Exhibit 10.1
CONDOR YACU GOLD PROJECT
JOINT VENTURE AGREEMENT
BETWEEN
HECTOR
VITTONE
AND
SOUTHERN ENERGY COMPANY INC.
<PAGE>
JOINT VENTURE AGREEMENT
THIS AGREEMENT is dated for reference and is effective May 31,
2009.
BETWEEN:
HECTOR VITTONE
("Vittone")
AND:
SOUTHERN ENERGY COMPANY INC.
("Southern")
WHEREAS:
A. Vittone and Southern have agreed to form a joint
venture called the CONDOR
YACU JOINT VENTURE (the "Joint Venture") with respect
to the exploitation of
interest in certain mineral
properties (the "Property") located in
Salta
Province, Argentina; and
B. Vittone and Southern now wish to form this Joint Venture to
finance, explore,
develop, and bring into commercial production, the Property.
NOW THEREFORE in consideration of the covenants and agreements
contained herein,
Vittone and Southern agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Agreement, except as otherwise
expressly provided or
unless the context otherwise requires:
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.
<PAGE>
3
1.4 "ASSETS" means the Properties,
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 "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 the
Feasibility Study.
1.7 "EXPLORATION" means all
activities directed toward ascertaining
the
existence, location, quantity,
quality or commercial value of deposits of
Products.
1.8 "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
ore body 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 ore body 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 ore body
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 thereof;
(g) conclusions and
recommendations regarding the economic feasibility
and timing for bringing the prospective ore
body 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
about loaning
funds sufficient to construct the proposed mine with security
based
solely on the reserves and mine described in the Feasibility
Study.
1.9 "INITIAL CONTRIBUTION" means that
contribution each Participant has made
or agrees to make pursuant to
Section 5.1.
<PAGE>
4
1.10 "JOINT ACCOUNT" means the
account maintained in accordance with
the
Accounting Procedure
showing the charges and credits accruing to
the
Participants.
1.11 "MANAGEMENT COMMITTEE" means the committee established
under Article 7.
1.12 "MANAGER" means the person or entity
appointed under Article 8 to manage
Operations, or any successor
Manager.
1.13 "MINING" means the mining, extracting,
producing, handling, milling or
other processing of Products.
1.14 "OPERATIONS" means the activities carried out under this
Agreement.
1.15 "PARTICIPANT" and "PARTICIPANTS" means the persons or
entities that have a
Participating Interest.
1.16 "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. The initial
Participating
Interests of the Participants are
set forth in Section 6.1.
1.17 "PRODUCTION DECISION" means a decision by
the Management Committee to
commence Development and put the
Properties into production.
1.18 "PRODUCTS" means all ores, minerals, and
mineral resources produced from
the Properties under this
Agreement.
1.19 "PROGRAM" means a description in reasonable detail of
the activities which
are to be conducted by the Manager
during a period.
1.20 "PROPERTY" OR "PROPERTIES"
means those interests in mining
claims
described in Exhibit A.
1.21 "SIMPLE MAJORITY" means a decision by the
Management Committee by greater
than 50% of the votes being entitled
to be cast.
1.22.1"TRANSFER" means sell, grant,
assign, encumber, pledge or otherwise
commit or dispose of.
In addition, For the purposes of this Agreement, except
as otherwise expressly
provided or unless the context otherwise requires:
(a) "this Agreement"
means this Joint Venture agreement and all Exhibits
attached hereto;
(b) any
reference in this Agreement to
a designated "Section",
"Subsection", "paragraph", "Exhibit" or other subdivision
refers to
the designated section, subsection,
paragraph, exhibit or other
subdivision
of this Agreement;
<PAGE>
5
(c) the words "herein"
and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular
section
or
other subdivision of this Agreement, unless the context
clearly
otherwise provides;
(d) the word
"including", when following any general statement, term
or
matter, is not to be construed to limit such general statement,
term
or matter to the specific items or matters set
forth immediately
following such word or to similar items or matters,
whether or not
non-limiting language (such as "without
limitation" or "but not
limited to" or words of similar import) is
used with reference
thereto but rather refers to all other items or matters
that could
reasonably fall within the broadest possible scope of
such general
statement, term or matter;
(e) any reference to a
statute includes and, unless otherwise specified
herein, is a reference to such statute and to the
regulations made
pursuant thereto, with all amendments made thereto and in force
from
time to time, and to any statute or regulations that
may be passed
which has the effect of supplementing or superseding such statute
or
such regulation;
(f) any reference to
"party" or "parties" means, singly or collectively,
the Participants as the context requires;
(g) the headings in this
Agreement are for convenience of reference only
and do not affect the interpretation of this Agreement;
(h) words importing the
masculine gender include the feminine or neuter
gender, and vice versa, and words in
the singular include the
plural, and vice versa; and
(i) all references to
currency refer to US dollars.
1.2 EXHIBITS
The following are the Exhibits to this Agreement, and are
incorporated into this
Agreement by reference:
Exhibit
A Property Description, Purchase Agreement, Power of
Attorney
Exhibit
B Accounting Procedure
Wherever any term or condition, expressed or
implied, in any of the Schedules
conflicts or is at variance with any term or condition of
this Agreement, the
terms or conditions of this Agreement
will prevail but shall not affect any
difference of definition or terms internal to and specific to the
Exhibits where
such are internally consistent and do not offend the import of the
Agreement.
<PAGE>
6
2. REPRESENTATIONS AND WARRANTIES
2.1 MUTUAL REPRESENTATIONS AND WARRANTIES OF PARTICIPANTS
Each of the Participants represents and warrants to each other
that:
(a) it has the
capacity and authority to enter into and perform
this
Agreement and all transactions (other than present general
financial
capacity for the Property
Development which will require the
Participants to engage future debt or equity financing)
contemplated
under this Agreement and that all necessary
corporate and other
actions required to authorize it to enter into
and perform this
Agreement have been properly taken;
(b) it is unaware of any
material facts or circumstances which have not
been disclosed in this Agreement, which should be
disclosed to the
other Participant in order to prevent the
representations in this
Section 2 from being materially misleading;
(c) it will not breach
its constating documents or any other agreement
or arrangement by entering into or performing this Agreement;
(d) this
Agreement has been duly executed and delivered by
it and is
valid and binding upon it in accordance with its terms; and
(e) the parties
will duly, in good faith, and with
reasonable best
efforts punctually comply with the
terms of this Agreement in
accordance with the terms and spirit of this Agreement.
3. THE JOINT VENTURE
3.1 GENERAL TERMS
Vittone and Southern hereby enter into this Agreement for the
purposes stated in
this Agreement, 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. Pursuant to the terms of
the Purchase Agreement,
Vittone has agreed to transfer all interests of the
Property into the name of
the Joint Venture as outlined below. The
ownership of the interests on the
Property shall revert back to Vittone one year after
commercial production has
ceased on the Property, but may be
extended upon mutual agreement of the
parties.
3.2 NAME
The name of this Joint Venture shall be the "Condor
Yacu Joint Venture". The
Operator shall accomplish any registration required by applicable
legislation in
the name of the Joint Venture.
<PAGE>
7
3.3 TITLE
Except as otherwise provided herein
or by the Participants, title to the
Property shall be held in trust (with such
notations on title as shall place
third parties on notice) in the name of the Joint Venture for the
parties hereto
according to their Participating Interests or in such
commonly held corporation
or other entity as the Management Committee
may recommend and the parties
accept.
3.4 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,
shall accomplish such purposes:
(a) to conduct
Exploration on the Property;
(b) to evaluate the
possible Development of the Property;
(c) to engage in
Development of the Property;
(d) to carry on the
Operating Mine;
(e) to engage in
Property financing;
(f) to engage in
marketing Products; and
(g) to perform any other
activity necessary, appropriate, or incidental
to any of the foregoing.
3.5 LIMITATION
Unless the Participants otherwise agree in
writing, the Operations shall be
limited to the purposes described in
Subsection 3.4, and nothing in this
Agreement shall be construed to enlarge or expand such
purposes.
3.6 DISTRIBUTION OF NET PROFIT
To the extent permitted by law, the Net Profit of
the Joint Venture from the
sale of Assets and/or Products (for the purposes of
this section not including
taking in kind, as provided for in Part 14) available
for distribution, after
making such provisions for any Program or Budget as are
required in the opinion
(expressed by resolution) of the Management
Committee, will be distributed
quarterly within 60 days of the end of each calendar
quarter unless otherwise
agreed to in writing by the Participants.
<PAGE>
8
3.7 TAKING IN KIND
Unless otherwise agreed by the Participants, each
Participant shall take its
Proportionate Share of Product in kind in accordance
with the provisions set
forth elsewhere in this Agreement, subject to the most
favorable tax situation
available to Vittone under the tax laws of Argentina.
3.8 LOSS OF TITLE
Any failure or loss of title to the Assets or the
Property, and all costs of
recovering or defending title, shall be
charged to the Joint Account but if
caused or allowed to occur by negligence by a
party then such costs shall be
paid by such party or otherwise recovered from such party.
3.9 EFFECTIVE DATE AND TERM
The effective date of the Joint Venture shall be
the date of this Agreement.
This Agreement shall continue from the effective date for so long
as two or more
parties to this Agreement hold a Participating Interest.
4. RELATIONSHIP OF THE PARTICIPANTS
4.1 NO PARTNERSHIP
Nothing contained in this Agreement shall be deemed to render
either Participant
the partner of the other, nor, except as otherwise herein expressly
provided, to
render 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 Property
and the rights acquired hereunder
shall be as tenants in common.
Each
Participant shall indemnify, defend and hold harmless the other
Participant, its
directors, officers, employees, agents and
attorneys from and against any and
all losses, claims, damages and
liabilities arising out of any act or any
assumption of liability by the
indemnifying Participant, or any of
its
directors, officers, employees, agents 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 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
<PAGE>
9
the other. The doctrines of "corporate opportunity" or
"business opportunity"
shall not be applied to any other activity, joint
venture, or operation of
either Participant, and neither Participant
shall have any obligation to the
other with respect to any opportunity to acquire any
property outside the Area
of Interest at any time, or within the Area of Interest after the
termination of
this Agreement. Unless otherwise agreed to 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.
4.3 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 or the
Property, including any such
rights provided by statute.
4.4 TRANSFER OR TERMINATION OF RIGHTS TO THE PROPERTY
Except as otherwise provided in this
Agreement, neither Participant shall
Transfer all or any part of its interest in the
Assets, the Property or this
Agreement.
4.5 IMPLIED COVENANTS
There are no implied covenants contained in this
Agreement other than those of
good faith and fair dealing.
5. CONTRIBUTIONS BY PARTICIPANTS
5.1 PARTICIPANTS' INITIAL CONTRIBUTION
At the time of this Agreement, Each
Participant is deemed to have made the
following Initial Contribution to the Joint Venture:
(a) Southern:
Payment of $500,000 (payable to
Vittone as per the
attached Purchase Agreement) plus the further funding of
$4,500,000
for the work program on the Property. These
two payments shall
together constitute 100% of Southern's total required
contribution
to the Joint Venture; and
(b) Vittone:
Deemed payment of $750,000
(reflecting an initial
contribution of $500,000, which has been revalued at
current rates
to equal $750,000) plus the transfer of title to the
Property. This
payment and transfer of title shall
together constitute 100% of
Vittone's total required contribution to the Joint Venture.
5.2 ADDITIONAL CASH CONTRIBUTIONS
In addition to the Initial Contribution, Southern shall
be responsible for the
cost of putting the Property into production. In
exchange, Southern shall be
granted 80% of all proceeds of net revenue until they have
recovered 115% of the
<PAGE>
10
total costs of putting the Property into
production. Thereafter, the parties
shall each receive 50% of the net proceeds of the Joint
Venture.
5.3 PRIORITY OF THIRD PARTY FUNDING
The parties agree that wherever feasible,
priority will be given to funding
Operations by negotiated joint ventures with third parties,
in particular major
mining companies, or debt, or
other appropriate mechanisms which may
be
recommended by investment counsel.
All parties shall be involved in
any
negotiations and shall adopt reasonable positions in good
faith.
5.4 THIRD PARTY CONTRACTS
The parties agree that third party contracts, whether
entered into with majors
or otherwise, shall not alter, or be deemed to
alter, the parties' rights and
interests herein as between the parties hereto unless such shall be
specifically
provided in such third party agreement or would be an
unavoidable implication
thereof and would occur if the event occurred under this Agreement
(for example,
a dilution provision of a third party agreement would operate
to dilute a party
to this Agreement but would not extinguish any carried
interests provided for
hereunder, as between the parties hereto,
unless the third party agreement
specifically stated that it supersedes such provision
of this Agreement). If
additional rights or property are acquired or made
available under third party
agreements then such rights and
property shall accrue to the parties in
accordance with their rights and interests, as they may be from
time to time, of
this Agreement (for example, if a property is available
to the parties under a
third party agreement, then the parties
shall have the right to participate
therein in accordance with their Participating Interest
herein, as adjusted for
the third party interest under the third party agreement).
6. INTERESTS OF PARTICIPANTS
6.1 INITIAL PARTICIPATING INTEREST
Per section 5.2 above, the initial Participating
Interests of the Participants
in the Joint Venture is as follows:
(a) Southern as to
80% Participating Interest until it has been repaid
115% of the cost of putting the Property into production; and
(b) Vittone as to 20%
Participating Interest.
Thereafter, the parties shall each receive 50% of the net
proceeds of the Joint
Venture.
6.2 CHANGES IN PARTICIPATING INTERESTS
Southern's Participating Interest in the
Joint Venture shall be changed as
follows:
(a) transfer by Southern
of less than all its Participating Interest in
accordance with Section 14;
<PAGE>
11
(b) acquisition of
less than all of the Participating Interest of the
other Participant, however arising; or
(c) in the event
of default by Southern in making
its agreed-upon
contribution to an adopted Program
and Budget, followed by an
election by the other Participant to invoke paragraph 6.5(b).
6.3 Not Applicable
6.4 Not Applicable
6.5 DEFAULT IN MAKING COMMITTED CONTRIBUTIONS
If Southern, having committed to making a contribution
to a Program or Budget,
defaults in making a contribution or cash call or paying an
invoiced amount (the
Defaulted Contribution") required by an
approved Program and Budget to which
Southern had committed to contribute its
Proportionate Share, or some part
thereof, Vittone may elect, within thirty days of notice of
the default, one of
the following:
(a) to pay
the Defaulted Contribution
and treat the Defaulted
Contribution, together with any accrued
interest calculated and
compounded on a quarterly basis from
advance, as a demand loan
bearing interest at a rate of 10% per annum. The
failure to repay
said loan upon demand shall be a default of
the deemed loan and
Vittone may effect execution proceedings and take all steps it
deems
advisable to recover the loan and interest,
including auctioning
Southern's Interest. Southern hereby grants to Vittone
a lien upon
and a security interest in its Participating Interest in the
Assets
and the Property, and the Products and Net
Profit therefrom, to
secure any loan made hereunder,
including interest thereon,
reasonable legal 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; or
(b) to have Southern's
Participating Interest in the Property reduced.
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.
6.6 REASONABLE TIME FOR FINANCING
Southern shall be required to meet the following minimum finance
periods:
(a) $500,000 (the
payment to Vittone) on or before 60 days from the date
of this Agreement; and
<PAGE>
12
(b) $4,500,000 on or
before 120 days from the date of this Agreement.
The parties agree that an extension
of up to 60 days shall be granted to
Southern to meet either of the above
funding timelines, if, at the sole
discretion of Vittone, Southern has shown a reasonable plan
to meet the funding
requirement within this extended 60 day timeline.
6.7 CONTINUING LIABILITIES UPON ADJUSTMENTS OF PARTICIPATING
INTERESTS
Any reduction of Southern's Participating
Interest in the Joint Venture under
this Section 6 shall not relieve Southern of its share of any
liability, whether
it accrues before or after such reduction, arising out of
Operations conducted
prior to such reduction. For purposes of this Section
6, Southern'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 Vittone
as a result of the reduction of Southern's Participating
Interest shall be free
of royalties, liens or other encumbrances, other than those
existing at the time
the Property was acquired, those to which both
Participants have given their
written consent, or the Net Profits Interest of
Vittone. 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
Operator. 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.
7. MANAGEMENT COMMITTEE
7.1 ORGANIZATION AND COMPOSITION
The Participants hereby establish a Management
Committee to determine overall
policies, objectives, procedures, methods and actions
under this Agreement and
to supervise Operations and approve
Budgets and Programs. The Management
Committee shall consist of two members
appointed by Vittone and two members
appointed by Southern. 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 to the other
Participant.
7.2 DECISIONS
Each Participant, acting through its appointed
member(s) shall have one equal
vote on the Management Committee for each appointed member.
7.3 MEETINGS
The Management Committee shall hold regular
meetings at least annually at a
mutually agreed place. The
Operator shall give 15 days
notice to the
Participants of such regular meetings. Additionally, either
Participant may call
a special meeting upon 30 days'
notice to the Operator and the
other
<PAGE>
13
Participant. In case of emergency, reasonable notice of a
special meeting shall
suffice. There shall be a quorum of at
least one member representing each
Participant present. In the event that a quorum is not
present then the meeting
may be adjourned to the fifth business day, with notice to
the absent members,
and the members present at an adjourned meeting shall
constitute a quorum which
shall only have the power to deal with the matters of the
agenda circulated for
the adjourned meeting. Each notice of a meeting shall include an
itemized agenda
prepared by the Operator 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 the Participants. The
Management Committee shall
establish its own procedural rules,
which shall be modeled upon corporate
precedent. The Operator shall prepare
minutes of all meetings and shall
distribute copies of such minutes to the Participants
within 15 days after the
meeting. The minutes, when signed by the members of the
meeting, shall be the
official record of the decisions made by the Management
Committee and shall be
binding on the Operator and the Participants, except as
otherwise provided in
this Agreement or where inconsistent with this Agreement. If
personnel employed
in operations are required to attend a Management Committee
meeting, reasonable
costs incurred in connection with such attendance shall be a Joint
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 PROCEDURE FOR DEADLOCK
In the event of a dead-lock of the Management Committee
respecting the approval
of or operation of Programs,
Feasibility Reports, Operating plans,
mine
maintenance plans, mine closure plans, or
any other matters respecting the
exploration, development, operation,
maintenance, production, or sale of
Products of or from the Property, then the matter in
dispute shall be referred
to a recognized engineering or geological consultant (the
"CONSULTANT") selected
by the Operator. A dead-lock shall be
irrevocably deemed to occur upon the
Management Committee having failed to agree on a matter
in two (2) successive
meetings. Upon a dead-lock occurring:
(a) any party (the
"SENDING PARTY") may forthwith give
notice (the
"NOTICE") in writing to the other parties (the "RECEIVING
PARTIES")
declaring a dead-lock,
specifying the issue (or
issues) in
contention;
(b) the Operator
shall, within ten (10) days of receipt or issuance of
the written notice, select a
Consultant to examine and give an
opinion on the matter, and thereupon give
written notice to the
parties naming the Consultant and giving the
Consultant's estimate
of the cost to have the Consultant determine the issue;
(c) within thirty (30)
days (or such longer period as the Consultant may
allow, but it shall not be required to give any
extension) of the
<PAGE>
14
written notice of the Operator naming the
Consultant, the parties
shall submit to the
Consultant such materials as
they deem
advisable, in respect to the issue or issues, for
consideration by
the Consultant and, if a party fails to submit such
materials, then
the Consultant shall conduct its
inquiries from the submitted
materials of the other parties and
from its own resources and
researchers;
(d) the parties and the
Management Committee shall allow the Consultant
complete access to all records and files
regarding the Property,
whether on the premises of the parties or the
Management Committee
or elsewhere, and the Consultant shall
have access to all other
persons having knowledge of the Property and
shall have complete
access to the Property and shall have the right to conduct
all such
tests and researches as it may
determine including sampling,
trenching, drilling or other activities as it may deem
advisable;
(e) upon having
familiarized itself with the materials, the
Consultant
shall hold a meeting with the parties to hear their
representations
and to query the parties as to their opinions and to attempt to
seek
majority consensus of the parties with the Consultant's
assistance;
(f) if the parties
cannot reach majority consensus, the Consultant shall
submit its reports and recommendations to the parties in
respect to
the issue or issues
submitted to it and such
report and
recommendations shall be final and binding upon the
parties unless
modified by majority vote of the parties; and
(g) the cost of
the Consultant shall be a cost charged to
the Joint
Venture Account.
7.6 MATTERS REQUIRING APPROVAL
Except as otherwise delegated to the Operator in Subsection
8.2, the Management
Committee shall have exclusive authority to determine
all management matters
related to this Agreement.
8. OPERATOR
8.1 APPOINTMENT
The Joint Venture shall be the Operator
until such time as it resigns or is
required to resign by the terms of this
Agreement. The Joint Venture or its
successor hereby agrees to serve as such until it resigns or is
deemed to resign
as provided in Subsection 8.5 or it is removed, as provided
in Subsection 8.6.
The Joint Venture or its successor shall, at all
times, appoint an individual
employed on its staff as having primary
responsibility to direct the Joint
Venture's activities as Operator. Any
proposed change in the individual
appointed under this Subsection 8.1 will be communicated by notice
in writing to
the Participants in advance of the appointment.
<PAGE>
15
8.2 POWERS AND DUTIES OF OPERATOR
Subject to the terms and provisions of this
Agreement and subject to such
variations as may be prescribed by the Management
Committee from time to time,
the Operator shall have the following
powers and duties, subject to the
provision of adequate funding, which shall be
discharged in accordance with
adopted Programs and Budgets:
(a) The Operator shall
manage, direct and control Operations;
(b) The
Operator shall implement the
decisions of the Management
Committee, shall make all expenditures
necessary to carry out
adopted Programs, and shall promptly advise the Management
Committee
if it lacks sufficient funds to carry out its responsibilities
under
this Agreement;
(c) The Operator
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 and the Property free and clear
of all liens
and encumbrances, except for those liens
and encumbrances
existing at the time of, or created
concurrent with, the
acquisition of the Assets, or mechanic's or
material men's
liens which shall be released or discharged
in a diligent
manner, or liens and encumbrances specifically
approved by
the Management Committee.
(iv) make or arrange for
all payments required by leases,
licenses, permits, contracts and other agreements related
to
the Assets and the Property;
(v) pay all taxes, assessments and
like charges on Operations,
Assets and the Property
except taxes determined or measured
by a Participant's sales revenue or net income. If authorized
by the Management Committee, the
Operator shall have the
right to contest in the courts or otherwise, the validity
or
amount of any taxes, assessments or charges if the
Operator
deems them to be unlawful, unjust, inequitable or
excessive,
or to undertake such other steps
or proceedings as the
Operator may deem
reasonably necessary to secure
a
cancellation, reduction, readjustment or equalization thereof
before the Operator shall be required to pay them, but in
no
event shall the Operator permit or allow title to the
Assets
<PAGE>
16
or the Property to be lost as the result of the nonpayment of
any taxes, assessments or like
charges;
(vi) apply for all necessary permits, licenses and
approvals;
(vii) comply with applicable federal, provincial and local
laws and
regulations;
(viii) notify promptly the Management Committee of any
allegations
of violation of any license, regulation, agreement or
other
matter which may result in a dispute, fine,
prosecution, or
other liability or investigation or proceeding ;
(ix) prepare and file all
reports or notices required for
Operations. The Operator shall not be
in breach of this
provision if a violation has occurred
in spite of the
Operator's good faith efforts to comply and the Operator has,
or has attempted to, timely cured
or disposed of such
violation through performance, or
payment of fines and
penalties; and
(x) shall do all other acts reasonably
necessary to maintain the
Assets and the Property.
(d) The Operator
shall conduct such title examinations and cure
such
title defects
as may be advisable in the reasonable judgment of the
Operator.
(e) The
Operator shall prosecute and defend, but
shall not initiate
without consent of the Management
Committee, all litigation or
administrative proceedings arising out of Operations. Any
settlement
involving payments, commitments or obligations in excess of
$50,000
in cash or value shall be subject to the advance
approval of the
non-managing Participant.
(f) The
Operator shall provide insurance for
the benefit of the
Participants as stipulated by the Management Committee.
(g) The
Operator may dispose of Assets,
whether by abandonment,
surrender or Transfer in the ordinary course of
business, except
that the Property may be abandoned or surrendered only
as provided
in Section 13. However, without
prior authorization from the
Participants, the
Operator shall not:
(i) dispose of Assets in any one
transaction having a value in
excess of $50,000;
(ii) enter into any sales contracts or
commitments for Product,
except
as permitted in Subsection 11.2;
<PAGE>
17
(iii) begin a liquidation of the Joint Venture; or
(iv) dispose of all or a substantial part of the
Assets necessary
to
achieve the purposes of the Joint Venture.
(h) The Operator shall
have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent
contractors or,
with the written consent of the Participants, to an unrelated
third
party.
(i) The Operator shall
perform or cause to be performed during the term
of this Agreement all assessment and other work
required by law in
order to maintain in good standing the mining claims or
concessions
included within the Property. The Operator shall
not be liable on
account of any determination by any court or
governmental agency
that the work performed by Operator does not constitute the
required
annual assessment work or occupancy for the purposes of
preserving
or maintaining ownership of the claims, provided that the
work done
is in accordance with the adopted Program and Budget and such
error
does not occur due to negligence of reporting of the Operator to
the
Management Committee or in the carrying out
of the Programs or
Budgets. The Operator shall timely
record and file with the
appropriate governmental agency, records in proper form attesting
to
the performance of assessment work, and allocating
therein, to or
for the benefit of each claim, at least the minimum amount
required
by law to maintain such claim or site in good standing.
(j) If authorized by the
Management Committee, the Operator may:
(i) locate, amend or relocate any
mining claim or mill site or
tunnel site;
(ii) locate any fractions
resulting from such amendment or
relocation;
(iii) apply for patents or mining leases or other forms
of mineral
tenure for any such claims or sites;
(iv) abandon
any mining claims for the purpose of locating
mill
sites or otherwise;
(v) abandon any mill sites for the
purpose of locating mining
claims or otherwise;
(vi) exchange with or convey to the government of
Argentina any of
the Property for the purpose of
acquiring rights to the
ground covered thereby or other adjacent ground; and
(vii) convert any claims or mill sites into one or
more leases or
other forms of mineral tenure pursuant to any law
hereafter
enacted.
<PAGE>
18
(k) The Operator
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.
(l) The
Operator shall keep the Management
Committee advised of all
Operations by submitting in writing to the Management
Committee:
(i) monthly summary progress reports within
15 days of month end
which include programs in progress and completed during
the
month, number of samples collected, and estimated
statements
of expenditures;
(ii) immediately provide Participants with
notice of and written
details of all material changes, as such would reasonably
be
defined pursuant to relevant securities laws;
(iii) quarterly progress reports
which include statements of
expenditures and comparisons of such expenditures to be
the
adopted Budget, within 30 days of the end of
the calendar
quarter;
(iv) copies of reports concerning Operations;
(v) a detailed final report within 60
days after completion of
each Program and Budget, and no less frequently than one such
report every twelve months, which shall include
comparisons
between actual and budgeted expenditures
and comparisons
between the objectives and results of Programs, together with
the following information:
(A) introduction;
(B) project or property location and access;
(C) physiography, vegetation and climate;
(D) historical background and current exploration
program;
(E) description of properties, including claims with
expiry
dates and assessment requirements;
(F) regional geology;
(G) property geology;
<PAGE>
19
(H) mineralization;
(I) geochemistry-- rock and/or soil with interpretation;
&
