OPTION AGREEMENT GOLD KING, MAYFLOWER AND MOGUL PROPERTIES
Exhibit 1
OPTION AGREEMENT
GOLD KING, MAYFLOWER AND MOGUL PROPERTIES
GOLD KING, MAYFLOWER AND MOGUL PROPERTIES
THIS AGREEMENT made the 17th day of June, 2007
BETWEEN:
SAN XXXX CORP., a company incorporated under the laws of Colorado
and having an office at 000 Xxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxx,
X.X.X. 00000
(“San Xxxx”)
XXXX X. XXXXXX, a private individual, resident at 000 Xxxxx Xxxxxxx,
Xxxxxx, Xxxxxxxx 00000
(“Xxxxxx”)
(San Xxxx and Xxxxxx hereinafter referred to collectively as the
“Optionors”)
AND:
GARPA RESOURCES, INC., a company incorporated under the laws of
Nevada and having an office at 000-000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx
(“Optionee”)
WHEREAS:
A. | The Optionors are the recorded and beneficial owners of the right, title and interest in and
to the properties located in the San Xxxx County, Colorado, which are more particularly
described in Schedule A attached hereto and forming part hereof; |
B. | The parties wish to enter into an agreement granting to Optionee the exclusive right and
option to acquire an eighty percent (80%) undivided right, title and interest in and to the
Properties (as defined herein) on the terms and conditions set forth in this Agreement. |
NOW THEREFORE THIS AGREEMENT WITNESSES that, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. | INTERPRETATION |
|
1.1 | In this Agreement: |
(a) | “business day” means any day, other than a Saturday, Sunday or any other day on
which the principal chartered banks located in the city of Denver, Colorado are not
open for business during normal banking hours; |
||
(b) | “dollars” means legal currency of the United States of America; |
(c) | “Effective Date” means the date that all parties have signed this Agreement; |
||
(d) | “Environmental Claims” means any and all administrative, regulatory, or
judicial actions, suits, demands, claims, liens, notices of non-compliance or
violation, investigations, or proceedings relating in any way to any Environmental Law
or any permit issued under any Environmental Law, including, without limitation: |
(i) | any and all claims by government or regulatory authorities for
enforcement, clean-up, removal, response, remedial, or other actions or damages
under any applicable Environmental Law; and |
(ii) | any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation, or injunctive or
other relief resulting from hazardous materials, including any release of those
claims, or arising from alleged injury or threat of injury to human health or
safety (arising from environmental matters) or the environment; |
(e) | “Environmental Laws” means all requirements of the common law, civil code, or
of environmental, health, or safety statutes of any agency, board, or governmental
authority including, but not limited to, those relating to (i) noise, (ii) pollution or
protection of the air, surface water, ground water, or land, (iii) solid, gaseous, or
liquid waste generation, handling, treatment, storage, disposal, or transportation,
(iv) exposure to hazardous or toxic substances, or (v) the closure, decommissioning,
dismantling, or abandonment of any facilities, mines, or workings and the reclamation
or restoration of lands; |
(f) | “Expenditures” includes all expenditures and costs made or incurred by Optionee
or its affiliates or permitted assigns relating directly or indirectly to the
Properties, including without limitation all expenditures and costs made or incurred:
in doing geophysical, geochemical, land, airborne, environmental and/or geological
examinations, assessments, assays, audits and/or surveys; in line cutting, mapping,
trenching and staking; in searching for, digging, trucking, sampling, working,
developing, mining and/or extracting ores, minerals and metals; in doing diamond and
other drilling; all costs related to the Mill including without limitation the
purchase, upgrade, modification and operation of the Mill; in construction of access
roads and other facilities on or for the benefit of the Properties or any part thereof;
in transporting personnel, supplies, mining, machinery, tools, appliances or equipment
in, to or from the Properties or any part thereof; in paying reasonable wages and
salaries (including “fringe benefits”) of personnel directly engaged in performing work
on or with respect to the Properties; in payment of assessments or contributions under
applicable employment legislation relating to workers’ compensation, unemployment
insurance and other applicable legislation or ordinances relating to such personnel; in
supplying food, lodging and other reasonable needs for such personnel; in obtaining and
maintaining any insurance; in the management of and accounting for work and providing
supervisory, legal, accounting, consulting and other contract or professional services
or facilities relating to work performed or to be performed hereunder; in paying any
taxes, fees, charges, payments or rentals (including payments made in lieu of
assessment work) or otherwise incurred to transfer the Properties or any part thereof
or interest therein pursuant to this Agreement and to keep the Properties or any part
thereof in good standing; in acquiring access and surface rights to the Properties and
any costs required to be paid relating to the Royalties or any royalties pursuant to
section 2.5(a); in carrying out any negotiations and preparing, settling and
executing any agreements or other documents relating to environmental or indigenous
peoples’ claims, requirements or matters relating to the Properties; in carrying |
out any requirements or prerequisites in order to obtain and obtaining all necessary
or appropriate approvals, permits, consents or permissions relating to the carrying
out of work, including, without limitation, environmental permits, approvals or
consents; in carrying out reclamation or remediation; in improving, protecting, or
perfecting title in the Properties or any part thereof, in carrying out mineral,
soil, water, air or other testing; in preparing engineering, geological, or
environmental studies and/or reports and test work related thereto; and in preparing
one or more feasibility studies including any work or reports preliminary or
supplementary thereto; |
(g) | “Mill” means the Pride of the West Mill located in Howardsville, Colorado,
including any upgrades, modifications, ancillary facilities, buildings, machinery,
parts and supplies required to process and otherwise upgrade gold bearing ores and
tailings; |
(h) | “Operator” means the operator appointed pursuant to article 5 of
this Agreement; |
(i) | “Option” means the option granted by Optionors to Optionee pursuant to section
3.1 of this Agreement; |
(j) | “Program” means any program to carry out work and incur Expenditures on the
Properties or any of them and includes, as the context requires: |
(i) | documents that specify in reasonable detail an outline of any
and all research, prospecting, and exploration and development work proposed to
be carried out during the Program, the estimated Expenditures to be incurred in
carrying out the work, and the area of the Properties on which the work is to
be undertaken, and |
||
(ii) | the preparation of any feasibility report,
|
and includes any amendments to a Program which may be proposed by the Operator;
(k) | “Properties” means those mining claims described in Schedule A of this
Agreement and any other claims that become the subject of this Agreement pursuant to
section 14.1 hereof, together with: |
(i) | surface rights to the individual patented mining claim on which
the Gold King #7 mine portal, Mogul #1 and #2 portals exist together with any
related buildings and fixtures, |
(ii) | any rights granted by third parties and held by the Optionor
for access to, on or over the mining claims described in Schedule A to the
extent allowed by the underlying third party agreements, and |
(iii) | the Surface Rights Agreement entered into by the Optionor and
Optionee, pursuant to section 3.2. |
(l) | “Royalty” or “Royalties” means the royalty of (i) 3% net smelter return royalty
on Gold King, (ii) 2.5% net profits interest on Gold King, (iii) 2% net smelter return
royalty on the Mayflower Group, and (iv) 2.5% net profits interest in the Mayflower
Group as more particularly described in Schedule B hereto and forming a part hereof; |
(m) | “Royalty Holder” means Recreation Properties, Ltd., 000 Xxxx 00xx
Xxxxxx, Xxxxx X, Xxxxx, Xxxxxxxx 00000-0000, the holder of the Royalties; |
(n) | “Shares” means the common stock of Optionee; and |
(o) | “Underlying Agreements” means the Royalty agreements attached hereto as
Schedule B. |
2. | REPRESENTATIONS AND WARRANTIES |
|
2.1 | Optionee represents and warrants to Optionors as follows: |
(a) | Optionee is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has the requisite
corporate power and authority to own or lease all material property that it purports to
own or lease and to carry on its business as now being conducted. Optionee is duly
qualified as a foreign corporation, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except to the extent that the failure to
so qualify would not have a material adverse effect on the business or financial
condition of Optionee. |
(b) | Optionee has heretofore furnished to Purchaser or its counsel a complete and
correct copy of its Articles of Incorporation, as amended, and the Bylaws, as amended,
of Optionee, as presently in effect. |
(c) | As of May 31, 2007, the authorized capital stock of Optionee consists of
75,000,000 Shares of Common Stock of which 5,575,000 Shares are issued and outstanding.
Except for this Agreement and the foregoing and in the Optionee SEC Documents, there
are no options, warrants or other rights, agreements or commitments that do or may
obligate Optionee to issue any shares of its capital stock. The Shares to be issued
pursuant to this Agreement, upon issuance on the terms and conditions specified herein,
will be duly authorized, validly issued, fully paid and nonassessable, and free of
preemptive rights. |
(d) | Optionee has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by Optionee and constitutes a legal, valid and
binding obligation of Optionee enforceable against the Optionee in accordance with its
terms subject to (i) laws of general application relating to bankruptcy, insolvency and
any similar law relating to creditors’ rights and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies. |
(e) | The execution and delivery of this Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or violate any law,
regulation, court order, judgment or decree applicable to Optionee or by which its
property is bound or affected, or conflict with or result in any breach of or
constitute a default (or any event which without notice or lapse of time or both would
become a default) under, or give to others any rights of termination or cancellation
of, or result in the creation of any lien or encumbrance on any of the properties or
assets of Optionee pursuant to: (a) the Articles of Incorporation or Bylaws of Optionee
or (b) any material contract, instrument, permit, license or franchise to which
Optionee is a party or by which Optionee or its property is bound or affected. Except
for applicable requirements, if any, of the Securities Exchange Act of 1934 (the
“Exchange Act”), state securities laws (“Blue Sky Laws”) and the OTC Bulletin Board,
(i) Optionee is not required to submit any notice, report or other filing with any
governmental or regulatory authority, domestic or foreign, in connection with the
issuance of the Shares contemplated by this Agreement. |
(f) | Optionee has made available to Optionors a true and complete copy of each
statement, report, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the “Securities
Act”)), definitive proxy statement, and other filings filed with the SEC by Optionee
since its initial filing under the Securities Act (collectively, the “Optionee SEC
Documents”). In addition, Optionee has made available to Optionors all current
exhibits to the Optionee SEC Documents filed prior to the date hereof. All documents
required to be filed as exhibits to the Optionee SEC Documents have been so filed (and
such exhibits are true, correct and complete copies of such documents), and all
contracts so filed as exhibits are in full force and effect, except those that have
expired in accordance with their terms or those that have been terminated without
default by any party thereto, and neither Optionee nor any other party, is in material
default thereunder. As of their respective filing dates, (i) the Optionee SEC Documents
complied as to form in all material respects with the requirements of the Exchange Act
and the Securities Act, as applicable, and (ii) none of the Optionee SEC Documents
contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein, in
light of the circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed Optionee SEC Document. |
(g) | All financial statements filed with the Optionee SEC Documents (the “Optionee
Financial Statements”) have been prepared from the books and records of Optionee in
accordance with United States generally accepted accounting principles (“GAAP”)
consistently applied and maintained throughout the periods indicated (except as may be
indicated in the notes thereto) and fairly present in all material respects the
financial condition of Optionee at its respective dates and the consolidated results of
its operations and cash flows for the periods covered thereby. |
(h) | Optionee is in compliance in all material respects with all laws and
regulations applicable to its operations or with respect to which compliance is a
condition of engaging in the business thereof, except to the extent that failure to
comply would not have a material adverse effect on the business or financial condition
of Optionee. |
(i) | Except as disclosed in the Optionee SEC Documents or as contemplated by this
Agreement, since February 28, 2007, there has not been: |
(i) | any material adverse change in the business, assets, condition
(financial or otherwise), operations or prospects of Optionee; |
(ii) | any issuance of capital stock or of rights to acquire capital
stock or securities convertible into capital stock, or any agreements relating
to such issuance, other than the issuance of Common Stock upon the exercise of
stock options under the option plans of Optionee; |
(iii) | any redemption, repurchase or other acquisition of Common
Stock of Optionee or any declaration or payment of any dividend or other
distribution in cash, stock or property with respect to Common Stock, or any
amendment to the Articles of Incorporation or Bylaws or comparable documents of
Optionee; |
(iv) | any entry into any material commitment or transaction
including, without limitation, any borrowing, repayment of indebtedness,
capital expenditure or business combination, other than in the ordinary course
of business consistent with past practice or as contemplated by this Agreement;
or |
(v) | any pending or, to the knowledge of Optionee, threatened
litigation or investigation against Optionee which individually or in the
aggregate might result in any material adverse change in the business, assets,
condition (financial or otherwise), operations or prospects of Optionee. |
2.2 | Each of the Optionors represents and warrants to Optionee as follows: |
(a) | Each of the Optionors has the requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. This Agreement has been
duly authorized, executed and delivered by each of the Optionors and constitutes a
legal, valid and binding obligation of Optionor enforceable against each of the
Optionors in accordance with its terms subject to (i) laws of general application
relating to bankruptcy, insolvency and any similar law relating to creditors’ rights
and (ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. |
(b) | San Xxxx is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has the requisite
corporate power and authority to own or lease all material property that it purports to
own or lease and to carry on its business as now being conducted. San Xxxx is duly
qualified as a foreign corporation, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except to the extent that the failure to
so qualify would not have a material adverse effect on the business or financial
condition of San Xxxx. |
(c) | Neither the execution and delivery of this Agreement nor any of the agreements
referred to herein or contemplated hereby, nor the consummation of the transactions
hereby contemplated will conflict with, result in the breach of or accelerate the
performance required by any agreement to which it is a party. |
(d) | To the best of their knowledge and with the exception of Environmental Laws,
each of the Optionors is in compliance in all material respects with all laws and
regulations applicable to its operations or with respect to which compliance is a
condition of engaging in the business thereof, except to the extent that failure to
comply would not have a material adverse effect on the business or financial condition
of each of the Optionors. |
(e) | The mining claims comprised in the Properties have been duly and validly staked
and recorded (except as described in Exhibit 2.2(e)), are accurately described in
Schedule A, are presently in good standing under the laws of the jurisdiction in which
they are located, and are free and clear of all liens, charges, encumbrances, claims,
rights, or interest of any person save and except (i) permitted encumbrances including
but not limited to utility rights of way, municipal easements, and the like and (ii)
the Royalties. |
(f) | It has made all taxes, assessment, rentals, levies, or other payments relating
to the Properties required to be made to any federal, provincial, or municipal
government instrumentality. |
(g) | The Optionors are the recorded and beneficial owners of the Properties as
described in Schedule A. |
(h) | Optionors have the exclusive right to enter into this Agreement and all
necessary authority to dispose of up to an undivided eighty percent (80%) interest in
and to the Properties in accordance with the terms of this Agreement. |
(i) | To the knowledge of the Optionors, no person, firm or corporation has any
proprietary or possessory interest in the Properties other than Optionors [except the
Royalty Holder as indicated above], and to the knowledge of the Optionors no person is
entitled to any royalty or other payment in the nature of rent or royalty on any
minerals, ores, metals or concentrates or any other such products removed from the
Properties except for the Royalties or as described in Exhibit 2.2(i). |
(j) | There are no actions, suits, investigations or proceedings before any court,
arbitrator, administrative agency or other tribunal or governmental authority, whether
current, pending or threatened, which directly or indirectly relate to or affect the
Properties or the interests of Optionors therein nor are Optionors aware of any acts
that would lead it to suspect that the same might be initiated or threatened except as
disclosed in Exhibit 2.2(m). |
(k) | There is no adverse claim or challenge against or to the ownership of or title
to the Properties, or any portion thereof, nor is there any basis therefore and there
are no outstanding agreements or options to purchase or otherwise acquire the
Properties or any portion thereof or any interest therein. |
(l) | There are no outstanding agreements or options to purchase or otherwise acquire
the Properties or any portion thereof or any interest therein, except this Agreement. |
(m) | To the knowledge of the Optionors, after due enquiry, other than as disclosed
in Exhibit 2.2(m) there have been no material spills, discharges, leaks, emissions,
ejections, escapes, dumping, or other releases of any kind of any toxic or hazardous
substances in, on, or under the Properties or the surrounding environment from the time
the Optionors acquired ownership of the Properties up to and including the Effective
Date; |
(n) | To the knowledge of the Optionors, after due enquiry, the conditions on and
relating to the Properties respecting all past and current operations are in compliance
with all applicable laws, excluding all Environmental Laws. |
(o) | It has not received from any government authority or any other person any
notice of or communication relating to any actual or alleged Environmental Claims, and
there are no outstanding governmental actions required to be taken relating to
environmental matters respecting the Properties or any operations carried out on the
Properties, except for the correspondence attached as Exhibit 2.2(m). |
(p) | It has not agreed to nor made any commitments for reclamation, closure or other
environmental corrective, clean-up or remediation action with Federal or State
government authorities relating directly or indirectly to the Properties. |
(q) | Optionors will upon request, promptly make available to Optionee all
information in its possession or control relating to work done on or regarding the
Properties that could possibly be considered to be materially significant in indicating
whether the Properties might or might not have the potential for economic
mineralization. |
2.3 | The representations and warranties hereinbefore set out are conditions on which the parties
have relied in entering into this Agreement and will survive the acquisition of any interest
in the Properties by Optionee and each party will indemnify and save the other party harmless
from all loss, damage, costs, actions and suits arising out of or in connection with any
breach of any representation, warranty, covenant, agreement or condition made by the other
party and contained in this Agreement. |
2.4 | The Optionors’ total liability to the Optionees pursuant to section 2.3 is limited
to the total consideration ( and in the case of shares, the publicly traded value of the
shares as at the date the shares were transferred to the Optionors) paid to the Optionors
pursuant to sections 3.3, 3.4, 3.5, and 3.6,
increased by the value of any additional Optionee shares owned or acquired by the Optionors on
or before July 6, 2007, said shares valued as of the date the shares were acquired by the
Optionors. |
2.5 | Notwithstanding sections 2.3 and 2.4, in the event the mining claims
comprised in the Property are subject to other royalties not referred to or disclosed in this
Agreement or the royalty disclosed in Exhibit 2.2(i), any costs required to be paid pursuant
to such royalties, including costs to acquire, buy out or otherwise terminate such royalties: |
(a) | before the Optionee exercises its option pursuant to section 6.5,
will be paid by the Optionees and deemed to be included in and form part of the
Expenditures; or |
(b) | after the Optionee exercises its option pursuant to section 6.5,
will be paid solely by the Optionor and will not be considered to be joint venture
costs. |
3. | OPTION |
3.1 | Optionors hereby irrevocably grants to Optionee the sole and exclusive right and option to
acquire up to an undivided eighty percent (80%) right, title and interest in and to the
Properties in accordance with the terms of this Agreement, which Option is exercisable by
Optionee in stages as set out in sections 3.3, 3.4 and 3.5
hereof. |
|
3.2 | The Optionors agree they will on or before 5:00 pm Pacific time, June 22, 2007: |
(a) | grant all rights reasonably required by the Optionees over all of the surface
rights held by the Optionors to the Property listed in Schedule A and any access rights
to properties adjacent to the Property, for the purposes of exploring, mining, milling,
and storing minerals on or under the Property, or to construct, operate, maintain,
demolish and reclaim mine workings and related activities; and |
(b) | the rights referred to in 3.2 (a) will be granted to all parties to the joint
venture agreement for the Property, for $1.00. |
If the form of agreements contemplated by this section 3.2 are not mutually satisfactory
then this Option Agreement will hereby terminate and the Optionee will be under no further
obligation to the Optionors.
3.3 | In order to earn an undivided forty percent (40%) interest in the Properties (the “40%
Option”), Optionee will incur Expenditures on the Properties of not less than SIX MILLION
DOLLARS ($6,000,000) on the Properties on or before the fifth (5th) anniversary of
the Effective Date. Forthwith upon Optionee performing the requirements of Section 3.3, an undivided forty percent (40%) interest in and to the Properties will vest
in the Optionee. |
3.4 | In order to earn an additional undivided twenty percent (20%) interest in the Properties for
a total interest of sixty percent (60%) interest in the Properties (the “60% Option”),
Optionee will issue Shares and incur additional Expenditures on the Properties, all on the
following basis: |
(a) | the Optionee will incur additional Expenditures of not less than FOUR MILLION
FIVE HUNDRED THOUSAND DOLLARS ($4,500,000) on the Properties on or before the seven and
a half (7.5th) anniversary of the Effective Date; and |
(b) | subject to compliance with all applicable securities laws and the execution of
a Subscription Agreement and such other documentation as is reasonably required by the
Optionee, the Optionee will issue to Optionors five million (5,000,000) Shares (after
the Optionee effects a “forward split” of 7.9 to 1 of its Common Stock). |
Forthwith upon Optionee performing the requirements of paragraphs 3.4(a) and
(b), an undivided additional twenty percent (20%) interest in and to the
Properties will vest in the Optionee.
3.5 | In order to earn an additional undivided twenty percent (20%) interest in the Properties for
a total interest of eighty percent (80%) interest in the Properties (the “80% Option”),
Optionee will issue to Optionors additional Shares and incur additional Expenditures on the
Properties, all on the following basis: |
(a) | the Optionee will incur additional Expenditures of not less than FOUR MILLION
FIVE HUNDRED THOUSAND DOLLARS ($4,500,000) on the Properties on or before the tenth
(10th) anniversary of the Effective Date; and |
(b) | subject to compliance with all applicable securities laws and the execution of
a Subscription Agreement and such other documentation as is reasonably required by the
Optionee, the Optionee will issue to Optionors five million (5,000,000) Shares (after
the Optionee effects a “forward split” of 7.9 to 1 of its Common Stock). |
Forthwith upon Optionee performing the requirements of paragraphs 3.5(a) and
(b), an undivided additional twenty percent (20%) interest in and to the
Properties will vest in the Optionee.
3.6 | In order to keep the Option in good standing, the Optionee will make the following payments
to the Optionors, as follows: |
(a) | on or before 30 days after the
Effective Date, in cash
|
$50,000 | ||||
(b) | on or before the first anniversary of
the Effective Date, in cash
|
$100,000 | ||||
(c) | on or before the second anniversary of
the Effective Date, in cash
|
$200,000 | ||||
(d) | on or before the third anniversary of
the Effective Date, and annually thereafter
up to and including the tenth anniversary
of the Effective Date in gold contained in
gold dore (or equivalent in cash), which
payments are only payable if the Optionee
has successfully acquired the Mill and the
Mill operated during any part of the year
in which the payment is due.
|
100 xxxx ounces |
4. | EXPENDITURES |
4.1 | Optionors understand and confirm that the Expenditures in excess of the amounts required to
be spent within the periods referred to in each of paragraphs 3.3, 3.4(a) and 3.5(a), may be carried over and included in the aggregate
amount of Expenditures for the subsequent period. Optionors understand and confirm that
Expenditures may be incurred on the Properties by the Optionee or its successors or assigns. |
4.2 | Optionee will file assessment reports in a timely manner regarding all eligible Expenditures
incurred by Optionee in respect of the Properties. |
4.3 | As noted in Section 1.1(f), acquisition of Royalties shall be deemed an
Expenditure amount, and upon such acquisition, Optionee and/or Optionors agree that such
Royalty or Royalties, as the case may be, will be extinguished by making an appropriate legal
filing. |
|
5. | APPOINTMENT OF OPERATOR |
5.1 | Optionee will be the initial operator on the Properties (the “Operator”) and will be entitled
to continue to act as Operator until Optionee may resign as the Operator. Thereafter,
Optionors will be entitled to become the Operator. If Optionors decline to be the Operator or
resign as the Operator, the parties will appoint a new Operator. |
5.2 | The Operator will be entitled to a fee of ten percent (10%) of all Expenditures made or
incurred by it as Operator for management supervision and administrative services, and such
fee shall be included as an Expenditure for purposes of meeting the Expenditure requirements
set forth in Section 3 of this Agreement. |
5.3 | The Operator will have the sole and exclusive right and authority to manage and carry out all
Programs on the Properties and to incur the Expenditures required for that purpose. |
|
5.4 | In carrying out its duties, the Operator will: |
(a) | comply with the provisions of all agreements or instruments of title under
which the Properties are held, provided the Operator is informed, in writing, of such
agreements or instruments of title; |
||
(b) | pay all Expenditures properly incurred promptly as and when due; |
(c) | keep the Properties free of all liens and encumbrances (other than those, if
any, in effect on the Effective Date or the creation of which is permitted by this
Agreement) arising out of the carrying out of work on the Properties and, in the event
of any lien being filed as mentioned, proceed with diligence to contest or discharge
it; |
(d) | prosecute claims or, where a defence is available, defend litigation arising
out of the carrying out of any work on the Properties on or after the Effective Date,
provided that any party may join in the prosecution or defence at its own expense; |
(e) | perform assessment work or make payment in lieu thereof and pay the rentals,
taxes, or other payments and do all other things necessary to maintain the Properties
in good standing, including without limitation staking and restaking mining claims and
applying for licenses, leases, grants, concessions, permits, patents, and other rights
to and interests in the Properties; |
(f) | maintain accounts in accordance with principles generally accepted in the
mining industry in the United States; |
(g) | perform its duties and obligations in a sound and workmanlike manner, in
accordance with sound mining and engineering practices, and in compliance with all
applicable federal, provincial, state, territorial, and municipal laws, by-laws,
ordinances, rules and regulations, and this Agreement; |
(h) | regulate access to the Properties, subject only to the right of designates of
the parties authorized in writing to have access to the Properties at all reasonable
times at their own risk and expense for the purpose of inspecting work being done on
the Properties; |
(i) | employ and engage employees, agents, and independent contractors that it
considers necessary or advisable to carry out its duties and obligations and, in this
connection, to delegate any of its powers and rights to perform its duties and
obligations under this Agreement; |
(j) | permit the parties, at their own expense, to inspect, take abstracts from, or
audit any or all of the records and accounts related to the Properties and any work
done thereon during normal business hours; |
(k) | obtain and maintain, or cause any contractor engaged under this Agreement to
obtain and maintain, adequate insurance during any period in which active work is
carried out under this Agreement; |
(l) | arrange for and maintain workers’ compensation or equivalent coverage for all
eligible employees engaged by the Operator in accordance with local statutory
requirements; and |
(m) | transact, undertake, and perform all transactions, contracts, employments,
purchases, operations, negotiations with third parties, and any other matters
undertaken on behalf of the parties in the Operator’s name. |
5.5 | The Operator may resign as Operator on at least thirty (30) days’ notice to all parties. |
5.6 | Within sixty (60) days following the end of each calendar year or, at the Operator’s sole
discretion, within sixty (60) days following the completion of any Program on the Properties,
the Operator will deliver to the parties a statement showing in reasonable detail the
Expenditures incurred during the Program and the aggregate Expenditures incurred to the end of
the calendar year or such Program, as the case may be, and the parties to this Agreement will
have thirty (30) days from the time of receipt of such statement to question the accuracy
thereof in writing, failing which such statement will be deemed to be correct and
unimpeachable thereafter. |
5.7 | If a statement delivered pursuant to section 5.6 is questioned by a party to this
Agreement: |
(a) | such party will have two (2) months from the time of delivery of the statement
to have such audited; |
(b) | the audited results will be final and determinative of the amount of
Expenditures incurred for the audited period; provided that, if such audit discloses a
deficiency in the amount of Expenditures required to be incurred to maintain the Option
in good standing, the party that is the Operator may pay to the non-Operator party the
amount of such deficiency within fifteen (15) days following receipt of notice of such
audited results, whereupon
such amount will be deemed to have been Expenditures incurred during the audited
period; and |
(c) | the costs of the audit will be borne by the party requesting the audit if the
Operator’s statement was accurate within five percent (5%) and will be borne by the
Operator if such statement was not accurate within five percent (5%). |
6. | EXERCISE OF OPTION AND FORMATION OF JOINT VENTURE |
6.1 | Once the Optionee has incurred and performed the requirements as set out in section 3.3, the Optionee will be deemed to have exercised the 40% Option and to have
earned an undivided forty percent (40%) interest in and to the Properties. |
6.2 | Once the Optionee has incurred and performed the requirements as set out in section 3.4, the Optionee will be deemed to have exercised the 60% Option and to have
earned an undivided sixty percent (60%) interest in and to the Properties. |
6.3 | Once the Optionee has incurred and performed the requirements as set out in section 3.5, the Optionee will be deemed to have exercised the 80% Option and to have
earned an undivided eighty percent (80%) interest in and to the Properties. |
6.4 | The decision to proceed with the 40% Option, the 60% Option or the 80% Option will be made by
the independent directors of the Board of Directors of the Optionee. |
|
6.5 | In the event that the Optionee: |
(a) | exercises the 40% Option in accordance with the terms of this Agreement and
notifies Optionors in writing that it does not intend to exercise the 60% Option, or |
(b) | exercises the 60% Option in accordance with the terms of this Agreement and
notifies the Optionors in writing that it does not intend to exercise the 80% Option,
or |
||
(c) | exercises the 80% Option in accordance with the terms of this Agreement,
then Optionors and Optionee agree to associate on a joint venture basis for the further
exploration and development of the Properties and to contribute to all further costs
including exploration and development in accordance with their respective interests in the
Properties. |
6.6 | Upon an event specified in section 6.5, the parties further agree to negotiate in
good faith and enter into a joint venture agreement, which will include the following terms. |
(a) | A deemed initial expenditure by Optionee on the Properties representing its
percentage undivided interest in the Properties. |
||
(b) | The Optionee shall continue to be the Operator. |
(c) | A management committee (the “Management Committee”) will be formed and will be
composed as follows: |
(i) | if Optionee has exercised is 40% Option but not its 60% Option,
then Optionee shall have the right to appoint two (2) representatives, and the
Optionor shall have the right to appoint two (2) representatives; |
(ii) | if Optionee has exercised its 60% Option, then Optionee shall
have the right to appoint four (4) representatives, and the Optionor shall have
the right to appoint two (2) representatives; and |
(iii) | if Optionee has exercised its 80% Option, then Optionee shall
have the right to appoint six (6) representatives and the Optionor shall have
the right to appoint two (2) representatives. |
(d) | The Management Committee shall make all decisions in respect of exploration,
development and mining operations on the Properties, and shall decide every question
submitted to it by a vote with each party’s representatives collectively being entitled
to cast that number of votes which is equal to its party’s interest percentage in the
joint venture. Other than as is expressly set out herein to the contrary, the
Management Committee shall make decisions by simple majority. In the event of a tied
vote, the chairman shall have a casting vote in addition to the votes to which the
chairman is entitled to cast as the representative of a party. |
(e) | The representatives of the Optionors shall be the chairman and secretary,
respectively, of the Management Committee meeting. |
(f) | A standard formula for dilution of a non-contributing party’s interest. In the
event any party’s interest is reduced to five percent (5%) or less, such party shall
then be deemed to have assigned and conveyed its interest to the other party, and shall
be entitled to receive as its sole remuneration and benefit in consideration of that
assignment and conveyance, a one percent (1%) net smelter returns royalty, under a
standard definition of net smelter returns. |
(g) | A right of first offer regarding the sale or assignment of a party’s interest
in the Property to a non-affiliate. |
(h) | A protocol or set of procedures to avoid conflict of interest and ensure that
Xxxx Xxxxxx’ role as an officer and fiduciary of the Optionee does not conflict with
his interest and participation as one of the Optionors. |
(i) | Ores from the Gold King, Mogul and Mayflower mines will have first priority for
milling at the Mill, and such milling work and services shall be billed at actual
direct cost without markup or overhead charge of any kind. |
6.7 | On formation of a joint venture between the parties, Optionee will be Operator of the
Properties. |
6.8 | Optionors, in addition to, or in lieu of, contributing funds in accordance with their
respective interests in the Properties, may elect any one or a combination of the following: |
(a) | Assignment of Royalties and Income. Upon written notice to Optionee, Optionors
may require Optionee to advance and fund Optionor’s share of contribution with respect
to Optionor’s interests in the Properties, and as sole consideration for such
advancement funds, Optionor will assign to Optionee any and all of Optionor’s
respective interest in future royalties and income received on the Properties until
such time as the funds advanced by Optionee have be reimbursed in full, plus interest
at 10% per annum on the outstanding balance of any advanced funds. |
(b) | Application of Rents from Building and Equipment Leasing and/or Rental. It is
envisioned that Optionee may need to use, rent, or lease various supplies, mining
related
buildings or equipment from Optioners in connection with its Expenditure activities
pursuant to this Agreement. To the extent Optionee uses, rents or leases such
supplies, buildings and equipment and they are not already located on or form part
of the Properties, Optionee may elect to pay Optionor’s share of contribution with
respect to Optionor’s interests in the Properties by setoff of any amounts due under
such lease and/or rental arrangements. |
7. | RIGHT OF ENTRY |
7.1 | During the currency of this Agreement, Optionee and its respective employees, agents and
independent contractors, will have the sole and exclusive right and option to: |
(a) | enter upon the Properties; |
||
(b) | have exclusive and quiet possession thereof; |
(c) | do such prospecting, exploration, development or other mining work thereon and
thereunder as Optionee in its sole discretion may consider advisable; |
(d) | bring and erect upon the Properties such facilities as Optionee may consider
advisable; and |
(e) | remove from the Properties and dispose of, for its own account, ore or mineral
products for the purpose of bulk sampling, pilot plant or test operations. |
8. | ANCILLARY AGREEMENTS |
8.1 | Upon execution of this Agreement, Optionee shall execute and enter into an employment
agreement with Xxxxxx in the form attached hereto as Exhibit 8.1. |
8.2
(a) | If the Optionee determines to proceed with the preparation and filing with the
Securities and Exchange Commission (the “SEC”) of a registration statement (the
“Registration Statement”) relating to an offering for its own account or the account of
others under the United States Securities Act of 1933, as amended (the “1933 Act”) of
any of its common shares, other than on Form S-4 or Form S-8 (each as promulgated under
the 0000 Xxx) or its then equivalents relating to equity securities issuable in
connection with stock option or other employee benefit plans, the Optionee shall send
to the Optionors written notice of such determination and, if within ten (10) days
after receipt of such notice, the Optionors shall so request in writing, the Optionee
will cause the registration under the 1933 Act of all unregistered common shares
beneficially owned by the Optionors (the “Registrable Securities”), provided that if at
any time after giving written notice of its intention to register any of its common
shares and prior to the effective date of the registration statement filed in
connection with such registration, the Optionee shall determine for any reason not to
register or to delay registration of such common shares, the Optionee may, at its
election, give written notice of such determination to the Optionors and, thereupon,
(i) in the case of a determination not to register, shall be relieved of its obligation
to register the Registrable Securities in connection with such registration, and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering the Registrable Securities for the same period as the delay in registering
such other common shares. The Optionee shall include in such registration statement
all or any part of the Registrable Securities provided however that the Optionee |
shall not be required to register any of the Registrable Shares that are eligible
for sale pursuant to Rule 144(k) of the 1933 Act. Notwithstanding any other
provision in this Agreement, if the Optionee receives a comment from the SEC which
effectively results in the Optionee having to reduce the number of common shares
being registered on such Registration Statement, then the Optionee may, in its sole
discretion, reduce on a pro rata basis the number of Registrable Securities to be
included in such Registration Statement. |
(b) | Optionee will file a registration statement, or will amend an existing
registration statement, with the SEC with respect to the Registrable Securities if the
Optionee receives a written request from the Optionor at any time up to six years after
the date of this Agreement, provided that initial request shall be for a minimum of
500,000 Shares. The Optionee will, as soon as practicable, use its diligent efforts to
effect such registration as would permit the sale of all or such portion of such
Registrable Securities as are specified in such request. No additional request may be
made within six months of the expiration date of effectiveness of the registration
statement relating to the initial registration request. The Optionee will not be
obligated to take any action pursuant to this sub-section (b): |
(i) | after the Optionee has effected three such registrations
pursuant to this sub-section (b) and such registrations have been
declared or ordered effective; |
(ii) | during the period starting with the date 60 days prior to the
Optionee’s good faith estimate of the date of filing of, and ending on a date
180 days after the effective date of, a registration for a registered public
offering involving an underwriting; provided the Optionee is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective; or |
(iii) | with respect to Registrable Shares that are eligible for sale
pursuant to Rule 144(k) of the 1933 Act. |
8.3 | In connection with each Registration Statement described in Section 8.2 hereof,
the Optionors will furnish to the Optionee in writing such information and representation
letters with respect to itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable state securities laws.
The Optionee may require the Optionors to furnish to the Optionee a certified statement as to
the number of shares of common stock of the Optionee beneficially owned by the Optionors and
the name of the natural person thereof that has voting and dispositive control over the
Registrable Securities. |
8.4 | All fees and expenses incident to the performance of or compliance with the filing of the
Registration Statement shall be borne by the Optionee whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to filings required to
be made with the OTC Bulletin Board or other exchange or quotation service on which the common
stock of the Optionee is then listed for trading, and (B) in compliance with applicable state
securities or Blue Sky Laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Optionee, (v) 1933 Act
liability insurance, if the Optionee so desires such insurance, and (vi) fees and expenses of
all other persons retained by the Optionee in connection with the filing of the Registration
Statement. In addition, the Optionee shall be |
responsible for all of its internal expenses incurred in connection with the filing of the
Registration Statement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange, if applicable. In no event shall the Optionee be
responsible for any broker or similar commissions or, except to the extent provided for
hereunder, any legal fees or other costs of the Optionors. |
8.5 | The Optionee shall, notwithstanding any termination of this Agreement, indemnify and hold
harmless the Optionors, and if applicable, its officers, directors, agents and employees, and
each person who controls the Optionors (within the meaning of Section 15 of the 1933 Act or
Section 20 of the United States Securities Exchange Act of 1934 (the “1934 Act”)) and the
officers, directors, agents and employees of each such controlling person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except to the extent, but only to
the extent, that (i) such untrue statements or omissions are based solely upon information
regarding the Options furnished in writing to the Optionee by the Optionors expressly for use
therein, or to the extent that such information relates to the Optionors or the Optionors’
proposed method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by the Optionors expressly for use in the Registration Statement, or in
any amendment or supplement thereto or (ii) the use by the Optionors of an outdated or
defective Registration Statement after the Optionee has notified the Optionors in writing that
the Registration Statement is outdated or defective. |
8.6 | The Optionors shall indemnify and hold harmless the Optionee, its directors, officers, agents
and employees, each person who controls the Optionee (within the meaning of Section 15 of the
1933 Act and Section 20 of the 1934 Act), and the directors, officers, agents or employees of
such controlling persons, to the fullest extent permitted by applicable law, from and against
all Losses, as incurred, to the extent arising out of or based solely upon: (x) the Optionors’
failure to comply with the prospectus delivery requirements of the 1933 Act or (y) any untrue
or alleged untrue statement of a material fact contained in any Registration Statement, or in
any amendment or supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading (i) to the extent, but only to the
extent, that such untrue statement or omission is contained in any information so furnished in
writing by the Optionors to the Optionee specifically for inclusion in the Registration
Statement or (ii) to the extent that such untrue statements or omissions are based solely upon
information regarding the Optionors furnished in writing to the Optionee by the Optionors
expressly for use therein, or (iii) to the extent that such information relates to the
Optionors or the Optionors’ proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by the Optionors expressly for use in the
Registration Statement or in any amendment or supplement thereto or (z) the use by the
Optionors of an outdated or defective Registration Statement after the Optionee has notified
the Optionors in writing that the Registration Statement is outdated or defective. In no
event shall the liability of the Optionors hereunder be greater in amount than the dollar
amount of the net proceeds received by the Optionors upon the sale of the Registrable
Securities giving rise to such indemnification obligation. |
8.7 | If a claim for indemnification hereunder is unavailable to either the Optionee or the
Optionors (in each case, an “Indemnified Party or Indemnified Parties”, as applicable) (by
reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any proceeding to the
extent such party would have been indemnified for such fees or expenses if the indemnification
provided for in this section was available to such party in accordance with its terms. The
parties hereto agree that it would not be just and equitable if contribution pursuant to this
section were determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to in the immediately preceding
paragraph. |
9. | TERMINATION |
9.1 | In the event of default in the performance of the requirements of article 3, then,
subject to the provisions of article 11 of this Agreement, the Option and this
Agreement will terminate. |
9.2 | Notwithstanding any other provision of this Agreement, Optionee will have the right at any
time on or before eighteen (18) months after the Effective Date to terminate the Option and
this Agreement by giving ten (10) days written notice to the Optionors. If the Optionee gives
such notice of termination, then the Option and this Agreement will terminate, Optionee will,
subject to the provisions of section 11.1, have no further rights or interest in
the Properties and no further obligations or liabilities to Optionors (including in respect of
any cash or dore payments as contemplated in section 3.6 and any Share issuances or
Expenditures as contemplated in sections 3.3, 3.4 and 3.5
which have not been made) and Optionors will forthwith return to the Optionee any Shares
issued under the terms of this Agreement (except for shares of common stock which may have
been acquired or issued to Xx. Xxxxxx pursuant to his role as an employee with the Optionee)
and comply with the terms of section 11.2. |
|
10. | COVENANTS OF OPTIONORS |
|
10.1 | During the currency of this Agreement and the Option, Optionors will: |
(a) | do all things required under the Underlying Agreements to maintain the Royalty
in good standing and perform and fulfill all its obligations and covenants under the
Underlying Agreements; |
(b) | not do any act or thing which would or might in any way adversely affect the
rights of Optionee hereunder to earn up to an undivided eighty percent (80%) interest
in the Properties; |
(c) | promptly make available to Optionee and its representatives all records and
files in the possession of Optionors relating to the Properties, and permit Optionee
and its representatives at its own expense to take abstracts therefrom and make copies
thereof; and |
(d) | promptly provide Optionee with any and all notices and correspondence from
government agencies in respect of the Properties. |
11. | OBLIGATIONS OF PARTIES AFTER TERMINATION |
|
11.1 | In the event of the termination of the Option, Optionee will: |
(a) | leave the Properties in good standing for a minimum of six (6) months under all
applicable legislation, free and clear of all liens, charges and encumbrances arising
from this Agreement or their operations hereunder and in a safe and orderly condition; |
(b) | deliver to Optionors within sixty (60) days of completion of any Program on the
Properties by Optionee a comprehensive report on all work carried out by Optionee on
the Properties (limited to factual matter only) together with copies of all maps, drill
logs, assay results and other technical data compiled by Optionee with respect to the
Properties; and |
(c) | have the right, and obligation on demand made by Optionors, to remove from the
Properties within six (6) months of the effective date of termination all facilities
erected, installed or brought upon the Properties by or at the instance of Optionee
provided that at the option of Optionors, any or all of facilities not so removed will
become the property of Optionors. |
11.2 | In the event of the termination of the Option, Optionors will: |
(a) | if termination occurs at any time on or before eighteen (18) months from the
Effective Date pursuant to Section 9.2, forthwith return any Shares of the
Optionee issued or caused to be transferred to the Optionors pursuant to this Agreement
to the Optionee; |
(b) | cause Xxxxxx and any other directors appointed by Xxxxxx to resign forthwith
from the Board of Directors of Optionee. |
12. | TRANSFER OF TITLE |
12.1 | Upon Optionee earning the 40% Option, the 60% Option or the 80% Option and at the request of
Optionee, Optionors will deliver to Optionee a duly executed transfer in registrable form
transferring the applicable undivided percentage right, title and interest in and to the
Properties in favour of Optionee, which Optionee will be entitled to register against title to
the Properties. Notwithstanding the foregoing, transfer of title, Optionee and Optionors
shall be subject to the limitations specified in Note #2 to Schedule A regarding the ban on
either party conducting mining operations separate from the joint venture specified in Section
6.5 of this Agreement, provided that any custom milling from the Mill will be
excluded from this limitation. |
|
13. | REGISTRATION OF AGREEMENT |
13.1 | Notwithstanding section 12.1 of this Agreement, Optionee or Optionors will have
the right at any time to register this Agreement or notice thereof against title to the
Properties. |
14. | AREA OF MUTUAL INTEREST |
14.1 | An area of mutual interest located within two miles of the existing exterior boundaries of
the Properties is hereby established, (which area is hereinafter called the “AMI”). By signing
this Agreement, Optionee and Optionors hereby covenant and agree each with the other that any
property interest or mineral rights or Properties that may be acquired by either of them after
the Effective Date located wholly or partially within the AMI excluding the Mill, will become
a part of the Properties and be subject to this Agreement if: (a) the principal mineralization
is gold, silver, lead or zinc, and (b) the Optionors, acting in good faith, believe that the
property or interest has a reasonable potential for economic mineralization. If either
Optionee or Optionors acquires an interest as aforesaid, it will notify the other in writing
of the extent of the interest acquired. The notified party will have thirty (30) days
following receipt by it of the foregoing notification to elect in writing to have the property
interest or mineral rights or Properties included within the terms of this Agreement. If the
notified party does not so elect in writing within the thirty (30) day period, the acquiring
party will be entitled to acquire the property interest or mineral rights or Properties for
its own account and such interest will not be part of the Properties and will not be subject
to the terms of this Agreement. |
14.2 | An area of potential interest located within 10 miles, but more than two miles, of the
existing exterior boundaries of the Properties is hereby established, (which area is
hereinafter called the “API”). By signing this Agreement, Optionors hereby covenant and agree
that any property interest excluding the Mill or mineral rights that Optionors’ may locate or
acquire after the Effective Date located wholly or partially within the API will be offered to
Optionee if (i) the principal mineralization is gold, silver lead or zinc, and (ii) in the
good faith estimate of Optionors’, they believe that the property or interest has a reasonable
potential for economic mineralization. If Optionors locate or acquire an interest as
aforesaid, it will notify the Optionee in writing regarding the existence and nature of
property or interest. Optionee will have thirty (30) days following receipt by it of the
foregoing notification to elect in writing to have the property interest or mineral rights
included within the terms of this Agreement. If Optionee does not so elect in writing within
the thirty (30) day period, Optionor will be entitled to acquire or keep the property interest
or mineral rights for its own account and such interest will not be part of the Properties and
will not be subject to the terms of this Agreement. |
|
15. | DISPOSITION OF PROPERTIES |
15.1 | Optionee may, at any time after exercising the Option pursuant to article 6
hereof, sell, transfer or otherwise dispose of all or any portion of its interest in and to
the Properties and this Agreement provided that, at any time, Optionee has first obtained the
consent in writing of Optionors, such consent not to be unreasonably withheld and further
provided that, at any time during the currency of this Agreement, any purchaser, grantee or
transferee of any such interest will have first delivered to Optionors its agreement related
to this Agreement and to the Properties, containing: |
(a) | a covenant with Optionors by such transferee to perform all the obligations of
Optionee to be performed under this Agreement in respect of the interest to be acquired
by it from Optionee, and |
(b) | a provision subjecting any further sale, transfer or other disposition of such
interest in the Properties and this Agreement or any portion thereof to the
restrictions contained in this section 15.1. |
15.2 | The provisions of section 15.1 of this Agreement will not prevent Optionee from
entering into an amalgamation or corporate reorganization, which will have the effect in law
of the amalgamated or surviving company possessing all the property, rights and interests and
being subject to all the debts, liabilities and obligations of each amalgamating or
predecessor company. |
|
16. | CONFIDENTIAL NATURE OF INFORMATION |
16.1 | The parties agree that all information obtained from the work carried out hereunder and under
the operation of this Agreement will be the exclusive property of the parties and will not be
used other than for the activities contemplated hereunder except as required by law or by the
rules and regulations of any regulatory authority having jurisdiction, or with the written
consent of both parties, such consent not to be unreasonably withheld. Notwithstanding the
foregoing, it is understood and agreed that a party will not be liable to the other party for
the fraudulent or negligent disclosure of information by any of its employees, servants or
agents, provided that such party has taken reasonable steps to ensure the preservation of the
confidential nature of such information. |
|
17. | FURTHER ASSURANCES |
17.1 | The parties hereto agree that they and each of them will execute all documents and do all
acts and things within their respective powers to carry out and implement the provisions or
intent of this Agreement. |
|
18. | NOTICE |
18.1 | Any notice, direction or other communication required or permitted to be given under this
Agreement will be in writing and will be given by personal delivery or by prepaid registered
or certified mail or by facsimile or other form of telecommunication, in each case addressed
as follows: |
(a) if to Optionee:
Garpa Resources, Inc.
000 Xxxxxxx Xxxxxx Xxxx #000
Xxxxxxxxx, XX X0X 0X0
000 Xxxxxxx Xxxxxx Xxxx #000
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxx Xxxxxxxxxxxx
Fax: c/o 000.000.0000
(b) if to Optionors:
Xxxx Xxxxxx or San Xxxx Corp.
000 Xxxxx Xxxxxx
XX Xxxxxx X
Xxxxxx Xxxxx, XX 00000
000 Xxxxx Xxxxxx
XX Xxxxxx X
Xxxxxx Xxxxx, XX 00000
Fax: 000.000.0000
18.2 | Any notice, direction or other communication aforesaid will, if delivered, be deemed to have
been given and received on the day it was delivered, and if mailed, be deemed to have been
given and received on the third business day following the day of mailing, except in the event
of disruption of the postal services in which event notice will be deemed to be received only
when actually
received, and if sent by facsimile or other form of telecommunication, will be deemed to
have been given or received on the next business day following the date on which it was so
sent. |
18.3 | Any party may at any time give to the other notice in writing of any change of address of the
party giving such notice and from and after the giving of such notice, the address or
addresses therein specified will be deemed to be the address of such party for the purpose of
giving notice hereunder. |
|
19. | HEADINGS |
19.1 | The headings to the respective sections herein will not be deemed part of this Agreement but
will be regarded as having been used for convenience only. |
|
20. | DEFAULT |
20.1 | In the event that Optionee is in default of any of its obligations hereunder, Optionors will
give notice specifying the nature of the default. If Optionee does not take any reasonable
steps to cure such default within thirty (30) days from date of Optionee’s receipt of such
notice, this Agreement will terminate and be of no force and effect, except that Optionee will
remain responsible for any cash payment that is due to Optionors within the thirty (30) day
period following the date of such notice. |
|
21. | PAYMENT |
21.1 | All references to monies hereunder will be in United States funds except where otherwise
designated. All payments to be made to any party hereunder will be mailed or delivered to such
party at its address for notice purposes as provided herein, or for the account of such party
at such bank or banks in the United States as such party may designate from time to time by
written notice. Such bank or banks will be deemed the agent of the designating party for the
purpose of receiving, collecting and receiving such payment. |
|
22. | ENUREMENT |
22.1 | This Agreement will enure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. |
|
23. | TERMS |
23.1 | The terms and provisions of this Agreement will be interpreted in accordance with the laws of
Colorado. |
|
24. | FORCE MAJEURE |
24.1 | No party will be liable for its failure to perform any of its obligations under this
Agreement due to a cause beyond its control (except those caused by its own lack of funds)
including, but not limited to acts of God, fire, flood, explosion, strikes, lockouts or other
industrial disturbances, laws, rules and regulations or orders of any duly constituted
governmental authority or non-availability of materials, equipment, manpower or transportation
(each an “Intervening Event”). |
24.2 | All time limits imposed by this Agreement will be extended by a period equivalent to the
period of delay resulting from an Intervening Event described in section 24.1. |
24.3 | A party relying on the provisions of section 24.1 will take all reasonable steps
to eliminate an Intervening Event and, if possible, will perform its obligations under this
Agreement as far as practical, but nothing herein will require such party to settle or adjust
any labour dispute or to question or to test the validity of any law, rule, regulation or
order of any duly constituted governmental authority or to complete its obligations under this
Agreement if an Intervening Event renders completion impossible. |
|
25. | ENTIRE AGREEMENT |
25.1 | This Agreement constitutes the entire agreement between the parties and replaces and
supersedes all prior agreements, memoranda, correspondence, communications, negotiations and
representations, whether verbal or written, express or implied, statutory or otherwise between
the parties with respect to the subject matter herein. |
|
26. | OPTION ONLY |
26.1 | This Agreement provides for an option only and, except for the cash or other payments set out
in paragraph 3.6(a) hereof, nothing herein contained will be construed as
obligating Optionee to do any acts or make any payment hereunder and any act or acts or
payment or payments as will be made hereunder will not be construed as obligating Optionee to
do any further act or make any further payment. |
26.2 | The decision to proceed with the 40% Option, the 60% Option or the 80% Option will be made by
the independent directors of the Board of Directors of the Optionee. |
|
27. | TIME OF ESSENCE |
|
27.1 | Time will be of the essence in this Agreement. |
|
28. | ENFORCEMENT OF AGREEMENT |
28.1 | The covenants, promises, terms and conditions contained herein will be binding upon the
parties jointly and severally and may be enforced by each as against each other inter se. |
THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK
29. | COUNTERPARTS |
29.1 | This Agreement may be executed in several counterparts, each of which will be deemed to be an
original and all of which will together constitute one and the same instrument. |
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first
above written.
SAN XXXX CORP.
Per:
|
/s/ XXXX XXXXXX
|
/s/ XXXX XXXXXX
|
GARPA RESOURCES, INC.
Per:
|
/s/ XXXX XXXXXXXXXXXX
|