MINERAL PROPERTY OPTION AGREEMENT
MINERAL PROPERTY OPTION AGREEMENT
THIS MINERAL PROPERTY OPTION AGREEMENT is dated for reference as of the 20th day of October, 2006.
BETWEEN:
WAR EAGLE MINING COMPANY INC., a company having an address for delivery and notice located at Xxxxx 000, 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
(hereinafter the "Optionor");
OF THE FIRST PART
AND:
REVELSTOKE INDUSTRIES, INC., a company having an address for notice and delivery located at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx, X.X.X., 00000
(hereinafter the "Optionee").
OF THE SECOND PART
WHEREAS:
- The Optionor is the registered and beneficial owner of a one hundred percent (100%) interest in certain mineral licenses, claims, concessions or reservations (for convenience herein, collectively, the "mineral claims") situated in the Province of Saskatchewan and better known and described as the Georges Lake group of mineral claims, as detailed in the more specific description of such mineral claims attached hereto as Schedule A (and herein called the "Property"); and
- The Optionor has agreed to grant an exclusive option to the Optionee to acquire a seventy percent (70%) interest in and to the Property by incurring certain exploration Expenditures as detailed herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements hereinafter set forth the parties agree that:
- 2 -
PART I
DEFINITIONS
1.1 In this Mineral Property Option Agreement, except as otherwise expressly provided or as the context otherwise requires,
(a) "Area of Common Interest" means, subject to Part 16, the area included within 10 kilometres of the boundaries of the Property, but excluding any third party mineral claims in existence as of the Effective Date hereof;
(b) "Effective Date" means the date first above written;
(c) "Expenditures" means all direct or indirect costs and expenses incurred by the Optionee in respect of prospecting and exploring the Property after the date of this Agreement pursuant to §4.2 hereof. The certificate of the Controller or other financial officer of the Optionee, together with a statement of Expenditures in reasonable detail shall be prima facie evidence of such Expenditures;
(d) "Force Majeure" has the meaning set forth in Part 12;
(e) "Joint Venture" means the joint venture to be formed between the Optionor and the Optionee in respect of the Property in the event of and upon exercise of the Option and which is more particularly described in §4.3 and Schedule B;
(f) "Joint Venture Agreement" means the Joint Venture Agreement to be entered into between the Optionor and the Optionee if the Optionee exercises this Option as provided for in §4.3 and in the form attached as Schedule B;
(g) "Option" means the exclusive right herein granted by the Optionor to the Optionee to permit the Optionee to acquire a seventy percent (70%) undivided right, title and interest in the Property and thereupon form the Joint Venture all as provided in Part 4;
(h) "Option Period" means the period from the date above written on page one to and including the earliest of
(i) the date of exercise of the Option,
(ii) the fifth anniversary of the Effective Date, and
(iii) the termination hereof pursuant to Part 10;
(i) "Property" means the seven mineral claims described in Schedule A (the "Original Property") as they may be augmented pursuant to Part 16 (such augmenting claims or interests being referred to herein as the "Additional Property" and included as part of the Property) or reduced under Part 16, and all mining leases and other mining rights and interests derived from any such claims, and a reference herein to a mineral claim comprised in the Property includes any mineral leases or other interests into which such mineral claim may have been converted and Property includes all Property Rights;
- 3 -
(j) "Property Rights" means all licenses, permits, easements, rights-of-way, surface or water rights and other rights, approvals obtained by either of the parties either before or after the date of this Agreement and necessary or desirable for the development of the Property, or for the purpose of placing the Property into production or continuing production therefrom;
(k) "Schedule" means the documents attached hereto as follows:
(i) Schedule A - Mineral Claims Comprising the Property;
(ii) Schedule B - Joint Venture Agreement; and
(iii) Schedule C - Third Party Interests; and
(l) "Third Party Interests" means interests that are held by Bullion Fund Inc. and Xxxxxxx Leaderhouse pursuant to an agreement dated December 11, 2005, attached as Schedule C.
PART 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPTIONOR
2.1 The Optionor represents and warrants to the Optionee that
(a) it has been duly incorporated and validly exists as a corporation in good standing under the laws of the Province of British Columbia and is authorized to acquire, hold and option mineral claims in the Province of Saskatchewan, and it is exclusively legally entitled to hold the Property and all mineral claims comprised therein, and all Property Rights held by it and will remain so entitled until all interests of the Optionor in the Property earned by the Optionee have been duly transferred to the Optionee as contemplated hereby or this Option has terminated,
(b) it is now, and will also thereafter at the time of legal transfer of interests in the Property if the Option is exercised, the registered and beneficial owner of all of the mineral claims comprising the Property free and clear of all liens, charges and claims of others and no taxes, royalties or lease payments or like amounts are due in respect of any of the mineral claims, and to its knowledge and belief; the mineral claims comprised in the Property have been duly and validly located and recorded pursuant to the applicable mining laws of Canada, and, except as specified in Schedule A and accepted by the Optionee, are in good standing in the office of the relevant government mining office on the date hereof and until the dates set opposite the respective names thereof in Schedule A,
(c) there is no adverse claim or challenge against or to the ownership of or title to any of the mineral claims comprising the Property, nor to the knowledge of the Optionor is there any basis therefor, and there are no outstanding agreements or options to acquire or purchase the Property or any portion thereof, and no person other than the Optionor, pursuant to the provisions hereof, has any royalty or other interest whatsoever in production from any of the mineral claims comprising the Property,
- 4 -
(d) no third party consent of any kind is required by the Optionor to enter into this Agreement and grant the Option contemplated hereby,
(e) on execution hereof, the Optionor shall deliver or cause to be delivered to the Optionee copies of all available maps and other documents and data in its possession respecting the Property,
(f) the Optionor shall assume sole responsibility and liability for any obligations outstanding as of the date hereof with respect to reclamation of the Property,
(g) the execution and delivery of this Agreement and the agreements contemplated hereby by the Optionor will not violate or result in the breach of the laws of any jurisdiction applicable or pertaining thereto or of its constating documents, and
(h) this Agreement constitutes a legal, valid and binding obligation of the Optionor under Canadian law.
The Optionor acknowledges and confirms that the Optionee is relying on the foregoing representations and warranties in the entering into by it of this Agreement.
2.2 The representations and warranties contained in §2.1 are provided for the exclusive benefit of the Optionee, and a breach of any one or more thereof may be waived by the Optionee in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty; and the representations and warranties contained in §2.1 will survive the execution hereof and continue throughout the Option Period and for two years thereafter.
PART 3
REPRESENTATIONS AND WARRANTIES OF OPTIONEE
3.1 The Optionee represents and warrants to the Optionor that
(a) it has been duly incorporated and validly exists as a corporation in good standing under the laws of the State of Nevada and has the corporate power to hold mining claims and will obtain such necessary registrations as are necessary to explore and hold legal interests in mining properties in the Province of Saskatchewan;
(b) neither the execution and delivery of this Agreement by the Optionee nor the performance by the Optionee of its obligations hereunder conflicts with the Optionee's constating documents or any agreement to which it is bound;
- 5 -
(c) the execution, delivery and performance by the Optionee of this Agreement and any other agreement or instrument to be executed and delivered by it hereunder and the consummation by it of all the transactions contemplated hereby and thereby have been duly authorised by all necessary corporate action on the part of the Optionee;
(d) each of this Agreement and any other agreement or instrument to be executed and delivered by the Optionee hereunder constitutes a legal, valid and binding obligation of the Optionee enforceable against it in accordance with its terms; and
(e) excepting only as otherwise disclosed herein, the Optionee is not subject to, or a party to, any charter or by-law restriction, any law, any claim, any encumbrance or any other restriction of any kind or character which would prevent consummation of the transaction contemplated by this Agreement or any other agreement or instrument to be executed and delivered by the Optionee hereunder.
The Optionee acknowledges and confirms that the Optionor is relying on the foregoing representations and warranties in the entering into by it of this Agreement.
3.2 The representations and warranties contained in §3.1 are provided for the exclusive benefit of the Optionor and a breach of any one or more thereof may be waived by the Optionor in whole or in part at any time without prejudice to its rights in respect of any other breach of the same or any other representation or warranty; and the representations and warranties contained in §3.1 will survive the execution hereof and continue throughout the Option Period.
PART 4
GRANT AND EXERCISE OF OPTION
4.1 The Optionor hereby grants to the Optionee the sole and exclusive right and option (the "Option") to acquire a seventy percent (70%) interest in the Property, such 70% interest to be free and clear of all liens, charges, encumbrances, security interests and adverse claims arising from or through the Optionor except for the Third Party Interests, and subject to the laws applicable to the Property.
4.2 In order to exercise the Option, the Optionee must, by December 31, 2008, incur or caused to be incurred, Expenditures of not less than an aggregate of $1,000,000 pursuant to a work program or work programs commenced and operated by the Optionor.
4.3 Following the exercise of the Option by the Optionee, the Optionor and the Optionee will form a Joint Venture for the purpose of carrying out further development work and production on the Property and will in good faith, negotiate and execute a Joint Venture Agreement, substantially in the form of Schedule B, and said agreement shall include, but not be limited to, the following provisions:
- 6 -
(a) the initial participating interests of the parties in the Joint Venture will be seventy percent (70%) as to the Optionee and thirty percent (30%) as to the Optionor, which interests shall be at all times subject to the Third Party Interests;
(b) the Optionee shall be the initial manager of the Joint Venture and the Optionee shall remain the manager as long as the Optionee has not less than a 50% participating interest or when the Optionee is being diluted in accordance with §(d). Property claims shall be registered in the name of the manager on behalf of the Joint Venture;
(c) the operations of the Joint Venture will be overseen by a management committee, with each party to have voting rights on such committee equal to their participating interest in the Joint Venture. In the event that the parties interests become equal, the manager will have a casting vote;
(e) each party will have 15 days following adoption of work programs to elect to participate therein and invoices rendered to participating parties in respect of any work program shall be payable within 20 days;
(f) each party will grant to the other a 21 day right of first refusal with respect to any proposed sale of such party's interest in the Joint Venture to a third party. If a sale is completed the third party must agree to be bound to the terms of the Joint Venture Agreement; and
(g) in the event of a dispute in reaching a binding Joint Venture Agreement the parties shall refer any such dispute to binding arbitration to have a binding agreement imposed on themselves.
PART 5
VESTING OF INTEREST
5.2 Nothing herein shall be construed as requiring the Optionee to provide the Optionor with notice of exercise as contemplated by §5.1.
- 7 -
5.3 Upon giving notice to the Optionor of its exercise of the Option, the Optionee will immediately be vested in and be deemed to legally and beneficially own a seventy percent (70%) interest in the Property.
PART 6
TITLE TRANSFER
6.1 Upon the Optionee exercising the Option, then the Optionor shall execute such documentation as the Optionee may prepare and reasonably request be executed under the laws of the Province of Saskatchewan to record to the extent possible, the respective interests of each of the parties in the Property.
PART 7
Assignment of Option
7.1 Subject to Part 11, the Optionee may assign all or part of its obligations under this Mineral Property Option Agreement during the Option Period to a third party (the "Assignee") with consent of the Optionor, such consent not to be unreasonably withheld, providing also that the Assignee agrees to execute an acknowledgement to be bound by the terms hereof insofar as the Optionor's rights hereunder are concerned.
PART 8
OPTIONEE'S RIGHTS
8.1 Throughout the Option Period, the directors and officers of the Optionee and its servants, agents and independent contractors, will have the sole and exclusive right in respect of the Property to
- enter thereon,
- have exclusive and quiet possession thereof,
- do such prospecting, exploration, development and/or other mining work thereon and thereunder as the Optionee in its sole discretion may determine advisable,
- bring upon and erect upon the Property buildings, plant, machinery and equipment as the Optionee may deem advisable, and
- remove therefrom and dispose of reasonable quantities of ores, mineral and metals for the purpose of obtaining assays or making other tests.
PART 9
OBLIGATIONS OF Optionee DURING OPTION PERIOD
9.1 During the Option Period the Optionee will
- 8 -
(a) maintain in good standing those mineral claims comprised in the Property that are in good standing on the date hereof by the payment of fees, taxes and rentals and the performance of all other actions which may be necessary under Canadian law in that regard and in order to keep such mineral claims free and clear of all liens and other charges arising from the Optionee's activities thereon except those at the time contested in good faith by the Optionee,
(b) permit the directors, officers, employees and designated consultants of the Optionor, at their own risk, access to the Property at all reasonable times subject always to Part 13, and providing the Optionor agrees to indemnify the Optionee against and to save the Optionee harmless from all costs, claims, liabilities and expenses that the Optionee may incur or suffer as a result of any injury (including injury causing death) to any director, officer, employee or designated consultant of the Optionor while on the Property,
(c) while exploration and development is carried out, furnish the management committee with quarterly progress reports and with a final report within 90 days following the conclusion of each program which will be deemed to occur upon the verification of final assays. The final report shall show the exploration and development performed and the results obtained and shall be accompanied by a statement of costs and copies of pertinent plans, assay maps, diamond drill records and other factual engineering data. All information and data concerning or derived from the exploration and development shall be kept confidential except as permitted under this Agreement;
(d) deliver to the Optionor on or before six months after each anniversary hereof, a report (including up-to-date maps if there are any) describing the results of work done in the last completed expenditure year, together with reasonable details of Expenditures made,
(e) do all work on the Property in a good and workmanlike fashion and in accordance with all applicable laws, regulations, orders and ordinances of any governmental authority and
(f) indemnify and save the Optionor harmless in respect of any and all costs, claims, liabilities and expenses arising out of the Optionee's activities on the Property and, without limiting the generality of the foregoing will, during the currency of this Agreement, cause any of its independent contractors to carry not less than $1,000,000 in third party liability insurance in respect of their operations conducted on the Property on behalf of the Optionee, such insurance to be for the benefit of the Optionee and the Optionor as their interests appear; provided that neither the Optionee nor its independent contractors will incur any obligation thereunder in respect of claims arising or damages suffered after termination of the Option if upon termination of the Option any workings on or improvements to the Property made by the Optionee are left in as safe a condition as existed on the date hereof; and
- 9 -
(g) obtain such permits or operate through such qualified Canadian subsidiaries as may be required in to carry on exploration and to acquire and hold rights to mineral interests under Canadian law.
PART 10
TERMINATION OF OPTION
10.1 If the Option is terminated otherwise than upon the exercise thereof pursuant to Part 4, the Optionee will
(a) leave in good standing for a period of at least one year from the termination of the Option Period those mineral claims comprised in the Property that are in good standing on the date hereof and any other mineral claims comprised in the Property that the Optionee acquires after the date hereof, and
(b) deliver at no cost to the Optionor within 90 days of such termination copies of all reports, maps, assay results and other relevant technical data compiled by or in the possession of the Optionee with respect to the Property and not theretofore furnished to the Optionor.
10.2 Notwithstanding termination of the Option, the Optionee will have the right, within a period of 90 days following the end of the Option Period, to remove from the Property all buildings, plant, equipment, machinery, tools, appliances and supplies which have been brought upon the Property by or on behalf of the Optionee, and any such property not removed within such 90-day period will thereafter, only if the Optionor elects in writing, become the property of the Optionor.
PART 11
SURRENDER AND ACQUISITION OF PROPERTY INTERESTS BEFORE TERMINATION OF AGREEMENT
11.1 The Optionee may during the Option Period, elect to abandon any one or more of the mineral claims comprised in the Property by giving notice to the Optionor of such intention.
11.2 For a period of 30 days after the date of delivery of such notice the Optionor may elect to have any or all of the mineral claims in respect of which such notice has been given transferred to it by delivery of a request therefor to the Optionee, whereupon the Optionee will deliver to the Optionor a quit claim or provide such other appropriate Deed or assurance in registrable form transferring such mineral claims to the Optionor if the Optionor is not then already the registered owner of such mineral claims.
11.3 Any claims so transferred, if in good standing at the date hereof or if the Optionee causes the same to be placed in good standing after the date hereof, will be in good standing under applicable Canadian mining law for at least six months from the date of transfer. If the Optionor fails to make request for the transfer of any mineral claims as aforesaid within such 30-day period, the Optionee may then abandon such mineral claim without further notice to the Optionor. Upon any such transfer or abandonment the mineral claims so transferred or abandoned will for all purposes of this Agreement cease to form part of the Property.
- 10 -
PART 12
FORCE MAJEURE
12.2 The Optionee will within seven days give notice to the Optionor of each event of force majeure under §12.1 and upon cessation of such event will furnish the Optionor with notice to that effect together with particulars of the number of days by which the obligations of the Optionee hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure.
PART 13
CONFIDENTIAL INFORMATION
13.1 No information furnished by the Optionee to the Optionor hereunder in respect of the activities carried out on the Property by the Optionee, will be published by the Optionor without the written consent of the Optionee, but such consent in respect of the reporting of factual data will not be unreasonably withheld, and will not be withheld in respect of information required to be publicly disclosed pursuant to applicable securities or corporate laws. This provision shall terminate three years after the later of the termination of this Option and the termination of the Joint Venture Agreement.
PART 14
ARBITRATION
14.1 All questions or matters in dispute with respect to the interpretation of this Agreement or the Joint Venture Agreement will, insofar as lawfully possible, be submitted to arbitration pursuant to the terms hereof using "final offer" arbitration procedures.
14.2 It will be a condition precedent to the right of any party to submit any matter to arbitration pursuant to the provisions hereof, that any party intending to refer any matter to arbitration will have given not less than 10 days' prior written notice of its intention so to do to the other party together with particulars of the matter in dispute.
- 11 -
14.3 On the expiration of such 10 days, the party who gave such notice may proceed to commence procedure in furtherance of arbitration as provided in this Part 14.
14.4 The party desiring arbitration ("First Party") will nominate in writing three proposed arbitrators, and will notify the other party ("Second Party") of such nominees, and the other party will, within 10 days after receiving such notice, either choose one of the three or recommend three nominees of its own. All nominees of either party must hold accreditation as either a lawyer, accountant or mining engineer. If the First Party fails to choose one of the Second Party's nominees then all six names shall be placed into a hat and one name shall be randomly chosen by the president of the First Party and that person if he/she is prepared to act shall be the nominee. Except as specifically otherwise provided in this Part 14 the arbitration herein provided for will be conducted in accordance with the Commercial Arbitration Act (British Columbia). The parties shall thereupon each be obligated to proffer to the Arbitrator within 21 days of his/her appointment a proposed written solution to the dispute and the arbitrator shall within 10 days of receiving such proposals choose one of them without altering it except with the consent of both parties.
14.5 The expense of the arbitration will be paid as specified in the award.
14.6 The parties may agree that the award of the arbitrator will be final and binding upon each of them.
PART 15
DEFAULT AND TERMINATION
(a) it first gives to the party allegedly in default a notice of default containing particulars of the obligation which such has not performed, or the warranty breached,
(b) the other party does not dispute the default, then if it is reasonably possible to cure the default without irreparable harm to the non-defaulting party, the defaulting party does not, within 30 days after delivery of such notice of default, cure such default by appropriate payment or commence to correct such default and diligently prosecute the matter until it is corrected, and
(c) if the defaulting party fails to comply with the provisions of this §15.1 the other party may thereafter terminate this Agreement, and the provisions of Part 10 will then be applicable.
15.2 The Optionee may at any time terminate this Option by giving notice of termination to the Optionor and shall thereupon be relieved of any further obligations in connection herewith but shall remain liable for obligations which have accrued to the date of notice.
- 12 -
PART 16
area of COMMON interest
PART 17
NOTICES
17.1 Each notice, demand or other communication required or permitted to be given under this Agreement will be in writing and will be sent by personal delivery, fax or prepaid registered mail to the addresses of the parties written on page 1.
17.2 The date of receipt of such notice, demand or other communication will be the date of delivery or fax thereof if delivered or faxed during business hours, or, if given by registered mail as aforesaid, will be deemed conclusively to be the third day after the same will have been so mailed except in the case of interruption of postal services for any reason whatever, in which case the date of receipt will be the date on which the notice, demand or other communication is actually received by the addressee.
17.3 Either party may at any time and from time to time notify the other party in writing of a change of address and the new address to which notice will be given to it thereafter until further change.
PART 18
GENERAL
18.1 This Agreement will supersede and replace any other agreement or arrangement, whether oral or written, heretofore existing between the parties in respect of the subject matter of this Agreement.
18.2 No consent or waiver expressed or implied by either party in respect of any breach or default by the other in the performance of such other of its obligations hereunder will be deemed or construed to be a consent to or a waiver of any other breach or default.
18.3 The parties will promptly execute or cause to be executed all documents, deeds, conveyances and other instruments of further assurance which may be reasonably necessary or advisable to carry out fully the intent of this Agreement or to record wherever appropriate the respective interests from time to time of the parties in the Property.
- 13 -
18.4 This Agreement will enure to the benefit of and be binding upon the parties and their respective successors and assigns, subject to the conditions hereof.
18.5 This Agreement will be construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. This agreement is to be construed as an option only and nothing herein shall obligate the Optionee to do anything or pay any amount except where expressly herein provided.
18.6 All sums of money referred to herein are expressed in Canadian dollars.
18.7 The headings appearing in this Agreement are for general information and reference only and this Agreement will not be construed by reference to such headings.
18.8 In interpreting this Agreement and the schedules hereto attached, where the context so requires, the singular will include the plural, and the masculine will include the feminine, the neuter, and vice versa.
18.9 Nothing herein will constitute or be taken to constitute the parties as partners or create any fiduciary relationship between them.
18.10 No modification, alteration or waiver of the terms herein contained will be binding unless the same is in writing, dated subsequently hereto, and fully executed by the parties.
18.11 This Agreement may be executed in counterpart and by facsimile.
IN WITNESS WHEREOF this Mineral Property Option Agreement has been executed on behalf of the Optionor and the Optionee by their duly authorized officers on the 20th day of October, 2006.
The Optionee:
Per: ___________________________
Authorized Signatory
The Optionor:
WAR EAGLE MINING COMPANY INC.
Per: ___________________________
Authorized Signatory
__________
SCHEDULE A
This is Schedule A to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
Mineral Claims Comprising The Property
The following are the mineral claims comprising the Property, located on NTS Sheet G3-M-11 and within the Province of Saskatchewan, approximately 000 xxxxxxxxxx xxxxxxxxx xx Xx Ronge and comprising a total of 979 hectares.
|
Claim Name |
Registered Owner |
|
S-106844 S-106688 S-106689 S-108491 S-108619 S-108618 S-108619 |
Bullion Fund Inc.* Bullion Fund Inc.* Bullion Fund Inc.* War Eagle Mining Company Inc. War Eagle Mining Company Inc. War Eagle Mining Company Inc. War Eagle Mining Company Inc. |
* Beneficially owned by War Eagle Mining Company Inc. with title currently held by Bullion Fund Inc.
__________
SCHEDULE B
This is Schedule B to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
JOINT VENTURE AGREEMENT
BETWEEN
WAR EAGLE MINING COMPANY INC.
AND
[Date]
Respecting the Georges Lake Property
|
TABLE OF CONTENTS |
|||
|
Page |
|||
|
1. |
DEFINITIONS |
1 |
|
|
2. |
REPRESENTATIONS AND WARRANTIES; RECORD TITLE; INDEMNITIES |
5 |
|
|
CAPACITY OF PARTICIPANTS |
5 |
||
|
DISCLOSURES |
5 |
||
|
RECORD TITLE |
5 |
||
|
LOSS OF TITLE |
5 |
||
|
INDEMNITIES |
6 |
||
|
3. |
NAME, PURPOSES AND TERM |
7 |
|
|
GENERAL |
7 |
||
|
NAME |
7 |
||
|
PURPOSES |
7 |
||
|
LIMITATION |
8 |
||
|
TERM |
8 |
||
|
4. |
RELATIONSHIP OF THE PARTICIPANTS |
8 |
|
|
NO PARTNERSHIP |
8 |
||
|
OTHER BUSINESS OPPORTUNITIES |
8 |
||
|
TERMINATION OR TRANSFER OF RIGHTS TO PROPERTY |
9 |
||
|
NO ROYALTY OR OTHER INTERESTS |
9 |
||
|
NO THIRD PARTY BENEFICIARY RIGHTS |
9 |
||
|
5. |
CONTRIBUTIONS BY PARTICIPANTS |
9 |
|
|
INITIAL CONTRIBUTION |
9 |
||
|
VALUE OF INITIAL CONTRIBUTIONS |
9 |
||
|
CASH CONTRIBUTIONS |
9 |
||
|
6. |
PARTICIPATING INTERESTS |
10 |
|
|
PARTICIPATING INTERESTS |
10 |
||
|
VOLUNTARY REDUCTION IN PARTICIPATION - DILUTION |
10 |
||
|
DEFAULT IN MAKING CONTRIBUTIONS |
11 |
||
|
ELIMINATION OF MINORITY INTEREST |
12 |
||
|
DOCUMENTATION OF ADJUSTMENTS TO PARTICIPATING INTERESTS |
12 |
||
|
GRANT OF LIEN OR SECURITY INTEREST |
12 |
||
|
SUBORDINATION OF INTERESTS |
12 |
||
|
7. |
MANAGEMENT COMMITTEE |
13 |
|
|
ORGANIZATION AND COMPOSITION |
13 |
||
|
DECISIONS |
13 |
||
|
MEETINGS |
13 |
||
|
EXPENSE |
14 |
||
|
RULES |
14 |
||
|
ACTION WITHOUT MEETING |
14 |
||
|
MATTERS REQUIRING APPROVAL |
15 |
||
|
8. |
MANAGER |
15 |
|
|
APPOINTMENT |
15 |
||
|
POWERS AND DUTIES OF MANAGER |
15 |
||
|
STANDARD OF CARE |
19 |
||
- ii -
|
RESIGNATION; DEEMED OFFER TO RESIGN |
19 |
||
|
NEW MANAGER |
20 |
||
|
DELIVERY OF RECORDS |
20 |
||
|
NO REPLACEMENT FOR MANAGER |
20 |
||
|
PAYMENTS TO MANAGER |
20 |
||
|
TRANSACTIONS WITH AFFILIATES |
20 |
||
|
INDEPENDENT CONTRACTOR |
20 |
||
|
9. |
PROGRAMS AND BUDGETS |
21 |
|
|
OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS |
21 |
||
|
PRESENTATION OF PROGRAMS AND BUDGETS |
21 |
||
|
ADOPTION OF PROPOSED PROGRAMS AND BUDGETS |
21 |
||
|
ELECTION TO PARTICIPATE |
21 |
||
|
BUDGET OVERRUNS; PROGRAM CHANGES |
22 |
||
|
EMERGENCY EXPENDITURES |
22 |
||
|
MANDATORY EXPENDITURES |
22 |
||
|
CASH CALLS |
23 |
||
|
FAILURE TO MEET CASH CALLS |
23 |
||
|
AUDITS |
23 |
||
|
10. |
DISPOSITION OF PRODUCTION |
24 |
|
|
TAKING IN KIND |
24 |
||
|
FAILURE OF PARTICIPANT TO TAKE IN KIND |
24 |
||
|
HEDGING |
24 |
||
|
VALUE OF MINERAL PRODUCTS |
24 |
||
|
EXTRA EXPENDITURE |
25 |
||
|
MANAGER'S AUTHORITY |
25 |
||
|
PAYMENT OF PROCEEDS |
25 |
||
|
NON-ARM'S LENGTH TRANSACTION |
25 |
||
|
RECORDS |
25 |
||
|
11. |
SUSPENSION AND TERMINATION |
26 |
|
|
SUSPENSION OF OPERATIONS |
26 |
||
|
TERMINATION OF OPERATIONS FOLLOWING SUSPENSION |
26 |
||
|
TERMINATION BY AGREEMENT |
26 |
||
|
TERMINATION WHERE NO PROGRAM PROPOSED |
26 |
||
|
DISPOSITION OF ASSETS ON TERMINATION |
27 |
||
|
RIGHT TO DATA AFTER TERMINATION |
27 |
||
|
NON-COMPETE COVENANTS |
27 |
||
|
CONTINUING AUTHORITY |
27 |
||
|
SURVIVAL OF INGRESS AND EGRESS AFTER TERMINATION |
27 |
||
|
12. |
ABANDONMENT AND SURRENDER OF PROPERTY |
28 |
|
|
13. |
SURRENDER OF INTEREST |
28 |
|
|
SURRENDER OF INTEREST |
28 |
||
|
RELIEF FROM LIABILITIES |
28 |
||
|
ACCEPTANCE OF SURRENDER |
28 |
||
|
EXECUTION OF INSTRUMENTS |
29 |
||
|
14. |
TRANSFER OF INTEREST |
29 |
|
|
GENERAL |
29 |
||
|
LIMITATIONS ON FREE TRANSFERABILITY |
29 |
||
|
PRE-EMPTIVE RIGHT |
30 |
||
|
EXCEPTIONS TO PRE-EMPTIVE RIGHT |
31 |
||
|
ENCUMBRANCES |
32 |
||
- iii -
|
15. |
ACQUISITION WITHIN AREA OF INTEREST |
32 |
|
|
GENERAL |
32 |
||
|
NOTICE TO NON-ACQUIRING PARTICIPANT |
32 |
||
|
OPTION EXERCISE |
33 |
||
|
OPTION NOT EXERCISED |
33 |
||
|
16. |
GENERAL PROVISIONS |
33 |
|
|
NOTICES |
33 |
||
|
WAIVER |
34 |
||
|
MODIFICATION |
34 |
||
|
FORCE MAJEURE |
34 |
||
|
SURVIVAL OF TERMS AND CONDITIONS |
35 |
||
|
CONFIDENTIALITY AND PUBLIC STATEMENTS |
35 |
||
|
ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS |
36 |
||
|
DISPUTE RESOLUTION |
36 |
||
|
FURTHER ASSURANCES |
37 |
||
|
HEADINGS |
37 |
||
|
CURRENCY |
37 |
||
|
SEVERABILITY |
37 |
||
|
TAXES |
37 |
||
|
RULE AGAINST PERPETUITIES |
38 |
||
|
PARTITION |
38 |
||
|
GOVERNING LAW |
38 |
||
|
COUNTERPARTS |
38 |
||
Exhibit A - Property
Exhibit B - Area of Interest
Exhibit C - Accounting Procedure
Exhibit D - Net Returns
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is dated for reference as of u day of u , 200u ..
BETWEEN:
WAR EAGLE MINING COMPANY INC., a company having an address for delivery and notice located at Xxxxx 000, 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
("War Eagle");
OF THE FIRST PART
AND:
REVELSTOKE INDUSTRIES, INC., a company having an address for notice and delivery located at 0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx, X.X.X., 00000
("Revelstoke").
OF THE SECOND PART
WHEREAS:
- War Eagle and Revelstoke own certain Property known as the Georges Lake Property situated in the Province of Saskatchewan which are described in Exhibit A and are defined in §1.1(ee) below; and
- War Eagle and Revelstoke wish to participate in the further exploration, evaluation, and if justified, the development and mining of mineral resources within the Property;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements hereinafter set forth the parties agree that:
1.1 In this Joint Venture Agreement, except as otherwise expressly provided or as the context otherwise requires,
(a) "Accounting Procedure" means the procedure set forth in Exhibit C;
- 2 -
(b) "Affiliate" of a Participant means an entity or person that Controls, is Controlled by, or is under common Control with the Participant through direct or indirect ownership of greater than fifty percent (50%) of equity or voting interest;
(c) "Agreement" means this Joint Venture Agreement, including any amendments and modifications hereof, and all appendices, schedules and exhibits which are incorporated herein by this reference;
(d) "Area of Interest" means the area described in Exhibit B;
(e) "Assets" means the Property, Products, and all other real and personal property, tangible and intangible, held for the benefit of the Participants hereunder;
(f) "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;
(g) "Claims" means the mineral claims described in the agreement to which this Agreement is Schedule C, and any claims that become part of the Property pursuant to Article 14 hereof;
(h) "Continuing Obligations" means obligations or responsibilities that are reasonably expected to continue or arise after Operations on a particular area of the Property have ceased or are suspended, including, but not limited to, Environmental Compliance;
(i) "Control" used as a verb means, when used with respect to an entity, the ability, directly or indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity through (i) the legal or beneficial ownership of voting securities or membership interests; (ii) the right to appoint managers, directors or corporate management; (iii) contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when used with respect to a person, means the actual or legal ability to control the actions of another, through family relationship, agency, contract or otherwise; and "Control" used as a noun means an interest which gives the holder the ability to exercise any of the foregoing powers;
(j) "Development" means all preparation (other than Exploration) for the removal and recovery of Products, including the construction or installation of xxxxx pads, a mill or any other improvements to be used for the mining, handling, milling, beneficiation or other processing of Products;
(k) "Effective Date" means the date set forth in §3.5 of this Agreement;
(l) "Encumbrance" or "Encumbrances" means mortgages, deeds of trust, security interests, pledges, liens, net profits interests, royalties or overriding royalty interests, other payments out of production, or other burdens of any nature;
- 3 -
(m) "Environmental Compliance" means actions performed during or after Operations to comply with the requirements of all Environmental Laws or contractual commitments related to reclamation of the Property or other compliance with Environmental Laws;
(n) "Environmental Laws" means Laws aimed at reclamation or restoration of the Property; abatement of pollution; protection of the environment; monitoring environmental conditions; protection of wildlife, including endangered species; ensuring public safety from environmental hazards; protection of cultural or historic resources; management, storage or control of hazardous materials and substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances into the environment, and all other Laws relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes;
(o) "Environmental Liabilities" means any and all claims, actions, causes of action, damages, losses, liabilities, obligations, penalties, judgments, amounts paid in settlement, assessments, costs, disbursements, or expenses (including, without limitation, legal fees and costs, experts' fees and costs, and consultants' fees and costs) of any kind or of any nature whatsoever that are asserted against either Participant, by any person or entity other than the other Participant, alleging liability (including, without limitation, liability for studies, testing or investigatory costs, cleanup costs, response costs, removal costs, remediation costs, containment costs, restoration costs, corrective action costs, closure costs, reclamation costs, natural resource damages, property damages, business losses, personal injuries, penalties or fines) arising out of, based on or resulting from (i) the presence, release, threatened release, discharge or emission into the environment of any hazardous materials or substances existing or arising on, beneath or above the Property and/or emanating or migrating and/or threatening to emanate or migrate from the Property to off-site Property; (ii) physical disturbance of the environment caused by Operations; or (iii) the violation or alleged violation of any Environmental Laws arising from or relating to Operations;
(p) "Existing Data" means maps, drill logs and other drilling data, core tests, pulps, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records, and any other material or information relating to the Property;
(q) "Exploration" means activities directed toward ascertaining the existence, location, quantity, quality, or commercial value of deposits of Products;
(r) "Government Fees" means all rentals, holding fees, location fees, maintenance payments or other payments required by any law, rule or regulation to be paid to a federal, provincial or territorial government, in order to locate or maintain any mining leases or surface leases, Claims or other tenures included in the Property;
- 4 -
(s) "Initial Contribution" means that contribution each Participant agrees to make, or is deemed to have made, pursuant to §5.1;
(t) "Joint Account" means the account maintained in accordance with the Accounting Procedure showing the charges and credits accruing to the Participants;
(u) "Law" or "Laws" means all Canadian laws (statutory or common), rules, ordinances, regulations, grants, concessions, franchises, licenses, orders, directives, judgments, decrees, and other governmental restrictions, including permits and other similar requirements, whether legislative, municipal, administrative or judicial in nature, including Environmental Laws, which are applicable to the Property, Area of Interest, or Operations, regardless of whether or not in existence or enacted or adopted hereafter; provided, however, nothing in this definition is intended to make laws applicable to the parties during periods when the laws are not applicable by their terms or the timing of their enactment;
(v) "Management Committee" means the committee established under 7;
(w) "Manager" means the person or entity appointed under 8 to manage Operations, or any successor Manager;
(x) "Mineral Property Option Agreement" means the agreement between the parties hereto (and/or their predecessors in title) to which this Joint Venture Agreement is Schedule C;
(y) "Mining" means the mining, extracting, producing, handling, milling, or other processing of Products;
(z) "Net Returns" shall have the meaning specified in Exhibit D;
(aa) "Operations" means the activities carried out under this Agreement;
(bb) "Participant" and "Participants" mean the persons or entities that from time to time have Participating Interests;
(cc) "Participating Interest" means the percentage interest representing the ownership interest of a Participant in the Assets, and in all other rights and obligations arising under this Agreement, as such interest may from time to time be adjusted hereunder. Participating Interests shall be calculated to three decimal places and rounded to two (e.g., 1.519% rounded to 1.52%). Decimals of .005 or more shall be rounded up to .01; decimals of less than .005 shall be rounded down. The initial Participating Interests of the Participants are set forth in §6.1(a);
(dd) "Products" means all metals, ores, concentrates, minerals, and mineral resources, including materials derived from the foregoing, produced from the Property under this Agreement;
- 5 -
(ff) "Property" means the Property described on Exhibit A; and
(gg) "Venture" means the contractual relationship of the parties under this Agreement.
2. REPRESENTATIONS AND WARRANTIES; RECORD TITLE; INDEMNITIES
2.1 Each Participant represents and warrants to the other Participant as follows:
- it is a corporation duly incorporated, qualified to transact business, and in good standing under the laws of its jurisdiction and in Saskatchewan;
- it has the capacity to enter into and perform this Agreement and all transactions contemplated herein, and all corporate, board of directors and other actions required to authorize it to enter into and perform this Agreement have been properly taken; and
- it will not breach any other agreement or arrangement by entering into or performing this Agreement, and this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms.
2.3 Title to real and personal property included in the Assets shall be held in the name of the Manager. The Manager shall hold same in trust for the Participants in accordance with their respective interests from time to time.
2.4 Any failure or loss of title to the Assets, and all costs of defending title thereto, shall be charged to the Venture.
- 6 -
2.5
(c) If any claim or demand is asserted against an Indemnified Participant in respect of which such Indemnified Participant may be entitled to indemnification under this Agreement, written notice of such claim or demand shall promptly be given to the Indemnifying Participant. The Indemnifying Participant shall have the right, but not the obligation, by notifying the Indemnified Participant within thirty (30) days after its receipt of the notice of the claim or demand, to assume the entire control of (subject to the right of the Indemnified Participant to participate, at the Indemnified Participant's expense and with counsel of the Indemnified Participant's choice), the defence, compromise, or settlement of the matter, including, at the Indemnifying Participant's expense, employment of counsel of the Indemnified Participant's choice. Any damages to the Assets or business of the Indemnified Participant caused by a failure by the Indemnifying Participant to defend, compromise, or settle a claim or demand in a reasonable and expeditious manner requested by the Indemnified Participant, after the Indemnifying Participant has given notice that it will assume control of the defence, compromise, or settlement of the matter, shall be included in the damages for which the Indemnifying Participant shall be obligated to indemnify the Indemnified Participant. Any settlement or compromise of a matter by the Indemnifying Participant shall include a full release of claims against the Indemnified Participant which has arisen out of the indemnified claim or demand.
(d) Notwithstanding §(a), the Manager shall not be indemnified nor held harmless by any of the parties for any loss, liability, claim, demand, damage, expense, injury or death (including legal fees) resulting from the negligence or willful misconduct of the Manager or its officers, employees or agents.
(e) An act or omission of the Manager or its officers, employees or agents done or omitted to be done:
- 7 -
(i) at the direction, or within the scope of the direction, of the Management Committee;
(ii) with the concurrence of the Management Committee; or
(iii) unilaterally and in good faith by the Manager to protect life or property;
shall be deemed not to be negligence or willful misconduct.
(f) The Manager shall not be liable to any other party nor shall any party be liable to the Manager in contract, tort or otherwise for special or consequential damages including loss of profits or revenues.
3.1 War Eagle and Revelstoke hereby enter into this Agreement for the purposes hereinafter stated. All of the Participants' rights and obligations in connection with the Assets, the Area of Interest and all Operations shall be subject to and governed by this Agreement.
3.2 The Manager shall conduct the business of this Venture in the name of the Venture, doing business as the "Georges Lake Venture". If applicable, the Manager shall accomplish any registration required by applicable, assumed or fictitious name statutes and similar statutes.
(a) to conduct Exploration within the Property;
(b) to acquire additional real property and other interests within the Area of Interest;
(c) to evaluate the possible Development and Mining of the Property, and if justified, to engage in Development and Mining;
(d) to engage in Operations within the Property;
(e) to engage in disposition of Products, only to the limited extent permitted in §10;
(f) to complete and satisfy all Environmental Compliance obligations and other Continuing Obligations relating to the Property; and
- 8 -
(g) to perform any other operation or activity necessary, appropriate, or incidental to any of the foregoing.
3.4 Unless the Participants otherwise agree in writing, Operations shall be limited to the purposes described in §3.3, and nothing in this Agreement shall be construed to enlarge such purposes.
3.5 The Effective Date of this Agreement shall be the date determined according to the Mineral Property Option Agreement. Unless the Venture is earlier terminated or terminates as provided in this Agreement, the term of this Agreement is for so long as any of the Property are jointly owned by the Participants hereto and thereafter until all materials, supplies, and equipment have been salvaged and disposed of, a final accounting has been made between the Participants, and any required Environmental Compliance has been completed and accepted by the appropriate governmental agencies.
4 RELATIONSHIP OF THE PARTICIPANTS
4.1 Nothing contained in this Agreement shall be deemed to constitute either Participant the partner of the other, nor, except as otherwise herein expressly provided, to constitute either Participant the agent or legal representative of the other, nor to create any fiduciary relationship between them. The Participants do not intend to create, and this Agreement shall not be construed to create, any mining, commercial, tax, 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 is the Participants' intent that their ownership of Assets and the rights acquired hereunder shall be as tenants in common.
- 9 -
Termination or Transfer of Rights to Property
4.3 Except as otherwise provided in this Agreement, neither Participant shall permit or cause all or any part of its interest in the Assets or this Agreement to be sold, exchanged, encumbered, surrendered, abandoned, partitioned, divided, or otherwise terminated, by judicial means or otherwise. The Participants hereby waive and release all rights of partition, or of sale in lieu thereof, or other division of Assets, including any such rights provided by any law.
4.4 No Participant shall be entitled or permitted to create any royalty or similar carried interest in all or any part of the Assets.
No Third Party Beneficiary Rights
4.5 This Agreement shall be construed to benefit the Participants and their respective successors and assigns only, and shall not be construed to create third party beneficiary rights in any other party, governmental agency or organization.
5. CONTRIBUTIONS BY PARTICIPANTS
Value of Initial Contributions
5.2 The agreed value of the Participants' respective Initial Contributions shall be as follows:
|
War Eagle |
$[500,000] |
|
Revelstoke |
$1,000,000 |
5.3 The Participants shall contribute funds for adopted Programs and Budgets in proportion to their respective Participating Interests, subject to elections permitted by §9.4.
- 10 -
6.1
|
War Eagle |
30% |
|
Revelstoke |
70% |
(i) upon an election or deemed election by a Participant pursuant to §9.4, not to contribute or to contribute less to an adopted Program and Budget than the percentage reflected by its Participating Interest;
(ii) as provided in §6.4;
(iii) in the event of default by a Participant in making its agreed upon contribution to an adopted Program and Budget, followed by an election by the other Participant to invoke §6.3(b);
(iv) pursuant to a transfer by a Participant of all or a portion of its Participating Interest in accordance with 14; or
(v) upon acquisition by either Participant of part or all of the Participating Interest of the other Participant, however arising.
Voluntary Reduction in Participation - Dilution
In such event, the non-diluting Participant shall then have the option to either fully fund the remaining portion of the adopted Program and Budget; or, within 15 days following the election of the diluting Participant under §9.4(b), to propose a reduced alternative Program and Budget to which the Participants shall, within seven days, make a re-election under §9.4(a) or §9.4(b). If the non-diluting Participant elects to continue with the initially adopted Program and Budget, the Participating Interest of the Participant electing either §(a) or §(b) above shall be recalculated at the time of election by dividing: (i) the sum of (a) the value of that Participant's Initial Contribution as defined in §5.2, (b) the total of all that Participant's contributions to previous Programs and Budgets, and (c) the amount the Participant elects to contribute to the approved Program and Budget, by (ii) the sum of (a), (b) and (c) above for all Participants; and multiplying the result by 100. That is:
- 11 -
|
(a)+(b)+(c) diluting Participant |
x 100 = Recalculated Participating Interest |
|
(a)+(b)+(c) all Participants |
The Participating Interest of the other Participant shall thereupon become the difference between one hundred percent (100%) and the recalculated Participating Interest.
As soon as practicable after the necessary information is available at the end of each period covered by an adopted Program and Budget, a recalculation of each Participant's Participating Interest shall be made in accordance with the preceding formula to adjust, as necessary, the recalculations made at the beginning of such period to reflect actual contributions made by the Participants during the period. Except as otherwise provided in this Agreement, a diluting Participant shall retain all of its rights and obligations under this Agreement, including the right to participate in future Programs and Budgets at its Recalculated Participating Interest.
Default in Making Contributions
- 12 -
Elimination of Minority Interest
Documentation of Adjustments to Participating Interests
Grant of Lien or Security Interest
- 13 -
7.1 Upon execution of this Agreement, the Participants shall establish a Management Committee to determine overall policies, objectives, procedures, methods and actions under this Agreement. The Management Committee shall consist of one member appointed by War Eagle and one member appointed by Revelstoke. Each Participant may appoint an alternate 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 prior written notice to the other Participant.
7.2 Each Participant, acting through its appointed member, shall have votes on the Management Committee, in proportion to its Participating Interest. Unless otherwise provided in this Agreement, the vote of a Participant with a Participating Interest greater than fifty percent (50%) shall determine the decisions of the Management Committee. In the event of a tie vote, the Participant designated as Manager shall have the deciding vote of the Management Committee.
7.3 The Management Committee shall hold regular meetings at least annually in Vancouver, British Columbia, or at other mutually agreed places.
7.4 The Manager shall give 30 days' notice to the Participants of such regular meetings (unless such notice is waived by the Participants). Additionally, any Participant may call a special meeting upon 14 days' notice to the other Participant (unless such notice is waived by the Participants). In case of emergency, reasonable notice of a special meeting shall suffice.
7.5 With respect to a regular or special meeting of the Management Committee, there shall be a quorum if at least one member representing each Participant is present; provided, however, that in the event that, within 30 minutes from the time appointed for a meeting, a quorum does not exist at any such meeting, any Participant may reschedule the meeting, at a time at least two days following the originally scheduled meeting but no later than 14 days following the originally scheduled meeting, and, at such rescheduled meeting, there shall be a quorum if at least one member representing any Participant having greater than a twenty percent (20%) Participating Interest is present. If within half an hour from the time appointed for a meeting, a quorum is not present, the meeting shall, at the election of those representatives who are present:
(a) be dissolved; or
- 14 -
(b) be adjourned to the same place but on a date and at a time, to be fixed by the chairperson of the meeting before the adjournment, which shall be not less than 14 days following the date for which the meeting was called.
Notice of the adjourned meeting shall he given to the representatives of all parties immediately after the adjournment of the meeting. If at the adjourned meeting a quorum is not present within half an hour from the time appointed, the representative or representatives present and entitled to attend and vote at the meeting shall be a quorum, even if only one person is present.
7.6 Each notice of a meeting shall include an itemized agenda prepared by the Manager in the case of a regular meeting, or by the Participant calling the meeting in the case of a special meeting, but any matter may be considered with the consent of all Participants.
7.7 The Manager shall prepare minutes of all meetings and shall distribute copies of such minutes to the Participants within 30 days after the meeting. The Participants shall have thirty 30 days after receipt to sign and return such copies or to provide any written comments on such minutes to the Manager. If a Participant timely submits written comments on such minutes, the Management Committee shall seek, for a period not to exceed thirty 30 days, to agree upon minutes of such meeting acceptable to the Participants. At the end of such period, failing agreement by the Participants on revised minutes, the minutes of the meeting shall be the original minutes as prepared by the Manager, together with the comments on the minutes made by the other Participant. These documents shall be placed in the minutes book maintained by the Manager.
7.9 Each party shall bear the expenses incurred by its representatives and alternate representatives in attending meetings of the Management Committee.
7.10 The Management Committee may, by agreement of the representative of all the parties, establish other rules of procedure, not inconsistent with this agreement, as the Management Committee deems fit.
7.11 In lieu of meetings, the Management Committee may hold telephone conferences, so long as minutes are prepared in accordance with §7.3. The Management Committee may also take actions in writing signed by all members.
- 15 -
7.12 Except as otherwise delegated to the Manager in §8.2 the Management Committee shall have exclusive authority to determine all management matters related to this Agreement. Management Committee decisions made in accordance with this agreement shall be binding on all of the parties.
8.1 The parties hereby appoint Revelstoke as the Manager with overall management responsibility for Operations and to remain as Manager until it resigns pursuant to §8.4, or until its Participating Interest falls below fifty percent (50%). In the event that War Eagle and Revelstoke have equal participating interests, Revelstoke will act as the Manager.
(a) act as the chairperson of meetings of the Management Committee;
(b) the Manager shall manage, direct, and control Operations, and shall prepare and present to the Management Committee proposed Programs and Budgets;
(c) the Manager 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;
(d) the Manager shall use reasonable efforts to: (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 free and clear of all Encumbrances, except for those existing at the time of, or created concurrent with, the acquisition of such Assets, or mechanic's or materialmen's liens which shall be released or discharged in a diligent manner, or Encumbrances specifically approved by the Management Committee;
(e) the Manager shall conduct such title examinations and cure such title defects relating to the Property as may be advisable in the reasonable judgment of the Manager;
- 16 -
(f) the Manager shall: (i) make or arrange for all payments required by concessions, leases, licenses, permits, contracts, and other agreements related to the Assets; (ii) pay all taxes, assessments and like charges on Operations and Assets except taxes determined or measured by a Participant's sales revenue or net income. If authorized by the Management Committee, the Manager shall have the right to contest, in the courts or otherwise, the validity or amount of any taxes, assessments, or charges if the Manager deems them to be unlawful, unjust, unequal, or excessive, or to undertake such other steps or proceedings as the Manager may deem reasonably necessary to secure a cancellation, reduction, readjustment, or equalization thereof before the Manager shall be required to pay them, but in no event shall the Manager permit or allow title to the Assets to be lost as the result of the non-payment of any taxes, assessments, or like charges; and (iii) do all other acts reasonably necessary to maintain the Assets;
(g) the Manager shall: (i) apply for all necessary permits, licenses and approvals; (ii) comply with the Laws; (iii) notify promptly the Management Committee of any allegations of substantial violation thereof; and (iv) prepare and file all reports or notices required for Operations. In the event of any violation of permits, licenses or approvals, the Manager shall timely cure or dispose of such violation through performance, payment of fines and penalties, on both, and the cost thereof shall be charged to the Joint Account;
(h) the Manager shall notify the other Participant promptly of any litigation, arbitration, or administrative proceeding commenced against the Venture. The Manager shall prosecute and defend, but shall not initiate without consent of the Management Committee, all litigation or administrative proceedings arising out of Operations. The non-managing Participant shall have the right to participate, at its own expense, in such litigation or administrative proceedings. The Management Committee shall approve in advance any settlement involving payments, commitments or obligations in excess of $100,000 in cash or value;
(i) the Manager may dispose of Assets, whether by sale, assignment, abandonment or other transfer, in the ordinary course of business, except that Property may be abandoned or surrendered only as provided in 12. However, without prior authorization from the Management Committee, the Manager shall not: (i) dispose of Assets in any one transaction having a value in excess of $100,000; (ii) enter into any sales contracts or commitments for Products, except as permitted in §10.2; (iii) begin a liquidation of the Venture; or (iv) dispose of all or a substantial part of the Assets necessary to achieve the purposes of the Venture;
(j) the Manager shall have the right to carry out its responsibilities hereunder through agents, Affiliates or independent contractors;
(k) the Manager shall keep and maintain all required accounting and financial records pursuant to the Accounting Procedure and in accordance with generally accepted accounting procedures;
(l) the Manager shall select and employ at competitive rates all supervision and labour necessary or appropriate to all Operations hereunder. All persons employed hereunder, the number thereof; their hours of labour and their compensation shall be determined by the Manager, and they shall be employees of the Manager;
- 17 -
(m) the Manager shall keep the Management Committee advised of all Operations by submitting in writing to the Management Committee: (i) monthly progress reports within 20 days after the end of each month, which include statements of expenditures and comparisons of such expenditures to the adopted Budget; (ii) periodic summaries of data acquired; (iii) copies of reports concerning Operations; (iv) a detailed final report within 60 days after completion of each Program and Budget, which shall include comparisons between actual and budgeted expenditures; and (v) such other reports as the Management Committee may reasonably request. At all reasonable times, the Manager 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 information acquired in Operations, including but not limited to, maps, drill logs, core tests, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records. In addition, the Manager shall allow the non-managing Participant, at its sole risk and expense, and subject to reasonable safety regulations, to inspect the Assets and Operations at all reasonable times, so long as the inspecting Participant does not unreasonably interfere with Operations;
(n) the Manager shall provide insurance for the benefit of the Participants, in such amounts and of such nature as the Manager deems necessary to protect the Assets and Operations of the Venture;
(o) the Manager shall perform or cause to be performed all assessment and other work, and shall pay all Government Fees required by Law in order to maintain in good standing all mining leases, surface leases, Claims and other tenures included within the Property. The Manager shall have the right to perform the assessment work required hereunder pursuant to a common plan of exploration on other Property. The Manager shall not be liable on account of any determination by any court or governmental agency that the work performed by the Manager 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 pursuant to an adopted Program and Budget and is performed in accordance with the Manager's standard of care under §8.3. The Manager shall timely record and file with the appropriate governmental office any required affidavits, notices of intent to hold and other documents in proper form attesting to the payment of Government Fees and the performance of assessment work, in each case in sufficient detail to reflect compliance with the applicable requirements. The Manager shall not be liable on account of any determination by any court or governmental agency that any such document submitted by the Manager does not comply with applicable requirements, provided that such document is prepared and recorded or filed in accordance with the Manager's standard of care under §8.3;
- 18 -
(p) if authorized by the Management Committee, the Manager may: (i) locate, amend or relocate any mining claim, (ii) locate any fractions resulting from such amendment or relocation, and (iii) apply for patents or mining leases or other forms of mineral tenure for any such claims;
(q) the Manager shall prepare an Environmental Compliance plan for all Operations consistent with the requirements of any applicable Laws or contractual obligations and shall include in each Program and Budget sufficient funding to implement the Environmental Compliance plan and to satisfy the financial assurance requirements of any applicable Law or contractual obligation pertaining to Environmental Compliance. To the extent practical, the Environmental Compliance plan shall incorporate concurrent reclamation of Property disturbed by Operations;
(r) the funds that are to be deposited into the Environmental Compliance fund shall be maintained by the Manager in a separate, interest bearing cash management account, which may include, but is not limited to, money market investments and money market funds, and/or in longer term investments if approved by the Management Committee. Such funds shall be used solely for Environmental Compliance, including the committing of such funds, interests in property, insurance or bond policies, or other security to satisfy Laws regarding financial assurance for the reclamation or restoration of the Property, and for other Environmental Compliance requirements;
(s) the Manager shall undertake to perform Continuing Obligations when and as economic and appropriate, whether before or after termination of the Operations. The Manager shall have the right to delegate performance of Continuing Obligations to persons having demonstrated skill and experience in relevant disciplines. As part of each Program and Budget submittal, the manager shall specify in such Program and Budget the measures to be taken for performance of Continuing Obligations and the cost of such measures. The Manager shall keep the other Participant reasonably informed about the Manager's efforts to discharge Continuing Obligations. Authorized representatives of each Participant shall have the right from time to time to enter the Property to inspect work directed toward satisfaction of Continuing Obligations and audit books, records, and accounts related thereto;
(t) if Participating Interests are adjusted in accordance with this Agreement the Manager shall propose from time to time one or more methods for fairly allocating costs for Continuing Obligations;
(u) the Manager shall undertake all other activities reasonably necessary to fulfill the foregoing.
- 19-
Resignation; Deemed Offer to Resign
(a) the Participating Interest of the Manager (inclusive of any entity claiming through the Manager as provided in §14.2(g)) ceases to be the highest between the Participants, provided; however, that in the event the Manager transfers its Participating Interest to an Affiliate, such Affiliate shall automatically become the Manager; or
(b) the Manager fails to perform a material obligation imposed upon it under this Agreement, and such failure continues for a period of 60 days after notice from the other Participant demanding performance; or
(c) the Manager fails to pay its bills within 90 days after they are due, unless the Manager contests such bills in good faith; or
- 20 -
Under §(d), §(e) or §(f) above, any appointment of a successor Manager shall be deemed to pre-date the event causing a deemed offer of resignation.
8.5 The new Manager shall assume all of the rights, duties, liabilities and status of the previous Manager as provided in this Agreement. The new Manager shall have no obligation to hire or continue the employment of any of the employees of the former Manager resulting from this change of Manager.
8.6 On ceasing to be Manager, the former Manager shall immediately deliver to the person nominated for that purpose by the Management Committee, the custody of all the Property, books, records and other property both real and personal relating to this Agreement.
8.7 If the Manager resigns and no other party consents to act as Manager the Venture shall terminate.
8.8 The Manager shall be compensated for its services and reimbursed for its costs hereunder in accordance with the Accounting Procedure set forth in Exhibit C.
8.9 If the Manager engages Affiliates to provide services hereunder, it shall do so on terms no less favourable than would be the case with unrelated persons in arm's-length transactions.
8.10 The Manager is and shall act as an independent contractor and not as the agent of the other Participant. The Manager shall maintain complete control over its employees and all of its subcontractors with respect to performance of the Operations. Nothing contained in this Agreement or any subcontract awarded by the Manager shall create any contractual relationship between any subcontractor and the other Participant. The Manager shall have complete control over and supervision of Operations and shall direct and supervise the same so as to ensure their conformity with this Agreement.
- 21 -
Operations Pursuant to Programs and Budgets
9.1 Operations shall be conducted, expenses shall be incurred, and Assets shall be acquired only pursuant to Programs and Budgets approved pursuant to §9.2. Every Program and Budget adopted pursuant to this Agreement shall provide for accrual of reasonably anticipated Environmental Compliance expenses for all operations contemplated under the Program and Budget.
Presentation of Programs and Budgets
Adoption of Proposed Programs and Budgets
9.3 At the meeting convened to consider the proposed Program and Budget, the Management Committee shall consider and vote on the proposed Program and Budget.
- 22 -
If a Participant fails to provide notice to the Management Committee under this §9.4, the Participant will be deemed to have elected to contribute to such Program and Budget in proportion to its Participating Interest at the beginning of the Program period.
Budget Overruns; Program Changes
9.5 The Manager shall immediately notify the Management Committee of any material departure from an adopted Program. If the Manager exceeds the total of an adopted Program by more than ten percent (10%), the Manager shall immediately give written notice to the Participants contributing to that Program outlining the nature and extent of the additional costs and expenses (the "Program Overruns"). If Program Overruns are approved by the Participants contributing to that Program, then within 30 days after the receipt of a written request from the Manager, the Participants contributing to that Program shall provide the Manager with their respective shares of the Program Overruns. If Program Overruns are not approved by the Participants contributing to that Program, the Manager shall have the right, but not the obligation, to pay the Program Overruns, in which case, provided the Program Overruns result from work undertaken by an independent, third party contractor, the payment shall be considered to be a contribution to costs by the Manager; alternatively, the Manager shall have the right to curtail or abandon the Program.
9.7 Notwithstanding §9.1, if, in any year in which there is no Program adopted pursuant to this Agreement, circumstances are such that the Manager must incur costs in order to maintain tenure to the Property, to satisfy contractual obligations or obligations imposed by law, to prevent waste or to protect life and property (in this paragraph called the "non-discretionary costs"), the Manager shall immediately propose a program (in this paragraph called the "mandatory program") to incur those non-discretionary costs and provide each party with one copy of it. The mandatory program shall be deemed to be approved and each of the parties shall be obligated to contribute to the non-discretionary costs incurred in proportion to their respective Participating Interest within 30 days of receipt of the Manager's invoice
- 23 -
9.9 Subject to §6.3(c), if a Participant that fails to meet cash calls in the amount and at the times specified in §9.8 it shall be in default, and the amounts of the defaulted cash call shall bear interest from the date due at an annual rate equal to five percentage points over the prime rate in effect from time to time for demand, commercial loans quoted by Royal Bank of Canada at its main branch in Vancouver, British Columbia to its most credit-worthy customers or the maximum interest rate permitted by law, if less than this. Such interest shall accrue to the benefit of and be payable to the non-defaulting Participant, but shall not be deemed as amounts contributed by the non-defaulting Participant in the event dilution occurs in accordance with 6. The non-defaulting Participant shall have those rights, remedies and elections specified in §6.3, as well as any other rights and remedies available to it by law.
In addition each Participant shall have the right to conduct an independent audit of all books, records and accounts, at the expense of the requesting Participant, and which audit right will be limited to the period not more than twenty-four months prior to the date the audit is conducted. All exceptions to and claims upon the Manager for discrepancies disclosed by such audit shall be made in writing within three months after completion or delivery of such audit, or they shall be deemed waived.
- 24 -
Failure of Participant to Take in Kind
10.3 Neither Participant shall have any obligation to account to the other Participant for, nor have any interest or right of participation in any profits or proceeds, nor have any obligation to share in any losses from, future contracts, forward sales, trading inputs, calls, options or any similar hedging, price protection or marketing mechanism employed by a Participant with respect to its proportionate share of any Products produced or to be produced from the Property.
10.4 For purposes of determining the value of Mineral Products taken in kind pursuant to §10.1, each Participant's share of Products shall be valued at the time of delivery to the Participants at a value equal to that received by the other party for its share of the Products after deduction of:
(a) all smelting and other refining costs incurred with an independent third party smelter or other refining facility;
(b) all costs of transporting Products, including insurance, from the Property to the place of delivery designated by the purchaser of the Products;
(c) a reasonable charge for marketing Products as is consistent with generally accepted industry marketing practices; and
- 25 -
(c) all taxes (other than income taxes). royalties or other charges or imposts provided for pursuant to any law or legal obligation imposed by any government if paid by the Participant in connection with the disposition of Products taken in kind.
10.5 Any extra expenditure incurred by reason of the taking in kind or separate disposition by a Participant of its proportionate share of Products shall be borne by that Participant and that Participant shall he required to construct, operate and maintain, at its own expense, any and all facilities which may be necessary to receive, store and dispose of its share of Products, including any costs incurred in respect of security for receiving, storing or disposing of its share of Products.
10.7 Proceeds, if any, from the sale by the Manager of Products pursuant to §10.6 shall be calculated by the Manager separately for each Participant at the end of each calendar month and shall be paid monthly within 20 days after the end of each calendar month following payment to the Manager by each Participant of its respective cost share outstanding as at the end of that calendar month.
10.8 If the Manager, any Affiliate of the Manager, or any person with whom the Manager is not dealing at arm's length is a purchaser of Products from the Manager, and if the value of the Products is used to determine any matter arising under this paragraph, the Manager shall be required to receive competitive prices for all Products so sold.
10.9 The records relating to Products taken in kind or to the calculation of proceeds from the sale thereof shall be audited annually at the end of each fiscal year of the Manager and:
- 26 -
(a) any adjustments required by the audit shall be made immediately; and
(b) a copy of the audited statements shall be delivered to each of the Participants.
10.10 Any of the Participants shall, at reasonable times and on notice in writing to the Manager, have the right to inspect, audit and copy the Manager's accounts and records relating to the accounting for Products taken in kind or to the determination of proceeds from the sale thereof for any calendar year within twelve months following the end of the calendar year. All accounts and records shall be deemed to be correct and accurate unless questioned by a Participant within twelve months following the end of the calendar year to which the accounts relate. The Participants shall make all reasonable efforts to conduct audits in a manner which will result in a minimum of inconvenience to the Manager.
11. SUSPENSION AND TERMINATION
11.1 The Manager may, on at least 30 days' notice to all Participants, recommend that the Management Committee approve that Operations be suspended. The Manager's recommendation shall include a plan and budget (in this paragraph called the "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, cause the Manager to suspend Operations in accordance with the Manager's recommendation, with such changes to the Maintenance Plan as the Management Committee deems necessary. The Participants shall be committed to contribute their proportionate share of the costs incurred in connection with the Maintenance Plan. The Management Committee may cause Operations to be resumed at any time.
Termination of Operations Following Suspension
11.2 The Manager may, at any time following a period of at least 90 days during which Operations have been suspended, on at least 30 days' notice to all Participants, recommend that the Management Committee approve the permanent termination of Operations. The Manager's recommendation shall include a plan and budget (in this paragraph called the "Closure Plan"), in reasonable detail, of the activities to be performed to terminate Operations. The Management Committee may, by unanimous approval of the representatives of all Participants, approve the Manager's recommendation, with such changes to the Closure Plan as the Management Committee deems necessary.
11.3 The Participants may terminate the Venture at any time by written agreement.
Termination Where No Program Proposed
- 27 -
Disposition of Assets on Termination
Right to Data After Termination
(a) wind-up Operations; 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 Manager 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 both Participants and the Venture, encumber Assets, 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.
Survival of Ingress and Egress After Termination
- 28 -
12. ABANDONMENT AND SURRENDER OF PROPERTY
12.1 The Management Committee may authorize the Manager to surrender or abandon some 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 if the objecting party elects assign to the objecting Participant, by deed, assignment, or appropriate document, and without cost to the objecting 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. Provided, however, the objecting Participant shall assume all responsibility and liabilities, including but not limited to Environmental Liabilities, with regard to the surrendered or abandoned property.
13.1 A Participant may, at any time on notice, surrender its entire Participating Interest to the other Participant by giving that party notice of surrender, which notice shall:
(a) indicate a date for surrender not more than three months after the date on which the notice is given; and
(b) contain an undertaking that the surrendering party will:
(i) satisfy its proportionate share, based on its then Interest, of all obligations and liabilities which arose at any time prior to the date of surrender;
(ii) pay its proportionate share, based on its then Participating Interest, of the costs of rehabilitating the mine site and of reclamation as at the date of surrender; and
(iii) hold in confidence, for a period of two years from the date of surrender, all information and data which it acquired pursuant to this Agreement.
13.2 On the surrender of its entire Participating Interest and on delivery of a release in writing, in form acceptable to counsel for the Manager, releasing the other parties from all claims and demands under this agreement, the surrendering party shall be relieved of all obligations or liabilities except for those which arose or accrued or were accruing due on or before the date of the surrender.
13.3 A Participant to whom a notice of surrender has been given may elect, by notice within 90 days to the party which first gave the notice, to accept the surrender, or to join in the surrender. If all of the parties join in the surrender the Venture shall be terminated.
- 29 -
13.4 The surrendering Participant shall remain obligated to execute and deliver those instruments as may be necessary to formally effect the transfer of its Participating Interest to the other Participant.
Limitations on Free Transferability
14.2 The transfer right of a Participant in §14.1 shall be subject to the following terms and conditions:
(a) no Participant shall transfer any interest in this Agreement or the Assets (including but not limited to any royalty, profits or other interest in the Products) except by transfer of part or all of a Participating Interest;
(c) no transfer permitted by this 14 shall relieve the transferring Participant of its share of any liability, whether accruing before or after such transfer, which arises out of Operations conducted prior to such transfer;
(d) neither Participant, without the consent of the other, shall make a transfer that would violate any Law, or result in the cancellation of any permits, licenses, or other similar authorizations;
(e) the transferring Participant and the transferee shall bear all tax consequences of the transfer;
(f) such transfer shall be subject to a pre-emptive right in the other Participant as provided in §14.3;
- 30 -
(c) If the Transferring Entity falls to consummate the transfer to a third party within the period set forth in §(b), the pre-emptive right of the other Participant in such offered interest shall be deemed to be revived. Any subsequent proposal to transfer such interest shall be conducted in accordance with all of the procedures set forth in this §14.3.
- 31-
Exceptions to Pre-emptive Right
14.4 Section 14.3 shall not apply to:
(a) the transfer by either Participant of all or any part of its Participating Interest to an Affiliate provided that such Affiliate remains an Affiliate of the Participant for a period of not less than three years;
(b) corporate consolidation or reorganization of either Participant by which the surviving entity shall possess substantially all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of that Participant;
(c) corporate merger or amalgamation involving either Participant by which the surviving entity or amalgamated company shall possess all of the stock or all of the property rights and interests, and be subject to substantially all of the liabilities and obligations of that Participant; provided, however, that the value of the merging or amalgamating Participant's interest in the Assets, evidenced by its Initial Contribution and all subsequent contributions under approved Programs and Budgets, does not exceed thirty percent (30%) of the Net Worth of the surviving entity or amalgamated company;
(d) the transfer of Control of either Participant by an Affiliate to such Participant or to another Affiliate;
(e) the creation by any Affiliate of either Participant of an Encumbrance affecting its Control of such Participant;
(f) a sale or other commitment or disposition of Products or proceeds from sale of Products by either Participant upon distribution to it pursuant to 10 of the Agreement; or
(g) a transfer by an Affiliate of a Participant (whether an original party to this Agreement or Participant by virtue of §14.2(b)) of Control of such Participant to a third party, provided such Participant's interest in the Assets, as evidenced by its Initial Contribution and all subsequent contributions under approved Programs and Budgets, does not exceed thirty percent (30%) of the Net Worth of the transferring Affiliate, or does not exceed 30% of the Net Worth of Transferee.
For purposes hereof the term "Net Worth" shall mean the remainder after total liabilities are deducted from total assets. In the case of a corporation, Net Worth includes both capital stock and surplus. In the case of a limited liability company, Net Worth includes member contributions. In the case of a partnership or sole proprietorship, Net Worth includes the original investment plus accumulated and reinvested profits.
- 32 -
(a) the Chargee shall not enter into possession or institute any proceedings for foreclosure or partition of the encumbering Participant's Participating Interest and that such Encumbrance shall be subject to the provisions of this Agreement;
(b) the Chargee's remedies under the Encumbrance shall be limited to the sale of the whole (but only of the whole) of the encumbering Participant's Participating Interest to the other Participant, or, failing such a sale, at a public auction to be held at least 45 days after prior notice to the other Participant, such sale to be subject to the purchaser entering into a written agreement with the other Participant whereby such purchaser assumes all obligations of the encumbering Participant under the terms of this Agreement. The price of any pre-emptive sale to the other Participant shall be the remaining principal amount of the loan plus accrued interest and related expenses, and such pre-emptive sale shall occur within 60 days of the Chargee's notice to the other Participant of its intent to sell the encumbering Participant's Participating Interest. Failure of a sale to the other Participant to close by the end of such period, unless failure is caused by the encumbering Participant or by the Chargee, shall permit the Chargee to sell the encumbering Participant's Participating Interest at a public sale; and
(c) the charge shall be subordinate to any then-existing debt, including project financing previously approved by the Management Committee, encumbering the transferring Participant's Participating Interest.
14. ACQUISITION WITHIN AREA OF INTEREST
15.1 Any interest or right to acquire any interest in real property within the Area of Interest acquired while this Agreement is in effect by or on behalf of a Participant or any Affiliate shall be subject to the terms and provisions of this Agreement. This section shall apply to any property previously abandoned under 12.
Notice to Non-Acquiring Participant
15.2 Within ten days after the acquisition of any interest or the right to acquire any interest in real property or water rights wholly or partially within the Area of Interest (except real property acquired by the Manager pursuant to a Program), the acquiring Participant shall notify the other Participant of such acquisition by it or its Affiliate. If the acquisition of any interest pertains to real property or water rights partially within the Area of Interest, then all property subject to the acquisition shall be subject to this 15. The acquiring Participant's notice shall describe in detail the acquisition, the lands and minerals covered thereby, the costs thereof and the reasons why the acquiring Participant believes that the acquisition is in the best interests of the Participants under this Agreement. In addition to such notice, the acquiring Participant shall make any and all information concerning the acquired interest available for inspection by the other Participant.
- 33 -
15.4 If the other Participant does not give notice within the 30 day period set forth in §15.3, it shall have no interest in the acquired interest, and the acquired interest shall not be a part of the Property or be subject to this Agreement.
16.1 All notices, payments and other required communications ("Notices") to the Participants shall be in writing, and shall be given (i) by personal delivery to the Participant, or (ii) by electronic communication, with a confirmation sent by registered or certified mail, return receipt requested, or (iii) by registered or certified mail, return receipt requested.
All Notices shall be effective and shall be deemed delivered (i) if by personal delivery on the date of delivery, (ii) if by electronic communication on the date of receipt of the electronic communication, and (iii) if solely by mail on the day delivered as shown on the actual receipt. A Participant may change its address from time-to-time by Notice to the other Participant.
(a) Notice to War Eagle shall be sent to:
War Eagle Mining Company Inc.
Sutie 000, 000 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0XX
- 34 -
Attention: Xxxxxxxx Xxxxxx, President
Fax: (000) 000-0000
with a copy to:
u
(b) Notice to Revelstoke shall be sent to:
Revelstoke Industries, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx, X.X.X., 00000
Attention: Xxxxxx Xxxxxxx, President
Fax: (000) 000-0000
with a copy to:
Lang Xxxxxxxx LLP
Suite 1500, 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
Attention: Xxxxxx X. Deutsch
Fax: (000) 000-0000
16.2 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 hereof 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.
16.3 No modification of this Agreement shall be valid unless made in writing and duly executed by the Participants.
16.4 The obligations of a Participant, other than the payment of money provided hereunder, shall be suspended to the extent and for the period that performance is prevented or delayed 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, 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 Environmental Laws; action or inaction by any governmental entity that delays or prevents the issuance or granting of any approval or authorization required to conduct Operations; 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; actions by citizen groups, including but not limited to environmental organizations or native rights groups; 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 pursuant to §9.7 shall be reduced to levels consistent with Operations.
- 35 -
Survival of Terms and Conditions
16.5 The following Sections shall survive the transfer of any interests in the Assets under this Agreement or the termination of the Venture to the full extent necessary for their enforcement and the protection of the Participant in whose favour they run: §2.1, §2.2, §4.2, §6.3, §6.5, §9.9, §11.5, §11.6, §11.7, §11.8 and §11.9.
Confidentiality and Public Statements
The foregoing restrictions shall not apply to the disclosure of Confidential Information to any Affiliate, to any public or private financing agency or institution, to any contractors or subcontractors which the Participants may engage and to employees and consultants of the Participants or to any third party to which a Participant contemplates the transfer, sale, assignment, Encumbrance or other disposition of all or part of its Participating Interest pursuant to 14 or with which a Participant or its Affiliate contemplates a merger, amalgamation or other corporate reorganization; provided, however, that in any such case only such Confidential Information as such third party shall have a legitimate business need to know shall be disclosed and the person or company to whom disclosure is made shall first undertake in writing to protect the confidential nature of such information at least to the same extent as the parties are obligated under this §16.6.
In the event that a Participant is required to disclose Confidential Information to any government, any court, or any agency or department thereof to the extent required by applicable law, rule or regulation, or in response to a legitimate request for such Confidential Information, the Participant so required shall immediately notify the other Participants hereto of such requirement and the terms thereof, and the proposed form and content of the disclosure prior to such submission. The other Participant shall have the right to review and comment upon the form and content of the disclosure and to object to such disclosure to the court, agency, exchange or department concerned, and to seek confidential treatment of any Confidential Information to be disclosed on such terms as such Participant shall, in its sole discretion, determine.
- 36 -
For greater certainty, in the event a party is required or wishes to issue a press release containing Confidential Information, it shall provide the other party with a draft of the intended release for review and comment within one Business Day; the other party shall have the rights to object and withhold its consent set forth above acting reasonably but if no comment is provided within such time, the party will be free to issue the press release.
The provisions of this §16.6 shall apply during the term of this Agreement and for a period of three years thereafter and shall continue to apply to any Participant which forfeits, surrenders, assigns, transfers or otherwise disposes of its Participating Interest for such three year period.
Entire Agreement; Successors and Assigns
16.7 This Agreement contains the entire understanding of the Participants and supersedes all prior agreements and understandings, whether written or oral, between the Participants relating to the subject matter hereof, with respect to the Assets subject hereto, and any and all other prior negotiations, representations, offers or understandings between War Eagle and Revelstoke relating to the Property, whether written or oral. This Agreement and the obligations and rights created herein shall be binding upon and enure to the benefit of the respective successors and permitted assigns of the Participants.
16.8 The parties agree that all questions or matters in dispute with respect to any of the provisions of this agreement shall be submitted to arbitration on the following basis:
(a) it is a condition precedent to the right of either party to submit any matter to arbitration pursuant to the provisions hereof that such party shall have given not less than 30 days prior written notice of its intention to do so to the other party together with particulars of the matter in dispute; on the expiration of such 30 days, the party which gave such notice may proceed to refer the dispute to arbitration as provided for in sub-paragraph §(b) below;
(b) the party desiring arbitration shall appoint one arbitrator, and shall notify the other party of such appointment, and the other party shall, within 15 days after receiving such notice, appoint an arbitrator, and the two arbitrators so named before proceeding to act, shall, within 15 days of the appointment of the last appointed arbitrator, unanimously agree on the appointment of a third arbitrator to act with them and to be the chairman of the arbitration herein provided for. If the other party shall fail to appoint an arbitrator within 15 days after receiving notice of the appointment of the first arbitrator, or if the two arbitrators appointed by the parties shall be unable to agree on the appointment of the chairman, the chairman shall be appointed under the provisions of the Commercial Arbitration Act (British Columbia). Except as specifically otherwise provided in this subparagraph (b), the arbitration herein provided for shall be conducted in accordance with such Act. The chairman shall fix a time and place in Vancouver, British Columbia for the purpose of hearing the evidence and representations of the parties, and he shall provide over the arbitration and determine all questions of procedure not provided for under such Act or this sub-paragraph. After hearing any evidence and representations that the parties may submit, the arbitrators shall make and award and reduce the same to writing, and deliver one copy thereof to each of the parties. The expense of the arbitration shall be as specified in the award; and
- 37 -
(c) the parties agree that the award of a majority of the arbitrators shall be final and binding upon each of them.
16.9 Each Participant shall take, from time to time and without additional consideration, such further 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.
16.10 The headings to the Sections of this Agreement and the Exhibits are inserted for convenience only and shall not affect the construction hereof.
16.11 All currency amounts herein shall be as between the parties expressed in Canadian dollars.
16.12 If any provision of this Agreement is or shall become illegal, invalid, or unenforceable, in whole or in part, the remaining provisions shall nevertheless be and remain valid and enforceable and the said remaining provisions shall be construed as if this Agreement had been executed without the illegal, invalid, or unenforceable portion.
16.13 Each Participant shall be directly responsible for and shall directly pay all taxes applicable to revenues received by the Participant through Operations under this Agreement. In particular, each Participant shall individually file its tax returns with the proper authorities and independently file claims for and recover any income tax credits. A Participant's decisions with respect to such tax matters shall not have any binding effect on the course of actions taken by the other Participant. All costs of Operations incurred hereunder shall be for the account of the Participant or Participants making or incurring the same, if more than one then in proportion to their respective Participating Interests, and each Participant on whose behalf any costs have been so incurred shall be entitled to claim all tax benefits, write-offs and deductions with respect thereto.
- 38 -
16.14 If any provision of this Agreement should violate any rule against perpetuities or any related rule against interests that last too long or are not alienable, then any such provision shall terminate 20 years after the death of the last survivor of all the lineal descendants of His late Majesty King Xxxxxx V of England, living on the date of execution of this Agreement.
16.15 Each of the parties waives, during the term of this Agreement, any right to partition of the Assets or any part thereof and no party shall seek or be entitled to partition of the Property or other Assets whether by way of physical partition, judicial sale or otherwise during the term of this Agreement.
16.17 This Agreement shall be construed and governed by the laws of British Columbia and the laws of Canada applicable therein and the parties hereby attorn to the jurisdiction of the Courts of British Columbia in respect of all matters arising hereunder.
16.18 This Agreement and any other writing delivered pursuant hereto may be executed in any number of counterparts with the same effect as if all parties to this Agreement or such other writing had signed the same document and all counterparts will be construed together and will constitute one in the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
WAR EAGLE MINING COMPANY INC.
Per: ____________________________
Authorized Signatory
Per: ____________________________
Authorized Signatory
__________
EXHIBIT A
This is Exhibit A of Schedule B to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
Mineral Claims Comprising The Property
The following are the mineral claims comprising the Property, located on NTS Sheet G3-M-11 and within the Province of Saskatchewan, approximately 000 xxxxxxxxxx xxxxxxxxx xx Xx Ronge and comprising a total of 979 hectares.
|
Claim Name |
Registered Owner |
|
S-106844 S-106688 S-106689 S-108491 S-108619 S-108618 S-108619 |
Bullion Fund Inc.* Bullion Fund Inc.* Bullion Fund Inc.* War Eagle Mining Company Inc. War Eagle Mining Company Inc. War Eagle Mining Company Inc. War Eagle Mining Company Inc. |
* Beneficially owned by War Eagle Mining Company Inc. with title currently held by Bullion Fund Inc.
__________
EXHIBIT B
This is Exhibit B of Schedule B to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
AREA OF INTEREST
Area of Interest means the Property and all lands within the area included within ten kilometres of the boundaries of the Property (as detailed in the specific description of the mineral claims attached hereto as Schedule A).
[Insert map]
__________
EXHIBIT C
This is Exhibit C of Schedule B to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
ACCOUNTING PROCEDURE
The financial and accounting procedures to be followed by the Manager and the Participants under the Agreement are set forth below. Reference in this Accounting Procedure to Sections are to those located in this Accounting Procedure unless it is expressly stated that they are references to the Agreement.
The purpose of this Accounting Procedure is to establish equitable methods for determining charges and credits applicable to operations under the Agreement. It is the intent of the Participants that none of them shall lose or profit by reason of their duties and responsibilities as the Manager. The Participants shall meet and in good faith endeavour to agree upon changes deemed necessary to correct any unfairness or inequity. In the event of a conflict between the provisions of this Accounting Procedure and those of the Agreement, the provisions of the Agreement shall control.
1. GENERAL PROVISIONS
1.1 General Accounting Records
The Manager shall maintain detailed and comprehensive accounting records in accordance with this Accounting Procedure, 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
After the decision is made to begin Development, the Manager shall maintain one or more separate bank accounts for the payment of all expenses and the deposit of all receipts.
2. CHARGES TO JOINT ACCOUNT
Subject to the limitations hereinafter set forth, the Manager shall charge the Joint Account with the following:
- 2 -
2.1 Rentals and Other Payments
Property maintenance costs and other payments, including Government Fees and any other payments pursuant to the Mineral Property Option Agreement, necessary to maintain title to the Assets.
2.2 Labour and Employee Benefits
- Salaries and wages of the Manager's employees directly engaged in Operations, including salaries or wages of employees who are temporarily assigned to and directly employed by the Manager.
- The Manager's cost of holiday, vacation, sickness and disability benefits, and other customary allowances applicable to the salaries and wages chargeable under Sections 2.2(a) and 2.13.
- The Manager'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 §2.2(a) or 2.13, rather than employees' benefit plans) and other benefit plans of a like nature applicable to salaries and wages chargeable under §2.2(a) or 2.13, provided that the plans are limited to the extent feasible to those customary in the industry.
- Cost of assessments imposed by governmental authority which are applicable to salaries and wages chargeable under Sections 2.2(a) and 2.13, including all penalties except those resulting from the wilful misconduct or gross negligence of the Manager.
- Those costs in Sections 2.2(b), 2.2(c), 2.2(d) 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 be applied to wages or salaries excluding overtime and bonuses. Such rate shall be based on the Manager's cost experience and it shall be periodically adjusted to ensure that the total of such charges does not exceed the actual cost thereof to the Manager.
2.3 Assets
Cost of all Assets purchased or furnished.
2.4 Transportation
Reasonable costs incurred in connection with the transportation of employees, equipment, material and supplies necessary for exploration, maintenance and operation of Assets.
- 3 -
2.5 Services
- The cost of contract services and utilities procured from outside sources, other than services described in Sections 2.10 and 2.14. If contract services are performed by an Affiliate of the Manager, 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.
- The costs of using the Manager's exclusively-owned facilities in support of Venture activities provided that the charges may not exceed those currently prevailing in the vicinity. Such costs shall include costs of maintenance, repairs, other operating expenses, insurance, taxes, depreciation and interest at a rate not to exceed Prime Rate plus three percent (3%) per annum.
2.6 Materials, Equipment and Supplies
The cost of materials, equipment and supplies (herein called "Material") purchased from unaffiliated third parties or furnished by either Participant as provided in Section 3. The Manager shall purchase or furnish only so much Material as may be required for use in efficient and economical Operations. The Manager shall also maintain inventory levels of Materials at reasonable levels to avoid unnecessary accumulation of surplus stock.
2.7 Environmental Compliance Fund
Costs of reasonably anticipated Environmental Compliance which, on a Program basis, shall be determined by the Management Committee and shall be based on proportionate contributions in an amount sufficient to establish a fund, which through successive proportionate contributions during the duration of the Agreement, will pay for ongoing Environmental Compliance conducted during Operations and which will cover the reasonably anticipated costs of mine closure, post-Operations Environmental Compliance and other continuing obligations.
2.8 Insurance Premiums
Premiums paid or accrued for insurance required for the protection of the Participants.
2.9 Damages and Losses
All costs in excess of insurance proceeds necessary to repair or replace damage or losses to any Assets resulting from any cause other than the wilful misconduct or gross negligence of the Manager.
2.10 Legal Expense
All legal costs and expenses incurred in or resulting from the Operations or necessary to protect or recover the Assets. Routine legal expenses are included under Section 2.14.
- 4 -
2.11 Audit
Cost of annual audits under §9.10 of the Joint Venture Agreement.
2.12 Taxes
All taxes (except income taxes) of every kind and nature assessed or levied upon or in connection with the Assets, the production of Products or Operations, which have been paid by the Manager for the benefit of the Participants. Each Participant is separately responsible for income taxes which are attributable to its respective Participating Interest.
2.13 District and Camp Expense (Field Supervision and Camp Expenses)
A pro rata portion of (i) the salaries and expenses of the Manager'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 (hereafter, "the Manager'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. Such charges shall be apportioned for all Property served by the employees and facilities on an equitable basis consistent with the Manager's general accounting practice and generally accepted accounting principles.
2.14 Administrative Charge
After the Participants have made their entire Initial Contributions pursuant to Sections 5.1 and 5.2 of the Joint Venture Agreement, the Manager shall charge the Joint Account each month a sum as provided below, which shall be a liquidated amount to reimburse the Manager for its home office overhead and general and administrative expenses for its conduct of Operations, which shall be in lieu of any management fee:
- with respect to Operations before commencement of Development, the Manager's fee shall be ten percent (10%) of the Allowable Costs other than funds expended pursuant to any individual contract for materials or services which exceed in the aggregate $35,000.00 in any Program year, for which the Manager's fee shall be two percent (2%);
- with respect to operations after the commencement of Development but before commencement of Mining, Manager's fee shall be five percent (5%) of Allowable Costs other than funds expended pursuant to any individual contract for materials or services which exceeds in the aggregate $100,000 in any program year in which event the fee for such matters shall be two percent (2%);
These fee rates are based upon the principle that the Manager shall not make a profit or loss from this administrative charge but should be fairly and adequately compensated for the pro rata share of its costs and expenses. The specific rates provided for in this Section 2.14 shall be established and may be amended from time to time by mutual agreement among the Parties hereto if, in practice, the rates are found to be insufficient or excessive.
- 5 -
Allowable Costs as used in this Section 2.14 shall include all amounts accrued to the Environmental Compliance fund, and all charges to the Joint Account except (i) the administrative charge defined herein; (ii) depreciation, depletion or amortization of tangible or intangible assets; (iii) amounts expended for acquisition, construction or installation of tangible or intangible assets after mining operations have commenced; (iv) Property payments, taxes and assessments; and (v) funds disbursed from the Environmental Compliance fund.
The following representative list of items comprising the Manager's principal business office expenses are expressly covered by the administrative charge provided in this Section 2.14:
- administrative supervision, which includes services rendered by officers and directors of the Manager for Operations, except to the extent that such services represent a direct charge to the Joint Account, as provided for in Section 2.2;
- accounting, billing and record keeping in accordance with governmental regulations and the provisions of the Joint Venture Agreement;
- handling of 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;
- routine legal services by the Manager's in-house legal staff, and
- records and storage space, telephone service and office supplies.
2.15 Other Expenditures
Any reasonable direct expenditure, other than expenditures which are covered by the foregoing provisions, incurred by the Manager for the necessary and proper conduct of Operations.
3. BASIS OF CHARGES TO JOINT ACCOUNT
3.1 Purchases
Material purchased and services procured shall be charged at prices paid by the Manager after deduction of all discounts actually received.
3.2 Material Furnished by the Manager
At its discretion, the Manager may furnish Material from the Manager's stocks under the following conditions:
- 6 -
(a) New Material (Condition "A"): New Material transferred from the Manager's Property shall be priced f.o.b. the nearest reputable supply store or railway receiving point, where like Material is available, at current replacement cost of the same kind of Material (hereafter, "New Price").
(b) Used Material (Conditions "B" and "C"):
(i) material in sound and serviceable condition and suitable for reuse without reconditioning shall be classified as Condition "B" and priced at seventy-five percent (75%) of New Price.
(ii) other used Material as defined hereafter shall be classified as Condition "C" and priced at fifty percent (50%) of New Price:
(A) used Material which after reconditioning will be further serviceable for original function as good second-hand Material (Condition "B");
(B) used Material which is serviceable for original function but not substantially suitable for reconditioning;
(C) Material which cannot be classified as Condition "B" or Condition "C" shall be priced at a value commensurate with its use;
(D) 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 purpose.
3.3 Premium Prices
Whenever Material is not readily obtainable at prices specified in Sections 3.1 and 3.2, the Manager may charge the Joint Account for the required Material on the basis of the Manager's direct cost and expenses incurred in procuring such material; provided, however, that prior notice of the proposed charge is given to the Participants, whereupon any Participant shall have the right, by notifying the Manager within ten days of the delivery of the notice from the Manager, to furnish at the usual receiving point all or part of its share of Material suitable for use and acceptable to the Manager. If a Participant so furnishes Material in kind, the Manager shall make appropriate credits to its account.
3.4 Warranty of Material Furnished by the Manager or Participants
Neither the Manager nor any Participant warrants the Material furnished beyond any dealer's or manufacturer's warranty.
4. DISPOSAL OF MATERIAL
4.1 Disposition Generally
The Manager 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 Manager shall have the right to dispose of normal accumulations of junk and scrap Material either by transfer to the Participants as provided in §4.2 or by sale. The Manager shall credit the Participants in proportion to their Participating Interest for all Material sold hereunder.
- 7 -
4.2 Division in Kind
Division of Material in kind between the Participants shall be in proportion to their respective Participating Interests, and corresponding credits shall be made to the Joint Account.
4.3 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 Manager, which shall include all such Material as is ordinarily considered controllable by operators of mining Property. The expense of conducting such periodic inventories shall be charged to the Joint Account.
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 determined by the Manager. Inventory adjustments shall be made by the Manager to the Joint Account for overages and shortages, but the Manager shall be held accountable to the Venture only for shortages due to lack of reasonable diligence.
__________
EXHIBIT D
This is Exhibit D of Schedule B to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
NET RETURNS
Pursuant to the Agreement to which this Exhibit is attached, a party ("Payee") may be entitled to a royalty equal to five percent (5%) of net returns (the "Net Returns Royalty") payable by the other party ("Payor") as set forth below.
Net Returns Royalty
A. "Net Returns Royalty" means the aggregate of:
- all revenues from the sale or other disposition of ores, concentrates or minerals produced from the Property; and
- all revenues from the operation, sale or other disposition of any facilities the cost of which is included in the definition of "Operating Expenses", "Capital Expenses", or "Exploration Expenses"
less (without duplication) Working Capital, Operating Expenses, Capital Expenses and Exploration Expenses.
B. "Working Capital" means the amount reasonably necessary to provide for the operation of the mining operation on the Property and for the operation and maintenance of the Facilities for a period of six months.
C. "Operating Expenses" means all costs, expenses, obligations, liabilities and charges of whatsoever nature or kind incurred or chargeable directly or indirectly in connection with Commercial Production from the Property and in connection with the maintenance and operation of the Facilities, all in accordance with generally accepted accounting principles, consistently applied, including, without limiting the generality of the foregoing, all amounts payable in connection with mining, handling, processing, refining, transporting and marketing of ore, concentrates, metals, minerals and other products produced from the Property, all amounts payable for the operation and maintenance of the Facilities including the replacement of items which by their nature require periodic replacement, all taxes (other than income taxes), royalties and other imposts and all amounts payable or chargeable in respect of reasonable overhead and administrative services.
D. "Capital Expenses" means all expenses, obligations and liabilities of whatsoever kind (being of a capital nature in accordance with generally accepted accounting principles) incurred or chargeable, directly or indirectly, with respect to the development, acquisition, redevelopment, modernization and expansion of the Property and the Facilities, including, without limiting the generality of the foregoing, interest thereon from the time so incurred or chargeable at a rate per annum from time to time equal to prime rate established by the Royal Bank of Canada, Main Branch in Vancouver, British Columbia plus 2 percent per annum, but does not include Operating Expenses nor Exploration Expenses.
- 9 -
E. "Exploration Expenses" means all costs, expenses, obligations, liabilities and charges of whatsoever nature or kind incurred or chargeable, directly or indirectly, in connection with the exploration and development of the Property including, without limiting the generality of the foregoing, all costs reasonably attributable, in accordance with generally accepted accounting principles, to the design, planning, testing, financing, administration, marketing, engineering, legal, accounting, transportation and other incidental functions associated with the exploration and mining operation contemplated by this agreement and with the Facilities, but does not include Operating Expenses nor Capital Expenses.
F. "Facilities" means all plant, equipment, structures, roads, rail lines, storage and transport facilities, housing and service structures, real property or interest therein, whether on the Property or not, acquired or constructed exclusively for the mining operation on the Property contemplated by this Agreement (all commonly referred to as "infrastructure").
G. "Commercial Production" means the operation of the Property or any portion thereof as a producing mine and the production of mineral products therefrom (but does not include bulk sampling, pilot plant or test operations).
Payment
Net Returns shall be calculated for each calendar quarter in which Net Returns are realized, and payment as due hereunder shall be made within 30 days following the end of each such calendar quarter. Such payments shall be accompanied by a statement summarizing the computation of Net Returns and copies of all relevant settlement sheets. Such quarterly payments are provisional and subject to adjustment within 90 days following the end of each calendar year. Within ninety days after the end of each calendar year, Payor shall deliver to Payee an unaudited statement of royalties paid to Payee during the year and the calculation thereof. All year end statements shall be deemed true and correct six months after presentation, unless within that period Payee delivers notice to Payor specifying with particularity the grounds for each exception. Payee shall be entitled, at Payees's expense, to an annual independent audit of the statement by a national firm of chartered accountants, only if Payee delivers a demand for an audit to Payor within four months after presentation of the related year-end statement.
__________
SCHEDULE C
This is Schedule C to that certain Mineral Property Option Agreement between War Eagle Mining Company Inc. and Revelstoke Industries Inc. dated for reference as of 20th day of October, 2006.
THIRD PARTY INTEREST
[Insert]
__________
