JOINT VENTURE AGREEMENT
Between
GLOBE RESOURCES INC.
(called "Participant 1")
And
GETTY COPPER CORP.
(called "Participant 2")
JOINT VENTURE AGREEMENT
THIS AGREEMENT made effective October 15, 1996.
BETWEEN:
GLOBE RESOURCES INC., a body corporate, duly incorporated under the laws of
British Columbia, and having an office situate at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0;
(hereinafter called "Participant 1")
OF THE FIRST PART
AND:
GETTY COPPER CORP., a body corporate, duly incorporated under the laws of
British Columbia, and having an office situate at 0000 Xxxx Xxxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0;
(hereinafter called "Participant 2")
OF THE SECOND PART
SECTION 1 - DEFINITIONS
--------------------------
1.1 Specific Definitions
In and for the purposes of this Agreement, unless there is something in the
subject matter or context inconsistent therewith or unless otherwise
specifically provided, each of the words, phrases and expressions described in
Schedule "D" - Definitions shall have the meanings ascribed thereto.
1.2 Grammatical Changes
Where a word or expression is defined in this Agreement, other parts of speech
and grammatical forms of the same word or expression having corresponding
meanings, and words in the singular shall include the plural, and vice versa,
and words in the male person shall include the female person, and vice versa,
and either the male person or female person shall include the neuter and
corporation, and vice versa.
SECTION 2 - FORMATION AND PURPOSES
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2.1 Formation of Venture
Participant 1 and Participant 2 hereby associate themselves in a joint venture
having the scope and purposes, and upon the terms and conditions, as set forth
in this Agreement.
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2.2. Scope and Purposes
The scope and purposes of the Venture shall be:
a. exploring for and developing ores, minerals and other products from the
Property including opening, developing and operating mines on the Property;
b. processing (including beneficiating, leaching, concentrating, smelting,
refining or otherwise treating) ores, minerals or other products mined or
produced from the Property;
c. designing, engineering, constructing and operating Production Facilities to
mine and remove ores, mineral or other products from the Property, and
processing ores, minerals or other products mined or produced from the
Property;
d. marketing, selling and delivering Venture products;
e. performing any other operation or activity necessary, appropriate or
incidental to any of the foregoing; and
f. selling interests in all or part of the Property to third parties as may be
approved from time to time by the Management Committee.
2.3 Venture Limitations
Unless the Participants otherwise agree, the Venture shall be limited to its
stated scope and purposes and nothing in this Agreement shall be construed to
enlarge the stated scope and purposes of the Venture.
2.4 Effective Date
This Agreement shall become effective in regard to the Property subject to that
Earning Agreement on the date Participant 2 has earned the interest provided for
under the terms of that Earning Agreement.
2.5 Term
The term of this Agreement shall be for twenty years from the date of execution
of this Agreement and so long thereafter as the Venture holds any interest in
the Property, subject to the provisions of Section 9.
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SECTION 3 - CONTRIBUTIONS
----------------------------
3.1 Pro Rata Contributions
Each of the parties shall contribute their pro rata portion of Venture Costs as
determined by their Venture Share in order to allow for the development of the
Property and where a party fails to so contribute its Venture Shares shall be
adjusted in accordance with the provisions of section 9.
3.2 Contributions According to Budget
All contributions to the Venture shall be made in accordance with budgets
established pursuant to subsection 5.1.
3.3 Venture Share
Except as provided for in Section 9, the Venture Share of each party shall be
determined by the interest earned by Participant 2 under the terms of the
Earning Agreement.
SECTION 4 - OPERATOR
-----------------------
4.1 Operator
After the Effective Date, Participant 2 shall be the operator of the Venture
("Operator") subject to subsection 4.7.
4.2 Right of Supervision
The Operator shall have the sole right and responsibility to supervise and
manage the exploration and development of the Property and the engineering,
design and construction of the Production Facilities, and to supervise, manage
and conduct Activities of the Venture on behalf of the Participants in
accordance with this Agreement and, without limiting the generality of the
foregoing, the rights and responsibilities of the Operator shall include:
a. exploring for ores on the Property;
b. opening, developing and operating mines on the Property;
c. preparing Feasibility Reports or causing the same to be prepared;
d. designing, engineering and constructing Production Facilities in
accordance with an approved construction program;
e. processing ores or other minerals into Venture Products;
f. marketing, selling and delivering Venture Products;
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g. providing or acquiring all materials, supplies, machinery, equipment and
services required for the Venture, and disposing of the same when no longer
required or useful for the Venture;
h. hiring or transferring from its own personnel all executive and other
employees required for the Venture, which employees shall be employees of the
Operator or an Affiliate of the Operator, and not employees of the Venture;
i. performing all obligations of the Venture under any other agreement
binding upon the Venture;
j. performing all obligations necessary to maintain in good standing any
mineral property held by the Venture;
k. complying with laws applicable to the Venture;
l. securing licenses, permits and approvals for Activities of the Venture;
m. paying all taxes and other amounts payable by the Venture, except taxes
measured by or assessed upon net income or receipts;
n. preparing and filing all reports or notices required to be filed by the
Venture;
o. securing and maintaining liability and property insurance covering the
insurable risks of the Venture and the interests of the Participants with
coverage in the amounts to be determined by the Management Committee;
p. maintaining records of accounts for all transactions involving the
Venture;
q. preparing proposed programs and budgets for the Venture and such other
reports as may be required by this Agreement or reasonably requested by a
Participant; and
r. preparing and submitting to the Management Committee monthly progress
and financial reports, in the form and detail as from time to time reasonably
requested by the Management Committee.
4.3 Use of Agents
The rights and responsibilities or other Activities noted in subsection 2 may be
undertaken by the Operator itself or through such agents or independent
contractors as it may engage.
4.4 Budget Overruns
The following provisions shall apply to budget overruns:
a. the Operator shall undertake to carry out each annual program within the
limits of the annual budget and shall seek approval of the Management
Committee for any expenditure in excess of an annual budget as soon as
practicable, provided however that the
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Participants shall be liable for cost over-runs of up to 10% of the
budgeted amounts in proportion to their Venture Shares; and
b. in an emergency the Operator may make such expenditures as it deemed
necessary for the protection of life, limb or property and the Participants
shall be liable for such expenditures in proportion to their Venture
Shares.
4.5 Standard of Performance
The Operator shall have a fiduciary obligation to the Participants and shall
manage the operations of the Venture and perform all the responsibilities of the
Operator in a workmanlike and commercially reasonable manner, in accordance with
applicable geological, engineering, mining and processing methods and practices
and reasonably prudent business judgment.
4.6 Indemnity
The Operator shall indemnify and hold each Participant harmless from all losses,
claims, damages and liabilities arising out of any act or omission related to
the responsibilities of the Operator which is done or undertaken in bad faith or
which result from the willful misconduct or negligence of the Operator, and
notwithstanding the provisions of subsection 4.5, the Operator shall not
otherwise be responsible for any loss, claim, damage or liability related to the
Venture.
4.7 Removal or Resignation of Operator
The following provisions shall apply to the removal or resignation of the
Operator.
a. the Operator may resign effective at the earlier of six months after giving
notice to the Management Committee or the appointment of a new Operator
pursuant to the following paragraph b;
b. if an Operator who is not a Participant resigns or gives notice of its
intention to resign, the Management Committee shall promptly appoint a new
Operator, and, if the Management Committee is unable to agree upon a new
Operator within 30 days thereafter, the Participant who was not the
previous operator shall be the new Operator;
c. if an Operator who is a Participant gives notice of its intention to resign
and the Management Committee fails to agree upon a new Operator within six
months, the other Participant shall designate a new Operator;
d. if the Operator is not also a Participant, the Management Committee may
from time to time remove the Operator without cause and appoint a new
Operator;
e. if an Operator who is a Participant defaults in performance of its
obligations as Operator under this Agreement and fails to commence and
diligently pursue efforts to cure such default within 30 days after a
Participant gives the Operator notice of default, the other Participant
shall designate a new Operator, but, in the event of a dispute whether a
default
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exists, the time within which the Operator may cure a default shall not
commence until the existence of the default has been finally determined by
arbitration;
f. if an Operator who is a Participant withdraws from the Venture pursuant to
subjection 9.2 or commits a default specified in subsection 9.3 or if the
Operator fails or neglects to present a program or budget for a period of
two years following the completion of any previously approved program or
budget, the Operator shall be deemed to have resigned and the other
Participant shall designate a new Operator; and
g. upon the resignation or removal of the Operator, the outgoing Operator
shall turn over to the incoming Operator or to the Management Committee all
information, books, records and accounts of the Venture.
4.8 Relationship of Operator as Participant
An Operator who is a Participant shall not be deprived of any rights or relieved
of any obligations as a Participant by reason of being Operator of the Venture.
4.9 Management Committee
The following provisions shall apply to the management of the Venture:
a. except as provided in subsection 4.11, the policies, objectives and methods
of the Venture shall be solely determined by the Operator;
b. a committee (the "Management Committee") will be formed on the Effective
Date and shall be composed of one representative of each Participant and
shall make decisions on those matters specified in subsection 4.11;
c. each Participant shall notify the other Participant of the name of its
representative and the name of at least one alternate who may act in its
representative's absence, and the representative for each Participant, or
his alternate, shall have full power to bind such Participant;
d. meetings of the Management Committee shall be held at such intervals as may
be agreed upon by the Participants, but, in any event, shall be held not
less than once per year;
e. no business may be transacted by the Management Committee unless a quorum
of representatives is present and, for the purpose, a quorum shall be such
number of representatives of the Participants of the Management Committee
representing Participants holding, in the aggregate, greater than 50%
interest in the Venture;
f. in addition, the Operator may convene a meeting at any time it deems
appropriate and shall do so upon the request of a Participant's
representative on the Management Committee;
g. meetings of the Management Committee shall be held in Vancouver, British
Columbia, or at such other places as the Management Committee may from time
to time agree;
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h. at least 72 hours' notice of each meeting shall be given by the Operator to
the Management Committee accompanied by an agenda for the meeting, a copy
of any documents as to which action is to be taken and such supplemental
information as may be reasonably requested by either of the Participants,
but no notice of meeting shall be necessary when both members of the
Management Committee are present and agree upon the agenda;
i. in lieu of meetings, the Management Committee may convene telephone
conferences and the actions of the Management Committee so taken shall be
confirmed in writing and signed by the members of the Management Committee;
and
j. the Management Committee may, in lieu of deciding any matter at a meeting
or telephone conference, act by instrument in writing signed by each member
of the Management Committee.
4.10 Management Committee Decisions
Except as otherwise provided in this Agreement, action by the Management
Committee shall be taken on a majority vote of the members of the Management
Committee, each member being entitled to one vote for each one percent interest
of his Participant in the Venture.
4.11 Specific Items Requiring Approval
Approval of the Management Committee shall be required for the following:
a. approval of a budget or the making of any material revision to any Approved
Program and Budget;
b. material revision of any recommendations contained in any Engineering
Report;
c. material revision of any Construction Program;
d. any debt incurred on behalf of the Venture, as obligor, to either
Participant, the Operator or their Affiliates, in any amount, or to any
other person in an amount in excess of $10,000 outstanding at any one time
and any guarantee, directly or indirectly, by the Venture of any
obligations or undertaking of any other person;
e. any suspension or substantial curtailment of Venture Activities after
Production Facilities are deemed to be completed, except by reason of Force
Majeure or as otherwise required or permitted by this Agreement; f. any
settlement of any suit or claim involving the Venture for an amount in
excess of $10,000; and
g. any fee paid to the Operator for acting as Operator.
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4.12 Press Releases
All data, reports, records and other information relating to this Agreement and
the Participants' activities hereunder shall be treated by the Participants as
confidential, and while this Agreement is in effect, neither Participant shall,
without the prior approval of the other Participant, disclose to any other
entity any information concerning the results of exploration operations
hereunder or issue any press releases concerning this Agreement or its
performance, except as such disclosure may be deemed by a Participant to be
mandatory as a matter of law or regulations issued pursuant thereto.
SECTION 5 - BUDGETS, EXPENSES AND ACCOUNTS
------------------------------------------------
5.1 Programs and Budgets
The following provisions shall apply to the programs and budgets of the Venture:
a. the first Agreed Program and Budget for the Venture shall be determined
within 90 days following the Effective Date of this Agreement;
b. on or before January 1 of each successive year following the Effective
Date, the Operator shall prepare and submit to the Management Committee a
preliminary budget estimate and a proposed program for that calendar year
together with an initial report of the results of work performed on the
Property during the prior calendar year;
c. the Management Committee shall review the preliminary budget estimate and
proposed program and may either approve such program as an Approved Program
and Budget, or, no later than February 1 of that year, suggest alterations
thereto, in which event the Operator shall review the preliminary budget
and proposed program and submit to the Management Committee no later than
February 15 of that year a final proposed program and budget;
d. if agreement is not sooner reached by the Management Committee, each final
proposed program and budget submitted by the Operator shall be deemed to be
an Approved Program and Budget 30 days after submission; and
e. the Operator shall make all disbursements and carry on activities of the
Venture in substantial conformity with the Approved Program and Budget.
5.2 Costs
Subject to subsection 9.2, the Venture Costs shall be paid out of contributions
by the Participants and such contributions shall be allocated and charged to the
accounts of the Participants in accordance with their respective Venture Shares.
5.3 Cash Estimates and Advances
If the Approved Program and Budget does not include a schedule of cash calls,
the Operator shall submit to each Participant, on or before the tenth day
following each calendar quarter, an estimate
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of cash requirements for the next calendar quarter and such cash estimates
shall conform to the Approved Program and Budget established pursuant to
subsection 5.1, and shall set forth:
a. cash disbursements which the Operator expects to make during each month;
b. the extent, if any, to which such disbursements will be satisfied by cash
on hand, or cash to be received during such month otherwise than as
contributions from the Participants, after allowing for the maintenance of
a suitable cash balance; and
c. contributions, if any, which the Participants will be required to furnish.
5.4 Time of Contribution
Each Participant shall make the contribution to the Venture, if any, required
of it within 15 days after the receipt of each such cash estimate.
5.5 Records and Accounts
The Operator shall maintain accounts of contributions by Participants, revenues
of the Venture and costs and expenditures incurred by the Venture, and assets
and liabilities of the Venture, in accordance with generally accepted accounting
principles and such records and accounts shall be open at reasonable times for
inspection by Participants.
5.6 Capital Accounts of the Participants
The accounts of the Venture shall reflect the capital accounts of the
Participants, which shall be credited with the contributions to the Venture by
the Participants as provided in subsection 3.1, and the capital accounts of the
Participants shall be charged with distributions to the respective Participants
in excess of the then current net credit balances, if any, in the income
accounts of the Participants.
5.7 Income Accounts of the Participants
The accounts of the Venture shall reflect the income accounts of the respective
Venture Shares of the Participants in the Net Income of the Venture and the
income accounts of the Participants shall be:
a. charged with the respective Venture Shares of the Participants in the Net
Loss of the Venture, if any;
b. charged with distributions made to the Participants to the extent of the
then current net credit balances in such accounts and;
b. credited with the respective Venture Shares of the Participants in the net
gains from disposition of Venture assets held by the Venture or on its
behalf.
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5.8 Distribution of Income Accounts
Distribution of net credit balance, if any, in the income accounts of the
Participants (after providing for the maintenance of a suitable cash balance for
the Activities of the Venture) shall be made annually unless the Participants by
mutual agreement in writing accelerate or defer such distributions.
5.9 Recovery of Deficits
Net deficits in the income accounts of the Participants shall be closed into the
capital accounts of the respective Participants at the close of the fiscal year
of the Venture.
5.10 Sharing of Profits and Losses
Profits and losses of the Venture shall be shared by the Participants in
proportion to their respective Venture Shares.
5.11 Loan Accounts of the Participants
From time to time, one or more of the Participants may loan or cause to be
loaned to the Venture (but shall not be obligated to do so) such additional
funds as may be necessary or required for the Venture, and, the Operator is
hereby authorized, on behalf of the Venture, to execute and deliver to the
Participant making such loan customary evidences of indebtedness, security
agreements and collateral documentation, and, a loan account shall be maintained
for each Participant, and interest at generally prevailing rates shall be paid
on outstanding loans.
5.12 Annual Audit
The accounts of the Venture shall be audited annually by the firm auditing the
Operator's accounts, but the Management Committee may, in lieu of the annual
audit, request the Operator to conduct an internal audit of the accounts of the
Venture, and copies of the audit report of each such audit shall be furnished to
each Participant within ninety days after the end of each calendar year.
SECTION 6 - FEASIBILITY REPORT AND CONSTRUCTION
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6.1 Preparation of Feasibility Report
The following provisions shall apply to the preparation of Feasibility Reports:
a. if the Management Committee makes a decision to commence commercial
production from the Property, the Operator shall
i. determine when and if and by whom a Feasibility Report should be
prepared;
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ii. include the cost of preparation of a Feasibility Report as part of the
annual budgets for the periods during which it is being prepared;
b. the Report so prepared shall be submitted to the Management Committee;
c. all Feasibility Reports shall be kept confidential among the Participants
and shall not be disclosed to others except
i. as may be required in connection with the operations of the Venture
and financing sought by the Participants;
ii. as may be required to enable a Participant to make decisions regarding
the Venture; or
iii. as may be required by British Columbia regulatory bodies.
Within three months after a favourable Feasibility Report is submitted to the
Management Committee, either Participant may by notice to the other determine to
carry out the construction of Production Facilities in accordance with the
Feasibility Report.
6.2 Construction Program
If one or more Participants are determined to proceed to bring the Property into
commercial production, the Operator shall prepare or cause to be prepared a
program for approval by the Management Committee containing in reasonable detail
the ores to be mined by the Venture, the Production Facilities required, and the
capacities and estimated costs thereof, and if only one Participant has so
determined to proceed, the Participant not determining to proceed shall be
deemed to have withdrawn from participation in further contributions pursuant to
subsection 9.2 and such Participant's Venture Share shall be reduced as provided
for therein.
6.3 Completion of Production Facilities
Unless either Participant has previously withdrawn from participation in further
contributions pursuant to subsection 9.2, each Participant shall provide its
Venture Share of the funds necessary to construct and complete the Production
Facilities in accordance with the Construction Program, and the Production
Facilities will be deemed to be completed, for the purposes of this subsection,
paragraph 4.11.e. and subsection 6.4, at the end of the first calendar quarter
in which such facilities have produced Venture Products of marketable quality in
an amount equal to one-fourth of the annual capacity of the Production
Facilities specified in the Construction Program.
6.4 Limitation on Rights to Assign and Withdraw
Notwithstanding the provisions of Section 9, after establishment of the
Construction Program and until the Production Facilities are deemed to be
completed and payment of all debts incurred in connection with such construction
has been made, no Participant shall have the right to assign or otherwise
transfer all or any part of its interest in the Venture, or to withdraw from the
Venture or
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from further participation in the Venture, except with the prior
written consent of the other Participant and on the terms and conditions
attached to such consent.
SECTION 7 - DISPOSITION OF MINERAL PRODUCT
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7.1 Right to Venture Products in Kind
Each of the Participants shall have the right to take in kind and separately
dispose of its proportionate share of Venture Products, and, any extra
expenditures incurred by the reason of either Participant taking in kind and
separately disposing of its interest in the Venture Products shall be borne by
such party.
7.2 Sale of Venture Products
If a Participant fails to take its share of production in kind, the Operator
shall use reasonable efforts, subject to revocation at will by such Participant,
to sell to others such share at a price which is reasonable under the
circumstances prevailing at the time but any sales agreements for the sale of
such share of production are subject to the prior written approval of such
Participant, and all contracts of sale executed by the Operator for the share of
production owned by a Participant shall be for only such reasonable periods of
time as are consistent with the minimum needs of the industry under the
circumstances, but in no event longer than one year.
7.3 Crediting Sales Proceeds
Any credits, proceeds or other payments received by the Operator under such
sales contracts shall be distributed to the Participants within ten days
following receipt by the Operator.
SECTION 8 - RELATIONSHIP TO PARTIES
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8.1 Separate and Not Joint
The rights, duties, obligations and liabilities of the Participants shall be
separate as to the respective Venture Share of each Participant and not joint
nor joint and several and each Participant shall be responsible only for its
obligations herein set forth.
8.2 Joint Venture Only
It is not the intention of the Participants to create a mining, commercial or
other partnership or agency relationship between the Participants and this
Agreement shall not be construed so as to render the Participants liable as
partners or as creating a mining, commercial or other partnership.
8.3 Ownership of Property
The Participants shall hold and own their respective beneficial interests in the
Property as tenants in common and each Participant shall be responsible only for
its obligations as herein set forth and shall not in any way be obligated for
the debts or other obligations of any other Participant.
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8.4 No Partition
No Participant shall, during the term of this Agreement, exercise any right to
apply for partition of the Property or any other Joint Venture Assets or any
portion thereof or for sale thereof in lieu of partition.
8.5 Other Business Opportunities
Except as expressly provided in the Agreement, each Participant shall have the
right independently to engage in and receive full benefits from business
activities, whether or not competitive with the Venture, without consulting the
other, and the doctrines of "corporate opportunity" or "business opportunity"
shall not be applied to any other activity, venture or operation of either
Participant, and neither Participant shall have any obligation to the other with
respect to any opportunity to acquire any mineral property available to it
a. outside the boundaries of the Area of Interest at any time; or
b. within the boundaries of the Area of Interest after the termination of this
Agreement.
SECTION 9 - ASSIGNMENT , DILUTION AND TERMINATION
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9.1 Assignment
The following provisions shall apply to the assignment of any interest subject
to this Agreement:
a. neither Participant shall transfer any interest (including any transfer for
security) in this Agreement, its Venture Share or the Property after the
Effective Date without complying with Section 12 and without the prior
written consent of the other Participant, which consent shall not be
unreasonably withheld, except transfers to:
i. an Affiliate;
ii. a successor corporation by merger or consolidation; or
iii. a corporation to which a Participant has sold all or substantially all
of its assets; and
b. each transfer authorized by the foregoing paragraph shall be subject to the
following conditions:
i. if the transfer is by a Participant to an Affiliate, the transferring
Participant shall give the other Participant written commitment to
retain control of such Affiliate so long as this Agreement remains in
effect; and
ii. in all cases, the transferee shall give its written commitment to be
bound by this Agreement (including this Section).
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9.2 Dilution of Interest
The following provisions shall apply to the dilution of any interest subject to
this Agreement:
a. within 30 days of the fixing of an Approved Program and Budget by the
Management Committee, each Participant will give notice in writing to the
Operator whether it elects to fund its share of the Venture Cost in respect
of such Program;
b. failure to give notice within such period will be deemed to be an election
not to contribute to such Program;
c. after electing to fund a Program, each Participant will, within 30 days
after being requested in writing to do so by the Operator, pay such amount
of its share of the Venture Cost as the Operator may request in respect of
such Program, including Program cost overruns of up to 10% of the cost, but
the Operator will not request funds more than 30 days in advance.
d. If any Participant elects to contribute to an Approved Program and Budget
and gives notice to the Operator to that effect and thereafter fails to
contribute in accordance with a request for funds from the Operator, such
Participant will be deemed to be in default hereunder and will:
i. lose its right to contribute to the Approved Program and Budget and to
any subsequent Approved Program and Budget;
ii. lose its representation on the Management Committee; and
iii. lose and forfeit all of its Venture Share under this Agreement to the
other Participant;
e. the Operator shall not proceed with any Program which is not fully
subscribed and shall forthwith proceed with any Program which is fully
subscribed.
f. if any Participant elects, or is deemed to elect, not to fund an Approved
Program and Budget, the other Participant may give notice in writing to the
Operator that it will contribute all costs to be incurred under that
Approved Program and Budget and the Operator will proceed with that Program
and, thereafter, if the contributing Participant incurs at least 75% of the
cost to be incurred under the Approved Program and Budget, each
Participant's Venture Share will be adjusted to be equal to the product
obtained by multiplying 100% by a fraction of which the numerator is the
amount of such Participant's contributions and deemed contributions to
Venture Costs and the denominator of which is the amount of all
contributions and deemed contributions to the total Venture Cost by both
Participants;
g. as and after the Effective Date, the deemed contributions of each
Participant shall be the Expenditures incurred by Participant 2 under each
Earning Agreement pursuant to which it earned its interest in the Property
then subject to the Agreement; and
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h. if the percentage level of either Participants' Venture Share is reduced to
10% or less, such Participant's Venture Share will be deemed to be
forfeited to the other Participant and thereafter the Participant whose
interest has been forfeited (the "Non-participating Party") will be deemed
not to be a Participant and will:
i. lose its right to contribute to any Approved Program and Budget; and
ii. lose its representation on the Management Committee; and
iii. be deemed to hold only a Net Profits Interest in the Venture entitling
it to receive a 10% Net Profits Royalty calculable and payable in
accordance with Schedule "C".
9.3 Default
The following provisions shall apply to defaults under this Agreement:
a. each of the following shall be an act of default:
i. the filing by a Participant of a petition in bankruptcy or
reorganization;
ii. the failure of a Participant against whom a petition in bankruptcy or
reorganization is filed to secure dismissal of the same within 60
days;
iii. the making of an assignment for the benefit of creditors by a
Participant; and
iv. the failure of a Participant, prior to a withdrawal from participation
pursuant to subsection 9.2, for a period of 30 days after a request in
writing from the Operator specifically referring to this Section, to
make contributions required by an Approved Program and Budget;
b. the Participant in default shall be deemed to have transferred to the other
Participant, without cost, all of its rights and interests in the Property,
Area of Interest and this Agreement, and the defaulting Participant shall
have no further interest in the Venture; and
c. upon a default pursuant to paragraph a. above, the defaulting Participant
shall remain liable for its Venture Share of all liabilities and
obligations of the Venture incurred prior to the effective date of such
default but shall have no liability in respect of any such liabilities and
obligations of the Venture incurred thereafter.
9.4 Instruments of Conveyance
Upon a withdrawal pursuant to subsection 9.2 or a default pursuant to subsection
9.3, the withdrawing or defaulting Participant shall execute and deliver such
deeds, assignments and other instruments of conveyance as may be required to
vest in the other Participant all rights and interests in the Venture, the
assets of the Venture, and in this Agreement.
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9.5 Effect of Termination
The following provisions shall apply to the termination of this Agreement:
a. upon the termination of the Agreement for any reason other than withdrawal
pursuant to subsection 9.2 or default pursuant to subsection 9.3, all
rights and obligations of the Participants under this Agreement shall
cease, except the obligation to settle accounts for liabilities and
obligations incurred or accruing prior to termination and except any
obligation which in accordance with this Agreement survives termination,
and each Participant shall be entitled to proceed for its own account on
the Property and shall be entitled to use all information and data
developed while this Agreement was in force;
b. after all liabilities of the Venture have been satisfied, including
liabilities to the Participants in respect of advances, loans, capital and
profits, all remaining assets of the Venture shall be owned by the
Participants as tenants in common in proportion to their respective Venture
Shares;
c. subject to restrictions on assignment and transfer, each Participant and
the Operator shall execute and deliver such deeds, assignments or other
instruments of conveyance as may be required to vest in the Participants
their respective interests in the assets of the Venture and if such
assignment or transfer is restricted, the Participant holding legal title
to such property shall hold the same for the benefit of the Participant
equitably entitled thereto; and
d. upon the termination of this Agreement by reason or withdrawal pursuant to
subsection 9.2 or default pursuant to subsection 9.3, the withdrawing or
defaulting party shall not conduct any operations within the Area of
Interest for a period of two years after the date of termination.
SECTION 10 - PROPERTY
------------------------
10.1 Maintenance of Mining Property
The Operator shall pay all taxes, royalties, rentals, property and option
payments and other amounts required to be paid with respect to the Property held
by the Venture and shall perform all other duties required to maintain any
mineral claims, leases or other agreements relating to the Property held by the
Venture in full force and effect, and all payments made and expenses incurred in
maintaining the Property held by the Venture shall be paid out of funds
contributed by the Participants pursuant to section 3.
10.2 Loss of Property
If any part of the Property held by the Venture is lost through failure to
perform any obligation, including assessment work, or failure to make any
rental, royalty or other payment, or by expiration in accordance with the terms
of any lease or other agreement, such loss shall be a joint loss, and the
Operator shall not be liable therefore unless such loss is caused by the
Operator's negligence, willful misconduct or bad faith.
Page 17
SECTION 11 - RIGHT OF FIRST REFUSAL ON TRANSFERS
--------------------------------------------------------
11.1 Receipt of Offer
If a Participant should receive a bona fide offer from an independent third
party (the "Proposed Purchaser") dealing at arm's length with the Participant,
to purchase all or part of the interest of that Participant in the Property,
which offer it desires to accept, or if a Participant intends to sell or
otherwise dispose of all or substantially all of its interest in the Property,
the Participant (the "Selling Participant") shall first offer (the "Offer") such
interest in writing to the other Participant (the "Remaining Participant") upon
terms no less favourable than those offered by the Proposed Purchaser or
intended to be offered by the Selling Participant, as the case may be.
11.2 Contents of Offer
The Offer shall specify the price and terms and conditions of such sale, the
name of the Proposed Purchaser (which term shall, in the case of an intended
offer by the Selling Participant, mean the person or persons to whom the Selling
Participant intends to offer its interest) and, if the offer received by the
Selling Participant from the Proposed Purchaser provides for any consideration
payable to the Selling Participant otherwise than in cash, the Offer shall
include the Selling Participant's good faith estimate of the cash equivalent of
the non-cash consideration.
11.3 Acceptance of Offer
If, within a period of 60 days of the receipt of an Offer, the Remaining
Participant notifies the Selling Participant in writing that it will accept the
same, the Selling Participant shall be bound to sell to the Remaining
Participant the interest offered (subject as hereinafter provided with respect
to price) on the terms and conditions of the Offer.
11.4 Price Adjustment
If the Offer so accepted by the Remaining Participant contains the good faith
estimate of the Selling Participant of the cash equivalent consideration as
aforesaid, and if the Remaining Participant disagrees with the Selling
Participant's best estimate, the Remaining Participant shall so notify the
Selling Participant at the time of acceptance and the Remaining Participant
shall, in such notice, specify what it considers in good faith, the fair cash
equivalent to be and the resulting total purchase price and if the Remaining
Participant so notifies the Selling Participant, the acceptance by the Remaining
Participant shall be effective and binding upon the Selling Participant and the
Remaining Participant, and the cash equivalent of any such non-cash
consideration shall be determined by binding arbitration in the manner provided
under this Agreement and shall be payable by the Remaining Participant within 60
days following the determination thereof by arbitration
11.5 Transfer
Any payment by the Remaining Participant hereunder shall be made against receipt
of an absolute transfer of clear and unencumbered title to the interest of the
Selling Participant being sold.
Page 18
11.6 Failure to Accept Offer
If the Remaining Participant fails to notify the Selling Participant before the
expiration of the time limited therefor that he will purchase any interest
offered, the Selling Participant may, subject to subsection 9.1, sell and
transfer such interest to the Proposed Purchaser at the price and on the terms
and conditions specified in the Offer for a period of 60 days, provided that the
terms of this Section 12 shall again apply to such interest if the sale of the
Proposed Purchaser is not completed within the said 60 days, but, any sale
hereunder shall be conditional upon the Proposed Purchaser delivering a written
undertaking to the Remaining Participant, in form and substance satisfactory to
its counsel, to be bound by the terms and conditions of this Agreement.
11.7 Condition Precedent
Any sale hereunder shall be conditional upon the Proposed Purchaser delivering a
written undertaking to the Remaining Participant, in form and substance
satisfactory to its counsel, to be bound by the terms and conditions of this
Joint Venture.
11.8 No Other Transfers
Except as provided in this section or otherwise in this Agreement, neither party
may transfer an interest in the Property or this Agreement without the written
consent of the other party.
SECTION 12 - ARBITRATION
---------------------------
12.1 Settlement of Disputes
If any difference or dispute shall arise between any of the Participants in
respect to any matter where it is provided in any other part of this Agreement
that such dispute or such matter shall be arbitrated or submitted to
arbitration, or in respect of any other matter arising under this Agreement,
such dispute shall be submitted to arbitration under and pursuant to the
Commercial Arbitration Act of British Columbia, and such dispute shall be
referred by the Participants affected thereby to an arbitrator who shall be
agreed upon by such Participant and, failing such agreement within four weeks
after notice by any such Participant then an arbitrator may be named as provided
in the Commercial Arbitration Act.
12.2 Place of Arbitration
The arbitrator so appointed shall sit in Vancouver, British Columbia, unless
there is unanimous agreement of such Participants that he shall sit at another
place, and shall hear and dispose of such dispute in such manner as the
arbitrator, in his discretion, shall determine, but in so doing shall be
required to receive the submissions of such Participants.
12.3 Decision of Arbitrator Binding
The decision of the arbitrator shall be rendered in writing with all reasonable
speed and shall be final and binding upon such Participants involved.
Page 19
12.4 Costs of Arbitration
If the parties to the arbitration cannot agree as to the respective shares of
the costs of arbitration to be borne by them, the arbitrator shall determine
what part of the costs and expenses incurred in any such proceeding shall be
borne by each of them.
SECTION 13 - GENERAL PROVISIONS
-----------------------------------
13.1 Information and Reports
The Operator shall
a. make available to the Participants all drill logs, assay records, maps,
reports and other information and data relating to the Venture; and
b. furnish the Participants with a quarterly summary of Venture Activities.
13.2 Inspection
Each Participant, by its duly authorized representatives and at its own risk and
expense, may enter upon the Property, held by the Venture and the workings
thereon at all reasonable times for the purpose of inspecting the same.
13.3 Information
All data and information regarding the Property coming into the possession of
any Participant under this Agreement shall be disclosed to the Operator.
13.4 Applicable Law
This Agreement shall be interpreted and construed in accordance with the laws in
force from time to time in British Columbia.
13.5 Force Majeure
If the Operator shall be prevented by Force Majeure from timely performance of
any of its obligations hereunder
a. the failure of performance shall be excused and the period for performance
shall be extended for an additional period equal to the duration of the
Force Majeure, and, upon the occurrence and upon the termination of any
Force Majeure, the Operator shall promptly notify the Participants; and
b. the Operator shall use reasonable diligence to remedy a Force Majeure, but
shall not be required to contest the validity of any law or regulation or
any action or inaction of civil or military authority.
Page 20
13.6 Modification
No modification, variation, amendment or termination of this Agreement shall be
effective unless embodied in writing signed by both Participants.
13.7 Waiver
No waiver of any default under this Agreement shall be effective unless embodied
in writing signed by the Participant against whom such waiver is claimed, and no
waiver of any breach or default shall be deemed to be a waiver of any other or
subsequent breach or default.
13.8 Partial Invalidity
If any provision of this Agreement is determined to be invalid, such invalidity
shall not affect the enforceability of any other provision of this Agreement.
13.9 Entire Agreement
This Agreement sets forth the entire agreement of the Participants with respect
to the Venture; there are not other conditions, representations, warranties or
understandings.
13.10 Gender
Wherever the singular is used in this Agreement, the same shall be construed to
mean the plural and wherever the neuter gender is used, the same shall be
construed to mean the masculine or feminine or body corporate or vice versa
wherever the context of this Agreement so requires.
13.11 Independent Counsel
Each of the parties acknowledges having obtained independent legal advice from
its own solicitor with respect to this Agreement prior to its execution and
further acknowledges that it understands the terms, and its rights and
obligations under this Agreement.
13.12 Notices
The following provisions shall apply to the giving notices:
a. all notices and other communications to the Operator or to the Participants
shall be in writing and delivered personally or sent by registered or
certified mail, return receipt requested, addressed as hereinafter set
forth;
b. notices delivered personally shall be deemed to be given at the time of
such delivery, provided that a signed receipt is obtained;
c. notices mailed as provided above shall be deemed given three days after the
date of mailing; and
Page 21
d. until a change of address is so communicated, all notices to the respective
Participants shall be addressed as follows:
GLOBE RESOURCES INC.
0000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
and to:
GETTY COPPER CORP.
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
all with a copy to:
WERBES XXXXXX AND COMPANY
Barristers & Solicitors
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
13.13 Conditions Precedent
This Agreement is subject to notice of the Earning Agreements being accepted for
filing by the Vancouver Stock Exchange on or before December 31, 1996, and,
failing the same, either party may terminate this Agreement by notice in writing
to the other.
IN WITNESS WHEREOF the parties hereto have hereunto affixed their hands and
seals as of the day and year first above written.
THE CORPORATE SEAL of )
GLOBE RESOURCES INC. was )
hereunto affixed in the )
presence of: )
) (c/s)
/s/unknown )
___________________________ )
)
)
___________________________ )
)
THE CORPORATE SEAL of )
GETTY COPPER CORP. was )
hereunto affixed in the )
Page 22
presence of: )
) (c/s)
/s/unknown )
___________________________ )
)
)
___________________________ )
)
SCHEDULE "A" - PROPERTY
Kamloops Mining Division, British Columbia
Claim Name Lot/Tenure Number
----------- ------------------
Xxxxxxxxx 000X
Xxxxxxxx 000X
Imperial 000X
Xxxxxxxxxxx 000X
Xxxxxxxx 000X
Xxxxxxxxx 000X
Xxxxxxxx Fraction 200A
Glenora 4467
Highland No. 2 4468
SCHEDULE "B" - ACCOUNTING PROCEDURE
1. GENERAL PROVISIONS
-------------------
1.1 The purpose of this Accounting Memorandum is to establish the basic methods
for determining Venture Costs which shall be fair and equitable as between
the Participants.
1.2 It is the understanding of the Participants that, except in the case of a
management fee specifically designated as such, a Participant shall neither
gain nor lose by reason of its acting as Operator.
1.3 This Accounting Memorandum shall be reviewed annually by the Management
Committee, which may make such amendments as may be necessary or desirable.
1.4 In the event of any inconsistency between this Accounting Procedure and the
Agreement to which it is appended or any Approved Program and Budget, the
provisions of the Agreement or of the Approved Program and Budget, as the
case may be, shall be controlling.
1.5 The terms used herein shall have the same meaning as in the Agreement to
which this Accounting Procedure is attached.
2. EXPLORATION, DEVELOPMENT,
CONSTRUCTION, MINING AND OPERATING CHARGES
----------------------------------------------
Subject to limitations herein prescribed, the Operator shall charge the joint
account with the following items:
a. Rents and Royalties
rentals, royalties, bonuses, and other payments necessary to acquire and
maintain title to the Property or any interest therein;
b. Labour
salaries and wages of employees directly engaged in exploration,
development, construction, maintenance, mining and operating, including
salaries or wages paid to the on-site project manager, technical employees
(geologists, geophysicits, geochemists, draftsmen, engineers, etc.) mine,
mill and support employees (construction supervisors, mine and mill
supervisors, foremen and hourly employees, purchasing personnel, office
administration, accounting, inventory control etc., employees) and other
employees who are temporarily assigned to and directly employed by the
Venture;
c. Labour Benefits
Costs to the Operator of holiday, vacation, sickness and disability
benefits, and other customary allowances applicable to the salaries and
wages chargeable under paragraph b., provided these costs are charged by
percentage assessment on the amount of salaries and
Page 2
wages chargeable under paragraph b. other than overtime, bonuses, or
incentives, and the rate is based on the cost experience of the Operator.
d. Government Assessments
costs of expenditures or contributions made pursuant to assessments imposed
by governmental authority which are applicable to the labour cost to the
Operator of salaries and wages as provided under paragraph b.;
e. Employee Benefits
the current cost to the Operator of established plans for employees' group
life insurance, hospitalization, pension, retirement, stock purchase,
bonus, and other benefit plans customary in the industry, provided these
costs shall be charged by percentage assessment on the amount of salaries
and wages in the same manner as provided in paragraph b. above;
f. Material
material, equipment and supplies purchased or furnished by the Operator;
g. Transportation
transportation of employees, equipment, material and supplies necessary for
exploration, development, construction, maintenance, mining and operating,
subject to the following limitations:
i. if material is moved from the Operator's warehouse or other
properties, no charge shall be made for a distance greater than the
distance from the nearest reliable supply store or railway receiving
point where such material is available, except by special agreement
with the Participants;
ii. if surplus material is moved to the Operator's warehouse or other
storage point, no charge shall be made for a distance greater than the
distance from the nearest reliable supply store or railway receiving
point, except by special agreement with the Participants, and no
charge shall be made for moving material to other properties belonging
to the Operator, except by special agreement with the Participants;
h. Services
the cost of contract services and utilities procured from outside sources
other than services covered by paragraphs j. and n. provided that, if
contract services are performed by an affiliate of the Operator, the cost
charged shall not be greater than that for which comparable services and
utilities are available in the open market from sources not affiliated with
the Operator;
Page 3
i. Damages and Losses to Property and Equipment
all costs or expenses necessary to replace or repair damages or losses
incurred by fire, flood, storm, theft, accident, or any other cause not
controllable by the Operator through the exercise of reasonable diligence,
provided the Operator has furnished the Participants with written notice of
damages or losses incurred as soon as practicable after report of the same
has been received by the Operator;
j. Legal Expense
legal expenses, including all costs and expenses of securing legal advice
and services, negotiation on behalf of the Venture with third parties and
governmental agencies, processing applications for permits, licenses,
leases or other authorization from government agencies, handling,
investigating and settling litigation or claims arising by reason of
Activities or necessary to protect or recover property, including, but not
limited to, attorneys' fees, court costs, cost of investigation or
procuring evidence and amounts paid in settlement or satisfaction of any
such litigation or claims, but no charge shall be made for the services of
the legal staff of the Operator or other regularly employed personnel (such
services being considered to be Administrative Overhead under this
section), except by agreement with the Participants;
k. Taxes
all taxes of every kind and nature assessed or levied upon or in connection
with the properties held by the Venture, the production therefrom or the
operation thereof which have been paid by the Operator;
l. Insurance Premiums
premiums paid for insurance for the protection of the parties, although the
Operator may, in lieu of carrying insurance, elect with the consent of the
other participants to the Venture, which consent may not be unreasonably
withheld, to be self-insured as to such insurance coverage and in that
event, the Operator may charge an amount equal to the premiums which the
Operator would have had to pay in order to obtain insurance and will bear,
without charge, any liabilities which would have been fully compensated by
such insurance had the Operator carried the same;
m. District, Field, and Camp Expense
(Field Supervision and Camp Expenses)
a pro-rata portion of the salaries and expenses of the district, field and
camp exploration of the Operator or production management and other
employees serving the Venture and other properties of the Operator in the
same area, whose time is not allocated directly to the Venture, and a
pro-rata portion of the cost of maintaining and operating an exploration or
production district office or field office located at or near the Property
held by the Venture (or a comparable office if location changed), and
necessary sub-offices (if any), maintained for the convenience of the
above-described office, and all necessary camps,
Page 4
including housing facilities for employees if required, used in the conduct
of the operations; the expense of, less any revenue from, these facilities
should be inclusive of depreciation or a fair monthly rental in lieu of
depreciation on the investment; and such charges shall be apportioned to
all properties served on some equitable basis consistent with the
Operator's accounting practice;
n. Administrative Overhead
the Operator may charge each month, as its indirect and overhead expenses,
a sum which is established by the Management Committee from time to time,
and the amount upon which the indirect and overhead expenses shall be based
shall not include lease acquisition costs, salvage credits, legal expenses
or depreciation, depletion or amortization;
n. Other Expenditures
any expenditures, other than expenditures which are covered and dealt with
by the foregoing provisions, incurred by the Operator pursuant to approved
programs and budgets or pursuant to the provisions of the Agreement to
which this Account Memorandum is attached.
3. REPRESENTATIVE LIST OF ITEMS
TO BE INCLUDED IN ADMINISTRATIVE OVERHEAD
----------------------------------------------
3.1 The following is a representative list of items comprising the expenses
of the Operator expressly covered by the indirect and overhead expense:
a. services performed by corporate management, supervisory, administrative and
clerical personnel, including services rendered by the officers and
directors of the Operator in connection with exploration;
b. corporate accounting and keeping of records in accordance with the federal
and state requirements and the provisions of the Agreement to which this
Accounting Memorandum is attached, and preparation of reports and monthly
xxxxxxxx;
c. supervision and handling of tax matters, the filing of renditions, handling
of adjustments, settlements, payments, protests and any other matters
relating to taxes, except outside professional fees which would be a direct
charge to the Venture;
d. routine legal services provided by the legal staff of the Operator;
e. routine land services by the land staff of the Operator except outside
professional fees, which would be a direct charge to the Venture; and
f. the corporate office expenses of the Operator such as rent, telephone
service, stationery, office supplies, etc.
Page 5
3.2 If, at the end of any calendar year, it appears to any Participant that
such charge is insufficient or excessive, the Participant shall give written
notice to the other Participants and thereupon the Participants shall mutually
agree upon an appropriate charge for subsequent months.
4. PURCHASING OF MATERIAL
------------------------
So far as it is reasonably practical and consistent with efficient and
economical operation, the Operator shall purchase or transfer only such material
as may be required for immediate use, and shall avoid the accumulation of
surplus stocks.
SCHEDULE "C" - NET PROFITS ROYALTY
1. NET PROFITS
------------
1.1 If the Venture commences Commercial Production from the Property, the
Non-participating Party shall be entitled to receive, and the Venture shall pay
to the Non-participating Party, a royalty (the "Net Profits Royalty") equal to
10% of Net Profits.
1.2 The Venture shall be under no obligation whatever to place the Property
into Commercial Production and in the event it is placed into Commercial
Production, the Venture shall have the right at any time to curtail or suspend
such production as it, in its absolute discretion, may determine.
1.3 Net Profits payable to the Non-participating Party hereunder shall be
paid within 180 days after the end of each fiscal year of the Venture, and,
within 180 days after the end of each fiscal year during which the Property was
in Commercial Production, the records relating to the calculation of Net Profits
during that fiscal year shall be audited and any adjustments shall be made
forthwith and the audited statements shall be delivered to the Non-participating
Party who shall have 60 days after receipt of such statements to question in
writing their accuracy and failing such question, the statements shall be deemed
correct.
1.4 The Non-participating Party or its representatives, duly appointed in
writing, shall have the right at all reasonable times, upon written request, to
inspect those books and financial records of the Venture as are relevant to the
determination of Net Profits, and at his own expense, to make copies thereof.
2. DEFINITIONS
------------------
For the purpose of calculating the Net Profits Royalty payable under the
Agreement to which this Schedule "C" is attached, the definitions therein shall
apply, and, in addition, the following definitions shall also apply:
a. "Commercial Production" means Operating the Property as a Mine but shall
not include milling of ores for the purpose of testing or milling by a
pilot plant or milling during an initial tune-up period of a plant.
Commercial Production shall be deemed to have commenced:
i. if a mill is located on the Property, on the last day of a period 40
consecutive days in which, for not less than 30 days, Mineral Products
have been processed from the Property at not less than 60% of the
mill's rated capacity; or
ii. if no mill is located on the Property, the last day of the first
period 30 consecutive days during which ore has been shipped from the
Property for the purpose of earning revenues;
b. "Expenditures" means all cash, expenses, obligations and liabilities of
whatever kind or nature spent or incurred directly or indirectly by the
Venture, in excess of the contributions of the Non-participating Party to
the Venture, up to and including the date of
Page 2
commencement of Commercial Production in connection with the exploration
and development of the Property, the acquisition of Other Tenements, and
the equipping of the Property for Commercial Production, including without
limiting the generality of the foregoing, monies expended in maintaining
the Property in good standing by doing and filing assessment work, in doing
geophysical, geochemical and geological surveys, drilling, assaying and
metallurgical testing, in paying the fees, wages, salaries, travelling
expenses, and fringe benefits (whether or not required by law) of all
persons engaged in work in respect to and for the benefit of the Property,
plus an amount not to exceed 15% of such Operating costs and Expenditures
as compensation for overhead and other similar expenses which the Venture
will incur but which cannot be specifically allocated, and sufficient
initial working capital to finance the first three months of production as
in the opinion of the Venture is required for the Operation of the Property
as a Mine;
c. "Gross Proceeds" means, for any period, the aggregate gross revenues
received by the Venture during the period from the sale of Mineral Products
derived from Operating the Property as a Mine and any cash proceeds
received during the period from the disposition of any capital assets the
cost of which has been treated as an Expenditure or a Post production
Capital Expense.
d. "Mineral Products" means the products derived from Operating the Property
as a Mine;
e. "Mining Facilities" means all mines and plants, including without
limitation, all pits, shafts, haulageways, and other underground workings,
and all buildings, plants, facilities and other structures, fixtures and
improvements, and all other property, whether fixed or moveable, as the
same may exist at any time in, on or outside the Property and relating to
the Operation of the Property as a Mine;
f. "Net Profits" means for any period the excess, if any, of Gross Proceeds
for the period over the aggregate of:
i. Operating Costs for the period;
ii. Operating Costs for all previous periods to the extent they have
exceeded Gross Proceeds from such periods and have not previously been
deducted in computing Net Profits; and
iii. such amount of cash as is required for the ensuing three month period
for working capital as, in the opinion of the Venture, is required for
the Operation of the Property as a Mine, provided that this amount
shall be added to Gross Proceeds when calculating Net Profits for the
next ensuing period;
after deduction of all sums spent on the Property constituting
Expenditures;
g. "Operating Costs" means, for the period all costs, expenses, obligations,
liabilities and charges of whatsoever kind and nature incurred or
chargeable, directly or indirectly by the Venture, after commencement of
Commercial Production in connection with the Operation of the Property as a
Mine during the period, which costs, expenses, obligations,
Page 3
liabilities and charges shall include, without limiting the generality of
the foregoing, the following:
i. all costs of or related the Operation of the Property as a Mine;
ii. all costs of or related to the processing and marketing of Mineral
Products including, without limitation, transportation, storage,
commissions and/or discounts;
iii. all costs of acquiring Other Tenements and maintaining in good
standing or renewing from time to time the Property including the
payment of all royalties and taxes of any nature whatsoever in
connection therewith;
iv. all costs of or related to providing and/or operating employee
facilities, including housing;
v. all duties, charges, levies, royalties, taxes (excluding taxes levied
under the Income Tax Act, Canada, the Income Tax Act, British
Columbia, and any other act which taxes the income of the parties
hereto individually) and other payments imposed upon or in connection
with Operating the Property as a Mine by any government or
municipality or department or agency thereof;
vi. all actual costs of the Venture for providing technical, management
and/or supervisory services (the intent being that the Venture will
neither realize a profit nor suffer a loss as a result of its
management activity);
vii. all costs of consulting legal, accounting, insurance and other
services;
viii. all interest expenditures incurred after commencement of Commercial
Production;
ix. all costs of construction, equipment, mine development, after
commencement of Commercial Production;
x. all costs for pollution control, reclamation or any other similar
costs incurred or to be incurred by the Venture;
xi. a charge for the Expenditures and Postproduction Capital Expenses of
the Venture; and
xii. any costs or expenses incurred or to be incurred relating to the
termination of the Operation of the Property as a Mine;
Except where specific provision is made otherwise, all Operating Costs
shall be determined in accordance with generally accepted accounting
principles consistently applied;
Page 4
h. "Operating the Property as a Mine/Operation of the Property as a Mine"
means the extraction or production of minerals or metals from the Property,
the milling, smelting, refining, beneficiating, and other processing of
such minerals and metals and the marketing of Mineral Products;
i. "Other Tenements" means all surface rights of and to any lands within or
outside the Claims including surface rights held in fee or under lease,
license, easement, right of way or other rights of any kind (and all
renewals, extensions and amendments thereof) acquired by or on behalf of
the Venture with respect to the Property; and
i. "Postproduction Capital Expenditures" means all such costs expended or
incurred by the Venture after commencement of Commercial Production in
connection with a major improvement, expansion, modernization or
replacement of the Mining Facilities.
SCHEDULE "D" - DEFINITIONS
For the purposes of the Agreement to which this Schedule "D" is annexed, the
following words, phrases and definitions shall have the following meanings and
all definitions in Schedule "C" shall also be imported herein:
a. "Activities" means all activities and operations within the scope and
purpose of the Venture as defined in section 2;
b. "Affiliate" means any partnership, joint venture, corporation or other
entity which, directly or indirectly, controls, is controlled by, or is
under common control with, a Participant and, for the purposes hereof,
"control" means possession, directly or indirectly, of the power to direct
or cause direction of the management and policies of the entity through
ownership or voting securities, contract or otherwise;
c. "Approved Program and Budget" means the program and budget approved from
time to time by the Management Committee pursuant to subsection 5.1;
d. "Area of Interest" has the meaning assigned in subsection 11.1;
e. "Construction Program" means the program described in subsection 6.2;
f. "Earning Agreement" means the Agreement entered into by and between
Participant 1 and Participant 2 dated October 15, 1996, concerning the
grant of an option to Participant 2 to earn an interest in a part of the
Property and which provides for the preparation and conclusion of this
Agreement;
g. "Effective Date" shall be as defined in subsection 2.4;
h. "Feasibility Report" in relation to any proposed Operation of the Property
as Mine, means a study of all aspects of the proposed Operation of the
Property as a Mine prepared by a reputable mining engineer agreed by the
parties in respect of the project in a form generally prepared in
accordance with industry practice which:
i. states the proven and probable mineable reserves of ore and the grades
thereof;
ii. contains estimates of both capital costs and operating costs likely to
be incurred in establishing and conducting Operation of the Property
as a Mine, including costs to be incurred in mine development,
pre-production and the construction or acquisition of plant facilities
and infrastructure;
iii. analyses how to proceed with Operating the Property as a Mine to
economically and commercially extract minerals;
iv. includes reference to relevant marketing and financial aspects;
v. states whether or not establishment of the proposed Operation of the
Property as a Mine is commercially viable; and
Page 2
vi. is of such detail and scope as to be acceptable to a bank or other
financial institution for the purpose of deciding whether or not to
provide financing for the establishment and carrying out of the
proposed Operation of the Property as a Mine;
i. "Force Majeure" means any cause beyond the Operator's reasonable control,
including:
i. law or regulation action or inaction of civil or military authority;
ii. inability to obtain any license, permit or other authorization that
may be required to conduct operations upon the Property;
iii. unusually severe weather;
iv. mining casualty;
v. unavoidable mill shutdown;
vi. damage to or destruction of mine plant or facility;
vii. fire;
viii. explosion;
ix. flood;
x. insurrection;
xi. riot;
xii. labor disputes;
xiii. inability after diligent effort to obtain workmen or material;
xiv. delay in transportation; and
xv. acts of God.
j. "Management Committee" is the committee comprised of representatives of the
Participants as described in subsection 4.9;
k. "Net Income (or Loss) of the Venture" means the net income or loss, as the
case may be, of the Venture as shown by its accounts after deduction of
accrued expenses, depreciation, costs depletion and appropriate charges to
reserves in accordance wit generally accepted accounting principles
consistently applied, but without regard to accrual or deduction for income
taxes;
Page 3
l. "Net Profits Interest" means the interest of a withdrawing Participant
determined as specified in subsection 9.2;
m. "Participants" means Participant 1 and Participant 2 and their respective
successors and permitted assigns;
n. "Production Facilities" means mines, road, structures, buildings,
machinery, equipment and other facilities necessary to mine, remove and
process ores;
o. "Property" means the mineral claims and agreements relating thereto which
are described in Schedule "A" hereto attached as such may become subject to
this Agreement from time to time by operation of the provisions of the
Earning Agreement pursuant to which Participant 2 earned an interest in
such Property, and includes any additional mineral interests jointly held
by Participant 1 and Participant 2 in the Area of Interest;
p. "Venture" means the joint venture formed by this Agreement;
q. "Venture Costs" or "costs" means all costs, expenses, liabilities, charges
and property payments incurred or accrued on or off the Property within the
scope of the Venture, including the payment of royalties, determined in
accordance with the generally accepted accounting principles consistently
applied and in conformity with, but not limited to, the Accounting
Procedure attached hereto as Schedule "B";
r. "Venture Products" means all ores, minerals, concentrates or other products
mined or produced from the Property; and
s. "Venture Share" means the interest of a Participant in the Venture
determined in accordance with the Earning Agreement unless reduced by the
operation of subsection 9.2 and, for greater certainty, the parties agree
that at the commencement of the Effective Date, each party will hold a 50%
interest in the Venture.
