Exhibit 4.2 Mineral Asset Option Agreement
MINERAL ASSETS OPTION AGREEMENT
Between:
▇▇▇▇ ▇. ▇▇▇▇▇
And:
URANIUM ENERGY CORP.
Uranium Energy Corp.
Suite 401, 318 ▇▇▇▇▇ Street, Vancouver, British Columbia, Canada, V6B 2V2
MINERAL ASSETS OPTION AGREEMENT
THIS MINERAL ASSETS OPTION AGREEMENT is made and dated for reference
effective as of the 11th day of October, 2005 - (the "Effective Date"), as fully
executed on this _____ day of October, 2005.
BETWEEN:
▇▇▇▇ ▇. ▇▇▇▇▇, businessperson, having an address for notice and delivery
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇.▇.▇., ▇▇▇▇▇, AND THE OPTIONOR'S
ASSOCIATES AND AFFILIATES, as the case may be
(the "Optionor");
OF THE FIRST PART
AND:
URANIUM ENERGY CORP., a company incorporated under the laws of the State of
Nevada, U.S.A, and having an address for notice and delivery located at ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
(the "Optionee");
OF THE SECOND PART
(the Optionor and the Optionee being hereinafter singularly also referred to as
a "Party" and collectively referred to as the "Parties" as the context so
requires).
1
WHEREAS:
A. ▇▇▇▇ ▇. ▇▇▇▇▇ and his associates or affiliates, as the case may be
(collectively, the "Optionor" herein), own or are in the process of acquiring
various drill proven reserves and leases in Texas and, in particular, however,
without limitation, being comprised of: (i) the Optionor's current 100% legal,
registered and beneficial ownership in and to the Weesatche project, comprised
of four leases totalling m/l 593.46 acres, located in Goliad County; which the
Optionor has represented to the Optionee has total proven and probable reserves
reported of 5,200,000 pounds; and (ii) the Optionor's current intention to
acquire the Caldena project, totalling approximately 300 acres, located in ▇▇▇▇▇
County; which the Optionor has represented to the Optionee has total proven and
probable reserves of 1,200,000 pounds; together with such other leases or
interests which the Optionor may acquire within the Caldena deposit area from
August 11, 2005 moving forward (collectively, the "Assets" herein), and which
mineral property interests comprising the Assets are more particularly described
in Schedule "A" which is attached hereto and which forms a material part
hereof;.
B. The Optionee is a reporting company incorporated under the laws of the
State of Nevada, U.S.A., and is in the business of seeking, acquiring and
developing mineral resource property interests of merit;
C. In accordance with the terms and conditions of a certain "letter of
intent", dated for reference August 11, 2005 (the "Letter of Intent"), as
entered into between the Optionor and the Optionee, the parties thereto agreed
to use their best efforts to initiate, complete and enter into a formal
agreement whereby the Optionor would grant an option to the Optionee (the
"Option") to acquire an undivided 100% legal, beneficial and registerable
interest in and to the mineral property interests comprising the Assets in
accordance with the terms and conditions of the Letter of Intent; a copy of
which Letter of Intent being attached hereto as Schedule "B" and which forms a
material part hereof, and the terms and conditions of the Letter of Intent
setting forth the Parties general intentions herein; and
D. The Parties hereto have agreed to enter into this agreement (the "Agreement")
which formalizes and replaces, in its entirety, the Letter of Intent, as
contemplated and required by the terms of the Letter of Intent, and which
clarifies their respective duties and obligations in connection with the within
granting by the Optionor to the Optionee to acquire an undivided 100% legal,
beneficial and registerable interest in and to the mineral property interests
comprising the Assets as a consequence thereof;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS
FOLLOWS:
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Article 1
DEFINITIONS, SCHEDULES AND INTERPRETATION
1.1 Definitions. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(a) "Agreement" means this Mineral Assets Option Agreement as entered into
between the Parties hereto, together with any amendments thereto and any
Schedules as attached thereto;
(b) "Arbitration Rules" means American Arbitration Rules, as amended from time
to time, as set forth in Article "16" hereinbelow;
(c) "Assets" has the meaning ascribed to it in recital "A." hereinabove; and
which mineral property interests comprising the Assets are particularly
described in Schedule "A" which is attached hereto together with any other
claim or interests of the Parties hereto which are incorporated into the
Assets by the terms of this Agreement;
(d) "Assets Documentation" means any and all technical records and other
factual engineering data and information relating to the mineral property
interests comprising the Assets and including, without limitation, all
plans, maps, agreements and records which are in the possession or control
of any Party hereto;
(e) "Assets Rights" means all mineral licenses and all prioritized and
protocoled applications for exploration licenses, permits, easements,
rights-of-way, certificates, exclusive prospecting orders and other
approvals obtained by either of the Parties either before or after the
Effective Date of this Agreement and necessary for the exploration and
development of any of the mineral property interests comprising the Assets;
(f) "Cash Payments" has the meaning ascribed to it in section "2.2"
hereinbelow;
(g) "Closing" has the meaning ascribed to it in section "6.1" hereinbelow and
includes, without limitation, the closing of each of the transactions
contemplated hereby which shall occur after the conditions precedent set
out in Article "5" hereinbelow have been satisfied in their entirety;
(h) "Closing Date" has the meaning ascribed to it in section "6.1" hereinbelow;
(i) "Confidential Information" has the meaning ascribed to it in section "14.1"
hereinbelow;
(j) "Consultants" has the meaning ascribed to it in section "2.2" hereinbelow;
(k) "Consulting Arrangements" has the meaning ascribed to it in section "2.2"
hereinbelow;
(l) "Defaulting Party" and "Non-Defaulting Party" have the meanings ascribed to
them in section "17.1" hereinbelow;
(m) "Disposing Party" has the meaning ascribed to it in section "10.3"
hereinbelow;
(n) "Effective Date" has the meaning ascribed to in on the front page of this
Agreement;
(o) "Escrow Agent" means Lang ▇▇▇▇▇▇▇▇ LLP, Lawyers - Patent & Trade ▇▇▇▇
Agents, or such other mutually agreeable escrow agent as may be selected by
the Parties hereto either prior to or after the Effective Date and who
agrees to be bound by the terms and conditions of this Agreement;
(p) "Holding" has the meaning ascribed to it in section "10.3" hereinbelow;
(q) "Indemnified Parties" and "Indemnified Party" have the meanings ascribed to
them in section "18.1" hereinbelow;
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Article 1
DEFINITIONS, SCHEDULES AND INTERPRETATION - continued
(r) "Letter of Intent" has the meaning ascribed to it in recital "C."
hereinabove; and a copy of which Letter of Intent is attached hereto as
Schedule "B" and forms a material part hereof;
(s) "Management Committee" means a committee formed pursuant to Article "9"
hereinbelow;
(t) "Option" has the meaning ascribed to it in section "2.1" hereinbelow as
effected in the manner as set forth in Article "2" hereinbelow;
(u) "Option Cash Payment" has the meaning ascribed to it in section "2.2"
hereinbelow;
(v) "Option Period" has the meaning ascribed to it in section "2.1"
hereinbelow;
(w) "Option Share" has the meaning ascribed to it in section "2.2" hereinbelow;
(x) "Option Share Issuance" has the meaning ascribed to it in section "2.2"
hereinbelow;
(y) "Operator" means, initially, the Optionee, together with that person,
company or companies acting as such pursuant to this Agreement, and
otherwise shall be such party or parties as is determined by the Management
Committee;
(z) "Optionee" means Uranium Energy Corp., a company incorporated pursuant to
the laws of the State of Nevada, U.S.A.,, or any successor company, however
formed, whether as a result of merger, amalgamation or other action;
(aa) "Optionor" means ▇▇▇▇ ▇. ▇▇▇▇▇ and his associates or affiliates, as the
case may;
(ab) "Party" or "Parties" means the Optionor and/or the Optionee hereto,
together with their respective successors and permitted assigns as the
context so requires;
(ac) "person" or "persons" means an individual, corporation, partnership, party,
trust, fund, association and any other organized group of persons and the
personal or other legal representative of a person to whom the context can
apply according to law;
(ad) "Programs" means plans, including budgets, for every kind of work done or
in respect of the Assets by or under the direction of or on behalf of or
for the benefit of a Party, and, without limiting the generality of the
foregoing, includes exploration and development work, assessment work,
geophysical, geochemical and geological surveying, studies and mapping,
investigating, drilling, designing, examining, equipping, improving,
surveying, shaft sinking, raising, cross-cutting and drifting, searching
for, digging, trucking, sampling, working and procuring product, surveying
and bringing any mineral property interests comprising the Assets to lease
or patent, reporting, and all other work usually considered to be
prospecting, exploration, development and mining work;
(ae) "Regulatory Approval" means the acceptance for filing of the transactions
contemplated by this Agreement by the Regulatory Authorities;
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Article 1
DEFINITIONS, SCHEDULES AND INTERPRETATION - continued
(af) "Regulatory Authorities" means such regulatory bodies and agencies who have
jurisdiction over the affairs of any of the Parties hereto and including,
without limitation, all Regulatory Authorities from whom any such
authorization, approval or other action is required to be obtained or to be
made in connection with the transactions contemplated by this Agreement;
(ag) "Securities Act" means the United States Securities Act of 1933, as
amended, together with any Rules and Regulations promulgated thereunder;
(ah) "Subject Removal Date" has the meaning ascribed to it in section "5.1"
hereinbelow;
(ai) "subsidiary" means any company or companies of which more than 50% of the
outstanding shares carrying votes at all times (provided that the ownership
of such shares confers the right at all times to elect at least a majority
of the board of directors of such company or companies) are for the time
being owned by or held for a company and/or any other company in like
relation to the company, and includes any company in like relation to the
subsidiary; and
(aj) "Transfer Documents" has the meaning as set forth in section "7.2"
hereinbelow.
1.2 Schedules. For the purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following shall represent
the Schedules which are attached to this Agreement and which form a material
part hereof:
Schedule Description
Schedule "A": Assets; and
Schedule "B": Letter of Intent.
1.3 Interpretation. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context
otherwise requires:
(a) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
Article, section or other subdivision of this Agreement;
(b) the headings are for convenience only and do not form a part of this
Agreement nor are they intended to interpret, define or limit the scope or
extent of this or any provision of this Agreement;
(c) any reference to an entity shall include and shall be deemed to be a
reference to any entity that is a permitted successor to such entity; and
(d) words in the singular include the plural and words in the masculine gender
include the feminine and neuter genders, and vice versa.
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Article 2
GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION
2.1 Grant of the Option. Subject to the terms and conditions hereof and based
upon the representations, warranties and covenants contained in Articles "3" and
"4" hereinbelow and the prior satisfaction of the conditions precedent which are
set forth in Article "5" hereinbelow, the Optionor hereby agrees to give and
grant to the Optionee the sole and exclusive right and option to acquire an
undivided 100% legal, beneficial and registerable interest in and to the mineral
property interests comprising the Assets (again, the "Option") and, in order to
maintain the Option in good standing and in full force and effect, the Optionee
hereby agrees to exercise the Option on or before the Closing Date (as
hereinafter defined) (and which period in time from the Effective Date herein to
the Closing Date is referred to as the "Option Period") for each of the Cash
Payments (as hereinafter defined), Share Issuances (as hereinafter defined),
Consulting Arrangements (as hereinafter defined) and maintenance payments to be
paid and incurred in accordance with section "2.2" hereinbelow.
2.2 Consideration for and maintenance of the Option. In order to keep the right
and Option granted to the Optionee in respect of the Assets in good standing and
in force and effect during the Option Period the Optionee shall be obligated to
pay and issue the following Cash Payments (as hereinafter defined), Share
Issuances (as hereinafter defined), Consulting Arrangements (as hereinafter
defined) and maintenance payments to and for the order of the Optionor and the
mineral property interests comprising the Assets in the following manner:
(a) Option Cash Payments: pay to the order and direction of the Optionor the
following Option cash payments (each an "Option Cash Payment") in the
aggregate of U.S. $200,000.00 during the Option Period in the following
manner:
(i) an initial Option Cash Payment of U.S. $50,000.00 within five business
days of the date of the Effective Date of this Agreement; the receipt
and sufficiency of which initial Option Cash Payment being hereby
acknowledged by the Optionor; and
(ii) the final Option Cash Payment of U.S. $150,000.00 on the date which is
the earlier of:
(A) the date which is six months from the Effective Date; and
(B) the date that the Optionee's common shares are first listed, posed and
called for trading on a recognized stock exchange or over-the-counter
market in North America (the "Initial Listing Date");
(b) Option Share Issuances: issue to the order and direction of the Optionor
prior to and at the end of the Option Period an aggregate of 2,000,000
common shares in the share capital of the Optionee (each an "Option
Share"), at a deemed issuance price of U.S. $0.50 per Share (and each such
issuance being an "Option Share Issuance" hereunder), in the following
manner in this instance:
(i) an initial Option Share Issuance of an initial 500,000 of the Option
Shares within five business days of the date of the Effective Date of
this Agreement; the receipt and sufficiency of which initial Option
Cash Issuance being hereby acknowledged by the Optionor;
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Article 2
GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued.
(ii) an additional Option Share Issuance of an additional 500,000 of the
Option Shares on or before six months from the Effective Date;
(iii) a further Option Share Issuance of a further 500,000 of the Option
Shares on or before one year from the Effective Date; and
(iv) the final Option Share Issuance of the final 500,000 of the Option
Shares on or before 18 months from the Effective Date;
(c) Consulting Arrangements: in conjunction with or shortly after the
execution of this Agreement; however, to take effective only upon the
Initial Listing Date hereof; the Optionee will use its reasonably
commercial efforts to enter into industry standard forms of proposed
consulting arrangements (collectively, the "Consulting Arrangements")
with each of the Optionor and ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ (collectively, the
"Consultants" herein) therein providing for, without limitation, the
provision of certain consulting services to be provided by the
Consultants to the Optionee in connection with the exploration,
development and expansion of the Assets in consideration of, among
other matters, the provision of the monthly payment by the Optionee to
each of the Consultants of U.S. $10,000.00 together with entitlement
for the Consultants to participate in the Optionee's then incentive
stock option plan subject, at all times, to the final determination of
the Board of Directors of the Optionee in each such instance; and
(d) Maintenance payments: pay, or cause to be paid, to or on the
Optionor's behalf as the Optionee may determine, in the Optionee's
sole and absolute discretion, all underlying option, regulatory and
governmental payments and assessment work required to keep the mineral
property interests comprising the Assets and any underlying option
agreements respecting any of the mineral property interests comprising
the Assets in goodstanding during the Option Period of this Agreement.
2.3 Resale restrictions and legending of Share certificates. The Optionor hereby
acknowledges and agrees that the Optionee makes no representations as to any
resale or other restriction affecting the Option Shares and that it is presently
contemplated that the Option Shares will be issued by the Optionee to the
Optionor in reliance upon the registration and prospectus exemptions contained
in certain sections of the United States Securities Act of 1933 (the "Securities
Act") which will impose a trading restriction in the United States on the Shares
for a period of at least 12 months from the Closing Date (as hereinafter
determined). In addition, the Optionor hereby also acknowledges and agrees that
the within obligation of the Optionee to issue the Option Shares pursuant to
section "2.2" hereinabove will be subject to the Optionee being satisfied that
an exemption from applicable registration and prospectus requirements is
available under the Securities Act and all applicable securities laws, in
respect of each of the Optionor and the Option Shares, and that the Optione
shall be relieved of any obligation whatsoever to purchase the Assets and to
issue Option Shares in respect of the Optionor where the Optionee reasonably
determines that a suitable exemption is not available to it.
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Article 2
GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued.
The Optionor hereby also acknowledges and understands that neither the sale
of the Option Shares which the Optionor is acquiring nor any of the Option
Shares themselves have been registered under the Securities Act or any state
securities laws, and, furthermore, that the Option Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Optionor also acknowledges
and understands that the certificates representing the Option Shares will be
stamped with the following legend (or substantially equivalent language)
restricting transfer in the following manner if such restriction is required by
the Regulatory Authorities:
"The securities represented by this certificate have not been registered
under the United States Securities Act of 1933, as amended, or the laws of
any state, and have been issued pursuant to an exemption from registration
pertaining to such securities and pursuant to a representation by the
security holder named hereon that said securities have been acquired for
purposes of investment and not for purposes of distribution. These
securities may not be offered, sold, transferred, pledged or hypothecated
in the absence of registration, or the availability of an exemption from
such registration. Furthermore, no offer, sale, transfer, pledge or
hypothecation is to take place without the prior written approval of
counsel to the company being affixed to this certificate. The stock
transfer agent has been ordered to effectuate transfers only in accordance
with the above instructions.";and the Optionor hereby consents to the
Optionee making a notation on its records or giving instructions to any
transfer agent of the Optionee in order to implement the restrictions on
transfer set forth and described hereinabove.
The Optionor also acknowledges and understands that:
(a) the Option Shares are restricted securities within the meaning of
"Rule 144" promulgated under the Securities Act;
(b) the exemption from registration under Rule 144 will not be
available in any event for at least one year from the date of
issuance of the Option Shares to the Optionor, and even then will
not be available unless (i) a public trading market then exists
for the common stock of the Optionee, (ii) adequate information
concerning the Optionee is then available to the public and (iii)
other terms and conditions of Rule 144 are complied with; and
(c) any sale of the Option Shares may be made by the Optionor only in
limited amounts in accordance with such terms and conditions.
2.4 Standstill provisions. In consideration of the Optionee's within agreement
to purchase the Assets and to enter into the terms and conditions of this
Agreement, the Optionor hereby undertakes for itself, and for each of the
Optionor's respective agents and advisors, that they will not until the earlier
of the Closing Date (as hereinafter defined) or the termination of this
Agreement approach or consider any other potential purchasers, or make, invite,
entertain or accept any offer or proposal for the proposed sale of any mineral
property interests comprising the Assets or, for that matter, disclose any of
the terms of this Agreement, without the Optionee's prior written consent. In
this regard the Optionor hereby acknowledges that the foregoing restrictions are
important to the business of the Optionee and that a breach by the Optionor of
any of the covenants herein contained would result in irreparable harm and
significant damage to the Optionee that would not be adequately compensated for
by monetary award. Accordingly, the Optionor hereby agrees that, in the event of
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Article 2
GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued.
any such breach, in addition to being entitled as a matter of right to apply to
a Court of competent equitable jurisdiction for relief by way of restraining
order, injunction, decree or otherwise as may be appropriate to ensure
compliance with the provisions hereof, the Optionor will also be liable to the
Optionee, as liquidated damages, for an amount equal to the amount received and
earned by any such Party as a result of and with respect to any such breach. The
Optionor also acknowledges and agrees that if any of the aforesaid restrictions,
activities, obligations or periods are considered by a Court of competent
jurisdiction as being unreasonable, they agree that said Court shall have
authority to limit such restrictions, activities or periods as the Court deems
proper in the circumstances.
2.5 Termination of the Option. The Option shall terminate upon 30-calendar days'
prior written notice being first being provided by the Optionor to the Optionee:
(a) if the Optionee fails to make any of the required Cash Payments
to the Optionor in accordance with paragraph "2.2(a)" hereinabove
during the Option Period and prior to the time periods and the
Closing Date as specified in paragraph "2.2(a)" hereinabove; or
(b) if the Optionee fails to make any of the required Share Issuances
to the Optionor in accordance with paragraph "2.2(b)" hereinabove
during the Option Period and prior to the time periods and the
Closing Date as specified in paragraph "2.2(b)" hereinabove; or
(c) if the Optionee fails to enter into the proposed Consulting
Arrangements with the Consultants prior to the Initial Listing
Date in accordance with paragraph "2.2(c)" hereinabove and prior
to the Closing Date as specified in paragraph "2.2(c)"
hereinabove; or
(d) if the Optionee fails to pay, or cause to be paid, to or on the
Optionor's behalf as the Optionee may determine, in the
Optionee's sole and absolute discretion, all underlying option,
regulatory and governmental payments and assessment work required
to keep the mineral property interests comprising the Assets and
any underlying option agreements respecting any of the mineral
property interests comprising the Assets in goodstanding in
accordance with paragraph "2.2(d)" hereinabove.
2.6 Termination by the Optionee of the Option. Prior to the exercise of the
Option the Optionee may terminate the Option by providing a notice of
termination to the Optionor in writing of its desire to do so at least 30
calendar days prior to its decision to do so. After such 30-calendar days'
period the Optionee shall have no further obligations, financial or otherwise,
under this Agreement, except that the provisions of section "2.8" hereinbelow
shall become immediately applicable to the Optionee upon providing the said
notice of termination to the Optionor.
2.7 No interest in the Assets upon termination of the Option. If the Option is
so terminated in accordance with either of sections "2.5" or "2.6" hereinabove
the Optionee shall have no interest in and to any of the mineral property
interests comprising the Assets, and all Cash Payments, Share Issuances and
Consulting Arrangement and maintenance payments made, or caused to be made, or
incurred by the Optionee to or on behalf of the Optionor or any of the mineral
property interests comprising the Assets under this Agreement, shall then be
non-refundable by the Optionor to the Optionee for which the Optionee shall have
no recourse, and the provisions of section "2.8" hereinbelow shall become
immediately applicable to the Optionee.
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Article 2
GRANT, MAINTENANCE, EXERCISE AND TERMINATION OF THE OPTION - continued.
2.8 Obligations on termination of the Option. If the Option is terminated
otherwise than upon the exercise thereof pursuant to this Article, then the
Optionee shall:
(a) leave in good standing for a period of at least 60 calendar days
from the termination of the Option those mineral property
interests comprising the Assets that are in good standing on the
date thereof;
(b) cause to be delivered to the Optionor the Transfer Documents (as
hereinafter defined) and a ▇▇▇▇ of sale in recordable form
whereby the Optionee's entire right, title and interest in and to
the mineral property interests comprising the Assets has been
transferred to the Optionor free and clear of all liens or
charges arising from the Optionee's activities on the mineral
property interests comprising the Assets to the date thereof; and
(c) deliver at no cost to the Optionor within 30 calendar days of
such termination copies of all reports, maps, assay results and
other relevant technical data compiled by or in the possession of
the Optionee with respect to the mineral property interests
comprising the Assets and not theretofore already furnished to
the Optionor.
2.9 Deemed exercise of the Option. At such time as the Optionee has entered into
each of the Consulting Arrangements and made each of the required Cash Payments,
Share Issuances and maintenance payments in accordance with section "2.2"
hereinabove, within the Option Period and the time periods as specified in
section "2.2", then the Option shall be deemed to have been exercised by the
Optionee, and the Optionee shall have thereby, in accordance with the terms and
conditions of this Agreement and without any further act required on its behalf,
acquired an undivided 100% legal, beneficial and registerable interest in and to
the mineral property interests comprising the Assets.
Article 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR
3.1 General representations, warranties and covenants by the Optionor. In order
to induce the Optionee to enter into and consummate this Agreement, the Optionor
hereby represents to, warrants to and covenants with the Optionee, with the
intent that the Optionee will rely thereon in entering into this Agreement and
in concluding the transactions contemplated herein, that, to the best of the
knowledge, information and belief of the Optionor, after having made due
inquiry:
(a) the Optionor is qualified to do business in those jurisdictions
where it is necessary to fulfill the Optionor's obligations under
this Agreement, and the Optionor has the full power and authority
to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement;
(b) the Optionor has the requisite power, authority and capacity to
fulfill the Optionor's obligations under this Agreement;
10
Article 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued.
(c) the execution and delivery of this Agreement and the agreements
contemplated hereby have been duly authorized by all necessary
action on the Optionor's part;
(d) this Agreement constitutes a legal, valid and binding obligation
of the Optionor enforceable against the Optionor in accordance
with its terms, except as enforcement may be limited by laws of
general application affecting the rights of creditors;
(e) prior to the Subject Removal Date (as hereinafter defined) the
Optionor will have obtained all authorizations, approvals,
including Regulatory Approval, or waivers that may be necessary
or desirable in connection with the transactions contemplated in
this Agreement, and other actions by, and have made all filings
with, any and all Regulatory Authorities from whom any such
authorization, approval or other action is required to be
obtained or to be made in connection with the transactions
contemplated herein, and all such authorizations, approvals and
other actions will be in full force and effect, and all such
filings will have been accepted by the Optionor who will be in
compliance with, and have not committed any breach of, any
securities laws, regulations or policies of any Regulatory
Authority to which either the Optionor or any of the mineral
property interests comprising the Assets may be subject;
(f) except for Regulatory Approval of this Agreement by the
appropriate Regulatory Authorities, there are no other consents,
approvals or conditions precedent to the performance of this
Agreement which have not been obtained;
(g) the Optionor is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which the Optionor is
subject or which apply to the Optionor;
(h) no proceedings are pending for, and the Optionor is unaware of,
any basis for the institution of any proceedings leading to the
placing of the Optionor in bankruptcy or subject to any other
laws governing the affairs of insolvent persons;
(i) the Optionor has not received, nor has the Optionor requested or
does the Optionor require to receive, any offering memorandum or
similar document describing the business and affairs of the
Optionee in order to assist the Optionor in entering into this
Agreement and in consummating the transactions contemplated
herein;
(j) the Optionor is resident in the jurisdiction as set forth on the
front page of this Agreement, and that all negotiations and other
acts in furtherance of the execution and delivery of this
Agreement by the Optionor in connection with the transactions
contemplated herein have taken place and will take place solely
in such jurisdiction or the State of Nevada, U.S.A.;
(k) except as otherwise provided for herein, the Optionor has not
retained, employed or introduced any broker, finder or other
person who would be entitled to a brokerage commission or
finder's fee arising out of the transactions contemplated hereby;
11
Article 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued.
(l) the Optionor is not, nor until or at each Closing Date (as
hereinafter defined) will the Optionor be, in breach of any
provision or condition of, nor has the Optionor done or omitted
to do anything that, with or without the giving of notice or
lapse or both, would constitute a breach of any provision or
condition of, or give rise to any right to terminate or cancel or
accelerate the maturity of any payment under, any deed of trust,
contract, certificate, consent, permit, license or other
instrument to which the Optionor is a party, by which the
Optionor is bound or from which the Optionor derives benefit, any
judgment, decree, order, rule or regulation of any court or
governmental authority to which the Optionor is subject, or any
statute or regulation applicable to the Optionor, to an extent
that, in the aggregate, has a material adverse affect on either
the Optionor or on any of the mineral property interests
comprising the Assets;
(m) the Optionor will give to the Optionee, within at least five
calendar days prior to the Closing Date (as hereinafter defined),
by written notice, particulars of:
(i) each occurrence within the Optionor's knowledge after the
Effective Date of this Agreement that, if it had occurred
before the Effective Date, would have been contrary to any
of the Optionor's representations or warranties contained
herein; and
(ii) each occurrence or omission within the Optionor's knowledge
after the Effective Date that constitutes a breach of any of
the Optionor's covenants contained in this Agreement;
(n) the making of this Agreement and the completion of the
transactions contemplated hereby and the performance of and
compliance with the terms hereof does not and will not:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of any law, judgment, order,
injunction, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, to which the
Optionor is subject, or constitute or result in a default
under any agreement, contract or commitment to which the
Optionor is a party;
(ii) give to any party the right of termination, cancellation or
acceleration in or with respect to any agreement, contract
or commitment to which the Optionor is a party;
(iii) give to any government or governmental authority, or any
municipality or any subdivision thereof, including any
governmental department, commission, bureau, board or
administration agency, any right of termination,
cancellation or suspension of, or constitute a breach of or
result in a default under, any permit, license, control or
authority issued to the Optionor which is necessary or
desirable in connection with the conduct and operations of
the Optionor's business and the ownership or leasing of the
Optionor's business assets; or
12
Article 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued.
(iv) constitute a default by the Optionor, or any event which,
with the giving of notice or lapse of time or both, might
constitute an event of default, under any agreement,
contract, indenture or other instrument relating to any
indebtedness of the Optionor which would give any party to
that agreement, contract, indenture or other instrument the
right to accelerate the maturity for the payment of any
amount payable under that agreement, contract, indenture or
other instrument;
(o) neither this Agreement nor any other document, certificate or
statement furnished to the Optionee by or on behalf of the
Optionor in connection with the transactions contemplated hereby
knowingly or negligently contains any untrue or incomplete
statement of material fact or omits to state a material fact
necessary in order to make the statements therein not misleading
which would likely affect the decision of the Optionee to enter
into this Agreement; and
(p) the Optionor is not aware of any fact or circumstance which has
not been disclosed to the Optionee which should be disclosed in
order to prevent the representations, warranties and covenants
contained in this section from being misleading or which would
likely affect the decision of the Optionee to enter into this
Agreement.
3.2 Representations, warranties and covenants by the Optionor respecting the
Assets. In order to induce the Optionee to enter into and consummate this
Agreement, the Optionee hereby also represents to, warrants to and covenants
with the Optionee, with the intent that the Optionee will also rely thereon in
entering into this Agreement and in concluding the transactions contemplated
herein, that, to the best of the knowledge, information and belief of the
Optionor, after having made due inquiry:
(a) the Optionor is the legal and beneficial owner of all of the
mineral property interests comprising the Assets; the particulars
of which mineral property interests comprising the Assets being
more particularly described in Schedule "A" which is attached
hereto;
(b) the Optionor is authorized to hold the right to explore and
develop each of the mineral property interests comprising the
Assets and all Assets Rights held by the Optionor in and to the
mineral property interests comprising the Assets;
(c) the Optionor holds all of the mineral property interests
comprising the Assets free and clear of all liens, charges and
claims of others;
(d) no other person, firm or corporation has any written or oral
agreement, option, understanding or commitment, or any right or
privilege capable of becoming an agreement, for the purchase from
the Optionor of any interest in and to any of the mineral
property interests comprising the Assets;
13
Article 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued.
(e) the mineral property interests comprising the Assets have been
duly and validly located and recorded in a good and minerlike
manner pursuant to applicable mining laws;
(f) all permits and licenses covering the mineral property interests
comprising the Assets have been duly and validly issued pursuant
to applicable mining laws and are in good standing by the proper
doing and filing of assessment work and the payment of all fees,
taxes and rentals in accordance with the requirements of
applicable mining laws and the performance of all other actions
necessary in that regard;
(g) where appropriate, the Optionor has insured the mineral property
interests comprising the Assets against loss or damage on a
replacement cost basis;
(h) all conditions on and relating to the mineral property interests
comprising the Assets and the operations conducted thereon by or
on behalf of the Optionor are in compliance with all applicable
laws, regulations or orders and including, without limitation,
all laws relating to environmental matters, waste disposal and
storage and reclamation;
(i) there are no outstanding orders or directions relating to
environmental matters requiring any work, repairs, construction
or capital expenditures with respect to any of the mineral
property interests comprising the Assets and the conduct of the
operations related thereto, nor has the Optionor received any
notice of same;
(j) there is no adverse claim or challenge against or to the
ownership of or title to any of the mineral property interests
comprising the Assets or which may impede the development of any
of the mineral interests comprising the Assets, nor, to the best
of the knowledge, information and belief of the Optionor, after
having made due inquiry, is there any basis for any potential
claim or challenge, and, to the best of the knowledge,
information and belief of the Optionor, after having made due
inquiry, no person has any royalty, net profits or other
interests whatsoever in any production from any of the mineral
property interests comprising the Assets;
(k) there are no actions, suits, proceedings or investigations
(whether or not purportedly against or on behalf of the
Optionor), pending or threatened, which may affect, without
limitation, the rights of the Optionor to transfer any interest
in and to the mineral property interests comprising the Assets to
the Optionee at law or in equity, or before or by any federal,
state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, and, without limitation, there are no claims or
potential claims under any relevant family relations legislation
or other equivalent legislation affecting any of the mineral
property interests comprising the Assets. In addition, the
Optionor is not now aware of any existing ground on which any
such action, suit or proceeding might be commenced with any
reasonable likelihood of success;
14
Article 3
REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE OPTIONOR - continued.
(l) the Optionor has delivered to the Optionee all Assets
Documentation in the Optionor's possession or control relating to
the mineral property interests comprising the Assets together
with copies of all permits, permit applications and applications
for exploration and exploitation rights respecting any of the
mineral property interests comprising the Assets;
(m) the Optionee will also deliver, or caused to be delivered, to the
Optionee as soon as conveniently possible after the Effective
Date, however, prior to the Subject Removal Date (as hereinafter
defined), an independent geological report respecting the mineral
property interests comprising the Assets, together with, if
required, a title opinion or opinions respecting the mineral
property interests comprising the Assets, all as addressed to the
Optionee and prepared in accordance with applicable rules and
policies, together with such other documentation as the Optionee
may require in order to seek and obtain Regulatory Approval for
each of the transactions contemplated by this Agreement; and
(n) the Optionor is not aware of any fact or circumstance which has
not been disclosed to the Optionee which should be disclosed in
order to prevent the representations and warranties contained in
this section from being misleading or which would likely affect
the decision of the Optionee to enter into this Agreement.
3.3 Continuity of the representations, warranties and covenants by the Optionor.
The representations, warranties and covenants by the Optionor contained in this
Article "3", or in any certificates or documents delivered pursuant to the
provisions of this Agreement or in connection with the transactions contemplated
hereby, will be true at and as of the Closing Date (as hereinafter defined) as
though such representations, warranties and covenants were made at and as of
such time. Notwithstanding any investigations or inquiries made by the Optionee
or by the Optionee's professional advisors prior to the Closing Date, or the
waiver of any condition by the Optionee, the representations, warranties and
covenants of the Optionor contained in this Article "3" shall survive the
Closing Date and shall continue in full force and effect for a period of two
years from the Closing Date; provided, however, that the Optionor shall not be
responsible for the breach of any representation, warranty or covenant of the
Optionor contained herein caused by any act or omission of the Optionee prior to
the Effective Date hereof of which the Optionor was unaware or as a result of
any action taken by the Optionee after the Effective Date. In the event that any
of the said representations, warranties or covenants are found by a court of
competent jurisdiction to be incorrect and such incorrectness results in any
loss or damage sustained directly or indirectly by the Optionee, then the
Optionor will pay the amount of such loss or damage to the Optionee within 30
calendar days of receiving notice of judgment therefor; provided, however, that
the Optionee will not be entitled to make any claim unless the loss or damage
suffered may exceed the amount of U.S. $1,000.
15
Article 4
WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE
4.1 Warranties, representations and covenants by the Optionee. In order to
induce the Optionor to enter into and consummate this Agreement, the Optionee
hereby warrants to, represents to and covenants with the Optionor, with the
intent that the Optionor will rely thereon in entering into this Agreement and
in concluding the transactions contemplated herein, that, to the best of the
knowledge, information and belief of the Optionee, after having made due
inquiry:
(a) the Optionee is a corporation duly incorporated under the laws of
the State of Nevada, U.S.A., is validly existing and is in good
standing with respect to all statutory filings required by the
Nevada Revised Statutes;
(b) the Optionee is qualified to do business in those jurisdictions
where it is necessary to fulfill the Optionee's obligations under
this Agreement, and the Optionee has the full power and authority
to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement;
(c) the execution and delivery of this Agreement and the agreements
contemplated hereby has been duly authorized by all necessary
corporate action on the Optionee's part;
(d) prior to the Subject Removal Date (as hereinafter defined) the
Optionee will have obtained all authorizations, approvals,
including Regulatory Approval, or waivers that may be necessary
or desirable in connection with the transactions contemplated in
this Agreement, and other actions by, and have made all filings
with, any and all Regulatory Authorities from whom any such
authorization, approval or other action is required to be
obtained or to be made in connection with the transactions
contemplated herein, and all such authorizations, approvals and
other actions will be in full force and effect, and all such
filings will have been accepted by the Optionee who will be in
compliance with, and have not committed any breach of, any
securities laws, regulations or policies of any Regulatory
Authority to which the Optionee may be subject;
(e) except for Regulatory Approval of this Agreement by the
appropriate Regulatory Authorities, there are no other consents,
approvals or conditions precedent to the performance of this
Agreement which have not been obtained;
(f) this Agreement constitutes a legal, valid and binding obligation
of the Optionee enforceable against the Optionee in accordance
with its terms, except as enforcement may be limited by laws of
general application affecting the rights of creditors;
(g) no proceedings are pending for, and the Optionee is unaware of,
any basis for the institution of any proceedings leading to the
dissolution or winding up of the Optionee or the placing of the
Optionee in bankruptcy or subject to any other laws governing the
affairs of insolvent companies;
16
Article 4
WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE - continued.
(h) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or, to the
best of the knowledge, information and belief of the Optionee,
after making due inquiry, threatened against or affecting the
Optionee at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board,
bureau or agency;
(i) the Optionee is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which the Optionee is
subject or which apply to the Optionee;
(j) the Optionee will save the Optionor harmless in respect of all
claims, liabilities and expenses arising out of the Optionee's
activities on any of the mineral property interests comprising
the Assets;
(k) the Optionee will do all work on the Assets in a good and
minerlike fashion and in accordance with all applicable laws,
regulations, orders and ordinances of any governmental authority;
(l) the Optionee is not in breach of any provision or condition of,
nor has the Optionee done or omitted anything that, with or
without the giving of notice or lapse or both, would constitute a
breach of any provision or condition of, or give rise to any
right to terminate or cancel or accelerate the maturity of any
payment under, any deed of trust, contract, certificate, consent,
permit, license or other instrument to which the Optionee is a
party, by which the Optionee is bound or from which the Optionee
derives benefit, any judgment, decree, order, rule or regulation
of any court or governmental authority to which the Optionee is
subject, or any statute or regulation applicable to the Optionee,
to an extent that, in the aggregate, has a material adverse
affect on the Optionee;
(m) the Optionee will give to the Optionor, within at least five
calendar days prior to the Closing Date (as hereinafter defined),
by written notice, particulars of:
(i) each occurrence within the Optionee's knowledge after the
Effective Date of this Agreement that, if it had occurred
before the Effective Date, would have been contrary to any
of the Optionee's representations or warranties contained
herein; and
(ii) each occurrence or omission within the Optionee's knowledge
after the Effective Date that constitutes a breach of any of
the Optionee's covenants contained in this Agreement;
17
Article 4
WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE - continued.
(n) the making of this Agreement and the completion of the
transactions contemplated hereby and the performance of and
compliance with the terms hereof does not and will not:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of the incorporation
documents of the Optionee;
(ii) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of any law, judgment, order,
injunction, decree, regulation or ruling of any court or
governmental authority, domestic or foreign, to which the
Optionee is subject, or constitute or result in a default
under any agreement, contract or commitment to which the
Optionee is a party;
(iii) give to any party the right of termination, cancellation or
acceleration in or with respect to any agreement, contract
or commitment to which the Optionee is a party;
(iv) give to any government or governmental authority, or any
municipality or any subdivision thereof, including any
governmental department, commission, bureau, board or
administration agency, any right of termination,
cancellation or suspension of, or constitute a breach of or
result in a default under, any permit, license, control or
authority issued to the Optionee which is necessary or
desirable in connection with the conduct and operations of
the Optionee's business and the ownership or leasing of the
Optionee's business assets; or
(v) constitute a default by the Optionee or any event which,
with the giving of notice or lapse of time or both, might
constitute an event of default, under any agreement,
contract, indenture or other instrument relating to any
indebtedness of the Optionee which would give any party to
that agreement, contract, indenture or other instrument the
right to accelerate the maturity for the payment of any
amount payable under that agreement, contract, indenture or
other instrument;
(o) neither this Agreement nor any other document, certificate or
statement furnished to the Optionor by or on behalf of the
Optionee in connection with the transactions contemplated hereby
knowingly or negligently contains any untrue or incomplete
statement of material fact or omits to state a material fact
necessary in order to make the statements therein not misleading;
and
(p) the Optionee is not aware of any fact or circumstance which has
not been disclosed to the Optionor which should be disclosed in
order to prevent the representations, warranties and covenants
contained in this section from being misleading or which would
likely affect the decision of the Optionor to enter into this
Agreement.
18
Article 4
WARRANTIES, REPRESENTATIONS AND COVENANTS BY THE OPTIONEE - continued.
4.2 Continuity of the representations, warranties and covenants by the Optionee.
The representations, warranties and covenants of the Optionee contained in this
Article "4", or in any certificates or documents delivered pursuant to the
provisions of this Agreement or in connection with the transactions contemplated
hereby, will be true at and as of the Closing Date (as hereinafter defined) as
though such representations, warranties and covenants were made at and as of
such time. Notwithstanding any investigations or inquiries made by the Optionor
or by the Optionor's professional advisors prior to the Closing Date, or the
waiver of any condition by the Optionor, the representations, warranties and
covenants of the Optionee contained in this Article "4" shall survive the
Closing Date and shall continue in full force and effect for a period of two
years from the Closing Date; provided, however, that the Optionee shall not be
responsible for the breach of any representation, warranty or covenant of the
Optionee contained herein caused by any act or omission of the Optionor prior to
the Effective Date hereof of which the Optionee was unaware or as a result of
any action taken by the Optionor after the Effective Date. In the event that any
of the said representations, warranties or covenants are found by a court of
competent jurisdiction to be incorrect and such incorrectness results in any
loss or damage sustained directly or indirectly by the Optionor, then the
Optionee will pay the amount of such loss or damage to the Optionor within 30
calendar days of receiving notice of judgment therefor; provided, however, that
the Optionor will not be entitled to make any claim unless the loss or damage
suffered may exceed the amount of U.S. $1,000.
Article 5
CONDITIONS PRECEDENT TO CLOSING
5.1 Parties' conditions precedent prior to the Closing Date. All of the rights,
duties and obligations of each of the Parties hereto under this Agreement are
subject to the following conditions precedent for the exclusive benefit of each
of the Parties fulfilled in all material aspects in the reasonable opinion of
each of the Parties or to be waived by each or any of the Parties, as the case
may be, as soon as possible after the Effective Date, however, unless
specifically indicated as otherwise, not later than one year after the Effective
Date and not late than 60 calendar days prior to the Closing Date (as
hereinafter defined; and such date being the "Subject Removal Date" herein):
(a) receipt of all necessary approvals, including Regulatory
Approval, from all Regulatory Authorities having jurisdiction
over the Parties hereto and the transactions contemplated by this
Agreement, to the terms and conditions of and the transactions
contemplated by this Agreement; and
(b) if required, shareholders of the Optionee passing an ordinary
resolution or, where required, a special resolution, approving
the terms and conditions of this Agreement and all of the
transactions contemplated hereby or, in the alternative,
shareholders of the Optionee holding 100% of the issued shares of
the Optionee providing written consent resolutions evidencing
their approval to the terms and conditions of this Agreement and
all of the transactions contemplated hereby.
5.2 Parties' waiver of conditions precedent. The conditions precedent set forth
in section "5.1" hereinabove are for the exclusive benefit of each of the
Parties hereto and may be waived by each or any of the Parties in writing and in
whole or in part at any time, however, not later than the Subject Removal Date.
19
Article 5
CONDITIONS PRECEDENT TO CLOSING- continued.
5.3 The Optionor's conditions precedent. The rights, duties and obligations of
the Optionor under this Agreement are also subject to the following conditions
precedent for the exclusive benefit of the Optionor fulfilled in all material
aspects in the reasonable opinion of the Optionor or to be waived by the
Optionor as soon as possible after the Effective Date, however, unless
specifically indicated as otherwise, not later than 10 calendar days prior to
the Subject Removal Date:
(a) the representations, warranties and covenants of the Optionee
contained herein shall be true and correct as of and on the
Subject Removal Date;
(b) the Optionee shall have complied with all warranties,
representations, covenants and agreements herein agreed to be
performed or caused to be performed by the Optionee on or before
the Subject Removal Date;
(c) the Optionee will have obtained all authorizations, approvals,
including Regulatory Approval, or waivers that may be necessary
or desirable in connection with the transactions contemplated in
this Agreement, and other actions by, and have made all filings
with, any and all Regulatory Authorities from whom any such
authorization, approval or other action is required to be
obtained or to be made in connection with the transactions
contemplated herein, and all such authorizations, approvals and
other actions will be in full force and effect, and all such
filings will have been accepted by the Optionee who will be in
compliance with, and have not committed any breach of, any
securities laws, regulations or policies of any Regulatory
Authority to which the Optionee may be subject;
(d) all matters which, in the opinion of counsel for the Optionor,
are material in connection with the transactions contemplated by
this Agreement shall be subject to the favourable opinion of such
counsel, and all relevant records and information shall be
supplied to such counsel for that purpose;
(e) no material loss or destruction of or damage to the Optionee
shall have occurred since the Effective Date;
(f) no action or proceeding at law or in equity shall be pending or
threatened by any person, company, firm, governmental authority,
regulatory body or agency to enjoin or prohibit:
(i) the purchase or transfer of any interest in and to the mineral
property interests comprising the Assets as contemplated by this
Agreement or the right of the Optionor to dispose of any interest
in and to any of the mineral property interests comprising the
Assets; or
(ii) the right of the Optionee to conduct the Optionee's
operations and carry on, in the normal course, the
Optionee's business and operations as the Optionee has
carried on in the past;
20
Article 5
CONDITIONS PRECEDENT TO CLOSING - continued.
(g) the delivery to the Optionor by the Optionee, on a confidential
basis, of the following documentation and information:
(i) a copy of all material contracts, agreements, reports and
title information of any nature respecting the Optionee and
each of its subsidiaries, if any; and
(ii) details of any lawsuits, claims or potential claims relating
to the Optionee or to any of the Optionee's subsidiaries, if
any, of which the Optionee is aware and the Optionor is
unaware;
(h) the Optionee will, for a period of not less than five calendar
days during the period commencing on the Effective Date and
continuing until not later than 30 calendar days prior to the
Subject Removal Date, during normal business hours:
(i) make available for inspection by the respective solicitors,
auditors and representatives of the Optionor, at such
location as is appropriate, all of the Optionee's and each
of the Optionee's subsidiaries', if any, books, records,
contracts, documents, correspondence and other written
materials, and afford such persons every reasonable
opportunity to make copies thereof and take extracts
therefrom at the sole cost of the Optionor; provided such
persons do not unduly interfere in the respective operations
of the Optionee or any of the Optionee's subsidiaries, if
any;
(ii) authorize and permit such persons at the risk and the sole
cost of the Optionor, and only if such persons do not unduly
interfere in the respective operations of the Optionee and
each of the Optionee's subsidiaries, if any, to attend at
all of their respective places of business and operations to
observe the conduct of their respective businesses and
operations, inspect their respective properties and assets
and make physical counts of their respective inventories,
shipments and deliveries; and
(iii) require the Optionee's and each of the Optionee's
subsidiaries', if any, respective management personnel to
respond to all reasonable inquiries concerning the
Optionee's and each of the Optionee's subsidiaries', if any,
respective business assets or the conduct of their
respective businesses relating to their respective
liabilities and obligations; and
(i) the completion by the Optionor and by the Optionor's
professional advisors of a thorough due diligence and
operations review of the respective businesses and
operations of the Optionee and each of the Optionee's
subsidiaries, if any, to the sole and absolute satisfaction
of the Optionor.
5.4 The Optionor's waiver of conditions precedent. The conditions precedent set
forth in section "5.3" hereinabove are for the exclusive benefit of the Optionor
and may be waived by the Optionor in writing and in whole or in part at any time
after the Effective Date, however, unless specifically indicated as otherwise,
not later than 10 calendar days prior to the Subject Removal Date.
21
Article 5
CONDITIONS PRECEDENT TO CLOSING - continued.
5.5 The Optionee's conditions precedent. The rights, duties and obligations of
the Optionee under this Agreement are also subject to the following conditions
precedent for the exclusive benefit of the Optionee fulfilled in all material
aspects in the reasonable opinion of the Optionee or to be waived by the
Optionee as soon as possible after the Effective Date, however, unless
specifically indicated as otherwise, not later than 10 calendar days prior to
the Subject Removal Date:
(a) the representations, warranties and covenants of the Optionor
contained herein shall be true and correct as of and on the
Subject Removal Date;
(b) the Optionor shall have complied with all warranties,
representations, covenants and agreements herein agreed to be
performed or caused to be performed by the Optionor on or before
the Subject Removal Date;
(c) the Optionor will have obtained all authorizations, approvals,
including Regulatory Approval, or waivers that may be necessary
or desirable in connection with the transactions contemplated in
this Agreement, and other actions by, and have made all filings
with, any and all Regulatory Authorities from whom any such
authorization, approval or other action is required to be
obtained or to be made in connection with the transactions
contemplated herein, and all such authorizations, approvals and
other actions will be in full force and effect, and all such
filings will have been accepted by the Optionor who will be in
compliance with, and have not committed any breach of, any
securities laws, regulations or policies of any Regulatory
Authority to which the Optionor may be subject;
(d) all matters which, in the opinion of counsel for the Optionee,
are material in connection with the transactions contemplated by
this Agreement shall be subject to the favourable opinion of such
counsel, and all relevant records and information shall be
supplied to such counsel for that purpose;
(e) no material loss or destruction of or damage to any of the
mineral property interests comprising the Assets shall have
occurred since the Effective Date;
(f) no action or proceeding at law or in equity shall be pending or
threatened by any person, company, firm, governmental authority,
regulatory body or agency to enjoin or prohibit:
(i) the sale or transfer of any interest in and to the mineral
property interests comprising the Assets as contemplated by
this Agreement or the right of the Optionee to acquire any
interest in and to any of the mineral property interests
comprising the Assets; or
(ii) the right of the Optionee to conduct the Optionee's
operations and carry on, in the normal course, the
Optionee's business and operations as the Optionee has
carried on in the past;
22
Article 5
CONDITIONS PRECEDENT TO CLOSING - continued.
(g) the delivery to the Optionee by the Optionor, on a confidential
basis, of all Assets Documentation and including, without
limitation,:
(i) a copy of all material contracts, agreements, reports and
title information of any nature respecting any of the
mineral interests comprising the Assets; and
(ii) details of any lawsuits, claims or potential claims relating
to any of the mineral interests comprising the Assets of
which the Optionor is aware and the Optionee is unaware;
(h) the delivery by the Optionor to the Optionee of an opinion of
counsel for the Optionor, in a form satisfactory to the
Optionee's counsel, acting reasonably, dated as at the date of
delivery, to the effect that:
(i) the Optionor is the legal and beneficial owner of all of the
mineral property interests comprising the Assets prior to
the completion of the transactions contemplated by this
Agreement;
(ii) the Optionor holds the right to explore and develop each of
the mineral property interests comprising the Assets and all
Assets Rights held by the Optionor in and to the mineral
property interests comprising the Assets;
(iii) the Optionor holds all of the mineral property interests
comprising the Assets free and clear of all liens, charges
and claims of others;
(iv) the mineral property interests comprising the Assets have
been duly and validly located and recorded in a good and
minerlike manner pursuant to all applicable laws and are in
good standing;
(v) based on actual knowledge and belief, such counsel knows of
no adverse claim or challenge against or to the ownership of
or title to any of the mineral property interests comprising
the Assets or which may impede the Assets' development, and,
based on actual knowledge and belief, such counsel is not
aware of any basis for any potential claim or challenge,
and, based on actual knowledge and belief, such counsel
knows of no outstanding agreements or options to acquire or
purchase any portion of any of the mineral property
interests comprising the Assets, and no person has any
royalty, net profits or other interest whatsoever in any
production from any of the mineral property interests
comprising the Assets;
23
Article 5
CONDITIONS PRECEDENT TO CLOSING - continued.
(vi) based on actual knowledge and belief, such counsel knows of
no claims, judgments, actions, suits, litigation,
proceedings or investigations, actual, pending or
threatened, against the Optionor which might materially
affect any of the mineral property interests comprising the
Assets or which could result in any material liability to
either the Optionor or to any of the mineral property
interests comprising the Assets; and
(vii) as to all other legal matters of a like nature pertaining
to the Optionor and the mineral property interests
comprising the Assets and to the transactions contemplated
hereby as the Optionee or the Optionee's counsel may
reasonably require; and
(i) the completion by the Optionee and by the Optionee's
professional advisors of a thorough due diligence and
operations review of the mineral property interests
comprising the Assets, of the business and operations of the
Optionor and of the transferability of the mineral property
interests comprising the Assets as contemplated by this
Agreement, to the sole and absolute satisfaction of the
Optionee.
5.6 Optionee's waiver of conditions precedent. The conditions precedent set
forth in section "5.5" hereinabove are for the exclusive benefit of the Optionee
and may be waived by the Optionee in writing and in whole or in part at any
after the Effective Date, however, unless specifically indicated as otherwise,
not later than 10 calendar days prior to the Subject Removal Date.
Article 6
CLOSING AND EVENTS OF CLOSING
6.1 Closing and Closing Date. Subject to the prior and due and complete exercise
of by the Optionee of the Option in accordance with Article "2" hereinabove, the
closing (the "Closing") of the within purchase and delivery of an undivided 100%
interest in and to the mineral property interests comprising the Assets, as
contemplated in the manner as set forth in Article "2" hereinabove, together
with all of the transactions contemplated by this Agreement, shall occur on the
day which is five business days following the due and complete exercise of the
Option by the Optionee in accordance with Article "2" hereinabove (the "Closing
Date"), or on such earlier or later Closing Date as may be agreed to in advance
and in writing by each of the Parties hereto, and will be closed at the offices
of Lang ▇▇▇▇▇▇▇▇ LLP, Lawyers - Patent & Trade ▇▇▇▇ Agents, located at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ Street, Vancouver, British Columbia, Canada, V6E
4N7, counsel for the Optionee herein, at 2:00 p.m. (Vancouver time) on the
Closing Date.
6.2 Latest Closing Date. If the Closing Date in respect of the due and complete
exercise of the Option by the Optionee has not occurred within 19 months from
the Effective Date then this Agreement will be terminated and unenforceable
unless the Parties hereto agree in writing to grant an extension of such Closing
Date.
24
Article 6
CLOSING AND EVENTS OF CLOSING - continued.
6.3 Documents to be delivered by the Optionor prior to the Closing Date. Subject
to the prior and due and complete exercise of by the Optionee of the Option in
accordance with Article "2" hereinabove, and not later than five calendar days
prior to the Closing Date and in addition to the documentation which is required
by the agreements and conditions precedent which are set forth in Articles "2"
and "5" hereinabove, the Optionor shall also execute and deliver, or cause to be
delivered, to the Escrow Agent all such other documents, resolutions and
instruments as may be necessary, in the opinion of counsel for the Optionee,
acting reasonably, to complete all of the transactions contemplated by this
Agreement and including, without limitation, the necessary transfer of an
undivided 100% legal, beneficial and registerable interest in and to the mineral
property interests comprising the Assets to the Optionee (or, at the sole and
absolute discretion of the Optionee, to such other entity or subsidiary as may
be determined by the Optionee prior to the Closing Date) free and clear of all
liens, charges and encumbrances, and in particular including, but not being
limited to, the following materials:
(a) all documentation as may be necessary and as may be required by
the counsel for the Optionee, acting reasonably, to ensure that
an undivided 100% legal, beneficial and registerable interest in
and to the mineral property interests comprising the Assets has
have been duly transferred, assigned and is registerable in the
name of and for the benefit of the Optionee (or, at the sole and
absolute discretion of the Optionee, to such other entity or
subsidiary as may be determined by the Optionee) under all
applicable laws;
(b) all necessary deeds, conveyances, bills of sale, assurances,
transfers, assignments and consents, including all necessary
consents and approvals, and any other documents necessary or
reasonably required to effectively transfer an undivided 100%
legal, beneficial and registerable interest in and to the mineral
property interests comprising the Assets to the Optionee (or, at
the sole and absolute discretion of the Optionee, to such other
entity or subsidiary as may be determined by the Optionee) with
good and marketable title, free and clear of all mortgages,
liens, charges, pledges, claims, security interests or
encumbrances whatsoever;
(c) all necessary consents and approvals in writing to the completion
of the transactions contemplated herein and including, without
limitation, Regulatory Approval from all Regulatory Authorities
having jurisdiction over either the Optionor or any of the
mineral property interests comprising the Assets;
(d) a certificate of an authorized officer of the Optionor, dated as
at the Closing Date, acceptable in form to counsel for the
Optionee, acting reasonably, certifying that the representations,
warranties, covenants and agreements of the Optionor contained in
this Agreement are true and correct in all respects as of the
Closing Date as if made by the Optionor on the Closing Date;
(e) an opinion of counsel for the Optionor, dated as at the Closing
Date and addressed to the Optionee and the Optionee's counsel, in
form and substance satisfactory to the Optionee's counsel, acting
reasonably, to the effect that:
25
Article 6
CLOSING AND EVENTS OF CLOSING - continued.
(i) the Optionor is the beneficial owner of all of the
mineral property interests comprising the Assets prior
to the completion of the transactions contemplated by
this Agreement;
(ii) the Optionor holds the right to explore and develop
each of the mineral property interests comprising the
Assets and all Assets Rights held by the Optionor in
and to the mineral property interests comprising the
Assets;
(iii) the Optionor holds all of the mineral property
interests comprising the Assets free and clear of all
liens, charges and claims of others;
(iv) the mineral property interests comprising the Assets
have been duly and validly located and recorded in a
good and minerlike manner pursuant to all applicable
laws and are in good standing as of the Closing Date;
(v) all necessary steps have been taken by the Optionor to
permit the transfer of an undivided 100% legal,
beneficial and registerable interest in and to the
mineral property interests comprising the Assets to the
Optionee (or, at the sole and absolute discretion of
the Optionee, to such other entity or subsidiary as may
be determined by the Optionee) with good and marketable
title, free and clear of all mortgages, liens, charges,
pledges, claims, security interests or encumbrances
whatsoever;
(vi) based on actual knowledge and belief, such counsel
knows of no adverse claim or challenge against or to
the ownership of or title to any of the mineral
property interests comprising the Assets or which may
impede the Assets' development, and, based on actual
knowledge and belief, such counsel is not aware of any
basis for any potential claim or challenge, and, based
on actual knowledge and belief, such counsel knows of
no outstanding agreements or options to acquire or
purchase any portion of any of the mineral property
interests comprising the Assets, and no person has any
royalty, net profits or other interest whatsoever in
any production from any of the mineral property
interests comprising the Assets;
(vii) based on actual knowledge and belief, such counsel
knows of no claims, judgments, actions, suits,
litigation, proceedings or investigations, actual,
pending or threatened, against the Optionor which might
materially affect any of the mineral property interests
comprising the Assets or which could result in any
material liability to either the Optionor or to any of
the mineral property interests comprising the Assets;
and
26
Article 6
CLOSING AND EVENTS OF CLOSING - continued.
(viii) as to all other legal matters of a like nature
pertaining to the Optionor and the mineral property
interests comprising the Assets and to the transactions
contemplated hereby as the Optionee or the Optionee's
counsel may reasonably require;
(f) any remaining Assets Documentation; and
(g) all such other documents and instruments as the Optionee and the
Optionee's counsel may reasonably require.
6.4 Documents to be delivered by the Optionee prior to the Closing Date. Subject
to the prior and due and complete exercise of by the Optionee of the Option in
accordance with Article "2" hereinabove, and not later than five calendar days
prior to the Closing Date and in addition to the documentation which is required
by the agreements and conditions precedent which are set forth in Articles "2"
and "5" hereinabove, the Optionee shall also execute and deliver, or cause to be
delivered, to the Escrow Agent all such other documents, resolutions and
instruments as are necessary, in the opinion of counsel for the Optionor, acting
reasonably, to complete all of the transactions contemplated by this Agreement
and including, without limitation, each of the Cash Payments, Share Issuances,
Consulting Arrangements and maintenance payments hereunder, and effectively
accepting the transfer to the Optionee (or, at the sole and absolute discretion
of the Optionee, to such other entity or subsidiary as may be determined by the
Optionee prior to the Closing Date) of an undivided 100% legal, beneficial and
registerable interest in and to the mineral property interests comprising the
Assets free and clear of all liens, charges and encumbrances, and in particular
including, but not being limited to, the following materials:
(a) a Closing agenda;
(b) if required, a certified copy of an ordinary resolution or, where
required, a special resolution, of the shareholders of the
Optionee approving the terms and conditions of this Agreement and
all of the transactions contemplated hereby or, in the
alternative, shareholders of the Optionee holding 100% of the
issued shares of the Optionee providing written consent
resolutions evidencing their approval to the terms and conditions
of this Agreement and all of the transactions contemplated
hereby;
(c) a certified copy of the resolutions of the directors of the
Optionee providing for the approval of the terms and conditions
of this Agreement and all of the transactions contemplated
hereby;
(d) all necessary consents and approvals in writing to the completion
of the transactions contemplated herein and including, without
limitation, Regulatory Approval from all Regulatory Authorities
having jurisdiction over the Optionee;
(e) a certificate of an officer of the Optionee, dated as at the
Closing Date, acceptable in form to counsel for the Optionor,
acting reasonably, certifying that the representations,
warranties, covenants and agreements of the Optionee contained in
this Agreement are true and correct in all respects as of the
Closing Date as if made by the Optionee on the Closing Date; and
27
Article 6
CLOSING AND EVENTS OF CLOSING - continued.
(f) all such other documents and instruments as the Optionor and the
Optionor's counsel may reasonably require.
Article 7
APPOINTMENT OF ESCROW AGENT AND TRANSFER DOCUMENTS
7.1 Appointment of Escrow Agent. The Parties hereto hereby acknowledge and
appoint the Escrow Agent as escrow agent
herein.
7.2 Escrow of Transfer Documents. Subject to and in accordance with the terms
and conditions hereof and the requirements of Articles "2", "5" and "6"
hereinabove, and without in any manner limiting the obligations of each of the
Parties hereto as contained therein and hereinabove, it is hereby acknowledged
and confirmed by the Parties hereto that each of the Parties will execute,
deliver, or cause to be delivered, all such documentation as may be required by
the requirements of Articles "2", "5" and "6" hereinabove (herein, collectively,
the "Transfer Documents") and deposit the same with the Escrow Agent, or with
such other mutually agreeable escrow agent, together with a copy of this
Agreement, there to be held in escrow for release by the Escrow Agent to the
Parties in accordance with the strict terms and provisions of Articles "2" and
"6" hereinabove.
7.3 Resignation of Escrow Agent. The Escrow Agent may resign from its duties and
responsibilities if it gives each of the Parties hereto three calendar days'
written notice in advance. Upon receipt of notice of the Escrow Agent's
intention to resign the Parties shall, within three calendar days, select a
replacement escrow agent and jointly advise the Escrow Agent in writing to
deliver the Transfer Documents to the replacement escrow agent. If the Parties
fail to agree on a replacement escrow agent within three calendar days of such
notice, the replacement escrow agent shall be selected by a Judge of the Supreme
Court of the Province of British Columbia upon application by any Party hereto.
The Escrow Agent shall continue to be bound by this Agreement until the
replacement escrow agent has been selected and the Escrow Agent receives and
complies with the joint instructions of the Parties to deliver the Transfer
Documents to the replacement escrow agent. The Parties agree to enter into an
escrow agreement substantially in the same form of this Agreement with the
replacement escrow agent.
7.4 Instructions to Escrow Agent. Instructions given to the Escrow Agent
pursuant to this Agreement shall be given by duly authorized signatories of the
respective Parties hereto.
7.5 No other duties or obligations. The Escrow Agent shall have no duties or
obligations other than those specifically set forth in this Article.
7.6 No obligation to take legal action. The Escrow Agent shall not be obligated
to take any legal action hereunder which might, in its judgment, involve any
expense or liability unless it shall have been furnished with a reasonable
indemnity by all of the Parties hereto together with such other third parties as
the Escrow Agent may require in its sole and absolute discretion.
7.7 Not bound to any other agreements. The Escrow Agent is not bound in any way
by any other contract or agreement between the Parties hereto whether or not it
has knowledge thereof or of its terms and conditions and its only duty,
28
Article 7
APPOINTMENT OF ESCROW AGENT AND TRANSFER DOCUMENTS - continued
liability and responsibility shall be to hold and deal with the Transfer
Documents as herein directed.
7.8 Notice. The Escrow Agent shall be entitled to assume that any notice and
evidence received by it pursuant to these instructions from anyone has been duly
executed by the Party by whom it purports to have been signed and that the text
of any notice and evidence is accurate and the truth. The Escrow Agent shall not
be obliged to inquire into the sufficiency or authority of the text or any
signatures appearing on such notice or evidence.
7.9 Indemnity. The Parties hereto, jointly and severally, covenant and agree to
indemnify the Escrow Agent and to hold it harmless against any loss, liability
or expense incurred, without negligence or bad faith on its part, arising out of
or in connection with the administration of its duties hereunder and including,
without limitation, the costs and expenses of defending itself against any claim
or liability arising therefrom.
7.10 Not required to take any action. In the event of any disagreement between
any of the Parties hereto to these instructions or between them or either or any
of them and any other person resulting in adverse claims or demands being made
in connection with the Transfer Documents, or in the event that the Escrow Agent
should take action hereunder, it may, at its option, refuse to comply with any
claims or demands on it, or refuse to take any other action hereunder, so long
as such disagreement continues or such doubt exists and, in any such event, it
shall not be or become liable in any way or to any person for its failure or
refusal to act and it shall be entitled to continue so to refrain from acting
until:
(a) the rights of all Parties shall have been fully and finally
adjudicated by a court of competent jurisdiction; or
(b) all differences shall have been adjusted and all doubt resolved
by agreement among all of the interested persons and it shall
have been notified thereof in writing signed by all such persons.
Article 8
THE OPERATOR
8.1 Optionee as initial Operator. Subject to the determination of the Management
Committee in accordance with Article "9" hereinbelow, and subject to the terms
of any completed assignment or transfer of any Holding (as hereinafter
determined) of the Optionee in accordance with Article "10" hereinbelow, prior
to the due and complete exercise of the Option the Optionee or, at the
Optionee's option and in the Optionee's sole and absolute discretion, the
Optionee's respective associate, nominee or such other unrelated entity as the
Optionee may determine, will act as the Operator of the Assets under this
Agreement. The Operator may resign as the Operator at any time by giving 30
calendar days' prior written notice to the Parties hereto and, within such
30-day period, the Management Committee may appoint another party who covenants
to act as the Operator of the Assets upon such terms as the Management Committee
shall agree.
8.2 Subsequent Operator. After the execution of this Agreement and prior to the
due and complete exercise of the Option if the Operator is not the Optionee the
Operator shall, prior to being appointed to act as the Operator, enter into a
29
Article 8
THE OPERATOR - continued
written agreement to assume the obligations of the Operator hereunder and to be
bound by the terms and conditions of this Agreement as the Operator.
8.3 Powers and authority. After the execution of this Agreement and prior to the
due and complete exercise of the Option, and subject to the control and
direction of the Management Committee, the Operator shall have the full right,
power and authority to do everything necessary or desirable in connection with
the exploration and development of the mineral property interests comprising the
Assets and to determine the manner of operation of the Assets as a mine and
including, without limitation, the right, power and authority to:
(a) regulate access to the mineral property interests comprising the
Assets subject only to the right of each of the Parties hereto to
have access to the mineral property interests comprising the
Assets at all reasonable times for the purpose of inspecting work
being done thereon, but at their own risk and expense; and
(b) employ and engage such employees, agents and independent
contractors as the Operator may consider necessary or advisable
to carry out the Operator's duties and obligations hereunder and,
in this connection, to delegate any of the Operator's powers and
rights to perform the Operator's duties and obligations
hereunder; however, the Operator shall not enter into contractual
relationships with an associated party except on terms which are
commercially competitive.
8.4 Duties and obligations. After the execution of this Agreement and prior to
the due and complete exercise of the Option the Operator shall have such duties
and obligations as the Management Committee may from time to time determine and
including, without limitation, the following duties and obligations:
(a) to implement Programs;
(b) to manage, direct and control all exploration, development and
producing operations in and under the mineral property interests
comprising the Assets in a prudent and workmanlike manner and in
compliance with all applicable laws, rules, orders and
regulations;
(c) to prepare and deliver to the Parties during periods of active
field work, and during the Option Period only, monthly progress
reports of the work in progress and comprehensive annual reports
on or before March 31st of every year covering the activities
hereunder and the results obtained during the calendar year
ending on the December 31st immediately preceding;
(d) subject to the terms and conditions of this Agreement, to keep
the mineral property interests comprising the Assets in good
standing free of liens, charges and encumbrances of every
character arising from operations, (except liens for taxes not
yet due, other inchoate liens and liens contested in good faith
by the Operator), and to proceed with all diligence to contest or
discharge any such lien that is filed;
(e) to maintain true and correct books, accounts and records of
operations hereunder;
30
Article 8
THE OPERATOR - continued
(f) to permit the Parties, at their own expense, to inspect, take
abstracts from or audit any or all of the records and accounts
during normal business hours;
(g) to obtain and maintain, or cause any contractor engaged hereunder
to obtain and maintain, during any period in which active work is
carried out hereunder, adequate insurance;
(h) to permit the Parties or their respective representatives so
appointed, at their own expense and risk, access to the mineral
property interests comprising the Assets and all data derived
from carrying out work thereon;
(i) to arrange for and maintain worker's compensation or equivalent
coverage for all eligible employees engaged by the Operator in
accordance with local statutory requirements;
(j) to perform the Operator's duties and obligations in a manner
consistent with good exploration and mining practices; and
(k) to transact, undertake and perform all transactions, contracts,
employments, purchases, operations, negotiations with third
parties and any other matter or thing undertaken on behalf of the
Parties or the mineral interests property comprising the Assets
in the Operator's name.
Article 9
THE MANAGEMENT COMMITTEE
9.1 Establishment. During the Option Period only, and as soon as is practicable
after the Effective Date of this Agreement, the Parties hereto shall establish a
Management Committee consisting of two members and an alternate member of each
Party. Each Party shall designate in writing to the other Party the names of its
members and alternate member of the Management Committee.
9.2 Alternate members. A Party may from time to time revoke in writing the
appointment of its members to the Management Committee and appoint in writing
others in their place. A Party may from time to time in writing appoint one
alternate member for any member theretofore appointed by such Party. Alternate
members may attend meetings of the Management Committee and, in the absence of a
member, the alternate member may vote and otherwise act in the place and stead
of the member. Whenever any member or alternate member votes or acts the
member's votes or actions shall, for all purposes of this Agreement, be
considered the actions of the Party whom that member represents. The Parties
shall give written notice to each other from time to time as to the names,
addresses and telephone numbers of their respective members and alternate
members on the Management Committee.
9.3 Meetings. Meetings of the Management Committee shall be held at such times
as the Parties hereto deem appropriate but, in any event, not less than once
each month. A meeting of the Management Committee may take place by means of
conference telephone or other communications facility by which means the members
and alternate members of both Parties participating in the meeting can hear each
other. The members participating in a meeting in accordance with this section
shall be deemed to be present at the meeting and shall be counted in the quorum
therefor and be entitled to speak and vote thereat.
31
Article 9
THE MANAGEMENT COMMITTEE - continued
9.4 Notice and place for meetings. Meetings of the Management Committee shall be
called by the Operator by giving not less than ten calendar days' prior notice
in writing to each of the Parties hereto, and all meetings shall be held at such
place and time as shall be designated by the Operator unless otherwise agreed to
by each of the Parties hereto.
9.5 Reporting. The Operator shall consult freely with the Management Committee
and the members thereof and keep them fully advised of the present and
prospective operations and plans and shall furnish the Management Committee with
semi-annual reports relating to the status of the mineral interests comprising
the Assets together with timely current reports and information on any material
results relating to the mineral property interests comprising the Assets.
9.6 Voting. Voting by the Management Committee may be conducted by verbal,
written, telex or telecopier ballot.
9.7 Quorum. Except as hereinafter provided, a quorum of any meeting of the
Management Committee shall consist of one member of each Party, one alternate
member of each Party or one member of one Party and one alternate member of the
other Party. If a quorum is not present within 30 minutes after the time fixed
for holding any such meeting, the meeting shall be adjourned to the same day in
the next week (unless such day is a non-business day in which case it shall be
adjourned to the next following business day thereafter) at the same time and
place. At the adjourned meeting the members or alternate members present in
person (which may include only one person) shall form a quorum and may transact
the business for which the meeting was originally convened.
9.8 Votes by members. Prior to the exercise of the Option the Optionee's member
(or alternate member in the absence of a member) of the Management Committee
shall have two votes and the Optionor's member (or alternate member in the
absence of a member) of the Management Committee shall have one vote at each
duly constituted meeting in respect of every matter which is thereat brought
before the Management Committee for consideration or approval.
9.9 Majority. All decisions of the Management Committee shall be by the
affirmative vote of a majority of the votes entitled to be cast by members in
attendance at each such meeting.
9.10 Powers. The Management Committee shall, without limiting any of its powers
as specified elsewhere in this Agreement, have the exclusive right, power and
authority to:
(a) appoint a new Operator or joint Operator;
(b) determine the terms of engagement of the Operator, including any
remuneration payable to the Operator; and
(c) approve or reject the abandonment or disposition of any part of
the mineral interests comprising the Assets.
9.11 Arbitration. In the case of an equality of votes on any question or matter
which cannot to be resolved, other than the exercise by the Optionee of the
Option, such question or matter shall be submitted to arbitration pursuant to
the terms of Article "16" hereinbelow.
9.12 Material and data at meetings. There shall be included with a notice of
meeting such material and data as may be reasonably required to enable the
32
Article 9
THE MANAGEMENT COMMITTEE - continued
members of the Management Committee to determine the position they should take
in respect of any vote or election to be made at such meeting.
9.13 Termination of the Management Committee. It is hereby acknowledged and
agreed that upon the due and complete exercise of the Option by the Optionee in
accordance with Article "2" hereinabove, and in conjunction with the
corresponding completion of the transfer to the Optionee (or, at the sole and
absolute discretion of the Optionee, to such other entity or subsidiary as may
be determined by the Optionee prior to the Closing Date) of an undivided 100%
legal, beneficial and registerable interest in and to the mineral property
interests comprising the Assets in accordance with Articles "5" and "6"
hereinabove, the Management Committee will be deemed, without any further act,
to be disbanded and of no further force and effect.
Article 10
POWER TO CHARGE AND ASSIGNMENT AND RIGHT OF FIRST REFUSAL
10.1 Power to charge. At any time prior to the exercise of the Option by the
Optionee the Optionee may grant mortgages, charges or liens (each of which is
herein called a "mortgage") of and upon the interest of the Optionee in and to
any of the mineral property interests comprising the Assets, upon any mill or
other fixed assets located thereon and on any or all of the tangible personal
Assets located on or used in connection with any of the mineral property
interests comprising the Assets, to secure only the financing of development of
any of the mineral property interests comprising the Assets; provided that,
unless otherwise agreed to by the Optionor, it shall be a term of each mortgage
that the mortgagee or any person acquiring title to any mineral property
interest comprising the Assets, or to any mill or other fixed assets or tangible
personal Assets located on or used in connection with any mineral property
interest comprising the Assets upon enforcement of the mortgage, shall hold the
same subject to the rights of the Optionor hereunder as if the mortgagee or any
such person had executed this Agreement as party of the first part.
10.2 Assignment. Save and except as otherwise provided for hereinabove and in
this Article, no Party may sell, assign, pledge, mortgage or otherwise encumber
all or any part of its interest herein or to any of the mineral property
interests comprising the Assets without the prior written consent of the other
Party hereto; provided, however, that any Party hereto may at anytime, and at
its sole and absolute discretion and without the prior approval of the other
Party, assign and transfer its interest herein or to any of the mineral property
interests comprising the Assets to any wholly-owned subsidiary subject, at all
times, to the requirement that any such subsidiary remain wholly owned by the
Party hereto failing which any such interest must be immediately transferred
back to such Party hereto; and, provided further, that any transfer of all or
any part of a Party's interest herein or to any of the mineral property
interests comprising the Assets to its wholly owned subsidiary shall be
accompanied by the written agreement of any such subsidiary to assume the
obligations of such Party hereunder and to be bound by the terms and conditions
hereof.
10.3 Right of first refusal. At any time both prior to and after the exercise of
the Option by the Optionee in accordance with the terms of this Agreement each
Party (hereinafter called the "Disposing Party") hereby grants to the other
Party a right of first refusal to acquire all or any portion of any interest
herein or to any of the mineral property interests comprising the Assets which
the Disposing Party desires to dispose of (hereinafter called, collectively, the
33
Article 10
POWER TO CHARGE AND ASSIGNMENT AND RIGHT OF FIRST REFUSAL - continued
"Holding"). If a Disposing Party receives a bona fide offer to purchase from, or
where a sale is solicited by the Disposing Party, then upon settling the
proposed terms thereof with a third party for the purchase or sale of the
Holding, the Disposing Party shall forthwith offer to sell the Holding to the
other Party. The offer to sell to the non-Disposing Party (or Parties as the
case may be) shall be on the same terms and conditions and of equivalent dollar
value as those contained in the offer to the third party; provided, however,
that should the Parties fail to agree upon a determination of the equivalent
dollar value for any such offer, such equivalent dollar value shall be
determined finally by arbitration under the provisions of Article "16"
hereinbelow. The other Party shall be entitled to elect, by notice to the
Disposing Party within 30 calendar days from the date of receipt of the offer to
sell, to acquire the Holding, on the same terms and conditions as those set
forth in the offer to the third party. If the other Party does not exercise its
right to acquire the Holding as aforesaid, the Disposing Party may, for a period
of 60 calendar days following the last date upon which the other Party could
have made the election hereinabove, dispose of the Holding, but only on the same
terms and conditions as set forth in that offer. Any transfer of all or any part
of a Disposing Party's interest herein or to any of the mineral property
interests comprising the Assets shall be accompanied by the written agreement of
any such transferee to assume the obligations of such Disposing Party hereunder
and to be bound by the terms and conditions hereof.
Article 11
REGISTRATION, PARTITION AND TENANCY
11.1 Registration. Upon the request of the Optionee the Optionor shall assist
the Optionee to record this Agreement with the appropriate mining recorder and,
when required, the Optionor shall further provide the Optionee with such
recordable documents as the Optionee and its counsel shall require to record its
due interest in respect of the mineral property interests comprising the Assets.
11.2 Partition. No Party owning a partitionable interest in any to any of the
mineral property interests comprising the Assets shall, during the term of this
Agreement, exercise any right to apply for any partition of any portion of the
mineral property interests comprising the Assets or for the sale thereof in lieu
of partition.
11.3 Tenancy. Any interests of the Optionee and Optionor in and to any of the
mineral property interests comprising the Assets shall be held as tenants in
common and not as joint tenants.
Article 12
DUE DILIGENCE INVESTIGATION
12.1 Due Diligence. Each of the Parties hereto shall forthwith conduct such
further due diligence examination of the
other Parties hereto as it deems appropriate.
12.2 Confidentiality. Each Party may in a reasonable manner carry out such
investigations and due diligence as to the other Parties hereto, at all times
subject to the confidentiality provisions of Articles "14" and "15" hereinbelow,
as each Party deems necessary. In that regard the Parties agree that each shall
have full and complete access to, if and where applicable, the other Parties'
34
Article 12
DUE DILIGENCE INVESTIGATION - continued
respective books, records, financial statements and other documents, articles of
incorporation, by-laws, minutes of Board of Directors' meetings and its
committees, investment agreements, material contracts and as well as such other
documents and materials as the Parties hereto, or their respective solicitors,
may deem reasonable and necessary to conduct an adequate due diligence
investigation of each Party and its respective operations and financial
condition prior to the Closing.
Article 13
NON-DISCLOSURE
13.1 Non-disclosure. Subject to the provisions of section "13.3" hereinbelow,
the Parties hereto, for themselves and, if and where applicable, their officers,
directors, shareholders, consultants, employees and agents, agree that they each
will not disseminate or disclose, or knowingly allow, permit or cause others to
disseminate or disclose to third parties who are not subject to express or
implied covenants of confidentiality, without the other Parties' express written
consent, either: (i) the fact or existence of this Agreement or discussions
and/or negotiations between them involving, inter alia, possible business
transactions; (ii) the possible substance or content of those discussions; (iii)
the possible terms and conditions of any proposed transaction; (iv) any
statements or representations (whether verbal or written) made by either Party
in the course of or in connection with those discussions; or (v) any written
material generated by or on behalf of any Party and such contacts, other than
such disclosure as may be required under applicable securities legislation or
regulations, pursuant to any order of a court or on a "need to know" basis to
each of the Parties' respective professional advisors.
13.2 Documentation. Any document or written material generated by either Party
hereto in the course of, or in connection with, the due diligence investigations
conducted pursuant to this Agreement shall be marked "Confidential" and shall be
treated by each Party as a trade secret of the other Parties. Upon termination
of this Agreement prior to Closing all copies of any and all documents obtained
by any Party from any other Party herein, whether or not marked "Confidential",
shall be returned to the other Parties forthwith.
13.3 Public announcements. Notwithstanding the provisions of this Article, the
Parties hereto agree to make such public announcements of this Agreement
promptly upon its execution in accordance with the requirements of applicable
securities legislation and regulations.
Article 14
PROPRIETARY INFORMATION
14.1 Confidential Information. Each Party hereto acknowledges that any and all
information which a Party may obtain from, or have disclosed to it, about the
other Parties constitutes valuable trade secrets and proprietary confidential
information of the other Parties (collectively, the "Confidential Information").
No such Confidential Information shall be published by any Party without the
prior written consent of the other Parties hereto; however, such consent in
respect of the reporting of factual data shall not be unreasonably withheld and
shall not be withheld in respect of information required to be publicly
disclosed pursuant to applicable securities or corporation laws. Furthermore,
each Party hereto undertakes not to disclose the Confidential Information to any
third party without the prior written approval of the other Parties hereto and
35
Article 14
PROPRIETARY INFORMATION - continued
to ensure that any third party to which the Confidential Information is
disclosed shall execute an agreement and undertaking on the same terms as
contained herein.
14.2 Impact of breach of confidentiality. The Parties hereto acknowledge and
agree that the Confidential Information is important to the respective
businesses of each of the Parties and that, in the event of disclosure of the
Confidential Information, except as authorized hereunder, the damage to each of
the Parties hereto, or to either of them, may be irreparable. For the purposes
of the foregoing sections the Parties recognize and hereby agree that a breach
by any of the Parties of any of the covenants therein contained would result in
irreparable harm and significant damage to each of the other Parties that would
not be adequately compensated for by monetary award. Accordingly, the Parties
agree that in the event of any such breach, in addition to being entitled as a
matter of right to apply to a court of competent equitable jurisdiction for
relief by way of restraining order, injunction, decree or otherwise as may be
appropriate to ensure compliance with the provisions hereof, any such Party will
also be liable to the other Parties, as liquidated damages, for an amount equal
to the amount received and earned by such Party as a result of and with respect
to any such breach. The Parties also acknowledge and agree that if any of the
aforesaid restrictions, activities, obligations or periods are considered by a
court of competent jurisdiction as being unreasonable, the Parties agree that
said court shall have authority to limit such restrictions, activities or
periods as the court deems proper in the circumstances. In addition, the Parties
further acknowledge and agree that all restrictions or obligations in this
Agreement are necessary and fundamental to the protection of the respective
businesses of each of the Parties and are reasonable and valid, and all defenses
to the strict enforcement thereof by either of the Parties are hereby waived by
the other Parties.
Article 15
FORCE MAJEURE
15.1 Events. If any Party hereto is at any time prevented or delayed in
complying with any provisions of this Agreement by reason of strikes, walk-outs,
labour shortages, power shortages, fires, wars, acts of God, earthquakes,
storms, floods, explosions, accidents, protests or demonstrations by
environmental lobbyists or native rights groups, delays in transportation,
breakdown of machinery, inability to obtain necessary materials in the open
market, unavailability of equipment, governmental regulations restricting normal
operations, shipping delays or any other reason or reasons beyond the control of
that Party, then the time limited for the performance by that Party of its
respective obligations hereunder shall be extended by a period of time equal in
length to the period of each such prevention or delay.
15.2 Notice. A Party shall, within seven calendar days, give notice to the other
Parties of each event of force majeure under section "15.1" hereinabove and,
upon cessation of such event, shall furnish the other Parties with notice of
that event together with particulars of the number of days by which the
obligations of that Party hereunder have been extended by virtue of such event
of force majeure and all preceding events of force majeure.
36
Article 16
ARBITRATION
16.1 Matters for Arbitration. The Parties hereto agree that all questions or
matters in dispute with respect to this Agreement shall be submitted to
arbitration pursuant to the terms hereof.
16.2 Notice. It shall be a condition precedent to the right of any Party to
submit any matter to arbitration pursuant to the provisions hereof that any
Party intending to refer any matter to arbitration shall have given not less
than 10-calendar days' prior written notice of its intention to do so to the
other Party together with particulars of the matter in dispute. On the
expiration of such 10 calendar days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided in section "16.3" hereinbelow.
16.3 Appointments. The Party desiring arbitration shall appoint one arbitrator,
and shall notify the other Party of such appointment, and the other Party shall,
within 10 calendar days after receiving such notice, appoint an arbitrator, and
the two arbitrators so named, before proceeding to act, shall, within 10
calendar days of the appointment of the last appointed arbitrator, unanimously
agree on the appointment of a third arbitrator, to act with them and be
chairperson of the arbitration herein provided for. If the other Party shall
fail to appoint an arbitrator within 10 calendar days after receiving notice of
the appointment of the first arbitrator, or if the two arbitrators appointed by
the Parties shall be unable to agree on the appointment of the chairperson, the
chairperson shall be appointed under the provisions of the Arbitration Rules.
Except as specifically otherwise provided in this section, the arbitration
herein provided for shall be conducted in accordance with such Arbitration
Rules. The chairperson, or in the case where only one arbitrator is appointed,
the single arbitrator, shall fix a time and place in Vancouver, British
Columbia, Canada, for the purpose of hearing the evidence and representations of
the Parties, and such arbitrator shall preside over the arbitration and
determine all questions of procedure not provided for under such Arbitration
Rules or this section. After hearing any evidence and representations that the
Parties may submit, the single arbitrator, or the arbitrators, as the case may
be, shall make an award and reduce the same to writing, and deliver one copy
thereof to each of the Parties. The expense of the arbitration shall be paid as
specified in the award.
16.4 Award. The Parties hereto agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be
final and binding upon each of them.
Article 17
DEFAULT AND TERMINATION
17.1 Default. The Parties hereto agree that if any Party hereto is in default
with respect to any of the provisions of this Agreement (herein called the
"Defaulting Party"), the non-defaulting Party (herein called the "Non-Defaulting
Party") shall give notice to the Defaulting Party designating such default, and
within 10 calendar days after its receipt of such notice, the Defaulting Party
shall either:
(a) cure such default, or commence proceedings to cure such default
and prosecute the same to completion without undue delay; or
37
Article 17
DEFAULT AND TERMINATION - continued
(b) give the Non-Defaulting Party notice that it denies that such
default has occurred and that it is submitting the question to
arbitration as herein provided.
17.2 Arbitration. If arbitration is sought a Party shall not be deemed in
default until the matter shall have been determined finally by appropriate
arbitration under the provisions of Article "16" hereinabove.
17.3 Curing the Default. If:
(a) the default is not so cured or the Defaulting Party does not
commence or diligently proceed to cure the default; or
(b) arbitration is not so sought; or
(c) the Defaulting Party is found in arbitration proceedings to be in
default, and fails to cure it within five calendar days after the
rendering of the arbitration award,
the Non-Defaulting Party may, by written notice given to the Defaulting Party at
any time while the default continues, terminate the interest of the Defaulting
Party in and to this Agreement.
17.4 Termination. In addition to the foregoing it is hereby acknowledged and
agreed by the Parties hereto that this Agreement will be immediately terminated
in the event that:
(a) the Option is terminated in accordance with Article "2"
hereinabove;
(b) either of the Parties hereto has either not satisfied or waived
each of their respective conditions precedent prior to the
Subject Removal Date in accordance with the provisions of Article
"5" hereinabove;
(c) either of the Parties hereto has failed to deliver, or caused to
be delivered, any of their respective materials required to be
delivered in accordance with Articles "5" and "6" hereinabove
prior to each of the Subject Removal Date and the Closing Date in
accordance with the provisions of Articles "5" and "6"
hereinabove;
(d) either of the Parties hereto has not provided a satisfactory
report on its respective due diligence as contemplated in
accordance with Articles "5" and "6" hereinabove;
(e) the Closing Date in respect of the due and complete exercise of
the Option by the Optionee has not occurred within 19 months from
the Effective Date; or
(f) by agreement in writing by each of the Parties hereto;
and in such event this Agreement will be terminated and be of no further force
and effect other than the obligations under Articles "2", "13" and "14"
hereinabove.
38
Article 18
INDEMNIFICATION AND LEGAL PROCEEDINGS
18.1 Indemnification. Each Party hereto agrees to indemnify and save the other
Parties, their respective Affiliates and their respective directors, officers,
employees and agents (collectively, the "Indemnified Parties" and, individually,
as an "Indemnified Party") harmless from and against any and all losses, claims,
actions, suits, proceedings, damages, liabilities or expenses of whatsoever
nature or kind, including any investigation expenses incurred by any Indemnified
Party, to which an Indemnified Party may become subject by reason of the terms
and conditions of this Agreement. This indemnity will not apply in respect of an
Indemnified Party in the event and to the extent that a court of competent
jurisdiction in a final judgment shall determine that the Indemnified Party was
grossly negligent or guilty of willful misconduct. The Parties hereto agree to
waive any right they might have of first requiring the Indemnified Party to
proceed against or enforce any other right, power, remedy, security or claim
payment from any other person before claiming this indemnity. In case any action
is brought against an Indemnified Party in respect of which indemnity may be
sought against any Party hereto, the Indemnified Party will give the affected
Party prompt written notice of any such action of which the Indemnified Party
has knowledge and the affected Party will undertake the investigation and
defense thereof on behalf of the Indemnified Party, including the prompt
employment of counsel acceptable to the Indemnified Parties affected and the
payment of all expenses. Failure by the Indemnified Party to so notify shall not
relieve the affected Party of its obligation of indemnification hereunder unless
(and only to the extent that) such failure results in a forfeiture by the
affected Party of any substantive rights or defenses. No admission of liability
and no settlement of any action shall be made without the affected Party's
consent and the consent of the Indemnified Parties affected, such consent not to
be unreasonable withheld. Notwithstanding that the affected Party will undertake
the investigation and defense of any action, an Indemnified Party will have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel will be at the
expense of the Indemnified Party unless:
(a) employment of such counsel has been authorized by the affected
Party;
(b) the affected Party has not assumed the defense of the action
within a reasonable period of time after receiving notice of the
action;
(c) the named parties to any such action include that the affected
Party and the Indemnified Party shall have been advised by
counsel that there may be a conflict of interest between the
affected Party and the Indemnified Party; or
(d) there are one or more legal defenses available to the Indemnified
Party which are different from or in addition to those available
to the affected Party.
If for any reason other than the gross negligence or bad faith of the
Indemnified Parties (or any of them) being the primary cause of the loss claim,
damage, liability, cost or expense, the foregoing indemnification is unavailable
to the Indemnified Parties (or any of them) or insufficient to hold them
harmless, the affected Party shall contribute to the amount paid or payable by
the Indemnified Parties as a result of any and all such losses, claim, damages
or liabilities in such proportion as is appropriate to reflect not only the
relative benefits received by the affected Party on the one hand and the
Indemnified Parties on the other, but also the relative fault of the Parties and
39
Article 18
INDEMNIFICATION AND LEGAL PROCEEDINGS - continued
other equitable considerations which may be relevant. Notwithstanding the
foregoing, the affected Party shall in any event contribute to the amount paid
or payable by the Indemnified Parties as a result of the loss, claim, damage,
liability, cost or expense (other than a loss, claim, damage, liability, cost or
expenses, the primary cause of which is the gross negligence or bad faith of the
Indemnified Parties or any of them), any excess of such amount over the amount
of the fees actually received by the Indemnified Parties hereunder.
18.2 Legal proceedings. The Parties hereto agrees that if:
(a) any legal proceedings shall be brought against either of them by
any governmental commission or regulatory authority or any stock
exchange; or
(b) an entity having regulatory authority, either domestic or
foreign, shall investigate either of them;
and personnel of either Party shall be required to testify in connection
therewith or shall be required to respond to procedures designed to discover
information regarding the terms and conditions of this Agreement, such Party
shall have the right to employ its own counsel in connection therewith and the
affected Party will pay to such Party a per diem amount for their services based
on its normal hourly or daily rate together with such disbursements and
reasonable out-of-pocket expenses as may be incurred in connection therewith,
including fees and disbursements of counsel incurred in connection with such
testimony or participation.
Article 19
NOTICE
19.1 Notice. Each notice, demand or other communication required or permitted to
be given under this Agreement shall be in writing and shall be sent by prepaid
registered mail deposited in a post office addressed to the Party entitled to
receive the same, or delivered to such Party, at the address for such Party
specified above. The date of receipt of such notice, demand or other
communication shall be the date of delivery thereof if delivered or, if given by
registered mail as aforesaid, shall be deemed conclusively to be the third
calendar day after the same shall have been so mailed, except in the case of
interruption of postal services for any reason whatsoever, in which case the
date of receipt shall be the date on which the notice, demand or other
communication is actually received by the addressee.
19.2 Change of Address. Either Party may at any time and from time to time
notify the other Parties in writing of a change of address and the new address
to which notice shall be given to it thereafter until further change.
Article 20
GENERAL PROVISIONS
20.1 Entire agreement. This Agreement constitutes the entire agreement to date
between the Parties hereto and supersedes every previous agreement,
communication, expectation, negotiation, representation or understanding,
whether oral or written, express or implied, statutory or otherwise, between the
Parties hereto with respect to the subject matter of this Agreement and
including, without limitation, the Letter of Intent.
40
Article 20
GENERAL PROVISIONS - continued
20.2 Enurement. This Agreement will enure to the benefit of and will be binding
upon the Parties hereto and their respective heirs, executors, administrators
and assigns.
20.3 Schedules. The Schedules to this Agreement are hereby incorporated by
reference into this Agreement in their entirety.
20.4 Time of the essence. Time will be of the essence of this Agreement.
20.5 Representation and costs. It is hereby acknowledged by each of the Parties
hereto that Lang ▇▇▇▇▇▇▇▇ LLP, Lawyers - Patent & Trade ▇▇▇▇ Agents, act solely
for the Optionee, and, correspondingly, that the Optionor has been required by
each of Lang ▇▇▇▇▇▇▇▇ LLP and the Optionee to obtain independent legal advice
with respect to its review and execution of this Agreement. In addition, it is
hereby further acknowledged and agreed by the Parties hereto that Lang ▇▇▇▇▇▇▇▇
LLP, and certain or all of its principal owners or associates, from time to
time, may have both an economic or shareholding interest in and to the Purchaser
and/or a fiduciary duty to the same arising from either a directorship,
officership or similar relationship arising out of the request of the Optionee
for certain of such persons to act in a similar capacity while acting for the
Optionee as counsel. Correspondingly, and even where, as a result of this
Agreement, the consent of each Party hereto to the role and capacity of Lang
▇▇▇▇▇▇▇▇ LLP, and its principal owners and associates, as the case may be, is
deemed to have been received, where any conflict or perceived conflict may
arise, or be seen to arise, as a result of any such capacity or representation,
each Party hereto acknowledges and agrees to, once more, obtain independent
legal advice in respect of any such conflict or perceived conflict and,
consequent thereon, Lang ▇▇▇▇▇▇▇▇ LLP, together with any such principal owners
or associates, as the case may be, shall be at liberty at any time to resign any
such position if it or any Party hereto is in any way affected or uncomfortable
with any such capacity or representation. Each Party to this Agreement will also
bear and pay its own costs, legal and otherwise, in connection with its
respective preparation, review and execution of this Agreement and, in
particular, that the costs involved in the preparation of this Agreement, and
all documentation necessarily incidental thereto, by Lang ▇▇▇▇▇▇▇▇ LLP, shall be
at the cost of the Optionee.
20.6 Applicable law. The situs of this Agreement is Vancouver, British Columbia,
Canada, and for all purposes this Agreement will be governed exclusively by and
construed and enforced in accordance with the laws and Courts prevailing in the
Province of British Columbia, Canada.
20.7 Further assurances. The Parties hereto hereby, jointly and severally,
covenant and agree to forthwith, upon request, execute and deliver, or cause to
be executed and delivered, such further and other deeds, documents, assurances
and instructions as may be required by the Parties hereto or their respective
counsel in order to carry out the true nature and intent of this Agreement.
20.8 Currency. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of the United States.
20.9 Severability and construction. Each Article, section, paragraph, term and
provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
41
Article 20
GENERAL PROVISIONS - continued
agency or tribunal with valid jurisdiction in a proceeding to any of the Parties
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and agreement as of the date upon which the ruling becomes
final).
20.10 Captions. The captions, section numbers and Article numbers appearing in
this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.
20.11 Counterparts. This Agreement may be signed by the Parties hereto in as
many counterparts as may be necessary and, if required, by facsimile, each of
which so signed being deemed to be an original, and such counterparts together
shall constitute one and the same instrument and notwithstanding the date of
execution will be deemed to bear the Effective Date as set forth on the front
page of this Agreement.
20.12 No partnership or agency. The Parties hereto have not created a
partnership and nothing contained in this Agreement shall in any manner
whatsoever constitute any Party the partner, agent or legal representative of
any other Party, nor create any fiduciary relationship between them for any
purpose whatsoever. No Party shall have any authority to act for, or to assume
any obligations or responsibility on behalf of, any other party except as may
be, from time to time, agreed upon in writing between the Parties or as
otherwise expressly provided.
20.13 Consents and waivers. No consent or waiver expressed or implied by either
Party hereto in respect of any breach or default by any other Party in the
performance by such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or
waiver pursuant to this section;
(b) be relied upon as a consent to or waiver of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver
pursuant to this section in any other or subsequent instance.
IN WITNESS WHEREOF each of the Parties hereto have hereunto set their
respective hands and seals in the presence of their duly authorized signatories
effective as of the Effective Date as set forth in the front page of this
Agreement.
SIGNED, SEALED and DELIVERED by
▇▇▇▇ ▇. ▇▇▇▇▇,
-------------
the Optionor herein, in the presence of:
42
Witness Signature
Witness Address
Witness Name and Occupation
The CORPORATE SEAL of
URANIUM ENERGY CORP.,
--------------------
the Optionee herein, was hereunto affixed
in the presence of: (C/S)
Authorized Signatory
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------
▇▇▇▇ ▇▇▇▇▇▇
43
Schedule A
This is Schedule "A" to that certain Mineral Assets Option Agreement
between ▇▇▇▇ ▇. ▇▇▇▇▇ and Uranium Energy Corp. dated for reference effective on
October 11, 2005.
Assets
Refer to the materials attached hereto.
End of Schedule A
{Draft #1 for discussion purposes only on 11/10/05}
-- Mineral Assets Option Agreement --
-- Uranium Energy Corp. --
1055690.1
-- Mineral Assets Option Agreement --
-- Uranium Energy Corp. --
1055690.1
Schedule B
This is Schedule "B" to that certain Mineral Assets Option Agreement
between ▇▇▇▇ ▇. ▇▇▇▇▇ and Uranium Energy Corp. dated for reference effective on
October 11, 2005.
Letter of Intent
Refer to the materials attached hereto.
44
URANIUM ENERGY CORP.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ and Fax: (▇▇▇) ▇▇▇-▇▇▇▇
-------------------------------------------------------------------------------
August 5, 2005
M. ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇.▇.▇., ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇
Dear Sir:
Re: Option to acquire a 100% interest in certain Assets of the Optionor ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇ and his associates or affiliates (collectively, the "Optionor")
own or are in the process of acquiring various drill proven reserves and leases
in Texas and, in particular, however, without limitation, being comprised of:
(i) the Optionor's current 100% legal, registered and beneficial ownership in
and to the Weesatche project, comprised of four leases totalling m/l 593.46
acres, located in Goliad County; which the Optionor has represented to Uranium
Energy Corp. (the "Optionee") has total proven and probable reserves reported of
5,200,000 pounds; and (ii) the Optionor's current intention to acquire the
Caldena project, totalling approximately 300 acres, located in ▇▇▇▇▇ County;
which the Optionor has represented to the Optionee has total proven and probable
reserves of 1,200,000 pounds; together with such other leases or interests which
the Optionor may acquire within the Caldena deposit area from the Acceptance
Date (as hereinafter defined and determined) moving forward (collectively, the
"Assets"). The purpose of this letter is to summarize the mutual intentions and
understandings of the Optionor and the Optionee regarding, among other things,
the proposed granting by the Optionor to the Optionee of an option to acquire an
undivided 100% legal, beneficial and registerable interest in and to the Assets
herein (the "Option"). This letter is a "letter of intent" which summarizes the
basis upon which the parties are prepared to negotiate with a view to entering
into a binding Option or other form of agreement. This letter, however, does not
create a contract or impose obligations on the parties other than as set forth
in sections 4, 5 and 6 below provided that it is acknowledged that this letter
supersedes and replaces all prior agreements or understandings between the
parties hereto. It is acknowledged that the Optionee has been provided with
certain information which describes the business, assets, financial and
operating history and condition and prospects of the Optionor and its Assets
(such information is herein referred to, collectively, as the "Disclosure
Information"). The transaction summarized in this letter assumes that the
Disclosure Information is accurate and complete in all material respects and
that the Optionee is relying on such Disclosure Information as a condition of
its providing and entering into this letter with the Optionor with respect to
its proposed Option.
1. Summary of the Option and transaction
1.1 Option: In order to keep the right and Option granted to the Optionee in
respect of the Assets in good standing and in force and effect during the Option
period hereof (the "Option Period"); the Option Period commencing on the
acceptance date of this letter by the Optionor (the "Acceptance Date") and
terminating on the date which is the earlier of (i) 18 months from the Effective
Date hereof (as hereinafter defined and determined) and (ii) 12 months from the
date that the Optionee's common shares are first listed, posted and called for
trading on a recognized stock exchange or over-the-counter market in North
America (the "Initial Listing Date"); the Optionee shall be obligated to provide
the following cash payments to the Optionor (each being a "Option Cash Payment")
to provide the following common share issuances from treasury to the Optionor
45
(each being an Option Share Issuance") and to provide for the following
consulting agreements and/or arrangements in respect of the Optionor (each being
a "Consulting Arrangement") in the following manner prior to the end of the
Option Period in this instance as follows:
(a) Non-Refundable Cash Payments: pay to the order and direction of
the Optionor the following Option Cash Payments in the aggregate
of U.S. $200,000.00 during the Option Period in the following
manner:
(i) an initial Non-Refundable Cash Payment of U.S. $50,000.00 on
the day of the due and complete execution of a definitive
Agreement (as herein defined and determined) setting out in
detail the terms and conditions of the Option arising
herefrom (the "Effective Date"); and
(ii) the final Non-Refundable Cash Payment of U.S. $150,000.00 on
the date which is set the earlier of (i) six months from the
Acceptance Date the and (ii) the Initial Leasing Date;
(b) Option Share Issuance: issue to the order and direction of the
Optionor prior to and at the end of the Option Period an
aggregate of 2,000,000 common shares in the share capital of the
Optionee (each a "Share") at a deemed issuance price of U.S.
$0.50 per Share, in the following manner in this instance;
(i) an initial Option Share Issuance of an initial 500,000 of
the Shares upon the Effective Date:
(ii) an additional Option Share Issuance of an additional 500,000
of the Shares on or before six months from the Effective
Date;
(iii) a further Option Share Issuance of a further 500,000 of the
Shares on or before one year from the Effective Date; and
(iv) the final Option Share Issuance of 500,000 of the Shares on
or before 18 months from the Effective Date.
In this regard the Optionor acknowledges that the Shares, when issued, will be
issued by the Optionee to the Optionor in reliance upon the registration and
prospectus exemptions contained in certain sections of the United States
Securities Act of 1933, as amended, which will impose a trading restriction in
the United States on the Shares for a period of at least 12 months from their
respective date of issuance; and
(c) Consulting Agreements: in conjunction with the execution of a
definitive Agreement (as hereafter defined and determined);
however, to take effective only upon the Initial Listing Date
hereof,; the Optionee will use its reasonably commercial efforts
to enter into industry standard forms of proposed Consulting
Arrangements with each of the Optionor and ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
(collectively, the "Consultants" herein) therein providing for,
without limitation, the provision of certain consulting services
to be provided by the Consultants to the Optionee in connection
with the exploration, development and expansion of the Assets in
consideration of, among other matters, the provision of the
monthly payment by the Optionee to each of the Consultants of US
$10,000.00 together with the entitlement for the Consultants to
participate in the Optionee's then incentive stock option plan
46
subject, at all times, to the final determination of the Board of
Directors or the Optionee in each such instance.
1.2 Termination of Option: The Option shall terminate upon 10-calendar days'
prior written notice being first being provided by the Optionor to the Optionee:
(a) if the Optionee fails to make any of the required Optional Cash
Payments to the Optionor in accordance with paragraph 1.1(a)
hereinabove within the time periods specified in paragraph
1.1(a); or
(b) if the Optionee fails to make the required Share Issuance in
accordance with paragraph 1.1(b) hereinabove within the time
period specified in paragraph 1.1(b).
(c) if the Optionee fails to enter into acceptable Consulting
Arrangements with the Consultants in accordance with paragraph
1.1(c) hereinabove within the time period specified in paragraph
1.1(c)
1.3 Right of Optionee to terminate Option: Prior to the exercise of the Option
the Optionee may terminate the Option by providing a notice of termination to
the Optionor in writing of its desire to do so at least five calendar days prior
to its decision to do so. After such five-calendar days' period the Optionee
shall have no further obligations, financial or otherwise, under this letter,
except that the provisions of section 1.5 hereinbelow shall become immediately
applicable to the Optionee upon providing such notice of termination to the
Optionor.
1.4 Termination of Option and no interest acquired in the Assets: If the Option
is so terminated in accordance with either of sections 1.2 or 1.3 hereinabove
then the Optionee shall have no right, entitlement or interest, legally or
equitably, in and to any of the Assets, and all Option Cash Payments, Option
Share Issuances and any consideration provided under the proposed Consulting
Arrangements theretofore made to the Optionor and the Consultants by the
Optionee shall be non-refundable for which the Optionee shall have no recourse
whatsoever.
1.5 Obligations upon termination of the Option: If the Option is terminated
otherwise than upon the exercise thereof, then the Optionee shall:
(a) leave in good standing for a period of at least 60 calendar days
from the termination of the Option those interests comprising the
Assets that are in good standing on the date thereof; and
(b) deliver at no cost to the Optionor within 60 calendar days of
such termination copies of all reports, maps, assay results and
other relevant technical data compiled by or in the possession of
the Optionee with respect to the interests comprising the Assets
and not theretofore already furnished to the Optionor.
1.6 Deemed exercise of Option: At such time as the Optionee has made each of the
required Option Cash Payments and Option Share Issuance in accordance with
section 1.1 hereinabove, within the Option Period and the time periods as
specified in section 1.1, then the Option shall be deemed to have been exercised
by the Optionee, and the Optionee shall have thereby, in accordance with the
terms and conditions of this letter and without any further act required on its
behalf, acquired an undivided 100% legal, beneficial and registerable interest
in and to the interests comprising the Assets.
47
2. Due diligence investigations
2.1 From the Acceptance Date and for a period of 60 calendar days from the
Acceptance Date (such period in time being the "Optionee's Due Diligence Period"
herein) the Optionee all and any due diligence investigations in respect of the
Optionor and its Assets as the Optionee may consider necessary, in its sole and
absolute decision, from time to time, in order to determine whether it is
advisable to enter into a definitive Agreement (as herein defined and
determined) setting out in detail the terms and conditions of the Option arising
herefrom. For purposes of such investigations the Optionor will give to the
Optionee and its agents and representatives as soon as reasonably practicable
after the Acceptance Date hereof full access to its Assets and all books,
records, financial and operating data and other information concerning the
Assets as the Optionee and its agents and representatives may reasonably
request. If, at any time during the Optionee's Due Diligence Period, the
Optionee determines that it is not satisfied, in its sole discretion, with the
results of such investigations, it may elect not to proceed with the
transactions contemplated hereby. In such instance the Optionee will notify the
Optionor of such fact and thereupon this letter will terminate and the parties
hereto will have not further obligations hereunder except the obligations set
forth in section 4 below.
3. Negotiation and execution of definitive Agreement
3.1 While the Optionee is conducting the due diligence investigations described
in section 2 above the Optionor and the Optionee will negotiate in good faith to
complete and execute a definitive agreement and related documentation
(collectively, the "Agreement") setting out in detail the terms and conditions
of the Option arising herefrom; such definitive Agreement to be entered into on
or before the final day of the Optionee's Due Diligence Period herein. The
Agreement will incorporate the terms and conditions set out in this letter
together with all other reasonable terms and conditions as the parties or their
legal advisors consider necessary or desirable, including standard
representations, warranties and covenants, indemnities from the parties relating
to such representations, warrants and covenants, and conditions to closing. In
particular, and without limiting the generality of the foregoing, the parties
shall structure the Option and negotiate the Agreement in a manner which is tax
advantageous to each of the parties hereto. If each of the Optionor and the
Optionee are satisfied with the results of their due diligence investigations,
it is intended that negotiations of the terms of the Agreement and execution of
the Agreement will be effective on the Effective Date hereof; provided, however,
that it is hereby acknowledged that the Agreement may be subject to the prior
acceptance of the respective shareholders of parties hereto and such regulatory
authorities as may have jurisdiction over the affairs of the parties hereto.
4. Transaction costs
4.1 Each of the parties will be responsible for all costs (including, but not
limited to, legal fees and expenses) incurred by it in connection with the
transactions contemplated hereby. The obligations of the parties under this
section 4 will survive the termination of this letter.
5. Confidentiality agreements
5.1 As soon as reasonably practicable after the Acceptance Date and prior to the
end of the Optionee's Due Diligence Period the Optionor and the Optionee will
use their best efforts to prevent public disclosure or knowledge of the
transaction contemplated hereby, without the prior approval of the other, and
will maintain the confidentiality of the negotiations regarding such
transaction. The foregoing will not restrict or otherwise affect the right of
48
any such party to make or permit any disclosure: (a) which, in its opinion, is
reasonably necessary or desirable for it to carry out and give full effect to
the terms, provisions and intent hereof and the transaction contemplated hereby;
(b) to consultants, legal advisors, financial institutions, business
associates and others provided such disclosure is not intended for
broad dissemination to the public;
(c) in the case of the Optionee, which the legal advisors for the Optionee
advise is required or advisable to ensure compliance with applicable
securities laws and regulations; or
(d) as may be required by law.
6. Exclusive dealing
6.1 As an inducement to the Optionee to proceed with the due diligence
investigations described in section 2 above and to proceed with the preparation
of the Agreement, the Optionor hereby agrees with the Optionee to deal
exclusively and in confidence with the Optionee in respect of the matters set
out herein and to take no action, directly or indirectly, which would impair the
ability of the Optionor to complete the transactions contemplated hereby and,
without limitation, hereby agrees and undertakes that, unless consented to in
writing by the Optionee, it will not at any time prior to the earlier of the end
of the Optionee's Due Diligence Period or the termination of the Option, if
applicable, enter into, negotiate, solicit or knowingly encourage or participate
in, any negotiations or discussions relating to any disposition of all or any
interest in and to any of its Assets.
7. Assignment
7.1 Notwithstanding anything else contained herein, it is acknowledged that the
Optionee may assign its rights and obligations herein with respect to the Option
or any portion thereof to any other entity, by way of any arrangement including,
without limitation, an additional option or joint venture in respect of the
development of the Assets, and in such instance the Agreement contemplated by
section 3 herein would be negotiated and entered into between the Optionee and
such entity.
8. General
8.1 Obligations: Other than the obligations set forth in sections 4, 5 and 6
above, the parties will not be obligated in any manner with respect to the
transaction contemplated hereby (including obligations to negotiate in good
faith) unless and until the Agreement is executed by the parties.
8.2 Proper law: This letter of intent will be governed by and construed in
accordance with the laws of the State of Nevada. The parties submit to the
jurisdiction of the courts of the State of Nevada with respect to any matters
arising out of this letter of intent.
8.3 Counterparts: This letter of intent may be executed in any number of
counterparts, by facsimile or otherwise, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same
document. Please confirm that this letter accurately sets forth your
understanding of the terms of the proposed transaction and the other matters
discussed herein, by signing a copy of this letter below and returning it to us.
Upon our receipt we confirm that we will immediately seek Board approval to the
general terms of this letter and move forward with our due diligence
49
investigations respecting the Optionor and its Assets. As the terms and
conditions respecting our proposed offer to acquire an Option as set forth in
this letter should not be disclosed to any third party without our prior written
approval. In addition, and as we are now ready, willing and able to perform upon
the terms contained herein we confirm that the offer contained in this letter is
open for acceptance by the Optionor's acceptance of which our offer and the
contents of this letter will be deemed null and void and of no further force and
effect whatsoever. In the interim, and while we await the Optionor's response we
remain,
Yours very truly, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
URANIUM ENERGY CORP.
▇▇▇▇ ▇. ▇▇▇▇▇
-----------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Per:
Authorized Signatory
ACCEPTED on this 11th day of August, 2005, by the Optionor:
▇▇▇▇ ▇. ▇▇▇▇▇
End of Schedule B
End of Mineral Assets Option Agreement
50