JOINT VENTURE AGREEMENT
Dated May 20, 1996
BETWEEN
IDAHO CONSOLIDATED METALS CORPORATION
AND
CYPRUS GOLD EXPLORATION CORPORATION
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS
ARTICLE 2 REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
2.1 Capacity of Participants
2.2 Representations and Warranties
2.3 Representations and Warranties
2.4 Disclosures
2.5 Record Title
2.6 Joint Loss of Title
ARTICLE 3 NAME, PURPOSES AND TERM
3.1 General
3.2 Name
3.3 Purposes
3.4 Limitation
ARTICLE 4 RELATIONSHIP OF THE PARTICIPANTS
4.1 No Partnership
4.2 U.S. Tax Elections and Allocations
4.3 Other Business Opportunities
4.4 Waiver of Right to Partition
4.5 Implied Covenants
ARTICLE 5 CONTRIBUTIONS BY PARTICIPANTS
5.1 Participants' Initial Contributions
5.2 Failure to Make Initial Contributions
5.3 Obligations Prior to Earn-In
5.4 Additional Cash Contributions
5.5 Earn-In
5.6 Additional Interest
5.7 Reports
5.8 Development by ICMC
ARTICLE 6 INTERESTS OF PARTICIPANTS;
DEFAULTS AND REMEDIES; FINANCING
6.1 Participating Interests
6.2 Changes in Participating Interests
6.3 Voluntary Reduction in Participation
6.4 Default in Making Contributions
6.5 Conversion of Interest
6.6 Continuing Liabilities Upon Adjustments of
Participating Interests
6.7 Financing by Cyprus
ARTICLE 7 MANAGEMENT COMMITTEE
7.1 Organization and Composition
7.2 Decisions
7.3 Meetings
7.4 Action Without Meeting
7.5 Matters Requiring Approval
ARTICLE 8 MANAGER
8.1 Appointment
8.2 Powers and Duties of Manager
8.3 Standard of Care
8.4 Resignation; Deemed Offer to Resign
8.5 Payments to Manager
8.6 Transactions With Affiliates
8.7 Activities During Deadlock
ARTICLE 9 PROGRAMS AND BUDGETS
9.1 Initial Program and Budget
9.2 Operations Pursuant to Programs and Budgets
9.3 Presentation of Programs and Budgets
9.4 Review and Approval of Proposed Programs and
Budget
9.5 Election to Participate
9.6 Deadlock on Proposed Programs and Budgets
9.7 Budget Overruns; Program Changes
9.8 Emergency or Unexpected Expenditures
ARTICLE 10 ACCOUNTS AND SETTLEMENTS
ARTICLE 11 DISPOSITION OF PRODUCTION
11.1 Taking in Kind
11.2 Failure of Participant to Take in Kind
ARTICLE 12 WITHDRAWAL AND TERMINATION
12.1 Termination by Expiration or Agreement
12.2 Withdrawal
12.3 Continuing Obligations
12.4 Disposition of Assets on Termination
12.5 Right to Data after Termination
12.6 Continuing Authority
12.7 Non-Compete Covenants
12.8 Mutual Withdrawal
ARTICLE 13 SURRENDER OF PROPERTY
13.1 Surrender of Property
13.2 Reacquisition
ARTICLE 14 TRANSFER OF INTEREST
14.1 General
14.2 Limitations on Free Transferability
14.3 Right of First Refusal
14.4 Exceptions to Right of First Refusal
ARTICLE 15 CONFIDENTIALITY AND RELEASES
15.1 General
15.2 Exceptions
15.3 Duration of Confidentiality
15.4 Releases
ARTICLE 16 AREA OF INTEREST
16.1 Acquisitions in Area of Interest
ARTICLE 17 GENERAL PROVISIONS
17.1 Notices
17.2 Waiver
17.3 Modification
17.4 Force Majeure
17.5 Economic Force Majeure
17.6 Governing Law
17.7 Rule Against Perpetuities
17.8 Further Assurances
17.9 Survival of Terms and Conditions
17.10 Entire Agreement; Successors and Assigns
17.11 Memorandum
17.12 Funds
JOINT VENTURE AGREEMENT
THIS AGREEMENT, made effective as of May 20, 1996 between IDAHO
CONSOLIDATED METALS CORPORATION ("ICMC") with an address of P.O. Box
1124, Lewiston, Idaho 83501 and CYPRUS GOLD EXPLORATION CORPORATION
("Cyprus") with an address of 9100 East Mineral Circle, P.O. Box 3299,
Englewood, Colorado 80155-3299.
RECITALS
A. ICMC owns and/or controls one hundred percent (100%) interest in
certain unpatented mining claims, such claims being located in
Idaho County, State of Idaho, which are described in Exhibit A-1,
attached hereto and made a part hereof.
B. Cyprus owns and/or controls one hundred percent (100%) interest in
certain unpatented mining claims, such claims being located in
Idaho County, State of Idaho, which are described in Exhibit A-2,
attached hereto and made a part hereof.
C. The claims described in Exhibits A-1 and A-2 shall herein be
collectively referred to as the "Property".
D. Cyprus wishes to participate with ICMC in the exploration,
evaluation, development and mining of minerals within the Property
and ICMC is willing to grant such right to Cyprus.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, ICMC and Cyprus agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 "ACCOUNTING PROCEDURE" means the procedures set forth in
Exhibit B.
1.2 "AFFILIATE" means any person, partnership, joint venture,
corporation or other form of enterprise which directly or
indirectly controls, is controlled by, or is under common
control with, a Participant. For purposes of the preceding
sentence, "control" means possession, directly or indirectly,
of the power to direct or cause direction of management and
policies through ownership of voting securities, contract,
voting trust or otherwise.
1.3 "AGREEMENT" means this Joint Venture Agreement, including all
amendments and modifications thereof, and all schedules and
exhibits, which are incorporated herein by this reference.
1.4 "ASSETS" means the Property, Products and all other real and
personal property, tangible and intangible, held for the
benefit of the Participants hereunder.
1.5 "BUDGET" means a detailed estimate of all costs to be incurred
by the Participants with respect to a Program and a schedule of
cash advances to be made by the Participants.
1.6 "COMMENCEMENT OF COMMERCIAL PRODUCTION" means the date upon
which the production and processing facilities developed under
this Agreement achieve an ore production and processing rate
for a continuous thirty-day period equal to at least seventy
percent (70%) of the design rate established in a Feasibility
Study.
1.7 "DEVELOPMENT" means all preparation for the removal and
recovery of Products, including the construction or
installation of a mill or any other improvements to be used for
the mining, handling, milling, processing or other
beneficiation of Products, and all Exploration work conducted
subsequent to a decision to commence Development as
contemplated by a feasibility study.
1.8 "EARN-IN" means the date upon which Cyprus earns its interest
in the Property pursuant to Section 5.5.
1.9 "EXPLORATION" means all activities directed toward ascertaining
the existence, location, quantity, quality or commercial value
of deposits of Products.
1.10 "EXPLORATION EXPENDITURES" means the cost of evaluation of the
Property defined as further exploring and developing the
Property, including drilling, excavating and searching by
recognized prospecting techniques, sampling, assaying, testing
and evaluating materials removed from the Property, mapping,
plotting, surveying, constructing and maintaining camps, roads,
works and structures necessary to carry out such evaluation,
sampling or testing, all studies including but not limited to a
Feasibility Study required to develop a mine and all work that
may be required in preparing a mine for operating, the cost or
payments to maintain the Property, including costs to locate
and/or relocate the unpatented mining claims, Property
acquisition costs, taxes and/or fees to maintain Property and
filings together with an allowance for overhead and
administrative expenses as described in Section 5.3(a).
1.11 "FEASIBILITY STUDY" means a detailed study compiled by Manager
or an independent third party conducted to determine commercial
feasibility and viability of placing a prospective orebody or
deposit into production and may include, but not be limited to:
(a) such geophysical, geochemical, geological, aerial or other
survey as may be necessary to provide a reasonable
estimate of the quality and extent of the deposit;
(b) such technical or assay reports as may be necessary to
evaluate any proposed method of extraction and processing;
(c) the area required for optimum development of the orebody
or deposit;
(d) a mine construction program setting forth the descriptions
of the work, permits, equipment, facilities, supplies and
mines required to bring the prospective orebody or
deposits of Products into Commercial Production, and the
estimated costs thereof or a schedule of expenditures by
year of the costs necessary to bring the project into
production;
(e) details of a proposed annual program for initial
development of the deposit;
(f) a plan for such reclamation of the Properties as is
required by law and the estimated costs hereof;
(g) conclusions and recommendations regarding the economic
feasibility and timing for bringing the prospective
orebody or deposits of Products into Commercial
Production, taking into account items (a) through (e)
above;
(h) such other information as the Management Committee may
deem appropriate to allow banking or other financial
institutions familiar with the mining business to make a
decision to loan funds sufficient to construct the
proposed mine with security based solely on the reserves
and mine described in a Feasibility Study.
1.12 "INITIAL CONTRIBUTION" means that contribution each Participant
has made or agrees to make pursuant to Section 5.1.
1.13 "JOINT ACCOUNT" means the account maintained in accordance with
the Accounting Procedure showing the charges and credits
accruing to the Participants.
1.14 "MANAGEMENT COMMITTEE" means the committee established under
Article 7.
1.15 "MANAGER" means Cyprus during the Earn-In phase or the person
or entity appointed under Article 8 to manage Operations, or
any successor Manager.
1.16 "MINING" means the mining, extracting, producing, handling,
milling or other processing of Products.
1.17 "NET PROCEEDS OF PRODUCTION ROYALTY" means certain amounts
calculated as provided in Exhibit C, which may be payable to a
Participant under Section 6.4.
1.18 "OPERATIONS" means the activities carried out under this
Agreement after Earn-In.
1.19 "PARTICIPANT" and "PARTICIPANTS" means the persons or entities
that have a Participating Interest.
1.20 "PARTICIPATING Interest" means the percentage interest
representing the operating ownership interest of a Participant
in Assets, and all other rights and obligations arising under
this Agreement, as such interest may from time to time be
adjusted hereunder. Participating Interests shall be
calculated to three decimal places and rounded to two (e.g.,
1.519% rounded to 1.52%). Decimals of .005 or more shall be
rounded up to .01, decimals of less than .005 shall be rounded
down. The initial Participating Interests of the Participants
are set forth in Section 6.1.
1.21 "PRIME RATE" means the prime interest rate quoted as "Prime" by
the Wall Street Journal as said rate may change from day to day
(which quoted rate may not be the lowest rate averaged on a
month-to-month basis at which a financing institution loans
funds).
1.22 "PRODUCTION DECISION" means a decision by the Management
Committee to commence Development and put the Property into
production.
1.23 "PRODUCTS" means all ores, minerals, and mineral resources
produced from the Property under this Agreement.
1.24 "PROGRAM" means a description in reasonable detail of the
activities of the Venture which are to be conducted by the
Manager during a period.
1.25 "PROPERTY" means those interests in property described in
Exhibits A-1 and A-2.
1.26 "SIMPLE MAJORITY" means a decision by the Management Committee
by greater than 50% of the votes being entitled to be cast.
1.27 "TRANSFER" means sell, grant, assign, encumber, pledge or
otherwise commit or dispose of.
1.28 "VENTURE" means the business arrangement of the Participants
under this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES; TITLE TO ASSETS
-----------------------------------------------
2.1 CAPACITY OF PARTICIPANTS. Each of the parties hereto
represents and warrants as follows:
(a) that it is a corporation duly incorporated and in good
standing in its state of incorporation and that it is
qualified to do business and is in good standing in those
jurisdictions where necessary in order to carry out the
purposes of this Agreement;
(b) that it has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and
that all corporate and other actions required to authorize
it to enter into and perform this Agreement have been
properly taken;
(c) that it will not breach any other agreement or arrangement
by entering into or performing this Agreement; and
(d) that this Agreement has been duly executed and delivered
by it and is valid and binding upon it in accordance with
its terms.
2.2 REPRESENTATIONS AND WARRANTIES. ICMC makes the following
representations and warranties effective the date hereof:
(a) ICMC has the full and exclusive right and power to act on
behalf of ICMC, and on behalf of any other interested
person or entities, to enter into this Agreement and to
grant the rights granted to Cyprus hereunder.
(b) To the best of its knowledge and belief with respect to
unpatented mining claims set forth in Exhibit A-1 and that
are included within the Property, subject to the paramount
title of the United States and except as disclosed in
writing to Cyprus: (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required
location and validation work was properly performed; (iii)
location notices and certificates were properly recorded
and filed with appropriate governmental agencies; (iv) the
claims are free and clear of defects, liens and
encumbrances arising by, through or under ICMC, except
those of record or disclosed in writing to Cyprus and
defects, liens, and any such encumbrances that do not
materially affect Cyprus' rights under this Agreement; (v)
ICMC has not received notice from anyone asserting
conflicting claims and (vi) the unpatented mining claims
are in good standing and compliance with all federal and
state regulations in force as of the effective date of
this Agreement. Nothing in this Section 2.2(b), however,
shall be deemed to be a representation or a warranty that
any of the unpatented mining claims contains a discovery
of minerals.
(c) except as otherwise provided herein, Cyprus may with
ICMC's prior written consent, such consent to not be
unreasonably withheld, take all action necessary
(including judicial proceedings) to remove any cloud from
or cure any defect in ICMC's title to the Property. ICMC
agrees to cooperate with Cyprus in any such action taken
and agrees to pay its proportionate share of all costs and
expenses (including attorney's fees) incurred by Cyprus.
Cyprus' share of such costs and expenses shall be credited
against Cyprus Earn-In obligations set forth in Section
5.3(a).
(d) ICMC knows of no violation of any applicable federal,
state, regional, or county law or regulation relating to
zoning, land use, environmental protection, or otherwise
with respect to the Property or activities relating
thereto; and,
(e) With respect to the Property, ICMC knows of no pending or
threatened actions, suits, claims or proceedings.
(f) With respect to certain of the Property acquired by ICMC
pursuant to an Option to Purchase Interest in Mining
Claims Agreement with Idaho Mining and Development Company
dated February 8, 1996 and an agreement being negotiated
with Idaho Gold Corporation for the Friday, Friday
Fraction, Alaska No. 3 and Alaska No. 4 patented claims,
MS 1834, patent no. 41174 and the Regina patented claim,
MS 1833, patent no. 39226, which will become Property
subject to this Agreement, ICMC shall be responsible for
all costs associated with such acquisitions except for the
contribution by Cyprus as set forth in Section 5.3(b)
herein.
The representations and warranties set forth above shall
survive the execution and delivery of any documents of
Transfer provided under this Agreement.
2.3 REPRESENTATIONS AND WARRANTIES. Cyprus makes the following
representations and warranties effective the date hereof:
(a) To the best of its knowledge and belief with respect to
unpatented mining claims that are set forth in Exhibit A-2
and included within the Property, subject to the paramount
title of the United States and except as disclosed in
writing to ICMC: (i) the unpatented mining claims were
properly laid out and monumented; (ii) all required
location and validation work was properly performed; (iii)
location notices and certificates were properly recorded
and filed with appropriate governmental agencies; (iv) the
claims are free and clear of defects, liens and
encumbrances arising by, through or under Cyprus, except
those of record or disclosed in writing to ICMC and
defects, liens, and any such encumbrances that do not
materially affect Cyprus' rights under this Agreement;
(v) Cyprus has not received notice from any one asserting
conflicting claims; and (vi) the unpatented mining claims
are in good standing and compliance with all federal and
state regulations in force as of the effective date of
this Agreement. Nothing in this Section 2.2(b), however,
shall be deemed to be a representation or a warranty that
any of the unpatented mining claims contains a discovery
of minerals.
2.4 DISCLOSURES. Each of the Participants represents and warrants
that it is unaware of any material facts or circumstances which
have not been disclosed in this Agreement, which would be
disclosed to the other Participant in order to prevent the
representations in this Article 2 from being materially
misleading.
2.5 RECORD TITLE. Title to the Assets shall be held by the Manager
for the benefit of the Venture after Cyprus has earned its
interest.
2.6 JOINT LOSS OF TITLE. Any failure or loss of title to the
Assets, and all costs of defending title, shall be charged to
the Joint Account, except that all costs and losses arising out
of or resulting from breach of the representations and
warranties of ICMC shall be charged to ICMC and all such costs
and losses arising out of gross negligence by Cyprus or the
Manager shall be charged to Cyprus or the Manager as the case
may be.
ARTICLE 3
NAME, PURPOSES AND TERM
-----------------------
3.1 GENERAL. ICMC and Cyprus hereby enter into this Agreement for
the purposes hereinafter stated, and they agree that all of
their rights and all of the Operations on or in connection with
the Property shall be subject to and governed by this
Agreement.
3.2 NAME. The name of this Venture shall be the Petsite Venture.
The Manager shall accomplish any registration required by
applicable assumed or fictitious name statutes and similar
statutes.
3.3 PURPOSES. This Agreement is entered into for the following
purposes and for no others, and shall serve as the exclusive
means by which the Participants, or either of them, accomplish
such purposes:
(a) to conduct Exploration within the Property,
(b) to evaluate the possible Development of the Property,
(c) to engage in Development and Mining Operations on the
Property, if feasible.
(d) to engage in marketing Products, but only to the extent
permitted by Article 11, and
(e) to perform any other activity necessary, appropriate, or
incidental to any of the foregoing.
3.4 LIMITATION. Unless the Participants otherwise agree in
writing, the Operations shall be limited to the purposes
described in Section 3.3, and nothing in this Agreement shall
be construed to enlarge such purposes.
ARTICLE 4
RELATIONSHIP OF THE PARTICIPANTS
--------------------------------
4.1 NO PARTNERSHIP. Nothing contained in this Agreement shall be
deemed to constitute either Participant the partner of the
other, nor, except as otherwise herein expressly provided, to
constitute either Participant the agent or legal representative
of the other, nor to create any fiduciary relationship between
them. It is not the intention of the Participants to create,
nor shall this Agreement be construed to create, any mining,
commercial or other partnership. Neither Participant shall
have any authority to act for or to assume any obligation or
responsibility on behalf of the other Participant, except as
otherwise expressly provided herein. The rights, duties,
obligations and liabilities of the Participants shall be
several and not joint or collective. Each Participant shall be
responsible only for its obligations as herein set out and
shall be liable only for its share of the costs and expenses as
provided herein, it being the express purpose and intention of
the Participants that their ownership of Assets and the rights
acquired hereunder shall be as tenants in common. Each
Participant, its directors, officers, employees, agents and
attorneys shall be indemnified from and against any and all
losses, claims, damages and liabilities arising out of any act
or any assumption of liability by the indemnifying Participant,
or any of its directors, officers, employees, agents and
attorneys done or undertaken, or apparently done or undertaken,
on behalf of the other Participant, except pursuant to the
authority expressly granted herein or as otherwise agreed in
writing between the Participants.
4.2 U.S. TAX ELECTIONS AND ALLOCATIONS. Each of the parties hereto
agrees and elects to be excluded from the application of all of
the provisions of Subchapter K of the Internal Revenue Code of
1986, as authorized by Treasury Regulation Section 1.761-2. The
parties hereto agree to execute or join in such instruments as
are necessary to make such election effective, and hereby
authorize and direct Manager to take such action as is
necessary to effectuate such purpose, including filing of the
partnership tax return required by Treasury Regulation Section
1.761-2(b)(2). Each party shall be entitled to claim all tax
benefits, write-offs, and deductions with respect to all and
any costs which it has incurred.
4.3 OTHER BUSINESS OPPORTUNITIES. Except as expressly provided in
this Agreement, each Participant shall have the right
independently to engage in and receive full benefits from
business activities, whether or not competitive with the
Operations, without consulting the other. The doctrines of
"corporate opportunity" or "business opportunity" shall not be
applied to any other activity, venture, or operation of either
Participant. Unless otherwise agreed in writing, no
Participant shall have any obligation to mill, beneficiate or
otherwise treat any Products or any other Participant's share
of Products in any facility owned or controlled by such
Participant.
4.4 WAIVER OF RIGHT TO PARTITION. The Participants hereby waive
and release all rights of partition, or of sale in lieu
thereof, or other division of Assets, including any such right
provided by statute.
4.5 IMPLIED COVENANTS. There are no implied covenants contained in
this Agreement other than those of good faith and fair dealing.
ARTICLE 5
CONTRIBUTIONS BY PARTICIPANTS
-----------------------------
5.1 PARTICIPANTS' INITIAL CONTRIBUTIONS. ICMC, as its Initial
Contribution, hereby contributes the Property described in
Exhibit A-1 to the purposes of this Agreement. Cyprus, as its
Initial Contribution, shall contribute the Property described
in Exhibit A-2 and the Exploration Expenditures and payment as
hereinafter set forth.
5.2 FAILURE TO MAKE INITIAL CONTRIBUTIONS. Cyprus' failure to make
its Initial Contribution in accordance with the provisions of
this Article 5 shall not be deemed to be a withdrawal of Cyprus
from this Agreement and the termination of its Interest
hereunder. In the event Cyprus fails to make its firm
commitment and its Initial Contribution pursuant to this
Article 5, ICMC shall provide Cyprus written notice of such
failure. If within thirty (30) days of receipt of notice
Cyprus does not cure such failure, then Cyprus shall be deemed
to have withdrawn from this Agreement. Additionally, at any
time prior to Earn-In, but only after Cyprus completes its firm
commitment, Cyprus may provide ICMC with sixty (60) days
written notice of Cyprus' decision to terminate its interest in
this Agreement. Upon such event, Cyprus shall have no further
right, title or interest in and to the Property or this
Agreement. Cyprus' withdrawal shall be effective sixty (60)
days after such failure or notice, but such withdrawal shall
not relieve Cyprus of its reclamation or any other obligations
or liabilities resulting from its work on the Property. Cyprus
shall be responsible only for reclamation resulting directly
from its work on the Property, but shall not be responsible for
reclamation liability incurred prior to the effective date of
this Agreement or for any liability incurred by ICMC as a
result of conduct of mining operations pursuant to Section 5.8
herein. Except as provided in this Section 5.2, Cyprus'
withdrawal shall relieve Cyprus from any other obligation to
make contributions hereunder.
5.3 OBLIGATIONS PRIOR TO EARN-IN. Prior to earning its interest in
the Property, and subject to the termination provisions
contained herein, Cyprus shall be required, but not obligated
to make the following Exploration Expenditures on or for the
benefit of the Property to extend this Agreement into the next
period with the exception of a firm commitment to incur Three
Hundred Thousand Dollars ($300,000) in Exploration Expenditures
by the first anniversary date of this Agreement.
(a) Exploration Expenditures:
Minimum
Expenditure Cumulative
Date Amount Amount
----------------------- ----------- -----------------
By 1st anniversary date $300,000 $300,000
(Firm Commitment)
By 2nd anniversary date 400,000 700,000
Ten percent (10%) of all Exploration Expenditures, except
property payments, taxes and/or fees to maintain the
Property, to cover Cyprus' overhead and administrative
costs shall be charged by Cyprus and shall qualify as
Exploration Expenditures but shall be limited to five
percent (5%) on contracts in excess of One Hundred
Thousand Dollars ($100,000).
All Exploration Expenditures shall be cumulative and any
Exploration Expenditures in excess of the minimum required
in any period shall be credited and applied toward any
subsequent Exploration Expenditures.
(b) Payments:
Upon execution of this Agreement, Cyprus shall provide
Fifty Thousand Dollars ($50,000) to complete ICMC's
acquisition of certain of the Property described in
Exhibit A-1 and being the claims subject to the Option to
Purchase Interest in Mining Claims Agreement dated
February 8, 1996 between Idaho Mining and Development
Company and ICMC. This Fifty Thousand Dollar ($50,000)
cash payment shall be credited against Cyprus' firm
commitment of Three Hundred Thousand Dollars ($300,000) in
Exploration Expenditures. Additionally, Cyprus shall
during the Earn-In period be responsible for maintaining
the unpatented lode claims which comprise the Property and
may relocate any of the unpatented claims which Cyprus
believes may be defective.
(c) Cyprus may terminate this Agreement at any time during the
Earn-In period for any reason or no reason after Cyprus
completes the firm commitment by providing ICMC sixty (60)
days written notice of such termination. Until Cyprus has
earned its interest in the Property, Cyprus shall have
complete discretion in conducting exploration activities,
maintaining the Property and shall conduct operations
according to its own plans. Cyprus shall hold ICMC
harmless from any liabilities resulting from Cyprus'
activities on the Property during the Earn-In period.
5.4 ADDITIONAL CASH CONTRIBUTIONS. At such time as Cyprus has
earned its fifty percent (50%) interest in the Property,
pursuant to Section 5.5, the Participants, subject to any
election permitted by Sections 6.1, 6.2 and 6.3, shall be
obligated to contribute funds to adopted Programs and Budgets
in proportion to their respective Participating Interest.
5.5 EARN-IN. Cyprus shall earn a fifty percent (50%) Participating
Interest in the Property upon completion of the Exploration
Expenditures and payment set forth under Section 5.3. Except
as provided for in Section 6.2, subsequent to Cyprus earning
fifty percent (50%) interest in the Property, all expenditures
for the benefit of the Property shall be contributed by the
Parties in accordance to their Participating Interest.
Immediately upon Cyprus satisfying its Earn-In requirements
under Section 5.3 (a) and (b), ICMC shall execute and deliver
to Cyprus such documents that are necessary to transfer an
appropriate percentage of interest in ICMC's interest in and to
the Property to Cyprus.
5.6 ADDITIONAL INTEREST. Within sixty (60) days after Cyprus
completes its requirements to earn fifty percent (50%)
Participating Interest in the Property, Cyprus, by providing
written notice to ICMC, may elect to earn an additional twenty
percent (20%) Participating Interest in the Property, bringing
its interest to seventy percent (70%), by completing the
following:
(a) Exploration Expenditures:
Minimum
Expenditure Cumulative
Date Amount Amount
----------------------- ----------- -----------------
By 3rd anniversary date $400,000 $1,100,000
By 4th anniversary date 400,000 1,500,000
Ten percent (10%) of all Exploration Expenditures, except
property payments, taxes and/or fees to maintain the
Property, to cover Cyprus' overhead and administrative
costs shall be charged by Cyprus and shall qualify as
Exploration Expenditures but shall be limited to five
percent (5%) on contracts in excess of One Hundred
Thousand Dollars ($100,000).
All Exploration Expenditures shall be cumulative and any
Exploration Expenditures in excess of the minimum required
in any period, including Exploration Expenditures incurred
in the first and second years of this Agreement, shall be
credited and applied toward any subsequent Exploration
Expenditures.
(b) Cyprus shall, during this Earn-In period, continue to be
responsible for maintaining the unpatented lode claims
which comprise the Property.
5.7 REPORTS. Cyprus shall, during the Earn-In period, provide ICMC
with copies of periodic reports describing its activities on
the Property and shall conduct a semi-annual review with ICMC
to discuss the progress Cyprus has made during the preceding
period as well as the plans and programs being contemplated for
the next period.
5.8 DEVELOPMENT BY ICMC. Cyprus and ICMC acknowledge that a
Mineral Resource has been identified on certain of the Eagle
and Golden Eagle Claims, such claims being described in the
attached Exhibit F . For the purposes of this Section 5.8, a
Mineral Resource shall be defined as being equal to or less
than fifty thousand ounces (50,000 ozs.) of gold. ICMC may
propose to develop such Mineral Resource, shall do so at its
sole risk, and shall be responsible for all costs to develop
such Mineral Resource, so long as in the opinion of Cyprus it
does not interfere with or adversely impact any Operations or
planned Operations on the Property. ICMC shall submit to
Cyprus for Cyprus' approval, such approval not to be
unreasonably withheld, their detailed plans on each phase of
mining activity. ICMC hereby indemnifies, defends and holds
harmless Cyprus, its affiliates, their successors and assigns
and their respective directors, officers, employees and
shareholders from and against any and all past, present and
future obligations, liabilities, claims, damages, losses or
expenses (including interest and penalties, legal fees and
other reasonable expenses of defending any actions relating
thereto) sustained in any way relating to all activities on or
pertaining to the Mineral Resource, including without
limitation, reclamation and environmental liabilities and
obligations.
If at any time prior to Cyprus earning seventy percent (70%)
interest in the Property production from the Mineral Resource
is projected to exceed fifty thousand ounces (50,000 ozs.),
ICMC shall provide Cyprus with a written notice of the
projected date production will exceed the fifty-thousand ounce
(50,000 ounce) level, such notice to be provided to Cyprus at
least sixty (60) days prior to such projected date. Cyprus
shall have the right, but not the obligation, to participate in
the production beyond the initial fifty thousand ounces (50,000
ozs.) by providing its share of the production costs and
expenses.
Notwithstanding the above, at its sole election after vesting
in a seventy percent (70%) Participating Interest in the
Property, Cyprus may require that production of the Mineral
Resource be terminated.
ARTICLE 6
INTERESTS OF PARTICIPANTS;
DEFAULTS AND REMEDIES; FINANCING
--------------------------------
6.1 PARTICIPATING INTERESTS. The Participants shall have the
following Participating Interests upon Cyprus' completion of
the obligations set forth in Section 5.3:
Cyprus - 50%
ICMC - 50%
Cyprus shall have no Participating Interest unless and until it
has completed the Exploration Expenditures set forth in Section
5.3 during the Earn-In period. At such time as Cyprus
completes the obligations set forth in Section 5.3 and has
earned its fifty percent (50%) Participating Interest in the
Property and determines it will not elect to earn an additional
twenty percent (20%) Participating Interest in the Property as
set forth in Section 5.6, ICMC and Cyprus shall have a period
of sixty (60) days to either (a) elect to participate in the
Venture and contribute to each Program and Budget for their
entire respective Participating Interest, or (b) to elect to
participate in the Venture pursuant to Section 6.3(a), or (c)
elect to withdraw from the Venture and convert to a five
percent (5%) Net Proceeds of Production as set out in Exhibit
C. In no event shall the cumulative Net Proceeds of Production
payable to the withdrawing party, whether one or more, exceed
an aggregate of five percent (5%). A Management Committee
shall then be formed as provided for in Section 7.1.
At Earn-In Cyprus and ICMC shall, irrespective of their actual
expenditures on or with respect to the Property, be deemed to
have incurred expenditures as follows:
Cyprus $700,000
ICMC 700,000
In the event Cyprus, pursuant to Section 5.6, elected to earn
an additional twenty percent (20%) Participating Interest in
the Property, at such time as Cyprus completes the obligations
set forth in such Section 5.6 and has earned its seventy
percent (70%) Participating Interest in the Property, ICMC and
Cyprus shall have a period of ninety (90) days to either (a)
elect to participate in the Venture and contribute to each
Program and Budget for their entire respective Participating
Interest, or (b) to elect to participate in the Venture
pursuant to Section 6.3(a), or (c) elect to withdraw from the
venture and convert to a five percent (5%) Net Proceeds of
Production Royalty as set out in Exhibit C. In no event shall
the cumulative Net Proceeds of Production Royalty payable to
the withdrawing party, whether one or more, exceed an aggregate
of five percent (5%). A Management Committee shall then be
formed as provided for in Section 7.1.
At Earn-In Cyprus and ICMC shall, irrespective of their actual
expenditures on or with respect to the Property, be deemed to
have incurred expenditures as follows:
Cyprus $1,500,000
ICMC 642,857
6.2 CHANGES IN PARTICIPATING INTERESTS. A Participant's
Participating Interest shall be changed as follows:
(a) As provided in Section 6.5; or
(b) Upon an election by a Participant pursuant to Section 6.3
to contribute less to an adopted Program and Budget than
the percentage reflected by its Participating Interest; or
(c) In the event of default by a Participant in making its
agreed-upon contribution to an adopted Program and Budget,
followed by an election by the other Participant to invoke
Section 6.4(b); or
(d) Transfer by a Participant of less than all its
Participating Interest in accordance with Article 14; or
(e) Acquisition of less than all of the Participating Interest
of the other Participant, however arising.
(f) Pursuant to Section 5.6.
6.3 VOLUNTARY REDUCTION IN PARTICIPATION. A Participant may elect,
as provided in Section 9.5, to limit its contributions to an
adopted Program and Budget as follows:
(a) To some lesser amount than its respective Participating
Interest; or
(b) Not at all.
If a Participant elects to contribute to an adopted Program and
Budget some lesser amount than its respective Participating
Interest, or not at all, the Participating Interest of that
Participant shall be recalculated at the time of election by
dividing: (i) the sum of (a) the agreed value of the
Participant's deemed expenditure under Section 6.1 and (b) the
total of all of the Participant's actual expenditures including
the amount the Participant elects to contribute to the adopted
Program and Budget; by (ii) the sum of (a) and (b) above for
all Participants; and then multiplying the result by one
hundred. The Participating Interest of the other Participant
shall thereupon become the difference between 100% and the
recalculated Participating Interest.
6.4 DEFAULT IN MAKING CONTRIBUTIONS.
(a) If a Participant defaults in making a contribution or cash
call required by an approved Program and Budget, the non-
defaulting Participant may advance the defaulted
contribution on behalf of the defaulting Participant and
treat the same, together with any accrued interest, as a
demand loan bearing interest from the date of the advance
at the Prime Rate plus two percent (2%) compounded
quarterly. The failure to repay said loan upon demand
shall be a default. Each Participant hereby grants to the
other a lien upon its interest in the Property and a
security interest in its rights under this Agreement and
in its Participating Interest in other Assets, and the
proceeds therefrom, to secure any loan made hereunder,
including interest thereon, reasonable attorneys' fees and
all other reasonable costs and expenses incurred in
recovering the loan with interest and in enforcing such
lien or security interest, or both. A non-defaulting
Participant may elect the applicable remedy under this
Section 6.4, or, to the extent a Participant has a lien or
security interest under applicable law, it shall be
entitled to its rights and remedies at law and in equity.
All such remedies shall be cumulative. The election of
one or more remedies shall not waive the election of any
other remedies. Each Participant hereby irrevocably
appoints the other its attorney-in-fact to execute, file
and record all instruments necessary to perfect or
effectuate the provisions hereof.
(b) The Participants acknowledge that if a Participant
defaults in making a contribution, a cash call, in
repaying a loan or any payment, as required hereunder, it
will be difficult to measure the damages resulting from
such default. In the event such default is not cured by
the defaulting Participant within thirty (30) days after
receiving notice of such default, as reasonable liquidated
damages, the defaulting Participant shall be deemed to
have withdrawn from the Venture and to have automatically
relinquished its Participating Interest to the non-
defaulting Participant; provided, however, the defaulting
Participant shall have the right to receive only from five
percent (5%) of Net Proceeds of Production Royalty, as set
out in Exhibit C, and not from any other source, an amount
equal to the defaulting Participant's actual expenditures
contributed hereunder. Upon receipt of such amount the
defaulting Participant shall thereafter have no further
right, title, or interest under this Agreement or in the
Assets.
6.5 CONVERSION OF INTEREST. If at any time the Participating
Interest of a Participant is reduced to ten percent (10%) or
less by an affirmative election not to contribute all or some
portion of its share pursuant to a Program and Budget as
provided in Article 9 and the resulting application of the
dilution formula in Section 6.3, the diluted Participant shall
be deemed to have withdrawn from the Venture and this Agreement
shall terminate; provided, however, the diluting Participant
shall have the right to receive only from five percent (5%) of
Net Proceeds of Production Royalty, as set out in Exhibit C,
and not from any other source, an amount equal to one hundred
and fifteen percent (115%) of the diluting Participant's actual
or deemed expenditures contributed hereunder, whichever is
greater. Upon receipt of such amount the diluting Participant
shall thereafter have no further right, title, or interest
under this Agreement or in the Assets.
6.6 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING
INTERESTS. Any reduction of a Participant's Participating
Interest under this Section 6 shall not relieve such
Participant of its share of any liability, whether it accrued
before or after such reduction, arising out of Operations
conducted prior to such reduction. For purposes of this
Article 6, such Participant's share of such liability shall be
equal to its Participating Interest at the time such liability
was incurred. The increased Participating Interest accruing to
a Participant as a result of the reduction of the other
Participant's Participating Interest shall be free of
royalties, liens or other encumbrances arising by, through or
under such other Participant, other than those existing at the
time the Property was acquired or those to which both
Participants have given their written consent. An adjustment
to a Participating Interest need not be evidenced during the
term of this Agreement by the execution and recording of
appropriate instruments, but each Participant's Participating
Interest shall be shown in the books of the Manager. However,
either Participant, at any time upon the request of the other
Participant, shall execute and acknowledge instruments
necessary to evidence such adjustment in form sufficient for
recording in the jurisdiction where the Property is located.
6.7 FINANCING BY CYPRUS. Within sixty (60) days after Cyprus
completes its requirements to earn an additional twenty percent
(20%) Participating Interest in the Property as set forth in
Section 5.6, bringing its Participating Interest to seventy
percent (70%), and ICMC and Cyprus have elected to participate
in the Venture in proportion to their respective Participating
Interest, ICMC may elect in writing to have Cyprus fund ICMC's
share of Exploration Expenditures until the completion of a
Feasibility Study. In such event, such expenditures by Cyprus
on behalf of ICMC shall be treated as a loan and shall bear
interest at the Prime Rate plus two percent (2%), compounded
quarterly. Such loan shall be secured by ICMC's interest in
the Property and the Assets. Cyprus shall be repaid from
eighty-five percent (85%) of the proceeds received by ICMC from
the sale of its proportionate share of Products, after
deduction of operating costs. ICMC shall execute a document
securing the loan with its interest in the Property and the
Assets and assigning to Cyprus such eighty-five percent (85%)
of the proceeds in form and content acceptable to the legal
counsel of both Cyprus and ICMC.
In the event a Feasibility Study is completed and Development
is not recommended and the Management Committee votes to
continue Exploration, Cyprus will continue to fund ICMC's share
of Exploration Expenditures until the completion of another
Feasibility Study. Such additional expenditures by Cyprus on
behalf of ICMC shall also be treated as a loan and recouped by
Cyprus as previously set forth in this Section 6.7.
If the Management Committee, after completion of a Feasibility
Study, votes to suspend Operations on the Property for any
reason, no additional interest would accrue on the Exploration
Expenditures provided by Cyprus on behalf of ICMC until
Operations are again commenced.
In the event a Feasibility Study recommends development, but
for reasons beyond the control of the Participants (e.g.
government taking, Force Majeure, etc.) the Property can never
be developed, accrual of interest on the Exploration
Expenditures provided by Cyprus on behalf of ICMC would cease.
Repayment to Cyprus of such loan and any interest accrued would
be repaid from ICMC's share of any compensation that the
Participants may be entitled to as a result of the prohibition
of Mining. If no compensation is received by the Participants,
the loan and its accrued interest would be forgiven when the
Participants agree to drop their interest in the Property,
discontinue any litigation which may have commenced and
dissolve the Venture.
ARTICLE 7
MANAGEMENT COMMITTEE
--------------------
7.1 ORGANIZATION AND COMPOSITION. After completion of Cyprus'
Earn-In and the election by ICMC and Cyprus to participate in
the Venture as provided in Section 6.1, the Participants shall
establish a Management Committee to determine overall policies,
objectives, procedures, methods and actions under this
Agreement. The Management Committee shall consist of one
member appointed by ICMC and one member appointed by Cyprus.
Each Participant may appoint one or more alternates to act in
the absence of a regular member. Any alternate so acting shall
be deemed a member. Appointments shall be made or changed by
notice in writing to the other Participant.
7.2 DECISIONS. Each Participant, acting through its appointed
member(s) shall have a vote equal to its Participating Interest
in the Property. Decisions of the Management Committee shall
be decided by Simple Majority of the Participating Interests.
In the event of a deadlock, the Manager shall hold the deciding
vote.
7.3 MEETINGS. The Management Committee shall hold regular meetings
at least annually at mutually agreed places. The Manager shall
give thirty (30) days' written notice to the Participants of
such regular meetings. Additionally, either Participant may
call a special meeting upon thirty (30) days' written notice to
the Manager and the other Participant. In case of emergency,
reasonable notice of a special meeting shall suffice. There
shall be a quorum if at least one member representing each
Participant is present. The Management Committee shall not
transact any business at a meeting unless a quorum is present
at the commencement of the meeting. If a quorum is not present
at the commencement of the meeting or within one-half hour
after the time fixed for the commencement of the meeting, the
meeting shall be adjourned to the same time and day of the next
week at the same place. If a quorum is not present at the
commencement of the adjourned meeting, one representative shall
be deemed to constitute a quorum. Each notice of a meeting
shall include an itemized agenda and detailed back-up
information prepared by the Manager in the case of a regular
meeting, or by the Participant calling the meeting in the case
of a special meeting, but any matters may be considered with
the consent of all Participants. The Manager shall prepare
minutes of all meetings and shall distribute copies of such
minutes to the Participants within thirty (30) days after the
meeting. The minutes, when signed by all Participants, shall
be the official record of the decisions made by the Management
Committee and shall be binding on the Manager and the
Participants. If personnel employed in Operations are required
to attend a Management Committee meeting, reasonable costs
incurred in connection with such attendance shall be a Venture
cost. All other costs shall be paid by the Participants
individually.
7.4 ACTION WITHOUT MEETING. In lieu of meetings, the Management
Committee may hold telephone conferences, so long as all
decisions are immediately confirmed in writing by the
Participants.
7.5 MATTERS REQUIRING APPROVAL. Except as otherwise delegated to
the Manager in Section 8.2, the Management Committee shall have
exclusive authority to determine all management matters related
to this Agreement.
ARTICLE 8
MANAGER
--------
8.1 APPOINTMENT. Following completion of Cyprus' Earn-In as
provided for in Sections 5.5 or 5.6 Cyprus shall be the initial
Manager.
8.2 POWERS AND DUTIES OF MANAGER. Subject to the terms and
provisions of this Agreement, the Manager shall have the
following powers and duties which shall be discharged in
accordance with adopted Programs and Budgets:
(a) The Manager shall manage, direct and control Operations.
(b) The Manager shall implement the decisions of the
Management Committee, shall make all expenditures
necessary to carry out adopted Programs and Budgets, and
shall promptly advise the Management Committee if it lacks
sufficient funds to carry out its responsibilities under
this Agreement.
(c) The Manager shall: (i) purchase or otherwise acquire all
material, supplies, equipment, water, utility and
transportation services required for Operations, such
purchases and acquisitions to be made on the best terms
available, taking into account all of the circumstances;
(ii) obtain such customary warranties and guarantees as
are available in connection with such purchases and
acquisitions; and (iii) keep the Assets free and clear of
all liens and encumbrances, except for those existing at
the time of, or created concurrent with, the acquisition
of such Assets, or mechanic's or materialmen's liens which
shall be released or discharged in a diligent manner, or
liens and encumbrances specifically approved by the
Management Committee.
(d) The Manager shall conduct such title examinations and cure
such title defects as may be advisable in the reasonable
judgment of the Manager.
(e) The Manager shall: (i) make or arrange for all payments
required by leases, licenses, permits, contracts and other
agreements related to the Assets; (ii) pay all taxes,
assessments and like charges on Operations and Assets
except taxes determined or measured by a Participant's
sales revenue or net income. If authorized by the
Management Committee, the Manager shall have the right to
contest in the courts or otherwise, the validity or amount
of any taxes, assessments or charges if the Manager deems
them to be unlawful, unjust, unequal or excessive, or to
undertake such other steps or proceedings as the Manager
may deem reasonably necessary to secure a cancellation,
reduction, readjustment or equalization thereof before the
Manager shall be required to pay them, but in no event
shall the Manager permit or allow title to the Assets to
be lost as the result of the nonpayment of any taxes,
assessments or like charges; and (iii) shall do all other
acts reasonably necessary to maintain the Assets.
(f) The Manager shall: (i) apply for all necessary permits,
licenses and approvals; (ii) comply with applicable
federal, provincial, municipal and local laws and
regulations; (iii) notify promptly the Management
Committee of any allegations of substantial violation
thereof; and (iv) prepare and file all reports or notices
required for Operations. The Manager shall not be in
breach of this provision if a violation has occurred in
spite of the Manager's good faith efforts to comply, and
the Manager has timely cured or disposed of such violation
through performance, or payment of fines and penalties.
(g) The Manager shall prosecute and defend, but shall not
initiate without consent of the Management Committee, all
litigation or administrative proceedings greater than
$50,000 arising out of Operations. The non-managing
Participant shall have the right to participate, at its
own expense, in such litigation or administrative
proceedings. The non-managing Participant's approval
shall be required in advance of any settlement involving
payments, commitments or obligations, if the non-managing
Participant's share is in excess of Twenty-Five Thousand
Dollars ($25,000) in cash or value.
(h) The Manager shall provide insurance for the benefit of the
Participants as provided in Exhibit D.
(i) The Manager may dispose of Assets, whether by release,
abandonment, surrender or Transfer in the ordinary course
of business, except that Property may be released,
abandoned or surrendered only as provided in Article 13.
However, without prior authorization from the Management
Committee, the Manager shall not: (i) dispose of Assets
in any one transaction having a value in excess of
$250,000: (ii) enter into any sales contracts or
commitments for Product, except as permitted in Section
11.2; (iii) begin a liquidation of the Venture; or (iv)
dispose of all or a substantial part of the Assets
necessary to achieve the purposes of the Venture.
(j) The Manager shall have the right to carry out its
responsibilities hereunder through agents, affiliates or
independent contractors.
(k) The Manager shall be obligated to perform or cause to be
performed during the term of this Agreement all
obligations required by law in order to maintain the
Property which obligations shall be included in Programs
and Budgets.
(l) The Manager shall keep and maintain all required
accounting and financial records pursuant to the
Accounting Procedure and in accordance with customary cost
accounting practices in the mining industry.
(m) The Manager shall keep the Management Committee advised of
all Operations by submitting in writing to the Management
Committee: (i) monthly progress reports which include
statements of expenditures and comparisons of such
expenditures to the adopted Budget; (ii) periodic
summaries of data acquired; (iii) copies of reports
concerning Operations; (iv) a detailed final report within
forty-five (45) days after completion of each Program and
Budget, which shall include comparisons between actual and
budgeted expenditures and comparisons between the
objectives and results of Programs; and (v) such other
reports as the Management Committee may reasonably
request. At all reasonable times the Manager shall
provide the Management Committee or the representative of
any Participant, upon the request of any member of the
Management Committee, access to, and the right to inspect
and copy all maps, drill logs, core tests, reports,
surveys, assays, analyses, production reports, operations,
technical, accounting and financial records, and other
information acquired in Operations. In addition, the
Manager shall allow the non-managing Participant, at the
latter's sole risk and expense, and subject to reasonable
safety regulations, to inspect the Assets and Operations
at all reasonable times, so long as the inspecting
Participant does not unreasonably interfere with
Operations.
(n) The Manager shall undertake all other activities
reasonably necessary to fulfill the foregoing.
The Manager shall not be in default of any duty under this
Section 8.2 if its failure to perform results from the failure
of the non-managing Participant to perform acts or to
contribute amounts required of it by this Agreement.
8.3 STANDARD OF CARE. The Manager shall conduct all Operations in
a good, workmanlike and efficient manner, in accordance with
all applicable laws, sound mining and other applicable industry
standards and practices, and in accordance with the terms and
provisions of leases, licenses, permits, contracts and other
agreements pertaining to Assets. The Manager shall not be
liable to the non-managing Participant for any act or omission
resulting in damage or loss except to the extent caused by or
attributable to the Manager's willful misconduct or gross
negligence.
8.4 RESIGNATION; DEEMED OFFER TO RESIGN. The Manager may resign
upon thirty (30) days prior notice to the other Participant.
If any of the following shall occur, the Manager shall be
deemed to have offered to resign, which offer shall be accepted
by the other Participant, if at all, within ninety (90) days
following such deemed offer:
(a) The Participating Interest of the Manager becomes less
than fifty percent (50%); or
(b) The Manager fails to perform a material obligation imposed
upon it under this Agreement and such failure continues
for a period of thirty (30) days after written notice from
the other Participant demanding performance; or
(c) The Manager fails to pay or contest in good faith its
bills within thirty (30) days after receiving written
notice that they are due; or
(d) A receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for a substantial part of
its assets is appointed and such appointment is neither
made ineffective nor discharged within sixty (60) days
after receiving written notice of the making thereof, or
such appointment is consented to, requested by, or
acquiesced in by the Manager; or
(e) The Manager commences a voluntary case under any
applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or consents to the entry of an order
for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or
other similar official of any substantial part of its
assets; or makes a general assignment for the benefit of
creditors; or fails generally to pay its or Venture debts
as such debts become due; or takes corporate or other
action in furtherance of any of the foregoing; or
(f) Entry is made against the Manager of a judgment, decree or
order for relief affecting a substantial part of its
assets by a court of competent jurisdiction in an
involuntary case commenced under any applicable
bankruptcy, insolvency or other similar law of any
jurisdiction now or hereafter in effect.
8.5 PAYMENTS TO MANAGER. The Manager shall be compensated for its
services and reimbursed for its costs hereunder in accordance
with the Accounting Procedure.
8.6 TRANSACTIONS WITH AFFILIATES. If the Manager engages
Affiliates to provide services hereunder, it shall do so on
terms no more favorable than would be the case with unrelated
persons in arm's-length transactions.
8.7 ACTIVITIES DURING DEADLOCK. If the Management Committee for
any reason fails to adopt a Program and Budget, subject to the
contrary direction of the Management Committee and to the
receipt of necessary funds, the Manager shall continue
Operations at levels comparable with the last adopted Program
and Budget. For purposes of determining the required
contributions of the Participants and their respective
Participating Interests, the last adopted Program and Budget
shall be deemed extended.
ARTICLE 9
PROGRAMS AND BUDGETS
--------------------
9.1 INITIAL PROGRAM AND BUDGET. The initial Program and Budget
will be provided by the Management Committee within ninety (90)
days of the Management Committee being formed.
9.2 OPERATIONS PURSUANT TO PROGRAMS AND BUDGETS. Except as
otherwise provided in Sections 7.2 and 9.7, Operations shall be
conducted, expenses shall be incurred, and Assets shall be
acquired only pursuant to approved Programs and Budgets.
9.3 PRESENTATION OF PROGRAMS AND BUDGETS. Proposed Programs and
Budgets shall be prepared by the Manager for a period of up to
one year. Each adopted Program and Budget, regardless of
length, shall be reviewed at least once a year at the annual
meeting of the Management Committee. During the period
encompassed by any Program and Budget, and at least two months
prior to its expiration, a proposed Program and Budget for the
succeeding period shall be prepared by the Manager and
submitted to the Management Committee.
9.4 REVIEW AND APPROVAL OF PROPOSED PROGRAMS AND BUDGETS. Within
thirty (30) days after submission of a proposed Program and
Budget to the Management Committee, the Management Committee
shall:
(a) Approve the proposed Program and Budget; or
(b) Propose modifications of the proposed Program and Budget;
or
(c) Reject the proposed Program and Budget.
If the Management Committee makes the elections pursuant to
Section 9.4(b) or (c), then the Manager will review the
modifications and/or any recommendations of the Management
Committee and will resubmit a Program and Budget within thirty
(30) days.
9.5 ELECTION TO PARTICIPATE. By written notice to the Management
Committee within thirty (30) days after approving a Program and
Budget except as provided for in Section 6.1, a Participant may
elect to contribute to such Program and Budget in an amount
equal to its Participating Interest or a lesser amount as
provided for in Section 6.3. If a Participant fails to so
notify the Management Committee, the Participant shall be
deemed to have elected not to contribute to such Program and
Budget and the provisions of Section 6.3 shall apply. Subject
to Section 9.6 if a Participant elects not to participate in
the Program and Budget and the other Participant elects to
contribute to the Program and Budget the provisions of Section
6.2 shall apply.
9.6 DEADLOCK ON PROPOSED PROGRAMS AND BUDGETS. If the
Participants, acting through the Management Committee, fail to
approve a Program and Budget by the beginning of the period to
which the proposed Program and Budget applies, the provisions
of Section 8.7 shall apply.
9.7 BUDGET OVERRUNS; PROGRAM CHANGES. The Manager shall
immediately notify the Management Committee of any material
departure from an adopted Program and Budget. If the Manager
exceeds an adopted Budget by more than ten percent (10%), then
such excess over ten percent (10%), shall be for the sole
account of the Manager, not creditable to the calculation of
Participating Interests, unless such excess amount is directly
caused by an emergency or unexpected expenditure made pursuant
to Section 9.8 or is otherwise authorized by the approval of
the Management Committee. Budget overruns of ten percent (10%)
or less shall be borne by the Participants in proportion to
their respective Participating Interests as of the time the
overrun occurs.
9.8 EMERGENCY OR UNEXPECTED EXPENDITURES. In case of emergency,
the Manager may take any reasonable action it deems necessary
to protect life, limb or property, to protect the Assets or to
comply with law or government regulation. The Manager may also
make reasonable expenditures for unexpected events which are
beyond its reasonable control and which do not result from a
breach by it of its standard of care. The Manager shall
promptly notify the Participants of the emergency or unexpected
expenditures, and the Manager shall be reimbursed for all
resulting costs by the Participants in proportion to their
respective Participating Interests at the time the emergency or
unexpected expenditures are incurred.
ARTICLE 10
ACCOUNTS AND SETTLEMENTS
------------------------
Matters of accounts and settlements shall be governed by the
provisions in Exhibit "B" (Accounting Procedures) attached hereto.
ARTICLE 11
DISPOSITION OF PRODUCTION
-------------------------
11.1 TAKING IN KIND. Each Participant shall take in kind or
separately dispose of its share of all Products in accordance
with its Participating Interest. Any extra expenditure
incurred in the taking in kind or separate disposition by any
Participant of its proportionate share of Products shall be
borne by such Participant. Nothing in this Agreement shall be
construed as providing, directly or indirectly, for any joint
or cooperative marketing or selling of Products or permitting
the processing of Products of any parties other than the
Participants at any processing facilities constructed by the
Participants pursuant to this Agreement. The Manager shall
give the Participants notice at least ten (10) days in advance
of the delivery date upon which their respective shares of
Products will be available.
11.2 FAILURE OF PARTICIPANT TO TAKE IN KIND. If a Participant fails
to take in kind, the Manager shall have the right, but not the
obligation, for a period of time consistent with the minimum
needs of the industry, but not to exceed one year, to purchase
the Participant's share for its own account or to sell such
share as agent for the Participant at not less than the
prevailing market price in the area. Subject to the terms of
any such contracts of sale then outstanding, during any period
that the Manager is purchasing or selling a Participant's share
of production, the Participant may elect by notice to the
Manager to take in kind. The Manager shall be entitled to
deduct from proceeds of any sale by it for the account of a
Participant reasonable expenses incurred in such a sale.
ARTICLE 12
WITHDRAWAL AND TERMINATION
--------------------------
12.1 Termination BY EXPIRATION OR AGREEMENT. This Agreement shall
terminate as expressly provided in this Agreement, unless
earlier terminated by written agreement.
12.2 WITHDRAWAL. A Participant may elect to withdraw as a
Participant from this Agreement by giving forty-five (45) days
written notice to the other Participant of the effective date
of withdrawal. Upon such withdrawal, this Agreement shall
terminate, and the withdrawing Participant shall be deemed to
have transferred to the remaining Participant, without cost and
free and clear of royalties owing to the withdrawing
Participant, liens or other encumbrances arising by, through or
under such withdrawing Participant, all of its Participating
Interest in the Assets and in this Agreement. Any withdrawal
under this Section 12.2 shall not relieve the withdrawing
Participant of its share of liabilities to third parties
(whether such accrues before or after such withdrawal)
including environmental liabilities arising out of Operations
conducted prior to such withdrawal. For purposes of this
Section 12.2, the withdrawing Participant's share of such
liabilities shall be equal to its Participating Interest at the
time such liability was incurred.
12.3 CONTINUING OBLIGATIONS. On termination of this Agreement under
Section 12.1 or 12.2, the Participants shall remain liable for
continuing obligations hereunder until final settlement of all
accounts and for any liability, whether it accrues before or
after termination, if it arises out of Operations during the
term of the Agreement.
12.4 DISPOSITION OF ASSETS ON TERMINATION. Promptly after
termination under Section 12.1, the Manager shall take all
action necessary to wind up the activities of the Venture, and
all costs and expenses incurred in connection with the
termination of the Venture shall be expenses chargeable to the
Venture. Any Participant that has a negative Joint Account
balance when the Venture is terminated for any reason shall
contribute to the Assets of the Venture an amount sufficient to
raise such balance to zero. The Assets shall first be paid,
applied, or distributed in satisfaction of all liabilities of
the Venture to third parties and then to satisfy any debts,
obligations, or liabilities owed to the Participants. Before
distributing any funds or Assets to Participants, the Manager
shall have the right to segregate amounts which, in the
Manager's reasonable judgment, are necessary to discharge
continuing obligations or to purchase for the account of
Participants, bonds or other securities for the performance of
such obligations. The foregoing shall not be construed to
include the repayment of any Participant's contributions or
Joint Account balance. Thereafter, any remaining cash and all
other Assets, including property shall be distributed (in
undivided interests unless otherwise agreed) to the
Participants, first in the ratio and to the extent of their
respective Joint Accounts and then in proportion to their
respective Participating Interests, subject to any dilution,
reduction, or termination of such Participating Interests as
may have occurred pursuant to the terms of this Agreement. No
Participant shall receive a distribution of any interest in
Products or proceeds from the sale thereof if such
Participant's Participating Interest therein has been
terminated pursuant to this Agreement.
12.5 RIGHT TO DATA AFTER TERMINATION. After termination of this
Agreement pursuant to Section 12.1, each Participant shall be
entitled to copies of all information acquired hereunder before
the effective date of termination not previously furnished to
it, but a terminating or withdrawing Participant shall not be
entitled to any such copies in respect to a later termination
or withdrawal.
12.6 CONTINUING AUTHORITY. On termination of this Agreement under
Section 12.1 or the deemed withdrawal of a Participant pursuant
to Section 6.4 or 6.5, the Manager shall have the power and
authority, subject to control of the Management Committee, if
any, to do all things on behalf of the Participants which are
reasonably necessary or convenient to: (a) wind up Operations
and (b) complete any transaction and satisfy any obligation,
unfinished or unsatisfied, at the time of such termination or
withdrawal, if the transaction or obligation arises out of
Operations prior to such termination or withdrawal. The
Manager shall have the power and authority to grant or receive
extensions of time or change the method of payment of an
already existing liability or obligation, prosecute and defend
actions on behalf of the Participants and the Venture, mortgage
Assets, and take any other reasonable action in any matter with
respect to which the former Participants continue to have, or
appear or are alleged to have, a common interest or a common
liability.
12.7 NON-COMPETE COVENANTS. A Participant that withdraws pursuant
to Section 12.2, or is deemed to have withdrawn pursuant to
Section 5.2, 6.4, or 6.5, shall not directly or indirectly
acquire any interest in property within the Area of Interest
for two (2) years after the effective date of withdrawal. If a
withdrawing Participant, or an Affiliate of a withdrawing
Participant, breaches this Section 12.7, such Participant or
Affiliate shall be obligated to offer to convey to the non-
withdrawing Participant, without cost, any such property or
interest so acquired. Such offer shall be made in writing and
can be accepted by the non-withdrawing Participant at any time
within forty-five (45) days after it is received by such non-
withdrawing Participant.
12.8 MUTUAL WITHDRAWAL. If a Participant elects to withdraw from
this Agreement pursuant to Section 12.2, the other Participant
may also elect to withdraw as a Participant by giving written
notice thereof to the other Participant within thirty (30) days
after receipt of the first Participant's notice of withdrawal,
in which event the Participants shall be deemed to have agreed
to terminate the Venture as of the first date of withdrawal
pursuant to Section 12.1.
ARTICLE 13
SURRENDER OF PROPERTY
---------------------
13.1 SURRENDER OF PROPERTY. The Management Committee may authorize
the Manager to surrender part or all of the Property. If the
Management Committee authorizes any such surrender over the
objection of a Participant, the Participant that desires to
surrender shall assign to the objecting Participant, without
cost to the objecting Participant, all of the surrendering
Participant's interest in the Property to be surrendered, and
the surrendered Property shall cease to be part of the
Property.
13.2 REACQUISITION. If any Property is surrendered under the
provisions of this Article 13, then, unless this Agreement is
earlier terminated, neither Participant nor any Affiliate
thereof shall acquire any interest in such Property or a right
to acquire such Property for a period of two years following
the date of such surrender. If a Participant reacquires any
Property in violation of this Section 13.2, the other
Participant may elect by notice to the reacquiring Participant
within forty-five (45) days after it has actual notice of such
reacquisition, to have such Property made subject to the terms
of this Agreement. In the event such an election is made, the
reacquired properties shall thereafter be treated as Property,
and the costs of reacquisition shall be borne pro rata by the
Participants and shall be included for purposes of calculating
the Participants' respective Participating Interests.
ARTICLE 14
TRANSFER OF INTEREST
--------------------
14.1 GENERAL. A Participant shall have the right to Transfer to any
third party all or any part of its interest in or to this
Agreement, its Participating Interest, or the Assets solely as
provided in this Article 14.
14.2 LIMITATIONS ON FREE TRANSFERABILITY. The Transfer right of a
Participant in Section 14.1 shall be subject to the following
terms and conditions:
(a) No transferee of all or any part of the interest of a
Participant in this Agreement, any Participating Interest,
or the Assets shall have the rights of a Participant
unless and until the transferring Participant has provided
to the other Participant notice of the Transfer, and
except as provided in Sections 14.2(e) and 14.2(f), the
transferee, as of the effective date of the Transfer, has
committed in writing to be bound by this Agreement to the
same extent as the transferring Participant;
(b) No Transfer permitted by this Article 14 shall relieve the
transferring Participant of its share of any liability,
whether accruing before or after such Transfer, which
arises out of Operations conducted prior to such Transfer;
(c) In the event of a Transfer of less than all of a
Participating Interest, the transferring Participant and
its transferee shall act and be treated as one
Participant;
(d) Except as provided in Section 14.4 (c), no Participant
shall transfer any interest in this Agreement or the
Assets except by Transfer of part or all of its
Participating Interest;
(e) From the date of execution of this Agreement, if the
Transfer is the grant of a security interest by mortgage,
deed of trust, pledge, lien or other encumbrance of any
interest in this Agreement, any Participating Interest or
the Assets to secure a loan or other indebtedness of a
Participant in a bona fide transaction, such security
interest shall be subordinate to the terms of this
Agreement and the rights and interests of the other
Participant hereunder. Upon any foreclosure or other
enforcement of rights in the security interest the
acquiring third party shall be deemed to have assumed the
position of the encumbering Participant with respect to
this Agreement and the other Participant, and it shall
comply with and be bound by the terms and conditions of
this Agreement; and
(f) If a sale or other commitment or disposition of Products
or proceeds from the sale of Products by a Participant
upon distribution to it pursuant to Article 11 creates in
a third party a security interest in Products or proceeds
therefrom prior to such distribution, such sales,
commitment or disposition shall be subject to the terms
and conditions of this Agreement.
14.3 RIGHT OF FIRST REFUSAL. Except as otherwise provided in
Sections 14.2 and 14.4, if either Participant receives an offer
to Transfer or otherwise dispose of all or a part of its
Participating Interest in the Property to a third party, prior
to accepting such offer the transferring Participant shall
first offer the interest to the non-transferring Participant at
the same terms and conditions as set forth in the third party
offer. The non-transferring Participant may accept the offer
by written notice to the transferring Participant given within
sixty (60) days of receipt of the transferring Participant s
offer. If the non-transferring Participant does not accept the
offer, then the transferring Participant may sell or otherwise
dispose of its interest under terms and conditions not less
favorable to it than those set forth in the third party offer,
provided that the sale or other disposition is effectuated
within one hundred and eighty (180) days from the effective
date of the third party offer.
14.4 EXCEPTIONS TO RIGHT OF FIRST REFUSAL. Section 14.3 shall not
apply to the following:
(a) Transfer by a Participant of all or any part of its
interest in this Agreement, any Participating Interest, or
the Assets to an Affiliate, to Amax Gold, Inc. or Amax
Gold Exploration, Inc.;
(b) Incorporation of a Participant, or corporate merger,
consolidation, amalgamation or reorganization of a
Participant by which the surviving entity shall possess
substantially all of the stock, or all of the property
rights and interests, and be subject to substantially all
of the liabilities and obligations of that Participant;
(c) The grant by a Participant of a security interest in any
interest in this Agreement, any Participating Interest, or
the Assets by mortgage, deed of trust, pledge, lien or
other encumbrance which shall be subordinate as set forth
above; or
(d) A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Participant upon
distribution to it pursuant to Article 11.
ARTICLE 15
CONFIDENTIALITY AND RELEASES
----------------------------
15.1 GENERAL. The financial terms of this Agreement and all
information obtained in connection with the performance of this
Agreement shall be the exclusive property of the Participants
and, except as provided in Section 15.2, shall not be disclosed
to any third party or the public without the prior written
consent of the other Participant, which consent shall not be
unreasonably withheld.
15.2 EXCEPTIONS. The consent required by Section 15.1 shall not
apply to a disclosure:
(a) To an Affiliate, consultant, contractor or subcontractor
that has a bona fide need to be informed;
(b) To any third party to whom the disclosing Participant
contemplates a Transfer of all or any part of its interest
in or to this Agreement, its Participating Interest, or
the Assets; or
(c) Which the disclosing Participant is required by pertinent
law or regulation or the rules of any stock exchange to
disclose; provided that in any case to which this Section
15.2 is applicable, the disclosing Participant shall give
written notice to the other Participant prior to the
making of any such disclosure.
(d) As necessary to administer or enforce this Agreement.
As to any disclosure pursuant to Section 15.2(a) or (b), only
such confidential information as such third party shall have a
legitimate business need to know shall be disclosed and such
third party shall first agree in writing to protect the
confidential information from further disclosure to the same
extent as the Participants are obligated under this Article 15.
15.3 DURATION OF CONFIDENTIALITY. The provisions of this Article 15
shall apply during the term of this Agreement and for two (2)
years following a termination pursuant to Section 12.1 or
following withdrawal pursuant to Section 12.2, and shall
continue to apply to any Participant who withdraws, who is
deemed to have withdrawn, or who Transfers its Participating
Interest, for two years following the date of such occurrence.
15.4 RELEASES. There shall be no public release by either party of
any information concerning the Property, the Operations or the
Venture without the prior written consent of the other party
(such consent not to be unreasonably withheld or delayed)
unless such information is required by a lawful authority of or
other regulatory body having jurisdiction in which case the
party making such required disclosure shall first deliver a
copy thereof to the other party and allow the other party
twenty-four (24) hours to comment on the nature and extent of
such required disclosure.
ARTICLE 16
AREA OF INTEREST
----------------
16.1 ACQUISITIONS IN AREA OF INTEREST. If at any time during the
subsistence of this Agreement any Participant or any non-
Participant that has a production royalty interest as provided
for herein, (in this section only called the "Acquiring Party")
stakes or otherwise acquires any right to or interest in any
properties within the exterior boundaries of the area depicted
on Exhibit E attached hereto and made a part hereof, ("Area of
Interest"), the Acquiring Party shall forthwith give notice to
the other parties of such acquisition, the total cost thereof
and all details in the possession of that Participant with
respect to the details of the acquisition, the nature of the
property and the known mineralization. Each other Participant
may, within thirty (30) days of receipt of the Acquiring
Party's notice, elect, by notice to the Acquiring Party, to
require that the properties and the right or interest acquired
be included in and thereafter form part of the Property for all
purposes of this Agreement.
If the election aforesaid is made, the other Participants shall
reimburse the Acquiring Party for that portion of the cost of
acquisition which is equivalent to their respective
Participating Interests.
If no other Participant makes the election aforesaid within
that period of thirty (30) days, the right or interest acquired
shall not form part of the Property and the Acquiring Party
shall be solely entitled thereto.
Notwithstanding the provisions of this Article 16, should
either Cyprus or ICMC or their Affiliates control any
properties within the Area of Interest on the effective date of
this Agreement and such properties are not included in Exhibits
A-1 or A-2, such properties shall be considered Property and
become subject to this Agreement.
ARTICLE 17
GENERAL PROVISIONS
------------------
17.1 NOTICES. All notices, payments and other required
communications ("Notices") to the Participants shall be in
writing, and shall be addressed respectively as follows:
If to ICMC:
Idaho Consolidated Metals Corporation
P.O. Box 1124
Lewiston, Idaho 83501
Attn: President
Fax: (208) 746-6678
If to Cyprus:
Cyprus Gold Exploration Corporation
9100 East Mineral Circle
P.O. Box 3299
Englewood, Colorado 80155-3299
Attn: Exploration Manager, North America
Fax: (303) 643-5943
With a copy to:
Cyprus Gold Exploration Corporation
9100 E. Mineral Circle
P.O. Box 3299
Englewood, CO 80155-3299
Attn: Land Management Department
Fax: (303) 643-5250
All Notices shall be given (i) by personal delivery to the
Participant, or (ii) by electronic communication or facsimile,
with a confirmation sent by registered or certified mail return
receipt requested, (iii) by registered or certified mail return
receipt requested or (iv) by express mail. All Notices shall
be effective and shall be deemed delivered (i) if by personal
delivery on the date of delivery if delivered during normal
business hours, and, if not delivered during normal business
hours, on the next business day following delivery, (ii) if by
electronic communication or facsimile on the next business day
following receipt of the electronic communication or facsimile,
and (iii) if solely by mail on the next business day after
actual receipt. A Participant may change its address by Notice
to the other Participant.
17.2 WAIVER. The failure of a Participant to insist on the strict
performance of any provision of this Agreement or to exercise
any right, power or remedy upon a breach hereof shall not
constitute a waiver of any provision of this Agreement or limit
the Participant's right thereafter to enforce any provision or
exercise any right.
17.3 MODIFICATION. No modification of this Agreement shall be valid
unless made in writing and duly executed by the Participants.
17.4 FORCE MAJEURE. Except for the obligation to make payments when
due hereunder, the obligations of a Participant shall be
suspended to the extent and for the period that performance is
prevented by any cause, whether foreseeable or unforeseeable,
beyond its reasonable control, including, without limitation,
lack of satisfactory market, labor disputes (however arising
and whether or not employee demands are reasonable or within
the power of the Participant to grant); acts of God; laws,
regulations, orders, proclamations, instructions or requests of
any government or governmental entity; judgments or orders of
any court; inability to obtain on reasonably acceptable terms
any public or private license, permit or other authorization;
curtailment or suspension of activities to remedy or avoid an
actual or alleged, present or prospective violation of federal,
provincial or local environmental standards; acts of war or
conditions arising out of or attributable to war, whether
declared or undeclared; riot, civil strife, insurrection or
rebellion; fire, explosion, earthquake, storm, flood, sink
holes; drought or other adverse weather condition; delay or
failure by suppliers or transporters of materials, parts,
supplies, services or equipment or by contractors' or
subcontractors' shortage of, or inability to obtain, labor,
transportation, materials, machinery, equipment, supplies,
utilities or services; accidents; breakdown of equipment,
machinery or facilities; or any other cause whether similar or
dissimilar to the foregoing. The affected Participant shall
promptly give notice to the other Participant of the suspension
of performance, stating therein the nature of the suspension,
the reasons therefor, and the expected duration thereof and
this Agreement shall be extended by the total period of such
delays or suspension. The affected Participant shall resume
performance as soon as reasonably possible. During the period
of suspension the obligations of the Participants to advance
funds pursuant to Section 9.2 shall be reduced to levels
consistent with Operations.
17.5 ECONOMIC FORCE MAJEURE. If, at any time after the Management
Committee reaches a determination, in its reasonable judgment,
that the minerals encompassed within the Property cannot be
profitably mined under the terms and conditions of this
Agreement as it is then in effect, the Management Committee may
declare that a condition of Force Majeure exists as provided in
Section 17.4, above; provided, that in no event shall a
condition of Force Majeure declared pursuant to this Section
16.5 be in effect for more than five (5) consecutive years.
17.6 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Idaho.
17.7 RULE AGAINST PERPETUITIES. Any right or option to acquire any
interest in real or personal property under this Agreement must
be exercised, if at all, so as to vest such interest in the
acquirer within twenty-one (21) years after the effective date
of this Agreement.
17.8 FURTHER ASSURANCES. Each of the Participants agrees to take
from time to time such actions and execute such additional
instruments as may be reasonably necessary or convenient to
implement and carry out the intent and purpose of this
Agreement.
17.9 SURVIVAL OF TERMS AND CONDITIONS. The following Sections shall
survive the termination of this Agreement to the full extent
necessary for their enforcement and the protection of the
Participant in whose favor they run: Sections 2.2, 4.3, 6.4,
6.6, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 13.2, 17.6 and Exhibit
"B".
17.10 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement
contains the entire understanding of the Participants and
supersedes all prior agreements and understandings between the
Participants relating to the subject matter hereof. This
Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the
Participants. In the event of any conflict between this
Agreement and any Exhibit attached hereto, the terms of this
Agreement shall be controlling.
17.11 MEMORANDUM. At the request of either Participant, a Memorandum
or short form of this Agreement, as appropriate, which shall
not disclose financial information contained herein, shall be
prepared and recorded by Manager. This Agreement shall not be
recorded.
17.12 FUNDS. All references to dollar amounts contained in this
Agreement are references to United States dollars.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the day and year first above written.
CYPRUS GOLD EXPLORATION CORPORATION
By: /s/ Milton H. Ward
---------------------------------
Title: President
------------------------------
IDAHO CONSOLIDATED METALS CORPORATION
By: /s/ Delbert W. Steiner
---------------------------------
Title: President and CEO
------------------------------
Tax ID#: 82-0465571
----------------------------
EXHIBIT "A-1"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
The following unpatented mining claims located in
Idaho County, State of Idaho.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------- ----------
Petsite #1 175109 Eagle #1 11134
Petsite #2 175110 Eagle #2 11135
Petsite #3 175111 Eagle #3 11136
Petsite #4 175112 Eagle #4 11137
Petsite #5 175113 Eagle #5 11138
Petsite #6 175114 Eagle #6 11139
Petsite #7 16203 Eagle #7 11140
Petsite Fraction 175115 Eagle #9 11142
Toronto #1 175116 Eagle #10 11143
Toronto No. 2 16193 Eagle #12 11145
Badger 16195 Eagle #13 11146
Side Hill Gouger 175117 Eagle #15 11148
Ville Maria 175118 Eagle #16 11149
Frog 7 18660 Eagle #18 11151
Frog 9 18661 Eagle #19 11152
Frog 10 18662 Eagle #21 11154
Frog 12 18664 Eagle #22 11155
Frog 16 18667 Eagle #23 11156
Frog 18 18669 Eagle #24 11157
Frog 19 18670 Eagle #25 11158
Frog 20 18671 Eagle #26 11159
Frog 21 18672 Eagle #27 11160
Frog 22 18673 Eagle #28 11161
Frog 23 18674 Eagle #29 11162
Frog 24 18675 Eagle #30 423
Frog 26 18677 Eagle #30 175127
Frog 33 18681 Eagle #31 11163
Frog 35 18683 Eagle #32 175128
Frog 55 82197 Eagle #33 421
Frog 56 82198 Eagle #34 175129
Frog 57 82199 Eagle #34 11164
Frog 58 82200 Eagle #35 11165
Surprise #15 82187 Eagle #36 11166
Surprise #16 82188 Eagle #37 11167
Surprise No. 17 82189 Eagle #38 11168
Surprise No. 18 82190 Eagle #39 9325
Lost Wheelbarrow #1 123246 Eagle #39 175130
Lost Wheelbarrow #2 123247 Eagle #40 9326
Lost Wheelbarrow #3 123248 Eagle #40 175131
This Is It Placer 29189 Eagle #41 11169
This Is It Placer 175152 Eagle #41 175132
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------- ----------
Eagle #42 11170 Eagle #97 9349
Eagle #42 175133 Eagle #98 9350
Eagle #43 11171 Eagle #99 9351
Eagle #44 11172 Eagle #100 9352
Eagle #45 11173 Eagle #101 9353
Eagle #46 11174 Eagle #102 9354
Eagle #47 11175 Eagle #103 9355
Eagle #48 11176 Eagle #104 9356
Eagle #49 11177 Eagle #105 9357
Eagle #50 11178 Eagle #106 9358
Eagle #51 11179 Eagle #107 9359
Eagle #52 11180 Eagle #108 9360
Eagle #53 11659 Eagle #109 44037
Eagle #54 420 Eagle #110 44038
Eagle #54 175134 Eagle #111 44039
Eagle #55 417 Eagle #112 44040
Eagle #56 416 Eagle #113 44041
Eagle #57 415 Eagle #114 44042
Eagle #58 4009 Eagle #115 44043
Eagle #59 4010 Eagle #116 44044
Eagle #60 4011 Eagle #117 44045
Eagle #61 4012 Eagle #118 44046
Eagle #62 4013 Eagle #119 44047
Eagle #63 175135 Eagle #119A 44048
Eagle #64 4015 Eagle #120 44049
Eagle #65 4016 Eagle #121 44050
Eagle #66 4017 Eagle #122 44051
Eagle #67 4018 Eagle #123 44052
Eagle #68 4019 Eagle #124 44053
Eagle #71 4022 Eagle #125 44054
Eagle #75 175136 Eagle #126 44055
Eagle #78 9330 Eagle #127 44056
Eagle #79 9331 Eagle #128 44057
Eagle #80 9332 Eagle #129 44058
Eagle #81 9333 Eagle #130 44059
Eagle #82 9334 Eagle #131 95654
Eagle #83 9335 Eagle #132 95655
Eagle #84 9336 Eagle #133 175137
Eagle #85 9337 Eagle #134 95657
Eagle #86 9338 Eagle #135 95658
Eagle #87 9339 Eagle #136 95659
Eagle #88 9340 Eagle #137 95660
Eagle #89 9341 Eagle #138 95661
Eagle #90 9342 Eagle #139 95662
Eagle #91 9343 Eagle #140 95663
Eagle #92 9344 Eagle #141 95664
Eagle #93 9345 Eagle #142 95665
Eagle #94 9346 Eagle #143 95666
Eagle #95 9347 Eagle #144 95667
Eagle #96 9348 Eagle #145 95668
BLM BLM
Claim Name Serial No. Claim Name Serial No.
------------------- ---------- ------------------ ----------
Eagle #146 95669 Golden Eagle #16 11124
Eagle #147 95670 Golden Eagle #17 11125
Eagle #148 95671 Golden Eagle #18 175124
Eagle #149 95672 Golden Eagle #18 425
Eagle #150 95673 Golden Eagle #19 424
Eagle #151 95674 Golden Eagle #19X 13965
Eagle #152 95675 Golden Eagle #20F 11126
Eagle #153 95676 Golden Eagle #21F 11127
Eagle #154 95677 Golden Eagle #21F 175125
Eagle #155 95678 Golden Eagle #22F 11128
Eagle #156 95679 Golden Eagle #22F 175126
Eagle #157 95680 Golden Eagle #23 11129
Eagle #178 101736 Golden Eagle #24 11130
Eagle #182 101740 Golden Eagle #25 11131
Eagle #185 101743 Golden Eagle #26 11132
Golden Eagle 175119 Golden Eagle #27 11133
Golden Eagle #2 175120 Golden Eagle #28 418
Golden Eagle #3 175121 Golden Eagle #29 3996
Golden Eagle #4 175122 Golden Eagle #30 3997
Golden Eagle #5 11113 Golden Eagle #31 3998
Golden Eagle #6 11114 Golden Eagle #32 3999
Golden Eagle #7 175123 Golden Eagle #33 4000
Golden Eagle #8 11116 Golden Eagle #34 4001
Golden Eagle #9 11117 Golden Eagle #35 4002
Golden Eagle #10 11118 Golden Eagle #36 4003
Golden Eagle #11 11119 Golden Eagle #37 4004
Golden Eagle #12 11120 Golden Eagle #38 4005
Golden Eagle #13 11121 Golden Eagle #39 4006
Golden Eagle #14 11122 Golden Eagle #40 4007
Golden Eagle #15 11123 Golden Eagle #41 4008
EXHIBIT "A-2"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
The following unpatented mining claims
located in Idaho County, State of Idaho.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------ ----------
PT 1 177154 PT 43 177196
PT 2 177155 PT 44 177197
PT 3 177156 PT 45 177198
PT 4 177157 PT 46 177199
PT 5 177158 PT 47 177200
PT 6 177159 PT 48 177201
PT 7 177160 PT 49 177202
PT 8 177161 PT 50 177203
PT 9 177162 PT 51 177204
PT 10 177163 PT 52 177205
PT 11 177164 PT 53 177206
PT 12 177165 PT 54 177207
PT 13 177166 PT 55 177208
PT 14 177167 PT 56 177209
PT 15 177168 PT 57 177210
PT 16 177169 PT 58 177211
PT 17 177170 PT 59 177212
PT 18 177171 PT 60 177213
PT 19 177172 PT 61 177214
PT 20 177173 PT 62 177215
PT 21 177174 PT 63 177216
PT 22 177175 PT 64 177217
PT 23 177176 PT 65 177218
PT 24 177177 PT 66 177219
PT 25 177178 PT 67 177220
PT 26 177179 PT 68 177519
PT 27 177180 PT 69 177520
PT 28 177181 PT 70 177521
PT 29 177182 PT 71 177522
PT 30 177183 PT 72 177523
PT 31 177184 PT 73 177524
PT 32 177185 PT 74 177525
PT 33 177186 PT 75 177526
PT 34 177187 PT 76 177527
PT 35 177188 PT 77 177528
PT 36 177189 PT 78 177529
PT 37 177190 PT 79 177530
PT 38 177191 PT 80 177531
PT 39 177192 PT 81 177532
PT 40 177193 PT 82 177533
PT 41 177194 PT 83 177534
PT 42 177195 PT 84 177535
BLM BLM
Claim Name Serial No. Claim Name Serial No.
---------------- ---------- ------------------ ----------
PT 85 177536 PT 99 177550
PT 86 177537 PT 100 177551
PT 87 177538 PT 101 177552
PT 88 177539 PT 102 177553
PT 89 177540 PT 103 177554
PT 90 177541 PT 104 177555
PT 91 177542 PT 105 177556
PT 92 177543 PT 106 177557
PT 93 177544 PT 107 177558
PT 94 177545 PT 108 177559
PT 95 177546 PT 109 177560
PT 96 177547 PT 110 177561
PT 97 177548 PT 111 177562
PT 98 177549
EXHIBIT "B"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation
ACCOUNTING PROCEDURES
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The purpose of these Accounting Procedures is to establish equitable
methods for determining charges and credits applicable to Operations
under the captioned Agreement (the "Agreement"). It is the intent of
the Manager and any Participant that is not acting as the Manager
("the non-Manager") that neither of them shall gain nor lose by reason
of their duties and responsibilities as the Manager or the non-Manager
but that the Manager should be reimbursed for the value of services
provided hereunder. If any method proves unfair or inequitable to the
Manager or the non-Manager, the Participants shall meet and in good
faith endeavor to agree upon changes deemed necessary to correct the
unfairness or inequity. In the event of a conflict between the
provisions of these Accounting Procedures and those of the Agreement,
the provisions of the Agreement shall control.
ARTICLE 1
GENERAL PROVISIONS
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1.1 DEFINITIONS. The definitions set forth in the Agreement shall
apply to these Accounting Procedures and shall have the same
meanings as used herein. Additional terms used in these
Accounting Procedures are set forth below shall have the
following meanings:
(a) "MATERIAL" shall mean personal property, including but not
limited to supplies and non-depreciable equipment,
acquired and held for use in Operations.
(b) "OUTSIDER" shall mean participants other than
"Participant" to the Agreement and their affiliates.
(c) "PERSONAL EXPENSES" shall mean travel and other reasonable
reimbursable expenses of employees of the Manager or its
Affiliates.
(d) "TECHNICAL EMPLOYEES" shall mean those employees having
special and specific engineering, geological, legal, or
other professional skills, and whose primary function in
Operations is the handling of specific matters for the
benefit of Operations.
1.2 ACCOUNTING RECORDS.
(a) The Manager shall maintain accounting records for the
Joint Account in accordance with generally accepted
accounting principles consistently applied and used in the
mining industry.
(b) The Manager shall take advantage of and credit the Venture
with all cash and trade discounts, freight allowances and
equalizations, annual volume or other allowances, credits,
salvages, commissions, insurance discount dividends and
retroactive premium adjustments, and any other benefits
which accrue to the Manager wholly or in part because of
Operations.
1.3 STATEMENTS, BILLINGS AND ADJUSTMENTS.
(a) The Manager shall promptly submit to the Management
Committee monthly statements of account reflecting in
reasonable detail the charges and credits to the Joint
Account during the preceding month.
(b) On the basis of the adopted Program and Budget, the
Manager shall submit to each Participant prior to the last
day of each month, a billing for estimated cash
requirements for the next month. Within ten (10) days
after receipt of each billing, each Participant shall
advance to the Manager its proportionate share of the
estimated amount. Time is of the essence of payment of
such billings. The Manager shall at all times maintain a
cash balance approximately equal to the rate of
disbursement for up to forty-five (45) days.
(c) A Participant that fails to meet cash calls in the amount
and at the times specified in Section 1.3(b) shall be in
default, and the amount of the defaulted cash call shall
bear interest from the date due at an annual rate equal to
two (2) percentage points over the Prime Rate, but in no
event shall said rate of interest exceed the maximum
permitted by law. The non-defaulting Participant shall
have those rights, remedies and elections specified in
Section 6.4 of the Agreement.
(d) Payment of bills shall not prejudice the right of the non-
Manager to protest or question the correctness thereof;
however, all bills and statements rendered during any
calendar year shall be presumed conclusively to be true
and correct after twelve (12) months following the end of
any such calendar year unless, within the said
twelve-month period, the non-Manager takes written
exception thereto and makes claim on the Manager for
adjustment. No adjustment favorable to the Manager shall
be made unless it is made within the same prescribed
period or in connection with an adjustment in favor of the
non-Manager. The provisions of this paragraph shall not
prevent adjustments resulting from a physical inventory of
the Assets.
1.4 ADVANCES AND PAYMENTS.
(a) As provided for in this Exhibit "B", the non-Manager shall
advance its share of the estimated cash outlay for the
succeeding month's operation. If the non-Manager's
advances exceed its share of actual expenditures,
subsequent cash calls will be adjusted downward or the
Manager will refund to the non-Manager excess funds that
are not necessary for subsequent Operations.
(b) The Manager shall base its estimates of cash advance
requirements on the latest information available and shall
take into account cash on hand which may be applied to
satisfy such requirements in order to reduce the amounts
to be advanced. It is the intent of the Participants to
provide adequate funds for the Operations and to maintain
bank balances at minimum levels.
(c) If the Manager does not request the non-Manager to advance
its share of estimated cash requirements, the non-Manager
shall pay its share of expenditures within thirty (30)
days following receipt of the Manager's billing.
(d) Except as provided in Section 6.4 of the Agreement, all
payments shall be made on or before the due date by wire
transfer in immediately available funds to bank accounts
designated by the Manager. If not so paid, the unpaid
balance shall bear interest after the due date at the rate
of Prime Rate plus two percent (2%) for each thirty (30)
day period or portion thereof until such amount is paid,
plus attorneys' fees, court costs, and other costs related
to the collection of the unpaid amounts.
(e) Funds received by the Manager from the non-Manager
Participant shall be segregated or maintained by the
Manager as a separate fund, and may not be commingled with
the Manager's own funds, except with the consent of the
non-Manager Participant.
1.5 AUDITS. Upon notice in writing to the Manager, the non-
Manager shall have the right to audit the accounts and records
relating to the accounting made under this Agreement for any
calendar year within the twelve (12) month period following the
end of such calendar year; provided, however, the making of an
audit shall not extend the time for the taking of written
exception to and the adjustments of accounts pursuant to
Section 1.3 (d). The non-Manager may arrange for audits by its
own staff or outside professional and qualified independent
auditors. Audits shall be conducted in a manner so as to cause
the minimum inconvenience to the Manager. The Manager shall
bear no portion of non-Manager's audit costs unless agreed to
by the Manager in advance of such audit. Notwithstanding the
above, in the event the non-Manager does not audit the accounts
and records relating to the accounting made under this
Agreement the Manager shall have conducted annually an audit of
the accounts and records relating to the accounting made under
this Agreement. Such audit shall be for the account of the
Venture. If the non-Manager does have an audit performed as
provided herein, the Manager shall not be required to perform
an additional audit.
ARTICLE 2
CHARGEABLE COSTS
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Subject to the provisions of the Agreement, the Manager shall charge
the Joint Account with all costs incurred by it as necessary and
proper for the conduct of Operations or maintenance of the Assets.
Such costs shall be reasonable and comparable with similar projects in
the area. Except as otherwise provided in the Agreement, the Manager
shall charge the Joint Account with: (1) exploration expenditures
made for the exploration activities within the Property,
(2) expenditures made for engineering, environmental, planning,
Development and construction related to the Property and for the
equipment and facilities necessary for Operations, including all
working capital and sustaining capital for ongoing Operations and for
the expansion and updating of Operations, and (3) costs and expenses
of mining, processing, reclamation, restoration, worker's compensation
and other claims upon closing of the mines, and any other costs
following the mine closing. Such costs include, but are not limited
to the following:
2.1 PROPERTY PAYMENTS. Property payments, rentals, royalties and
other payments out of production (unless such royalties or
other payments shall burden the ownership interests of only one
Participant) and fees, paid by the Manager for Operations
including permits, fees, and other charges which are assessed
by various governmental agencies. Such costs also include
acquisition of easements, rights of way, and surface rights.
2.2 LABOR.
(a) Salaries and wages of the Manager's employees directly
engaged in and the conduct of and for the benefit of
Operations, whether temporarily or permanently assigned.
The proportion of salaries and wages charged will be
prorated proportionate to the time spent by employees for
the benefit of Operations. Salaries and wages shall
include everything constituting gross pay to employees as
reflected on the Manager's payroll, including travel time
and overtime.
(b) The Manager's cost of holidays, rest days, vacations,
disability benefits, sickness, and other customary
allowances and reasonable expenses which are paid or
reimbursed under the Manager's usual practice. Such
amounts may be charged either on a "percentage assessment"
of salaries and wages, or on a cash basis.
(c) Costs of expenditures or contributions made pursuant to
assessments imposed by governmental authority which are
applicable to the Manager's cost of salaries and wages.
(d) Personal Expenses of employees whose salaries and wages
are chargeable to the Joint Account under Section 2.2 (a),
but only to the extent that such Personal Expenses are
incurred in connection with their efforts while directly
engaged in the conduct of and for the benefit of
Operations.
(e) The Manager's actual costs of established plans for
employees' group life insurance, hospitalization, medical,
dental, pension, retirement, stock purchase, profit
sharing, thrift, bonus, and other benefit plans of a
similar nature applicable to the Manager's labor cost
chargeable to the Joint Account.
(f) If a percentage assignment is used for Section 2.2 (b) and
(e), the rate shall be based on actual cost experience for
the previous year. Such rate shall be determined during
the first quarter of each year and shall be applied in
current year operations.
(g) Relocation costs of employees permanently or temporarily
assigned and directly engaged in the conduct of
Operations. Such costs shall include transportation of
employees' families and their personal and household
effects and all other relocation costs in accordance with
the Manager's usual practice.
2.3 MATERIAL. Material purchased or furnished by the Manager for
use in Operations as provided under Article 3. So far as is
reasonably practical, and consistent with efficient and
economical operations, only such Material shall be purchased or
transferred for use in Operations as may be required for
immediate use.
2.4 TRANSPORTATION.
(a) Transportation of material and other related costs such as
expediting, crating, freight, and unloading at
destination.
(b) Transportation of employees as required in the conduct of
Operations.
2.5 SERVICES.
(a) The cost of consultants, contract labor, services,
equipment, and utilities procured from Outsiders.
(b) Technical or research services, such as, but not limited
to, laboratory analysis, drafting, geophysical and
geological interpretation, engineering, reserve studies
and related computer services, and data processing, which
may be delegated to and performed by the specialized
staffs of one of the Participants or their Affiliate.
Such professional services shall be on a cost of service
basis and charges shall not exceed the cost of comparable
quality services by qualified Outsiders. Charges to the
Joint Account for services directly benefitting Operations
shall be in addition to any charges allowed under Sections
2.11 and 2.12.
(c) In the event the Manager from time to time utilizes
skilled personnel of the Participants or their Affiliates
for performance of services either within the Property or
elsewhere for the benefit of Operations, whose time in
full or in part is not otherwise charged hereunder, a
proper proportion of the direct and indirect salary,
employee benefits, and travel expenses of such personnel
shall be charged to the Joint Account, provided such work
is pursuant to written authorization by the Manager. Such
professional services shall be on a cost of service basis
and charges shall not exceed the cost of comparable
quality services by qualified Outsiders.
(d) Use of the Manager's and the non-Manager's separately
owned equipment and facilities for benefit of Operations.
Such use shall be charged to the Joint Account at rates
commensurate with the Manager's actual and full costs of
ownership and operation and such rates shall include cost
of maintenance, repairs, other operating expense,
insurance, taxes (other than income taxes), depreciation,
and other overhead. These charges shall not exceed the
prevailing commercial rates in the area.
(e) Data processing and computer services acquired for the
benefit of Operations may be contracted through Outsiders,
or by arrangement for computer services from one of the
Participants, or their Affiliates, even though such
facilities are not physically located within the Property.
Charges to the Joint Account under this provision for
services directly benefiting Operations shall be in
addition to any charges allowed under Section 2.11 and
2.12. Such professional services shall be on a cost of
service basis and charges shall not exceed the cost of
comparable quality services by qualified Outsiders.
(f) Any technical services, skilled personnel, equipment,
facilities or data processing services provided to
Operations by the non-Manager, at the request of the
Manager, shall be charged on the same basis as provided in
Sections 2.5 (b), (c) (d) and (e) above. The non-Manager
shall bill the Manager in accordance with Section 1.4 (c)
of the Accounting Procedures. The Manager may audit the
records of the non-Manager with regard to such services in
accordance with the procedure set forth in Section 1.5.
2.6 REPAIR AND REPLACEMENT OF PROPERTY. All costs or expenses (net
of the recoveries from insurance for which the premiums have
been charged to the Joint Account, if any) necessary for the
repair or replacement of property resulting from damages or
losses incurred by fire, flood, storm, theft, accident, or any
other cause, excepting the Manager's gross negligence or
willful misconduct. The Manager shall furnish to the non-
Manager written notice of damages or losses in excess of
Fifteen Thousand Dollars ($15,000) as soon as practicable.
Such costs and expenses include the costs to combat and control
the actions of the hazard.
2.7 INSURANCE.
(a) Premiums paid for Workers' Compensation or Employer's
Liability Insurance required to be carried for Operations.
In the event Operations are conducted in a state or
province in which the Manager may act as self-insurer for
Workers' Compensation or Employer's Liability under the
applicable state's or province's law, the Manager may, at
its election, provided that it is allowed by the laws of
the Province, include the risk under its self-insurance
program and in that event, the Manager shall include a
charge at the Manager's cost equal to the Standard
Workers' Compensation rate during any one contract year.
Premiums paid for an insurance program covering such
property, business interruption, casualty, and fidelity
risks as are deemed prudent by the Manager based on sound
business judgment, which judgment shall be subject to
review and revision by the Management Committee. Premiums
paid for other insurance as requested by the Management
Committee. Each Participant may procure and maintain, at
its own cost and expense, such other insurance as it may
determine to be necessary to protect its interests, and
any such insurance so procured and maintained shall inure
solely to the benefit of the Participant procuring the
same.
(b) Actual expenditures incurred in the investigation,
defense, and settlement of all losses, claims, damages,
judgments, and other expenses for the benefit of
Operations, excepting those resulting from the Manager's
gross negligence or willful misconduct.
2.8 LITIGATION AND CLAIMS. All costs or expenses of handling,
investigation and settling litigation or claims arising by
reason of Operations or necessary to protect or recover
property, including, but not limited to, attorneys' fees, court
costs, cost of investigation or procuring evidence and amounts
paid in settlement or satisfaction of any such litigation or
claims. In the event actions or claims affecting Operations
shall be handled by the legal staff of one of the Participants,
a charge commensurate with the cost of providing such service
is chargeable to the Joint Account.
2.9 TAXES. All taxes (except taxes based on or determined with
reference to income), fees, and governmental assessments of
every kind and nature. If the Manager is required hereunder to
pay ad valorem taxes based in whole or in part upon separate
valuations of each Participant's Interest, then notwithstanding
anything to the contrary herein, charges to the Joint Account
shall be made and paid by the Participants hereto in accordance
with the percentage of tax value generated by each
Participant's Interest.
2.10 FINES. All fines resulting from non-compliance with applicable
laws, rules, and regulations, except to the extent that such
fines were due to the gross negligence or willful misconduct of
the Manager.
2.11 DIRECT ADMINISTRATIVE COSTS. The net cost of maintaining and
operating any offices (excepting the corporate headquarters
office), suboffices, camps, warehouses, housing, and other
facilities directly serving Operations shall be charged to the
Joint Account. If such facilities serve operations in addition
to Operations, the net costs shall be allocated to all
operations served on an equitable basis mutually agreed to by
the Participants.
2.12 MANAGER'S MANAGEMENT FEE. A charge to reimburse the Manager
for overhead and other general and administrative services of
the Manager's corporate headquarters office equal to the
following percentages applied to costs and expenses determined
on a monthly basis under the provisions of Paragraphs 2 through
7, 11 and 13 through 15 of this Article 2:
(a) Ten percent (10%) of all cash expenditures incurred prior
to Development, but only five percent (5%) on contracts
greater than One Hundred Thousand Dollars ($100,000).
(b) Five percent (5%) of all cash expenditures incurred
following commencement of Development.
Notwithstanding the above, such Manager's fees shall not be
charged on the overhead of any contractors or agents. The
overhead rates set out above shall be reviewed annually at the
request of either party. If a detailed analysis of the
Manager's actual cost experiences establishes that higher or
lower overhead expenses were incurred or are likely to be
incurred, and if higher, are reasonable in the circumstances,
then the rates shall be amended by the Management Committee.
Such amendment shall be on the basis that the Manager neither
profits nor loses as a result thereof.
2.13 STORAGE OF PRODUCTION INVENTORIES. Each Participant will bear
the cost incurred for handling and storage of merchantable ore
or concentrates as follows:
(a) Personal property taxes on ore or concentrates in storage
for a Participant within the Property shall be charged to
such Participant.
(b) The cost of loading out such ore in storage for a
Participant from the Property shall be charged to such
Participant.
(c) Cost associated with providing storage of ore or
concentrates within the Property will be charged on a pro
rata basis determined by the Participants.
(c) Other costs arising out of storage or handling of ore or
concentrates shall be charged to the Participant owning
such Materials.
2.14 PROJECT ASSETS. The cost of all capital expenses of the Assets
which are normally depreciable, depletable, or amortizable,
including but not limited to land acquisition, exploration,
development, pre-mine development and stripping, machinery,
equipment, plant, buildings, rail facilities and equipment,
improvements, camp and port facilities, townsites and other
infrastructure, whether incurred or acquired prior to or after
Commencement of Commercial Production.
2.15 OTHER NECESSARY EXPENSES. Any other chargeable expenditures
not covered or dealt with in the foregoing provisions which are
necessary and proper for the conduct of Operations.
ARTICLE 3
PRICING OF JOINT ACCOUNT MATERIAL PURCHASES,
TRANSFERS, AND DISPOSITION
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The Manager is responsible for Joint Account Material and shall make
proper and timely charges and credits for all Material movements
affecting the Property. The Manager shall provide all Material for
use within the Property, however, at the Manager's option, such
Material may be supplied by the non-Manager.
3.1 PURCHASES. Material purchased shall be charged at the price
paid by the Manager after deduction of all discount received.
In case of Material found to be defective or returned to vendor
for any other reason, credit shall be passed to the Joint
Account when adjustment has been received by the Manager.
3.2 TRANSFER AND DISPOSITIONS. Material furnished to the Property
and Material transferred from the Property or disposed of by
the Manager, unless otherwise agreed to by the Participants,
shall be priced at its current fair market value.
3.3 PREMIUM PRICES. Whenever Material is not readily obtainable at
published or listed prices because of national emergencies,
strikes, or other unusual causes over which the Manager has no
control, the Manager may charge the Joint Account for the
required Material at the Manager's actual cost incurred in
providing such Material, in making it suitable for use, and in
moving it to the Property.
3.4 WARRANTY OF MATERIAL. The Manager shall not be held
responsible for defects in Material furnished for Operations.
In the event Material is defective, credit shall not be passed
to the Joint Account until the adjustment has been received by
the Manager from the manufacturer or its agents.
ARTICLE 4
DISPOSAL OF SURPLUS MATERIAL
----------------------------
4.1 DISTRIBUTION GENERALLY. The disposition of major items of
surplus Material shall be decided upon by the Manager. The
Manager may purchase, but shall be under no obligation to
purchase, the interests of the non-Manager in surplus Material.
4.2 PURCHASE BY PARTICIPANTS. Surplus Material purchased by either
the Manager or the non-Manager shall be credited by the Manager
to the Joint Account at its fair market value.
4.3 DISTRIBUTION TO PARTICIPANTS. Division of Material in kind, if
made between the Manager and the non-Manager, shall be in
proportion to their respective interests in such Material.
Each Participant will thereupon be charged individually with
the value of the Material received or receivable by each
Participant, and corresponding credits will be made by the
Manager to the Joint Account. Such credits shall appear in the
monthly statement of operations.
4.4 SALES. Sales to Outsiders of Material from the Property shall
be credited by the Manager to the Joint Account at the net
amount collected by the Manager from vendee, which shall be
priced on the basis of the best available market price. Any
claim by vendee for defective Materials or otherwise shall be
charged back to the Joint Account if and when paid by the
Manager.
ARTICLE 5
INVENTORIES
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5.1 PERIODIC INVENTORIES. The Manager shall take physical
inventory of Joint Account Material at reasonable intervals in
accordance with generally accepted accounting principles but
not less than once a year. The non-Manager may be represented
when any inventory shall bind the non-Manager to accept the
inventory taken by the Manager.
5.2 RECONCILIATION. Reconciliation of inventories with the Joint
Account shall be made by the Manager, and a list of overages
and shortages shall be furnished to the non-Manager within
ninety (90) days following the taking of inventory. Inventory
adjustments shall be made by the Manager to the Joint Account
for overages and shortages, but the Manager shall be held
accountable to the non-Manager only for shortages due to the
lack of reasonable diligence.
5.3 SPECIAL INVENTORIES. Whenever there is a sale or change of
Interest in the Mineral Rights, the Property or the Assets, a
special inventory may be taken by the Manager, provided the
seller or purchaser or such Interest requests such inventory
and agrees to bear all of the expense thereof. In such cases,
both the seller and the purchaser shall be entitled to be
represented. A special inventory shall be required when there
is a change in the Manager. The cost of the latter inventory
will be charged to the Joint Account when the change in the
Manager does not come about as the result of a sale of the
former Manager's Interest.
5.4 EXPENSES. The expense incurred by the Manager in conducting
periodic inventories shall be charged to the Joint Account.
EXHIBIT "C"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation
and Cyprus Gold Exploration Corporation.
NET PROCEEDS OF PRODUCTION ROYALTY
----------------------------------
1 OBLIGATION.
1.01 If any party becomes entitled to an interest in Net Proceeds
pursuant to the Agreement (an Owner ), the Manager shall
separately calculate, as at the end of each calendar quarter
subsequent to commencement of commercial operations, Net
Proceeds.
1.02 INTEREST IN NET PROCEEDS. Each Participant shall within sixty
(60) days of the end of each calendar quarter, as and when any
Net Proceeds are available for distribution:
(a) severally pay or cause to be paid to each Owner that
percentage of the Net Proceeds to which that Owner is
entitled under the Agreement;
(b) deliver to each Owner a statement indicating:
(i) the Gross Receipts during the calendar quarter;
(ii) the deductions therefrom made in the order itemized
in subsection 3.01 of this Exhibit C;
(iii) the amount of Net Proceeds remaining; and
(iv) the amount of the Net Proceeds to which that Owner
is entitled;
provided, however, that until such time as there are Net
Proceeds available, the Manager shall deliver to each
Owner within sixty (60) days of the end of each calendar
quarter commencing with the first calendar quarter
following the commencement of commercial operations, a
statement indicating the Gross Receipts during the
calendar quarter less the deductions therefrom made in the
order itemized in subsection 3.01 of this Exhibit C.
1.03 Nothing contained in the Agreement or this Exhibit C shall be
construed as:
(a) imposing on a Participant any obligation with respect to
the payments of amounts due hereunder to an Owner from any
other Participant; or
(b) conferring on any Owner any right to or interest in any
Property or Assets except the right to receive payments
pursuant to the Net Proceeds Interest Royalty from each
Participant to the Agreement as and when due.
2 DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings given thereto in the Agreement.
2.01 "COSTS" means, all items of outlay and expense whatsoever,
direct or indirect, with respect to Operations including loans
made by one Participant for the benefit of another Participant,
recorded by the Manager in accordance with the Agreement;
without limiting generality, the following categories of Costs
shall have the following meanings:
(a) "CONSTRUCTION COSTS" means those Costs recorded by the
Manager during the period of Development, including,
without limiting generality, the Manager's fee
contemplated in Section 2.12 of Exhibit B;
(b) "DISTRIBUTION COSTS" means all costs of:
(i) transporting ore or concentrates from a mine or a
concentrating plant to a smelter, refinery or other
place of delivery designated by the purchase and,
in the case of concentrates tolled, of transporting
the metal from a smelter to the place of delivery
designated by the purchaser;
(ii) handling, warehousing and insuring the concentrates
and metal; and
(iii) in the case of concentrates tolled, of smelting and
refining, including any penalties thereon or in
connection therewith.
(iv) "EXPLORATION COSTS" means those Costs, including
Exploration Expenditures, pertaining to all
activities directed toward ascertaining the
existence, location, quantity, quality or
commercial value of deposits of Products, and
specifically includes the preparation of a
Feasibility Study.
(c) "INTEREST COSTS" means interest computed quarterly and not
in advance calculated as follows:
(i) If financing for Development of the Property has
been obtained from a third party lender, at the
interest rates provided for therein.
(ii) If such third party financing is not in effect, as
follows:
(1) the average of the opening and closing monthly
outstanding balances for each month during the
quarter of the net unrecovered amounts of all costs
in the classes enumerated paragraphs 2.01 (a),
(b), (c), (d), (e) (f) and (g) of this Exhibit C;
MULTIPLIED BY:
(2) Prime Rate plus two percent;
MULTIPLIED BY:
(3) the number of days in the quarter;
DIVIDED BY:
(4) the number of days in the year;
(e) "MARKETING COSTS" means such reasonable charge actually
incurred for marketing of ores and concentrates sold or of
concentrates tolled as is consistent with generally
accepted industry marketing practices; and
(f) "OPERATING COSTS" means those Costs recorded by the
Manager subsequent to the commencement of commercial
production, including, without limiting generality, the
Manager's fee contemplated in Section 2.12 of Exhibit B
and additional costs of capital; and
(g) "TAXES AND ROYALTIES" means all taxes (other than income
taxes), royalties or other charges or imposts provided for
pursuant to any law or legal obligation imposed by any
government if paid by the Participant and any other
royalties payable to third parties.
2.02 Wherever used in this Exhibit C, "Gross Receipts" means the
aggregate of all receipts, recoveries or amounts received by or
credited to a Participant in connection with its participation
under the Agreement including, without limiting the generality
of the foregoing:
(a) the receipts from the sale of that Participant's
proportionate share of the ores, concentrates or other
materials derived from Products produced from the
Property;
(b) all proceeds received from the sale of the Property or
Assets subsequent to the effective date of the Agreement;
(c) all insurance recoveries (including amounts received to
settle claims) in respect of loss of, or damage to any
portion of the Property or Assets subsequent to the
effective date of the Agreement;
(d) all amounts received as compensation for the expropriation
or forcible taking of any portion of the Property or
Assets subsequent to the effective date of the Agreement;
(e) the fair market value, at the Property, of those Assets,
if any, purchased for the Joint Account, that are
transferred from the Property for use by a Participant
elsewhere subsequent to the effective date of the
Agreement; and
(f) the amount of any negative balance remaining after the
reallocation of negative balances pursuant to subsection
3.03 of this Exhibit C;
to the extent that those receipts, recoveries or amounts have
not been applied by the Participant as a recovery of any of the
classes of Costs itemized in subsection 3.01 of this Exhibit C.
3 NET PROCEEDS CALCULATION.
3.01 "NET PROCEEDS" means the Gross Receipts minus deductions
therefrom of the then net unrecovered amounts of the following
classes of Costs made in the following itemized order:
(a) Marketing Costs;
(b) Distribution Costs;
(c) Operating Costs;
(d) Taxes and Royalties;
(e) Interest Costs;
(f) Construction Costs; and
(g) Exploration Costs;
it being understood that the deductions in respect of the Costs
referred to in paragraphs 3.01(a), (b), (d) and (e) of this
Exhibit C shall be based on those Costs as recorded by that
Participant and the deductions in respect of the Costs referred
to in paragraphs 3.01(c), (f) and (g) of this Exhibit C shall
be based on that Participant's proportionate share of those
Costs as recorded by the Manager.
3.02 For greater certainty in calculating Net Proceeds at any time,
each of the classes of Costs shall constitute a separate pool
from which all Costs deducted on any previous quarterly
calculation shall be removed and to which, in the case of all
classes of Costs, Costs of those classes recorded since the
commencement of commercial production (in the case of the first
quarterly calculation) or since the date of the last quarterly
calculation (in the case of any calculation subsequent to the
first quarterly calculation) shall be added.
3.03 If the application of credits to a pool of Costs results in a
negative balance in that pool of Costs, the amount of any
negative balance from a Cost pool shall be applied to reduce
the balance then remaining in pools itemized in subsection 3.01
of this Exhibit C in the order itemized.
4 ADJUSTMENTS AND VERIFICATION.
4.01 Payment of any Net Proceeds of Production Royalty by a
Participant in the Agreement shall not prejudice the right of
that Participant to protest the correctness of the statement
supporting the payment; provided, however, that all statements
presented to the Owner by that Participant for any quarter
shall conclusively be presumed to be true and correct upon the
expiration of twelve (12) months following the end of the
quarter to which the statement relates, unless within that
twelve (12) month period that Participant gives notice to the
Owner making claim on the Owner for an adjustment to the
statement which will be reflected in subsequent payment of the
Net Proceeds of Production Royalty.
4.02 The Participant shall not adjust any statement in favor of
itself after the expiration of twelve (12) months following the
end of the quarter to which the statement relates.
4.03 The Owner shall be entitled upon notice to any Participant to
have an auditor selected by the Owner review all appropriate
records and perform an audit and provide the Owner with an
opinion that any statement delivered pursuant to subsection
1.01 of this Exhibit C in respect of any quarterly period
falling within the twelve (12) month period immediately
preceding the date of the Owner notice has been prepared in
accordance with this Agreement.
4.04 The time for giving the audit opinion contemplated in
subsection 4.03 of this Exhibit C shall not extend the time for
the taking of exception to and making claim on the Owner for
adjustment as provided in subsection 4.01 of this Exhibit C.
4.05 The cost of the auditor's opinion referred to in subsection
4.03 of this Exhibit C shall be solely for the account of the
Owner requesting the auditor's opinion unless the auditors
opinion confirms that the Owner received less than ninety-seven
percent (97%) of the Net Proceeds of Production Royalty due to
it during the year in question, in which event the Participant
shall reimburse the Owner for the reasonable costs of the
audit.
EXHIBIT "D"
Attached to and made part of that certain Joint Venture Agreement
dated May 20, 1996, by and between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation
INSURANCE
---------
The Manager shall, at all times while conducting Operations, comply
fully with the applicable worker's compensation laws and purchase, or
with the unanimous consent of the Management Committee provide through
self-insurance, protection for the Participants comparable to that
provided under standard form insurance policies for (i) comprehensive
public liability and property damage with combined limits of Two
Million Dollars for bodily injury and property damage; (ii) automobile
insurance with combined limits of Two Million Dollars; and (iii)
adequate and reasonable insurance against risk of fire and other risks
ordinarily insured against in similar operations. If the Manager
elects to self-insure, it shall charge to the Joint Account an amount
equal to the premium it would have paid had it secured and maintained
a policy or policies of insurance on a competitive bid basis in the
amount of such coverage. Each Participant may self-insure or purchase
for its own account such additional insurance as it deems necessary.
EXHIBIT E
Area of Interest of the Petsite Venture
Idaho County, Idaho
Includes:
Sections 1, 2, 3, 4, 11, 12, 13, 14, 23, 24, 25, 26, Township 27
North, Range 7 East
Sections 6, 7, 18, 19, 30, Township 27 North, Range 8 East
Sections 25, 26, 27, 28, 33, 34, 35, 36, Township 28 North, Range 7
East
Sections 30, 31, Township 28 North, Range 8 East, Boise Meridian
EXHIBIT "F"
Attached to and made part of that certain Joint Venture Agreement
dated the 20th day of May, 1996 between
Idaho Consolidated Metals Corporation and
Cyprus Gold Exploration Corporation.
BLM BLM
Claim Name Serial No. Claim Name Serial No.
--------------- ----------- --------------- ----------
Eagle #30 423 Eagle #115 44043
Eagle #30 175127 Eagle #116 44044
Eagle #34 11164 Eagle #117 44045
Eagle #34 175129 Eagle #122 44051
Eagle #39 9325 Golden Eagle 175119
Eagle #39 175130 Golden Eagle #3 175121
Eagle #40 9326 Golden Eagle #4 175122
Eagle #40 175131 Golden Eagle #5 11113
Eagle #41 11169 Golden Eagle #6 11114
Eagle #41 175132 Golden Eagle #7 175123
Eagle #42 11170 Golden Eagle #12 11120
Eagle #42 175133 Golden Eagle #15 11123
Eagle #43 11171 Golden Eagle #16 11124
Eagle #50 11178 Golden Eagle #18 425
Eagle #54 420 Golden Eagle #18 175124
Eagle #54 175134 Golden Eagle #22F 11128
Eagle #98 9350 Golden Eagle #22F 175126
Eagle #99 9351 Golden Eagle #25 11131
Eagle #109 44037 Golden Eagle #26 11132
Eagle #110 44038 Golden Eagle #27 11133