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EXHIBIT 10.1
MASTER AGREEMENT
This agreement is entered into this ___ day of _____________,
1998.
Recitals
WHEREAS, in July, 1996, USMX, Inc., a Delaware corporation,
entered into a Joint Exploration and Development Agreement with Cadgie
Company, a Nevada corporation, relating to development and exploration
of certain mineral properties located in the municipality of Sierra
Mojades, State of Coahuila. A true and correct copy of that document
is attached hereto as Exhibit "A", and
WHEREAS, Cadgie Company is, by virtue of a corporate name change,
now known as Metalline Mining Company (hereinafter "Metalline"), and
WHEREAS, pursuant to the terms of the Joint Exploration and
Development Agreement, Metalline agreed to a schedule of Work
Expenditures to be performed by Metalline in the exploration and
development of mineral concessions owned by USMX's wholly owned Mexican
subsidiary, MXUS S.A. DE C.V. and by Metalline's wholly owned Mexican
subsidiary Minera Metalin, S.A. DE C.V. and
WHEREAS, only after the completion of certain specified work by
Metalline and notice and evidence of that completion, together with a
tentative Program and Budget, as defined in the Joint Exploration and
Development Agreement, were provided to USMX, USMX was to have had
ninety days to receive either a 2.5% Net Smelter Return Royalty on
"precious metals" together with a 1.5% Net Smelter Return Royalty on
"base metals" as further delineated in the Joint Exploration and
Development Agreement or to elect to obtain a 35% interest in a
corporation which would own the Concessions subject to the agreement,
and undertake an obligation to fund 35% of any subsequent expenditures,
and
WHEREAS, in May 1997, USMX, Inc. became the wholly owned
subsidiary of Dakota Mining Company, a Canadian federal corporation
(hereinafter "Dakota"), and
WHEREAS, on January 6, 1998, Dakota entered into an Election of
Net Smelter Return Royalty and Assignment of Interest Agreement
(hereinafter "Election Agreement"), with Metalline and Royal Silver
Mines, a Utah corporation, as set forth in greater detail in the
Election Agreement, a copy of which is attached as Exhibit B to this
Agreement, and
WHEREAS, in exchange for $100,000 cash plus 200,000 shares of
common stock of Metalline and 100,000 shares of free-trading Royal
Silver common stock, all of which Dakota received from Royal Silver,
Dakota as beneficial owner of 100% of the interests of USMX , and on
behalf of USMX and its Mexican subsidiary, MXUS, elected to receive a
2.5% Net Smelter Return royalty on "precious metals" and 1.5% net
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smelter return royalty, subject to a reduction for underlying royalties
NSR as set out in greater detail in the Election Agreement, and to
transfer its interests in certain Mexican Mining Concessions to the
wholly-owned Mexican subsidiary of Metalline, Minera Metalin, S.A. DE
C.V. and
WHEREAS, in the Election Agreement, the parties to that agreement
agreed that Royal could participate in the project at a 35% interest,
with the obligation to fund 35% of any subsequent expenditure
obligation and to pay 35% of the costs of maintaining the existing and
any future acquired concessions, and
WHEREAS the parties to the Election Agreement agreed to prepare
and sign a more detailed mutually acceptable Royalty Agreement, and
Metalline and Royal agreed to draft and sign a new Joint Venture
Agreement and Dakota agreed to cause MXUS to transfer the MXUS
concessions to Minera Metalin as soon as possible, and
WHEREAS, in May of 1998, USMX filed for reorganization under
Chapter 11 of the U. S. bankruptcy laws, and
WHEREAS, the parties wish to revise and clarify their agreements
and to insure the enforceability of this agreement, the parties hereby
agree as follows
1. Minera Metalin, S.A. DE C.V. warrants that it is a Mexican
mining corporation legally incorporated and in good standing according
to the laws of the Mexican Republic and is legally qualified to execute
this Agreement.
2. MXUS, S.A. DE C.V. warrants that it is a Mexican mining
corporation, legally incorporated and in good standing according to the
laws of the Mexican Republic and is legally qualified to execute this
Agreement.
3. Metalline Mining Company warrants that it is a Nevada
corporation legally incorporated and in good standing according to the
laws of the State of Nevada and is legally qualified to execute this
Agreement.
4. USMX warrants that it is a Delaware corporation legally
incorporated and in good standing according to the laws of the State of
Delaware and is legally qualified to execute this Agreement.
5. Dakota Mining Company warrants that it is a Canadian Federal
corporation legally incorporated and in good standing according to the
laws of Canada and is legally qualified to execute this Agreement.
6. Royal Silver Mines warrants that it is a Utah corporation,
legally incorporated and in good standing according to the laws of the
State of Utah and is legally qualified to execute this Agreement.
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7. The Joint Exploration and Development Agreement and the Joint
Exploration and the Election of Net Smelter Return Royalty and
Assignment of Interest Agreement are of no further force or effect and
are superseded by this agreement and the agreements listed below, which
agreements are hereby ratified and approved by all the parties hereto,
true and correct copies of which are attached hereto as Exhibit 1, 2
and 3, respectively:
1. Net Smelter Return Royalty Agreement;
2. Concession Purchase Agreement
3. Joint Venture Agreement.
8. This Agreement shall take effect only upon execution of this
document by all parties hereto and the execution of the Net Smelter
Return Royalty Agreement, the Concession Purchase Agreement and the
Joint Venture Agreement by the required parties to each of these
agreements.
USMX, INC. DAKOTA MINING COMPANY
BY: _________________________ BY: _____________________________
Its: ____________________ Its: ________________________
METALLINE MINING COMPANY ROYAL SILVER MINES
BY: _________________________ BY: _____________________________
Its: ____________________ Its: ________________________
MXUS S.A. DE C.V. MINERA METALIN, S.A. DE C.V.
BY: _________________________ BY: _____________________________
Its: ____________________ Its: ________________________
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Net Smelter Return Royalty Agreement
This Agreement is made as of ________________ among Dakota Mining
Company ("Dakota"), a Canadian Federal Corporation and Royal Silver
Mining ("Royal"), a Utah corporation, Metalline Mining Company
("Metalline"), a Nevada corporation, USMX, Inc., a Delaware
corporation, MXUS S.A. DE C.V. ("MXUS"), a Mexican Mining Company and
Minera Metalin, S.A. DE C.V. ("Minera Metalin"), a Mexican Mining
Company:
Recitals
Dakota, USMX, Inc., MXUS, Metalline, Minera Metalin, have entered
into a Master Agreement which supersedes all prior agreements between
and among them and which agreement expressly ratifies and incorporates
this Net Smelter Return Royalty Agreement.
NOW, THEREFORE, in consideration of the payment of and transfer to
Dakota of $100,000, 200,000 shares of the common stock of Metalline, as
well as 100,000 shares of free-trading Royal Commerce stock to Dakota,
and in consideration of the Net Smelter Royalty payment provisions
called for in this agreement, and in further consideration of the sale
to Metalline's Mexican subsidiary, Minera Metalin, S.A. DE C.V., of all
rights, title and interest that Dakota and USMX and/or MXUS, S.A., DE
C.V. have in the existing exploration and mining concessions over the
following lots ("The Lots"):
Name of Xxx Xxxxx Xx. Xxxxxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxx 000000 4,767.3154 November 29, 1999
Mojada 3 199246 2,616.8326 March 28, 2000
located in the Municipality of Sierra Mojada, State of Coahuila, within
the circumscription of the Mining Agency of Sabinas, Coahuila, the
parties agree as follows:
1. Warranties of MXUS, USMX and Dakota
MXUS, USMX and Dakota each represent and warrant, to the best of
each's actual knowledge and belief that they have the legal capacity to
enter into and perform this Agreement and this Agreement is valid and
binding upon each of them in accordance with its terms. MXUS, USMX and
Dakota also each warrant, to the best of each's actual knowledge and
belief, The Lots are free of all royalties, liens, encumbrances or
limitations of ownership and that USMX and/or MXUS and/or Dakota are
not aware of any facts, such as notices from governmental agencies that
cast doubt on the ownership of The Lots; that neither MXUS nor USMX nor
Dakota is a party to any other agreement affecting the MXUS
concessions; that USMX, MXUS and Dakota will not encumber, limit,
create a lien on or diminish any rights affecting the Lots during the
term of the agreement, and that MXUS, USMX and Dakota will take all
necessary actions to assist Metalline, Minera Metalin or Royal to
remove any liens or encumbrances on The Lots.
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2. Warranty of Metalline and Minera Metalin
Minera Metalin and Metalline represent and warrant, to the best of
each's actual knowledge and belief, that each has the capacity to enter
into and perform this Agreement and this Agreement is valid and binding
upon it in accordance with its terms.
3. Warranty of Royal Silver
Royal Silver represents and warrants to the best of its actual
knowledge and belief that it has the capacity to enter into and perform
this Agreement and this Agreement is valid and binding upon it in
accordance with it terms.
4. Definitions
4.a. "Area of Interest" means the area within 10 kilometers
of The Claims.
4.b. "The Claims" means the following described existing
exploitation, exploration and mining concessions:
Type of Concession
Name of Xxx Xxxxx Xx. Xxxxxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxx 000000 4,767.3154 November 29, 1999
Mojada 3 199246 2,616.8326 March 28, 0000
Xxxxxxx Xxxxxxxx 000000 336.7900 Exploitation Mining
Concession Valid
until _____________
Xxxxxxxxx 188765 117.5025 Exploration Mining
Concession Valid
until _____________
Xxxxxxxxx 187776 97.6800 Exploration Mining
Concession Valid
until _____________
Xx Xxxxxx 000000 33.50444 Exploration Mining
Concession Valid
until ____________
4.c. "Net Smelter Return" means:
(1) Except as provided in subparagraph (2) below, in
the event that the Payor sells ores, concentrates, precipitates,
cathodes, xxxxx solutions or any other primary, intermediate or final
product or any other mineral substances (other than fine gold and/or
silver bullion, dore or other valuable mineral or element) produced
from the Properties, Net Smelter Return for the calendar quarter shall
mean the amount of Revenues (as defined below) actually received by the
Payor from the sale of such mineral substances, less to the extent paid
or incurred by the Payor, (a) the cost of transportation between the
Payor's mill and the buyer, (b) the cost of assaying, sampling,
custom-smelting and refining such products, including any independent
representative and umpire charges, and (c) taxes (other than income
taxes) imposed upon or in connection with producing, transporting and
selling such products.
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(2) If, in any quarter, the Payor produces as a final
product or has produced as a final product through a tolling/refining
contract or any other transacting that results in the Payor owning
title to fine gold and/or silver bullion, dore, or other valuable
mineral or element produced from the Properties, that payor withholds
from sale, Net Smelter Return for a calendar quarter shall mean the
amount of fine gold, Silver bullion or other valuable mineral produced
or the amount of payable gold, silver or other valuable mineral
contained in bullion produced from the Properties during the quarter
multiplied by (i) for gold, the average London Bullion Brokers daily
P.M. Gold Fixing for the calendar quarter of production and (ii) for
silver, the average London Bullion Market Association daily Silver
Fixing for the calendar quarter of production, (iii)for copper, lead,
or zinc the average daily LME closing price, and (iv) for other
valuable minerals the average or industry standard pricing, less the
following costs attributed to that production, to the extent paid or
incurred by the Payor prior to the date payment is due to the Royalty
Holder as prescribed in Section 9.a.(2) of this Exhibit, (a) the costs
of transportation from the Payor's mill to the smelter/refiner, (b) the
cost of assaying, sampling, custom-smelting and refining said bullion,
(c) taxes (other than income taxes) imposed upon or in connection with
producing, transporting and selling said fine gold and/or silver
bullion and (d) selling costs, if any, actually paid or incurred by the
Payor prior to the date payment is due the Royalty Holder as described
above.
For purposes of this Section, the average gold and
silver prices for the production quarter shall be determined by
dividing the sum of all daily prices posted during the calendar quarter
by the number of days that prices were posted.
The posted prices shall be obtained from The Wall
Street Journal, Reuters or another reliable source. If either the
London Bullion Brokers P.M. Gold Fixing or the London Bullion market
Association daily Silver Fixing ceases to be published, the Payor and
the Royalty Holder shall agree upon a similar alternative method for
determining the average spot market price for gold and/or silver, as
the case may be, which shall be used in calculating Net Smelter Return.
The Payor and the Royalty Holder acknowledge that the purpose
of this Section is to assure that Net Smelter Return is determined in
a timely manner for find gold and/or silver bullion produced, dore
bullion or other valuable minerals produced during a calendar quarter
regardless of whether an actual sale of gold, silver or other valuable
mineral to a third party is made by the Payor. The parties further
acknowledge that the Payor shall have the right to market and sell to
third parties the gold, silver and other valuable minerals produced
from the Properties in any manner it chooses, including the forward
sale of gold, silver or other valuable mineral on the commodity markets
to the extent approved by Royalty Holder as to the amount due to
Royalty Holder.
(3) In no event shall the Payor deduct the cost of
mining, milling, leaching or any other processing costs incurred by the
Payor in the determination of Net Smelter Return.
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(4) In the event smelting or refining are carried out
in facilities owned or controlled, in whole or in part, by the Payor,
then charges, costs and penalties for such smelting or refining shall
mean the amount the Payor would have incurred if such smelting or
refining were carried out at facilities not owned or controlled by the
Payor then offering comparable services for comparable products on
prevailing terms, but in no event greater than actual costs incurred by
the Payor with respect to such smelting and refining.
4.d. "Payor" shall mean the person or entity obligated to pay
a Net Smelter Return royalty to the Royalty Holder pursuant to the
terms of this Royalty Agreement
4.e. "Properties" means The Claims and all other interests in
real property, including surface rights or concessions in process, held
or acquired by Minera Metalin within the area of interest.
4.f. "Royalty Holder" shall mean the person or entity
entitled to receive a net Smelter Return Royalty pursuant to the terms
of this Royalty Agreement.
4.g. "Revenues" shall mean the total amounts received by the
Payor from the sale of mineral substances produced from the Properties
at the point of sale, less all selling costs, provided such sales are
arm's length transactions, and provided further that sales to
Affiliates of the Payor are valued at the fair market value of the
products sold. For the purposes of this Exhibit, mineral substances
may be in a primary, intermediate or final form; however, Royalty
Holder shall be given all benefit of value added beneficiation by Payor
and its Affiliates as is reasonable hereunder.
5. Net Smelter Return Royalty on Precious Metals
As a Royalty, Minera Metalin shall pay Dakota 2.5% of the Net
Smelter Return as calculated pursuant to paragraphs 4.c.(1) or 4.c.(2)
of this Agreement, whichever is applicable, for production and or sales
of precious metals by Minera Metalin from the Concessions located
within the Area of Interest. The Net Smelter Royalty on precious
metals will be paid on any precious metals produced and sold by Minera
Metalin from the Concessions or any other concessions located and
acquired by Minera Metalin within the Area of Interest, including
silver, gold, germanium, gallium and any other mineral, element or
material whose price or value equals or exceeds the value of silver on
a per ounce basis.
The above described royalty on precious metals to be paid to
Dakota shall be reduced by any actual underlying royalties to be paid
as specified in paragraph 8 below.
The Net Smelter Return Royalty on precious metals shall be paid as
long as the Concessions remain valid and there is production and sale
of precious metals by Minera Metalin from the Area of Interest.
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6. Net Smelter Return Royalty on Base Metals
As a Royalty Minera Metalin shall pay Dakota a 1.5% Net Smelter
Royalty as calculated pursuant to paragraphs 4.(c)(1) or 4.(c)(2) of
this agreement, whichever is applicable, for production and or sales of
base metals by Minera Metalin from smelter returns or invoices for
first hand sales of base metals that will be produced and sold by
Minera Metalin from the Concessions located in the Area of Interest.
This royalty on will be paid on any base metals produced and sold by
Minera Metalin from the Concessions or from any other concessions
located and acquired by Minera Metalin within the Area of Interest.
The above-described Net Smelter Royalty on base metals to be paid
to Dakota shall be reduced by any actual underlying royalties to be
paid as specified in paragraph 8 below.
The Net Smelter Return Royalty on base metals shall be paid as
long as the concessions remain valid and there is production and sale
of precious metals by Minera Metalin from the Area of Interest.
7. Term of this Agreement
The term of this Agreement will be for an indefinite period of
time and it will continue to be valid and in force as long as there
exists a valid and enforceable mining concession issued over the
concessions, or any of them.
8. Underlying Royalties
As expressly agreed between the parties, the above-mentioned Net
Smelter Royalties on precious and base metals to be paid to Dakota
shall be reduced by any actual underlying royalties to be paid which
are as follows:
Dakota Dakota
Xxxxxxxx Underlying Royalty on Royalty on
Concession Title Royalty Royalty Precious Metals Base Metals
Sierra Mojada 198513 .5% - 2.0% 1.0%
Mojada 3 199246 - - 2.5% 1.5%
Xxxxxxx Xxxxxxxx 000000 - 2.0% 1.0% 1.0%
Xxxxxxx 000000 .5% - 2.0% 1.0%
Xxxxxxxxx 000000 .5% - 2.0% 1.0%
Xxxxxxxxx I 187776 .5% - 2.0% 1.0%
La Xxxxxx Ex.6703 - - 2.5% 1.5%
If in the future Minera Metalin's obligation to pay any of these
underlying royalties terminates, then, thereafter, Minera Metalin will
have to add to the Net Smelter Royalties to be paid to Dakota the
percentage that until then had been paid on said underlying royalties.
9. Payments of Net Smelter Return Royalty
Once production and sale of precious metals and/or base metals of
at least an aggregate total of one thousand tons of concentrates a
month for three months has been achieved, Minera Metalin shall have to
begin to pay royalties as specified herein:
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a. The amount of Net Smelter Return royalty due the Royalty
Holder shall be payable in the following alternative manners depending
on the Payor's method of sale or disposition of mineral substances
produced from the Properties:
(1) If the Payor produces and sells ores, concentrates,
precipitates, cathodes, xxxxx solutions or any other primary,
intermediate product or mineral substances other than fine gold and/or
silver bullion or dore bullion, the Net Smelter Return royalty paid to
the Royalty Holder shall be calculated by multiplying the amount of Net
Smelter Return determined in Section 4.(c)(1) by the percentage of Net
Smelter Return to which the Royalty Holder is entitled under the
Agreement. Payment shall be made within 30 days after the Payor's
receipt of Revenues from such sales during a calendar quarter.
(2) If, in any quarter, the Payor produces fine gold,
silver bullion, dore or other valuable minerals, that payor elects to
withhold from sale, the Net Smelter Return royalty paid to the Royalty
Holder shall be calculated by multiplying the amount of the Net Smelter
Return determined in Section 4.(c)(2)by the percentage of Net Smelter
Return to which the Royalty Holder is entitled under the Joint
Exploration and Development Agreement. Payment shall be made within 30
days after the end of a calendar quarter. At the option of the Royalty
Holder payment may be made in kind or by check.
b. The Payor shall provide copies of all data relating to
the Net Smelter Return royalty calculation (including, but not limited
to, settlement sheets used in calculating the Royalty Holder's Net
Smelter Return royalty) to the Royalty Holder at the same time that the
Royalty Holder's Net Smelter Return royalty payments are paid.
10. Audits and Disputes
a. The Royalty Holder, upon written notice, shall have the
right to have an independent firm of certified public accountants audit
the records that relate to the calculation of the Net Smelter Return
interest within12 months after receipt of a payment described in
paragraph 9. of this agreement for a calendar quarter.
b. The Royalty Holder shall be deemed to have waived any
right it may have had to object to a payment made for any calendar
quarter, unless it provides notice in writing of such objection within
24months after receipt of final payment for the calendar quarter. If
the parties are unable to resolve the dispute within 60 days after the
receipt of such notice, the dispute shall be resolved by arbitration in
Coeur D'Alene, Idaho , pursuant to the commercial arbitration rules of
the American Arbitration Association. The resolution pursuant to such
arbitration shall be binding on the parties. Alternatively, the
parties may elect to submit the dispute to a mutually acceptable
certified public accountant, or firm or certified public accountants,
for a binding resolution thereof. Unless the parties agree to share
the costs of arbitration, the arbitrator shall determine what part of
the costs and expenses incurred in any such proceeding shall be borne
by each party participating in the arbitration.
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11. General
a. The Payor shall keep true and accurate books and records
for the purposes of this agreement. Such books and records shall be
kept on the accrual basis in accordance with generally accepted
accounting principles and practices consistently applied.
b. The Royalty Holder or its authorized representative may
enter upon all surface and subsurface portions of the Properties for
the purpose of inspecting the Properties, all improvements thereto and
operations thereon, and may inspect and copy all records and data
pertaining to the calculation of its interest, including without
limitation such records and data which are maintained electronically.
The Royalty Holder or its authorized representative shall enter the
Properties at the Royalty Holder's own risk and may not unreasonably
hinder operations on or pertaining to the Properties. The Royalty
Holder shall indemnify and hold harmless the Payor and its Affiliates
(including without limitation direct and indirect parent companies),
and its or their respective directors, officers, shareholders,
employees, agents and attorneys, from and against any Liabilities which
may be imposed upon, asserted against or incurred by any of them by
reason of injury to the Royalty Holder or any of its agents or
representatives arising out of or resulting from the Royalty Holder's
exercise of its rights herein.
c. All notices or communications hereunder shall be made
and effective in accordance with the provisions of this Royalty
Agreement.
d. The Net Smelter Return interest shall be attached to any
amendments, relocations or conversions of any concessions comprising
the Properties, or to any renewals or extensions of any mineral rights
acquired by the Payor and any Affiliates in lands embraced within any
concessions comprising the Properties and Area of Interest. The Net
Smelter Return interest shall be a real property interest that runs
with the Properties and Area of Interest and shall be applicable to any
person who produces and sells Products from the Properties.
e. All information and data provided to Royalty Holder
shall be subject to the confidentiality provisions of this Agreement.
f. Notwithstanding anything to the contrary herein, the
Payor shall have the right to mine and market amounts of precious
metals or other minerals reasonably necessary for bulk sampling,
assaying, metallurgical testing and evaluation of the minerals
potential of the Properties without initiating the obligation to make
production royalty payments hereunder.
g. The Payor shall have the right to commingle ore and
minerals from the Properties with ore from other lands outside the Area
of Interest; provided, however, that the Payor shall calculate from
representative samples the average grade of the ore and shall weigh (or
calculate by volume) the ore before commingling. If concentrates are
produced from the commingled ores by the Payor, the Payor shall also
calculate from representative samples the average recovery percentage
for all concentrates produced during the calendar quarter. In
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obtaining representative samples, calculating the average grade of the
ore and average recovery percentages, the Payor may use any procedures
accepted in the mining and processing activity being conducted and, in
the absence of fraud, its choice of such procedures shall be final and
binding on the Royalty Holder. In addition, comparable procedures may
be used by the Payor to apportion among the commingled ores penalty
charges, if any, imposed by the purchaser of such ore or concentrates.
10. Transfer of the Lots to Third Parties
Should Minera Metalin at any time in the future transfer the
concessions or the rights to exploit them or any of them, to third
parties, Minera Metalin shall have the obligation to make the acquiring
party to undertake all of the obligations contained herein and
particularly the obligation to pay Dakota the royalties called for by
this agreement, on the terms and conditions agreed to herein, to make
any other further acquiring party to assume said obligations. Any such
transfer shall not relieve Minera Metalin of its primary obligation to
have the payments called for in this agreement to be paid to Dakota.
11. Fees, Duties, Taxes and Expenses
All fees, duties, taxes and expenses incurred on the granting and
execution of this Agreement and of the respective purchase agreement
will be paid by Dakota, except for those taxes imposed on the income
obtained by Minera Metalin from royalty payments and/or advance royalty
payments, which will be paid by it.
12. Additional Obligations of Minera Metalin.
In addition to the obligations assumed by Minera Metalin at the
preceding clauses, during all the term this Agreement will be in force,
it will have also the following:
a. Maintain valid and in force the rights derived from the
mining Concessions over the Concessions and, likewise, to maintain them
free and clear from any lien, encumbrance or limitation of dominion.
b. Hold all of the other parties free and clear and
harmless and indemnify them from any claims and responsibilities that
may be asserted against them due to any acts by, or directly imputable
to, Minera Metalin.
13. Force Majeure
a. No party shall be liable to the other party and no party
shall be deemed in default hereunder for any failure or delay to
perform any of its covenants, agreements or obligations caused or
arising out of any act not reasonably within the control of such party,
excluding lack xx X 00000
XXX Xxxxxxxx, Xxxxxx
Phone 000 000 0000 Phone 000 000 0000 Phone 00-000-00000
Fax 000 000 0000 Fax 000 000 0000
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MXUS Royal
MXUS, S.A. DE C.V. Royal Silver Mines, Inc.
San Francisco NB 656 - 601 10220 N. Nevada St.,
Col. Del Xxxxx, C./P. 03100 Suite 270
Mexico, D.F. Xxxxxxx, XX 00000 XXX
Phone 0 000 0000 Phone 000 000 0000
Fax 0 000 0000 Fax 000 000 0000
All Notices shall be given (i) by personal delivery to the party,
(ii) by electronic communication, with confirmation of transmission,
(iii) by registered or certified mail, return receipt requested, or
(iv) by commercial courier. 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, and (ii) if by electronic communication, by mail,
or by commercial carrier, on the next business day after actual
receipt. Any change in the above addresses shall be communicated in
writing to the other parties when and if it occurs.
16. Applicable Laws and Courts
For everything not expressly stipulated in this Agreement, the
parties agree to be governed by the applicable laws of Mexico, Federal
District, particularly those of the Mining Law, its Regulations, the
Federal Duties Law, the Commerce Code and the Civil Code for the
Federal District and in case of dispute, the parties agree that any
such dispute except as otherwise provided herein shall be resolved by
binding arbitration in Coeur d'Alene, Idaho, pursuant to the commercial
rules of the American Arbitration Association. The decision in any
such arbitration shall be binding on all parties to this Agreement.
Unless otherwise agreed to by the parties, the arbitrator shall decide
what part of the costs and expenses of arbitration shall be borne by
each of the parties to that arbitration.
17. Full Transfer Required
The obligations to pay royalties out of production from The Lots
as specified in this Agreement shall take effect only after the
transfer of all rights, title and interest in the Lots to Minera
Metalin has been fully accomplished.
Each of the parties signs two copies of this Agreement on the ___
day of September, 1998.
METALLINE MINING COMPANY DAKOTA MINING CORPORATION
By____________________________ By_____________________________
MINERA METALIN, S.A., DE C.V. MXUS, S.A. DE C.V.
By____________________________ By____________________________
ROYAL SILVER MINES, INC. USMX
By_____________________________ By___________________________
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Concession Purchase Agreement
This Agreement is executed by MXUS, S.A. DE C.V. (hereinafter
called the "Seller"), and Minera Metalin, S.A., DE C.V. (hereinafter
called the "Purchaser"), a wholly owned subsidiary of Metalline Mining
Company, in accordance with the following provisions:
STATEMENTS
1. The Seller warrants as follows:
a) It is a Mexican mining corporation legally incorporated
according to the laws of the Mexican Republic and legally qualified to
execute agreements and to be the owner of mining concessions.
b) That its duly empowered to represent it and to execute
this Agreement.
c) That it is the legal titleholder of the rights derived
from the existing exploration mining concessions over the following
lots (the "Lots").
Name of the Xxx Xxxxx Xx. Xxxxxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxx 000000 4,767.3154 November 19, 1999
Mojada 3 199246 2,616.8326 March 28, 2000
All of the Lots are located in the Municipality of Sierra Mojada,
State of Coahuila, within the circumscription of the Mining Agency of
Saltillo, Coahuila.
d) That as titleholder of the rights derived from the
existing mining concessions over The Lots, it is up to date in
fulfilling all obligations imposed on it by the Mining Law, its
regulations and all other applicable legal dispositions, including the
filing of assessment work reports and the payment of duties on mining
concessions, and all taxes thereon.
e) That the rights derived from the mining concessions
existing over The Lots are free and clear from any encumbrances, liens
or limitations of dominion, and
f) That in accordance with all of the foregoing, the Seller
is willing to sell to the Purchaser the rights derived from the mining
concessions existing over The Lots, in accordance with the terms and
conditions stipulate in this Agreement.
2. The Purchaser warrants:
a) It is a mining corporation legally incorporated
according to the laws of the Mexican Republic, legally qualified to
execute agreements and to be owner of mining concessions.
b) That its President, Xx. Xxxxxx Xxxxxxx, is duly
empowered to represent it and to execute this Agreement, and
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c) That Metalline Mining Company, which beneficially owns
100% of MXUS, and MXUS have executed a Net Smelter Return Royalty
Agreement to which MXUS and its parent company, USMX, Inc., are
parties.
In accordance with and reliance upon the foregoing, the parties
agree as follows:
CLAUSES
A. Purchase. The Seller hereby sells to the Purchaser and the
latter purchases from the Seller the rights derived from the existing
mining concessions over the Lots in consideration of a Net Smelter
Return Royalty Agreement executed by Metalline Mining Company, Dakota
Mining Company, Minera Metalin, S.A. de C.V., MXUS, S.A. de C.V., USMX,
Inc. and Royal Silver Mines, Inc. and the payment by Minera Metalin of
$ 100.00 US to MXUS.
B. Subrogation of Rights and Obligations. With the execution
of this Agreement, the Purchaser hereby assumes all the rights and
obligations that the Seller had as titleholder of the rights derived
from the mining concessions existing over The Lots.
C. Indemnification. Seller promises to indemnify and hold
harmless the Purchaser from all losses or expenses incurred by
Purchaser, arising from any breach of Seller's warranties.
D. Fees, Duties, Taxes and Expenses. All fees, duties, taxes
and expenses incurred on the granting and execution of this Agreement
will be paid by the Purchaser, except for those taxes imposed on the
income, if any, obtained by the Seller which will be paid by Seller.
E. Delivery of The Lots. The Seller shall execute and deliver
all documents required or necessary to transfer The Lots to the
Purchaser.
F. Agreement of the parties. This agreement is binding upon the
parties thereto, and their successors, heirs assignees or
beneficiaries.
The parties agree to ratify this agreement before a notary Public
and to register it with the Public Registry of Mining in accordance
with the provisions of the Mining Law and its Regulations.
G. Applicable Laws and Courts. For everything not expressly
stipulated to in this agreement, the parties submit themselves to the
applicable laws in Mexico, Federal District, particularly to those of
the Mining law, its Regulations, the Federal Duties Law, the Commerce
Code and the Civil Code for the Federal District, waiving the
jurisdiction of any other courts to which they may be entitled by
reason of their present or future domiciles.
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This Agreement is signed in duplicate and dated, the ____ day of
March, 1999.
THE SELLER
MXUS, S.A. DE C.V.MINERA
BY: __________________________
Its ______________________
THE PURCHASER
METALIN, S.A. DE C.V.
BY: _________________________
Xxxxxx Xxxxxxx
Its President
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JOINT VENTURE AGREEMENT
This Agreement is made as of __________________1998 among
Metalline Mining Company ("Metalline"), a Nevada corporation, its
wholly owned subsidiary Minera Metalin, a Mexican mining company and
Royal Silver Mines, Inc. ("Royal"), a Utah corporation.
RECITALS
A. Metalline beneficially owns 100% of the outstanding stock of
Minera Metalin S.A. de C.V. ("Minera Metalin").
B. Royal beneficially owns 100% of the outstanding stock of
Minera Plata Real S.A. de C.V. ("Plata Real").
X. Xxxxxx Metalin owns or controls certain concessions
("Concessions") in the Sierra Mojada District, Coahuila, Mexico, which
concessions are listed on Exhibit A.
D. Metalline and Royal desire to explore and develop the Sierra
Mojada District jointly according to the terms of this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, Minera Metalin, Metalline and Royal agree as follows:
ARTICLE I
DEFINITIONS
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 of a Joint
Venture Participant. For purposes of the preceding sentence, "control"
means possession, directly or indirectly, of the power to direct or
cause direction of management and policies through ownership of voting
securities, contract, voting trust or otherwise.
1.3 "Agreement" means this Agreement, including all written
amendments and written modifications thereof, and all schedules and
exhibits, which are incorporated herein by this reference.
1.4 "Area of Interest" means the area within 10 km from those
concessions listed on Exhibit A.
1.5 "Board" means the governing body, as provided by Mexican law,
of Minera Metalin.
1.6 "Budget" means a detailed estimate of all costs to be
incurred with respect to a Program and of contributions to be made by
the Joint Venture Participants.
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1.7 "Budgetary Period" means the budgetary period established in
a Program and Budget.
1.8 "Chief Officer" means the controlling officer, as provided by
Mexican law, of Metalin.
1.9 "Development" means all preparation for the removal and
recovery of Products, including the construction or installation of a
mine or any other improvements to be used for the mining, handling,
milling, processing or other beneficiation of Products.
1.10 "Exploration" means all activities directed toward
ascertaining the existence, location, quantity, quality or commercial
value of deposits of Products. Exploration may include all activities
undertaken through the completion of a Feasibility Study, if any, but
shall not include construction of milling or processing facilities or
commencement of commercial mining operations on the Properties.
1.11 "Feasibility Study" means a technical report to be prepared
by Metalline, or a qualified consultant, based upon the Exploration and
Development work performed by Metalline and/or Minera Metalin prior to
the date of such report, which report shall consist of the following
elements:
(a) the results of Metalline's and/or Minera Metalin's
Exploration and Development work, including analyses of Metalline's
proposal for mining, processing and beneficiation of products; proposed
mining, milling, and production rates; proposal for placement of
facilities, proposal for waste treatment and handling; the estimated
recoverable reserves of Products, and the estimated analysis of the
permitting and environmental liability implications of the proposal;
appropriate metallurgical tests to project the efficiency of proposed
extraction, recovery and, if applicable, processing techniques; and
such other analyses as deemed appropriate by Metalline and/or Minera
Metalin;
(b) general estimates of capital costs for the Development
and start-up of a mine, and, if applicable, of a mill and other
processing and ancillary facilities, which cost estimates shall
include:
(1) reasonable estimates of all material expenditures
required to purchase, construct and install all material machinery,
equipment and other facilities and infra-structure (including
contingencies) required to bring a mine into commercial production,
including an analysis of costs of equipment or supply contracts in lieu
of Development costs;
(2) reasonable estimates of material expenditures
required to perform all other related work required to commence
commercial production of Products (including reasonable estimates of
working capital requirements, if any); and
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(3) reasonable estimates of all other material direct
and indirect costs and general and administrative expenses that may be
required for an evaluation of the proposed production levels. The
capital cost estimates shall include a schedule of the timing of the
estimated material capital requirements for such proposal.
(c) a general estimate of the annual expenditures required
for the first year of Operations after completion of the capital
program described in subparagraph (b) above, and for subsequent years
of mining Operations, including estimates of annual production,
administrative, operating and maintenance expenditures, taxes (other
than income taxes), working capital funding requirements, royalties,
material equipment leasing or material supply contract expenditures,
expansion or modification capital requirements, work commitments, and
all other anticipated material costs of Operations. This analysis shall
also include a general estimate of the number of employees required to
conduct Operations;
(d) a review of the nature, extent and rated capacity of the
mining, equipment and proposed production schedule; and
(e) such other information as Metalline and/or Minera
Metalin deem appropriate.
(f) Metalline and/or Minera Metalin will use reasonable
efforts to assure that any Feasibility Study is in a form typically
relied upon for decisions by financial institutions. Provided, however,
that neither Metalline nor Minera Metalin warrants the sufficiency of
any Feasibility Study for any purpose.
1.12 "Joint Venture Participant" means any of the parties to this
Joint Venture, Agreement, specifically Metalline Mining Company, Royal
Silver Mines, Inc., and Minera Metalin
1.13 "Manager" means the person or entity appointed under Article
VII to manage Operations, or any successor manager.
1.14 "Minera Metalin concessions" means any concessions acquired
or denounced within the Area of Interest.
1.15 "Liability(ies)" means any and all claims, demands,
investigations, judgments, losses, liabilities, costs and expenses,
including reasonable attorneys' fees.
1.16 "Mining" means the mining, extracting, producing, handling,
milling, beneficiation or other processing of Products.
1.17 "Net Proceeds" means the proceeds from production of Products
from the Properties calculated pursuant to Exhibit "C" hereto.
1.18 "Net Smelter Return Royalty" means certain amounts calculated
as provided in the Net Smelter Return Royalty Agreement among Minera
Metalin, Metalline, Royal Silver and Dakota Mining Company, which may
be payable to underlying interests of the Minera Metalin concessions.
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1.19 "Operations" means the Development and Mining activities
carried out on or for the benefit of the Properties.
1.20 "Positive Feasibility Study" means a Feasibility Study that
Metalline in its sole discretion accepts for the purpose of proceeding
with Development.
1.21 "Prime Rate" means the interest rate in United States dollars
published as the Prime Rate in the "Money Rates" column of The Wall
Street Journal, as said rate may change from day to day, or if said
column sets forth a range of rates on a single day, the arithmetic mean
thereof. In the event The Wall Street Journal ceases to be published
or ceases to publish the Prime Rate, the parties shall select an
alternative and mutually acceptable source which quotes an interest
rate as the Prime Rate.
1.22 "Products" means all ore, minerals and mineral resources
produced from the Properties under this Agreement.
1.23 "Program" means a description in reasonable detail of the
scope, duration and nature of Operations to be undertaken by Metalin
for a specified period.
1.24 "Properties" means the Minera Metalin concessions and all
other interests in real property, including surface rights or
concessions in process, held or acquired by the Joint Venture
Participants within the Area of Interest.
1.25 "Transfer" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.26 "Work Expenditures" means the work obligations incurred by
Metalline and Minera Metalin and shall include, for purposes of this
Agreement, the value of all labor, money, supplies, equipment and the
use of equipment contributed to or used on or in connection with the
Properties or the Area of Interest by or on behalf of Metalline in good
faith after the execution of this Agreement, relating to Operations,
including but not limited to (a) all contractors' and consultants' time
and expenses; (b) all time and expenses of geologists and other
personnel of Metalline and Minera Metalin or its Affiliates; (c) all
costs of physical work on the Properties or the Area of Interest; (d)
all costs of project maintenance (including insurance, title
examination and curative work) and costs of acquisition of third party
property and concessions within the Properties or the Area of Interest;
(e) all costs of equipment, materials, fuel, utilities and supplies;
(f) all costs of equipment purchased; (g) all costs associated with
maintaining title to the Properties, payments, taxes, filing fees,
etc.; and (h) costs incurred in the preparation of a Feasibility Study.
1.27 "$" shall mean dollars in the currency of the United States
of America.1.28 "Recoverable Capital Costs" has the meaning described
in Exhibit "C" hereto.
1.28 "Transfer" means to sell, grant, assign, encumber, pledge or
otherwise dispose of or convey.
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1.29 "Underlying Agreements" means collectively the agreements
listed in Exhibit D hereto and all agreements which may be entered into
by the Venture with third parties to lease or acquire mining claims,
mineral rights, real property or other interests in the Area of
Interest.
1.30 "Venture" means the business arrangement of the Participants
under this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Capacity of Participants
(a) Minera Metalin represents and warrants that it is a
corporation duly incorporation and in good standing in the Republic of
Mexico and that it has the capacity to enter into and perform this
Agreement and that this Agreement is valid and binding on it according
to its terms and that it is a wholly owned subsidiary of Metalline.
(b) Royal Silver represents and warrants that it is a
corporation duly incorporated and in good standing with the State of
Utah and that it has the capacity to enter into and perform this
Agreement and that this Agreement is valid and binding on it according
to its terms.
(c) Metalline represents and warrants that it is a
corporation duly incorporated and in good standing with the State of
Nevada and that it has the capacity to enter into and perform this
Agreement and that this Agreement is valid and binding on it according
to its terms.
(d) Each of the Participants represent and warrants as
follows:
(i) 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.
(ii) That it will not breach any other agreement or
arrangement by entering into or performing this Agreement.
(iii) 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 Disclosures. Each of the participants represents and
warrants that its is not aware of any material facts or circumstances
which have not been disclosed in this Agreement which should be
disclosed to the other Participant in order to prevent the
representations in this Article II from being materially misleading.
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2.3 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 such costs and losses arising out of or
resulting from breach of the representations and warranties of the
Contributing Participant as to the Properties it contributed shall be
charged to that Participant.
ARTICLE III
NAME, PURPOSES AND TERM
3.1 Metalline, Minera Metalin and Royal Silver enter into this
Agreement for the purposes hereinafter mentioned and they agree that
all of their rights and all of the Operations on or in connection with
the Properties or within the Area of Interest shall be subject to and
governed by this Agreement.
3.2 Name. The name of this Venture shall be the Minera Metalin
Joint Venture. The Manager shall register the name as required by
applicable assumed or fictitious name statutes and similar statutes.
3.3 Purposes. This Agreement is entered into for the following
purposes and, to the extent appropriate, shall serve as the exclusive
means by which they are accomplished: (a) to conduct Exploration on the
Properties and within the Area of Interest, (b) to acquire additional
properties within the Area of Interest, (c) to evaluate the possible
Development of the Properties, (d) to engage in Development and Mining,
(e) to engage in marketing Products to the extent permitted by Article
VI, and (f) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.4 Limitations. Unless the Participants otherwise agree in
writing, the Operations shall be limited to the purposes described in
paragraph 3.3 above and nothing contained in this Agreement shall be
construed to enlarge such purposes.
3.5 Term. The term of this Agreement shall be fifteen years from
the effective date and for so long thereafter as Products are produced
by or on behalf of the Participants from the Properties or any portion
thereof or Exploration or Development is being conducted on the
Properties unless this Agreement is earlier terminated as herein
provided.
ARTICLE IV
RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership. Nothing contained in this Agreement shall be
deemed to make or constitute Royal Silver as the partner of Minera
Metalin or Metalline, nor, except as otherwise herein expressly
provided, to constitute Royal Silver as the agent or legal
representative of Minera Metalin or Metalline, nor to make Minera
Metalin or Metalline the agent of legal representative of Royal Silver
nor to create any fiduciary relationship among 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.
Royal Silver shall not have any authority to act for or to assume any
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obligation or responsibility on behalf of Metalline and/or Minera
Metalin, except as otherwise expressly provided herein, nor shall
Minera Metalin or Metalline have any authority on behalf of Royal
Silver except as expressly provided herein. The rights, duties,
obligations and liabilities of the Participants shall be several and
not joint or collective. Each Participant shall be responsible only
for its obligations as herein set out and shall be liable only for its
share of the costs and expenses as provided herein. Except pursuant to
the authority expressly granted herein or as otherwise agreed in
writing between the Participants, each Participant shall indemnify,
defend and hold harmless the other Participants and its directors,
officers, employees, agents and attorneys from and against any and all
losses, claims, damages and liabilities arising out of any act or any
assumption of liability by the indemnifying Participant or any of its
directors, officers, employees, agents or attorneys done or undertaken,
or apparently done or undertaken, on behalf of the other Participants.
4.2 Federal Tax Elections. The Participants hereby elect to be,
and to have the arrangement evidenced hereby, excluded from the
application of any provisions of Subchapter K of the U.S. Internal
Revenue Code, as amended. Each of the Participants shall be solely
responsible for preparation and filing of its own income tax returns
and reports.
4.3 State Income Tax. The Participants also agree that, to the
extent permissible under applicable law, their relationship shall be
treated for state income tax purposes in the same manner as it is for
federal income tax purposes including exclusion from any state income
tax provisions that are similar to Subchapter K of the U. S. Internal
Revenue Code, as amended.
4.4 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
operations of any Participant and, except as otherwise provided in
Section 12.6, no Participant shall have any obligation to the others
with respect to any opportunity to acquire any property outside the
Area of Interest at any time or within the Area of Interest after two
years following the termination of this Agreement. 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.
4.5 Waiver of Right to Partition. During the term of this
Agreement, the Participants hereby waive and release all rights of
partition or sale in lieu thereof or other division of Assets,
including any such rights provided by statute.
4.6 Transfer or Termination of Rights to Properties. Except as
otherwise provided in this Agreement, no Participant shall transfer all
or any part of its interest in the Assets or this Agreement or its
Participating Interest, or otherwise permit or cause such interests to
terminate.
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4.7 Implied Covenants. The obligations, duties and standards of
conduct of the Participants with respect to their dealings with each
other and with third parties is defined and limited by the express
terms of this Agreement, provided that the covenants of good faith and
fair dealing generally implied in contracts are expressly incorporated
herein.
ARTICLE V
INTERESTS OF PARTICIPANTS
5.1 Initial Participation Interests
(a) The participants shall have the following initial
Participating Interests.
Minera Metalin 65%
Royal Silver 35%
Minera Metalin's interest is beneficially owned by its parent,
Metalline.
(b) In a Net Smelter Royalty Agreement executed by, among
others, Royal Silver, Minera Metalin and Metalline, the parties agreed
to pay certain underlying royalties, together with additional royalties
to be paid to Dakota Mining Company. it is agreed that all royalties
called for in the Net Smelter Royalty Agreement shall be paid out of
Royal Silver's 35% participating interest.
(c) In the event Royal Silver transfers, Assigns, sells or
otherwise conveys all or part of its participating interest, the
interest of any transferee, assignee or buyer shall be subject to the
obligations of Royal Silver to pay royalties, and shall do so in an
amount equal to its proportionate share of Royal Silver's participating
interest under this Agreement.
ARTICLE VI
MANAGEMENT
6.1 Management of the Joint Venture
(a) The Joint Venture will be managed by the Metalline Board
of Directors. RoyalSilver shall be entitled to appoint one director to
the Metalline Board. Joint Venture management decisions of the Board
shall be determined by a simple majority vote of the directors. The
Board shall be responsible for overall policies, objectives,
procedures, methods and action of the Joint Venture.
(b) The officers of Minera Metalin shall be responsible for
day-to-day operations under this Agreement and shall report regularly
to the Metalline Board. The Chief Officer of Minera Metalin shall have
final say on all matters entrusted to the officers of Minera Metalin
under Mexican law. The Chief Officer of Miner Metalin shall conduct
all Operations in a good, xxxxxxx-like and efficient manner, in
accordance with sound mining and other applicable industry standards
and practices. The Chief Officer shall not be liable for any act or
omission resulting in damage or loss except to the extent caused by or
attributable to the Chief officer's misconduct or gross negligence.
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6.2 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: (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 or contested in a diligent
manner, or liens and encumbrances specifically approved by the
Management Committee.
(c) The Manager shall conduct such title examinations and
cure such title defects as may be advisable in the reasonable judgment
of the Manager.
(d) 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 or net income and (iii) shall do all other
acts reasonably necessary to maintain the Assets. 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 the
Manager shall not permit or allow title to Assets to be lost as the
result of the nonpayment of any taxes, assessments or like charges.
(e) The Manager shall: (i) apply for all necessary permits,
licenses and approvals; (ii) comply with applicable Mexican, U.S.
Government, state and local laws and regulations, including laws and
regulations concerning reclamation and restoration of the Properties;
(iii) notify promptly the Participants 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 cured or disposed of
such violation through performance and/or payment of fines and
penalties.
(f) The Manager shall prosecute or defend all litigation or
administrative proceedings arising out of Operations. The non-managing
Participants shall have the right to participate at their own expense,
in such litigation or administrative proceedings.
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(g) The Manager shall provide insurance for the benefit of
the Participants in amounts required by law and, in any event, in
amounts customary in the mining industry for projects comparable to the
Operations hereunder. If the Manager is or becomes self-insured for
public liability through itself and/or its parent, the manager agrees
to cause the non-managing Participant to be protected against loss in
the event of a third-party claim in the same manner as if it were an
additional insured if the manager carried liability insurance with an
independent carrier. The Manager may charge the Joint Account an
amount equal to the premium reasonably attainable from independent
companies for insurance equivalent to such protection. Nothing herein
shall prevent the manager, if it so elects, from obtaining insurance
for the Venture from a third party and charging the premium therefor to
the Joint Account.
(h) The Manager may dispose of Assets whether by
abandonment, surrender or transfer in the ordinary course of business,
in accordance with Article XIV. However, the Manager shall not,
without prior authorization from the Metalline Board: (i) dispose of
Assets in any one transaction or in a related series of transactions
having a value in excess of $200,000.00; (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.
(i) The Manager shall have the right to carry out its
responsibilities hereunder through agents, Affiliates or independent
contractors.
(j) The Manager shall perform or cause to be performed
during the term of this Agreement all assessment and other work
required by law on or for the benefit of the Properties. The Manager
shall not be liable on account of any determination by any court or
governmental agency that the work performed by the Manager does not
constitute the required work or occupancy for the purposes of
preserving or maintaining ownership of the concessions, provided that
the work done is work generally recognized in the mining industry as
sufficient to maintain occupancy or is in accordance with an adopted
Program and Budget. The Manager shall timely record and file with the
appropriate federal, state and local offices, affidavits attesting to
the performance pertaining to the concessions included in the
Properties.
(k) The Manager may: (i) locate, amend, relocate or abandon
any concessions; (ii) locate any fractions resulting from such
amendment or relocation; (iii) apply for patents or mining leases or
other forms of mineral tenure for any such unpatented claims or sites;
(iv) abandon any unpatented mining claims for the purpose of locating
mill sites or otherwise acquiring rights to the ground covered thereby;
(v) abandon any unpatented mill sites for the purpose of locating
mining claims or otherwise acquiring rights to the ground covered
thereby; (vi) exchange with or convey to the United States any of the
Properties for the purpose of acquiring rights to the ground covered
thereby or other adjacent ground and (vii) convert any unpatented
claims or mill sites into one or more leases or other forms of mineral
tenure pursuant to any federal law hereafter enacted.
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(l) The Manager shall keep and maintain all required
accounting and financial records pursuant to Exhibit "B", Accounting
Procedure, and in accordance with customary cost accounting practices
in the mining industry.
(m) The Manager shall prepare in writing, with copies
available to all Metalline Board Members and all Joint Venture
participants:
(i) Quarterly progress reports which include statements
of expenditures and comparisons of such expenditures to the
adopted Budget, summaries of data acquired and a description and
analysis of Operations.
(ii) Such other reports as the Metalline Board may
reasonably request. At all reasonable times, the Manager shall
provide the Metalline Board or the representative of any
Participant, upon the request of any member of the Metalline
Board, access to and the right to inspect and copy all maps, drill
logs, core tests, geological reports, surveys, assays, analyses,
production reports, the operations, technical, accounting and
financial records and other information acquired in Operations. In
addition, the Manager shall allow the non-managing Participants,
at their sole risk and expense and subject to reasonable safety
regulations, to inspect the Assets and Operations at all
reasonable times, so long as the inspecting participant does not
unreasonably interfere with Operations.
(n) The Manager shall undertake all other activities
reasonably necessary to fulfill the foregoing.
The Manager shall not be in default of any duties under this
Section 6.2 if its failure to perform results from the failure of the
non-managing Participants to perform acts or to contribute amounts
required of it by this Agreement.
6.3 Standard of Care. The Manager shall not be liable to any
non-managing Participant for any act or omission resulting in damage or
loss to the Venture except to the extent caused by or attributable to
the Manager's willful misconduct or gross negligence.
6.4 Payments to Manager. The Manager shall be compensated for
its services and reimbursed for its costs hereunder in accordance with
the Accounting Procedure, Exhibit B, Article 2.13.
6.5 Transactions with Affiliates. If the Manager engages
Affiliates to provide services hereunder, it shall do so on terms no
less favorable than would be the case with unrelated persons in arm's
length transactions.
6.6 Manager's Lien. The Participants grant to the Manager a lien
and security interest upon their respective Participating Interests,
the Assets, Products, the Properties and upon their interests in all
production as security for payment of costs chargeable to them under
this Agreement. The Manager shall have the right to bring any action
by law or in equity to enforce collection of such indebtedness with or
without foreclosure of such lien.
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ARTICLE VII
PROGRAMS AND BUDGET
7.1 Operations shall be conducted and expenses shall be incurred
according to approved Programs and Budgets.
(a) Proposed Programs and Budgets shall be prepared by the
Chief Officer on an annual basis, except during periods of major
capital investment, when Programs and budgets may exceed one year.
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 Budgetary Period shall be prepared by the Chief Officer
and submitted to the Joint Venture Participants.
(b) Within 30 days after submission of a proposed Program
and Budget, each Venture Participant shall submit to the Chief Officer:
(i) Notice that the Joint Venture Participant approves
the proposal; or
(ii) Proposed modifications to the proposal; or
(iii) Notice that the Joint Venture Participant
rejects the proposal.
If a Joint Venture Participant fails to give any of the
foregoing responses within the allotted time, the failure shall be
deemed to be an approval by the Joint Venture Participant of the
proposed Program and Budget. If a Joint Venture Participant makes a
timely submission to the Chief Officer pursuant to paragraph 7.1(b)(ii)
or (iii), then the Chief Officer shall seek to develop a Program and
Budget acceptable to the Joint Venture Participants; provided, however
the proposed Programs and Budgets shall be approved by a simple
majority vote of the Board notwithstanding the inability to accommodate
an individual Joint Venture Participants objections.
(c) The Joint Venture Participants will be required to fund
the Programs and Budgets in proportion to their Joint Venture interest.
(d) In case of emergency, the Chief Officer may take any
reasonable action it deems necessary to protect life, limb or property,
or to comply with law or government regulation. The Chief Officer 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 it standard of care. The Chief Officer shall promptly notify the
Joint Venture Participants of the emergency or unexpected expenditure,
and the Chief Officer shall be reimbursed for all resulting costs by
the Joint Venture Participants in proportion to their respective
interests.
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ARTICLE VIII
ACCOUNTS AND SETTLEMENTS
8.1
(a) The Chief Officer shall promptly submit to the Joint
Venture Participants annual statements of account reflecting in
reasonable detail the charges and credits to the Joint Venture during
the preceding year. The date of the annual accounting shall be June
30.
(b) On the basis of the adopted Program and Budget, the
Chief Officer shall submit to each Joint Venture Participant, 30 days
prior to the last day of the accounting year, a billing for estimated
contributions required for the next year. Within 10 days after receipt
of each billing, each Joint Venture Participant shall advance its
proportionate share of the estimated amount. Time is of the essence
for payment of such xxxxxxxx. The Chief Officer shall at all times
maintain a cash balance approximately equal to the rate of
disbursements for up to 60 days. All funds in excess of this cash
balance shall be invested in interest-bearing accounts.
(c) A Joint Venture Participant that fails to meet cash
calls in the amount and at the times specified in this Article shall be
in default.
(d) The Joint Venture Participants acknowledge that if a
Joint Venture Participant defaults in making a contribution or a cash
call as required hereunder, it will be difficult to measure the damages
resulting from such default. Therefore, in the event such default is
not covered by payment of all sums due, including applicable interest
at the prime rate plus three percentage points within thirty days after
notice to the defaulting Joint Venture Participant, that Joint Venture
Participant's interest shall be extinguished in its entirety and its
interests and responsibilities shall be deemed to be transferred free
and clear of royalties, liens or other encumbrances arising by, through
or under such defaulting participant to the remaining Joint Venturer
participants, pro rata based on their percentage of Participating
Interests as they existed immediately prior to the default. If, within
thirty days after notice of default pursuant to this paragraph, the
participant alleged to be in default disputes, in good faith, the
existence of a default, its Participating Interest shall not be
terminated until it is adjudged to be in default by a final judgment of
a court of competent jurisdiction and fails within thirty days after
such judgment to pay the amount in default, together with interest at
the rate set forth above.
(e) Any default or transfer under this paragraph shall not
relieve the defaulting Joint Venture Participant of its share of
liabilities to third persons (whether such accrues before or after such
withdrawal). For purposes of this paragraph, the defaulting Joint
Venture participant's share of such liabilities shall be equal to its
Participating Interest percentage at the time such liability was
incurred.
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(f) Within 3 months following the end of Metalin's fiscal
year the Chief Officer shall have an audit of the accounting and
financial records for such year conducted. All written exceptions to
and claims upon the Chief Officer for discrepancies disclosed by such
audit shall be made not more than 3 months after receipt of the audit
report. Failure to make any such exception or claim within the 3 month
period shall mean the audit is correct and binding upon the Joint
Venture Participants. The audits shall be conducted by a firm of
certified public accountants selected by the Chief Officer. Additional
audits may be requested by a Joint Venture Participant at any time, the
costs of which shall be borne by the Joint Venture Participant making
that request.
ARTICLE IX
APPLICABILITY OF AGREEMENT
9.1
(a) This Agreement shall take effect upon the completion of
the transfer of all rights, title and interest of the Sierra Mojada and
Mojada 3 concessions described on Exhibit A to this Agreement to Minera
Metalin. It is further agreed that upon such transfer costs or
expenses incurred by Metalline and Minera Metalin which would have been
subject to this Agreement and which were incurred after January 6,
1998, shall be treated as costs and expenses subject to the terms of
this Agreement.
ARTICLE X
ACQUISITIONS WITHIN AREA OF INTEREST
10.1 Royal Silver agrees that neither Royal Silver nor its
affiliates will acquire any interest or right to acquire any interest
in mineral or real property or mining concession within the Area of
Interest during the term of this Agreement. Royal Silver Minera Metalin
and Metalline agree that any acquisition of mineral, or real property,
or mining concession within the Area of Interest shall be done solely
by and in the name of Minera Metalin. Any such acquisition shall be
subject to the terms of this Agreement and no such acquisition shall be
made without approval of the Metalline board. Metalline agrees that
neither Metalline, nor its affiliates, except Minera Metalin as set
forth above will acquire any interest in mineral property, or real
property, or mining concessions within the Area of Interest.
ARTICLE XI
ABANDONMENT AND SURRENDER OF PROPERTIES
11.1
(a) Part or all of the Properties may be surrendered or
abandoned by Minera Metalin If a Joint Venture Participant objects to
the surrender or abandonment, Minera Metalin shall assign to the
objecting Joint Venture Participant, by appropriate deed without cost
to Minera Metalin, all of Minera Metalin's interest in the property to
be abandoned or surrendered, and the abandoned or surrendered property
shall cease to be part of the Properties. The objecting Joint Venture
Participant to whom such property is assigned shall indemnify, defend
and hold harmless each abandoning Joint Venture Participant and its
Affiliates (including without limitation direct and indirect parent
companies), and its or their respective officers, directors,
shareholders, employees, agents and attorneys, from and against any
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Liabilities incurred by any of them relating in any respect to
activities occurring thereafter on or with respect to the property
abandoned under this Section. The abandoning Joint Venture Participant
shall remain liable for its share of all Liabilities relating to the
abandoned property arising out of Operations conducted on such property
prior to the transfer of such property to the objecting Joint Venture
Participant.
(b) If any Properties are abandoned or surrendered under the
provisions of this Section with the approval of all Joint Venture
Participants, then, unless this Agreement is earlier terminated, a
Joint Venture Participant or any of its Affiliates (other than Minera
Metalin) shall not acquire any interest in such properties for a period
of two years following the date of such abandonment or surrender. If
a Joint Venture Participant reacquires any properties in violation of
this provision, the other Joint Venture Participant may elect by notice
to the reacquiring Joint Venture Participant within 45 days after it
has actual notice of such reacquisition, to have such properties
acquired by Minera Metalin and made subject to the terms of this
Agreement. In the event such an election is made by the Joint Venture
Participant, the reacquired properties shall thereafter be treated as
Properties, and the costs of reacquisition shall be borne solely by the
reacquiring Joint Venture Participant.
ARTICLE XII
TRANSFER OF INTEREST
12.1 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.
12.2 Limitations on Free Transferability. The right to Transfer of
a Participant in paragraph 12.1. shall be subject to the following
terms and conditions:
(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 paragraphs 12(f) and (g),
the transferee, has committed in writing to be bound by this Agreement,
as of the effective date of the transfer, to the same extent as the
transferring Participant;
(b) No Participant, without the consent of the other
Participant, shall make a Transfer which shall cause a change in the
tax relationship of the participants under the provisions of Article IV
of this Agreement and if, contrary to this restriction, a Transfer is
made which causes such a change the transferring Participant and
transferee shall indemnify, defend and hold harmless the other
Participant from and against any and all loss, cost, expense or damage
arising from such change;
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(c) No Transfer permitted by this Article shall relieve the
transferring Participant of its share of any liability, whether
accruing before or after such Transfer, which arises out of Operations
conducted prior to such Transfer;
(d) The transferring Participant and the transferee shall
bear all tax consequences of the Transfer, including the tax liability
and consequences of and to the non-transferring Participants;
(e) In the event of a Transfer of less than all of a
Participating Interest, the transferring Participant and its transferee
(unless the transferee was a Participant prior to the Transfer) shall
act and be treated as one Participant;
(f) 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
(g) 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 XI creates in a third party a
security interest in Products or proceeds therefrom prior to such
distribution, such sales, commitment or disposition shall be subject to
the terms and conditions of this Agreement.
12.3 Pre-emptive Right. Except as otherwise provided in paragraph
12.4, if a Participant desires to Transfer all or any part of its
interest in this Agreement, any Participating Interest or the Assets,
the other Participant shall have the following preemptive right to
acquire such interests:
(a) A Participant intending to Transfer all or any part of
its interest in this Agreement, any Participating Interest or the
Assets shall promptly notify the other Participant of its intentions.
The notice shall state the price and all other pertinent terms and
conditions of the intended Transfer and shall be accompanied by a copy
of the offer or proposed contract for sale. The other Participant
shall have thirty days from the date such notice is delivered to notify
the transferring Participant whether it elects to acquire the offered
interest at the same price and on the same terms and conditions as
described in the notice. If it does so elect, the Transfer shall be
consummated promptly after notice of such election is delivered to the
transferring Participant.
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(b) If the other Participant fails to so elect within the
period provided for in paragraph 12.3(a), the transferring Participant
shall have one hundred-eighty (180) days following the expiration of
such period to consummate the Transfer to a third party at a price and
on terms no less favorable than those offered by the transferring
Participant to the other Participant in the notice required in
paragraph 12.3(a).
(c) If the transferring Participant fails to consummate the
Transfer to a third party within the period described in paragraph
12.3(b), the preemptive right of the other Participant in such offered
interest shall be deemed to be revived and any subsequent proposal to
Transfer such interest shall be conducted in accordance with all of the
procedures described in this paragraph 12.3.
12.4 Exceptions to Preemptive Right. Paragraph 12.3 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;
(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 encumbrances; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant.
ARTICLE XIII
CONFIDENTIALITY
The financial terms of this Agreement and all information obtained
by the parties pursuant hereto shall not be disclosed by the parties to
any third party or the public without the prior written consent of the
other party, which consent shall not be unreasonably withheld.
Moreover, the parties will only disclose it to its officers, directors,
or personnel who need to know such information, and then only after
they have agreed to keep such information confidential. The consent
required herein shall not apply to a disclosure: (a) to a consultant,
contractor, or subcontractor that has a bona fide need to be informed;
or (b) to a governmental agency or to the public which the disclosing
party believes in good faith is required by pertinent law or regulation
or the rules of any stock exchange. In any case to which (a) or (b)
above apply, the disclosing party shall give notice to the other party
concurrent with the making of such disclosure. As to any disclosure
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pursuant to (a), 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
described herein.
ARTICLE XIV
LIABILITIES AND INDEMNITIES
14.1
(a) If a Joint Venture Participant (the "Joint Venture
Participant providing services"), its Affiliates, or their officers,
directors, or representatives (collectively, the "providers of
services") perform services to Minera Metalin, the providers of
services shall perform or cause the performance of those services in
compliance with the standards of care, skill, and diligence normally
provided by responsible persons or entities in performance of services
similar to those provided. If the performance of services does not meet
this standard and if this deficiency is timely reported in writing to
the Joint Venture Participant providing services by the other Joint
Venture Participant, the Joint Venture Participant providing services
shall correct any deficiencies at its expense. The Joint Venture
Participants agree that, except in cases of gross negligence or willful
misconduct, the liability of the Shareholder providing services and the
providers of services is limited to the correction of the deficiencies.
(b) Each Joint Venture Participant (the "Indemnifier") shall
indemnify and hold harmless the other Joint Venture Participant (the
"Indemnified") against and from all costs, claims, expenses,
liabilities or losses sustained by the Indemnified which result,
directly or indirectly, from a Joint Venture Participant's, its
Affiliates or their officers', directors', or representatives' gross
negligence, willful misconduct, or failure to perform any of its or
their obligations under this Agreement.
ARTICLE XV
ACCESS TO CONCESSIONS AND INFORMATION
15.1
(a) Each Joint Venture Participant, its directors, officers,
employees and agents shall have the right, at the cost and risk of such
Joint Venture Participant and upon reasonable notice to the Chief
Officer, to enter into and upon the Concessions with the Chief Officer
at all reasonable times for the purpose of inspecting the same and the
work performed hereunder. Subject to Section 19(b) and Section 18, each
Joint Venture Participant, its directors, officers, employees and
agents shall have the right at all reasonable times to inspect all
drilling data, samples, cores, logs and other data pertaining to the
Concessions, and upon reasonable request from a Joint Venture
Participant, the Chief Officer shall furnish to such Joint Venture
Participant copies of all logs, assay reports, maps or other documents
connected with the work on the Concessions and reasonable samples of
material for testing purposes. The inspection and access rights herein
are granted on the conditions that the Joint Venture Participant comply
with Minera Metalin's rules and not obstruct or interfere with Minera
Metalin's work.
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(b) Notwithstanding any other provision of this Agreement,
neither Joint Venture Participant shall be required to disclose to
another Joint Venture Participant any of its confidential processes,
trade secrets or proprietary information, unless utilized by Minera
Metalin for operations with respect to the Properties, in which event
such information will be held confidential by the non-disclosing Joint
Venture Participant.
ARTICLE XVI
FORCE MAJEURE
16.1
(a) No party shall be liable to the other party and no party
shall be deemed in default hereunder for any failure or delay to
perform any of its covenants, agreements or obligations caused or
arising out of any act not reasonably within the control of such party,
excluding lack of funds, but including and not limited to acts of God,
strikes, lockouts or other industrial disputes, acts of the public
enemy, war, insurrection, riots, fire, storm, flood, explosion,
government restriction or delays in obtaining of governmental
approvals, unavailability of equipment necessary for work or other
causes, whether of the kind enumerated above or otherwise.
(b) The party hereto claiming the occurrence and duration of
any event contemplated under the provisions of paragraph 16 of this
Agreement hereof shall promptly notify the other party accordingly. All
times provided for in this Agreement shall be extended for a period
commensurate with the period of the delay if the party forthwith
notifies the other party in writing of the nature of the delay and, so
far as possible, the party affected takes all reasonable steps to
remedy the delay caused by the events contemplated by this paragraph;
provided however, that nothing contained in this paragraph shall
require any party to settle any industrial dispute or to test the
constitutionality of any law or governmental regulation.
ARTICLE XVII
TERMINATION AND WITHDRAWAL
17.1
(a) This Agreement shall terminate only on the mutual
consent of all Joint Venture Participants.
(b) Upon termination under this Article, the Joint Venture
Participants shall remain liable in accordance with their Participating
Interest percentages at the time of termination for contingency
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.
(c) Promptly after any termination under this Article, the
Manager shall take all action necessary to wind up the activities of
the Joint Venture and all costs and expenses incurred in connection
with the termination of the Venture shall be expenses chargeable to the
Venture. Any Participant that for any reason has a negative capital
account balance when the Venture is terminated 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
104
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. Thereafter,
any remaining cash and all other Assets shall be distributed (in
undivided interests unless otherwise agreed) to the Participants, first
in the ratio and to the extent of their respective capital accounts and
then in proportion to their respective Participating Interests as they
may appear at that time.
(d) A Joint Venture Participant may elect to withdraw from
this Agreement and from The Joint Venture by giving notice to the other
Joint Venture Participant of the effective date of withdrawal, which
shall be the later of the end of the then current Program and Budget or
at least 30 days after the date of the notice. Upon such withdrawal,
this Agreement shall terminate, and the withdrawing Joint Venture
Participant shall be deemed to have transferred to the remaining Joint
Venture Participant without cost and free and clear of royalties, liens
or other encumbrances arising by, through or under such withdrawing
Joint Venture Participant, all of its interest in this Agreement.
(e) Non-Compete Covenants. A Participant that withdraws
pursuant to this Article is deemed to have withdrawn pursuant to an
uncured default and its Affiliates shall not directly or indirectly
acquire any interest in property within the Area of Interest for
twenty-four (24) months after the effective date of withdrawal. If a
withdrawing Participant, or the Affiliate of a withdrawing Participant,
breaches this Article, such Participant or Affiliate shall be obligated
to offer to convey to the non-withdrawing 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
non-withdrawing Participant.
(f) Right to Data After Termination. Within ninety (90) days
after termination of this Agreement pursuant to this Article, each
Participant shall be entitled to copies of all information acquired
hereunder before the effective date of termination and not previously
furnished to it.
(g) Continuing Authority. Upon termination of this Agreement
under this Article the Manager shall have the power and authority,
subject to control of the Management Committee, or any successors
representing the former Participants, 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
105
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.
ARTICLE XVIII
MISCELLANEOUS
18.1
(a) All notices, payments and other required communications
("Notices") to the parties shall be in writing, and shall be addressed,
respectively, as follows:
if to Metalline: Metalline Mining Company
0000 Xxxxxxxx Xxxxxx
Xxxxx x'Xxxxx, XX 00000
(Ph) 208-665-2002
(Fax) 000-000-000
Attention: Xxxxxx Xxxxxxx
if to Royal Royal Silver Mines Inc.
00000 X. Xxxxxx, Xxxxx 000
(Ph) 000-000-0000
(Fax) 000-000-0000
Attention: Xxxx Xxxx
if to Minera Metalin: Xxxxx Xxxx #0
Xx Xxxxxxxxx
Xxxxxxxx, Xxxxxx
(Ph) 00-000-00000
Attention: Xxxxxx Xxxxxxx
All Notices shall be given (i) by personal delivery to the party, (ii)
by electronic communication, with confirmation of transmission, (iii)
by registered or certified mail return receipt requested, or (iv) by
commercial courier. 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, and
(ii) if by electronic communication, by mail, or by commercial carrier,
on the next business day after actual receipt. A party may change its
address by Notice to the other party.
(b) No modification of this Agreement shall be valid unless
made in writing and duly executed by all parties to this Agreement.
(c) Except with respect to matters pertaining to the
formation, corporate proceeding or conduct of business by Minera
Metalin, which matters shall be governed by the laws of the United
Mexican States, including without limitation the Mexican General Law of
Mercantile Companies, this Agreement shall be governed by and
interpreted in accordance with the laws of the State of Idaho. In the
event that any condition or other provision of this Agreement is held
to be invalid or void by any court of competent jurisdiction, the same
shall be deemed severable from the remainder of this Agreement and
shall in no way affect any other covenant or condition. If such
condition, covenant, or other provision shall be deemed invalid due to
its scope or breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
106
(d) The failure of a Participant to insist upon 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.
(e) The parties hereby agree to exercise all their voting
rights and other powers of control available to them in relation to
their respective company and their Affiliates so as to procure (insofar
as they are able by the exercise of such rights and powers) that the
parties and their Affiliates will comply with their obligations under
this Agreement.
(f) There are no implied covenants given by either parties
or otherwise contained in this Agreement other than those of good faith
and fair dealing.
(g) Each of the parties agrees that it shall take from time
to time such action and execute such instruments as may be reasonably
necessary or convenient to implement and carry out the intent and
purpose of this Agreement. The parties also agree to cause any
Affiliate of it to take all action necessary to implement and carry out
the intent and purpose of this Agreement.
(h) Except for any other agreement of the parties affecting
the Properties which is executed contemporaneously with this Agreement,
this Agreement contains the entire understanding of the parties and
supersedes all prior agreements and understandings between the parties
relating to the subject matter hereof.
(i) This Agreement may be executed in counterparts, each of
which when so executed shall be deemed an original, and such
counterparts shall together constitute but one and the same instrument.
(j) The captions and headings contained in this Agreement
are for reference only and shall not affect the interpretation of any
provision hereof
(k) Neither this Agreement nor any interest therein nor any
benefit or claim arising thereunder shall be sold, leased, transferred,
or otherwise dealt with except in conjunction with the sale,
assignment, or transfer by such Joint Venture Participant of its
Interest in conjunction with Article XI of this Agreement.
ATTEST: METALLINE MINING COMPANY
________________________ By: __________________________________
Secretary Its ______________________________
ATTEST: ROYAL SILVER MINES, INC.
________________________ By: __________________________________
Secretary Its ______________________________
ATTEST: MINERA METALIN, S.A., DE C.V.
________________________ By: __________________________________
Secretary Its ______________________________
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EXHIBIT A
Name of Xxx Xxxxx Xx. Xxxxxxxx Xxxxx Xxxxx
Xxxxxx Xxxxxx 000000 4,767.3154 November 29, 1999
Mojada 3 199246 2,616.8326 March 28, 0000
Xxxxxxx Xxxxxxxx 000000 336.7900 Exploitation Mining
Concession Valid
until _____________
Xxxxxxxxx
Concession 188765 117.5025 Exploration Mining
Concession Valid
until _____________
Xxxxxxxxx 187776 97.680 Exploration Mining
Concession Valid
until _____________
Xx Xxxxxx 000000 33.50444 Exploration Mining
Concession Valid
until ____________
All the foregoing located within the Sierra Mojada District, Coahuila,
Mexico.
108
EXHIBIT B
ACCOUNTING PROCEDURE
It is contemplated by the parties to the Agreement that it is in
the best interests of the parties that certain services or equipment
may be supplied to The Joint Venture by Metalline or by Affiliates of
Metalline. Certain financial and accounting procedures to be followed
in such cases are set forth below and reasonable and proper expenses
may be charged to The Joint Venture. References in this Accounting
Procedure to Sections and Articles are to those located in this
Accounting Procedure unless it is expressly stated that they are
references to the Joint Venture Agreement. Capitalized terms in this
Accounting Procedure shall have the meanings in the Joint Exploration
and Development Agreement. References in this Accounting Procedure to
the "Provider" shall mean Metalline or that Affiliate of Metalline that
provides services or supplies to The Joint Venture. To the extent that
Royal Silver may provide services or supplies to The Joint Venture,
this Accounting Procedure shall also apply.
The Accounting Procedure shall be reviewed upon the request of
Metalline or Royal Silver to assure that no party suffers a loss or
makes a profit because of its management fee. Royal Silver and
Metalline shall, in good faith, endeavor to agree on modification to
these Accounting Procedures that will remedy any alleged unfairness or
inequity.
ARTICLE I
GENERAL PROVISIONS
1.1 General Accounting Records. The Provider shall maintain
records prepared in accordance with this Accounting Procedure.
1.2 Statements and Xxxxxxxx. The Provider shall prepare
statements and xxxx The Joint Venture in accordance with Budgets.
Payment of any such xxxxxxxx by The Joint Venture shall not prejudice
the right of Royal Silver to protest or question the correctness
thereof; provided, however, that any such protest or questions shall be
in writing and shall be timely raised.
ARTICLE II
CHARGES TO THE JOINT VENTURE
Subject to the limitations hereinafter set forth, the Provider
shall charge The Joint Venture with the following:
2.1 Rentals, Royalties and Other Payments. All property
acquisition and holding costs, including filing fees, license fees,
costs of permits and assessment work, delay rentals, production
royalties, including any required advances, and all other payments made
by the Provider which are necessary to acquire or maintain title to the
Properties.
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2.2 Labor and Employee Benefits
(a) Salaries and wages of the Provider's employees or
employees of the Provider's Affiliates directly engaged in Operations,
including salaries or wages of employees who are temporarily assigned
to The Joint Venture.
(b) The cost of holiday, vacation, sickness and disability
benefits, and other customary allowances applicable to the salaries and
wages chargeable under Sections 2.2(a) and 2.11. Such costs may be
charged on a "when and as paid basis" or by "percentage assessment" on
the amount of salaries and wages. If percentage assessment is used,
the rate shall be applied to wages or salaries excluding overtime and
bonuses. Such rate shall be based on the Provider's cost experience and
it shall be periodically adjusted at least annually. It is the intent
of the parties to fully compensate the Provider for all actual costs to
the Provider or its affiliates for providing the services of the
employees to the Joint Venture.
(c) The Provider's or its Affiliates' actual cost of
established plans for employees' group life insurance, hospitalization,
pension, retirement, stock purchase, thrift, bonus (except production
or incentive bonus plans under a union contract based on actual rates
of production, cost savings and other production factors, and similar
non-union bonus plans customary in the industry or necessary to attract
competent employees, which bonus payments shall be considered salaries
and wages under Section 2.2(a) or 2.11, rather than employees' benefit
plans) and other benefit plans of a like nature applicable to salaries
and wages chargeable under Sections 2.2(a) or 2.11, provided that the
plans are limited to the extent feasible to those customary in the
industry.
(d) Cost of assessments imposed by governmental authority
which are applicable to salaries and wages chargeable under Sections
2.2(a) and 2.11,including all penalties except those resulting from the
willful misconduct or gross negligence of the Provider or its
Affiliates.
2.3 Fixed Assets, Materials, Equipment and Supplies
(a) All capital costs of developing and operating the
Properties as a mine, including all costs of land, construction,
equipment and mine development, and including maintenance, repairs and
replacements, and any capital expenditures relating to an improvement,
expansion, modernization or replacement of the facilities.
(b) The cost of materials, equipment and supplies (herein
called "Material") purchased from unaffiliated third parties or
furnished by the Provider or its Affiliates. The Provider shall
purchase only so much Material as may be required for immediate use in
efficient and economical Operations. The Provider shall also maintain
inventory levels of Material at reasonable levels to avoid unnecessary
accumulation of surplus stock.
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2.4 Equipment and Facilities Furnished by Provider. The cost of
machinery, equipment and facilities owned by the Provider and used in
Operations or used to provide support or utility services to Operations
charged at rates commensurate with the actual costs of ownership and
operation of such machinery, equipment and facilities. Such rates
shall include costs of maintenance, repairs, other operating expenses,
insurance, taxes, depreciation and interest at a rate not to exceed 2%
per annum in excess of the Prime Rate. Such rates shall not exceed the
average commercial rates currently prevailing in the vicinity of the
Operations, and shall not exceed the costs that would be incurred if
such items were purchased by or for the account of The Joint Venture.
2.5 Transportation. Reasonable transportation costs incurred in
connection with the transportation of employees and material necessary
for the Operations.
2.6 Contract Services and Utilities. The cost of contract
services and utilities procured from outside sources, other than
services described in Sections 2.9 and 2.12.
2.7 Insurance Premiums. Net premiums paid for insurance required
to be carried for Operations for the protection of The Joint Venture.
The Joint Venture may self-insure, and the Provider may elect to
include such risks in its self-insurance program and shall charge the
costs of self-insuring such risks to The Joint Venture provided that
such charges shall not exceed published manual rates. If self-
insurance is selected, the Provider shall provide to the Joint
Venturers' statements as to the extent and limits of such self-insurance
and the basis for the charges to The Joint Venture.
2.8 Damages and Losses. All costs in excess of insurance
proceeds necessary to repair damage or losses to any assets of The
Joint Venture resulting from any cause other than the willful
misconduct or gross negligence of the Provider or its affiliates. The
Provider shall furnish the Board with written notice of damages or
losses as soon as practicable after a report thereof has been received
by the Provider.
2.9 Legal and Regulatory Expenses. Except as otherwise provided
in section 2.12, al legal and regulatory costs and expenses incurred in
or resulting from the Operations or necessary to project or recover the
assets of the Joint Venture. All attorneys' fees and other legal costs
to handle, investigate and settle litigation or claims, including the
cost of legal services provided by the Provider's or its Affiliates'
legal staff.
2.10 Audit. Cost of annual audits.
2.11 District and Camp Expense (Field Supervision and Camp
Expenses). A pro rata portion of (i) the costs of maintaining and
operating an office (herein called "the Provider's Project Office") and
any necessary suboffice and (ii) all necessary camps, including housing
facilities for employees, used for Operations. During Development and
thereafter, the expense of those facilities, less any revenue
therefrom, shall include depreciation or a fair monthly rental in lieu
of depreciation of the investment. The total of such charges for all
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Properties served by the Provider's employees and facilities shall be
apportioned to The Joint Venture on the basis of the Provider's best
estimate of the proportionate amount of such expenses incurred for the
benefit of The Joint Venture.
2.12 Administrative Charge
(a) Each month, the Provider shall charge The Joint Venture
a sum for each phase of Operations as provided below, which shall be a
liquidated amount to reimburse the Provider and its Affiliates for
their home office overhead and general and administrative expenses to
conduct each phase of the Operations, and which shall be in lieu of any
management fee, except to the extent permitted in Section 2.2:
(1) Exploration Phase - 0% of Allowable Costs;
(2) Development Phase - 2% of Allowable Costs; and
(3) Mining Phase - 2% of Allowable Costs.
(b) The term "Allowable Costs" as used in this Section 2.12
for a particular phase of Operations shall mean all charges to The
Joint Venture excluding (i) the administrative charge referred to
herein; (ii) referred to depreciation, depletion or amortization of
tangible or intangible assets; and (iii) amounts charged in accordance
with Sections 2.1 and 2.9. The Provider shall attribute such Allowable
Costs to a particular phase of Operations by applying the following
guidelines.
(1) The "Exploration Phase" shall cover those
activities directed toward ascertaining the existence, location,
quantity, quality or commercial value of deposits of products. Such
phase shall include all activities undertaken through the completion of
the Feasibility Study, if any, but shall not include construction of
milling or processing facilities or commencement by commercial mining
operations on the Properties.
(2) The "Development Phase" shall cover those
activities conducted to prepare for removal and recovery of products
(including from an existing ore body), and to construct or install a
mill or another improvement to be used for the mining, extracting,
producing, handling, milling, processing or other beneficiation of
products.
(3) The "Mining Phase" shall include mining,
extracting, producing, handling, milling or other processing of
products and all other activities not otherwise covered above,
including activities conducted after mining operations have ceased.
(c) The following is a representative list of items
comprising the Provider's or its Affiliates' principal business office
expenses that are expressly covered by the administrative charge
provided in this Section 2.12, except to the extent that such services
represent a direct charge to The Joint Venture, as provided for in
Article II:
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(1) Administrative supervision, which includes services
rendered by chief officers, department supervisors, officers and
directors of the Provider or its Affiliates for Operations;
(2) Rentals and other charges for office and records
storage space, telephone service, office equipment and supplies;
(3) Accounting, data processing, personnel
administration, billing and record keeping in accordance with
governmental regulations and the provisions of the Agreement, and
preparation of reports;
(4) The services of tax counsel and tax administration
employees for all tax matters, including any protests, except any
outside professional fees which the Board may approve as a direct
charge to the Joint Venture;
(5) Routine legal services rendered by the Provider's
or its Affiliates' legal staff.
(d) The board shall biannually review the administration
charges and shall amend the methodology or rates used to determine such
charges if they are found to be insufficient or excessive.
2.13 Other Expenditures. Any reasonable direct expenditure,
other than expenditures which are covered by the foregoing provisions,
incurred by the Provider or its Affiliates for the necessary and proper
conduct of Operations.
ARTICLE III
BASIS OF CHARGES
3.1 Purchases. Material purchased and services procured from
third parties shall be charged to The Joint Venture by the Provider at
invoiced cost, including applicable transfer taxes, less all discounts
taken. If any Material is determined to be defective or is returned to
a vendor for any other reason, the Provider shall credit Newco when an
adjustment is received from the vendor.
3.2 Material Furnished by or Transferred to the Provider or a
Joint Venturer. Any material furnished by the Provider or a Joint
Venturer or their Affiliates or transferred to the same shall be priced
on the following basis:
(a) New Material. New Material transferred from the
Provider or a Joint Venturer or their Affiliates shall be priced F.O.B.
the nearest reputable supply store or railway receiving point, where
like Material is available, at the current replacement costs of the
same kind of Material, exclusive of any available cash discounts, at
the time of the transfer (herein called "New Price).
(b) Used Material. Used Material shall be priced at a value
commensurate with its use or at prevailing prices. Material no longer
suitable for its original purpose but usable for some other purpose
shall be priced on a basis comparable with items normally used for such
other purposes.
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(c) Obsolete Material. Any Material which is serviceable
and usable for its original function, but its condition is not
equivalent to that which would justify a price as provided above shall
be priced by the Board. Such price shall be set at a level which will
result in a charge to The Joint Venture equal to the value of the
service to be rendered by such Material.
3.3 Premium Prices. Whenever material is not readily obtainable
at published or listed prices because of national emergencies, strikes
or other unusual circumstances over which the Provider has no control,
the Provider may charge The Joint Venture for the required material on
the basis of the Provider's direct cost and expenses incurred in
procuring such Material and making it suitable for use. The Provider
shall give written notice o the proposed charge to the Joint Venturers
prior to the time when such charge is to be billed, whereupon any Joint
Venturer shall have the right, by notifying the Provider within 10 days
of delivery of the notice from the Provider, to furnish at the usual
receiving point all or part of its share of Material suitable for use
and acceptable to the Provider.
3.4 Warranty of material Furnished by the Operator or Joint
Venturers. Neither the Provider, nor any Joint Venturer warrants the
material furnished beyond any dealer's or manufacturer's warranty and
no credits shall be made to The Joint Venture for defective Material
until adjustments are received by the Provider from the dealer,
manufacturer or their respective agents.
ARTICLE IV
DISPOSAL OF MATERIAL
4.1 Disposition Generally. The provider shall have no obligation
to purchase a Joint Venturer's interest in Material. The Board shall
determine the disposition of major items of surplus Material, provided
the provider shall have the right to dispose of normal accumulations of
junk and scrap material either by sale or by transfer to the Joint
Venturers as provided in Section 4.2.
4.2 Distribution to Joint Venturers. Any Material to be
distributed to the Joint Venturers shall be made in proportion to their
respective Participating Interests, and corresponding credits shall on
the basis provided in Section 3.2.
4.3 Sales. Sales of Material to third parties shall be credited
to The Joint Venture at the net amount received. Any damages or claims
by the purchaser shall be charged back to The Joint Venture if and when
paid.
ARTICLE V
INVENTORIES
5.1 Periodic Inventories, Notice and Representations. At
reasonable intervals, inventories shall be taken by the Provider, which
shall include all such Material as is ordinarily considered
controllable by providers of mining Properties and the expense of
conducing such periodic inventories shall be charged to The Joint
Venture. The Provider shall give written notice to the Joint Venturers
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of its intent to take any inventory at least thirty (30) days before
such inventory is scheduled to take place. Joint Venturers shall be
deemed to have accepted the results of any inventory taken by the
Provider if the Joint Venturer fails to be represented at such
inventory.
5.2 Reconciliation and Adjustment of Inventories. Reconciliation
of inventory with charges to The Joint Venture shall be made, and a
list of overages and shortages shall be furnished to the board within
6 months after the inventory is taken. Inventory adjustments shall be
made by the Provider to The Joint Venture for overages and shortages,
but the Provider shall be held accountable only for shortages due to
lack of reasonable diligence.
ARTICLE VI
CREDITS
The Provider will credit The Joint Venture with revenues received
by the Provider including, for example:
(a) Collection of insurance proceeds when the insurance
premiums have been charged to The Joint Venture.
(b) Sales of geologic or other information authorized by the
Joint Venturers, and provided that the costs related to such data have
been charged to The Joint Venture;
(c) Sales or property, plant, equipment and materials of The
Joint Venture in the normal course of the day-to-day business;
(d) Rentals received, refunds of custom duties or
transportation claims, rebates and other credits pertaining to
Operations;
(e) Credits received from third parties or from the Joint
Venturers for the use of facilities or service of the Operations.
(f) Refunds for defective equipment when the Provider
receives the corresponding payments from the manufacturers or agents;
and
(g) Any other credits for material recovery or from other
sources which correspond to The Joint Venture.
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EXHIBIT C
NET PROCEEDS
1. Definitions. For the purposes of the Agreement of which this
Exhibit is a part, the following definitions shall apply:
1.1 "Gross Proceeds" shall mean, for any period, the aggregate
Product Sales during such period, proceeds realized by the sale of any
other assets of the Properties other than sales used in the
determination of Product Sales, and any insurance proceeds realized
from mine related accidents, but excluding any investment income
received by any Participant.
"Product Sales" shall mean, for gold, the quantity of refined
gold attributable to the Properties produced in any calendar quarter
valued at the average of the Second London Daily PM Fix in U.S. dollars
per xxxx ounce for such calendar quarter and, for silver, the quantity
of refined silver attributable to the Properties produced in any
calendar quarter valued at the average of the Metals Week published
monthly price designated as "Handy & Xxxxxx" in U.S. cents per xxxx
ounce for such calendar quarter, and, for any other products, the
proceeds actually realized from the sale of such products.
1.2 "Net Proceeds" shall mean, for any period, Gross Proceeds for
the period less the aggregate of:
(a) Operating Costs for the period;
(b) Negative Net Proceeds, if any, from the previous period;
and,
(c) Changes in working capital for the operation of the
Properties as a mine, as determined by the Manager of the Venture,
after the beginning of commercial production.
(d) Payment of Net Smelter royalties or other Royalty
Agreements to which properties in the Area of Interest are subject.
1.3 "Operating Costs" shall mean, for any period, all costs,
expenses, underlying obligations, liabilities and charges of whatsoever
kind or nature incurred or chargeable, directly or indirectly, by the
Manager or Venture after the date of this Agreement, in connection with
the operation of the Property as a mine during the period, which costs,
expenses, underlying obligations, liabilities and charges shall
include, without limiting the generality of the foregoing, the
following:
(a) All costs of or related to the operation of the property
as a mine;
(b) All costs of or related to marketing of mineral products
including, without limitation, transportation, storage, commissions
and/or discounts;
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(c) All costs of maintaining in good standing or renewing
from time to time, the Properties, including but not limited to the
payment of all underlying obligations, if required by the terms of the
Agreement, and other tenements or other interest therein including the
payment of all royalties and taxes of any nature whatsoever in
connection therewith;
(d) All costs of or related to providing and/or operating
employee facilities, including housing and land;
(e) All duties, charges, levies, royalties, taxes (excluding
taxes levied on the income of the parties) and other payments imposed
upon or in connection with operating the Properties as a mine by any
level of government or department or agency thereof;
(f) All reasonable and actual costs of Manager or Venture
for providing technical, management and/or supervisory services, and
fees paid by Manager or Venture as referenced in the Accounting
Procedure Exhibit "B" (the intent being that the Manager of the Venture
will neither realize a profit nor suffer a loss as a result of its
indirect costs incurred as a result of its management activity);
(g) All costs of consulting, legal, accounting, insurance
and other services;
(h) All costs relating to maintenance, repairs, replacements
and expansion, including capital expenditures, land acquisition
expenditures, and any development costs incurred to increase the output
of the Properties or to expose or provide access to a major new orebody
or orebodies, all incurred after the mine has commenced commercial
production;
(i) All costs for pollution control, reclamation or other
similar costs incurred or to be incurred by Manager or Venture;
(j) Any costs or expenses incurred or to be incurred
relating to the termination of the operation of the Properties as a
mine;
(k) Exploration expenditures, however incurred, development
drilling and underground or open pit development costs incurred after
commencement of commercial production to maintain an economic output of
saleable minerals, as determined by Manager of the Venture;
(l) All interest on funds advanced or guaranteed by any
Participant for the benefit of the Properties, from the date of the
advance to date of repayment of such funds at the Citibank, N.A., 000
Xxxx Xxxxxx, Xxx Xxxx, XX 00000, prime rate of interest plus Two
Percent (2%); and
(m) All interest on funds incurred by the project itself on
a nonrecourse basis;
but, shall exclude any non-cash expenses such as
depreciation, amortization and depletion.
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Subject to the above, all operating costs shall be determined in
accordance with generally accepted accounting principles consistently
applied.
1.4 "Recoverable Capital Costs" shall mean all costs incurred
before beginning of commercial production for all Qualified Exploration
and Development Expenditures of the mine or mines including interest
pursuant to Sections 1.3(l) and 1.3(m) of this Exhibit, and property
acquisition costs such as lease, option and cash payments and all costs
of equipping the Properties for commercial production, including
inventory and pre-production working capital, plus such amount to
compensate Manager or Venture for its overhead as outlined in the
Accounting Procedure, Exhibit "B", attached to the Agreement.
2. Custom Milling. In the event any of the facilities of the
Property are used for the treatment of ore or concentrate from another
property, not controlled by the Participants, any fee or charge
received by Manager or Venture for the use of the facilities shall be
included as Gross Proceeds.
Exhibit C to ____________ Joint Venture Agreement dated the ____ day of
________, 1998, by and among Minera Metalin, Metalline Mining Company
and Royal Silver Mining Co.
