain inventory levels of
Material at reasonable levels to avoid unnecessary accumulation of surplus
stock.
38
2.4 EQUIPMENT AND FACILITIES FURNISHED BY OPERATOR
The cost of machinery, equipment and facilities owned by the Operator and used
in Operations or used to provide support or utility services to Operations
charged at rates commensurate with the actual costs of ownership and operation
of such machinery, equipment and facilities. Such rates shall include costs of
maintenance, repairs, other operating expenses, insurance, taxes, depreciation
and interest at a rate not to exceed the rate charged by the principal chartered
bank of the Operator plus 1% per annum. Such rates shall not exceed the average
commercial rates currently prevailing in the vicinity of the Operations.
2.5 TRANSPORTATION
Reasonable transportation costs incurred in connection with the transportation
of employees and material necessary for the Operations.
2.6 CONTRACT SERVICES AND UTILITIES
The cost of contract services and utilities procured from outside sources. If
contract services are performed by the Operator or an Affiliate thereof the cost
charged to the Joint Account shall not be greater than that for which comparable
services and utilities are available in the open market within the vicinity of
the Operations. The cost of professional consultant services procured from
outside sources, or provided by the Operator, in excess of $50,000 shall not be
charged to the Joint Account unless approved by the Management Committee.
2.7 INSURANCE PREMIUMS
Net premiums paid for insurance required to be carried for Operations for the
protection of the Participants. When the operations are conducted in an area
where the Operator may self-insure for Workers Compensation and/or Employer's
liability under applicable law, the Operator may elect to include such risks in
its self-insurance program and shall charge its costs of self-insuring such
risks to the Joint Account provided that such charges shall not exceed published
manual rates.
2.8 DAMAGES AND LOSSES
Costs in excess of insurance proceeds necessary to repair or replace damage or
losses to any Assets or the Property resulting from any cause other than the
willful misconduct or gross negligence of the Operator. The Operator shall
furnish the Management Committee with written notice of damages or losses as
soon as practicable after a report thereof has been received by the Operator.
39
2.9 LEGAL AND REGULATORY EXPENSE
Except as otherwise provided in Subsection 2.13, all legal and regulatory costs
and expenses incurred in or resulting from the Operations or necessary to
protect or recover the Assets or the Property of the Joint Venture. All
attorney's fees and other legal costs to handle, investigate and settle
litigation or claims, including the cost of legal services provided by the
Operator's legal staff; and amounts paid in settlement of such litigation or
claims in excess of $50,000 shall not be charged to the Joint Account unless
approved by the Management Committee.
2.10 AUDIT
Cost of audits under Subsection 16.2 of the Joint Venture Agreement if approved
by all of the Participants.
2.11 TAXES
All taxes (except income taxes) of every kind and nature assessed or levied upon
or in connection with the Assets, the Property, the production of Products or
Operations, which have been paid by the Operator for the benefit of the
Participants. Each Participant is separately responsible for income taxes which
are attributable to its respective Participating Interest.
2.12 DISTRICT AND CAMP EXPENSES (FIELD SUPERVISION AND CAMP EXPENSES)
A pro rata portion of (i) the salaries and expenses of the Operator's
superintendent and other employees serving operations whose time is not
allocated directly to such Operations, and (ii) the costs of maintaining and
operating an office (herein called "the Operator's Project Office") and any
necessary suboffice and (iii) all necessary camps, including housing facilities
for employees, used for Operations. The expense of those facilities, less any
revenue therefrom, shall include depreciation or a fair monthly rental in lieu
of depreciation of the investment. The total of such charges for all properties
served by the Operator's employees and facilities shall be apportioned to the
Joint Account on the basis of a ratio, the numerator of which is the direct
labour costs of the Operations and the denominator of which is the total direct
labour costs incurred for all activities served by the Operator.
2.13 ADMINISTRATIVE CHARGE
(a) Each month the Operator shall charge the Joint Account a sum for
each phase of Operations as provided below, which shall be a
liquidated amount to reimburse the Operator for its home office
overhead and general and administrative expenses to conduct each
phase of the Operations, and which shall be in lieu of any
management fee:
(i) Exploration Phase: 5% of Allowable Costs.
40
(ii) Development Phase: 5% of Allowable Costs.
(iii) Major Construction Phase: 2.5% of Allowable Costs.
(iv) Mining Phase: 2.5% of Allowable Costs.
(b) The term "Allowable Costs" as used in this Subsection 2.13 for a
particular phase of Operations shall mean all charges to the Joint
Account excluding:
(i) the administrative charge referred to herein;
(ii) depreciation, depletion or amortization of tangible or
intangible assets; and
(iii) amounts charged in accordance with Subsections 2.1 and 2.9.
The Operator shall attribute such Allowable Costs to a particular
phase of Operations by applying the following guidelines:
(i) the Exploration phase shall cover those activities conducted
to ascertain the existence, location, extent or quantity of
any deposit of ore or mineral. Such phase shall cease when a
commercially recoverable reserve is determined to exist on
completion of a bankable Feasibility Report;
(ii) the Development phase shall cover those activities conducted
to access a commercially feasible ore body or to extend
production of an existing ore body, and to construct or
install related fixed assets;
(iii)the major construction phase shall include all activities
involved in the construction of a mill, smelter or other ore
processing facilities;
(iv) the Mining phase shall include all other activities not
otherwise covered above, including activities conducted
after mining operations have ceased.
(c) The monthly administration charge determined for each phase of
Operations shall be equitably apportioned among all of the Property
served during such monthly period on the basis of a ratio, the
numerator of which is the direct labour costs charged to a
particular property and the denominator of which is the total direct
labour costs incurred for the Property served by the Operator
(d) The following is a representative list of items comprising the
Operator's principal business office expenses that are expressly
covered by the administrative charge provided in this Subsection
2.13:
41
(i) administrative supervision, which includes services rendered
by managers, department supervisors, officers and directors
of the Operator for Operations, except to the extent that
such services represent a direct charge to the Joint
Account, as provided for in Subsection 2.2;
(ii) accounting, data processing, personnel administration,
billing and record keeping in accordance with governmental
regulations and the provisions of the Joint Venture
Agreement, and preparation of reports;
(iii)the services of tax counsel and tax administration
employees for all tax matters, including any protests,
except any outside professional fees which the Management
Committee may approve as a direct charge to the Joint
Account;
(iv) routine legal services rendered by outside sources and the
Operator's legal staff not otherwise charged to the Joint
Account under Subsection 2.9; and
(v) rentals and other charges for office and records storage
space, telephone service, office equipment and supplies.
(e) The Management Committee shall annually review the administration
charges and shall amend the methodology or rates used to determine
such charges if they are found to be insufficient or excessive.
2.14 OTHER EXPENDITURES
Any reasonable direct expenditure, other than expenditures which are covered by
the foregoing provisions, incurred by the Operator for the necessary and proper
conduct of Operations.
3. BASIS OF CHARGES TO JOINT ACCOUNT
3.1 PURCHASES
Material purchased and services procured from third parties shall be charged to
the Joint Account by the Operator at invoiced cost, including applicable
transfer taxes, less all discounts taken. If any Material is determined to be
defective or is returned to a vendor for any other reason, the Operator shall
credit the Joint Account when an adjustment is received from the vendor.
3.2 MATERIAL FURNISHED BY OR TRANSFERRED TO THE OPERATOR OR A PARTICIPANT
Any Material furnished by the Operator or Participant from its stocks or
transferred to the Operator or Participant shall be priced on the following
basis:
(a) New Material
42
New Material transferred from the Operator or Participant shall be
priced F.O.B. the nearest reputable supply store or railway receiving
point, where like Material is available, at the current replacement
cost of the same kind of Material, exclusive of any available cash
discounts, at the time of the transfer (herein called, "New Price").
(b) Used Material
(i) Used Material in sound and serviceable condition and suitable for
reuse without reconditioning shall be priced as follows:
(A) Used Material transferred by the Operator or Participant
shall be priced at 70% of the New Price;
(B) Used Material transferred to the Operator or Participant
shall be priced:
(1) at 70% of the New Price if such Material was originally
charged to the Joint Account as new Material, or
(2) at 70% of the price if such Material was originally
charged to the Joint Account as good used Material at
70 % of the New Price.
(ii) Other Used Material which, after reconditioning will be further
serviceable for original function as good secondhand Material, or
which is serviceable for original function but not substantially
suitable for reconditioning shall be priced at 45% of the New
Price. The cost of any reconditioning shall be borne by the
transferee.
(iii)All other Material, including junk, shall be priced at a value
commensurate with its use or at prevailing prices. Material no
longer suitable for its original purpose but usable for some
other purpose shall be priced on a basis comparable with items
normally used for such other purposes.
(c) Obsolete Material
Any Material which is serviceable and usable for its original
function, but its condition is not equivalent to that which would
justify a price as provided above shall be Priced by the Management
Committee. Such price shall be set at a level which will result in a
charge to the Joint Account equal to the value of the service to be
rendered by such Material. }
43
3.3 PREMIUM PRICES
Whenever Material is not readily obtainable at published or listed prices
because of national emergencies, strikes or other unusual circumstances over
which the Operator has no control, the Operator may charge the Joint Account for
the required Material on the basis of the Operator's direct cost and expenses
incurred in procuring such Material and making it suitable for use. The Operator
shall give written notice of the proposed charge to the Participants prior to
the time when such charge is to be billed, whereupon any Participant shall have
the right, by notifying the Operator within ten days of the delivery of the
notice from the Operator, to furnish at the usual receiving point all or part of
its share of Material suitable for use and acceptable to the Operator.
3.4 WARRANTY OF MATERIAL FURNISHED BY THE OPERATOR OR PARTICIPANTS
Neither the Operator nor any Participant warrants the Material furnished beyond
any dealer's or manufacturer's warranty and no credits shall be made to the
Joint Account for defective Material until adjustments are received by the
Operator from the dealer, manufacturer or their respective agents.
4. DISPOSAL OF MATERIAL
}
4.1 DISPOSITION GENERALLY
The Operator shall have no obligation to purchase a Participant's interest in
Material. The Management Committee shall determine the disposition of major
items of surplus Material, provided the Operator shall have the right to dispose
of normal accumulations of junk and scrap Material either by sale or by transfer
to the Participants as provided in Subsection 4.2.
4.2 DISTRIBUTION TO PARTICIPANTS
Any Material to be distributed to the Participants shall be made in proportion
to their respective Participating Interests, and corresponding credits shall be
made to the Joint Account on the basis provided in Subsection 3.2.
4.2 SALES
Sales of Material to third parties shall be credited to the Joint Account at the
net amount received. Any damages or claims by the purchaser shall be charged
back to the Joint Account if and when paid.
5. INVENTORIES
5.1 PERIODIC INVENTORIES, NOTICE AND REPRESENTATIONS
At reasonable intervals, inventories shall be taken by the Operator, which shall
include all such Material as is ordinarily considered controllable by operators
44
of mining properties and the expense of conducting such periodic inventories
shall be charged to the Joint Account. The Operator shall give written notice to
the Participants of its intent to take any inventory at least 30 days before
such inventory is scheduled to take place. A Participant shall be deemed to have
accepted the results of any inventory taken by the Operator if the Participant
fails to be represented at such inventory.
5.2 RECONCILIATION AND ADJUSTMENT OF INVENTORIES
Reconciliation of inventory with charges to the Joint Account shall be made, and
a list of overages and shortages shall be furnished, to the Management Committee
within six months after the inventory is taken. Inventory adjustments shall be
made by the Operator to the Joint Account for overages and shortages, but the
Operator shall be held accountable to the Joint Venture only for shortages due
to lack of reasonable diligence.
