Exhibit 10.2
========================================================================
This is an accurate certified copy.
Date 10/4/96
Signed /s/ Xxxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxxx X. Xxxxxxxx Corporate Secretary
Idaho Consolidated Metals Corporation
========================================================================
JOINT VENTURE AGREEMENT
Dated May 20, 1996
BETWEEN
IDAHO CONSOLIDATED METALS CORPORATION
AND
CYPRUS GOLD EXPLORATION CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS..................................................................................2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES: TITLE TO ASSETS..............................................6
2.1 Capacity of Participants.....................................................................6
2.2 Representations and Warranties...............................................................7
2.3 Representations and Warranties...............................................................8
2.4 Disclosures..................................................................................9
2.5 Record Title.................................................................................9
2.6 Joint Loss of Title..........................................................................9
ARTICLE 3 NAME, PURPOSES AND TERM......................................................................9
3.1 General......................................................................................9
3.2 Name........................................................................................10
3.3 Purposes....................................................................................10
3.4 Limitation..................................................................................10
ARTICLE 4 RELATIONSHIP OF THE PARTICIPANTS............................................................10
4.1 No Partnership..............................................................................10
4.2 U.S. Tax Elections and Allocations..........................................................11
4.3 Other Business Opportunities................................................................11
4.4 Waiver of Right to Partition................................................................12
4.5 Implied Covenants...........................................................................12
ARTICLE 5 CONTRIBUTIONS BY PARTICIPANTS...............................................................12
5.1 Participants' Initial Contributions.........................................................12
5.2 Failure to Make Initial Contributions.......................................................12
5.3 Obligations Prior to Earn-in................................................................13
5.4 Additional Cash Contributions...............................................................14
5.5 Earn-In.....................................................................................14
5.6 Additional Interest.........................................................................14
5.7 Reports.....................................................................................15
5.8 Development by ICMC.........................................................................15
ARTICLE 6 INTERESTS OF PARTICIPANTS:
DEFAULTS AND REMEDIES: FINANCING............................................................16
6.1 Participating Interests.....................................................................16
6.2 Changes in Participating Interests..........................................................18
6.3 Voluntary Reduction in Participation........................................................15
6.4 Default In Making Contributions.............................................................19
6.5 Conversion of Interest......................................................................20
6.6 Continuing Liabilities Upon Adjustments of Participating
Interests...................................................................................20
6.7 Financing by Cyprus.........................................................................21
i
TABLE OF CONTENTS
(Continued)
Page
ARTICLE 7 MANAGEMENT COMMITTEE........................................................................22
7.1 Organization and Composition................................................................22
7.2 Decisions...................................................................................22
7.3 Meetings....................................................................................23
7.4 Action Without Meeting......................................................................23
7.5 Matters Requiring Approval..................................................................23
ARTICLE 8 MANAGER.....................................................................................24
8.1 Appointment.................................................................................24
8.2 Powers and Duties of Manager................................................................24
8.3 Standard of Care............................................................................27
8.4 Resignation; Deemed Offer to Resign.........................................................27
8.5 Payments to Manager.........................................................................28
8.6 Transactions With Affiliates................................................................28
8.7 Activities During Deadlock..................................................................28
ARTICLE 9 PROGRAMS AND BUDGETS........................................................................29
9.1 Initial Program and Budget..................................................................29
9.2 Operations Pursuant to Programs and Budget..................................................29
9.3 Presentation of Programs and Budget.........................................................29
9.4 Review and Approval of Proposed Programs and
Budgets.....................................................................................29
9.5 Election to Participate.....................................................................30
9.6 Deadlock on Proposed Program and Budgets....................................................30
9.7 Budget Overruns; Program Changes............................................................30
9.8 Emergency or Unexpected Expenditures........................................................30
ARTICLE 10 ACCOUNTS AND SETTLEMENTS....................................................................31
ARTICLE 11 DISPOSITION OF PRODUCTION...................................................................31
11.1 Taking in Kind..............................................................................31
11.2 Failure of Participant to Take In Kind......................................................31
ARTICLE 12 WITHDRAWAL AND TERMINATION..................................................................32
12.1 Termination by Expiration or Agreement......................................................32
12.2 Withdrawal..................................................................................32
12.3 Continuing Obligations......................................................................32
12.4 Disposition of Assets on Termination........................................................33
12.5 Right to Data after Termination.............................................................33
12.6 Continuing Authority........................................................................33
12.7 Non-Compete Covenants.......................................................................34
12.8 Mutual Withdrawal...........................................................................34
ii
TABLE OF CONTENTS
(Continued)
Page
ARTICLE 13 SURRENDER OF PROPERTY.......................................................................35
13.1 Surrender of Property.......................................................................35
13.2 Reacquisition...............................................................................35
ARTICLE 14 TRANSFER OF INTEREST........................................................................35
14.1 General.....................................................................................35
14.2 Limitations on Free Transferability.........................................................35
14.3 Right of First Refusal......................................................................37
14.4 Exceptions to Right of First Refusal........................................................37
ARTICLE 15 CONFIDENTIALITY AND RELEASES................................................................38
15.1 General.....................................................................................38
15.2 Exceptions..................................................................................38
15.3 Duration of Confidentiality.................................................................39
15.4 Releases....................................................................................39
ARTICLE 16 AREA OFINTEREST.............................................................................39
16.1 Acquisitions in Area of Interest...........................................................39
ARTICLE 17 GENERAL PROVISIONS..........................................................................40
17.1 Notices.....................................................................................40
17.2 Waiver......................................................................................41
17.3 Modification................................................................................41
17.4 Force Majeure...............................................................................41
17.5 Economic Force Majeure......................................................................42
17.6 Governing Law...............................................................................42
17.7 Rule Against Perpetuities...................................................................43
17.8 Further Assurances..........................................................................43
17.9 Survival of Terms and Conditions............................................................43
17.10 Entire Agreement; Successors and Assigns....................................................43
17.11 Memorandum..................................................................................43
17.12 Funds.......................................................................................43
iii
JOINT VENTURE AGREEMENT
THIS AGREEMENT, made effective as of May 20, 1996 between IDAHO
CONSOLIDATED METALS CORPORATION ("ICMC") with an address of X.X. Xxx 0000,
Xxxxxxxx, Xxxxx 00000 and CYPRUS GOLD EXPLORATION CORPORATION ("Cyprus") with an
address of 0000 Xxxx Xxxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxxxx, Xxxxxxxx
00000-0000.
RECITALS
A. ICMC owns and/or controls one hundred percent (100%) interest in certain
unpatented mining claims, such claims being located in Idaho County, State of
Idaho, which are described in Exhibit A-1, attached hereto and made a part
hereof.
B. Cyprus owns and/or controls one hundred percent (100%) interest in
certain unpatented mining claims, such claims being located in Idaho County,
State of Idaho, which are described in Exhibit A-2, attached hereto and made a
part hereof.
C. The claims described in Exhibits A-1 and A-2 shall herein be
collectively referred to as the "Property".
D. Cyprus wishes to participate with ICMC in the exploration, evaluation,
development and mining of minerals within the Property and ICMC is willing to
grant such right to Cyprus.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, ICMC and Cyprus agree as follows:
1
ARTICLE 1
DEFINITIONS
1.1 "Accounting Procedure" means the procedures set forth in Exhibit B.
1.2 "Affiliate" means any person, partnership, joint venture, corporation
or other form of enterprise which directly or indirectly controls, is controlled
by, or is under common control with, a Participant. For purposes of the
preceding sentence, 11control" means possession, directly or indirectly, of the
power to direct or cause direction of management and policies through ownership
of voting securities, contract, voting trust or otherwise.
1.3 "Agreement" means this Joint Venture Agreement, including all
amendments and modifications thereof, and all schedules and exhibits, which are
incorporated herein by this reference.
1.4 "Assets" means the Property, Products and all other real and personal
property, tangible and intangible, held for the benefit of the Participants
hereunder.
1.5 "Budget" means a detailed estimate of all costs to be incurred by the
Participants with respect to a Program and a schedule of cash advances to be
made by the Participants.
1.6 "Commencement of Commercial Production" means the date upon which the
production and processing facilities developed under this Agreement achieve an
ore production and processing rate for a continuous thirty-day period equal to
at least seventy percent (70%) of the design rate established in a Feasibility
Study.
1.7 "Development" means all preparation for the removal and recovery of
Products, including the construction or installation of a mill or any other
improvements to be used for the mining, handling, milling, processing or other
beneficiation of
2
Products, and all Exploration work conducted subsequent to. a decision to
commence Development as contemplated by a feasibility study.
1.8 "Earn-In" means the date upon which Cyprus earns its interest in the
Property pursuant to Section 5.5.
1.9 "Exploration" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products.
1.10 "Exploration Expenditures" means the cost of evaluation of the
Property defined as further exploring and developing the Property, including
drilling, excavating and searching by recognized prospecting techniques,
sampling, assaying, testing and evaluating materials removed from the Property,
mapping, plotting, surveying, constructing and maintaining camps, roads, works
and structures necessary to carry out such evaluation, sampling or testing, all
studies including but not limited to a Feasibility Study required to develop a
mine and all work that may be required in preparing a mine for operating, the
cost or payments to maintain the Property, including costs to locate and/or
relocate the unpatented mining claims, Property acquisition costs, taxes and/or
fees to maintain Property and filings together with an allowance for overhead
and administrative expenses as described in Section 5.3(a).
1.11 "Feasibility Study" means a detailed study compiled by Manager or an
independent third party conducted to determine commercial feasibility and
viability of placing a prospective orebody or deposit into production and may
include, but not be limited to:
(a) such geophysical, geochemical, geological, aerial or other survey
as may be necessary to provide a reasonable estimate of the quality and
extent of the deposit;
(b) such technical or assay reports as may be necessary to evaluate
any proposed method of extraction and processing;
(c) the area required for optimum development of the orebody or
deposit;
3
(d) a mine construction program setting forth the descriptions of the
work, permits, equipment, facilities, supplies and mines required to bring
the prospective orebody or deposits of Products into Commercial Production,
and the estimated costs thereof or a schedule of expenditures by year of
the costs necessary to bring the project into production;
(e) details of a proposed annual program for initial development of
the deposit;
(f) a plan for such reclamation of the Properties as is required by
law and the estimated costs hereof;
(g) conclusions and recommendations regarding the economic feasibility
and timing for bringing the prospective orebody or deposits of Products
into Commercial Production, taking into account items (a) through (e)
above;
(h) such other information as the Management Committee may deem
appropriate to allow banking or other financial institutions familiar with
the mining business to make a decision to loan funds sufficient to
construct the proposed mine with security based solely on the reserves and
mine described in a Feasibility Study.
1.12 "Initial Contribution" means that contribution each Participant has
made or agrees to make pursuant to Section 5.1.
1.13 "Joint Account" means the account maintained in accordance with the
Accounting Procedure showing the charges and credits accruing to the
Participants.
1.14 "Management Committee" means the committee established under Article
7.
1.15 "Manager" means Cyprus during the Earn-In phase or the person or
entity appointed under Article 8 to manage Operations, or any successor Manager.
4
1.16 "Mining" means the mining, extracting, producing, handling, milling or
other processing of Products.
1.17 "Net Proceeds of Production Royalty" means certain amounts calculated
as provided in Exhibit C, which may be payable to a Participant under Section
6.4.
1.18 "Operations" means the activities carried out under this Agreement
after Earn-In.
1.19 "Participant" and "Participants" means the persons or entities that
have a Participating Interest.
1.20 "Participating Interest" means the percentage interest representing
the operating ownership interest of a Participant in Assets, and all other
rights and obligations arising under this Agreement, as such interest may from
time to time be adjusted hereunder. 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 Section 6.1.
1.21 "Prime Rate" means the prime interest rate quoted as "Prime" by the
Wall Street Journal as said rate may change from day to day (which quoted rate
may not be the lowest rate averaged on a month-to-month basis at which a
financing institution loans funds).
1.22 "Production Decision" means a decision by the Management Committee to
commence Development and put the Property into production.
1.23 "Products" means all ores, minerals, and mineral resources produced
from the Property under this Agreement.
5
1.24 "Program" means a description in reasonable detail of the activities
of the Venture which are to be conducted by the Manager during a period.
1.25 "Property" means those interests in property described in Exhibits A-1
and A-2.
1.26 "Simple Majority" means a decision by the Management Committee by
greater than 50% of the votes being entitled to be cast.
1.27 "Transfer" means sell, grant, assign, encumber, pledge or otherwise
commit or dispose of.
1.28 "Venture" means the business arrangement of the Participants under
this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES: TITLE TO ASSETS
2.1 Capacity of Participants. Each of the parties hereto represents and
warrants as follows:
(a) that it is a corporation duly incorporated and in good standing in
its state of incorporation and that it is qualified to do business and is
in good standing in those jurisdictions where necessary in order to carry
out the purposes of this Agreement;
(b) that it has the capacity to enter into and perform this Agreement
and all transactions contemplated herein and that all corporate and other
actions required to authorize it to enter into and perform this Agreement
have been properly taken;
(c) that it will not breach any other agreement or arrangement by
entering into or performing this Agreement; and
6
(d) that this Agreement has been duly executed and delivered by it and
is valid and binding upon it in accordance with its terms.
2.2 Representations and Warranties. ICMC makes the following
representations and warranties effective the date hereof:
(a) ICMC has the full and exclusive right and power to act on behalf
of ICMC, and on behalf of any other interested person or entities, to enter
into this Agreement and to grant the rights granted to Cyprus hereunder.
(b) To the best of its knowledge and belief with respect to unpatented
mining claims set forth in Exhibit A-1 and that are included within the
Property, subject to the paramount title of the United States and except as
disclosed in writing to Cyprus: W the unpatented mining claims were
properly laid out and monumented; (ii) all required location and validation
work was properly performed; (iii) location notices and certificates were
properly recorded and filed with appropriate governmental agencies; (iv)
the claims are free and clear of defects, liens and encumbrances arising
by, through or under ICMC, except those of record or disclosed in writing
to Cyprus and defects, liens, and any such encumbrances that do not
materially affect Cyprus' rights under this Agreement; (v) ICMC has not
received notice from anyone asserting conflicting claims and (vi) the
unpatented mining claims are in good standing and compliance with all
federal and state regulations in force as of the effective date of this
Agreement. Nothing in this Section 2.2(b), however, shall be deemed to be a
representation or a warranty that any of the unpatented mining claims
contains a discovery of minerals.
(c) Except as otherwise provided herein, Cyprus may with ICMC's prior
written consent, such consent to not be unreasonably withheld, take all
action necessary (including judicial proceedings) to remove any cloud from
or cure any defect in ICMC's title to the Property. ICMC agrees to
cooperate with Cyprus in any such action taken and agrees to pay its
proportionate share of all costs and expenses (including attorney's fees)
incurred by Cyprus. Cyprus' share of such costs and expenses shall be
credited against Cyprus Earn-in obligations set forth in Section 5.3(a).
7
(d) ICMC knows of no violation of any applicable federal, state,
regional, or county law or regulation relating to zoning, land use,
environmental protection, or otherwise with respect to the Property or
activities relating thereto; and,
(e) With respect to the Property, ICMC knows of no pending or
threatened actions, suits, claims or proceedings.
(f) With respect to certain of the Property acquired by ICMC pursuant
to an Option to Purchase Interest in Mining Claims Agreement with Idaho
Mining and Development Company dated February 8, 1996 and an agreement
being negotiated with Idaho Gold Corporation for the Friday, Friday
Fraction, Alaska No. 3 and Alaska No. 4 patented claims, MS 1834, patent
no. 41174 and the Xxxxxx patented claim, MS 1833, patent no. 39226, which
will become Property subject to this Agreement, ICMC shall be responsible
for all costs associated with such acquisitions except for the contribution
by Cyprus as set forth in Section 5.3(b) herein.
The representations and warranties set forth above shall survive the
execution and delivery of any documents of Transfer provided under this
Agreement.
2.3 Representations and Warranties. Cyprus makes the following
representations and warranties effective the date hereof:
(a) To the best of its knowledge and belief with respect to unpatented
mining claims that are set forth in Exhibit A-2 and included within the
Property, subject to the paramount title of the United States and except as
disclosed in writing to ICMC: (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required location and validation
work was properly performed; (iii) location notices and certificates were
properly recorded and filed with appropriate governmental agencies; (iv)
the claims are free and clear of defects, liens and encumbrances arising
by, through or under Cyprus, except those of record or disclosed in writing
to ICMC and defects, liens, and any such encumbrances that do not
materially affect Cyprus' rights under this
8
Agreement; (v) Cyprus has not received notice from any one asserting
conflicting claims; and (iv) the unpatented mining claims are in good
standing and compliance with all federal and state regulations in force as
of the effective date of this Agreement. Nothing in this Section 2.2(b),
however, shall be deemed to be a representation or a warranty that any of
the unpatented mining claims contains a discovery of minerals.
2.4 Disclosures. Each of the Participants represents and warrants that it
is unaware of any material facts or circumstances which have not been disclosed
in this Agreement, which would be disclosed to the other Participant in order to
prevent the representations in this Article 2 from being materially misleading.
2.5 Record Title. Title to the Assets shall be held by the Manager for the
benefit of the Venture after Cyprus has earned its interest.
2.6 Joint Loss of Title. Any failure or loss of title to the Assets, and
all costs of defending title, shall be charged to the Joint Account, except that
all costs and losses arising out of or resulting from breach of the
representations and warranties of ICMC shall be charged to ICMC and all such
costs and losses arising out of gross negligence by Cyprus or the Manager shall
be charged to Cyprus or the Manager as the case may be.
ARTICLE 3
NAME, PURPOSES AND TERM
3.1 General. ICMC and Cyprus hereby enter into this Agreement for the
purposes hereinafter stated, and they agree that all of their rights and all of
the Operations on or in connection with the Property shall be subject to and
governed by this Agreement.
9
3.2 Name. The name of this Venture shall be the Petsite Venture. The
Manager shall accomplish any registration required by applicable assumed or
fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following purposes and
for no others, and shall serve as the exclusive means by which the Participants,
or either of them, accomplish such purposes:
(a) to conduct Exploration within the Property,
(b) to evaluate the possible Development of the Property,
(c) to engage in Development and Mining Operations on the Property, if
feasible.
(d) to engage in marketing Products, but only to the extent permitted
by Article 11, and
-
(e) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.4 Limitation. Unless the Participants otherwise agree in writing, the
Operations shall be limited to the purposes described in Section 3.3, and
nothing in this Agreement shall be construed to enlarge such purposes.
ARTICLE 4
RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership. 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. It is not the intention of the Participants to create, nor shall this
Agreement be construed to create, any mining, commercial or other partnership.
Neither Participant shall have any authority to act for or to assume any
obligation or responsibility on behalf of the other Participant, except as
otherwise expressly provided herein. The rights, duties,
10
obligations and liabilities of the Participants shall be several and not joint
or collective. Each Participant shall be responsible only for its obligations as
herein set out and shall be liable only for its share of the costs and expenses
as provided herein, it being the express purpose and intention of the
Participants that their ownership of Assets and the rights acquired hereunder
shall be as tenants in common. Each Participant, its directors, officers,
employees, agents and attorneys shall be indemnified from and against any and
all losses, claims, damages and liabilities arising out of any act or any
assumption of liability by the indemnifying Participant, or any of its
directors, officers, employees, agents and attorneys done or undertaken, or
apparently done or undertaken, on behalf of the other Participant, except
pursuant to the authority expressly granted herein or as otherwise agreed in
writing between the Participants.
4.2 U.S. Tax Elections and Allocations. Each of the parties hereto agrees
and elects to be excluded from the application of all of the provisions of
Subchapter K of the Internal Revenue Code of 1986, as authorized by Treasury
Regulation ss.1.761-2. The parties hereto agree to execute or join in such
instruments as are necessary to make such election effective, and hereby
authorize and direct Manager to take such action as is necessary to effectuate
such purpose, including filing of the partnership tax return required by
Treasury Regulation ss. 1.761-2(b) (2). Each party shall be entitled to claim
all tax benefits, write-offs, and deductions with respect to all and any costs
which it has incurred.
4.3 Other Business Opportunities. Except as expressly provided in this
Agreement, each Participant shall have the right independently to engage in and
receive full benefits from business activities, whether or not competitive with
the Operations, without consulting the other. The doctrines of "corporate
opportunity" or "business opportunity" shall not be applied to any other
activity, venture, or operation of either Participant. Unless otherwise agreed
in writing, no Participant shall have any obligation to mill, beneficiate or
otherwise treat any Products or any other Participant's share of Products in any
facility owned or controlled by such Participant.
11
4.4 Waiver of Right to Partition. The Participants hereby waive and release
all rights of partition, or of sale in lieu thereof, or other division of
Assets, including any such right provided by statute.
4.5 Implied Covenants. There are no implied covenants contained in this
Agreement other than those of good faith and fair dealing.
ARTICLE 5
CONTRIBUTIONS BY PARTICIPANTS
5.1 Participants' Initial Contributions. ICMC, as its Initial Contribution,
hereby contributes the Property described in Exhibit A-1 to the purposes of this
Agreement. Cyprus, as its Initial Contribution, shall contribute the Property
described in Exhibit A-2 and the Exploration Expenditures and payment as
hereinafter set forth.
5.2 Failure to Make Initial Contributions. Cyprus' failure to make its
Initial Contribution in accordance with the provisions of this Article 5 shall
not be deemed to be a withdrawal of Cyprus from this Agreement and the
termination of its Interest hereunder, In the event Cyprus fails to make its
firm commitment and its Initial Contribution pursuant to this Article 5, ICMC
shall provide Cyprus written notice of such failure. If within thirty (30) days
of receipt of notice Cyprus does not cure such failure, then Cyprus shall be
deemed to have withdrawn from this Agreement. Additionally, at any time prior to
Earn-In, but only after Cyprus completes its firm commitment, Cyprus may provide
ICMC with sixty (60) days' written notice of Cyprus' decision to terminate its
interest in this Agreement. Upon such event, Cyprus shall have no further right,
title or interest in and to the Property or this Agreement. Cyprus' withdrawal
shall be effective sixty (60) days after such failure or notice, but such
withdrawal shall not relieve Cyprus of its reclamation or any other obligations
or liabilities resulting from its work on the Property. Cyprus shall be
responsible only for reclamation resulting directly from its work on the
Property, but shall not be responsible for reclamation liability incurred prior
to the effective date of this
12
Agreement or for any liability incurred by ICMC as a result of conduct of mining
operations pursuant to Section 5.8 herein. Except as provided in this Section
5.2, Cyprus' withdrawal shall relieve Cyprus from any other obligation to make
contributions hereunder.
5.3 Obligations Prior to Earn-In. Prior to earning its interest in the
Property, and subject to the termination provisions contained herein, Cyprus
shall be required, but not obligated to make the following Exploration
Expenditures on or for the benefit of the Property to extend this Agreement into
the next period with the exception of a firm commitment to incur Three Hundred
Thousand Dollars ($300,000) in Exploration Expenditures by the first anniversary
date of this Agreement.
(a) Exploration Expenditures:
Minimum
Expenditure Cumulative
Date Amount Amount
---- ------ ------
By 1st anniversary date $300,000 $300,000
(Firm Commitment)
By 2nd anniversary Date 400,000 700,000
Ten percent (10%) of all Exploration Expenditures, except property
payments, taxes and/or fees to maintain the Property, to cover Cyprus'
overhead and administrative costs shall be charged by Cyprus and shall
qualify as Exploration Expenditures but shall be limited to five percent
(5%) on contracts in excess of One Hundred Thousand Dollars ($100,000).
All Exploration Expenditures shall be cumulative and any Exploration
Expenditures in excess of the minimum required in any period shall be
credited and applied toward any subsequent Exploration Expenditures.
(b) Payments:
Upon execution of this Agreement, Cyprus shall provide Fifty Thousand
Dollars ($50,000) to complete ICMCs acquisition of certain of the Property
described in Exhibit A-1 and being the claims subject to the Option to
Purchase Interest in Mining Claims Agreement dated February 8, 1996 between
Idaho Mining and Development Company and ICMC. This Fifty Thousand Dollar
($50,000) cash payment shall be credited against Cyprus' firm commitment of
13
Three Hundred Thousand Dollars ($300,000) in Exploration Expenditures.
Additionally, Cyprus shall during the Earn-In period be responsible for
maintaining the unpatented lode claims which comprise the Property and may
relocate any of the unpatented claims which Cyprus believes may be
defective.
(c) Cyprus may terminate this Agreement at any time during the Earn-In
period for any reason or no reason after Cyprus completes the firm
commitment by providing ICMC sixty (60) days written notice of such
termination. Until Cyprus has earned its interest in the Property, Cyprus
shall have complete discretion in conducting exploration activities,
maintaining the Property and shall conduct operations according to its own
plans. Cyprus shall hold ICMC harmless from any liabilities resulting from
Cyprus' activities on the Property during the Earn-In period.
5.4 Additional Cash Contributions. At such time as Cyprus has earned its
fifty percent (50%) interest in the Property, pursuant to Section 5.5, the
Participants, subject to any election permitted by Sections 6.1, 6.2 and 6.3,
shall be obligated to contribute funds to adopted Programs and Budgets in
proportion to their respective Participating Interest.
5.5 Earn-In. Cyprus shall earn a fifty percent (50%) Participating Interest
in the Property upon completion of the Exploration Expenditures and payment set
forth under Section 5.3. Except as provided for in Section 6.2, subsequent to
Cyprus earning fifty percent (50%) interest in the Property, all expenditures
for the benefit of the Property shall be contributed by the Parties in
accordance to their Participating Interest. Immediately upon Cyprus satisfying
its Earn-In requirements under Section 5.3 (a) and (b), ICMC shall execute and
deliver to Cyprus such documents that are necessary to transfer an appropriate
percentage of interest in ICMC's interest In and to the Property to Cyprus.
5.6 Additional Interest. Within sixty (60) days after Cyprus completes its
requirements to earn fifty percent (50%) Participating Interest in the Property,
Cyprus, by providing written notice to ICMC, may elect to earn an additional
twenty percent
14
(20%) Participating Interest in the Property, bringing its interest to seventy
percent (70%), by completing the following:
(a) Exploration Expenditures:
Minimum
Expenditure Cumulative
Date Amount Amount
---- ------ ------
By 3rd anniversary date $400,000 $1,100,000
(Firm Commitment)
By 4th anniversary Date 400,000 1,500,000
Ten percent (10%) of all Exploration Expenditures, except property
payments, taxes and/or fees to maintain the Property, to cover Cyprus'
overhead and administrative costs shall be charged by Cyprus and shall
qualify as Exploration Expenditures but shall be limited to five percent
(5%) on contracts in excess of One Hundred Thousand Dollars ($100,000).
All Exploration Expenditures shall be cumulative and any Exploration
Expenditures in excess of the minimum required in any period, including
Exploration Expenditures incurred in the first and second years of this
Agreement, shall be credited and applied toward any subsequent Exploration
Expenditures.
(b) Cyprus shall, during this Earn-In period, continue to be
responsible for maintaining the unpatented lode claims which comprise the
Property.
5.7 Reports. Cyprus shall, during the Earn-in period, provide ICMC with
copies of periodic reports describing its activities on the Property and shall
conduct a semi-annual review with ICMC to discuss the progress Cyprus has made
during the preceding period as well as the plans and programs being contemplated
for the next period.
5.8 Development by ICMC. Cyprus and ICMC acknowledge that a Mineral
Resource has been identified on certain of the Eagle and Golden Eagle Claims,
such claims being described in the attached Exhibit "F". For the purposes of
this Section 5.8, a Mineral Resource shall be defined as being equal to or less
than fifty thousand ounces (50,000 ozs.) of gold. ICMC may propose to develop
such Mineral Resource,
15
shall do so at its sole risk, and shall be responsible for all costs to develop
such Mineral Resource, so long as in the opinion of Cyprus it does not interfere
with or adversely impact any Operations or planned Operations on the Property.
ICMC shall submit to Cyprus for Cyprus' approval, such approval not to be
unreasonably withheld, their detailed plans on each phase of mining activity.
ICMC hereby indemnities, defends and holds harmless Cyprus, its affiliates,
their successors and assigns and their respective directors, officers, employees
and shareholders from and against any and all past, present and future
obligations, liabilities, claims, damages, losses or expenses (including
interest and penalties, legal fees and other reasonable expenses of defending
any actions relating thereto) sustained in any way relating to all activities on
or pertaining to the Mineral Resource, including without limitation, reclamation
and environmental liabilities and obligations.
If at any time prior to Cyprus earning seventy percent (70%) interest in
the Property production from the Mineral Resource is projected to exceed fifty
thousand ounces (50,000 ozs.), ICMC shall provide Cyprus with a written notice
of the projected date production will exceed the fifty-thousand ounce (50,000
ounce) level, such notice to be provided to Cyprus at least sixty (60) days
prior to such projected date. Cyprus shall have the right, but not the
obligation, to participate in the production beyond the initial fifty thousand
ounces (50,000 ozs.) by providing its share of the production costs and
expenses.
Notwithstanding the above, at its sole election after vesting in a seventy
percent (70%) Participating Interest in the Property, Cyprus may require that
production of the Mineral Resource be terminated.
ARTICLE 6
INTERESTS OF PARTICIPANTS;
DEFAULTS AND REMEDIES; FINANCING
6.1 Participating Interests. The Participants shall have the following
Participating Interests upon Cyprus' completion of the obligations set forth in
Section 5.3:
16
Cyprus - 50%
ICMC - 50%
Cyprus shall have no Participating Interest unless and until it has
completed the Exploration Expenditures set forth in Section 5.3 during the
Earn-in period. At such time as Cyprus completes the obligations set forth in
Section 5.3 and has earned its fifty percent (50%) Participating Interest in the
Property and determines it will not elect to earn an additional twenty percent
(20%) Participating Interest in the Property as set forth in Section 5.6, ICMC
and Cyprus shall have a period of sixty (60) days to either (a) elect to
participate in the Venture and contribute to each Program and Budget for their
entire respective Participating Interest, or (b) to elect to participate in the
Venture pursuant to Section 6.3(a), or (c) elect to withdraw from the Venture
and convert to a five percent (5%) Net Proceeds of Production as set out in
Exhibit C. In no event shall the cumulative Net Proceeds of Production payable
to the withdrawing party, whether one or more, exceed an aggregate of five
percent (5%). A Management Committee shall then be formed as provided for in
Section 7.1.
At Earn-in Cyprus and ICMC shall, irrespective of their actual expenditures
on or with respect to the Property, be deemed to have incurred expenditures as
follows:
Cyprus $700,000
ICMC $700,000
In the event Cyprus, pursuant to Section 5.6, elected to earn an additional
twenty percent (20%) Participating Interest in the Property, at such time as
Cyprus completes the obligations set forth in such Section 5.6 and has earned
its seventy percent (70%) Participating Interest in the Property, ICMC and
Cyprus shall have a period of ninety (90) days to either (a) elect to
participate in the Venture and contribute to each Program and Budget for their
entire respective Participating Interest, or (b) to elect to participate in the
Venture pursuant to Section 6.3(a), or (c) elect to withdraw from the venture
and convert to a five percent (5%) Net Proceeds of Production Royalty as set out
in Exhibit C. In no event shall the cumulative Net Proceeds of Production
Royalty payable to the withdrawing party, whether one or
17
more, exceed an aggregate of five percent (5%). A Management Committee shall
then be formed as provided for in Section 7.1.
At Earn-In Cyprus and ICMC shall, irrespective of their actual expenditures
on or with respect to the Property, be deemed to have incurred expenditures as
follows:
Cyprus $1,500,000
ICMC $642,857
6.2 Changes in Participating Interests. A Participant's Participating
Interest shall be changed as follows:
(a) As provided in Section 6.5; or
(b) Upon an election by a Participant pursuant to Section 6.3 to
contribute less to an adopted Program and Budget than the percentage
reflected by its Participating Interest; or
(c) 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 Section 6.4(b); or
(d) Transfer by a Participant of less than all its Participating
Interest in accordance with Article 14; or
(e) Acquisition of less than all of the Participating Interest of the
other Participant, however arising.
(f) Pursuant to Section 5.6.
6.3 Voluntary Reduction in Participation. A Participant may elect, as
provided in Section 9.5, to limit its contributions to an adopted Program and
Budget as follows:
(a) To some lesser amount than its respective Participating Interest;
or
(b) Not at all.
If a Participant elects to contribute to an adopted Program and Budget some
lesser amount than its respective Participating Interest, or not at all, the
Participating Interest of that Participant shall be recalculated at the time of
election by dividing: M the sum of (a) the agreed value of the Participant's
deemed expenditure under Section 6.1 and (b) the total of all of the
Participant's actual expenditures including the
18
amount the Participant elects to contribute to the adopted Program and Budget;
by (ii) the sum of (a) and (b) above for all Participants; and then multiplying
the result by one hundred. The Participating Interest of the other Participant
shall thereupon become the difference between 100% and the recalculated
Participating Interest.
6.4 Default in Making Contributions.
(a) If a Participant defaults in making a contribution or cash call
required by an approved Program and Budget, the non-defaulting Participant
may advance the defaulted contribution on behalf of the defaulting
Participant and treat the same, together with any accrued interest, as a
demand loan bearing interest from the date of the advance at the Prime Rate
plus two percent (2%) compounded quarterly. The failure to repay said loan
upon demand shall be a default. Each Participant hereby grants to the other
a lien upon its interest in the Property and a security interest in its
rights under this Agreement and in its Participating Interest in other
Assets, and the proceeds therefrom, to secure any loan made hereunder,
including interest thereon, reasonable attorneys' fees and all other
reasonable costs and expenses incurred in recovering the loan with interest
and in enforcing. such lien or security interest, or both. A non-defaulting
Participant may elect the applicable remedy under this Section 6.4, or, to
the extent a Participant has a lien or security interest under applicable
law, it shall be entitled to its rights and remedies at law and in equity.
All such remedies shall be cumulative. The election of one or more remedies
shall not waive the election of any other remedies. Each Participant hereby
irrevocably appoints the other its attorney-in-fact to execute, file and
record all instruments necessary to perfect or effectuate the provisions
hereof.
(b) The Participants acknowledge that if a Participant defaults in
making a contribution, a cash call, in repaying a loan or any payment, as
required hereunder, it will be difficult to measure the damages resulting
from such default. In the event such default is not cured by the defaulting
Participant within thirty (30) days after receiving notice of such default,
as reasonable liquidated damages, the defaulting Participant shall be
deemed to
19
have withdrawn from the Venture and to have automatically relinquished its
Participating Interest to the non-defaulting Participant; provided,
however, the defaulting Participant shall have the right to receive only
from five percent (5%) of Net Proceeds of Production Royalty, as set out in
Exhibit C, and not from any other source, an amount equal to the defaulting
Participant's actual expenditures contributed hereunder. Upon receipt of
such amount the defaulting Participant shall thereafter have no further
right, title, or interest under this Agreement or in the Assets.
6.5 Conversion of Interest. If at any time the Participating Interest
of a Participant is reduced to ten percent (10%) or less by an affirmative
election not to contribute all or some portion of its share pursuant to a
Program and Budget as provided in Article 9 and the resulting application of the
dilution formula in Section 6.3, the diluted Participant shall be deemed to have
withdrawn from the Venture and this Agreement shall terminate; provided,
however, the diluting Participant shall have the right to receive only from five
percent (5%) of Net Proceeds of Production Royalty, as set out in Exhibit C, and
not from any other source, an amount equal to one hundred and fifteen percent
(115%) of the diluting Participant's actual or deemed expenditures contributed
hereunder, whichever is greater. Upon receipt of such amount the diluting
Participant shall thereafter have no further right, title, or interest under
this Agreement or in the Assets.
6.6 Continuing Liabilities Upon Adjustments of Participating Interests.
Any reduction of a Participant's Participating Interest under this Section 6
shall not relieve such Participant of its share of any liability, whether it
accrued before or after such reduction, arising out of Operations conducted
prior to such reduction. For purposes of this Article 6, such Participant's
share of such liability shall be equal to its Participating Interest at the time
such liability was incurred. The increased Participating Interest accruing to a
Participant as a result of the reduction of the other Participant's
Participating Interest shall be free of royalties, liens or other encumbrances
arising by, through or under such other Participant, other than those existing
at the time the Property was acquired or those to which both Participants
20
have given their written consent. An adjustment to a Participating Interest need
not be evidenced during the term of this Agreement by the execution and
recording of appropriate instruments, but each Participant's Participating
Interest shall be shown in the books of the Manager. However, either
Participant, at any time upon the request of the other Participant, shall
execute and acknowledge instruments necessary to evidence such adjustment in
form sufficient for recording in the jurisdiction where the Property is located.
6.7 Financing by Cyprus. Within sixty (60) days after Cyprus completes its
requirements to earn an additional twenty percent (20%) Participating Interest
in the Property as set forth in Section 5.6, bringing its Participating Interest
to seventy percent (70%), and ICMC and Cyprus have elected to participate in the
Venture in proportion to their respective Participating Interest, ICMC may elect
in writing to have Cyprus fund ICMC's share of Exploration Expenditures until
the completion of a Feasibility Study. In such event, such expenditures by
Cyprus on behalf of ICMC shall be treated as a loan and shall bear interest at
the Prime Rate plus two percent (2%), compounded quarterly. Such loan shall be
secured by ICMC's interest in the Property and the Assets. Cyprus shall be
repaid from eighty-five percent (85%) of the proceeds received by ICMC from the
sale of its proportionate share of Products, after deduction of operating costs.
ICMC shall execute a document securing the loan with its interest in the
Property and the Assets and assigning to Cyprus such eighty-five percent (85%)
of the proceeds in form and content acceptable to the legal counsel of both
Cyprus and ICMC.
In the event a Feasibility Study is completed and Development is not
recommended and the Management Committee votes to continue Exploration, Cyprus
will continue to fund ICMC's share of Exploration Expenditures until the
completion of another Feasibility Study. Such additional expenditures by Cyprus
on behalf of ICMC shall also be treated as a loan and recouped by Cyprus as
previously set forth in this Section 6.7.
If the Management Committee, after completion of a Feasibility Study, votes
to suspend Operations on the Property for any reason, no additional interest
would
21
accrue on the Exploration Expenditures provided by Cyprus on behalf of ICMC
until Operations are again commenced.
In the event a Feasibility Study recommends development, but for reasons
beyond the control of the Participants (e.g. government taking, Force Majeure,
etc.) the Property can never be developed, accrual of interest on the
Exploration Expenditures provided by Cyprus on behalf of ICMC would cease.
Repayment to Cyprus of such loan and any interest accrued would be repaid from
ICMC's share of any compensation that the Participants may be entitled to as a
result of the prohibition of Mining. If no compensation is received by the
Participants, the loan and its accrued interest would be forgiven when the
Participants agree to drop their interest in the Property, discontinue any
litigation which may have commenced and dissolve the Venture.
ARTICLE 7
MANAGEMENT COMMITTEE
7.1 Organization and Composition. After completion of Cyprus' Earn-in and
the election by ICMC and Cyprus to participate in the Venture as provided in
Section 6.1, 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 ICMC and one member appointed by Cyprus. Each Participant may appoint one or
more alternates to act in the absence of a regular member. Any alternate so
acting shall be deemed a member. Appointments shall be made or changed by notice
in writing to the other Participant.
7.2 Decisions. Each Participant, acting through its appointed member(s)
shall have a vote equal to its Participating Interest in the Property. Decisions
of the Management Committee shall be decided by Simple Majority of the
Participating Interests. In the event of a deadlock, the Manager shall hold the
deciding vote.
22
7.3 Meetings. The Management Committee shall. hold regular meetings at
least annually at mutually agreed places. The Manager shall give thirty (30)
days' written notice to the Participants of such regular meetings. Additionally,
either Participant may call a special meeting upon thirty (30) days' written
notice to the Manager and the other Participant. In case of emergency,
reasonable notice of a special meeting shall suffice. There shall be a quorum if
at least one member representing each Participant is present. The Management
Committee shall not transact any business at a meeting unless a quorum is
present at the commencement of the meeting. If a quorum is not present at the
commencement of the meeting or within one-half hour after the time fixed for the
commencement of the meeting, the meeting shall be adjourned to the same time and
day of the next week at the same place. If a quorum is not present at the
commencement of the adjourned meeting, one representative shall be deemed to
constitute a quorum. Each notice of a meeting shall include an itemized agenda
and detailed back-up information 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 matters may be considered with the consent of all
Participants. The Manager shall prepare minutes of all meetings and shall
distribute copies of such minutes to the Participants within thirty (30) days
after the meeting. The minutes, when signed by all Participants, shall be the
official record of the decisions made by the Management Committee and shall be
binding on the Manager and the Participants. If personnel employed in Operations
are required to attend a Management Committee meeting, reasonable costs incurred
in connection with such attendance shall be a Venture cost. All other costs
shall be paid by the Participants individually.
7.4 Action Without Meeting. In lieu of meetings, the Management Committee
may hold telephone conferences, so long as all decisions are immediately
confirmed in writing by the Participants.
7.5 Matters Requiring Approval. Except as otherwise delegated to the
Manager in Section 8.2, the Management Committee shall have exclusive authority
to determine all management matters related to this Agreement.
23
ARTICLE 8
MANAGER
8.1 Appointment. Following completion of Cyprus' Earn-In as provided for in
Sections 5.5 or 5.6 Cyprus shall be the initial Manager.
8.2 Powers and Duties of Manager. Subject to the terms and provisions of
this Agreement, the Manager shall have the following powers and duties which
shall be discharged in accordance with adopted Programs and Budgets:
(a) The Manager shall manage, direct and control Operations.
(b) The Manager shall implement the decisions of the Management
Committee, shall make all expenditures necessary to carry out adopted
Programs and Budgets, and shall promptly advise the Management Committee if
it lacks sufficient funds to carry out its responsibilities under this
Agreement.
(c) The Manager shall: (i) purchase or otherwise acquire all material,
supplies, equipment, water, utility and transportation services required
for Operations, such purchases and acquisitions to be made on the best
terms available, taking into account all of the circumstances; (ii) obtain
such customary warranties and guarantees as are available in connection
with such purchases and acquisitions; and (iii) keep the Assets free and
clear of all liens and 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 liens and encumbrances specifically approved by the
Management Committee.
(d) The Manager shall conduct such title examinations and cure such
title defects as may be advisable in the reasonable judgment of the
Manager.
(e) The Manager shall: (i) make or arrange for all payments required
by 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
24
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
nonpayment of any taxes, assessments or like charges; and (iii) shall do
all other acts reasonably necessary to maintain the Assets.
(f) The Manager shall: (i) apply for all necessary permits, licenses
and approvals; (ii) comply with applicable federal, provincial, municipal
and local laws and regulations; (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. The
Manager shall not be in breach of this provision if a violation has
occurred in spite of the Manager's good faith efforts to comply, and the
Manager has timely cured or disposed of such violation through performance,
or payment of fines and penalties.
(g) The Manager shall prosecute and defend, but shall not initiate
without consent of the Management Committee, all litigation or
administrative proceedings greater than $50,000 arising out of Operations.
The non-managing Participant shall have the right to participate, at its
own expanse, in such litigation or administrative proceedings. The
non-managing Participant's approval shall be required in advance of any
settlement involving payments, commitments or obligations, if the
non-managing Participant's share is in excess of Twenty-Five Thousand
Dollars ($25,000) in cash or value.
(h) The Manager shall provide insurance for the benefit of the
Participants as provided in Exhibit D.
(i) The Manager may dispose of Assets, whether by release,
abandonment, surrender or Transfer in the ordinary course of business,
except that Property may be released, abandoned or surrendered only as
provided in Article 13. However, without prior authorization from the
Management
25
Committee, the Manager shall not: (i) dispose of Assets in any one
transaction having a value in excess of $250,000: (ii) enter into any sales
contracts or commitments for Product, except as permitted in Section 11.2;
(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 be obligated to perform or cause to be performed
during the term of this Agreement all obligations required by law in order
to maintain the Property which obligations shall be included in Programs
and Budgets.
(1) The Manager shall keep and maintain all required accounting and
financial records pursuant to the Accounting Procedure and in accordance
with customary cost accounting practices in the mining industry.
(m) The Manager shall keep the Management Committee advised of all
Operations by submitting in writing to the Management Committee: (i)
monthly progress reports 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 forty-five (45) days after completion
of each Program and Budget, which shall include comparisons between actual
and budgeted expenditures and comparisons between the objectives and
results of Programs; 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 maps, drill logs, core tests, reports, surveys,
assays, analyses, production reports, operations, technical, accounting and
financial records, and other information acquired in Operations. In
addition, the Manager shall allow the non-managing Participant, at the
latter's sole risk and expense, and subject to reasonable safety
regulations, to inspect the Assets and Operations at all reasonable times,
26
so long as the inspecting Participant does not unreasonably interfere with
Operations.
(n) The Manager shall undertake all `other activities reasonably
necessary to fulfill the foregoing.
The Manager shall not be in default of any duty under this Section 8.2 if
its failure to perform results from the failure of the non-managing Participant
to perform acts or to contribute amounts required of it by this Agreement.
8.3 Standard of Care. The Manager shall conduct all Operations in a good,
workmanlike and efficient manner, in accordance with all applicable laws, sound
mining and other applicable industry standards and practices, and in accordance
with the terms and provisions of leases, licenses, permits, contracts and other
agreements pertaining to Assets. The Manager shall not be liable to the
non-managing Participant for any act or omission resulting in damage or loss
except to the extent caused by or attributable to the Manager's willful
misconduct or gross negligence.
8.4 Resignation; Deemed Offer to Resign. The Manager may resign upon thirty
(30) days prior notice to the other Participant. If any of the following shall
occur, the Manager shall be deemed to have offered to resign, which offer shall
be accepted by the other Participant, if at all, within ninety (90) days
following such deemed offer:
(a) The Participating interest of the Manager becomes less than fifty
percent (50%); or
(b) The Manager fails to perform a material obligation imposed upon it
under this Agreement and such failure continues for a period of thirty (30)
days after written notice from the other Participant demanding performance;
or
(c) The Manager fails to pay or contest in good faith its bills within
thirty (30) days after receiving written notice that they are due; or
(d) A receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for a substantial part of its assets is appointed and
such appointment is neither made ineffective nor discharged within sixty
(60) days
27
after receiving written notice of the making thereof, or such appointment
is consented to, requested by, or acquiesced in by the Manager; or
(e) The Manager commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or
consents to the entry of an order for relief in an involuntary case under
any such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar
official of any substantial part of its assets; or makes a general
assignment for the benefit of creditors; or fails generally to pay its or
Venture debts as such debts become due; or takes corporate or other action
in furtherance of any of the foregoing; or
(f) Entry is made against the Manager of a judgment, decree or order
for relief affecting a substantial part of its assets by a court of
competent jurisdiction in an involuntary case commenced under any
applicable bankruptcy, insolvency or other similar law of any jurisdiction
now or hereafter in effect.
8.5 Payments to Manager. The Manager shall be compensated for its services
and reimbursed for its costs hereunder in accordance with the Accounting
Procedure.
8.6 Transactions With Affiliates. If the Manager engages Affiliates to
provide services hereunder, it shall do so on terms no more favorable than would
be the case with unrelated persons in arm's-length transactions.
8.7 Activities During Deadlock. If the Management Committee for any reason
fails to adopt a Program and Budget, subject to the contrary direction of the
Management Committee and to the receipt of necessary funds, the Manager shall
continue Operations at levels comparable with the last adopted Program and
Budget. For purposes of determining the required contributions of the
Participants and their respective Participating Interests, the last adopted
Program and Budget shall be deemed extended.
28
ARTICLE 9
PROGRAMS AND BUDGETS
9.1 Initial Program and Budget. The initial Program and Budget will be
provided by the Management Committee within ninety (90) days of the Management
Committee being formed.
9.2 Operations Pursuant to Programs and Budgets. Except as otherwise
provided in Sections 7.2 and 9.7, Operations shall be conducted, expenses shall
be incurred, and Assets shall be acquired only pursuant to approved Programs and
Budgets.
9.3 Presentation of Programs and Budgets. Proposed Programs and Budgets
shall be prepared by the Manager for a period of up to one year. Each adopted
Program and Budget, regardless of length, shall be reviewed at least once a year
at the annual meeting of the Management Committee. During the period encompassed
by any Program and Budget, and at least two months prior to its expiration, a
proposed Program and Budget for the succeeding period shall be prepared by the
Manager and submitted to the Management Committee.
9.4 Review and Approval of Proposed Programs and Budgets. Within thirty
(30) days after submission of a proposed Program and Budget to the Management
Committee, the Management Committee shall:
(a) Approve the proposed Program and Budget; or
(b) Propose modifications of the proposed Program and Budget; or
(c) Reject the proposed Program and Budget.
If the Management Committee makes the elections pursuant to Section 9.4(b)
or (c), then the Manager will review the modifications and/or any
recommendations of the Management Committee and will resubmit a Program and
Budget within thirty (30) days.
29
9.5 Election to Participate. By written notice to the, Management Committee
within thirty (30) days after approving a Program and Budget except as provided
for in Section 6.1, a Participant may elect to contribute to such Program and
Budget in an amount equal to its Participating Interest or a lesser amount as
provided for in Section 6.3. If a Participant fails to so notify the Management
Committee, the Participant shall be deemed to have elected not to contribute to
such Program and Budget and the provisions of Section 6.3 shall apply. Subject
to Section 9.6 if a Participant elects not to participate in the Program and
Budget and the other Participant elects to contribute to the Program and Budget
the provisions of Section 6.2 shall apply.
9.6 Deadlock on Proposed Programs and Budgets. If the Participants, acting
through the Management Committee, fail to approve a Program and Budget by the
beginning of the period to which the proposed Program and Budget applies, the
provisions of Section 8.7 shall apply.
9.7 Budget Overruns; Program Changes. The Manager shall immediately notify
the Management Committee of any material departure from an adopted Program and
Budget. If the Manager exceeds an adopted Budget by more than ten percent (10%),
then such excess over ten percent (10%), shall be for the sole account of the
Manager, not creditable to the calculation of Participating Interests, unless
such excess amount is directly caused by an emergency or unexpected expenditure
made pursuant to Section 9.8 or is otherwise authorized by the approval of the
Management Committee. Budget overruns of ten percent (10%) or less shall be
borne by the Participants in proportion to their respective Participating
Interests as of the time the overrun occurs.
9.8 Emergency or Unexpected Expenditures. In case of emergency, the Manager
may take any reasonable action it deems necessary to protect life, limb or
property, to protect the Assets or to comply with law or government regulation.
The Manager may also make reasonable expenditures for unexpected events which
are beyond its reasonable control and which do not result from a breach by it of
its
30
standard of care. The Manager shall promptly notify the Participants of the
emergency or unexpected expenditures, and the Manager shall be reimbursed for
all resulting costs by the Participants in proportion to their respective
Participating Interests at the time the emergency or unexpected expenditures are
incurred.
ARTICLE 10
ACCOUNTS AND SETTLEMENTS
Matters of accounts and settlements shall be governed by the provisions in
Exhibit "B" (Accounting Procedures) attached hereto.
ARTICLE 11
DISPOSITION OF PRODUCTION
11.1 Taking in Kind. Each Participant shall take in kind or separately
dispose of its share of all Products in accordance with its Participating
Interest. Any extra expenditure incurred in the taking in kind or separate
disposition by any Participant of its proportionate share of Products shall be
borne by such Participant. Nothing in this Agreement shall be construed as
providing, directly or indirectly, for any joint or cooperative marketing or
selling of Products or permitting the processing of Products of any parties
other than the Participants at any processing facilities constructed by the
Participants pursuant to this Agreement. The Manager shall give the Participants
notice at least ten (1 0) days in advance of the delivery date upon which their
respective shares of Products will be available.
11.2 Failure of Participant to Take in Kind. If a Participant fails to take
in kind, the Manager shall have the right, but not the obligation, for a period
of time consistent with the minimum needs of the industry, but not to exceed one
year, to purchase the Participant's share for its own account or to sell such
share as agent for the Participant at not less than the prevailing market price
in the area. Subject to the terms of any such contracts of sale then
outstanding, during any period that the
31
Manager is purchasing or selling a Participant's share of production, the
Participant may elect by notice to the Manager to take in kind. The Manager
shall be entitled to deduct from proceeds of any sale by it for the account of a
Participant reasonable expenses incurred in such a sale.
ARTICLE 12
WITHDRAWAL AND TERMINATION
12.1 Termination by Expiration or Agreement. This Agreement shall terminate
as expressly provided in this Agreement, unless earlier terminated by written
agreement.
12.2 Withdrawal. A Participant may elect to withdraw as a Participant from
this Agreement by giving forty-five (45) days written notice to the other
Participant of the effective date of withdrawal. Upon such withdrawal, this
Agreement shall terminate, and the withdrawing Participant shall be deemed to
have transferred to the remaining Participant, without cost and free and clear
of royalties owing to the withdrawing Participant, liens or other encumbrances
arising by, through or under such withdrawing Participant, all of its
Participating Interest in the Assets and in this Agreement. Any withdrawal under
this Section 12.2 shall not relieve the withdrawing Participant of its share of
liabilities to third parties (whether such accrues before or after such
withdrawal) including environmental liabilities arising out of Operations
conducted prior to such withdrawal. For purposes of this Section 12.2, the
withdrawing Participant's share of such liabilities shall be equal to its
Participating Interest at the time such liability was incurred.
12.3 Continuing Obligations. On termination of this Agreement under Section
12.1 or 12.2, the Participants shall remain liable for continuing obligations
hereunder until final settlement of all accounts and for any liability, whether
it accrues before or after termination, if it arises out of Operations during
the term of the Agreement.
32
12.4 Disposition of Assets on Termination. Promptly after termination under
Section 12.1, the Manager shall take all action necessary to wind up the
activities of the Venture, and all costs and expenses incurred in connection
with the termination of the Venture shall be expenses chargeable to the Venture.
Any Participant that has a negative Joint Account balance when the Venture is
terminated for any reason shall contribute to the Assets of the Venture an
amount sufficient to raise such balance to zero. The Assets shall first be paid,
applied, or distributed in satisfaction of all liabilities of the Venture to
third parties and then to satisfy any debts, obligations, or liabilities owed to
the Participants. Before distributing any funds or Assets to Participants, the
Manager shall have the right to segregate amounts which, in the Manager's
reasonable judgment, are necessary to discharge continuing obligations or to
purchase for the account of Participants, bonds or other securities for the
performance of such obligations. The foregoing shall not be construed to include
the repayment of any Participant's contributions or Joint Account balance.
Thereafter, any remaining cash and all other Assets, including property shall be
distributed (in undivided interests unless otherwise agreed) to the
Participants, first in the ratio and to the extent of their respective Joint
Accounts and then in proportion to their respective Participating Interests,
subject to any dilution, reduction, or termination of such Participating
Interests as may have occurred pursuant to the terms of this Agreement. No
Participant shall receive a distribution of any interest in Products or proceeds
from the sale thereof if such Participant's Participating Interest therein has
been terminated pursuant to this Agreement.
12.5 Right to Data after Termination. After termination of this Agreement
pursuant to Section 12.1, each Participant shall be entitled to copies of all
information acquired hereunder before the effective date of termination not
previously furnished to it, but a terminating or withdrawing Participant shall
not be entitled to any such copies in respect to a later termination or
withdrawal.
12.6 Continuing Authority. On termination of this Agreement under Section
12.1 or the deemed withdrawal of a Participant pursuant to Section 6.4 or 6.5,
the Manager shall have the power and authority, subject to control of the
Management
33
Committee, if any, to do all things on behalf of the Participants which are
reasonably necessary or convenient to: (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 the Participants and the Venture, mortgage
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.
12.7 Non-Compete Covenants. A Participant that withdraws pursuant to
Section 12.2, or is deemed to have withdrawn pursuant to Section 5.2, 6.4, or
6.5, shall not directly or indirectly acquire any interest in property within
the Area of Interest for two (2) years after the effective date of withdrawal.
If a withdrawing Participant, or an Affiliate of a withdrawing Participant,
breaches this Section 12.7, such Participant or Affiliate shall be obligated to
offer to convey to the nonwithdrawing Participant, without cost, any such
property or interest so acquired. Such offer shall be made in writing and can be
accepted by the non-withdrawing Participant at any time within forty-five (45)
days after it is received by such nonwithdrawing Participant.
12.8 Mutual Withdrawal. If a Participant elects to withdraw from this
Agreement pursuant to Section 12.2, the other Participant may also elect to
withdraw as a Participant by giving written notice thereof to the other
Participant within thirty (30) days after receipt of the first Participant's
notice of withdrawal, in which event the Participants shall be deemed to have
agreed to terminate the Venture as of the first date of withdrawal pursuant to
Section 12.1.
34
ARTICLE 13
SURRENDER OF PROPERTY
13.1 Surrender of Property. The Management Committee may authorize the
Manager to surrender part or all of the Property. If the Management Committee
authorizes any such surrender over the objection of a Participant, the
Participant that desires to surrender shall assign to the objecting Participant,
without cost to the objecting Participant, all of the surrendering Participant's
interest in the Property to be surrendered, and the surrendered Property shall
cease to be part of the Property.
13.2 Reacquisition. If any Property is surrendered under the provisions of
this Article 13, then, unless this Agreement is earlier terminated, neither
Participant nor any Affiliate thereof shall acquire any interest in such
Property or a right to acquire such Property for a period of two years following
the date of such surrender. If a Participant reacquires any Property in
violation of this Section 13.2, the other Participant may elect by notice to the
reacquiring Participant within forty-five (45) days after it has actual notice
of such reacquisition, to have such Property made subject to the terms of this
Agreement. In the event such an election is made, the reacquired properties
shall thereafter be treated as Property, and the costs of reacquisition shall be
borne pro rata by the Participants and shall be included for purposes of
calculating the Participants' respective Participating Interests.
ARTICLE 14
TRANSFER OF INTEREST
14.1 General. A Participant shall have the right to Transfer to any
third party all or any part of its interest in or to this Agreement, its
Participating Interest, or the Assets solely as provided in this Article 14.
14.2 Limitations on Free Transferability. The Transfer right of a
Participant in Section 14.1 shall be subject to the
following terms and conditions:
35
(a) No transferee of all or any part of the interest of a Participant
in this Agreement, any Participating Interest, or the Assets shall have the
rights of a Participant unless and until the transferring Participant has
provided to the other Participant notice of the Transfer, and except as
provided in Sections 14.2(e) and 14.2(f), the transferee, as of the
effective date of the Transfer, has committed in writing to be bound by
this Agreement to the same extent as the transferring Participant;
(b) No Transfer permitted by this Article 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;
(c) In the event of a Transfer of less than all of a Participating
Interest, the transferring Participant and its transferee shall act and be
treated as one Participant;
(d) Except as provided in Section 14.4(c), no Participant shall
transfer any interest in this Agreement or the Assets except by Transfer of
part or all of its Participating Interest;
(e) From the date of execution of this Agreement, if the Transfer is
the grant of a security interest by mortgage, deed of trust, pledge, lien
or other encumbrance of any interest in this Agreement, any Participating
Interest or the Assets to secure a loan or other indebtedness of a
Participant in a bona fide transaction, such security interest shall be
subordinate to the terms of this Agreement and the rights and interests of
the other Participant hereunder. Upon any foreclosure or other enforcement
of rights in the security interest the acquiring third party shall be
deemed to have assumed the position of the encumbering Participant with
respect to this Agreement and the other Participant, and it shall comply
with and be bound by the terms and conditions of this Agreement; and
(f) If a sale or other commitment or disposition of Products or
proceeds from the sale of Products by a Participant upon distribution to it
pursuant to Article 11 creates in a third party a security interest in
Products or
36
proceeds therefrom prior to such distribution, such sales, commitment or
disposition shall be subject to the terms and conditions of this Agreement.
14.3 Right of First Refusal. Except as otherwise provided in Sections 14.2
and 14.4, if either Participant receives an offer to Transfer or otherwise
dispose of all or a part of its Participating Interest in the Property to a
third party, prior to accepting such offer the transferring Participant shall
first offer the interest to the nontransferring Participant at the same terms
and conditions as set forth in the third party offer. The non-transferring
Participant may accept the offer by written notice to the transferring
Participant given within sixty (60) days of receipt of the transferring
Participant's offer. If the non-transferring Participant does not accept the
offer, then the transferring Participant may sell or otherwise dispose of its
interest under terms and conditions not less favorable to it than those set
forth in the third party offer, provided that the sale or other disposition is
effectuated within one hundred and eighty (180) days from the effective date of
the third party offer.
14.4 Exceptions to Right of First Refusal. Section 14.3 shall not apply to
the following:
(a) Transfer by a Participant of all or any part of its interest in
this Agreement, any Participating Interest, or the Assets to an Affiliate,
to Amax Gold, Inc. or Amax Gold Exploration, Inc.;
(b) Incorporation of a Participant, or corporate merger,
consolidation, amalgamation or reorganization of a 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) The grant by a Participant of a security interest in any interest
in this Agreement, any Participating Interest, or the Assets by mortgage,
deed of trust, pledge, lien or other encumbrance which shall be subordinate
as set forth above; or
37
(d) A sale or other commitment or disposition of Products or proceeds
from sale of Products by a Participant upon distribution to it pursuant to
Article 11.
ARTICLE 15
CONFIDENTIALITY AND RELEASES
15.1 General. The financial terms of this Agreement and all information
obtained in connection with the performance of this Agreement shall be the
exclusive property of the Participants and, except as provided in Section 15.2,
shall not be disclosed to any third party or the public without the prior
written consent of the other Participant, which consent shall not be
unreasonably withheld.
15.2 Exceptions. The consent required by Section 15.1 shall not apply to a
disclosure:
(a) To an Affiliate, consultant, contractor or subcontractor that has
a bona fide need to be informed;
(b) To any third party to whom the disclosing Participant contemplates
a Transfer of all or any part of its interest in or to this Agreement, its
Participating Interest, or the Assets; or
(c) Which the disclosing Participant is required by pertinent law or
regulation or the rules of any stock exchange to disclose; provided that in
any case to which this Section 15.2 is applicable, the disclosing
Participant shall give written notice to the other Participant prior to
the making of any such disclosure.
(d) As necessary to administer or enforce this Agreement.
As to any disclosure pursuant to Section 15.2(a) or (b), only such
confidential information as such third party shall have a legitimate
business need to know shall be disclosed and such third party shall first
agree in writing to protect the confidential information from further
disclosure to the same extent as the Participants are obligated under this
Article 15.
38
15.3 Duration of Confidentiality. The provisions of this Article 15 shall
apply during the term of this Agreement and for two (2) years following a
termination pursuant to Section 12.1 or following withdrawal pursuant to Section
12.2, and shall continue to apply to any Participant who withdraws, who is
deemed to have withdrawn, or who Transfers its Participating Interest, for two
years following the date of such occurrence.
15.4 Releases. There shall be no public release by either party of any
information concerning the Property, the Operations or the Venture without the
prior written consent of the other party (such consent not to be unreasonably
withheld or delayed) unless such information is required by a lawful authority
of or other regulatory body having jurisdiction in which case the party making
such required disclosure shall first deliver a copy thereof to the other party
and allow the other party twenty-four (24) hours to comment on the nature and
extent of such required disclosure.
ARTICLE 16
AREA OF INTEREST
16.1 Acquisitions in Area of Interest. If at any time during the
subsistence of this Agreement any Participant or any non-Participant that has a
production royalty interest as provided for herein,'(in this section only called
the "Acquiring Party") stakes or otherwise acquires any right to or interest in
any properties within the exterior boundaries of the area depicted on Exhibit E
attached hereto and made a part hereof, ("Area of Interest"), the Acquiring
Party shall forthwith give notice to the other parties of such acquisition, the
total cost thereof and all details in the possession of that Participant with
respect to the details of the acquisition, the nature of the property and the
known mineralization. Each other Participant may, within thirty (30) days of
receipt of the Acquiring Party's notice, elect, by notice to the Acquiring
Party, to require that the properties and the right or interest acquired be
included in and thereafter form part of the Property for all purposes of this
Agreement.
39
If the election aforesaid is made, the other Participants shall reimburse
the Acquiring Party for that portion of the cost of acquisition which is
equivalent to their respective Participating Interests.
If no other Participant makes the election aforesaid within that period of
thirty (30) days, the right or interest acquired shall not form part of the
Property and the Acquiring Party shall be solely entitled thereto.
Notwithstanding the provisions of this Article 16, should either Cyprus or
ICMC or their Affiliates control any properties within the Area of Interest on
the effective date of this Agreement and such properties are not included in
Exhibits A-1 or A-2, such properties shall be considered Property and become
subject to this Agreement.
ARTICLE 17
GENERAL PROVISIONS
17.1 Notices. All notices, payments and other required communications
("Notices") to the Participants shall be in writing, and shall be addressed
respectively as follows:
If to ICMC:
Idaho Consolidated Metals Corporation
X.X. Xxx 0000
Xxxxxxxx, Xxxxx 00000
Attn: President
Fax: (000) 000-0000
If to Cyprus:
Cyprus Gold Exploration Corporation
0000 Xxxx Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Exploration Manager, North America
Fax: (000) 000-0000
40
With a copy to:
Cyprus Gold Exploration Corporation 91 00 X. Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Attn: Land Management Department
Fax: (000) 000-0000
All Notices shall be given (i) by personal delivery to the Participant, or
00 by electronic communication or facsimile, with a confirmation sent by
registered or certified mail return receipt requested, (iii) by registered or
certified mail return receipt requested or (iv) by express mail. All Notices
shall be effective and shall be deemed delivered (i) if by personal delivery on
the date of delivery if delivered during normal business hours, and, if not
delivered during normal business hours, on the next business day following
delivery, (ii) if by electronic communication or facsimile on the next business
day following receipt of the electronic communication or facsimile, and (iii) if
solely by mail on the next business day after actual receipt. A Participant may
change its address by Notice to the other Participant.
17.2 Waiver. The failure of a Participant to insist on the strict
performance of any provision of this Agreement or to exercise any right, power
or remedy upon a breach 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.
17.3 Modification. No modification of this Agreement shall be valid unless
made in writing and duly executed by the Participants.
17.4 Force Majeure. Except for the obligation to make payments when due
hereunder, the obligations of a Participant shall be suspended to the extent and
for the period that performance is prevented by any cause, whether foreseeable
or unforeseeable, beyond its reasonable control, including, without limitation,
lack of satisfactory market, labor disputes (however arising and whether or not
employee demands are reasonable or within the power of the Participant to
grant); acts of God;
41
laws, regulations, orders, proclamations, instructions or requests of any
government or governmental entity; judgments or orders of any court; inability
to obtain on reasonably acceptable terms any public or private license, permit
or other authorization; curtailment or suspension of activities to remedy or
avoid an actual or alleged, present or prospective violation of federal,
provincial or local environmental standards; acts of war or conditions arising
out of or attributable to war, whether declared or undeclared; riot, civil
strife, insurrection or rebellion; fire, explosion, earthquake, storm, flood,
sink holes; drought or other adverse weather condition; delay or failure by
suppliers or transporters of materials, parts, supplies, services or equipment
or by contractors' or subcontractors' shortage of, or inability to obtain,
labor, transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; or any
other cause whether similar or dissimilar to the foregoing. The affected
Participant shall promptly give notice to the other Participant of the
suspension of performance, stating therein the nature of the suspension, the
reasons therefor, and the expected duration thereof and this Agreement shall be
extended by the total period of such delays or suspension. 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 Section 9.2 shall be reduced to levels consistent with Operations.
17.5 Economic Force Majeure. If, at any time after the Management Committee
reaches a determination, in its reasonable judgment, that the minerals
encompassed within the Property cannot be profitably mined under the terms and
conditions of this Agreement as it is then in effect, the Management Committee
may declare that a condition of Force Majeure exists as provided in Section
17.4, above; provided, that in no event shall a condition of Force Majeure
declared pursuant to this Section 16.5 be in effect for more than five (5)
consecutive years.
17.6 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Idaho.
42
17.7 Rule Against Perpetuities. Any right or option to acquire any interest
in real or personal property under this Agreement must be exercised, if at all,
so as to vest such interest in the acquirer within twenty-one (21) years after
the effective date of this Agreement.
17.8 Further Assurances. Each of the Participants agrees to take from time
to time such actions and execute such additional instruments as may be
reasonably necessary or convenient to implement and carry out the intent and
purpose of this Agreement.
17.9 Survival of Terms and Conditions. The following Sections shall survive
the termination of this Agreement to the full extent necessary for their
enforcement and the protection of the Participant in whose favor they run:
Sections 2.2, 4.3, 6.4, 6.6, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 13.2, 17.6 and
Exhibit "B".
17.10 Entire Agreement; Successors and Assigns. This Agreement contains the
entire understanding of the Participants and supersedes all prior agreements and
understandings between the Participants relating to the subject matter hereof.
This Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the Participants. In the event of any
conflict between this Agreement and any Exhibit attached hereto, the terms of
this Agreement shall be controlling.
17.11 Memorandum. At the request of either Participant, a Memorandum or
short form of this Agreement, as appropriate, which shall not disclose financial
information contained herein, shall be prepared and recorded by Manager. This
Agreement shall not be recorded.
17.12 Funds. All references to dollar amounts contained in this Agreement
are references to United States dollars.
43
IN WITNESS WHEREOF, this Agreement has been, executed by the parties hereto
effective as of the day and year first above written.
CYPRUS GOLD EXPLORATION CORPORATION
By: /s/ X. Xxxxxxx
-------------------------
Title: President
IDAHO CONSOLIDATED METALS CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
--------------------------
Title: Pres. & CEO
Tax ID#: 00-0000000
44
EXHIBIT "A-1"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
The following unpatented mining claims located in Idaho County, State of Idaho.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------- ---------- ---------- ----------
Petsite #1 175109 Surprise #15 82187
Petsite #2 175110 Surprise #16 82188
Petsite #3 175111 Surprise No. 17 82189
Petsite #4 175112 Surprise No. 18 82190
Petsite #5 175113 Lost Wheelbarrow #1 123246
Petsite #6 175114 Lost Wheelbarrow #2 123247
Petsite #7 16203 Lost Wheelbarrow #3 123248
Petsite Fraction 175115 This Is It Placer 29189
Toronto #1 175116 This Is It Placer 175152
Toronto No. 2 00000 Xxxxx #0 00000
Xxxxxx 00000 Xxxxx #0 00000
Xxxx Xxxx Xxxxxx 000000 Xxxxx #0 00000
Xxxxx Xxxxx 175118 Eagle #4 11137
Frog 7 18660 Eagle #5 11138
Frog 9 18661 Eagle #6 11139
Frog 10 18662 Eagle #7 11140
Frog 12 18664 Eagle #9 11142
Frog 16 18667 Eagle #10 11143
Frog 18 18669 Eagle #12 11145
Frog 19 18670 Eagle #13 11146
Frog 20 18671 Eagle #15 11148
Frog 21 18672 Eagle #16 11149
Frog 22 18673 Eagle #18 11151
Frog 23 18674 Eagle #19 11152
Frog 24 18675 Eagle #21 11154
Frog 26 18677 Eagle #22 11155
Frog 33 18681 Eagle #23 11156
Frog 35 18683 Eagle #24 11157
Frog 55 82197 Eagle #25 11158
Frog 56 82198 Eagle #26 11159
Frog 57 82199 Eagle #27 11160
Frog 58 82200 Eagle #28 11161
1
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------- ---------- ---------- ----------
Eagle #29 11162 Eagle #64 0000
Xxxxx #00 000 Xxxxx #00 4016
Eagle #30 175127 Eagle #66 0000
Xxxxx #00 00000 Xxxxx #67 4018
Eagle #32 175128 Eagle #68 0000
Xxxxx #00 000 Xxxxx #00 4022
Eagle #34 175129 Eagle #75 175136
Eagle #34 11164 Eagle #78 0000
Xxxxx #00 00000 Xxxxx #79 0000
Xxxxx #00 00000 Xxxxx #80 0000
Xxxxx #00 00000 Xxxxx #81 0000
Xxxxx #00 00000 Xxxxx #82 0000
Xxxxx #00 0000 Xxxxx #83 9335
Eagle #39 175130 Eagle #84 0000
Xxxxx #00 0000 Xxxxx #85 9337
Eagle #40 175131 Eagle #86 0000
Xxxxx #00 00000 Xxxxx #87 9339
Eagle #41 175132 Eagle #88 0000
Xxxxx #00 00000 Xxxxx #89 9341
Eagle #42 175133 Eagle #90 0000
Xxxxx #00 00000 Xxxxx #91 0000
Xxxxx #00 00000 Xxxxx #92 0000
Xxxxx #00 00000 Xxxxx #93 9345
Eagle #46. 11174 Eagle #94 0000
Xxxxx #00 00000 Xxxxx #95 0000
Xxxxx #00 00000 Xxxxx #96 0000
Xxxxx #00 00000 Xxxxx #97 0000
Xxxxx #00 00000 Xxxxx #98 0000
Xxxxx #00 00000 Xxxxx #99 0000
Xxxxx #00 00000 Xxxxx #100 0000
Xxxxx #00 00000 Xxxxx #101 0000
Xxxxx #00 000 Xxxxx #000 9354
Eagle #54 175134 Eagle #103 0000
Xxxxx #00 000 Xxxxx #000 0000
Xxxxx #00 000 Xxxxx #000 0000
Xxxxx #00 000 Xxxxx #000 9358
Eagle #58 0000 Xxxxx #000 0000
Xxxxx #59 0000 Xxxxx #000 0000
Xxxxx #60 0000 Xxxxx #000 00000
Xxxxx #61 0000 Xxxxx #000 00000
Xxxxx #62 0000 Xxxxx #000 00000
Xxxxx #63 175135 Eagle #112 44040
2
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------- ---------- ---------- ----------
Eagle #113 44041 Eagle #154 00000
Xxxxx #000 00000 Xxxxx #155 00000
Xxxxx #000 00000 Xxxxx #156 00000
Xxxxx #000 00000 Xxxxx #157 00000
Xxxxx #000 00000 Xxxxx #178 101736
Eagle #118 44046 Eagle #182 101740
Eagle #119 44047 Eagle #185 101743
Eagle #119A 44048 Golden Eagle 175119
Eagle #120 44049 Golden Eagle #2 175120
Eagle #121 44050 Golden Eagle #3 175121
Eagle #122 44051 Golden Eagle #4 175122
Eagle #123 44052 Golden Eagle #5 11113
Eagle #124 44053 Golden Eagle #6 11114
Eagle #125 44054 Golden Eagle #7 175123
Eagle #126 44055 Golden Eagle #8 11116
Eagle #127 44056 Golden Eagle #9 11117
Eagle #128 44057 Golden Eagle #10 00000
Xxxxx #000 00000 Xxxxxx Eagle #11 00000
Xxxxx #000 00000 Xxxxxx Eagle #12 00000
Xxxxx #000 00000 Xxxxxx Eagle #13 00000
Xxxxx #000 00000 Xxxxxx Eagle #14 11122
Eagle #133 175137 Golden Eagle #15 00000
Xxxxx #000 00000 Xxxxxx Eagle #16 00000
Xxxxx #000 00000 Xxxxxx Eagle #17 00000
Xxxxx #000 00000 Xxxxxx Eagle #18 175124
Eagle #137 95660 Golden Eagle #18 000
Xxxxx #000 00000 Xxxxxx Eagle #19 000
Xxxxx #000 00000 Xxxxxx Eagle #19X 00000
Xxxxx #000 00000 Xxxxxx Eagle #20F 00000
Xxxxx #000 00000 Xxxxxx Eagle #21F 00000
Xxxxx #000 00000 Xxxxxx Eagle #21F 175125
Eagle #143 95666 Golden Eagle #22F 00000
Xxxxx #000 00000 Xxxxxx Eagle #22F 175126
Eagle #145 95668 Golden Eagle #23 00000
Xxxxx #000 00000 Xxxxxx Eagle #24 00000
Xxxxx #000 00000 Xxxxxx Eagle #25 00000
Xxxxx #000 00000 Xxxxxx Eagle #26 00000
Xxxxx #000 00000 Xxxxxx Eagle #27 00000
Xxxxx #000 00000 Xxxxxx Eagle #28 000
Xxxxx #000 00000 Xxxxxx Eagle #29 0000
Xxxxx #000 00000 Xxxxxx Eagle #30 0000
Xxxxx #000 00000 Xxxxxx Eagle #31 3998
3
BLM
Claim Name Serial No.
---------- ----------
Golden Eagle #32 3999
Golden Eagle #33 4000
Golden Eagle #34 4001
Golden Eagle #35 4002
Golden Eagle #36 4003
Golden Eagle #37 4004
Golden Eagle #38 4005
Golden Eagle #39 4006
Golden Eagle #40 4007
Golden Eagle $41 4008
4
EXHIBIT "A-2"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
The following unpatented mining claims located in Idaho County, State of Idaho.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------- ---------- ---------- ----------
XX 0 000000 XX 00 000000
XX 2 177155 PT 36 177189
XX 0 000000 XX 00 000000
XX 4 177157 PT 38 177191
XX 0 000000 XX 00 000000
XX 6 177159 XX 00 000000
XX 7 177160 PT 41 177194
XX 0 000000 XX 00 000000
XX 9 177162 XX 00 000000
XX 00 000000 XX 44 177197
XX 00 000000 XX 00 000000
XX 12 177165 PT 46 177199
XX 00 000000 XX 00 000000
XX 14 177167 PT 48 177201
XX 00 000000 XX 00 000000
XX 16 177169 XX 00 000000
XX 00 000000 XX 51 177204
XX 00 000000 XX 00 000000
XX 19 177172 XX 00 000000
XX 00 000000 XX 54 177207
XX 00 000000 XX 00 000000
XX 22 177175 XX 00 000000
XX 00 000000 XX 57 177210
XX 00 000000 XX 00 000000
XX 25 177178 XX 00 000000
XX 00 000000 XX 60 177213
XX 00 000000 XX 00 000000
XX 28 177181 XX 00 000000
XX 00 000000 XX 63 177216
XX 00 000000 XX 00 000000
XX 31 177184 XX 00 000000
XX 00 000000 XX 66 177219
XX 00 000000 XX 00 000000
XX 34 177187 PT 68 177519
1
BLM BLM
Claim Name Serial No. Claim Name Xxxxxx Xx.
XX 00 000000 XX 111 177562
XX 00 000000
XX 00 000000
XX 72 177523
XX 00 000000
XX 00 000000
XX 75 177526
XX 00 000000
XX 00 000000
XX 78 177529
XX 00 000000
XX 00 000000
XX 81 177532
XX 00 000000
XX 00 000000
XX 84 177535
XX 00 000000
XX 00 000000
XX 87 177538
XX 00 000000
XX 00 000000
XX 90 177541
XX 00 000000
XX 00 000000
XX 93 177544
XX 00 000000
XX 00 000000
XX 96 177547
XX 00 000000
XX 00 000000
XX 99 177550
PT 100 177551
PT 101 177552
PT 102 177553
PT 103 177554
PT 104 177555
PT 105 177556
PT 106 177557
PT 107 177558
PT 108 177559
PT 109 177560
PT 110 177561
2
EXHIBIT "B"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation
ACCOUNTING PROCEDURES
The purpose of these Accounting Procedures is to establish equitable
methods for determining charges and credits applicable to Operations under the
captioned Agreement (the "Agreement"). It is the intent of the Manager and any
Participant that is not acting as the Manager ("the non-Manager") that neither
of them shall gain nor lose by reason of their duties and responsibilities as
the Manager or the non-Manager but that the Manager should be reimbursed for the
value of services provided hereunder. If any method proves unfair or inequitable
to the Manager or the non-Manager, the Participants shall meet and in good faith
endeavor to agree upon changes deemed necessary to correct the unfairness or
inequity. In the event of a conflict between the provisions of these Accounting
Procedures and those of the Agreement, the provisions of the Agreement shall
control.
ARTICLE 1
GENERAL PROVISIONS
1.1 Definitions. The definitions set forth in the Agreement shall apply to
these Accounting Procedures and shall have the same meanings as used herein.
Additional terms used in these Accounting Procedures are set forth below shall
have the following meanings:
(a) "Material" shall mean personal property, including but not limited
to supplies and non-depreciable equipment, acquired and held for use in
Operations.
1
(b) "Outsider" shall mean participants other than "Participant" to the
Agreement and their affiliates.
(c) Personal Expenses" shall mean travel and other reasonable
reimbursable expenses of employees of the Manager or its Affiliates.
(d) "Technical Employees" shall mean those employees having special
and specific engineering, geological, legal, or other professional skills,
and whose primary function in Operations is the handling of specific
matters for the benefit of Operations.
1.2 Accounting Records.
(a) The Manager shall maintain accounting records for the Joint
Account in accordance with generally accepted accounting principles
consistently applied and used in the mining industry.
(b) The Manager shall take advantage of and credit the Venture with
all cash and trade discounts, freight allowances and equalizations, annual
volume or other allowances, credits, salvages, commissions, insurance
discount dividends and retroactive premium adjustments, and any other
benefits which accrue to the Manager wholly or in part because of
Operations.
1.3 Statements, Xxxxxxxx and Adjustments.
(a) The Manager shall promptly submit to the Management Committee
monthly statements of account reflecting in reasonable detail the charges
and credits to the Joint Account during the preceding month.
(b) On the basis of the adopted Program and Budget, the Manager shall
submit to each Participant prior to the last day of each month, a billing
for estimated cash requirements for the next month. Within ten (10) days
after receipt
2
of each billing, each Participant shall advance to the Manager its
proportionate share of the estimated amount. Time is of the essence of
payment of such xxxxxxxx. The Manager shall at all times maintain a cash
balance approximately equal to the rate of disbursement for up to
forty-five (45) days.
(c) A Participant that fails to meet cash calls in the amount and at
the times specified in Section 1.3(b) shall be in default, and the amount
of the defaulted cash call shall bear interest from the date due at an
annual rate equal to two (2) percentage points over the Prime Rate, but in
no event shall said rate of interest exceed the maximum permitted by law.
The non-defaulting Participant shall have those rights, remedies and
elections specified in Section 6.4 of the Agreement.
(d) Payment of bills shall not prejudice the right of the non-Manager
to protest or question the correctness thereof; however, all bills and
statements rendered during any calendar year shall be presumed conclusively
to be true and correct after twelve (12) months following the end of any
such calendar year unless, within the said twelve-month period, the
non-Manager takes written exception thereto and makes claim on the Manager
for adjustment. No adjustment favorable to the Manager shall be made unless
it is made within the same prescribed period or in connection with an
adjustment in favor of the non-Manager. The provisions of this paragraph
shall not prevent adjustments resulting from a physical inventory of the
Assets.
1.4 Advances and Payments.
(a) As provided for in this Exhibit "B", the non-Manager shall advance
its share of the estimated cash outlay for the succeeding month's
operation. If the non-Manager's advances exceed its share of actual
expenditures, subsequent cash calls will be adjusted downward or the
Manager will refund to the non-Manager excess funds that are not necessary
for subsequent Operations.
3
(b) The Manager shall base its estimates of cash advance requirements
on the latest information available and shall take into account cash on
hand which may be applied to satisfy such requirements in order to reduce
the amounts to be advanced. It is the intent of the Participants to provide
adequate funds for the Operations and to maintain bank balances at minimum
levels.
(c) If the Manager does not request the non-Manager to advance its
share of estimated cash requirements, the non-Manager shall pay its share
of expenditures within thirty (30) days following receipt of the Manager's
billing.
(d) Except as provided in Section 6.4 of the Agreement, all payments
shall be made on or before the due date by wire transfer in immediately
available funds to bank accounts designated by the Manager. If not so paid,
the unpaid balance shall bear interest after the due date at the rate of
Prime Rate plus two percent (2%) for each thirty (30) day period or portion
thereof until such amount is paid, plus attorneys' fees, court costs, and
other costs related to the collection of the unpaid amounts.
(e) Funds received by the Manager from the non-Manager Participant
shall be segregated or maintained by the Manager as a separate fund, and
may not be commingled with the Manager's own funds, except with the consent
of the non-Manager Participant.
1.5 Audits. Upon notice in writing to the Manager, the non-Manager shall
have the right to audit the accounts and records relating to the accounting made
under this Agreement for any calendar year within the twelve (12) month period
following the end of such calendar year; provided, however, the making of an
audit shall not extend the time for the taking of written exception to and the
adjustments of accounts pursuant to Section 1.3(d). The non-Manager may arrange
for audits by its own staff or outside professional and qualified independent
auditors. Audits shall be conducted in a manner so as to cause the minimum
inconvenience to the Manager. The Manager shall bear no portion of non-Manager's
audit costs unless agreed to by the Manager in advance of such audit.
Notwithstanding the above in the event the non-Manager
4
does not audit the accounts and records relating to the accounting made under
this Agreement the Manager shall have conducted annually an audit of the
accounts and records relating to the accounting made under this Agreement. Such
audit shall be for the account of the Venture. If the non-Manager does have an
audit performed as provided herein, the Manager shall not be required to perform
an additional audit.
ARTICLE 2
CHARGEABLE COSTS
Subject to the provisions of the Agreement, the Manager shall charge the
Joint Account with all costs incurred by it as necessary and proper for the
conduct of Operations or maintenance of the Assets. Such costs shall be
reasonable and comparable with similar projects in the area. Except as otherwise
provided in the Agreement, the Manager shall charge the Joint Account with: (1)
exploration expenditures made for the exploration activities within the
Property, (2) expenditures made for engineering, environmental, planning,
Development and construction related to the Property and for the equipment and
facilities necessary for Operations, including all working capital and
sustaining capital for ongoing Operations and for the expansion and updating of
Operations, and (3) costs and expenses of mining, processing, reclamation,
restoration, worker's compensation and other claims upon closing of the mines,
and any other costs following the mine closing. Such costs include, but are not
limited to the following:
2.1 Property Payments. Property payments, rentals, royalties and other
payments out of production (unless such royalties or other payments shall burden
the ownership interests of only one Participant) and fees, paid by the Manager
for Operations including permits, fees, and other charges which are assessed by
various governmental agencies. Such costs also include acquisition of easements,
rights of way, and surface rights.
5
2.2 Labor.
(a) Salaries and wages of the Manager's employees directly engaged in
and the conduct of and for the benefit of Operations, whether temporarily
or permanently assigned. The proportion of salaries and wages charged will
be prorated proportionate to the time spent by employees for the benefit of
Operations. Salaries and wages shall include everything constituting gross
pay to employees as reflected on the Manager's payroll, including travel
time and overtime.
(b) The Manager's cost of holidays, rest days, vacations, disability
benefits, sickness, and other customary allowances and reasonable expenses
which are paid or reimbursed under the Manager's usual practice. Such
amounts may be charged either on a "percentage assessment" of salaries and
wages, or on a cash basis.
(c) Costs of expenditures or contributions made pursuant to
assessments imposed by governmental authority which are applicable to the
Manager's cost of salaries and wages.
(d) Personal Expenses of employees whose salaries and wages are
chargeable to the Joint Account under Section 2.2 (a), but only to the
extent that such Personal Expenses are incurred in connection with their
efforts while directly engaged in the conduct of and for the benefit of
Operations.
(e) The Manager's actual costs of established plans for employees'
group life insurance, hospitalization, medical, dental, pension,
retirement, stock purchase, profit sharing, thrift, bonus, and other
benefit plans of a similar nature applicable to the Manager's labor cost
chargeable to the Joint Account.
(f) If a percentage assignment is used for Section 2.2(b) and (e), the
rate shall be based on actual cost experience for the previous year. Such
rate
6
shall be determined during the first quarter of each year and shall be
applied in current year operations.
(g) Relocation costs of employees permanently or temporarily assigned
and directly engaged in the conduct of Operations. Such costs shall include
transportation of employees' families and their personal and household
effects and all other relocation costs in accordance with the Manager's
usual practice.
2.3 Material. Material purchased or furnished by the Manager for use in
Operations as provided under Article 3. So far as is reasonably practical, and
consistent with efficient and economical operations, only such Material shall be
purchased or transferred for use in Operations as may be required for immediate
use.
2.4 Transportation.
(a) Transportation of material and other related costs such as
expediting, crating, freight, and unloading at destination.
(b) Transportation of employees as required in the conduct of
Operations.
2.5 Services.
(a) The cost of consultants, contract labor, services, equipment, and
utilities procured from Outsiders.
(b) Technical or research services, such as, but not limited to,
laboratory analysis, drafting, geophysical and geological interpretation,
engineering, reserve studies and related computer services, and data
processing, which may be delegated to and performed by the specialized
staffs of one of the Participants or their Affiliate. Such professional
services shall be on a cost of service basis and charges shall not exceed
the cost of comparable quality services by qualified Outsiders.
7
Charges to the Joint Account for services directly benefiting Operations
shall be in addition to any charges allowed under Sections 2.11 and 2.12.
(c) In the event the Manager from time to time utilizes skilled
personnel of the Participants or their Affiliates for performance of
services either within the Property or elsewhere for the benefit of
Operations, whose time in full or in part is not otherwise charged
hereunder, a proper proportion of the direct and indirect salary, employee
benefits, and travel expenses of such personnel shall be charged to the
Joint Account, provided such work is pursuant to written authorization by
the Manager. Such professional services shall be on a cost of service basis
and charges shall not exceed the cost of comparable quality services by
qualified Outsiders.
(d) Use of the Manager's and the non-Manager's separately owned
equipment and facilities for benefit of Operations. Such use shall be
charged to the Joint Account at rates commensurate with the Manager's
actual and full costs of ownership and operation and such rates shall
include cost of maintenance, repairs, other operating expense, insurance,
taxes (other than income taxes), depreciation, and other overhead. These
charges shall not exceed the prevailing commercial rates in the area.
(e) Data processing and computer services acquired for the benefit of
Operations may be contracted through Outsiders, or by arrangement for
computer services from one of the Participants, or their Affiliates, even
though such facilities are not physically located within the Property.
Charges to the Joint Account under this provision for services directly
benefiting Operations shall be in addition to any charges allowed under
Section 2.11 and 2.12. Such professional services shall be on a cost of
service basis and charges shall not exceed the cost of comparable quality
services by qualified Outsiders.
(f) Any technical services, skilled personnel, equipment, facilities
or data processing services provided to Operations by the non-Manager, at
the request
8
of the Manager, shall be charged on the same basis as provided in Sections
2.5 (b), (c) (d) and (e) above. The non-Manager shall xxxx the Manager in
accordance with Section 1.4 (c) of the Accounting Procedures. The Manager
may audit the records of the non-Manager with regard to such services in
accordance with the procedure set forth in Section 1.5.
2.6 Repair and Replacement of Property. All costs or expenses (net of the
recoveries from insurance for which the premiums have been charged to the Joint
Account, if any) necessary for the repair or replacement of property resulting
from damages or losses incurred by fire, flood, storm, theft, accident, or any
other cause, excepting the Manager's gross negligence or willful misconduct. The
Manager shall furnish to the non-Manager written notice of damages or losses in
excess of Fifteen Thousand Dollars ($15,000) as soon as practicable. Such costs
and expenses include the costs to combat and control the actions of the hazard.
2.7 Insurance.
(a) Premiums paid for Workers' Compensation or Employer's Liability
Insurance required to be carried for Operations. In the event Operations
are conducted in a state or province in which the Manager may act as
self-insurer for Workers' Compensation or Employer's Liability under the
applicable state's or province's law, the Manager may, at its election,
provided that it is allowed by the laws of the Province, include the risk
under its self-insurance program and in that event, the Manager shall
include a charge at the Manager's cost equal to the Standard Workers'
Compensation rate during any one contract year. Premiums paid for an
insurance program covering such property, business interruption, casualty,
and fidelity risks as are deemed prudent by the Manager based on sound
business judgment, which judgment shall be subject to review and revision
by the Management Committee. Premiums paid for other insurance as requested
by the Management Committee. Each Participant may procure and maintain, at
its own cost and expense, such other insurance as it may determine to be
necessary to protect its interests, and any such
9
insurance so procured and maintained shall inure solely to the benefit of
the Participant procuring the same.
(b) Actual expenditures incurred in the investigation, defense, and
settlement of all losses, claims, damages, judgments, and other expenses
for the benefit of Operations, excepting those resulting from the Manager's
gross negligence or willful misconduct.
2.8 Litigation and Claims. All costs or expenses of handling, investigation
and settling litigation or claims arising by reason of Operations or necessary
to protect or recover property, including, but not limited to, attorneys' fees,
court costs, cost of investigation or procuring evidence and amounts paid in
settlement or satisfaction of any such litigation or claims. In the event
actions or claims affecting Operations shall be handled by the legal staff of
one of the Participants, a charge commensurate with the cost of providing such
service is chargeable to the Joint Account.
2.9 Taxes. All taxes (except taxes based on or determined with reference to
income), fees, and governmental assessments of every kind and nature. If the
Manager is required hereunder to pay ad valorem taxes based in whole or in part
upon separate valuations of each Participant's Interest, then notwithstanding
anything to the contrary herein, charges to the Joint Account shall be made and
paid by the Participants hereto in accordance with the percentage of tax value
generated by each Participant's Interest.
2.10 Fines. All fines resulting from non-compliance with applicable laws,
rules, and regulations, except to the extent that such fines were due to the
gross negligence or willful misconduct of the Manager.
2.11 Direct Administrative Costs. The net cost of maintaining and operating
any offices (excepting the corporate headquarters office), suboffices, camps,
warehouses, housing, and other facilities directly serving Operations shall be
charged to the Joint Account. If such facilities serve operations in addition to
Operations the
10
net costs shall be allocated to all operations served on an equitable basis
mutually agreed to by the Participants.
2.12 Manager's Management Fee. A charge to reimburse the Manager for
overhead and other general and administrative services of the Manager's
corporate headquarters office equal to the following percentages applied to
costs and expenses determined on a monthly basis under the provisions of
Paragraphs 2 through 7, 11 and 13 through 15 of this Article 2:
(a) Ten percent (10%) of all cash expenditures incurred prior to
Development, but only five percent (5%) on contracts greater than One
Hundred Thousand Dollars ($100,000).
(b) Five percent (5%) of all cash expenditures incurred following
commencement of Development.
Notwithstanding the above, such Manager's fees shall not be charged on the
overhead of any contractors or agents. The overhead rates set out above shall be
reviewed annually at the request of either party. If a detailed analysis of the
Manager's actual cost experiences establishes that higher or lower overhead
expenses were incurred or are likely to be incurred, and if higher, are
reasonable in the circumstances, then the rates shall be amended by the
Management Committee. Such amendment shall be on the basis that the Manager
neither profits nor loses as a result thereof.
2.13 Storage of Production Inventories. Each Participant will bear the cost
incurred for handling and storage of merchantable ore or concentrates as
follows:
(a) Personal property taxes on ore or concentrates in storage for a
Participant within the Property shall be charged to such Participant.
11
(b) The cost of loading out such ore in storage for a Participant from
the Property shall be charged to such Participant.
(c) Cost associated with providing storage of ore or concentrates
within the Property will be charged on a pro rata basis determined by the
Participants.
(d) Other costs arising out of storage or handling of ore or
concentrates shall be charged to the Participant owning such Materials.
2.14 Project Assets. The cost of all capital expenses of the Assets which
are normally depreciable, depletable, or amortizable, including but not limited
to land acquisition, exploration, development, pre-mine development and
stripping, machinery, equipment, plant, buildings, rail facilities and
equipment, improvements, camp and port facilities, townsites and other
infrastructure, whether incurred or acquired prior to or after Commencement of
Commercial Production.
2.15 Other Necessary Expenses. Any other chargeable expenditures not
covered or dealt with in the foregoing provisions which are necessary and proper
for the conduct of Operations.
ARTICLE 3
PRICING OF JOINT ACCOUNT MATERIAL PURCHASES
TRANSFERS, AND DISPOSITION
The Manager is responsible for Joint Account Material and shall make proper
and timely charges and credits for all Material movements affecting the
Property. The Manager shall provide all Material for use within the Property,
however, at the Manager's option, such Material may be supplied by the
non-Manager.
3.1 Purchases. Material purchased shall be charged at the price paid by the
Manager after deduction of all discount received. In case of Material found to
be
12
defective or returned to vendor for any other reason, credit shall be passed to
the Joint Account when adjustment has been received by the Manager.
3.2 Transfer and Dispositions. Material furnished to the Property and
Material transferred from the Property or disposed of by the Manager, unless
otherwise agreed to by the Participants, shall be priced at its current fair
market value.
3.3 Premium Prices. Whenever Material is not readily obtainable at
published or listed prices because of national emergencies, strikes, or other
unusual causes over which the Manager has no control, the Manager may charge the
Joint Account for the required Material at the Manager's actual cost incurred In
providing such Material, in making it suitable for use, and in moving it to the
Property.
3.4 Warranty of Material. The Manager shall not be held responsible for
defects in Material furnished for Operations. In the event Material is
defective, credit shall not be passed to the Joint Account until the adjustment
has been received by the Manager from the manufacturer or its agents.
ARTICLE 4
DISPOSAL OF SURPLUS MATERIAL
4.1 Distribution Generally. The disposition of major items of surplus
Material shall be decided upon by the Manager. The Manager may purchase, but
shall be under no obligation to purchase, the interests of the non-Manager in
surplus Material.
4.2 Purchase by Participants. Surplus Material purchased by either the
Manager or the non-Manager shall be credited by the Manager to the Joint Account
at its fair market value.
4.3 Distribution to Participants. Division of Material in kind, if made
between the Manager and the non-Manager, shall be in proportion to their
respective
13
interests in such Material. Each Participant will thereupon be charged
individually with the value of the Material received or receivable by each
Participant, and corresponding credits will be made by the Manager to the Joint
Account. Such credits shall appear in the monthly statement of operations.
4.4 Sales. Sales to Outsiders of Material from the Property shall be
credited by the Manager to the Joint Account at the net amount collected by the
Manager from vendee, which shall be priced on the basis of the best available
market price. Any claim by vendee for defective Materials or otherwise shall be
charged back to the Joint Account if and when paid by the Manager.
ARTICLE 5
INVENTORIES
5.1 Periodic Inventories. The Manager shall take physical inventory of
Joint Account Material at reasonable intervals in accordance with generally
accepted accounting principles but not less than once a year. The non-Manager
may be represented when any inventory shall bind the non-Manager to accept the
inventory taken by the Manager.
5.2 Reconciliation. Reconciliation of inventories with the Joint Account
shall be made by the Manager, and a list of overages and shortages shall be
furnished to the non-Manager within ninety (90) days following the taking of
inventory. Inventory adjustments shall be made by the Manager to the Joint
Account for overages and shortages, but the Manager shall be hold accountable to
the non-Manager only for shortages due to the lack of reasonable diligence.
5.3 Special Inventories. Whenever there is a sale or change of Interest in
the Mineral Rights, the Property or the Assets, a special inventory may be taken
by the Manager, provided the seller or purchaser or such Interest requests such
inventory and agrees to bear all of the expense thereof. In such cases, both the
seller and the purchaser shall be entitled to be represented. A special
inventory shall be required
14
when there is a change in the Manager. The cost of the latter inventory will be
charged to the Joint Account when the change in the Manager does not come about
as the result of a sale of the former Manager's Interest.
5.4 Expenses. The expense incurred by the Manager in conducting periodic
inventories shall be charged to the Joint Account.
15
EXHIBIT "C"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation
and Cyprus Gold Exploration Corporation.
NET PROCEEDS OF PRODUCTION ROYALTY
1 Obligation.
1.01 If any party becomes entitled to an interest in Net Proceeds pursuant to
the Agreement (an "Owner"), the Manager shall separately calculate, as at the
end of each calendar quarter subsequent to commencement of commercial
operations, Net Proceeds.
1.02 Interest in Net Proceeds Each Participant shall within sixty (60) days of
the end of each calendar quarter, as and when any Net Proceeds are available for
distribution:
(a) severally pay or cause to be paid to each Owner that percentage of the
Net Proceeds to which that Owner is entitled under the Agreement;
(b) deliver to each Owner a statement indicating:
i. the Gross Receipts during the calendar quarter;
ii. the deductions therefrom made in the order itemized in subsection
3.01 of this Exhibit C;
iii. the amount of Net Proceeds remaining; and
1
iv. the amount of the Net Proceeds to which that Owner is entitled;
provided, however, that until such time as there are Net Proceeds available, the
Manager shall deliver to each Owner within sixty (60) days of the end of each
calendar quarter commencing with the first calendar quarter following the
commencement of commercial operations, a statement indicating the Gross Receipts
during the calendar quarter less the deductions therefrom made in the order
itemized in subsection 3.01 of this Exhibit C.
1.03 Nothing contained in the Agreement or this Exhibit C shall be construed as:
(a) imposing on a Participant any obligation with respect to the payments
of amounts due hereunder to an Owner from any other Participant; or
(b) conferring on any Owner any right to or interest in any Property or
Assets except the right to receive payments pursuant to the Net
Proceeds Interest Royalty from each Participant to the Agreement as
and when due.
2. Definitions. Capitalized terms used but not defined herein shall have the
meanings given thereto in the Agreement.
2.01 "Costs" means, all items of outlay and expense whatsoever, direct or
indirect, with respect to Operations including loans made by one Participant for
the benefit of another Participant, recorded by the Manager in accordance with
the Agreement; without limiting generality, the following categories of Costs
shall have the following meanings:
(a) "Construction Costs" means those Costs recorded by the Manager during
the period of Development, including, without limiting generality, the
Manager's fee contemplated in Section 2.12 of Exhibit B;
2
(b) "Distribution Costs" means all costs of:
i. transporting ore or concentrates from a mine or a concentrating
plant to a smelter, refinery or other place of delivery
designated by the purchase and, in the case of concentrates
tolled, of transporting the metal from a smelter to the place of
delivery designated by the purchaser;
ii. handling, warehousing and insuring the concentrates and metal;
and
iii. in the case of concentrates tolled, of smelting and refining,
including any penalties thereon or in connection therewith.
(c) "Exploration Costs" means those Costs, including Exploration
Expenditures, pertaining to all activities directed toward
ascertaining the existence, location, quantity, quality or commercial
value of deposits of Products, and specifically includes the
preparation of a Feasibility Study.
(d) "Interest Costs" means interest computed quarterly and not in advance
calculated as follows:
i. If financing for Development of the Property has been obtained
from a third party lender, at the interest rates provided for
therein.
ii. If such third party financing is not in effect, as follows:
(1) the average of the opening and closing monthly outstanding
balances for each month during the quarter of the net unrecovered
amounts of all costs in the classes enumerated paragraphs 2.01
(a), (b), (c), (d), (e) (f) and (g) of this Exhibit C;
3
multiplied by:
(2) Prime Rate plus two percent;
multiplied by:
(3) the number of days in the quarter;
divided by:
(4) the number of days in the year;
(e) "Marketing Costs" means such reasonable charge actually incurred for
marketing of ores and concentrates sold or of concentrates tolled as
is consistent with generally accepted industry marketing practices;
and
(f) "Operating Costs" means those Costs recorded by the Manager subsequent
to the commencement of commercial production, including, without
limiting generality, the Manager's fee contemplated in Section 2.12 of
Exhibit B and additional costs of capital; and
(g) "Taxes and Royalties" means all taxes (other than income taxes),
royalties or other charges or imposts provided for pursuant to any law
or legal obligation imposed by any government if paid by the
Participant and any other royalties payable to third parties.
2.02 Wherever used in this Exhibit C, "Gross Receipts" means the aggregate of
all receipts, recoveries or amounts received by or credited to a Participant in
connection with its participation under the Agreement including, without
limiting the generality of the foregoing:
(a) the receipts from the sale of that Participant's proportionate share
of the ores, concentrates or other materials derived from Products
produced from the Property;
(b) all proceeds received from the sale of the Property or Assets
subsequent to the effective date of the Agreement;
4
(c) all insurance recoveries (including amounts received to settle claims)
in respect of loss of, or damage to any portion of the Property or
Assets subsequent to the effective date of the Agreement;
(d) all amounts received as compensation for the expropriation or forcible
taking of any portion of the Property or Assets subsequent to the
effective date of the Agreement;
(e) the fair market value, at the Property, of those Assets, if any,
purchased for the Joint Account, that are transferred from the
Property for use by a Participant elsewhere subsequent to the
effective date of the Agreement; and
(f) the amount of any negative balance remaining after the reallocation of
negative balances pursuant to subsection 3.03 of this Exhibit C;
to the extent that those receipts, recoveries or amounts have not been applied
by the Participant as a recovery of any of the classes of Costs itemized in
subsection 3.01 of this Exhibit C.
3. Net Proceeds Calculation.
3.01 "Net Proceeds" means the Gross Receipts minus deductions therefrom of the
then net unrecovered amounts of the following classes of Costs made in the
following itemized order:
(a) Marketing Costs;
(b) Distribution Costs;
(c) Operating Costs;
5
(d) Taxes and Royalties;
(e) Interest Costs;
(f) Construction Costs; and
(g) Exploration Costs;
it being understood that the deductions in respect of the Costs referred to in
paragraphs 3.01 (a), (b), (d) and (e) of this Exhibit C shall be based on those
Costs as recorded by that Participant and the deductions in respect of the Costs
referred to in paragraphs 3.01 (c), (f) and (g) of this Exhibit C shall be based
on that Participant's proportionate share of those Costs as recorded by the
Manager.
3.02 For greater certainty in calculating Net Proceeds at any time, each of the
classes of Costs shall constitute a separate pool from which all Costs deducted
on any previous quarterly calculation shall be removed and to which, in the case
of all classes of Costs, Costs of those classes recorded since the commencement
of commercial production (in the case of the first quarterly calculation) or
since the date of the last quarterly calculation (in the case of any calculation
subsequent to the first quarterly calculation) shall be added.
3.03 If the application of credits to a pool of Costs results in a negative
balance in that pool of Costs, the amount of any negative balance from a Cost
pool shall be applied to reduce the balance then remaining in pools itemized in
subsection 3.01 of this Exhibit C in the order itemized.
4. Adjustments and Verification.
4.01 Payment of any Net Proceeds of Production Royalty by a Participant in the
Agreement shall not prejudice the right of that Participant to protest the
correctness of the statement supporting the payment; provided, however, that all
statements
6
presented to the Owner by that Participant for any quarter shall conclusively be
presumed to be true and correct upon the expiration of twelve 0 2) months
following the end of the quarter to which the statement relates, unless within
that twelve (12) month period that Participant gives notice to the Owner making
claim on the Owner for an adjustment to the statement which will be reflected in
subsequent payment of the Net Proceeds of Production Royalty.
4.02 The Participant shall not adjust any statement in favor of itself after the
expiration of twelve (12) months following the end of the quarter to which the
statement relates.
4.03 The Owner shall be entitled upon notice to any Participant to have an
auditor selected by the Owner review all appropriate records and perform an
audit and provide the Owner with an opinion that any statement delivered
pursuant to subsection 1.01 of this Exhibit C in respect of any quarterly period
failing within the twelve (112) month period immediately preceding the date of
the Owner notice has been prepared in accordance with this Agreement.
4.04 The time for giving the audit opinion contemplated in subsection 4.03 of
this Exhibit C shall not extend the time for the taking of exception to and
making claim on the Owner for adjustment as provided in subsection 4.01 of this
Exhibit C.
4.05 The cost of the auditor's opinion referred to in subsection 4.03 of this
Exhibit C shall be solely for the account of the Owner requesting the auditor's
opinion unless the auditors opinion confirms that the Owner received less than
ninety-seven percent (97%) of the Net Proceeds of Production Royalty due to it
during the year in question, in which event the Participant shall reimburse the
Owner for the reasonable costs of the audit.
7
EXHIBIT "D"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation
INSURANCE
The Manager shall, at all times while conducting Operations, comply fully
with the applicable worker's compensation laws and purchase, or with the
unanimous consent of the Management Committee provide through self-insurance,
protection for the Participants comparable to that provided under standard form
insurance policies for (i) comprehensive public liability and property damage
with combined limits of Two Million Dollars for bodily injury and property
damage; (ii) automobile insurance with combined limits of Two Million Dollars;
and (iii) adequate and reasonable insurance against risk of fire and other risks
ordinarily insured against in similar operations. If the Manager elects to
self-insure, it shall charge to the Joint Account an amount equal to the premium
it would have paid had it secured and maintained a policy or policies of
insurance on a competitive bid basis in the amount of such coverage. Each
Participant may self-insure or purchase for its own account such additional
insurance as it deems necessary.
EXHIBIT "E"
Area of Interest of the Petsite Venture
Idaho County, Idaho
[Map of Idaho County, Idaho]
Includes: Sections 1, 2, 3, 4, 11, 12, 13, 14, 23, 24, 25, 26, Township
27 North, Range 7 East Sections 6, 7, 18, 19, 30, Township 27
North, Range 8 East Sections 25, 26, 27, 28, 33, 34, 35, 36,
Township 28 North, Range 0 Xxxx Xxxxxxxx 00, 00, Xxxxxxxx 00
Xxxxx, Xxxxx 8 East, Boise Meridian
EXHIBIT "F"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------- ---------- ---------- ----------
Eagle #30 423 Golden Eagle #6 11114
Eagle #30 175127 Golden Eagle #7 175123
Eagle #34 11164 Golden Eagle #12 11120
Eagle #34 175129 Golden Eagle #15 11123
Eagle #39 9325 Golden Eagle #16 11124
Eagle #39 175130 Golden Eagle #18 000
Xxxxx #00 0000 Xxxxxx Xxxxx #18 175124
Eagle #40 175131 Golden Eagle #22F 11128
Eagle #41 11169 Golden Eagle #22F 175126
Eagle #41 175132 Golden Eagle #25 11131
Eagle #42 11170 Golden Eagle #26 11132
Eagle #42 175133 Golden Eagle #27 00000
Xxxxx #00 00000
Xxxxx #50 11178
Eagle #54, 420
Eagle #54 175134
Eagle #98 9350
Eagle #99 0000
Xxxxx #000 00000
Xxxxx #110 44038
Eagle #115 00000
Xxxxx #000 00000
Xxxxx 0117 44045
Eagle #122 44051
Golden Eagle 175119
Golden Eagle #3 175121
Golden Eagle #4 175122
Golden Eagle #5 11113
1
