EXHIBIT 4.8
Bachelor Lake Joint Venture Agreement
by and between
Halo Resources Ltd.
and
Metanor Resources Inc.
Dated
September 8, 2005
JOINT VENTURE AGREEMENT
made between
HALO RESOURCES LTD.
and
RESSOURCES METANOR INC./METANOR RESOURCES INC.
Dated September 8, 2005.
TABLE OF CONTENTS
DEFINITIONS....................................................................1
DEFINITIONS.................................................................1
GENDER AND EXTENDED MEANINGS................................................7
CURRENCY....................................................................7
BUSINESS DAYS...............................................................7
PERIOD OF TIME/TIME OF ESSENCE..............................................8
SECTION HEADINGS............................................................8
GOVERNING LAW...............................................................8
FURTHER ASSURANCES..........................................................8
SCHEDULES......................................................................8
SCHEDULES...................................................................8
REPRESENTATIONS AND WARRANTIES.................................................8
REPRESENTATION AND WARRANTIES OF THE PARTIES................................8
COMMENCEMENT OF AGREEMENT......................................................9
EFFECTIVE DATE..............................................................9
JOINT VENTURE.................................................................10
PURPOSES...................................................................10
AUTHORITY..................................................................10
CONTINUING INTERESTS.......................................................10
TERM.......................................................................10
FISCAL YEAR................................................................10
RELATIONSHIP..................................................................11
NO PARTNERSHIP.............................................................11
OTHER BUSINESS OPPORTUNITIES...............................................11
RELATIONSHIP OF PARTICIPANTS...............................................11
RESPONSIBILITY FOR EXPENDITURES............................................11
INTERESTS OF PARTICIPANTS.....................................................12
INITIAL CONTRIBUTIONS......................................................12
CASH CONTRIBUTIONS.........................................................12
CHANGES IN PARTICIPATING INTERESTS.........................................12
VOLUNTARY REDUCTION IN PARTICIPATION.......................................12
FAILURE TO MEET CASH CALLS.................................................13
ELIMINATION OF MINORITY INTEREST...........................................13
CONTINUING LIABILITIES UPON ADJUSTMENT OF PARTICIPATING INTERESTS..........13
MANAGEMENT COMMITTEE..........................................................14
ORGANIZATION AND COMPOSITION...............................................14
DECISIONS..................................................................14
MEETING AND QUORUM.........................................................14
ACTION WITHOUT MEETING.....................................................15
MATTERS REQUIRING APPROVAL.................................................15
MATTERS REQUIRING UNANIMOUS APPROVAL.......................................15
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DECISIONS BINDING..........................................................16
EXPENSES...................................................................16
RULES......................................................................16
PARTICIPANT MAY REQUIRE OPERATIONS TO BE SHUT DOWN.........................16
RESUMPTION OF OPERATIONS...................................................16
LOSS OF RIGHTS.............................................................16
MANAGER.......................................................................17
MANAGER DURING EXPLORATION OPERATIONS......................................17
MANAGEMENT OF ACCOUNTS DURING EXPLORATION OPERATIONS.......................17
MANAGER DURING DEVELOPMENT, MINING AND OTHER OPERATIONS....................17
STANDARD OF CARE...........................................................21
DEEMED RESIGNATION OF THE MANAGER..........................................21
PAYMENTS TO MANAGER........................................................22
TRANSACTIONS WITH AFFILIATES...............................................22
PROGRAMS AND BUDGETS..........................................................22
OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS................................22
PRESENTATION OF PROGRAMS AND BUDGETS.......................................22
REVIEW OF PROGRAMS.........................................................23
REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS.......................23
ELECTION TO PARTICIPATE....................................................23
NO CONTRIBUTION - LIMITED CONTRIBUTION.....................................23
BUDGET DECREASES...........................................................24
BUDGET OVERRUNS; PROGRAM CHANGES...........................................24
EMERGENCY OR UNEXPECTED EXPENDITURES.......................................24
MANDATORY EXPENDITURES.....................................................25
FUNDS SPENT PROPORTIONATELY................................................25
ELECTION NOT TO CONTRIBUTE.................................................25
ALLOCATION OF EXPENDITURES.................................................25
FEASIBILITY STUDY..........................................................25
ACCOUNTS AND SETTLEMENTS......................................................26
VENTURE BANK ACCOUNT.......................................................26
MANAGER'S FUNDS............................................................26
MONTHLY STATEMENTS.........................................................26
CASH CALLS.................................................................27
SPECIAL CASH CALLS.........................................................27
PAYMENT OF CASH CALLS......................................................28
FAILURE TO MEET CASH CALLS.................................................28
AUDITS AND ADJUSTMENTS.....................................................28
DISPOSITION OF PRODUCTS.......................................................28
DIVISION OF PRODUCTION.....................................................28
EXISTING ROYALTIES.........................................................28
LIENS......................................................................28
WITHDRAWAL AND TERMINATION....................................................29
WITHDRAWAL.................................................................29
OCCURRENCE OF TERMINATION..................................................30
CONTINUING OBLIGATIONS.....................................................30
DISPOSITION OF ASSETS ON TERMINATION.......................................30
RIGHT TO DATA AFTER TERMINATION............................................31
CONTINUING AUTHORITY.......................................................31
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TRANSFER OF INTEREST AND FINANCING............................................31
RIGHTS TO TRANSFER.........................................................31
RIGHT OF FIRST REFUSAL.....................................................32
LIMITATIONS ON FREE TRANSFERABILITY........................................32
ACQUISITION OF INTEREST....................................................33
FINANCING..................................................................33
DISPUTES......................................................................34
DISPUTE RESOLUTION.........................................................34
FORCE MAJEURE.................................................................34
FORCE MAJEURE..............................................................34
AREA OF INTEREST..............................................................35
AREA OF INTEREST...........................................................35
NOTICE OF ACQUISITION......................................................35
INFORMATION, DATA AND CONFIDENTIALITY.........................................36
ACCESS.....................................................................36
PROGRESS REPORTS...........................................................36
CONFIDENTIALITY............................................................36
EVENT OF DEFAULT OF PARTICIPANT...............................................37
EVENT OF DEFAULT...........................................................37
ADDITIONAL REMEDIES........................................................38
INSURANCE.....................................................................38
INSURANCE..................................................................38
NOTICE........................................................................38
NOTICES....................................................................38
MISCELLANEOUS - GENERAL.......................................................39
ACTS IN GOOD FAITH.........................................................39
AMENDMENT..................................................................39
ENTIRE AGREEMENT...........................................................39
ENUREMENT..................................................................39
COUNTERPARTS...............................................................40
SCHEDULE "A"
SCHEDULE "B"
SCHEDULE "C"
SCHEDULE "D"
SCHEDULE "E"
THIS JOINT VENTURE AGREEMENT dated the 8th day of September, 2005.
BETWEEN:
HALO RESOURCES LTD.
a corporation existing under the laws of the
Province of British Columbia
("Halo")
OF THE FIRST PART
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RESSOURCES METANOR INC./METANOR RESOURCES INC.
a corporation existing under the laws of the
Province of Quebec
("Metanor")
OF THE SECOND PART
WHEREAS each of Metanor and Halo owns an undivided 50% interest in and to the
Property (as hereinafter defined).
AND WHEREAS Metanor and Halo have determined to jointly develop and operate the
Property as a joint venture pursuant to and in accordance with the terms of this
Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants, conditions and premises herein contained, the sum of Two Dollars now
paid by each of the Parties (as hereinafter defined) to the other and for other
good and valuable consideration (the receipt and sufficiency of which is hereby
acknowledged) the Parties do hereby covenant and agree as follows:
1. DEFINITIONS
1.1 DEFINITIONS. IN THIS AGREEMENT:
(A) "THIS AGREEMENT", "HEREIN", "HEREBY", "HEREOF", "HEREUNDER"
and similar expressions shall mean or refer to this Joint
Venture Agreement and all schedules hereto and any and all
agreements or instruments supplemental or ancillary hereto and
the expression "section" followed by a number means and refers
to the specified section of this Agreement.
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(B) "ACCOUNTING PROCEDURE" shall mean the procedures set forth in
Schedule "B".
(C) "AFFILIATE" shall mean any person, partnership, joint venture,
corporation or other form of enterprise which directly or
indirectly controls, is controlled by or is under common
control with, a Participant. "Control" means possession,
directly or indirectly, of the power to direct or cause
direction of management decisions and policies through
ownership of voting securities, contract, voting trust or
otherwise.
(D) "AGENTS" shall mean consultants (including financial
advisors), servants, employees, agents, workmen, contractors
and subcontractors.
(E) "ASSETS" shall mean the Property, all Products and all other
real and personal property, tangible and intangible, held by
or for the benefit of the Participants hereunder including,
without limiting the generality of the foregoing, all
equipment, machinery, vehicles, tools, furniture and other
assets used in connection with the Operations or appurtenant
to the Property and all buildings, structures, improvements,
▇▇▇▇▇, concentrators and facilities situated on or appurtenant
to the Property on the Effective Date and thereafter in the
course of the Operations.
(F) "AUDITOR" means the auditors for the Venture as determined by
a unanimous decision of the Management Committee.
(G) "BUDGET" shall mean a detailed estimate of all costs to be
incurred with respect to a Program and a schedule of cash
advances to be made by the Participants.
(H) "CAPITAL EXPENDITURES" shall mean those items presented in
Programs and Budgets approved by the Management Committee and
which are capital expenditures under Canadian generally
accepted accounting principles.
(I) "CLAIMS" shall mean any and all debts, claims, actions,
lawsuits, causes of action, demands, duties and obligations of
whatsoever nature and howsoever incurred.
(J) "COMMERCIAL PRODUCTION" shall mean the exploitation of
Products from the Property, but shall not include treating,
shipping or milling of Products for the purposes of testing or
milling or leaching by a pilot plant or during an initial
tune-up period of a plant. Commercial Production shall be
deemed to have commenced:
(i) If a plant is located on the Property, on the first
day of the month following the first period of 30
consecutive days during which Products have been
processed through such plant at an average rate of
not less than 70% of the initial rated capacity of
such plant; or
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(ii) If no plant is located on the Property, on the first
day of the month following the first 30 consecutive
days during which Products have been shipped from the
Property on a reasonably regular basis for the
purpose of earning revenue.
(K) "DEVELOPMENT" shall mean all preparation for the removal and
recovery of Products including the construction or
installation of a mill, processing plant, ▇▇▇▇▇ pads or any
other improvements to be used for the mining, handling,
milling, treatment, processing or other beneficiation of
Products and the preparation of feasibility studies and
financing plans.
(L) "EFFECTIVE DATE" shall mean July 1st, 2005.
(M) "ENCUMBRANCES" shall mean any and all mortgages, pledges,
security interests, liens, charges, encumbrances, contractual
obligations and claims of others, whether recorded or
unrecorded, or registered or unregistered.
(N) "EXPENDITURES" shall mean all costs, charges, expenses and
liabilities of whatever kind or nature incurred and actually
paid or accrued, including, without limitation, Capital
Expenditures, in accordance with good and reasonable mining
practices and in accordance with Canadian generally accepted
accounting principles and the Accounting Procedure, with
respect to Operations from and after the Effective Date.
(O) "EXISTING ROYALTIES" shall mean those royalties set forth in
Schedule "C" attached hereto.
(P) "EXPLORATION" shall mean all activities directed toward
ascertaining the existence, location, quantity, quality or
commercial value of deposits of Products on, in or under the
Property.
(Q) "FACILITIES" shall mean all mines and plants including without
limitation all pits, shafts, drifts, haulage ways and other
underground workings and all buildings, plants and other
structures, fixtures and improvements and all other property,
whether fixed or moveable, as the same may exist at any time
in or on the Property if for the exclusive benefit of the
Property.
(R) "FEASIBILITY STUDY" means a detailed report or reports
prepared by or for the Operator evaluating the feasibility of
placing the Property, or any part thereof, into production and
operation as a mine, which detailed report or reports shall
include, without limitation, a reasonable assessment of the
mineable mineral reserves and their amenability to
metallurgical treatment, a complete description of the Work,
equipment and supplies required to bring the Property into
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mineral production and the estimated cost thereof, a
description of the mining methods to be employed and a
financial appraisal of possible mining operations. Such
detailed report or reports shall be, in the opinion of the
person or firm commissioning such report or reports, or, in
the event of a dispute between the Parties, in the opinion of
such qualified independent firm of consultants as the
Management Committee shall select in good faith, in such form
and of such substance which is normally accepted by
substantial and recognized financial institutions for the
purpose of lending funds for the development of mineral
deposits, and shall include and be supported by at least the
following:
(i) a description of the Property and that part of the
Property proposed to be the subject of a Mine;
(ii) the estimated recoverable reserves of minerals and
the estimated composition and content thereof;
(iii) the procedure for the Development, Mining and
production of Products from the Property;
(iv) results of mineral processing tests and ore
amenability tests;
(v) the nature and extent of the Facilities which it
might be necessary to acquire or construct, which may
include ore processing facilities if the nature,
volume and location of the ore makes such ore
processing facilities necessary and feasible, in
which event the study shall also include a design for
such ore processing facilities;
(vi) a detailed cost and timing analysis, including a
capital cost budget, of the total estimated costs and
expenses required to develop a mine on the Property
and to purchase, construct and install all
structures, machinery and equipment required for such
Mine including an ore processing facility, if so
included in accordance with the terms hereof;
(vii) detailed operating cost estimates, including working
capital requirements for the initial three months of
operation of the mine or such longer period as may be
reasonably justified;
(viii) all necessary environmental impact and mitigation
studies and costs including planned rehabilitation of
the Property with estimated costs thereof;
(ix) a critical path time schedule for bringing the
Property or any part thereof to Commercial
Production;
(x) such other data and information as are reasonably
necessary to substantiate the existence of a mineral
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deposit of sufficient size and grade to justify
development of a mine on the Property, taking into
account all relevant business, tax and other economic
considerations;
(xi) disclosure of all price assumptions, together with a
market analysis;
(xii) a transportation cost analysis;
(xiii) a proposed procedure or method of disposing of
tailings as required under the environmental and
mining laws of all Governmental Authorities having
jurisdiction;
(xiv) a detailed discussion and analysis of governmental
requirements with respect to the development of a
mine on the Property including time schedules;
(xv) a discounted cash flow (net of income taxes) and
return on investment analysis, including an economic
forecast for the life of the proposed mine; and
(xvi) appropriate sensitivity analyses.
(S) "GOVERNMENTAL AUTHORITY" means any federal, provincial, state,
municipal or other governmental department, commission, board,
bureau, agency, state owned corporation or instrumentality, or
any court, including, for greater certainty, the governing
body of any Inuit organization having jurisdiction.
(T) "INITIAL CONTRIBUTIONS" shall have the meanings set forth in
section 7.1.
(U) "INITIAL PARTICIPATING INTERESTS" shall mean the Initial
Participating Interest of each Participant as set forth in
section 7.2.
(V) "MANAGEMENT COMMITTEE" shall mean the committee established
under Article 8.
(W) "MANAGER" shall mean the person or entity appointed under
Article 9 to manage Operations and any successor Manager.
(X) "MINE" shall mean a mine constructed by Mining on the Property
and shall include all mine workings established on the
Property and the Assets acquired, improved or rehabilitated in
respect of such Mine, including the related ore body and all
development headings, plant and concentrator installations,
infrastructure and other Facilities constructed on the
Property in the conduct of Mining Operations.
(Y) "MINING" shall mean the mining, extracting, producing,
treating, handling, milling or other processing of Products.
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(Z) "OPERATIONS" shall mean every kind of Work performed
exclusively on or in respect of the Property by or under the
direction of the Management Committee including, without
limiting the generality of the foregoing, the work of
assessment, geophysical, geochemical and geological surveys,
studies and mapping, investigating, drilling, designing,
examining, equipping, improving, surveying, shaft-sinking,
raising, cross-cutting and drifting, searching for, digging,
trucking, sampling, working and procuring minerals, ores and
metals, surveying and bringing any mining claims to lease, and
all other work usually considered to be prospecting,
exploration, development and mining work.
(AA) "PARTY" or "PARTIES" shall mean either of, or collectively,
Halo and Metanor, as the context may require, as parties to
this Agreement and includes their respective successors and
permitted assigns which become parties to this Agreement in
accordance with its terms.
(BB) "PARTICIPANT" and "PARTICIPANTS" mean initially, Metanor and
Halo, and includes (i) any permitted transferee of a
Participating Interest from either of Halo and Metanor in
accordance with this Agreement and (ii) any other Person
having a Participating Interest.
(CC) "PARTICIPATING INTEREST" shall mean the percentage interest
representing the undivided ownership interest of a Participant
in the Assets and all other rights and obligations arising
under this Agreement, as such undivided ownership interest may
from time to time be adjusted hereunder.
(DD) "PERSON" shall mean any natural person, partnership, company,
corporation, unincorporated association, joint venture, trust,
trustee, Governmental Authority or other entity howsoever
designated or constituted.
(EE) "PRIME RATE" shall mean the interest rate quoted from time to
time as "Prime" by The Toronto-Dominion Bank to its most
creditworthy customers.
(FF) "PRODUCTS" shall mean all ores, minerals and mineral products
located on, in or under or extracted from the Property and all
beneficiated and other products produced therefrom under this
Agreement.
(GG) "PROGRAM" shall mean a description in reasonable detail in
accordance with good mining industry practice of Operations to
be conducted and objectives to be accomplished by the Manager
with respect to the Property and includes, as the context
requires:
(i) a document or documents wherein there is specified in
reasonable detail an outline of any and all research,
prospecting and Exploration and Development Work
proposed to be carried out during the program, the
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estimated Expenditures to be incurred in carrying out
the Work and the area of the Property on which the
Work is to be undertaken, and
(ii) the preparation of any Feasibility Study,
and shall include any amendments to a Program as may be agreed
upon by the Management Committee.
(HH) "PROPERTY" shall mean the mining claims and mining concessions
commonly referred to as the Bachelor Lake Property located in
Canton Le Sueur in the Abitibi Region of Quebec, as more
particularly described in Schedule "A" attached hereto and all
other interest in mineral properties made subject to this
Agreement by the Parties in accordance with its terms,
including, without limiting the generality of the foregoing,
all related surface rights, lands subject to land use permit
and all tailings located on the Property and all easements and
rights of way in connection therewith.
(II) "TRANSFER" when used as a verb, shall mean to sell, grant,
assign, or otherwise dispose of, directly or indirectly,
including through mergers, consolidations or asset purchases
and when used as a noun, shall mean a sale, grant, assignment,
or disposal or the commitment to do any of the foregoing,
directly or indirectly, including through mergers,
consolidation or asset purchase.
(JJ) "VENTURE" or "JOINT VENTURE" shall mean the business
arrangement of the Participants under this Agreement.
(KK) "WORK" means Exploration, Development or Mining work performed
exclusively on or directly in relation to the Property or
Products by or through the Manager for the benefit of and on
the account of the Venture and the Participants in accordance
with the terms of this Agreement.
1.2 GENDER AND EXTENDED MEANINGS. In this Agreement all words and personal
pronouns relating thereto shall be read and construed as the number and gender
of the party or parties referred to in each case require and the verb shall be
construed as agreeing with the required word and pronoun. In this Agreement
words importing the singular number include the plural and vice versa.
1.3 CURRENCY. All references to currency in this Agreement including
"dollars" and "$" are in Canadian funds.
1.4 BUSINESS DAYS. All references in this Agreement to business days are to
days excluding Saturdays, Sundays and banking holidays in the Province of Quebec
or British Columbia.
1.5 PERIOD OF TIME/TIME OF ESSENCE. When calculating the period of time
within which or following which any act is to be done or step is to be taken
pursuant to this Agreement, the date which is the reference date in calculating
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such period shall be excluded. If the last day of such period is a non-business
day, the period in question shall end on the next business day. Time is of the
essence of this Agreement.
1.6 SECTION HEADINGS. The section and other headings contained in this
Agreement or in the Schedules are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
1.7 GOVERNING LAW. This Agreement and the rights and obligations and
relations of the parties shall be governed by and construed in accordance with
the laws of the Province of Quebec and the federal laws of Canada applicable
therein. The Parties agree that the courts of Quebec shall have jurisdiction to
hear any action or other legal proceedings based on any provisions of this
Agreement and each Party hereby attorns to the jurisdiction of the courts of the
Province of Quebec.
1.8 FURTHER ASSURANCES. Each Party agrees from time to time, subsequent to
the date hereof, to execute and deliver or cause to be executed and delivered to
the other Party such instruments or further assurances as may be necessary or
desirable to give effect to the provisions of this Agreement or as may be
reasonably required for registering or recording changes in ownership interests
in the Property.
2. SCHEDULES
2.1 SCHEDULES. The following are the schedules attached to and incorporated
in this Agreement by reference and deemed to be a part hereof:
Schedule "A" - Description of the Property
Schedule "B" - Accounting Procedure
Schedule "C" - Existing Royalties
Schedule "D" - Net Smelter Returns Royalty Interest
Schedule "E" - Rules for Arbitration
3. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATION AND WARRANTIES OF THE PARTIES. Each of the Parties
hereby represents and warrants to the other as follows and acknowledges that the
other is relying on such representations and warranties in entering into this
Agreement:
(a) It is a company duly existing under the laws of its governing
jurisdiction and it is duly organized and validly subsisting
under such laws.
(b) It has full power and authority to carry on its business and
to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement and to carry out
and perform all of its obligations and duties hereunder and
thereunder.
(c) It has duly obtained all corporate and regulatory
authorizations for the execution, delivery and performance of
this Agreement and such execution, delivery and performance
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and the consummation of the transactions herein and therein
contemplated does not conflict with or result in a breach of
any covenants or agreements contained in or constitute a
default under or result in the creation of any Encumbrance,
under the provisions of its constating documents or any
shareholders' or directors' resolution or any indenture,
agreement or other instrument whatsoever to which it is a
party or by which it is bound and does not contravene any
applicable laws.
(d) This Agreement has been duly executed and delivered by it and
is valid, binding and enforceable against it in accordance
with its terms.
(e) It has not committed an act of bankruptcy, is not insolvent,
has not proposed a compromising arrangement to its creditors
generally, has not had any petition for a receiving order in
bankruptcy filed against it, has not made a voluntary
assignment in bankruptcy, has not taken any proceedings with
respect to a compromise or arrangement, has not taken any
proceeding to have itself declared bankrupt or wound-up, has
not taken any proceeding to have a receiver appointed in
respect of any part of its assets, has not had any
encumbrancer take possession of any of its property and has
not had any execution or distress become enforceable or become
levied upon any of its property.
(f) As of the Effective Date it owns its right, title and interest
in and to the Property free and clear of all Encumbrances,
subject to the Existing Royalties and the terms and conditions
of any and all leases, permits, licences or other approvals
related to the Property.
4. COMMENCEMENT OF AGREEMENT
4.1 EFFECTIVE DATE. This Agreement shall be operative and shall take effect
as of the Effective Date.
5. JOINT VENTURE
5.1 PURPOSES. The Joint Venture shall be entered into for the following
purposes and shall serve as the exclusive means by which the Participants or
either of them accomplish such purposes:
(a) To conduct Exploration on, in and under the Property.
(b) To engage in Development and Mining on the Property.
(c) To evaluate the possible further Development of the Property.
(d) To perform any other activity necessary, appropriate or
incidental to any of the foregoing, including providing custom
milling services to any Participant in respect of any ore of
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any Participant which ore is not subject to this Agreement, or
to any third party, on such terms as the Management Committee
may agree.
Unless the Participants otherwise agree in writing, Operations shall be limited
to the purposes described in this section.
5.2 AUTHORITY. Subject as otherwise set out in this Agreement, all
transactions, contracts, employments, purchases, operations, negotiations with
third parties and any other matter or act undertaken on behalf of the
Participants in connection with the Property shall be done, transacted,
undertaken or performed in the name of the Manager, and no Participant shall do,
transact, perform or undertake anything in the name of the other Participant or
in the joint names of the Participants.
5.3 CONTINUING INTERESTS. Each Participant shall have a Participating
Interest as determined in accordance with the provisions of this Agreement from
time to time, and any legal title to any of the Assets or Property held by any
Participant shall be subject to this Agreement.
5.4 TERM. Unless earlier terminated pursuant to Section 13, or as a result
of one party acquiring a 100% Participating Interest and a 100% of the net
smelter returns royalty interest, this Agreement shall remain in full force and
effect for so long as any Party has any right, title or interest in and to the
Assets. Termination of the Agreement shall not, however, relieve any Party from
any obligations accrued but unsatisfied at the time of such termination.
5.5 FISCAL YEAR. The fiscal year end of the Joint Venture shall be December
31 commencing on December 31 in the year in which this Agreement takes effect,
unless otherwise determined in accordance with the terms of this Agreement.
6. RELATIONSHIP
6.1 NO PARTNERSHIP. Nothing contained in this Agreement shall be deemed to
constitute either Party the partner of the other nor, except as otherwise herein
expressly provided, to constitute either Party the agent or legal representative
of the other nor to create any fiduciary relationship between the Parties. It is
not the intention of the Parties to create nor shall this Agreement be construed
to create any mining, commercial or other partnership. Neither Party shall have
any authority to act for or to assume any obligation or responsibility on behalf
of the other Party except as otherwise expressly provided herein. The rights,
duties, obligations and liabilities of the Parties 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. Each Party shall indemnify, defend and
hold harmless the other Party, its directors, officers and Agents from and
against any and all losses, claims, damages and liabilities arising out of any
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act or any assumption of liability by the indemnifying Party or any of its
directors, officers and Agents done or undertaken or apparently done or
undertaken on behalf of the other Party, except pursuant to the authority
expressly granted herein or as otherwise agreed in writing between the Parties.
6.2 OTHER BUSINESS OPPORTUNITIES. Except as expressly provided in this
Agreement, each Party shall have the right independently to engage in and
receive full benefits from other business activities, whether or not competitive
with Operations, without consulting the other Party. The doctrines of "corporate
opportunity" or "business opportunity" shall not be applied to any other
activity, venture or operation of either Participant and, except as expressly
provided in this Agreement, neither Party shall have any obligation to the other
with respect to any opportunity to acquire property at any time.
6.3 RELATIONSHIP OF PARTICIPANTS.
(a) Claims by third parties arising out of the activities of the
Joint Venture shall be borne by the Participants in proportion
to their respective Participating Interests.
(b) Subject to the terms of this Agreement, the right of each
Party to mine and market production from other sources in
competition with the other Parties and of each Participant to
market its share of any Product in competition with any other
Participant is confirmed.
6.4 RESPONSIBILITY FOR EXPENDITURES. Except as otherwise provided in this
Agreement, the Participants shall bear all Expenditures and all liabilities
arising under this Agreement, and shall own the Assets, in proportion to their
respective Participating Interests.
7. INTERESTS OF PARTICIPANTS
7.1 INITIAL CONTRIBUTIONS. The value of each Participant's initial
contribution (an "Initial Contribution") shall be deemed to be as set forth
below, notwithstanding the amounts spent by each Participant in acquiring its
right, title and interest in and to the Property:
Halo - $3,700,000
Metanor - $3,700,000
7.2 INITIAL PARTICIPATING INTEREST. On the Effective Date, Metanor shall
have a 50% Participating Interest and Halo shall have a 50% Participating
Interest. Thereafter, each Participant shall have a Participating Interest as is
determined from time to time in accordance with the provisions of this
Agreement.
7.3 CASH CONTRIBUTIONS. Subject to any election permitted by section 7.5
the Participants shall be obligated to contribute funds to approved Programs and
Budgets in proportion to their respective Participating Interests.
7.4 CHANGES IN PARTICIPATING INTERESTS. The Participants' Participating
Interests shall be changed in the event of the following:
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(a) an election by a Participant not to contribute an approved
Program and Budget, or to contribute to Expenditures which are
a part of an approved Program and Budget less than the
percentage reflected by its Participating Interest; or
(b) default by a Participant in making its agreed contribution to
an approved Program and Budget; or
(c) an acquisition of less than all of the Participating Interest
of any Participant however arising.
7.5 REDUCTION IN PARTICIPATING INTEREST. A Participant may elect not to
contribute to an approved Program and Budget or to limit its contributions
toward Expenditures which are a part of an approved Program and Budget to some
amount less than its respective Participating Interest (other than in respect of
the then current Program and Budget to the extent to which such Participant has
previously elected to contribute). If a Participant elects not to contribute to
an approved Program and Budget or elects to contribute to an approved Program
and Budget some amount toward Expenditures less than its respective
Participating Interest, the Participating Interest of that Participant shall be
recalculated at the time of such election by dividing the sum of, (i) such
Participant's Initial Contribution set forth in section 7.1, (ii) the total of
all of such Participant's contributions toward the Venture's Expenditures to the
date of such election, and (iii) the amount, if any, that such Participant
elects to contribute toward the Venture's Expenditures in the approved Program
and Budget, by the sum of (i), (ii) and (iii) above for both Participants; and
then multiplying the result by 100. The Participating Interest of the other
Participant shall thereupon increase and become the difference between 100% and
the recalculated Participating Interest of the Participant that made such
election pursuant to this section 7.5.
7.6 FAILURE TO MEET CASH CALLS. If a Participant fails to meet cash calls
to which it has agreed to contribute pursuant to the terms of this Agreement in
the amounts and at the times specified under this Agreement, it shall be deemed
to be in default of its obligations under this Agreement and the Manager shall,
by written notice to such Participant, demand payment. If no payment is made by
such Participant within the period of fifteen days next succeeding the receipt
of the demand notice by the Participant, the other Participant may elect to
increase their contributions to satisfy the shortfall, or the Manager shall
curtail any applicable Program, and the defaulting Participant shall have its
Participating Interest reduced in the manner contemplated in section 7.5.
7.7 ELIMINATION OF MINORITY INTEREST. Upon the dilution or other reduction
of a Participating Interest to 15% or less, such Participating Interest shall
convert to a 1% net smelter returns royalty interest and the Participant whose
Participating Interest is so converted shall be entitled to receive ongoing
royalty payments equal to 1% of net smelter returns as calculated and paid in
accordance with the terms set out in Schedule "D" and, subject as set out in
section 7.8 below, such Participant shall be relieved of all obligations to
contribute to Programs and Budgets, shall be relieved of its share of any
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liabilities, costs, penalty or fine arising out of Operations conducted after
such conversion and shall forfeit all of its rights to have its representatives
appointed as members of the Management Committee, to receive notice of and to
attend at Management Committee Meetings and to receive and participate in
Feasibility Studies and Programs and Budgets.
7.8 CONTINUING LIABILITIES UPON ADJUSTMENT OF PARTICIPATING INTERESTS. Any
reduction or conversion of a Participant's Participating Interest under this
Article 7 shall not relieve such Participant of its share of any liability,
cost, penalty or fine arising out of Operations conducted prior to such
reduction; provided, that notwithstanding the foregoing, upon the conversion of
a Participating Interest to a net smelter returns royalty interest pursuant to
section 7.7, the holder of such net smelter returns royalty interest shall not
be obligated to pay or incur any expense or liability related to the costs of
the closure of any mine or processing facility located on the Property or
related to rehabilitation or reclamation of the Property upon the closure of
such mine or processing facility located on the Property. For the purposes of
this Article 7, such Participant's share of such liability, cost, penalty or
fine shall be equal to its Participating Interest at the time the liability,
cost, penalty or fine was incurred and shall continue thereafter to be equal to
its Participating Interest at the time such liability, cost, penalty or fine was
incurred. The increased Participating Interest accruing to a Participant as a
result of the reduction of another Participant's Participating Interest shall be
free of Encumbrances other than those existing at the date of this Agreement or
those arising out of Operations or to which both Participants have given their
written consent. At any time upon the request of any other Participant, a
Participant whose Participating Interest has been adjusted, shall execute and
acknowledge such instruments and perform such acts as may be necessary to
evidence such adjustment, including in such form as may be necessary for
recording or registering notice of such adjustment in the relevant public
offices of all Governmental Authorities having jurisdiction.
8. MANAGEMENT COMMITTEE
8.1 ORGANIZATION AND COMPOSITION. The Participants hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under this Agreement. The Management Committee shall oversee
all Operations conducted by the Manager on or related to the Property. The
Management Committee shall consist of two members appointed by each of the
Participants. At least one of the members appointed by each Participant shall be
an engineer or geoscientist or any other person with experience in mineral
exploration, mine development or operation or mineral project assessment, or any
combination of the foregoing (a "Qualified Member"). Each Participant may
appoint one or more alternates to act in the absence of a regular member,
provided that each Participant shall be represented by at least one Qualified
Member at all times. Any alternate so acting shall be deemed a member of the
Management Committee. Appointments shall be made or changed by notice to the
other Participant.
8.2 DECISIONS. The Management Committee shall determine matters it
addresses by way of vote of the Management Committee members. Each Participant
acting through its appointed Management Committee members shall have the number
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of votes on the Management Committee equal to its Participating Interest. Unless
otherwise provided in this Agreement, including pursuant to section 8.6,
decisions of the Management Committee shall be determined by a majority vote.
8.3 MEETING AND QUORUM. The Management Committee shall hold regular
meetings at least every three months in Val d'Or, Quebec or at such other
locations agreed to by the Participants. The Manager shall give 15 days' advance
notice to the Participants of such regular meetings. Notice of a meeting shall
not be required if both representatives of each Participant are present at a
meeting and unanimously waive notice. Either Participant may call a special
meeting upon 15 days' advance notice to the Manager and the other Participant.
In the case of an emergency, reasonable notice of a special meeting shall
suffice. A quorum of the Management Committee shall consist of at least one
member representing each Participant present at a duly called meeting of the
Management Committee or in attendance by telephone conference. Each notice of a
meeting shall include an itemized agenda prepared by the Manager in the case of
a regular meeting or by the Participant calling the meeting in the case of a
special meeting, but any matters may be considered with the consent of both
Participants. The Manager shall prepare detailed minutes of all meetings and
shall distribute copies of such minutes to the Participants within 15 days after
each meeting. Failure by a Participant to sign or furnish written detailed
notice of objection to the minutes within 15 days after receipt from the Manager
shall be deemed acceptance of such minutes by the Participants. When signed or
deemed accepted by both Participants, the minutes shall be the official record
of the decisions made by the Management Committee and shall be binding on the
Manager and the Participants. If personnel employed in Operations are required
to attend a Management Committee meeting, reasonable costs incurred in
connection with such attendance shall be a Venture cost. All other costs shall
be paid by the Participants individually.
8.4 ACTION WITHOUT MEETING. In lieu of meetings, the Management Committee
may hold telephone conference meetings provided that all decisions of the
Management Committee are immediately confirmed in minutes in writing and
distributed for review or objection and accepted by the Participants in
accordance with section 8.3.
8.5 MATTERS REQUIRING APPROVAL. Except as otherwise provided by this
Agreement, the Management Committee shall have exclusive authority to determine
all management matters related to this Agreement.
8.6 MATTERS REQUIRING UNANIMOUS APPROVAL. Notwithstanding any other
provision of this Agreement the following matters shall require the unanimous
approval of the Management Committee:
(a) Changing the fiscal year end of the Venture.
(b) Selling or otherwise disposing of all or substantially all of
the Assets or any Asset or Assets or Surplus Material in
accordance with Section IV of the Accounting Procedure.
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(c) Entering into any transaction with an Affiliate of a
Participant or any party related to a Participant other than
on an arm's length basis.
(d) Entering into any acquisition or investment other than in the
ordinary course of the business of the Venture.
(e) Executing and delivering any agreement with respect to the
disposition or encumbrance of all or any part of the Property.
(f) Carrying on any business other than Operations, including any
custom milling contemplated in section 5.1 (d) of this
Agreement.
(g) Commencing any litigious or administrative claim for an amount
in excess of $50,000.00.
(h) Amending this Agreement.
(i) Appointing the Auditor.
(j) The approval of any Program and Budget and any decision in
relation to such approved Program and Budget and the conduct
of Work pursuant thereto, having a budget over $500,000.
(k) Appointing the Manager.
8.7 DECISIONS BINDING. Management Committee decisions made in accordance
with this Agreement shall be binding on the Parties.
8.8 EXPENSES. Each party shall bear the expenses incurred by its
representatives and alternate representatives in attending meetings of the
Management Committee.
8.9 RULES. The Management Committee may, by unanimous agreement of the
representatives of the Participants on the Management Committee, establish rules
of procedure for the conduct of the business of the Management Committee, not
inconsistent with the terms of this Agreement.
8.10 PARTICIPANT MAY REQUIRE OPERATIONS TO BE SHUT DOWN. Either Participant
shall be entitled, by notice in writing to the other Participant, to require
that Operations be suspended if such Participant can demonstrate (as set forth
in such notice) that its proportionate share of Expenditures based on its
Participating Interest has exceeded its proceeds from the sale of Products for a
period of three consecutive months. If such notice is given to the other
Participant, the Management Committee shall cause the Manager to prepare a
Program and Budget for placing the Mine on care and maintenance and the Parties
shall convene a meeting of the Management Committee to approve such Program and
Budget.
8.11 RESUMPTION OF OPERATIONS. If at any time after the suspension of
Operations pursuant to section 8.10, the Manager determines that the Mine can be
placed back into Commercial Production with the Participants' proportionate
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share of Expenditures based on its Participating Interest being not more than
80% of the proceeds which they should realize on the sale of their share of
Products, the Manager shall prepare a Program and Budget for the resumption of
Operations and the Parties shall convene a meeting of the Management Committee
to approve such Program and Budget.
8.12 LOSS OF RIGHTS. In the event that the Participating Interest of any
Party shall be diluted or otherwise reduced to 35% or less, then such
Participant shall forfeit all of its rights to have its representatives
appointed as members of the Management Committee and to receive notice of,
attend and vote at any Management Committee meetings.
9. MANAGER
9.1 MANAGER DURING EXPLORATION OPERATIONS. During the period from and after
the Effective Date that the Joint Venture is conducting Exploration Operations
on the Property, the Management Committee shall unanimously appoint any single
person having the same qualifications as a Qualified Member of the Management
Committee as Manager of the Joint Venture to carry out the day to day management
of such Exploration Operations on the Property for and on behalf of, and subject
to the discretion of, the Management Committee. Such Manager shall have the
powers and duties of the Manager set out in Section 9.3, as may be applicable to
Exploration Operations, and shall act in accordance with the standard of care
set out in Section 9.4. Such individual shall be entitled to such form of
compensation from the Joint Venture as the Management Committee may unanimously
determine.
9.2 MANAGEMENT OF ACCOUNTS DURING EXPLORATION OPERATIONS. During the period
from and after the Effective Date that the Joint Venture is conducting
Exploration Operations on the Property, the books and records of account and the
accounts and cash flow of the Joint Venture shall be managed by a controller
that shall be a qualified bookkeeper or chartered accountant located in Val
d'Or, Quebec and unanimously chosen by the Management Committee. Such controller
shall be subject at all times to the general oversight and direction of the
Manager and the Management Committee and the provisions of section 8.6.
9.3 MANAGER DURING DEVELOPMENT, MINING AND OTHER OPERATIONS. During any
Development Mining and other stage of Operations other than Exploration
Operations, the Management Committee shall (i) choose between either of the
Participants to act as Manager on such terms as such Party and the Management
Committee shall unanimously agree; or (ii) contract with an experienced and
financially sound mining company that is independent of each of the Participants
to act as the Manager under this Agreement on such terms as the Management
Committee shall unanimously agree. Such Manager shall have the responsibility
for the conduct of Operations and shall be subject at all times to the general
oversight and direction of the Management Committee and the provisions of
section 8.6. The Manager shall be vested with the authority to manage and carry
out the day to day management of the Property and to conduct Operations pursuant
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to the terms of this Agreement and the most recently approved Program and
Budget. The Manager shall agree to carry out its duties as Manager itself or
through its Agents in accordance with the terms and intent of this Agreement and
on behalf of and for the account of the Participants in accordance with their
Participating Interests. Without limiting the generality of the foregoing, the
Manager shall have the following powers and duties:
(a) The Manager shall manage, direct and control day to day
Operations.
(b) The Manager shall implement the decisions of the Management
Committee, make all expenditures necessary to carry out
approved Programs and promptly advise the Management Committee
if it lacks sufficient funds to carry out its responsibilities
under this Agreement.
(c) The Manager shall: (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and
transportation services required for Operations from
independent parties and on the best terms available, taking
into account all of the circumstances; (ii) obtain such
customary warranties and guarantees as are available in
connection with such purchases and acquisitions; and (iii)
keep the Assets free and clear of all Encumbrances except for
those existing at the time of or created concurrent with the
acquisition of such Assets, and except for the Existing
Royalties, the terms of those encumbrances contemplated in
this Agreement, any construction, mechanic's or materialmen's
liens which shall be caused to be released or discharged in a
diligent manner by the Manager or Encumbrances specifically
approved by the Management Committee.
(d) The Manager shall preserve and protect title to the Property
at all times (including the renewal of any and all related
leases, mining claims, permits, licences or other approvals or
grants of interest as required) and shall conduct such title
examinations and cure such title defects as may be advisable
in the reasonable judgment of the Manager.
(e) The Manager shall: (i) make or arrange for all payments
required by all leases, licenses, permits, contracts and other
agreements related to the Assets including, without
limitation, the Existing Royalties; (ii) pay or arrange for
payment of all taxes, assessments and like charges on
Operations and Assets except taxes determined or measured by a
Participant's sales revenue or net income (if authorized by
the Management Committee, the Manager shall have the right to
contest in court 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
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equalization thereof, but in no event shall the Manager permit
or allow title to the Assets to be lost as the result of the
nonpayment of any taxes, assessments or like charges); and
(iii) do or cause to be done all other acts reasonably
necessary to maintain the Assets and to maintain the title
thereto in good standing including, without limitation, the
performance of all assessment and other Work that is required
by law.
(f) The Manager shall: (i) apply for all permits, licenses and
approvals necessary to conduct Operations; (ii) use reasonable
best efforts to comply with all laws, regulations, orders or
policy directions of any Governmental Authority having
jurisdiction; (iii) notify promptly the Management Committee
of any allegations of substantial violation of the foregoing;
and (iv) prepare and file all reports or notices required for
or arising out of the conduct of Operations.
(g) With respect to any joint sale or other joint disposition of
Products that may be agreed to pursuant to section 12.1,
procure and negotiate on behalf of the Participants such
contracts as are required, deposit the proceeds from such
sales to the account of the Venture to the extent applicable
under the terms of this Agreement and distribute the surplus
proceeds to the Participants in accordance with their
respective Participating Interests.
(h) Invest all cash contributions and other revenues of the
Venture for the benefit of the Venture and the participants
and any undistributed proceeds of the sale of Product for the
benefit of the Participants on such short term basis as will
maximize the returns on such investments but will enable the
Manager and the Venture to comply with their contractual
obligations and to exercise their contractual rights,
including pursuant to the terms of this Agreement.
(i) The Manager shall prosecute and defend, but shall not initiate
without the consent of the Management Committee, all
litigation or administrative proceedings arising out of the
conduct of Operations. The other Participant shall have the
right to participate in such litigation or administrative
proceedings at its own expense. The other Participant shall
approve in advance any settlement of litigation or
administrative proceedings involving payments, commitments or
obligations of the Venture in excess of $50,000.00.
(j) The Manager shall obtain or arrange and keep in force
insurance for the benefit of the Participants, including
comprehensive general public liability and property damage
insurance and automobile insurance, insuring against claims
for bodily injury or death or property damage arising out of
or resulting from Operations, in such amounts and covering
such claims, losses and risks as will adequately protect the
interests of the Participants, including by enabling the
Manager to repair or cause to be repaired or rebuilt all
Facilities on the Property and to continue operations of any
mine or mineral processing facility relating thereto, all in
accordance with sound mining practice and customary industry
standards.
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(k) The Manager may dispose of Assets (other than the Property or
part thereof) whether by abandonment, surrender or Transfer in
the ordinary course of business but subject to the terms of
this Agreement, including the Accounting Procedure. The
Manager shall not enter into any sales contracts or
commitments for Product without the prior authorization of
each Participant in respect of its share of Product.
(l) The Manager shall prepare and shall file after approval of the
Management Committee any tax returns or other tax filings
required to be filed on behalf of the Venture. With respect to
the Goods and Services Tax (the "GST") under the Excise Tax
Act S.C. 1990, c.45, (the "ITA") or Quebec sales tax ("QST")
under the Quebec Sales Tax Act (the "QSTA"), the Manager shall
account for all GST and QST in respect of any supplies made to
or by the Venture. The Participants shall be registrants and
will each execute and provide to the Manager a joint venture
election (the "Election") pursuant to the ITA and QSTA,
confirming that the Manager shall account for all GST and QST
in respect of any supplies made to or by the Venture and the
Manager shall file the required elections along with the
Manager's return as and when required under the ITA and QSTA.
Accounting for GST and QST shall include paying GST and QST on
all taxable purchases and claiming the corresponding input tax
credits on behalf of the Venture.
(m) The Manager shall have the right to carry out its
responsibilities hereunder through its Agents or
subcontractors.
(n) The Manager shall keep and maintain all required accounting
and financial records pursuant to Canadian generally accepted
accounting principles, the Accounting Procedure and in
accordance with customary accounting practices in the mining
industry in Canada.
(o) The Manager shall keep the Management Committee advised of all
Operations by submitting in writing to the Management
Committee: (i) monthly progress reports in respect of
Operations, which reports shall include statements of
Expenditures and comparisons of such Expenditures to the
adopted Program and Budget and all other pertinent data
including, without limitation, drill and assay results, survey
results, geological and reserve figures and production
reports; (ii) monthly summaries of data acquired; (iii) copies
of all reports concerning Operations, including the immediate
delivery to the Management Committee of all significant
results; (iv) a detailed final report within 30 days after
completion of each Program and Budget which shall include
comparisons between actual and budgeted Expenditures and
comparisons between the objectives and results of the Program;
and (v) such other reports as the Management Committee may
request or as either Participant may reasonably request. At
all reasonable times the Manager shall provide the Management
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Committee or the representative of any Participant access to
and the right to copy all maps, drill logs, core tests,
reports, surveys, assays, analyses, production reports,
operations, technical, accounting and financial records and
other information acquired in Operations. In addition, the
Manager shall allow the other Participant, at its sole risk
and expense and subject to reasonable safety regulations, to
inspect the Assets and Operations at all reasonable times.
(p) The Manager shall undertake all other activities reasonably
necessary to fulfill its obligations as Manager under this
Agreement and to advance and conduct the business of the
Venture.
(q) The Manager shall keep the financial and accounting records,
to the extent and in such detail and at such places as the
Management Committee may determine, such books and records
pertaining to the Venture and Operations and to the costs and
expenses thereof and the performance of the Manager hereunder,
and to the receipt and disposition of proceeds from any joint
sales agreed to pursuant to section 12.1, as will properly
reflect, in accordance with generally accepted accounting
principles in Canada, to the extent applicable and not in
conflict with the provisions hereof, all transactions of the
Manager in relation to the Venture and Operations and the
performance of its duties hereunder and all costs paid by it
in the performance thereof and for which it will seek
reimbursement hereunder, all of which books and records shall
be made available to each of the Participants and the
Management Committee, upon reasonable notice and at all
reasonable times, for inspection, audit and reproduction. As
soon as possible after the close of each fiscal year of the
Venture, all the books and accounts of the Manager relating to
the Venture and Operations for such fiscal year of the Venture
shall be audited by the Auditor at the expense of the Venture
and Operations and copies of the report of the Auditor shall
be provided to each Participant within 60 days of each fiscal
year end. Any claim of a Participant against the Manager, and
vice versa, relating to any transactions during the period
covered by such audit shall be made within two years after the
receipt of such audit report by the Participant.
(r) Upon termination of the Venture, the Manager shall, at the
cost and expense of the Venture, manage the rehabilitation and
reclamation of the Property as required by applicable
environmental and mining laws and to the standard required by
all Governmental Authorities having jurisdiction including,
without limitation, filing or posting or causing to be filed
or posted, all letters of credit, surety, bonds or other forms
of security for all reclamation or rehabilitation obligations
of the Venture as may be required by any Governmental
Authority having jurisdiction.
9.4 STANDARD OF CARE. The Manager and its Agents shall agree to conduct all
Operations in a good, workmanlike and efficient manner to the best of their
ability, skill and judgment in accordance with sound mining and other applicable
industry standards and practices and, in accordance with all applicable laws of
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all Governmental Authorities having jurisdiction and in compliance with the
terms and provisions of all leases, licenses, permits, contracts and other
agreements relating to the Property.
9.5 DEEMED RESIGNATION OF THE MANAGER. Any contract between the Parties and
any third party Manager shall provide that if any of the following shall occur,
the Manager shall be deemed to have resigned as Manager:
(a) The Manager fails to perform a material obligation imposed
upon the Manager under this Agreement or its contract for
Managership and fails to commence curing or contesting such
default within 30 days after notice from the Management
Committee demanding performance of such material obligation;
or
(b) The Manager shall generally not pay its debts as such debts
become due or has committed an act of bankruptcy, is
insolvent, has proposed a compromising arrangement to its
creditors generally, has had any petition for a receiving
order in bankruptcy filed against it, has made a voluntary
assignment in bankruptcy, has taken proceedings with respect
to a compromise or arrangement, has taken proceeding to have
itself declared bankrupt or wound-up, has taken proceeding to
have a receiver appointed of any part of its assets, has had
any encumbrancer take possession of any of its property and
has had any execution or distress become enforceable or become
levied upon any of its property.
9.6 PAYMENTS TO MANAGER. Any third party Manager shall be reimbursed for
its costs and paid such fees for service as set out in the Accounting Procedure
and in the contract appointing it as Manager.
9.7 TRANSACTIONS WITH AFFILIATES. If any third party Manager engages
Affiliates to provide services hereunder, it shall do so on terms no less
favourable to such Affiliate than would be the case with unrelated persons in
arm's-length transactions.
10. PROGRAMS AND BUDGETS
10.1 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS. Commencing on the
Effective Date, Operations shall be conducted, Expenditures shall be made or
incurred and Assets shall be acquired pursuant to Programs and Budgets prepared
by the Manager and delivered and approved by the Management Committee as
provided in this Article 10.
10.2 PRESENTATION OF PROGRAMS AND BUDGETS. Immediately after the Effective
Date and thereafter in each calendar year during the Venture or within ninety
(90) days after the completion of the last Program, or otherwise at the request
of the Management Committee, the Manager shall submit to the Participants, a
proposed Program and Budget on or before October 31, covering the period from
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January 1 to December 31 of the following year or such other period as the
Management Committee may unanimously determine. Each approved Program and Budget
shall, regardless of the term of such Program and Budget, be reviewed at least
once a year at a regular meeting of the Management Committee.
10.3 REVIEW OF PROGRAMS. The Management Committee shall review the Program
prepared and if it deems fit, adopt the Program with those modifications, if
any, as the Management Committee deems necessary. The Manager shall be entitled
to an allowance for a cost overrun of 10% in addition to any budgeted
Expenditures and any overrun Expenditures so incurred shall be deemed to be
included in the Program, as adopted.
10.4 SUBMISSION OF PROGRAMS AND BUDGETS. The Manager shall immediately
submit the adopted Program and budget to the Participants. Within 30 days after
submission of the adopted Program and Budget, each Participant shall submit to
the Management Committee:
(a) Notice that the Participant approves the adopted Program;
(b) Proposed modifications of the adopted Program and;
(c) Notice that the Participant rejects the adopted Program and
Budget.
If a Participant fails to give any of the foregoing responses within such 30 day
period, such failure shall be deemed to be an acceptance by the Participant of
the adopted Program and Budget. If a Participant makes a timely submission to
the Management Committee pursuant to section 10.4(b) or (c), then the Management
Committee shall meet to consider and develop a Program and Budget acceptable to
the Participants. If the Management Committee does not approve a Program and
Budget within 30 days after the Manager's receipt of a notice pursuant to
section 10.4(b) or (c), then either of the Participants may submit the matter to
arbitration pursuant to Section 15 for determination as to whether such
non-acceptance is reasonable in the circumstances. If it is determined that such
non-acceptance is not reasonable in the circumstances, then such Program and
Budget shall be deemed to be an adopted Program and Budget for the purposes of
this Agreement.
10.5 ELECTION TO PARTICIPATE. Within 20 days after the final vote of the
Management Committee approving a Program and Budget, each Party shall give
written notice to the Manager committing to contribute its proportionate share,
based on the respective Participating Interest at the time of such election, of
the Expenditures on that Program. A Participant may elect to contribute to
Expenditures which are a part of an approved Program and Budget an amount less
than its Participating Interest, or to not contribute to such Expenditures at
all, in which case the Participating Interests shall be recalculated as provided
in section 7.5. If a Participant fails to so notify the Manager, the Participant
shall be deemed to have elected to not contribute to such Program and Budget.
10.6 NO CONTRIBUTION - LIMITED CONTRIBUTION. If any Participant elected or
is deemed to have elected not to contribute to a Program, or have elected to
contribute to the Program an amount less than its Participating Interest, the
other Participant may give notice in writing to the Manager stating that it will
contribute all Expenditures under or pursuant to the Program and the Manager
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will proceed with that Program and thereafter the Participating Interests of the
Participants shall be adjusted in accordance with paragraph 7.5. The Manager
will not proceed with any Program which is not fully subscribed.
10.7 BUDGET DECREASES. If a Program and Budget is subsequently modified to
decrease expenditures by 20% or more, a non-contributing or partially
contributing Participant shall have the right to contribute the difference
between the amount, if any, it has already contributed and its full
proportionate share, based on its Participating Interest prior to the reduction,
of the modified Program and Budget and thereby avoid any reduction in its
Participating Interest. At such time as the Manager becomes aware that
expenditures for the Budget shall be 80% or less than as originally adopted, the
Manager shall notify the non-contributing or partially-contributing Participant.
Within 10 days thereafter the non-contributing or partially-contributing
Participant may notify the Manager of its election to contribute to its full
share of the modified Program and Budget. Such notice shall include full payment
of the non-contributing or partially-contributing Participant's proportionate
share of the modified Program and Budget to the date of the payment.
10.8 BUDGET OVERRUNS; PROGRAM CHANGES. The Manager shall immediately notify
the Management Committee of any departure (including either less or more) from
an adopted Program and Budget of an amount equal to ten percent or more of the
original budgeted amount of such Program outlining the nature and extent of the
additional costs and expenses (the "Program Overruns"). The Manager may not
exceed an approved Program or Budget by more than ten percent without the
unanimous approval of the Management Committee. If Program Overruns are approved
by the Participants contributing to that Program through the Management
Committee of this Agreement, then within thirty days after the receipt of a
written request from the Manager, the Participants contributing to that Program
shall provide the Manager with their respective shares of the Program Overruns.
If Program Overruns are not approved by the Participants contributing to that
Program through the Management Committee of this Agreement, the Manager shall
have the right to curtail the Program to the approved Budget.
10.9 EMERGENCY OR UNEXPECTED EXPENDITURES. In the case of an emergency, the
Manager may take any reasonable action it deems necessary to protect life, limb
or property, to protect the Assets or to comply with all laws, regulations,
orders or policy directives of any Governmental Authority having jurisdiction.
The Manager may also make reasonable expenditures for unexpected events which
are beyond its reasonable control and which do not result from a breach by it of
its standard of care. The Manager shall promptly notify the Participants of the
emergency or unexpected expenditures and the Manager shall be reimbursed for all
resulting costs by the Participants in proportion to their respective
Participating Interests at the time the emergency or unexpected expenditures are
incurred.
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10.10 MANDATORY EXPENDITURES. Notwithstanding section 10.1, if, in any year
in which there is no Program adopted pursuant to this Agreement, circumstances
are such that the Manager must incur costs in order to maintain tenure to the
Property, to satisfy contractual obligations or obligations imposed by law, to
prevent waste or to protect life and property (in the paragraph called
"non-discretionary costs"), the Manager shall immediately propose a program (in
this paragraph called the "mandatory program") to incur those non-discretionary
costs and provide each party with one copy of it. The mandatory program shall be
deemed to be approved and each of the Parties shall be obligated to contribute
to the non-discretionary costs incurred in proportion to their respective
Participating Interest within thirty days of receipt of the Manager's invoice.
Section 10.6 shall apply to any party failing to make its contribution under a
mandatory program.
10.11 FUNDS SPENT PROPORTIONATELY. The Manager shall expend all moneys
advanced by a Participant proportionately with the advances of the other
Participants. If the Manager suspends or prematurely terminates a Program, any
funds advanced by a Participant in excess of that Participant's proportionate
share of Expenditures incurred prior to the suspension or premature termination
shall be refunded immediately to the Participant that advanced such funds.
10.12 ELECTION NOT TO CONTRIBUTE. Notwithstanding that a Participant has or
is deemed to have elected not to contribute to a Program under section 10.6, it
shall, unless its Participating Interest has been converted to a Net Profits
Royalty Interest or been terminated pursuant to this Agreement, be entitled to
elect to participate in and contribute to future Programs.
10.13 ALLOCATION OF EXPENDITURES. All Expenditures incurred under this
Agreement shall be for the account of the Parties in proportion to their
respective Participating Interests, and each Party on whose behalf any
Expenditures have been incurred shall be entitled to claim all tax benefits,
write-offs and deductions with respect to such Expenditures.
10.14 FEASIBILITY STUDY.
(i) PREPARATION OF A FEASIBILITY STUDY. At the unanimous request
of the Management Committee, the Manager shall prepare or have
prepared and submit (i) a Feasibility Study, or (ii) a
pre-Feasibility Study (which study shall be based on such
terms as the Management Committee shall determine), the
purpose of which shall be to establish whether a mineralized
deposit on the Property is of sufficient size and grade to
justify development and the development of such other related
facilities as may be desirable, including, a beneficiation
plant for processing Products.
(ii) REQUEST FOR FEASIBILITY STUDY. Any Participant may request the
Management Committee to instruct the Manager to prepare or
have prepared (i) a Feasibility Study or (ii) a
pre-Feasibility Study (which study shall be based on such
terms as such Participant shall propose), prepared when, in
the reasonable good faith opinion of such Participant,
sufficient mineralization has been found to justify
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preparation of a Feasibility Study or pre-Feasibility Study,
and if the Management Committee fails or refuses to direct the
Manager to prepare such Feasibility Study or pre-Feasibility
Study, such Participant may at its own expense, prepare and
submit such Feasibility Study or pre-Feasibility Study along
with its recommendation to the Management Committee.
(iii) APPROVAL OF FEASIBILITY STUDY. The Management Committee shall
have ninety (90) days after receipt of any Feasibility Study
or pre-Feasibility Study and the recommendations of the
Participant commissioning or conducting such Feasibility Study
or pre-Feasibility Study to meet and consider, and to approve
or reject, the Feasibility Study or pre-Feasibility Study and
its recommendations. If the Management Committee approves or
makes substantial use of the Feasibility Study or
pre-Feasibility Study prepared by a Participant in its
decision to proceed to place the Property into Commercial
Production, it shall reimburse the Participant for the
reasonable costs of preparing the same. If the Management
Committee rejects a Feasibility Study or pre-Feasibility
Study, it may in its discretion direct the Manager to perform
or have performed such additional work as the Management
Committee deems necessary to revise the Feasibility Study or
pre-Feasibility Study. In such event, the Management Committee
shall direct the Manager to promptly perform such additional
work, revise the Feasibility Study or pre-Feasibility Study
accordingly and submit it to the Management Committee for
approval or rejection.
11. ACCOUNTS AND SETTLEMENTS
11.1 VENTURE BANK ACCOUNT. The Manager shall establish a bank account (the
"Venture Bank Account") with a Canadian chartered bank into which shall be paid
all payments to be made by the Participants pursuant to the provisions of this
Agreement and from which all disbursements made by the Manager shall be paid.
The Manager shall designate appropriate employees of it to be signing officers
for the Venture's Bank Account. Any interest earned on funds deposited in the
Venture Bank Account will accrue to the Participants in proportion to their
respective Participating Interest. Any amounts deposited in the Venture Bank
Account will accrue to the Participants in proportion to their respective
Participating Interest. Any amounts deposited in the Venture Bank Account shall
be deemed to be held in trust for the Participants.
11.2 MANAGER'S FUNDS. Neither Party nor the Manager shall in any manner
commingle the Venture's funds with its own funds.
11.3 MONTHLY STATEMENTS. Within 15 days of the end of each calendar month,
the Manager shall deliver to each Participant financial statements and other
relevant information, including copies of the monthly account statements for the
Venture Bank Account, reflecting in reasonable detail all transactions of the
Venture during the preceding month.
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11.4 CASH CALLS. The Manager shall, at least seven days but not more than 21
days, prior to the start of each calendar month present to each Participant an
invoice based on the most recently approved Program and Budget to each
Participant for their proportionate share based on their then Participating
Interest of:
(i) if advances for the prior month are less than actual
Expenditures, an amount equal to actual Expenditures less
advances for the prior month; and
(ii) estimated Expenditures for the succeeding month; and
(iii) estimated Expenditures for the second succeeding month to
maintain a minimum 30 day cash balance;
less:
(iv) if advances for the prior month are greater than actual
Expenditures, an amount equal to advances less actual
Expenditures for the prior month; and
(v) estimated Expenditures for the second succeeding month from
the prior month billing; and
(vi) interest or other revenues received by the Manager for the
account of the Venture; and
(vii) any cash receipts from the sale of Assets received by the
Manager for the account of the Venture;
plus or less:
(viii) any other adjustment necessary to comply with this Agreement.
Where a monthly invoicing results in a negative amount the Manager shall at the
sole option of each Participant, refund to the Participants their proportionate
share of the over-contribution or apply such amount as a credit to amounts
invoiced for the next ensuing month. The Manager shall use all reasonable
efforts to maintain at all times a minimum cash balance approximately equal to
the estimated disbursements for the next 90 days.
11.5 SPECIAL CASH CALLS. The Manager may present an invoice at any time to
each Participant for significant Expenditures requiring payment in a timely
manner that were unforeseen at the time of the prior monthly invoicing.
11.6 PAYMENT OF CASH CALLS. EACH Participant shall deposit in the Venture
Bank Account its proportionate share of the invoicing within 15 days of receipt
of the invoicing.
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11.7 FAILURE TO MEET CASH CALLS. If a Participant fails to meet cash calls
in the amounts and at the times specified under this Agreement the provisions of
section 7.6 of this Agreement shall be applicable in accordance with its terms.
11.8 AUDITS AND ADJUSTMENTS. The financial records of the Venture shall be
audited annually by the Auditor. The Management Committee shall arrange to have
the audit report prepared and distributed to each Participant not later than 60
days after the end of each fiscal year end. Each Participant shall also have the
right to audit the Venture's records on reasonable notice to the Manager and at
its own expense in accordance with the Accounting Procedure. All claims for
adjustment made as a result of audits must be made within twenty-four months of
delivery of the audit report to the Participants making the claim.
12. DISPOSITION OF PRODUCTS
12.1 DIVISION OF PRODUCTION. Each Participant shall be entitled and shall
take in kind and separately dispose of its share of all Products based on its
Participating Interest produced by the Venture from the Property at their
highest state of beneficiation on the Property, and for that purpose shall take
delivery of its share of the Products as the same are produced and placed in the
storage facilities for the account of such Participant. Individual ownership of
its share of said Products shall pass to each Participant concurrently with the
taking of delivery thereof in kind. Notwithstanding the foregoing the
Participants may, upon mutual agreement at any time and from time to time,
jointly sell or otherwise dispose of their respective shares of the Products and
make such arrangements in connection therewith as they deem mutually advisable,
without in any way causing them to be deemed to be in partnership. The proceeds
from such joint sales shall be to the account of the Participants in accordance
with their Participating Shares or as they may otherwise agree in writing.
12.2 EXISTING ROYALTIES. Each Participant hereby acknowledges that the
Property and all Products derived from the Property are subject to the Existing
Royalties and further acknowledges that it is liable for and shall direct the
Manager to pay from time to time on its behalf its Participating Share of the
Existing Royalties. Each Participant shall deliver to the Manager on a timely
basis all such information as the Manager needs in order to enable the Manager
to pay the Existing Royalties from time to time on behalf of such Participant.
12.3 LIENS. Each Participant shall have a lien on the other Participant's
share of Products to secure payment of such Participant's proportionate share of
Expenditures based on its Participating Interest. If a Participant defaults in
making a cash contribution in accordance with the terms of this Agreement or to
cure such default in accordance with section 7.6, then the non-defaulting
Participant may without limitation to its other rights at law, in equity or
under this Agreement:
(a) Elect to treat the default as an immediate and automatic
assignment to the non-defaulting Participant of the defaulting
Participant's share of the Products and from and after the
non-defaulting Participant making such election, the
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non-defaulting Participant may require the purchaser of the
defaulting Participant's share of Products to make payment
therefor to the non-defaulting Participant while the default
continues; and
(b) Enforce the lien created by the default in payment by taking
possession of all or any part of the defaulting Participant's
share of Products and selling the same. The proceeds of the
sale shall be firstly applied by the non-defaulting
Participant in payment of any Expenditures to be paid by the
defaulting Participant and not paid by it and any balance
remaining shall be paid to the defaulting Participant after
deducting reasonable costs of the sale. Any sale made
aforesaid shall be a perpetual bar both at law and in equity
against any claims to the Products sold by the defaulting
Participant and its assigns and against all other Persons
claiming the Products or any part or parcel thereof, sold as
aforesaid, from, through or under the defaulting Participant
or its assigns.
In the event that the value of such Products so assigned to the non-defaulting
Participant or the proceeds thereof are sufficient to cure a default or repay a
loan pursuant to the terms of section 7.5, the defaulting Participant shall be
deemed to be back in good standing under the terms of this Agreement.
13. WITHDRAWAL AND TERMINATION
13.1 WITHDRAWAL. A Participant may elect to withdraw as a Participant from
this Agreement by giving notice to the other Participant of the effective date
of withdrawal, which date shall be the later of the end of the then current
Program and Budget or 60 days after the date of the notice. Upon any such
withdrawal this Agreement shall terminate and the withdrawing Participant shall
be deemed to have transferred to the remaining Participant or those existing at
the date of this Agreement, all of its Participating Interest in the Assets and
in this Agreement without cost and free and clear of any and all Encumbrances
arising by, through or under such withdrawing Participant, except those to which
both Participants have given their written consent after the date of this
Agreement, and subject to the Existing Royalties and the terms and conditions of
all leases, permits, licences or other approvals related to the Property. No
withdrawal under this section 13.1 shall relieve the withdrawing Participant of
its share of liabilities, costs, penalties or fines to Governmental Authority
having jurisdiction or to third Persons (whether such accrues before or after
such withdrawal) arising out of Operations conducted prior to such withdrawal.
For the purposes of this section 13.1, the withdrawing Participant's
proportionate share of such liabilities shall be equal to its Participating
Interest at the time that the conduct of Operations giving rise to such
liability, cost, penalty or fine occurred.
13.2 TERMINATION. The Joint Venture shall terminate on the first to occur
of:
(i) the written agreement of the Participants to terminate the
Joint Venture;
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(ii) the purchase by one Participant of the Participating Interest
of all other Participating Interests in accordance with the
terms of this Agreement; and
(iii) 11:59 p.m. (Montreal time) on that date which is the second
anniversary of the date upon which the last interest of the
Participating Interests in the Assets is surrendered,
terminated, assigned, transferred or otherwise permanently
disposed of; provided that, subject to applicable law to the
contrary, the surrender, termination, assignment, transfer or
other permanent disposition of such last interest of the
Participating Interests in the Assets shall not occur until
the Participants shall have agreed to terminate the Commercial
Production, if it has commenced and is ongoing.
13.3 CONTINUING OBLIGATIONS. On termination of this Agreement under section
13.3, but subject to the terms of section 13.2, the Participants shall each
remain liable for continuing obligations hereunder as set out herein 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.
13.4 DISPOSITION OF ASSETS ON TERMINATION. Promptly after termination of the
Venture and this Agreement, the Management Committee shall direct the Manager to
take all action necessary to wind up the activities of the Venture and all costs
and expenses incurred in connection with the termination of the Venture shall be
expenses chargeable to the Venture. Any Participant that has a negative capital
account balance when the Venture is terminated for any reason shall contribute
to the Assets of the Venture an amount sufficient to raise such balance to zero.
The Assets shall first be paid, applied or distributed in satisfaction of all
liabilities of the Venture to third Persons and then to satisfy any debts,
obligations or liabilities owed to the Participants. Before distributing any
funds or Assets to Participants the Manager shall have the right to segregate
amounts which are necessary to discharge continuing obligations or to purchase
for the account of Participants, all required letters of credit, surety bonds or
other security for the performance of such obligations as may be required by any
Governmental Authority having jurisdiction. The foregoing shall not be construed
to include the repayment of any Participant's capital contributions. Thereafter
any remaining cash and all other Assets shall be distributed to the Participants
in proportion to their respective Participating Interests, first in the ratio
and to the extent of their respective capital accounts and then in proportion to
their respective Participating Interests subject to any dilution, reduction or
termination of such Participating Interests as may have occurred pursuant to the
terms of this Agreement. No Participant shall receive a distribution of any
interest in Products or proceeds from the sale thereof if such Participant's
Participating Interest therein has been terminated pursuant to this Agreement
other than by conversion to a royalty interest in accordance with the terms of
this Agreement.
13.5 RIGHT TO DATA AFTER TERMINATION. Each withdrawing Participant under
section 13.1 shall be entitled to all information acquired in the conduct of the
Venture prior to such withdrawal and pursuant to any Program of which the
withdrawing Participant has duly paid its pro rata share of costs and expenses,
based upon its Participating Interest, including copies of maps, data and
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reports which can be reproduced and which have not theretofore been furnished to
such withdrawing Participant, but such withdrawing Participant shall for a
period of two years from the date of such withdrawal or the completion of the
aforementioned Program, whichever is the later, hold in strict confidence all
information acquired by it in the conduct of the Venture.
13.6 CONTINUING AUTHORITY. On termination of the Venture or the deemed
withdrawal of a Participant from the Venture or the withdrawal of a Participant
pursuant to section 13.2 the Manager shall have the power and authority, subject
to control of the Management Committee, 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 existing liability or
obligation, prosecute and defend actions on behalf of the Participants and the
Venture, mortgage Assets and take any other reasonable action in any matter with
respect to which the former Participants continue to have or appear or are
alleged to have, a common interest or a common liability.
14. TRANSFER OF INTEREST AND FINANCING
14.1 RIGHTS TO TRANSFER. Neither Participant shall transfer its
Participating Interest or its interest in this Agreement other than in
accordance with this Article 14. Either Participant may, at any time after
execution of this Agreement, Transfer all of its rights, title and interest
under this Agreement to an Affiliate of that Participant or, subject to and in
compliance with sections 14.2 and 14.3 below, to a third party, provided such
transferring Participant shall provide to the other Participant 30 days notice
of such Transfer and provided (i) that in the case of a Transfer to such an
Affiliate, the transferring Participant shall ensure that such subsidiary shall
remain as an Affiliate for so long as it is entitled to the benefit of and bound
by the terms of this Agreement and (ii) such Affiliate shall have agreed in
writing with the other Participant, on terms satisfactory to the other
Participant, to be bound by the terms and conditions of this Agreement and to
perform all obligations of the transferring Participant hereunder.
Notwithstanding such Transfer to an Affiliate by a Participant, such
transferring Participant shall remain at all times liable for the due
performance of all covenants and obligations of such transferring Participant to
be performed hereunder. In the event a Participant completes a Transfer to a
third party in accordance with the terms of this Article 14 such Participant
shall be released from its obligations under this Agreement to the extent such
third party has agreed in writing to be bound by and to perform the obligations
of the transferring Participant under this Agreement.
14.2 RIGHT OF FIRST REFUSAL. If a Participant should desire to transfer to a
third party all of its Participating Interest and its interest in this Agreement
(the "Offered Interest"), it shall first have received an all cash BONA FIDE
written offer from an arm's length third party (the "Third Party Offer") which
shall state the price and all other pertinent terms and conditions upon which it
wishes to complete the Transfer and the transferring Participant shall have
delivered a copy of the Third Party Offer to the other Participant together with
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its own offer to sell to the other Participant on the same terms and conditions
(the "Offer"). The other Participant shall have 60 days from the date the Offer
is delivered to it, to notify the transferring Participant whether it elects to
acquire the Offered Interest at the price and on the terms and conditions set
forth in the Offer. If the other Participant does so elect the Transfer shall be
consummated promptly after notice of such election is delivered by the
transferring Participant. If the transferring Participant fails to so elect,
within the period provided for in this section, the transferring Participant
shall have 90 days following the expiration of such period to consummate the
Transfer to a third Person at a price and on terms no less favourable than those
offered in the Offer and in accordance with this Article 14. If the transferring
Participant fails to consummate the Transfer to a third Person within the period
set forth in this section, the right of first refusal herein contained shall be
deemed to be revived. Any subsequent proposal to Transfer its Participating
Interest and an interest in this Agreement to a third party by the transferring
Participant shall be conducted in accordance with the procedures set forth in
this section 14.2 and the balance of this Article 14. If the transferring
Participant transfers the Offered Interest pursuant to this section, it shall be
released from all liabilities and obligations under this Agreement provided that
the third Person delivers to the remaining Participant an agreement in writing
covenanting to be bound by this Agreement and the terms hereof in accordance
with section 14.3 below.
14.3 LIMITATIONS ON FREE TRANSFERABILITY. The Transfer right of a
Participant in this Article 14 shall be subject to the following terms and
conditions:
(a) No Transfer shall be for less than all of a Participating
Interest and related interest in this Agreement.
(b) No transferee of all of the interest of a Participating
Interest and related interest in this Agreement shall have the
rights of a Participant unless and until (i) the
non-transferring Participant shall have consented to such
Transfer, such consent not to be unreasonably withheld having
regard to the mining experience and reputation and the
financial strength of the proposed transferee, and (ii) the
transferee has, as of the effective date of the Transfer,
committed in writing on terms satisfactory to the
non-transferring Participant to be bound by the terms of this
Agreement and the terms of the Venture to the same extent as
the transferring Participant.
(c) No Transfer permitted by this Article 14 shall relieve the
transferring Participant of its share of any liability, cost,
penalty or fine 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.
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14.4 ACQUISITION OF INTEREST. Upon the completion of the transfer of a
Participating Interest pursuant to the terms of this Agreement, the Participants
or the third party acquiring such Participating Interest will be deemed to have
acquired a corresponding portion of the transferring Party's Expenditures. Such
transferee shall be entitled to all the rights and benefits accruing, and will
be subject to the same duties and obligations attributable, to the Participating
Interest which it has purchased from the transferring Party, including the right
to participate in any further Programs and Budgets and the right to have its
Participating Interest increased or reduced in the same manner as the
transferring Party.
14.5 FINANCING.
(a) Other than as set out below neither Participant shall
mortgage, pledge, charge, hypothecate or otherwise encumber
its Participating Interest or any part thereof without the
prior written approval of the other Participant.
(b) Notwithstanding the provisions of subparagraph 14.5(a) above,
each of the Participants shall be entitled to mortgage,
pledge, hypothecate or otherwise encumber its Participating
Interest provided that all of the proceeds of such mortgage,
charge, pledge or hypothec are applied by such Participant to
fund its participation in Programs and Budgets pursuant to
this Agreement and then only if the holder of the mortgage,
pledge, charge, hypothecation or other encumbrance shall have
agreed in writing on terms satisfactory to the other
Participant that, (i) upon realization of its security, its
recourse shall be limited to the sale of all, but not less
than all, of the Participating Interest in which it has
security and (ii) such holder is and shall be bound by the
provisions of this Agreement, including this Article 14, and
shall have agreed in writing with the other Participant to
require any purchaser of the Participating Interest from it to
be bound by the terms of this Agreement, including this
Article 14.
15. DISPUTES
15.1 DISPUTE RESOLUTION.
(a) In the event the Management Committee members of the
Participants are unable to resolve any dispute between the
Participants arising out of this Agreement or out of
Operations, within twenty (20) days of being seized of the
matter in dispute, then the matter in dispute shall be
referred to the Chief Executive Officers of the Participants
specifying in detail the matter in dispute, and the Chief
Executive Officers of each Participant shall meet and use
reasonable efforts to resolve the dispute.
(b) If the Chief Executive Officers of the Participants are unable
to resolve the dispute within fifteen (15) days of the matter
being referred to them by the Management Committee then the
matter shall be referred to binding arbitration with no appeal
from the arbitration. Such referral to binding arbitration
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shall be to a single arbitrator (qualified by education and
experience to decide the matter and fluent in both English and
French) pursuant to Book VII - Arbitrations - Code of Civil
Procedure (Quebec) and its successor legislation, which act
shall govern such arbitration proceeding in accordance with
its terms except to the extent modified by the rules of
arbitration set out in Schedule "E". The determination of such
arbitrator shall be final and binding upon the Parties hereto
and the costs of such arbitration shall be as determined by
the arbitrator. The Parties covenant that they shall conduct
all aspects of such arbitration having regard at all times to
expediting the final resolution of such arbitration.
16. FORCE MAJEURE
16.1 FORCE MAJEURE. Time shall be of the essence of this Agreement, provided
however that notwithstanding anything to the contrary contained herein, if
either Party should at any time or times during the currency of this Agreement
be delayed in or prevented from complying with this Agreement by reason of wars,
acts of God, strike, lockouts or other labour disputes, inability to access its
place of business or the Property, acts of public insurrection, riots, fire,
storm, flood, explosion, government restriction, failure to obtain any approvals
required from any Governmental Authority having jurisdiction (but only in the
circumstances that the Manager has filed timely and complete applications for
such approvals from such Governmental Authorities having jurisdiction),
including environmental protection agencies, interference of persons primarily
concerned about environmental issues or native rights groups or other causes
whether of the kind enumerated above or otherwise which are not reasonably
within the control of the applicable Party, but excluding for greater certainty,
unavailability of funds, the period of all such delays resulting from such
causes or any of them, shall be excluded in computing the time within which
anything required or permitted by the applicable Party to be done, is to be done
hereunder, and the time within which anything is to be done hereunder shall be
extended by the total period of all such delays. Nothing contained in this
Article shall require the applicable Party to settle any labour dispute or to
test the constitutionality of any enacted law. In the event that any Party
asserts that an event of force majeure has occurred, it shall complete such
reasonable actions or cause such reasonable actions to be completed as may be
necessary to correct or terminate the alleged event of force majeure and give
notice in writing to the other Party specifying the following:
(a) the cause and nature of the alleged event of force majeure;
(b) a summary of the action it or its Agents have taken to the
date of such notice to correct the alleged event of force
majeure;
(c) confirmation as to all acts, actions and things done by it or
its Agents to terminate the event of force majeure; and
(d) the reasonably expected duration of the period of force
majeure.
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Any Party asserting an event of force majeure shall provide ongoing periodic
notice in writing to the other Party including updates with respect to such
events of force majeure, including the matters set out above, within 15 days of
the end of each calendar month during the period of force majeure and shall
provide prompt notice in writing to the other Party upon the termination of the
event of force majeure.
17. AREA OF INTEREST
17.1 AREA OF INTEREST. Any mineral claim, mineral lease or mineral property
or any direct or indirect right, title or interest therein, including a royalty
interest, (such right, title or interest hereafter collectively a "Mineral
Interest"), which is located or otherwise acquired by or on behalf of any Party
and which lies wholly or partly within 1 kilometer of the circumambient
boundaries of any part of the Property as they exist on the date hereof (the
"Area of Interest"), including any Mineral Interest into which such Mineral
Interest may hereafter be converted, shall if the other Party so elects as set
out in section 17.2, form part of the Property and become subject to this
Agreement.
17.2 NOTICE OF ACQUISITION. If any Party acquires any Mineral Interest
during the term of this Agreement which lies wholly or partly within the Area of
Interest as set out in section 17.1 hereof, the acquiring Party shall within 30
days of such acquisition give notice of such acquisition or right to the same to
the other Party, together with copies of all related geological and other data
in its possession, and such other Party shall have the right during the 30 days
next following the receipt of such notice and data, by written notice to the
acquiring Party and upon payment of its pro rata share of the costs of
acquisition of such Mineral Interest, to elect that such Mineral Interest be
included as part of the Property under this Agreement. Failure to provide such
notice to the acquiring Party shall be deemed to constitute an election by the
other Party that such Mineral Interest not be included as part of the Property
under this Agreement. Any agreement entered into by the acquiring Party for the
acquisition of a Mineral Interest shall contain a term permitting the
disposition of an interest therein to the other Party. If the other Party elects
that such Mineral Interest not be included as part of the Property under this
Agreement, the acquiring Party shall be free to deal with such Mineral Interest
as it sees fit, free of any obligations contained in this Agreement. If the
other Party elects that such Interest shall be included as part of the Property
under this Agreement, all acquisition costs incurred (or the cash equivalent
thereof) with respect to such Mineral Interest shall be included as part of the
Expenditures under this Agreement and the other Party shall, within 120 days of
delivering notice electing that such Mineral Interest form part of the Property
under this Agreement, reimburse the acquiring Party or contribute cash to the
Venture in an amount equal to its proportionate share of such acquisition costs
as determined by its Participating Interest at the time of such acquisition.
18. INFORMATION, DATA AND CONFIDENTIALITY
18.1 ACCESS. At all times during the term of this Agreement the duly
authorized representatives of each Participant shall, at their sole risk and
expense and at reasonable intervals and times, have access to the Property and
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to all technical records and other factual engineering data and information
relating to the Property which is in the possession or control of the Manager.
18.2 PROGRESS REPORTS. During the period of any Exploration Operations the
Manager shall furnish the Participants with semi-annual progress reports and
with a final report on conclusion of each Exploration Program. The final report
shall show the Operations performed and the results obtained and shall be
accompanied by a statement of Expenditures and copies of pertinent plans, assay
maps, diamond drill records and other factual engineering data. During the
period of Development Operations the Manager shall provide monthly progress
reports to the Participants, which reports shall include information on any
material changes or affecting the development of a Mine or the related Mine
Development plan.
18.3 CONFIDENTIALITY. All information received by any Party as a result of
or in connection with the Assets or this Agreement shall be confidential, shall
be treated as confidential and shall not be disclosed, without the prior written
consent of the other Party to any other Person. Such consent shall not be
unreasonably withheld. Where disclosure is required by law or a regulatory
authority having jurisdiction, a copy of the information required to be
disclosed including without limitation, any press release shall be provided to
the other Party in advance of its disclosure. The consent required by this
Article 18 shall not apply to a disclosure: (i) to an Affiliate or Agent that
has a bona fide need to be informed; and (ii) to any third Person to whom the
disclosing Party contemplates a Transfer of all or any part of its interest in
or to the Assets and this Agreement. Only such confidential information as such
third Person shall have a legitimate business need to know shall be disclosed
and such third Person shall first agree in writing to protect the confidential
information from further disclosure to the same extent as the Parties are
obligated under this Article 18. The provisions of this Article 18 shall
continue to apply to any Party which withdraws or which is deemed to have
withdrawn from this Agreement. Where disclosure is required in connection with a
third Person Transfer, any intended third Person transferee must sign a
confidentiality agreement containing provisions similar to this Article 18. No
Party shall be liable to the disclosing Person in respect of any
interpretations, opinions, findings, conclusions or other non-factual
information included by the disclosing Person in any report or other document
provided to the other Party whether included by negligence or otherwise. Each
disclosing Person shall jointly and severally indemnify and save harmless the
other Party from and against all Losses actually incurred by the other Party in
respect of the release by the disclosing Person of such non-factual information
to third Persons, irrespective of whether such release was consented to by the
other Party.
19. EVENT OF DEFAULT OF PARTICIPANT
19.1 EVENT OF DEFAULT . In the event of an occurrence with respect to any
Participant of any one or more of the following:
(a) if the whole or any material part of the Participating
Interest of the Participant shall be the subject of a lien,
charge or attachment other than in accordance with the terms
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of this Agreement and such lien, charge or attachment shall
not have been discharged within sixty days thereafter; or
(b) It has committed an act of bankruptcy, is insolvent, has
proposed a compromising arrangement to its creditors
generally, has had any petition for a receiving order in
bankruptcy filed against it, has made a voluntary assignment
in bankruptcy, has taken any proceedings with respect to a
compromise or arrangement, has taken any proceeding to have
itself declared bankrupt or wound-up, has taken any proceeding
to have a receiver appointed in respect of any part of its
assets, has had any encumbrancer take possession of any of its
property and has had any execution or distress become
enforceable or become levied upon any of its property;
then:
(c) if such event occurs, such event shall be a default of such
Participant under this Agreement and the other Participant,
without prejudice to any other remedy it may have, shall have
the right to purchase the Participating Interest of the
defaulting Participant in accordance with the following:
(i) by giving concurrent written notice of its election
to do so to the defaulting Participant and to the
Manager (if it is not the defaulting Participant);
(ii) the completion of the purchase of the said defaulting
Participating Interest shall take place at the time
and place, and the defaulting Participant shall
perform such acts and execute such documents, as the
purchasing Participant may reasonably specify or
provide. The purchase price of the aforesaid
Participating Interest to the purchasing Participant
shall be the fair market value thereof to be
determined, within seventy five days of receipt by
the defaulting Participant of the notice provided for
herein, by an independent appraiser appointed by
mutual agreement of the Participant or failing such
agreement, by arbitration pursuant to Article 15; and
(iii) payment of any purchase price made as aforesaid shall
be a perpetual bar both at law and in equity by the
defaulting Participant and its successors and assigns
against the other Participant, and its successors and
assigns.
19.2 ADDITIONAL REMEDIES. In the event of the occurrence with respect to any
Participant of any of the events referred to in section 19.1, each
non-defaulting Participant, without prejudice to any other remedy it may have,
shall have the right to pursue any remedy available at law or in equity, it
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being acknowledged by each of the Participants that specific performance,
injunctive relief (mandatory or otherwise) or other equitable relief may be the
only adequate remedy for a default.
20. INSURANCE
20.1 INSURANCE. Commencing on the Effective Date, the Management Committee
shall cause the Manager to place and maintain with a reputable insurer or
insurers such insurance, if any, as the Management Committee in its discretion
deems advisable in order to protect the Parties together with any other
insurance as any Participant may by notice reasonably request. The Manager
shall, on the written request of any Participant, provide it with evidence of
such insurance. This paragraph shall not preclude any Party from placing, for
its own account, insurance for greater or other coverage than that placed by the
Manager.
21. NOTICE
21.1 NOTICES. All notices, requests, demands or other communications which
by the terms hereof are permitted to be given by either Party to the other shall
be given in writing by personal delivery or delivered by facsimile transmission,
addressed to such other Party or delivered to such other Party as follows:
(i) to Halo at:
▇▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇
Attention: Chief Executive Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) to Metanor at:
2872, chemin ▇▇▇▇▇▇▇▇
Bureau 2
Val D'Or, Quebec
Attention: President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
22. MISCELLANEOUS - GENERAL
22.1 ACTS IN GOOD FAITH. The Parties shall at all times during the currency
of this Agreement and after the termination of this Agreement during the period,
if any, when the provisions of this Agreement continue to apply, act in good
faith with respect to the other Party and shall do or cause to be done all
reasonable things within their respective control which may be necessary or
desirable to give full effect to the provisions hereof. The following clauses
shall survive termination of this Agreement: 3.1, 6.1, 6.2, 7.6, 7.7, 11.5,
13.1, 13.3, 13.4, 13.5, 13.6, 15.1, 18.3, 19.1 and 19.2.
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22.2 AMENDMENT. This Agreement may not be amended or modified in any respect
except by written instrument signed by the Parties.
22.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof. The execution of
this Agreement has not been induced by nor do the Parties rely upon or regard as
material, any covenants, representations or warranties whatsoever not
incorporated herein and made a part hereof.
22.4 ENUREMENT. This Agreement shall enure to the benefit of and be binding
upon the Parties and each of their successors and permitted assigns, but no
other Person.
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22.5 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same document.
IN WITNESS WHEREOF the Parties have executed these presents as of the Effective
Date.
HALO RESOURCES LTD.
Per: ________________________________________
Name:
Title:
RESSOURCES METANOR INC./METANOR RESOURCES INC.
Per: ________________________________________
Name:
Title:
LIST OF SCHEDULES [Not Attached]
Schedule A DESCRIPTION OF PROPERTY
Schedule B ACCOUNTING PROCEDURE
Schedule C EXISTING ROYALTIES
Schedule D NET SMELTER RETURNS ROYALTY
Schedule E RULES FOR ARBITRATION