OPTION AGREEMENT
----------------
BETWEEN:
FRONTEER DEVELOPMENT GROUP INC.
AND
NORTHWESTERN MINERAL VENTURES INC.
DATED THE 26TH DAY OF SEPTEMBER, 2003
I N D E X
---------
ARTICLE 1 DEFINITIONS, INTERPRETATION AND SCHEDULES
1.01 Definitions
1.02 Interpretation
1.03 Currency
1.04 Time of Essence
1.05 Modification
1.06 Waiver
1.07 Interpretation and Severability
1.08 Governing Law
1.09 Schedules
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties of the Optionor
2.02 Representations and Warranties of the Optionee
2.03 Survival of Representations and Warranties
ARTICLE 3 OPTION
3.01 Grant of Option
ARTICLE 4 EXPENDITURES AND PROGRAMS
4.01 Optionee Vesting Obligations
4.02 Exploration Expenditures
4.03 Cash Payments
4.04 Programs
4.05 Cash Calls
4.06 Monthly Statements
ARTICLE 5 VESTING OF INTEREST AND FORMATION OF JOINT VENTURE
5.01 Exercise of Option
5.02 Formation of Joint Venture
5.03 Purchase of Underlying Royalty
-ii-
ARTICLE 6 OPERATOR AND PERFORMANCE OF WORK
6.01 Operator
6.02 Management Fee
6.03 Standard of Care
6.04 Access to Property and Data
6.05 Abandonment of Property
ARTICLE 7 TERMINATION
7.01 Failure to Fulfil Optionee Vesting Obligations
7.02 Formation of Joint Venture
ARTICLE 8 TRANSFER OF INTEREST
8.01 General
8.02 Limitations on Free Transferability
8.03 Pre-Emptive Right
8.04 Exception to Pre-Emptive Right
ARTICLE 9 AREA OF INTEREST AND AFTER ACQUIRED PROPERTY
9.01 Notice of Acquisition
9.02 Exercise of Option
9.03 Failure to Exercise Option
9.04 Reimbursement of Costs of Acquisition
ARTICLE 10 CONFIDENTIALITY
10.01 General
10.02 Exceptions
ARTICLE 11 GENERAL PROVISIONS
11.01 Notice
11.02 Force Majeure
11.03 Further Assurances
-iii-
11.04 Enurement
11.05 Other Business Opportunities
11.06 No Partnership
11.07 Counterparts
OPTION AGREEMENT
THIS AGREEMENT made as of the 26th day of September, 2003.
B E T W E E N:
FRONTEER DEVELOPMENT GROUP INC., a corporation
incorporated under the laws of the Province of Ontario,
(hereinafter called the "Optionor")
- and -
NORTHWESTERN MINERAL VENTURES INC., a corporation
Incorporated under the laws of the Province of Ontario,
(hereinafter called the "Optionee")
THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants, conditions and agreements herein contained, the parties hereto agree
as follows:
1 - 1
ARTICLE 1
DEFINITIONS, INTERPRETATION AND SCHEDULES
1.01 DEFINITIONS
Where used or referred to in this Agreement:
"AFFILIATE" has the meaning assigned to it in the Canada Business Corporations
Act, as amended;
"AFTER ACQUIRED PROPERTY" means any and all mineral interests staked, located,
granted or acquired by or on behalf of any party during the currency of this
Agreement, which are located in whole or in part in the Area of Interest and
which are made part of the Property pursuant to Article 9 hereof,
"AREA OF INTEREST" means Canada, excluding the Central Mineral Belt of Labrador;
"CASH PAYMENTS" has the meaning ascribed thereto in Section 4.01(b);
"EFFECTIVE DATE" means the date first written above;
"EXPENDITURES" means all direct and indirect expenses of or incidental to
Operations, together with any and all costs, fees and expenses which may be paid
to obtain feasibility, engineering or other studies or reports on or with
respect to the Property;
"EXPLORATION" means all activities directed toward ascertaining the existence,
location, quantity, quality or commercial value of deposits of ore, minerals and
mineral resources. Exploration may include all activities undertaken through to
the completion of a feasibility study, if any, but shall not include
construction of milling or processing facilities or commencement of commercial
mining operations on the Property;
"INTEREST" means a party's interest in the Property, as provided in this
Agreement;
"IOCG DEPOSIT" means an Olympic Dam type iron oxide copper gold deposit;
"JOINT VENTURE" means the joint venture which may be formed by the parties
pursuant to Article 5;
"NON-OPERATOR" means the party to this Agreement who is not at the time the
Operator;
"OPERATIONS" includes any and every kind of work and activity directed toward
ascertaining the existence, location, quantity, quality or commercial value of
minerals, which the Operator in its sole discretion elects to do or to have done
on or in respect of the Property and all Expenditures in respect of or
incidental to such work;
1 - 2
"OPERATOR" has the meaning ascribed thereto in Section 6.01 hereof;
"OPTION" has the meaning ascribed thereto in Section 3.01 hereof;
"OPTIONEE VESTING OBLIGATIONS" means the Expenditures and Cash Payments referred
to in Sections 4.02 and 4.03;
"XXXXXX DODGE AGREEMENT" means the Exploration Option Agreement made as of the
4th day of October, 2002 between the Optionor and Xxxxxx Dodge Corporation of
Canada, Limited, a copy of which is attached hereto as Schedule B;
"PROGRAM" means a description in reasonable detail of the scope, direction and
nature of the Operations to be conducted and objectives to be accomplished by
the Operator for a year or any other reasonable period;
"PROPERTY" means the claims in the Bear Province of the Northwest Territories as
set out in Schedule "A" hereto;
"TRANSFER" means sell, grant, assign, encumber, pledge or otherwise commit or
dispose of;
"UNDERLYING ROYALTY" means the Net Smelter Returns Royalty granted to Xxxxxx
Dodge Corporation of Canada, Limited pursuant to the Xxxxxx Dodge Agreement.
1.02 INTERPRETATION
For all purposes of this Option Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) "this Agreement" means this Option Agreement as it may from time
to time be supplemented or amended by one or more agreements
entered into pursuant to the applicable provisions hereof;
(b) all references in this Agreement to designated "Articles",
"Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Agreement;
(c) 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;
(d) the headings of this Agreement are for convenience only and do
not form a part of
1 - 3
this Agreement nor are they intended to interpret, define or
limit the scope, extent or intent of this Agreement or any
provisions hereof;
(e) the words "including", when following any general statement, term
or matter, shall not be construed to limit such general
statement, term or matter to the specific items or matters set
forth immediately following such word or to similar items or
matters, whether or not non-limiting language (such as "without
limitation" or "but not limited to" or words of a similar import)
is used with reference thereof but rather shall be deemed to
refer to all other items or matters that could reasonably fall
within the broadest possible scope of such general statement,
term or matter;
(f) words importing the masculine gender include the feminine or
neuter gender and words in the singular include the plural, and
vice versa.
1.03 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in lawful money of Canada.
1.04 TIME OF ESSENCE
Time is of the essence of this Agreement.
1.05 MODIFICATION
No modification of this Agreement shall be valid unless made in writing
and duly executed by the parties.
1.06 WAIVER
The failure of a party to insist on the strict performance of any
provision of this Agreement or to exercise any right, power or remedy upon a
breach hereof shall not constitute a waiver of any provision of this Agreement
or limit that party's right thereafter to enforce any provision or exercise any
right.
1.07 INTERPRETATION AND SEVERABILITY
In the event that any condition, covenant or other provision of this
Agreement is held to be invalid or void by any court of competent jurisdiction,
the same shall be deemed severable from the remainder of this Agreement and
shall in no way affect any other condition, covenant or other provision of this
Agreement. If such condition, covenant or other provision shall be deemed
invalid due to its scope or breadth, such condition, covenant or other provision
shall be deemed valid to the
1 - 4
extent of the scope or breadth permitted by law.
1.08 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of Ontario.
1.09 SCHEDULES
The following are the schedules incorporated in this Agreement by
reference and deemed to be a part hereof:
Schedule "A" - Properties
Schedule "B" - Xxxxxx Dodge Agreement
2 - 1
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.01 COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE OPTIONOR
The Optionor covenants, represents and warrants to the Optionee as
follows:
(a) that the Optionor has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
other actions required to authorize it to enter into and perform
this Agreement have been properly taken;
(b) that the Optionor will not breach any other agreement or
arrangement by entering into or performing this Agreement;
(c) that this Agreement has been duly executed and delivered by the
Optionor and is valid and binding upon it in accordance with its
terms;
(d) that no consent or approval of any third party or governmental
agency is required for the execution, delivery or performance of
this Agreement by the Optionor or the transfer or acquisition of
any interest in the Property;
(e) the Optionor has not entered into and there are not any
agreements or options to grant or convey any interest in the
Property or to pay any royalties with respect to the Property
other than the Underlying Royalty as provided in the Xxxxxx Dodge
Agreement;
(f) to the best of its knowledge and belief, the claims comprised in
the Property have been duly and validly staked, located and
recorded pursuant to all applicable laws and regulations in the
Northwest Territories and are in good standing and no person has
protested and to the best of the Optionor's knowledge there is no
basis for protesting the recording of any such claims;
(g) to the best of its knowledge and belief, there are not any suits,
actions, prosecutions, investigations or proceedings, actual,
pending or threatened, against or affecting the Optionor or that
relates to or has an adverse effect on the Property;
(h) to the best of its knowledge and belief, all taxes, rates or
other levies of every nature and kind heretofore levied against
the Property have been fully paid and satisfied;
(i) to the best of its knowledge and belief, there has been no
material spill, discharge, leak, emission, ejection, escape,
dumping, or any release or threatened release of any kind, of any
toxic or hazardous substance or waste (as defined by any
applicable law) from, on, in or under the Property or into the
environment, except releases
2 - 2
permitted or otherwise authorized by such law;
(j) to the best of its knowledge and belief, no toxic or hazardous
substance or waste has been disposed of or is located on the
Property as a result of activities of the Optionor or its
predecessors in interest;
(k) to the best of its knowledge and belief, no toxic or hazardous
substance or waste has been treated on or is now stored on the
Property;
(l) to the best of its knowledge and belief, there are no pending or
ongoing actions taken by or on behalf of any native persons
pursuant to the assertion of any land claims with respect to
lands included in the Property; and
(m) the Xxxxxx Dodge Agreement has not been amended and represents
the entire agreement pertaining to the Property; the Xxxxxx Dodge
Agreement is a legal, valid, binding and enforceable agreement
and there has been no act or omission and there is no state of
acts existing which constitutes, or after notice or lapse of time
or both would constitute a breach or default thereunder.
The covenants, representations and warranties contained in this Section 2.01 are
provided for the exclusive benefit of the Optionee and a breach of any one or
more of them may be waived by the Optionee in writing in whole or in part at any
time without prejudice to its rights in respect of any other breach of the same
or any other representation or warranty.
2.02 COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
The Optionee covenants, represents and warrants to the Optionor as
follows:
(a) that the Optionee has the capacity to enter into and perform this
Agreement and all transactions contemplated herein and that all
other actions required to authorize it to enter into and perform
this Agreement have been properly taken;
(b) that the Optionee will not breach any other agreement or
arrangement by entering into or performing this Agreement;
(c) that this Agreement has been duly executed and delivered by the
Optionee and is valid and binding upon it in accordance with its
terms.
The covenants, representations and warranties contained in this Section 2.02 are
provided for the exclusive benefit of the Optionor and a breach of any one or
more of them may be waived by the Optionor in whole or in part at any time
without prejudice to its rights in respect of any other breach of the same or
any other covenant, representation or warranty.
2 - 3
2.03 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties contained in this Article 2 will not
merge in the Joint Venture Agreement and shall survive the execution and
delivery of the Joint Venture Agreement and shall continue in full force and
effect.
3 - 1
ARTICLE 3
OPTION
3.01 GRANT OF OPTION
The Optionor hereby grants to the Optionee the sole and exclusive right
and option (the "Option"), exercisable in the manner described herein, to
acquire a 50%undivided interest in the Property, free and clear of all liens,
charges, encumbrances, security interests and adverse claims other than those
arising under the Xxxxxx Dodge Agreement.
4 - 1
ARTICLE 4
EXPENDITURES AND PROGRAMS
4.01 OPTIONEE VESTING OBLIGATIONS
In order to exercise the Option, the Optionee must:
(a) incur the Expenditures referred to in Section 4.02; and
(b) make the cash payments referred to in Section 4.03 (the "Cash
Payments").
The Optionee has the right, but not the obligation, to make the foregoing Cash
Payments and incur the Expenditures.
4.02 EXPLORATION EXPENDITURES
The Optionee shall incur aggregate Expenditures of not less than
$5,000,000, as follows:
Date Amount
---- ------
On or before the first anniversary of the Effective Date $500,000
On or before the second anniversary of the Effective Date $700,000
On or before the third anniversary of the Effective Date $800,000
On or before the fourth anniversary of the Effective Date $1,000,000
On or before the fifth anniversary of the Effective Date $2,000,000
4.03 CASH PAYMENTS
The Optionee shall make Cash Payments of $270,000 to the Optionor as
follows:
Date Cash Payment
---- ------------
Effective Date $20,000
1st Anniversary of the Effective Date $30,000
2nd Anniversary of the Effective Date $40,000
3rd Anniversary of the Effective Date $50,000
4th Anniversary of the Effective Date $60,000
5th Anniversary of the Effective Date $70,000
The Optionee may accelerate any or all of the foregoing Cash Payments.
4 - 2
4.04 PROGRAMS
On or before January 31st in each year, the Optionor, as Operator,
shall prepare a Program for that calendar year and submit it to the Optionee for
approval. If the Optionee fails to approve the Program within 30 days of receipt
thereof, it shall have a further 30 day period in which to prepare and submit a
Program to the Optionor. Any Program prepared by either party shall be of an
amount not less than the minimum Expenditures required in Section 4.04.
4.05 CASH CALLS
The Optionor, as Operator, shall submit to the Optionee a billing for
the full amount of the estimated Expenditures for any Program scheduled to be
undertaken. Within 10 days after receipt of such billing, the Optionee shall
advance to the Optionor, as Operator, such estimated amount.
4.06 MONTHLY STATEMENTS
The Operator shall submit to the Non-Operator monthly statements of
account reflecting in reasonable detail the charges and credits to the joint
accounts of the parties during the preceding month.
5 - 1
ARTICLE 5
VESTING OF INTEREST AND FORMATION OF JOINT VENTURE
5.01 EXERCISE OF OPTION
Upon the Optionee fulfilling the Optionee Vesting Obligations referred
to in Section 4.01 and in the time contemplated thereby, the Optionee shall
without any further payment or action be deemed to have exercised the Option and
it will thereupon acquire and be deemed to have acquired and be vested with a
50% undivided right, title and interest in the Property free and clear of all
liens, charges, encumbrances, security interests and adverse claims and except
for proportionate responsibility for the Underlying Royalty.
5.02 FORMATION OF JOINT VENTURE
Upon the exercise of the Option by the Optionee pursuant to Section
5.01, the parties hereto shall be deemed to have associated themselves in a
joint venture and shall enter into a joint venture agreement based upon industry
standards.
5.03 PURCHASE OF UNDERLYING ROYALTY
In the event the Optionor decides to purchase up to 50% of the
Underlying Royalty pursuant to the Xxxxxx Dodge Agreement, it shall give notice
of such proposed purchase to the Optionee. The Optionee may, within 30 days of
receipt of the said notice, elect by notice to the Optionor, accompanied with
one-half of the purchase price for the purchased Underlying Royalty, to acquire
one-half of the purchased Underlying Royalty. In the event the Optionee does not
make the election aforesaid within the period of 30 days, the Optionor may
acquire the Underlying Royalty for its own account.
6 - 1
ARTICLE 6
OPERATOR AND PERFORMANCE OF WORK
6.01 OPERATOR
The Optionee is hereby appointed the Operator with overall
responsibility to manage and carry out Operations.
6.02 MANAGEMENT FEE
The Operator shall be entitled to charge a management fee of 10% of
Expenditures. The management fee shall be added to and shall constitute
Expenditures.
6.03 STANDARD OF CARE
The Operator shall conduct all Operations in a good, workmanlike and
efficient manner, in accordance with sound mining and other applicable industry
standards and practices, and in accordance with the terms and provisions of
leases, licenses, permits, contracts and other agreements. The Operator shall
not be liable to the Non-Operator for breach of its Agreement or any other act
or omission resulting in damage or loss unless the same constitutes the
Operator's wilful misconduct or gross negligence.
6.04 ACCESS TO PROPERTY AND DATA
The Non-Operator shall at all reasonable times have access to the
Property and to the technical data pertaining to the Property on reasonable
notice to the Operator, provided that the Non-Operator shall not interfere with
the Operator's operations hereunder.
6.05 ABANDONMENT OF PROPERTY
The Operator may at any time and from time to time abandon or surrender
any part or parts of the Property, provided that the Operator shall give to the
Non-Operator not less than 90 days' notice of any intended abandonment or
surrender of any part or parts of the Property and shall, if requested by the
Non-Operator by notice to the Operator within that period of time, deliver to
the non-operator duly executed transfers of the part or parts of the Property so
intended to be abandoned or surrendered as the non-operator may specify in the
said notice. Upon the abandonment, surrender or delivery of a transfer in
respect of any part or parts of the Property the same shall cease to be included
in the Property and shall cease to be subject to this Agreement for all
purposes.
7 - 1
ARTICLE 7
TERMINATION
7.01 FAILURE TO FULFIL OPTIONEE VESTING OBLIGATIONS
If the Optionee fails to fulfil the Optionee Vesting Obligations in the
time contemplated herein or defaults in the performance of a material delegation
under this Agreement, the Optionor may terminate this Agreement, but only if the
Optionor has first given the Optionee a notice of default containing particulars
of the failure or default and the Optionee has not cured such failure or default
within 15 days of receipt of the notice of default.
7.02 FORMATION OF JOINT VENTURE
If the parties form a joint venture as contemplated by Section 5.02,
then this Agreement shall terminate.
8 - 1
ARTICLE 8
TRANSFER OF INTEREST
8.01 GENERAL
Prior to the formation of the Joint Venture, each party shall have the
right to Transfer to any third party all or any part of its Interest solely as
provided in this Article 8.
8.02 LIMITATIONS ON FREE TRANSFERABILITY
The Transfer right of a party in Section 8.01 shall be subject to the
following terms and conditions:
(a) no transferee of all or any part of the Interest of a party shall
have any rights hereunder unless and until the transferring party
has provided to the other party notice of the Transfer as
required by Section 8.03, and the transferee, as of the effective
date of the Transfer, has committed in writing to be bound by
this Agreement to the same extent as the transferring party;
(b) no transfer permitted by this Article 8 shall relieve the
transferring party of any liability, whether accruing before or
after such Transfer, which arises herein prior to such Transfer;
(c) in the event of a Transfer of less than all of an Interest after
which the transferring party retains an Interest, it and its
transferee shall be treated as one party;
(d) if the Transfer is the grant of a security interest by mortgage,
deed of trust, pledge, lien or other encumbrance of the Interest
of a party to secure a loan or other indebtedness, such security
interest shall be subordinate to the terms of this Agreement and
the rights and interests of the other party hereunder. Upon any
foreclosure or other enforcement of rights in the security
interest, the acquiring third party shall be deemed to have
assumed the position of the encumbering party with respect to
this Agreement and the other party, and it shall comply with and
be bound by the terms and conditions of this Agreement.
8.03 PRE-EMPTIVE RIGHT
Except as otherwise provided in Section 8.04, if either party (the
"Selling Party") desires to Transfer all or any part of its Interest, the other
party (the "Remaining Party") shall have a pre-emptive right to acquire such
Interest as provided in this Section 8.03:
(a) if the Selling Party intends to Transfer all or any of its
Interest, it shall promptly
8 - 1
notify the Remaining Party of its intentions. The notice shall
state the price and all other pertinent terms and conditions of
the intended Transfer, and shall be accompanied by a copy of the
offer or contract for sale. Alternatively, the Selling Party may
propose terms of a sale that may be offered to a prospective
purchaser. If the consideration for the intended Transfer is, in
whole or in part, other than monetary, the notice shall describe
such consideration and its monetary equivalent based upon the
fair market value of the non-monetary consideration stated in
terms of cash or currency, together with information sufficient
to establish the basis for such equivalence. The Remaining Party
shall have 30 days from the date such notice is delivered to
notify the Selling Party whether it elects to acquire the offered
interest for the same consideration or its monetary equivalent in
cash or currency, and on the same terms and conditions as set
forth in the notice. If the Remaining Party so elects, the
Transfer shall be consummated promptly after notice of such
election is delivered to the Selling Party;
(b) if the Remaining Party does not so elect within the period
provided for in Section 8.03(a), the Selling Party shall have 90
days following the expiration of such period to consummate the
Transfer to a third party for the consideration and on terms no
less favourable than those offered by it to the Remaining Party
in the notice required in Section 8.03(a); and
(c) if the Selling Party fails to consummate the Transfer to a third
party within the period set forth in Section 8.03(b), the
pre-emptive right of the Remaining Party in such offered Interest
shall be deemed to be revived. Any subsequent proposal to
Transfer such Interest shall be conducted in accordance with all
of the procedures set forth in this Section 8.03.
8.04 EXCEPTION TO PRE-EMPTIVE RIGHT
Section 8.03 shall not apply to the following:
(a) transfer by any party of all or any part of its Interest to an
Affiliate;
(b) corporate consolidation, merger, amalgamation or reorganization
of or by any party by which the surviving entity shall possess
substantially all of the stock, or all of the property rights and
interests, and be subject to substantially all of the liabilities
and obligations of the party;
(c) the grant by any party of a security interest in its Interest by
mortgage, deed of trust, pledge, lien or other encumbrance and
any Transfer of such interest by reasons of exercise of the
rights granted to the secured party.
9 - 1
ARTICLE 9
AREA OF INTEREST AND AFTER ACQUIRED PROPERTY
9.01 NOTICE OF ACQUISITION
If either the Optionee or the Optionor (the "Acquiring Party") stakes
or otherwise acquires, directly or indirectly, any right to or interest in any
mining claim, licence, lease, grant, concession, permit, patent, or other
mineral property or surface rights or water rights in respect of an IOCG Deposit
(collectively the "Acquired Rights") located wholly or partly within the Area of
Interest, then the Acquiring Party shall forthwith give notice to the other (the
"Other Party") of that staking or acquisition, the cost thereof and all details
in possession of any party with respect to the nature of the Acquired Rights and
the known mineralization.
9.02 EXERCISE OF OPTION
The Other Party may, within 30 days of receipt of the Acquiring Party's
notice, elect, by notice to the Acquiring Party, to require that the Acquired
Rights and the right or interest acquired be included in After Acquired Property
and thereafter form part of the Property for all purposes of this Agreement.
9.03 FAILURE TO EXERCISE OPTION
If the Other Party does not make the election aforesaid within that
period of 30 days, the Acquired Rights shall not form part of the Property and
the Acquiring Party shall be solely entitled thereto.
9.04 REIMBURSEMENT OF COSTS OF ACQUISITION
If the Acquiring Party is the Non-Operator and the Operator makes the
election aforesaid, the Non-Operator's costs of or incidental to the staking or
acquiring of the Acquired Rights shall be deemed to be Expenditures. If the
Acquiring Party is the Operator and the Non-Operator makes the election
aforesaid, the Non-Operator shall reimburse the Operator for its costs of or
incidental to the staking or acquiring of the Acquired Rights and the amount so
reimbursed shall be deemed to be Expenditures incurred by the Non-Operator.
10 - 1
ARTICLE 10
CONFIDENTIALITY
10.01 GENERAL
The financial terms of this Agreement and all information obtained in
connection with the performance of this Agreement shall be the exclusive
property of the parties and, except as provided in Section 10.02, shall not be
disclosed by the Optionor or the Optionee to any third party or the public
without the prior written consent of the other party, which consent shall not be
unreasonably withheld. Whenever practical, any announcements, press releases, or
public statements shall be issued jointly by the parties. Each party agrees to
promptly review any proposed request for disclosure or press release made by the
other party.
10.02 EXCEPTIONS
The consent required by Section 10.01 shall not apply to a disclosure:
(a) to an Affiliate, consultant, contractor or subcontractor, banker,
insurance broker, or surety that has a bona fide need to be
informed;
(b) to any third party to whom the disclosing party contemplates
assigning any portion of its Interest; or
(c) to a governmental agency or to the public which the disclosing
party believes in good faith is required by pertinent law or
regulation or the rules of any stock exchange.
In any case to which this Section 10.02 is applicable, the disclosing party
shall give notice to the other party prior to making such disclosure. The text
of any public announcements or statements including news releases which a party
intends to make pursuant to this Section 10.02 shall be made available to the
other party prior to publication and such other party shall have the right to
make suggestions for changes therein. Unless required by law or regulatory
authority, if a party is identified in such public announcement or statement it
shall not be released without the consent of such party. As to any disclosure
pursuant to Section 10.02(a) or 10.02(b), only such confidential information as
such third party shall have a legitimate business need to know shall be
disclosed and such third party shall first agree in writing to protect the
confidential information from further disclosure to the same extent as the
parties are obligated under this Article 10.
ARTICLE 11
GENERAL PROVISIONS
11.01 NOTICE
Any notice or communication required or permitted to be given to any
party under this Agreement shall be in writing and may be given by hand delivery
to the party or sent by telex or facsimile or by mailing the same by prepaid
registered mail, return receipt requested, addressed as follows:
If to the Optionor: 2390 - 0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Attention: Xxxx X'Xxx
with a copy to: Beach, Hepburn
Xxxxx 0000
00 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxxxx
If to the Optionee: Xxxxx 0000
00 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Any notice or communication sent by registered mail shall be deemed to have been
given and received five (5) days after the date of registration in Canada. Any
notice or communication sent by telex or facsimile shall be deemed to have been
given one (1) day after such notice or communication was sent by the notifying
party. Any notice or communication hand delivered shall be deemed to have been
given and received on the date of delivery. Any party may change his address for
service at any time by notice in writing given as aforesaid to each other party
hereto.
11.02 FORCE MAJEURE
Except for the obligation to make payments when due hereunder, the
obligations of a party shall be suspended to the extent and for the period that
performance is prevented by any cause, whether foreseeable or unforeseeable,
beyond its reasonable control, including without limitation, labour disputes
(however arising and whether or not employee demands are reasonable or within
the power of the party to grant); acts of God; laws, regulations, orders,
proclamations, instructions or requests of any government or governmental
entity; judgments or orders of any
11 - 2
court; inability to obtain on reasonable acceptable terms any public or private
license, permit or other authorization; curtailment or suspension of activities
to remedy or avoid an actual or alleged, present or prospective violation of
federal, provincial or local environmental standards; acts of war or conditions
arising out of or attributable to war, whether declared or undeclared; riot,
civil strife, insurrection or rebellion; interference by environmentalists,
Natives or Native rights groups or other activists; fire, explosion, earthquake,
mudslide, storm, flood, avalanche, sink holes, volcanic eruption, drought or
other adverse weather conditions; delay or failure by suppliers or transporters
of materials, parts, supplies, services or equipment or by contractors' or
subcontractors; shortage of, or inability to obtain, labour, transportation,
materials, machinery, equipment, supplies, utilities or services; accidents;
breakdown of equipment, machinery or facilities; or any other cause whether
similar or dissimilar to the foregoing. The affected party shall promptly give
notice to the other party of the suspension of performance, stating therein the
nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected party shall resume performance as soon as reasonably
possible.
11.03 FURTHER ASSURANCES
Each of the parties agrees that it shall take from time to time such
actions and execute such additional instruments as may be reasonably necessary
or convenient to implement and carry out the intent and purpose of this
Agreement.
11.04 ENUREMENT
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns.
11.05 OTHER BUSINESS OPPORTUNITIES
Except as expressly provided in this Agreement, each party shall have
the right independently to engage in and receive full benefits from business
activities, whether or not competitive with the Operations, without consulting
the other. The doctrines of "corporate opportunity" or "business opportunity"
shall not be applied to any other activity, venture, or operation of any party
and no party shall have any obligation to the other with respect to any
opportunity to acquire any property outside the Area of Interest during the term
of this Agreement.
11.06 NO PARTNERSHIP
Nothing contained in this Agreement shall be deemed to constitute
either party, the partner of the other, nor, except as otherwise herein
expressly provided, to constitute either party the agent or legal representative
of the other, nor to create any fiduciary relationship between them. It is not
the intention of the parties to create, nor shall this Agreement be construed to
create, any mining, commercial or other partnership. Neither of the parties
shall have any authority to act for
11 - 3
or to assume any obligation or responsibility on behalf of the other, except as
otherwise expressly provided herein. The rights, duties, obligations and
liabilities of the parties shall be several and not joint or collective. Each
party shall be responsible only for its obligations as herein set out and shall
be liable only for its share of the costs and expenses as provided herein, it
being the express purpose and intention of the parties that their ownership of
Assets and rights acquired hereunder shall be as tenants-in-common.
11.07 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which so executed shall constitute an original and all of which together shall
constitute one and the same Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
FRONTEER DEVELOPMENT GROUP INC.
By: /s/ Xxxx X'Xxx
--------------------------------------
NORTHWESTERN MINERAL VENTURES INC.
By: /s/ Xxxxx Xxxxx
--------------------------------------
SCHEDULE "A"
To the Option Agreement dated September 26, 2003
Between FRONTEER DEVELOPMENT GROUP INC.
AND NORTHWESTERN MINERAL VENTURES INC.
DESCRIPTION OF PROPERTY
The properties consist of:
1. The following claims in the Northwest Territories, as illustrated in
the map attached hereto:
F76069 F76065 F76068
F76070 F76066
F76071 F76067
F76072
2. The claims in the Northwest Territories set out in the Xxxxxx Dodge
Agreement, namely F69754, F69755, F69756, F69757 and F69758.
SCHEDULE "B"
TO THE OPTION AGREEMENT DATED SEPTEMBER 26, 2003 BETWEEN FRONTEER DEVELOPMENT
GROUP INC. AND NORTHWESTERN MINERAL VENTURES INC.
EXPLORATION OPTION AGREEMENT
MADE AS OF THE 4TH DAY OF OCTOBER, 0000
XXXXXXX
XXXXXX XXXXX XXXXXXXXXXX XX XXXXXX, LIMITED
AND
FRONTEER DEVELOPMENT GROUP INC.
CONJUROR PROPERTY,
NORTH MINING DIVISION
NORTHWEST TERRITORIES
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS........................................................1
1.1 DEFINITIONS...........................................................1
ARTICLE 2 - PRINCIPLES OF INTERPRETATION.......................................4
2.1 PRINCIPLES OF INTERPRETATION..........................................4
2.2 SCHEDULES.............................................................4
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND COVENANTS..........................5
3.1 CAPACITY..............................................................5
3.2 LIENS AND ENCUMBRANCES................................................5
3.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PDC......................5
3.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF FRG......................6
3.5 MATERIALITY OF REPRESENTATIONS AND COVENANTS..........................7
3.6 SURVIVAL..............................................................7
3.7 INDEMNITIES/LIMITATION OF LIABILITY...................................7
ARTICLE 4 - ENVIRONMENTAL PROVISIONS...........................................8
4.1 COMPLIANCE WITH ENVIRONMENTAL LAWS, ENVIRONMENTAL INDEMNITY AND
NOTIFICATION..........................................................8
ARTICLE 5 - SCOPE AND MAINTENANCE OF OPTION...................................10
5.1 GRANT OF OPTIONS AND RIGHTS..........................................10
5.2 REQUIREMENTS TO MAINTAIN AND EXERCISE THE OPTION.....................11
5.3 COMMITMENTS OF FRG...................................................13
5.4 RIGHTS OF PDC........................................................14
5.5 EXERCISE OF THE OPTION...............................................15
5.6 TERMINATION OF ALL RIGHTS AND OPTIONS................................15
5.7 NOTICE OF DEFAULT....................................................15
5.8 CONDUCT OF FRG ......................................................16
5.9 TRANSFER OF TITLE....................................................16
ARTICLE 6 - ROYALTY...........................................................16
6.1 ROYALTY TO PDC.......................................................16
6.2 BUY BACK OF PORTION OF ROYALTY.......................................16
6.3 PRE-EMPTIVE RIGHT TO FRG.............................................16
ARTICLE 7 - WITHDRAWAL AND TERMINATION........................................17
7.1 TERMINATION OF AGREEMENT.............................................17
ARTICLE 8 - SURRENDER OR ABANDONMENT OF RIGHTS AND OPTIONS INTEREST IN CERTAIN
OF THE PROPERTIES.................................................17
8.1 SURRENDER OR ABANDONMENT OF RIGHTS AND OPTIONS IN CERTAIN OF THE
PROPERTIES...........................................................17
ARTICLE 9 - TRANSFER OF INTEREST..............................................17
9.1 TRANSFERS GENERALLY..................................................17
ARTICLE 10 - CONFIDENTIALITY..................................................17
10.1 GENERAL...........................................................17
10.2 EXCEPTIONS........................................................18
10.3 DURATION OF CONFIDENTIALITY.......................................18
10.4 INTERNAL PROPRIETARY INFORMATION..................................18
10.5 PUBLIC ANNOUNCEMENTS..............................................19
-2-
10.6 PARTIES' INFORMATION..............................................19
ARTICLE 11 - GENERAL PROVISIONS...............................................19
11.1 NOTICES...........................................................19
11.2 WAIVER............................................................20
11.3 MODIFICATION......................................................20
11.4 FORCE MAJEURE.....................................................21
11.5 GOVERNING LAW.....................................................21
11.6 FURTHER ASSURANCES................................................21
11.7 SURVIVAL OF TERMS AND CONDITIONS..................................21
11.8 ENTIRE AGREEMENT..................................................21
11.9 SUCCESSORS AND ASSIGNS............................................22
11.10 SEVERABILITY......................................................22
11.11 NO PARTNERSHIP....................................................22
11.12 FURTHER GROUND WITHIN AREA OF INTEREST AND OTHER BUSINESS
OPPORTUNITIES.....................................................22
11.13 WAIVER OF RIGHTS OF PARTITION AND SALE............................23
11.14 TRANSFER OR TERMINATION OF RIGHTS TO PROPERTIES...................23
11.15 IMPLIED COVENANTS.................................................23
11.16 EMPLOYEES.........................................................24
11.17 EXPENSE AND COMMISSIONS...........................................24
11.18 COUNTERPARTS......................................................24
11.19 RULE AGAINST PERPETUITIES.........................................24
11.20 ARBITRATION OF DISPUTES...........................................24
SCHEDULES
Schedule A Part 1 Property List - Conjuror Properties
Schedule A Part 2 Location Map
Schedule B Definition, Calculation and Payment of Royalty
EXPLORATION OPTION AGREEMENT
This Agreement is dated to be effective as of October 4th, 2002,
between XXXXXX DODGE CORPORATION OF CANADA, LIMITED, a corporation governed by
the laws of Delaware ("PDC"), and FRONTEER DEVELOPMENT GROUP INC., a corporation
governed by the laws of Ontario ("FRG").
WHEREAS:
A. PDC owns a 100% beneficial interest in the mineral claims identified in Parts
1 and 2 of Schedule A and defined in Article 1 as the "Properties";
B. Subject to the terms and provisions of Article 5 of this Agreement, FRG will
pay $25,000 to PDC upon execution of this Agreement and may thereafter at its
option make additional cash payments to PDC or issue common shares in the
capital of FRG to PDC and spend monies in exploration on the Properties all in
accordance with Subsection 5.1(c) and Section 5.4 of this Agreement in order to
earn an undivided 100% ownership interest in the Properties;
IN CONSIDERATION OF the mutual promises set forth below, PDC and FRG
agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 DEFINITIONS
As used in this Agreement and any schedules hereto, unless there is something
inconsistent in the subject matter or context, the following words and terms
shall have the meanings set out below:
"ADDITIONAL RIGHTS" means any mineral claims or any other right to explore or
mine or both any part of which is located within the Area of Interest and which
has been offered to or acquired by a Party and which has been offered by that
Party and accepted by the other Party to continue subject to the terms of this
Agreement.
"AFFILIATE" means any person, partnership, joint venture, corporation or other
form of enterprise which directly or indirectly has a Control Interest, is under
common control with or is controlled by a Party or another Affiliate.
"AGREEMENT" means this Exploration Option Agreement and all attached Schedules
and all instruments supplemental to or in amendment or confirmation of this
Agreement; and references to Parts, Articles, Sections or subsections are to the
specified Parts, Articles, Sections or subsections of this Agreement.
"AREA OF INTEREST" means the area of land within the configuration on the ground
formed by extending outward the outer boundaries of each of the Properties one
kilometre in perpendicular distance and then extending lengthwise those extended
boundary lines until they first meet the extension of another extended boundary
line. For purposes of this definition "Properties" are the Properties as they
exist as at the Effective Date, and the boundaries of the Area of Interest shall
- 2 -
be unaffected by acquisitions or surrenders of parts of the Properties or
Additional Rights during the term of this Agreement.
"ASSETS" means the Properties, the surface rights, Products and all other real
and personal property, tangible and intangible, including, without limitation,
rights under agreements with federal, territorial or local governments relating
to the Properties.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which the
principal commercial banks located at Vancouver, British Columbia are open for
business during normal banking hours.
"CONTROL INTEREST" means an interest which allows the holder to direct or cause
the direction of the management and policies of a Party or Affiliate through the
legal or beneficial ownership of voting securities, the right to appoint
directors or management, contract, voting trust, or otherwise.
"EFFECTIVE DATE" means the date set forth at the beginning of this Agreement.
"ENVIRONMENTAL LAWS" shall have the meaning given to it in Subsection 4.1(a).
"EXPENDITURES" for all purposes of this Agreement means all moneys expended in
connection with the Properties by FRG under the terms of this Agreement,
including moneys expended prior to the date hereof but subsequent to a Letter of
Intent executed between FRG and PDC on July 5, 2002, in prospecting and
exploration work on or in connection with the Properties or any part of them.
Without limiting the generality of the foregoing, Expenditures shall include all
reasonable direct and indirect charges and shall include moneys spent by FRG in
acquiring and maintaining the Properties, in constructing, maintaining and
operating roads, trails and bridges upon or across the Properties or other lands
for the purpose of having convenient access to the Properties; and in mining,
prospecting, exploring, developing, de-watering, sampling, examining, diamond
drilling, testing and metallurgical work of all types; for geophysical,
geological and other surveys; reasonable costs and expenses connected with
feasibility studies (whether prepared by persons who are associated with a Party
or on an arm's length basis) and for buildings, equipment, plant and supplies
for the Properties including reasonable supervision, office and travelling
expenses, workers' compensation assessments, unemployment insurance premiums,
fire insurance premiums, taxes, rents, license fees and all other payments
necessary to keep the Properties in good standing; and all other expenses
ordinarily incurred in exploring a mining property, including an indirect charge
for administration and overhead in accordance with the Accounting Procedure. The
certificate of an officer of FRG regarding the incurring of Expenditures in
connection with the Properties shall be accepted as prima facie evidence of the
making of Expenditures. Except as provided in this Agreement, PDC shall be given
access to the documentation used by FRG to certify Expenditures and shall be
entitled at its own cost and expense to audit the amount of Expenditures
certified to by FRG.
"EXPLORATION" means all activities directed toward ascertaining the existence,
location, quantity, quality or commercial value of deposits of Products
including such things as drilling, geophysics and geochemistry.
- 3 -
"GOVERNMENTAL AUTHORITY" means any federal, territorial or municipal body,
commission, council board or authority.
"HAZARDOUS SUBSTANCES" shall have the meaning given to it in Subsection 4.1(a).
"LAW" or "LAWS" means all applicable federal, territorial and local laws
(statutory or common), rules, ordinances, regulations, orders, directives,
standards, judgments, and decrees, and agreements with government departments or
agencies thereof, if any, whether legislative, administrative or judicial in
nature, including without limitation, the Canada Mining Regulations.
"MINERAL ACT" means the Canada Mining Regulations in force on the date this
Agreement is entered into, together with all amendments enacted thereto from
time to time.
"MINING" means the mining, extracting, producing, handling, milling or other
processing of Products.
"OPERATOR" means FRG as appointed under Section 5.3(a) to manage operations on
the Properties.
"OPTION" shall have the meaning given to it in Subsection 5.1(c).
"OPTION PERIOD" means the period of time during which the Option is in effect
before it is exercised.
"PARTY" and "PARTIES" means, initially, PDC and FRG, and thereafter the persons
or entities, that from time to time have the option or royalty rights under this
Agreement.
"PRODUCTS" means all ores, minerals and mineral resources and by-products
thereof produced under this Agreement, including, without limitation,
By-Products and Other Mineral Products, as such terms are defined in Schedule B.
"PROPERTIES" means the five mineral claims held by PDC under the Mineral Act as
listed in Schedule A and all Additional Rights that may be added under the terms
of this Agreement.
"RIGHTS AND OPTIONS" means any or all of the rights and options granted to FRG
pursuant to this Agreement and more particularly described in Article 5.
"ROYALTY" means the vested royalty on Products produced from the Properties,
which shall comprise an interest in, bind, run with and touch the Properties and
the Products and be defined and payable as provided in Schedule B attached
hereto.
"ROYALTY HOLDER" means PDC or its successors or assigns entitled to receive a
Royalty under the terms of this Agreement.
"SHARES " means Common shares in the authorized capital of FRG.
"TAX ACT" means the Income Tax Act (Canada), as amended.
- 4 -
"TRANSFER" means sell, grant, assign, arrange for substitute performance by an
Affiliate or third party, encumber, pledge or otherwise convey, commit or
dispose of and the word used as a noun shall have a corresponding meaning.
ARTICLE 2 - PRINCIPLES OF INTERPRETATION
2.1 PRINCIPLES OF INTERPRETATION
In this Agreement and the Schedules:
(a) time is of the essence in the performance of the Parties'
respective obligations; provided, however, that should the
Parties set new times for the performance of any of their
obligations time shall again be of the essence in respect of such
new times;
(b) unless otherwise specified, all references to money amounts are
to Canadian currency;
(c) the use of words in the singular or plural, or with a particular
gender, shall not limit the scope or exclude the application of
any provision of this Agreement or a Schedule to such person or
persons or circumstances as the context otherwise permits;
(d) the descriptive headings of Parts, Articles, Sections and
subsections are inserted solely for convenience of reference and
are not intended as complete or accurate descriptions of content
and shall not be used to interpret the provisions of this
Agreement;
(e) unless otherwise specified, any time period within or following
which any payment is to be made or act is to be done shall be
calculated by excluding the day on which the period commences and
including the day on which the period ends and by extending the
period to the next Business Day following if the last day of the
period is not a Business Day;
(f) whenever any payment is to be made or action to be taken under
this Agreement is required to be made or taken on a day other
than a Business Day, such payment shall be made or action taken
on the next Business Day following; and
(g) whenever the phrase "to the best of its knowledge" is used, such
phrase shall be interpreted to mean to the best of a Party's
knowledge after making a reasonable inquiry into the relevant
subject matter.
2.2 SCHEDULES
The Schedules annexed to this Agreement, as listed below, are an integral part
of this Agreement:
- 5 -
Title Description
----- -----------
Schedule A - Part 1 Property List
Schedule A - Part 2 Location Map
Schedule B Definition, Calculation and Payment of Royalty
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 CAPACITY
Each of the Parties represents and warrants to the other as follows:
(a) that it is a corporation existing and in good standing under the
laws of its governing jurisdiction and that it is qualified to do
business and is in good standing in the Northwest Territories and
in all jurisdictions where it carries on its business;
(b) that it has the capacity to enter into and perform its
obligations under this Agreement, no shareholder actions are
required on its part to authorize the transactions contemplated
herein and that all corporate and other actions required to
authorize it to enter into and perform its obligations under this
Agreement have been properly taken, subject to approval of this
Agreement on the part of FRG, by the TSX Venture Exchange;
(c) that it will not breach any other agreement or instrument by
entering into or performing under this Agreement; and
(d) that this Agreement has been duly executed and delivered by it
and is valid, binding and enforceable against it in accordance
with its terms, subject only to the qualifications that
enforceability may be limited by:
(i) bankruptcy, insolvency, reorganization, receivership,
moratorium, arrangement or winding-up laws or other similar
laws affecting the enforcement of creditors' rights
generally; and
(ii) equitable principles, including the principle that
equitable remedies such as specific performance and
injunction may only be granted in the discretion of a court
of competent jurisdiction.
3.2 LIENS AND ENCUMBRANCES
Each of the Parties covenants to the other that it will not knowingly cause or
permit any liens or encumbrances to be charged against the Properties.
3.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PDC
PDC represents, warrants, and covenants to FRG that as of the date of this
Agreement:
- 6 -
(a) the information in Part 1 of Schedule A hereto relating to the
Properties is true, correct and describes the area covered by the
rights subject to this Agreement;
(b) the Properties have been properly staked and recorded under the
Mineral Act and PDC is the sole beneficial owner and has
exclusive possession of the Properties;
(c) PDC has complete authority to deal with the Properties, and,
other than this Agreement there are no other agreements affecting
title to the Properties and the Properties are currently
registered in the name of PDC as to a 100% undivided interest;
(d) during the currency of this Agreement, without the prior written
consent of FRG, PDC will not enter into new agreements or
instruments, encumbering or affecting the Properties or amend or
modify any that now exist;
(e) none of the shareholders of PDC are required to approve the
execution and delivery of this Agreement and no stock exchange or
other regulatory body having jursdiction over PDC is required to
consent to or approve the execution and delivery of this
Agreement or the performance of any of its term;
(f) to the best of its knowledge, the Properties are free of all
liens, charges, encumbrances and instruments of any kind
whatsoever, registered and unregistered, and FRG has had access
to examine copies of all title documents, plots and field notes
of surveys and all data and information which PDC has in its
possession or under its control relating to the Properties, the
mineral potential of, and access rights to, the Properties;
(g) all municipal, provincial, territorial and federal taxes and
levies of any kind whatsoever in respect of the ownership and use
of all of the Properties which were due and payable as of the
date of this Agreement or prior to such date have been paid and
satisfied as of such date;
(h) PDC is a non-resident of Canada for purposes of Section 116 of
the Tax Act; and
(i) there are no outstanding or pending, or to the best of PDC's
knowledge, threatened, actions, suits or claims against or
affecting the Properties that would have an adverse effect on the
Properties.
PDC agrees with FRG that each of the foregoing representations, warranties and
covenants are conditions to this Agreement inserted for the sole benefit of FRG
and that each such condition shall survive the execution and delivery of this
Agreement and all transactions contemplated hereby. FRG agrees with PDC that the
foregoing representations and warranties are the sole representations and
warranties that PDC is making with respect to the Properties and are accepted as
such by FRG.
3.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF FRG
FRG represents, warrants and covenants to PDC that:
- 7 -
(a) its right to enter into and perform this Agreement is subject
only to obtaining the requisite consents to permit it to issue
the Shares as contemplated hereunder;
(b) any Shares issued to PDC under the terms of this Agreement will
be fully paid and non-assessable and qualified for trading on the
TSX Venture Exchange, subject to any required regulatory holding
period after the date of their issue;
(c) the shareholders of FRG are not required to consent to or approve
the execution and delivery of this Agreement or the performance
of any its terms; and
(d) FRG is not a non-resident of Canada for purposes of Section 116
of the Tax Act.
FRG agrees with PDC that each of the foregoing representations, warranties and
covenants are conditions to this Agreement inserted for the sole benefit of PDC
and that each such condition shall survive the execution and delivery of this
Agreement and all transactions contemplated hereby.
3.5 MATERIALITY OF REPRESENTATIONS AND COVENANTS
All representations, warranties and covenants made in this Article 3 are
material to this Agreement and the Parties' intent in entering into it.
3.6 SURVIVAL
All representations and warranties shall survive for a period of four (4) years
from the date of this Agreement.
3.7 INDEMNITIES/LIMITATION OF LIABILITY
(a) Each Party shall indemnify the other Party, its officers,
directors, agents, employees and its Affiliates (collectively,
the "INDEMNIFIED PARTY") from and against any Material Loss. A
"MATERIAL LOSS" shall mean all costs, expenses, damages or
liabilities, including attorneys' fees and other costs of
litigation (including threatened or pending) arising out of or
based on a breach by a Party ("INDEMNIFYING PARTY") of any
representation, warranty or covenant contained in this Article 3
or elsewhere in this Agreement. A Material Loss shall be deemed
to have occurred if, in the aggregate, an Indemnified Party
incurs losses, costs, damages or liabilities in excess of three
thousand dollars ($3,000.00) relating to the warranties,
representations and covenants described in Article 3 or elsewhere
in this Agreement.
(b) If any claim or demand is asserted against an Indemnified Party
in respect of which such Indemnified Party may be entitled to
indemnification under this Agreement, written notice of such
claim or demand shall promptly be given to the Indemnifying
Party. The Indemnifying Party shall have the right, by notifying
the Indemnified Party within thirty (30) days after its receipt
of the notice of the claim or demand, to request the Indemnified
Party, at the Indemnifying Party's expense, to assume the
defence, compromise or settlement of the matter if the
Indemnified
- 8 -
Party agrees, acting reasonably, that such course of action is
justified. The Indemnified Party may at, at any time, at the
expense of the Indemnifying Party settle or compromise the matter
in exchange for a full release of claims against the Indemnifying
Party and the Indemnified Party which have arisen out of the
claim or demand for which indemnification is sought.
ARTICLE 4 - ENVIRONMENTAL PROVISIONS
4.1 COMPLIANCE WITH ENVIRONMENTAL LAWS, ENVIRONMENTAL INDEMNITY AND NOTIFICATION
(a) FRG:
(i) FRG acknowledges that it has had the opportunity to
evaluate portions of the Properties and that on those
portions evaluated, it did not observe any conditions which
violate Environmental Laws or conditions which suggest that
the storage, disposal, or release of Hazardous Substances
has occurred. FRG shall comply, and shall cause all of its
employees, agents, representatives, contractors, invitees
and other third parties to comply, with all federal,
territorial and municipal laws, statutes, rules,
ordinances, codes and regulations relating to environmental
protection, public health and safety, nuisance or menace,
including without limitation, the Waste Management Act,
Fisheries Act (Canada), any laws relating to mines, mine
exploration, mine reclamation, including provisions of the
Mineral Act, and each of their territorial and municipal
counterparts presently in effect or amended or promulgated
in the future (collectively, "Environmental Laws") in
respect of the Properties. FRG expressly warrants,
represents and agrees that no Hazardous Substances will be
generated, stored or handled on, under, or about the
Properties, either by FRG or any of its employees, agents,
representatives, contractors, invitees or other third
parties in violation of any Environmental Law, and further
agrees that no Hazardous Substance will be treated,
released or disposed of on, under or about the Properties.
"Hazardous Substances" shall mean any substance, material,
pollutant, contaminant, or waste, whether solid, gaseous or
liquid, that is infectious, toxic, hazardous, explosive,
corrosive, flammable or radioactive, and that is regulated,
defined, listed or included in any Environmental Law,
including, but not limited to, asbestos, petroleum, or
petroleum additive substances, polychlorinated biphenyls,
urea formaldehyde, or waste tires. Further, FRG and its
employees, agents, representatives, contractors, invitees
and other third parties shall promptly notify PDC upon
becoming aware of any release or threatened release of a
Hazardous Substance under, on, from or about the Properties
or of any proceeding, inquiry or notice from any third
party, including any Governmental Authority, with respect
to the use or presence of any Hazardous Substances on the
Properties, or the migration thereof to or from other
property.
- 9 -
(ii) agrees to indemnify, protect and defend PDC, its past,
present and future corporate parents, subsidiaries and
Affiliates, and each of their past, present and future
officers, directors, shareholders, employees and agents,
and each of their respective successors and assigns
(collectively, "PDC's Representatives") and hold each of
them harmless, from any and all actions, causes of actions,
claims, demands, liabilities, losses, costs, expenses
(including reasonable consulting and attorneys' fees) or
suits of any kind brought by any third party, including,
but not limited to, any Governmental Authority, which
relates to or arises from any violation by FRG, its
employees, agents, representatives, contractors, invitees
or other third parties of Subsection 4.1(a)(i), or from the
investigation, removal and remediation of releases or
discharges or threatened releases and discharges of
Hazardous Substances on the Properties caused by FRG, its
employees, agents, representatives, contractors, entities
or other third parties If in the judgment of PDC, FRG is
incapable of defending, or unwilling to defend, PDC or
PDC's Representatives against such claims, or fails to
defend PDC or PDC's Representatives against any such claims
in a manner PDC deems appropriate, PDC shall be entitled to
appear in any action or proceeding to defend PDC or PDC's
Representatives against such claims, and FRG shall
reimburse PDC for all costs incurred by PDC in connection
therewith, including reasonable attorneys' fees, costs and
expenses, within ten (10) days after demand therefore.
(b) PDC:
(i) has complied and has caused all of its employees, agents,
representatives, contractors, invitees and other third
parties to comply, with all Environmental Laws with respect
to the Properties. PDC expressly warrants, represents and
agrees that no Hazardous Substances (as hereinafter
defined) have been generated, stored or handled on, under,
or about the Properties, either by PDC or any of its
employees, agents, representatives, contractors, invitees
or other third parties in violation of any Environmental
Law, and further agrees that no Hazardous Substance have
been treated, released or disposed of on, under or about
the Properties. Further, PDC shall promptly notify FRG upon
becoming aware of any proceeding, inquiry or notice from
any third party, including any Governmental Authority, with
respect to the use or presence of any Hazardous Substances
on the Properties, or the migration thereof to or from
other property.
(ii) agrees to indemnify, protect and defend FRG, its past,
present and future corporate parents, subsidiaries and
Affiliates, and each of their past, present and future
officers, directors, shareholders, employees and agents,
and each of their respective successors and assigns
(collectively, "FRG's Representatives") and hold each of
them harmless, from any and all actions, causes of actions,
claims, demands, liabilities, losses, costs, expenses
(including reasonable consulting and attorneys' fees) or
suits of
- 10 -
any kind brought by any third party, including, but not
limited to, any Governmental Authority, which relates to or
arises from any violation by PDC, its employees, agents,
representatives, contractors, invitees or other third
parties of Subsection 4.1(b)(i) between October 1, 2001 to
the date of this Agreement, or from the investigation,
removal and remediation of releases or discharges of
Hazardous Substances on the Properties caused by PDC
between October 1, 2001 to the date of this Agreement . If
in the judgment of FRG, PDC is incapable of defending, or
unwilling to defend, FRG or FRG's Representatives against
such claims, or fails to defend FRG or FRG's
Representatives against any such claims in a manner FRG
deems appropriate, FRG shall be entitled to appear in any
action or proceeding to defend FRG or FRG's Representatives
against such claims, and PDC shall reimburse FRG for all
costs incurred by FRG in connection therewith, including
reasonable attorneys' fees, costs and expenses, within ten
(10) days after demand therefor.
The agreements contained in this Section 4.1 shall survive the
expiration of any portion of this Agreement.
ARTICLE 5 - SCOPE AND MAINTENANCE OF OPTION
5.1 GRANT OF OPTIONS AND RIGHTS
Upon execution and delivery of this Agreement and the payment by FRG to PDC of
the sum of $25,000, PDC hereby gives and grants to FRG:
(a) Right and Option to Explore - The immediate licence, authority
and option to enter upon and explore all parts of the Properties
and during the currency of the Option to acquire interests
hereunder with the same power and authority granted to FRG, its
servants, agents, workers or contractors and their subcontractors
and agents as PDC has, to sample, examine, diamond drill,
prospect and explore the same in searching for minerals, in such
manner as may be permitted by Laws and as FRG in its sole
discretion may determine, including the right to erect, bring and
install thereon all such buildings, machinery, equipment and
supplies as FRG shall deem necessary and the right to remove
reasonable quantities of ore for assay and testing purposes only;
(b) Right to Return, Release and Otherwise Deal with Properties - FRG
may at any time give not less than 35 days' written notice (a
"RELEASE NOTICE") to PDC that it wishes to release all interest
which it holds in any portion of the Properties; provided,
always, that the assessment work credits against any such
Properties will keep them in good standing for not less than one
(1) year from the date of any such notice.
From the giving of FRG's Release Notice with respect to any
portion of the Properties, that portion of the Properties shall
no longer be subject to this
- 11 -
Agreement and PDC shall be free to acquire rights to explore or
mine or both over the areas previously covered by such Properties
at any time.
During the currency of the Option, PDC shall have the right with
prior notice to FRG to apply for renewals and extensions of each
of the rights constituting the Properties, to make any deficiency
payments required, and to apply for and on behalf of both Parties
for further and other mineral rights in respect of the areas
covered by the Properties, to distribute work credits and apply
for a mining lease and to negotiate with the owners and occupiers
of any surface rights, if any, required for access to, or the
exploration and development of, the Properties; and
(c) Right and Option to Earn a 100% Interest - The further sole and
exclusive right and option to earn on or before October 4th,
2006, 100% of PDC's interest in the Properties free of all other
liens, charges, encumbrances and conflicting claims (the
"OPTION") by giving PDC notice of exercise as provided in Section
5.2, all upon and subject to the terms and conditions of this
Agreement.
5.2 REQUIREMENTS TO MAINTAIN AND EXERCISE THE OPTION
(a) Option - In order to keep the Option in good standing after
October 4th, 2003 and exercise the same, FRG shall be required
to:
(i) make payments to PDC or, at FRG's option, issue additional
Shares to PDC having an equivalent value to all or a
portion of the cash payments required to be made, based on
the trading closing prices for the Shares on the TSX
Venture Exchange for the 7 consecutive trading days
immediately prior to the issue and delivery of such Shares
to PDC or, at FRG's option, make a combination of cash
payment and the issue of Shares to PDC by the dates set out
in Column (1) below;
(ii) incur Expenditures on or in respect of the Properties in
the aggregate amount of not less than $500,000 on or before
the 4th day of October, 2006; and
(iii) provide to PDC a preliminary report not later than thirty
(30) days prior to the dates set forth in Column (1) below
of the cumulative aggregate Expenditures it expects to have
made by such dates and certify in writing to PDC not later
than thirty (30) days following the dates set forth in
Column (1) below, what it has made in cumulative aggregate
Expenditures, based on a report by FRG in the nature of the
report referred to in Subsection 5.3(c) in respect of such
work to the extent not previously reported:
- 12 -
(1) On or Before October 4th (2) Value of Cash Payment/Issue of
Additional Shares
----------------------------------------------------------------------
2003 $10,000
2004 $20,000
2005 $30,000
2006 $40,000
(b) Failure to Make Required Expenditures in Respect of the Option -
Subject to the provisions regarding notice of default in Section
5.7 and the cure provisions contained therein, and force majeure
in Section 10.4 of this Agreement, if FRG fails to have paid to
PDC or issued the required number of additional Shares based on
an equivalent value or to certify in writing to PDC the
cumulative aggregate Expenditures required in accordance with
Subsection 5.2(a), then all Rights and Options hereunder shall
lapse and the Option shall terminate. Notwithstanding the
foregoing, if FRG should fail to make the Expenditures required
by Subsection 5.2(a) on or before the date set forth herein, FRG
shall have the option to pay any shortfall in cash to PDC and any
such payment made by October 4th, 2006 shall be counted towards
the cumulative aggregate Expenditures required by Subsection
5.2(a), in which case all Rights and Options under this Agreement
shall continue under the terms hereof.
(c) Rights or Duties on Termination - In the event of termination of
the Rights and Options hereunder through failure of FRG to comply
with the provisions of Subsection 5.2(a) or as otherwise provided
herein:
(i) FRG shall forthwith surrender the use of the Properties to
PDC, PROVIDED THAT for a period of 90 days after the
effective date of such termination, FRG shall have the
right of free access to the Properties for the purposes of
removing and may remove all buildings, plant, equipment,
machinery, tools, appliances, supplies and other materials
which FRG may have erected, placed or installed therein, or
thereon, but excluding any such items belonging to PDC
(collectively, "FRG'S EQUIPMENT") and no rental or
occupancy shall be charged to FRG for such privilege or
removal. If FRG does not remove FRG's Equipment within 90
days after termination, PDC may notify FRG in writing that
it requires FRG to remove all unremoved FRG's Equipment,
and if such removal has not occurred within 45 days after
such notice was delivered, PDC shall be entitled to remove
and dispose of all unremoved FRG's Equipment, and PDC shall
be entitled to recover from FRG and FRG shall forthwith
reimburse PDC for its reasonable cost and expenses of such
removal;
(ii) If FRG has acquired any surface rights which are assignable
that PDC requested to be assigned to it, FRG shall assign
such surface rights to
- 13 -
PDC, subject to PDC paying to FRG the amount of the
transfer fee and other costs for the transfer of such
surface rights;
(iii) FRG shall return the Properties to PDC in good standing as
required under all applicable Laws and shall comply with
all Laws and Governmental Authority with respect to
clean-up of its work on the Properties and in doing so will
comply with all government directives and regulations
whatsoever, including those of environmental agencies, and
will be responsible for all disturbances or contamination
arising from its work on the Properties;
(iv) FRG will, within ninety (90) days of any termination,
deliver to PDC a copy of any maps, reports, assays and a
certificate of its Expenditures in respect of those
portions of the Properties in respect of which termination
has occurred, to the extent that they have not previously
been supplied by FRG to PDC;
(v) FRG shall, to the extent not already paid, pay all taxes,
fees and fines if any, relating to all the Properties,
applicable to the period of the occupancy thereof by FRG;
and
(vi) FRG shall leave the Properties in good standing as to the
filing of work assessments or payment in lieu for a period
of not less than one (1) year after the date of such
termination.
5.3 COMMITMENTS OF FRG
(a) Operator during Option Period - FRG shall be the Operator of the
Properties and of all exploration activities on or in respect of
the Properties during the Option Period.
(b) Maintenance of Properties Free of Tax Liens - Until such time as
FRG may exercise the right to release portions of the Properties
under Subsection 4.1(b) or to abandon the Rights and Options
pursuant to Section 5.6, FRG shall, at its sole expense maintain
the Properties in good standing under the Mineral Act or other
Laws as applicable.
(c) Reports - FRG agrees to file, and to provide PDC with copies, the
results of all its Expenditures for assessment work credit under
the Mineral Act. FRG agrees to give PDC oral reports of material
occurrences in the conduct of work prior to the exercise of the
Option as soon as practicable and in all events not less
frequently than quarterly within thirty (30) days following the
completion of the applicable quarter. . FRG shall prepare an
annual technical report giving details of the factual data
resulting from the Expenditures incurred in the last completed
calendar year, within ninety (90) days following the completion
of the applicable calendar year and give a copy of same to PDC.
- 14 -
(d) Insurance - FRG will provide proof of insurance for liability
purposes naming PDC as an additional insured. FRG shall
continuously maintain the following minimum insurance coverages
during the term of this Agreement:
(i) Commercial general liability insurance coverage, with a
broad form comprehensive general liability endorsement of
single limits of no less than $2,000,000.00 per occurrence,
and aggregate limits of no less than $2,000,000.00, for
bodily injury, death, personal liability and property
damage liability on an occurrence and not claims-made
basis.
(ii) Commercial Property Broad Form Coverage with Guaranteed
Full Replacement Costs coverage, with deductibles of no
less than $250.00 per occurrence. FRG shall be responsible
for paying deductibles applicable to any and all loses,
claims and damages.
(iii) The insurance policies shall contain no exclusion or
limitation with regard to explosion, collapse or
underground hazard coverage. The insurance policies shall
name PDC as additional insured. The policies shall state
FRG's coverage is primary and that the inclusion of more
than one insured shall not operate or impair the right of
one insured against another insured and the coverage
afforded shall apply as though separate policies had been
issued to each insured. All the insurance policies shall
contain an endorsement providing that written notice by
certified mail, return receipt requested, shall be given by
the insurer to PDC at least thirty days prior to
termination, cancellation, non-renewal or modification or
reduction of coverage of any policy. The insurance policies
shall be issued by an insurance company approved by PDC.
The insurance policies shall contain cross-liability
endorsement permitting recovery by one insured as against
the other for negligence of the other. All insurance
policies shall contain a contractual liability endorsement
covering FRG's liability under this Agreement to ensure
FRG's indemnity obligations and other insurable provisions.
FRG shall require its insurance carrier to waive its right
of subrogation as to PDC.
5.4 RIGHTS OF PDC
(a) Access - PDC and its authorized representatives shall, after
reasonable advance notice to FRG, be entitled to enter upon the
Properties in reasonable numbers and at reasonable times at their
own risk and expense to inspect the work being carried out by FRG
under this Agreement. PDC will indemnify FRG against any expenses
or damages that it may incur as a result of any injury or
property damage sustained or caused by PDC or its
representatives.
(b) Removal of Liens - FRG will pay or cause to be paid all workers
or wage earners employed by it on the Properties and will pay for
all material purchased by it in connection with its work on the
Properties which might give rise to a lien. If a lien or notice
of lien is recorded against the Properties as a result of work
done by
- 15 -
or for FRG, it will promptly take reasonable steps to have the
lien removed; provided, however, that FRG may dispute any claim
for lien at its own expense so long as it proceeds diligently to
take steps to resolve such dispute. FRG will indemnify PDC
against any and all costs, expenses or damages that PDC may incur
as a result of any lien recorded against the Properties as a
result of work done by or for FRG.
5.5 EXERCISE OF THE OPTION
If FRG elects to exercise the Option, it shall do so by giving written notice of
exercise to PDC on or before October 4th, 2006, which notice shall specify
details of Expenditures incurred by FRG.
5.6 TERMINATION OF ALL RIGHTS AND OPTIONS
The Parties agree that the requirements under Subsection 5.2(a) are optional and
FRG may in its sole discretion terminate all the Rights and Options granted to
it under this Article 5 by giving notice of such termination to PDC. If FRG
gives notice of termination of the Rights and Options granted to FRG in Article
5, and provided FRG complies with all its accrued obligations to PDC under this
Agreement up to the date of such termination, FRG shall be under no obligation
to make any further payments or make any further Expenditures from and after the
date such notice is effective and shall forthwith thereafter deliver the
documentation and take the action relating to the Properties referred to in
Subsection 5.2(c).
5.7 NOTICE OF DEFAULT
If FRG fails to perform or defaults in the performance of a material obligation
under this Agreement, PDC may terminate the Option under this Agreement, but
only if:
(i) PDC has first given to FRG a notice of default containing
particulars of the failure or default; and
(ii) FRG has not:
(1) in the case of default on any payment, including any
expenditure or payment in lieu of work as provided in
Subsection 5.2(a), cured such default within fifteen (15)
days following delivery of a notice of default; or
(2) in the case of an environmental default, cured such default
or commenced proceedings to remedy such default by
appropriate performance within sixty (60) days following
delivery of a notice of default (FRG hereby agreeing that
should it so commence to cure any default it will prosecute
the same to completion without undue delay).
- 16 -
5.8 CONDUCT OF FRG
FRG agrees that it shall, during the currency of the Rights and Options hereby
granted, carry out its activities as contemplated hereunder in a manner
consistent with good and prudent mineral exploration and environmental practices
and in accordance with all Laws.
5.9 TRANSFER OF TITLE
If FRG exercises the Option by compliance with the terms of Sections 5.1 and 5.2
and gives notice pursuant to Section 5.5 and provides PDC with evidence that FRG
is legally eligible to transfer title, then PDC shall forthwith obtain all
requisite consents and take all requisite actions under the instruments and the
Laws by which the Properties are held to transfer, register and record the
transfer of 100% of PDC's interest in the title to each of the Properties in
favour of FRG to be held by FRG subject to the terms and conditions of this
Agreement, including PDC's Royalty under Article 6.
ARTICLE 6 - ROYALTY
6.1 ROYALTY TO PDC
In the event that FRG has fully exercised its Option under Article 5, PDC shall
be deemed to have been vested with a Royalty effective from the time FRG shall
earn 100% of PDC's interest in the Properties. Such Royalty shall be a 2% Net
Smelter Returns Royalty on all By-Products and Other Mineral Products (as
defined in Schedule B).
Notwithstanding anything in this Agreement to the contrary, such Royalty on
Products shall comprise an interest in, run with, bind and touch the Properties
and the Products if, as and whenever they constitute "real property" or severed
personal property, as the case may be.
6.2 BUY BACK OF PORTION OF ROYALTY
PDC hereby grants FRG the right at any time to reduce PDC's 2% Royalty to a 1%
Royalty by paying to PDC the sum of One Million Dollars ($1,000,000) and upon
such payment being made PDC's Royalty shall thereafter be One Percent (1%).
6.3 PRE-EMPTIVE RIGHT TO FRG
If at any time PDC wishes or seeks to sell, assign, transfer, convey or
otherwise dispose of any portion of its Royalty to a third party other than an
Affiliate of PDC, then PDC shall be required to offer to sell to FRG the portion
or all of the Royalty that it wishes to sell, assign, transfer, convey or
otherwise dispose of at the same price and on the same terms and conditions that
it prepared to offer to the third party by written notice setting out such
price, terms and conditions and the name of any proposed third party purchaser,
if known. FRG shall have 45 days from the date of receipt of such written notice
to accept such offer by written notice of acceptance to PDC and upon such
acceptance a binding contract of purchase and sale shall be concluded between
FRG and PDC and the sale of the applicable portion of the Royalty shall be
completed on the third Business Day after notice of acceptance is given. If no
written notice of acceptance is given within the required 45 days or if FRG
refuses to accept such offer, PDC shall be entitled to
- 17 -
sell the interest in the Royalty to the third party at the price and on terms
and conditions no more favourable than those offered to FRG at any time after
such failure or refusal to accept the offer.
ARTICLE 7 - WITHDRAWAL AND TERMINATION
7.1 TERMINATION OF AGREEMENT
This Agreement shall not terminate until all outstanding obligations hereunder
have been satisfied.
ARTICLE 8 - SURRENDER OR ABANDONMENT OF RIGHTS AND OPTIONS
INTEREST IN CERTAIN OF THE PROPERTIES
8.1 SURRENDER OR ABANDONMENT OF RIGHTS AND OPTIONS IN CERTAIN OF THE PROPERTIES
If FRG decides to surrender or abandon its Rights and Options with respect to
any part of the Properties, it shall so advise PDC, in writing specifying the
parts of the Properties to be so abandoned or surrendered, and the abandoned or
surrendered property shall cease to be part of the Properties for purposes of
this Agreement from the date of the giving of such notice. Any surrender or
abandonment of Rights and Options under this Section 8.1 shall not relieve FRG
of its liabilities to PDC or other third persons arising out of its activities
conducted prior to such surrender or abandonment. Any surrender or abandonment
of FRG's Rights and Options pursuant to this Section 8.1 shall not reduce or
change FRG's Rights and Options to the remaining Properties or reduce the
amounts payable to PDC or to be incurred by FRG in order to exercise the Option.
ARTICLE 9 - TRANSFER OF INTEREST
9.1 TRANSFERS GENERALLY
FRG may sell, assign or option its interest or rights in the Properties or any
portion thereof to a third party provided that third party shall have first
entered into an agreement with PDC that the third party acknowledges and agrees
to be bound by the provisions of this Agreement.
ARTICLE 10 - CONFIDENTIALITY
10.1 GENERAL
The terms of this Agreement and all information obtained in connection with the
performance of this Agreement shall be the exclusive property of the Parties
and, except as provided in Section 10.2, shall not be disclosed to any third
party or the public without the prior written consent of the other Party, which
consent shall not be unreasonably withheld. No Party need seek the consent of
PDC as a Royalty Holder under this Article 10; however, as set forth in this
Section 10.1, a Royalty Holder shall continue to be bound by the confidentiality
provisions of this Article 10.
- 18 -
10.2 EXCEPTIONS
The consent required by Section 10.1 shall not apply to a disclosure:
(a) To an Affiliate of a Party, or to a Party's consultant,
contractor or subcontractor that has a bona fide need to be
informed;
(b) To any third party to whom the disclosing Party contemplates a
Transfer of all or any part of its interest in or to this
Agreement, or all or any part of its Participating Interest once
the other Party has consented to the Transfer;
(c) To a governmental agency or to the public which the disclosing
Party believes in good faith is required by Laws or the
applicable rules of any stock exchange; or
(d) To any actual or potential lender or underwriter who has a bona
fide need to be informed.
In any case to which Subsections 10.2(b), (c) or (d) is applicable, the
disclosing Party shall give not less than five (5) days prior written notice to
the other Party specifying the entity proposed to receive the information and
the reason for the disclosure (unless in the case of Subsection 10.2(c), the
disclosing Party determines in good faith that sooner disclosure is required by
law, in which case the period of prior written notice shall be reduced as
determined by the disclosing Party). This notice shall include a summary of the
information to be disclosed and, if requested by the other Party, copies of all
confidential information to be delivered by the disclosing Party, and, in the
case of information to be delivered under Subsections 10.2(b) or (d), a copy of
the proposed agreement protecting the confidential information from further
disclosure. The disclosing Party shall make any changes to the
disclosure/release that the other Party may reasonably request. As to any
disclosure pursuant to Subsection 10.2(b), only such confidential information as
such third party shall have a legitimate business need to know shall be
disclosed and such third party shall first agree in writing to protect the
confidential information from further disclosure to the same extent as the
Parties are obligated under this Article 10.
10.3 DURATION OF CONFIDENTIALITY
The provisions of this Article 10 shall apply during the term of this Agreement
and for one (1) year following termination of this Agreement pursuant to Section
7.1, and shall continue to apply to any Party who withdraws, who is deemed to
have withdrawn, or who Transfers its interest, for one (1) year following the
date of such occurrence. If PDC becomes a Royalty Holder it shall be bound by
the confidentiality provisions of this Article 10 for so long as this Agreement
remains in force.
10.4 INTERNAL PROPRIETARY INFORMATION
The Parties agree not to use, sell, give, disclose, or otherwise make available
to third parties or the public at any time any knowledge or information they may
obtain relating to internal proprietary techniques and methods used by the other
Party for purposes of geological interpretation, extraction, mining, processing
of minerals, or any other proprietary information that may be acquired.
- 19 -
10.5 PUBLIC ANNOUNCEMENTS
Subject to the exception in Subsection 10.2(c), each Party shall consult with
and obtain the consent of the other Party (which consent is not to be
unreasonably withheld) prior to making or issuing any public announcement, press
release, or similar publicity or disclosure with respect to this Agreement or
any agreement entered into contemporaneously herewith or with respect to any
activities under this Agreement or any such other agreements. As early as
practicable, and not less than five (5) days, before a Party makes any public
announcement concerning this Agreement or activities undertaken pursuant hereto
(unless the disclosing Party determines in good faith that sooner disclosure is
required by law), such Party shall first give the other Party notice of the
intended announcement, including a copy of such proposed announcement.
Reasonable changes to the proposed announcement should be incorporated. If no
comments are received within five (5) days of proper notice to the other Party,
then the proposed announcement may be issued without further day.
10.6 PARTIES' INFORMATION
Any analysis, data, documentation, or other information developed by any Party
on its own behalf, and at no cost to the other Party, shall nevertheless be made
available to any other Party if such analysis, data, documentation, or
information utilizes information relevant to the Assets.
ARTICLE 11 - GENERAL PROVISIONS
11.1 NOTICES
All notices, payments and other required communications ("NOTICES") to the
Parties shall be in writing, and shall be addressed respectively as follows:
To: Xxxxxx Dodge Corporation of Canada, Limited
Xxxxx 0000
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0 Facsimile: (000) 000-0000
Attention: Exploration Manager, Canada
With a copy to:
Xxxxxx Dodge Exploration Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X.X.X. 00000-0000 Facsimile: (000) 000-0000
Attention: Xxx Xxxxxx, Legal Counsel
To: Fronteer Development Group Inc.
Suite 2390
- 20 -
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0 Facsimile: (604)
---------
Attention: The President
With a copy to:
Beach, Hepburn
Xxxxx 0000
00 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0 Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
All Notices shall be given:
(a) by personal delivery to the Party if delivered during normal
business hours;
(b) by electronic communication, with a confirmation sent by
registered or certified mail return receipt requested; or
(c) by registered or certified mail return receipt requested.
All Notices shall be effective and shall be deemed delivered:
(a) if by personal delivery, on the date of delivery if delivered
during normal business hours, and, if not delivered during normal
business hours, on the next Business Day following delivery;
(b) if by electronic communication, on the next Business Day
following receipt of the electronic communication; or
(c) if solely by mail, on the next Business Day after actual receipt.
A Party may change its address by Notice to the other Party.
11.2 WAIVER
The failure of a Party to insist on the strict performance of any provision of
this Agreement or to exercise any right, power or remedy upon a breach hereof
shall not constitute a waiver of any provision of this Agreement or limit the
Party's right thereafter to enforce any provision or exercise any right.
11.3 MODIFICATION
No modification of this Agreement shall be valid unless made in writing and duly
executed by the Parties.
- 21 -
11.4 FORCE MAJEURE
Except for any obligation to make payments when due hereunder, the obligations
of a Party shall be suspended to the extent and for the period that performance
is prevented by any cause, whether foreseeable or unforeseeable, beyond its
reasonable control, including, without limitation, labour disputes (however
arising and whether or not employee demands are reasonable or within the power
of the party to grant); acts of God; laws, regulations, orders, proclamations,
instructions or requests of any government or governmental entity; judgments or
orders of any court; inability to obtain on reasonably acceptable terms any
public or private license, permit or other authorization; curtailment or
suspension of activities to remedy or avoid an actual or alleged, present or
prospective violation of federal, provincial or territorial or local
environmental standards; acts of war or conditions arising out of or
attributable to war, whether declared or undeclared; riot, civil strife,
insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather conditions; delay or failure by
suppliers or transporters of materials, parts, supplies, services or equipment
or by contractors' or subcontractors' shortage of, or inability to obtain,
labour, transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; actions by
native rights or environmental pressure groups; or any other cause whether
similar or dissimilar to the foregoing. The affected Party shall promptly give
notice to the other Party of the suspension of performance, stating therein the
nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected Party shall resume performance as soon as reasonably
possible. Commercial frustration, commercial impracticability or the occurrence
of unforeseen events rendering performance hereunder uneconomical shall not
constitute an excuse of performance of any obligation imposed hereunder.
11.5 GOVERNING LAW
Except for conveyancing and title matters which shall be governed by the laws of
the Northwest Territories, this Agreement shall be governed by and interpreted
in accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein.
11.6 FURTHER ASSURANCES
Each of the Parties agrees to take from time to time such actions and execute
such additional instruments as may be reasonably necessary or convenient to
implement and carry out the intent and purpose of this Agreement.
11.7 SURVIVAL OF TERMS AND CONDITIONS
The following Sections shall survive the termination of this Agreement to the
full extent necessary for their enforcement and the protection of the Party in
whose favour they run: Sections 3.7, 4.2, 5.2(a), 5.3, 5.4(b) and 11.11 and
Article 10.
11.8 ENTIRE AGREEMENT
This Agreement contains the entire understanding of the Parties and supersedes
all prior agreements and understandings between the Parties relating to the
subject matter hereof including without limitation, the letter of intent dated
February 18, 2002.
- 22 -
11.9 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and enure to the benefit of the respective
successors and permitted assigns of the Parties. In the event of any conflict
between this Agreement and any Schedule attached hereto, the terms of this
Agreement shall be controlling.
11.10 SEVERABILITY
If a court of competent jurisdiction determines that any term, part or provision
of this Agreement is unenforceable, illegal, or in conflict with any federal,
provincial, territorial, or local laws, the Parties intend that the court reform
that term, part or provision within the limits permissible under law in a way as
to approximate most closely the intent of the Parties to this Agreement;
provided that, if the court cannot make a reformation, then that term, part or
provision shall be considered severed from this Agreement. The remaining
portions of this Agreement shall not be affected and it shall be construed and
enforced as if it did not contain that term, part or provision.
11.11 NO PARTNERSHIP
Nothing contained in this Agreement shall be deemed to constitute either Party
the partner of the other, nor, except as otherwise herein expressly provided, to
constitute either Party the agent or legal representative of the other, nor to
create any fiduciary relationship between them. It is not the intention of the
Parties to create, nor shall this agreement be construed to create, any mining,
commercial or other partnership. Neither Party shall have any authority to act
for or to assume any obligation or responsibility on behalf of the other Party,
except as otherwise expressly provided herein. The rights, duties, obligations
and liabilities of the Parties shall be several and not joint or collective.
Each Party shall be responsible only for its obligations as herein set out and
shall be liable only for its share of the costs and expenses as provided herein,
it being the express purpose and intention of the Parties that their ownership
of Assets and the rights acquired hereunder shall be as tenants in common. Each
Party shall indemnify, defend and hold harmless the other Party, its directors,
officers, employees, agents and attorneys from and against any and all losses,
claims, damages and liabilities arising out of any act or any assumption of
liability by the indemnifying Party, or any of its directors, officers,
employees, agents and attorneys done or undertaken, or apparently done or
undertaken, on behalf of the other Party, except pursuant to the authority
expressly granted herein or as otherwise agreed in writing between the Parties.
11.12 FURTHER GROUND WITHIN AREA OF INTEREST AND OTHER BUSINESS OPPORTUNITIES
(a) If, during the currency of this Agreement, any Party or any
Affiliate of a Party (herein called an "Acquiring Party") shall
stake or otherwise acquire or propose to acquire any right to
explore or mine or both or an interest in any such rights, direct
or indirect, whether by contract, staking or otherwise any part
of which is within the Area of Interest (as defined in Section
1.1) which acquisition or proposed acquisition was not part of
the original Properties (herein called an "Additional Right"),
such Additional Right shall be subject to the terms of this
Agreement. It is also agreed that any mineral claim, part of
which includes a restaking of any ground that was originally part
of the Properties, shall
- 23 -
nonetheless constitute an Additional Right to be dealt with under
this Section 10.12;
(b) The Acquiring Party shall give notice (the "Notice") to the other
Party who shall be the "Notified Party", such Notice shall
specify the nature and location of the Additional Right, the
acquisition costs and other terms upon which such acquisition is
proposed to be made or was made and any other information which
the Acquiring Party has which may be reasonably expected to be
pertinent to the Notified Party in determining whether it wishes
to have such Additional Right made part of the Properties which
are subject to this Agreement;
(c) If the Notified Party elects by written notice to the Acquiring
Party (notice to an Affiliate of a Party may be given to the
Party affiliated) given within thirty (30) days of the receipt of
the Acquiring Party's Notice, to continue such Additional Right
subject to this Agreement, the Acquiring Party shall pay all
acquisition costs therefor and such Additional Right shall
thereafter form part of the Properties;
(d) Each Party shall have the unrestricted right to stake or
otherwise acquire any rights to explore or mine or both or any
other rights in any property outside the Area of Interest, and to
use information obtained under this Agreement to do so without
advising the other Party or without allowing the other Party to
acquire any interest in any such rights or properties, both
before and after the Effective Date. Except as expressly provided
in this Agreement, each Party shall have the unrestricted right
to explore, develop and mine any lands now owned or hereafter
acquired by it without allowing the other Party any participation
in such activities; provided, however, that if any orebody should
be developed which straddles the boundary of the Area of Interest
and any such lands the Parties will use their reasonable best
efforts to enter into party wall or unitization agreements with
regard to the mining of any such orebody.
11.13 WAIVER OF RIGHTS OF PARTITION AND SALE
The Parties hereby waive and release all rights of partition or of sale in lieu
thereof, or other division of Assets, including any such rights provided by
statute and all similar rights applicable in the Province of British Columbia.
11.14 TRANSFER OR TERMINATION OF RIGHTS TO PROPERTIES
Except as otherwise provided in this Agreement, neither Party shall Transfer all
or any part of its interest in the Assets or this Agreement or otherwise permit
or cause such interests to terminate.
11.15 IMPLIED COVENANTS
There are no implied covenants contained in this Agreement except those of good
faith, fair dealing and development.
- 24 -
11.16 EMPLOYEES
Employees of the Operator are not and shall not be employees of the Party which
is not the Operator.
11.17 EXPENSE AND COMMISSIONS
Each Party shall pay its own legal and other costs and expenses incurred in
connection with this Agreement and agrees to save harmless each other Party from
and against any and all claims whatsoever for any commissions or other
remuneration payable or alleged to be payable to anyone acting on its behalf.
11.18 COUNTERPARTS
Each Party agrees that this Agreement and all documents and instruments
contemplated hereby may be executed in one or more counterparts which together
shall be deemed to constitute one valid and binding agreement or instrument, as
the case may be. Delivery of the counterparts may be effected by means of
facsimile transmission.
11.19 RULE AGAINST PERPETUITIES
Notwithstanding any provision of this Agreement, the Parties do not intend that
there shall be any violation of the rule against perpetuities, the rule against
unreasonable restraints on the alienation of property or any related rule
against interests that last too long. Accordingly, if any right, or option to
acquire any interest in the Properties, in a Participating Interest, in the
Assets, or in any real property exists under this Agreement, such right or
option must be exercised if at all, so as to vest such interest in the acquiring
Party within time periods permitted by applicable rules. If, however, any such
violation should inadvertently occur, the Parties hereby agree that a court
shall reform that provision in such a way as to approximate most closely the
intent of the Parties within the limits permissible under such rules.
11.20 ARBITRATION OF DISPUTES
(a) The parties contemplate all matters in dispute under this
Agreement may be settled by final and binding arbitration with no
appeal from the decision of the arbitrators; provided, however,
no party may refer any matter to arbitration without first having
given ten (10) Business Days advance written notice to each other
party specifying in detail the matter to be arbitrated, its
proposed resolution of such matter and the intention to refer the
matter to arbitration (collectively, a "NOTICE OF INTENDED
ARBITRATION"). After ten (10) Business Days have elapsed from the
delivery to each party of a Notice of Intended Arbitration
without resolution of the matter, the party who gave such notice
may refer the dispute to arbitration pursuant to all the
provisions of the Commercial Arbitration Act, (British Columbia)
and regulations thereunder (collectively, the "ARBITRATION
PROVISIONS") by naming an arbitrator and notifying each other
party of the arbitrator appointed by it accompanied by that
arbitrator's acceptance of his or her appointment;
- 25 -
(b) If the Parties agree in writing on a single arbitrator, any
matter covered by a Notice of Intended Arbitration under this
Agreement may be referred by the Parties to arbitration by a
single arbitrator in lieu of the arbitration panel otherwise
contemplated herein. The Parties contemplate the arbitrator(s)
appointed will be persons qualified by experience and skill in
the area(s) referred to in the Notice of Intended Arbitration.
The Parties further contemplate the arbitrator(s) will determine
the matter specified in the Notice of Intended Arbitration,
reduce their decision to writing and deliver a copy to each
party, all within forty-five (45) days of the appointment of the
last arbitrator, subject to any reasonable delay due to
unforeseen circumstances. Notwithstanding the foregoing, if the
single arbitrator fails to make a decision within sixty (60) days
after appointment or if the arbitrators, or a majority of them,
fail to make a decision within sixty (60) days after the
appointment of the third arbitrator, then either of the Parties
may by notice to the other elect to have a new single arbitrator
or arbitrators chosen in like manner as if none had previously
been selected;
(c) If the Parties do not agree on a single arbitrator, the other
Party shall, within ten days of the delivery of the notice of
appointment and acceptance of the first appointed arbitrator,
appoint an arbitrator and deliver to each other party notice of
such appointment and the acceptance of the appointed arbitrator.
If two arbitrators are appointed, those arbitrators shall within
fifteen (15) days of the appointment of the second of them choose
a third member of the arbitration panel. If either Party fails to
choose an arbitrator or the two arbitrators appointed by the
Parties, fail to choose a third member of the arbitration panel,
a judge of the Supreme Court of British Columbia shall, upon the
request of either Party appoint the arbitrator or arbitrators to
complete the three person arbitration panel;
(d) The Parties agree that proceedings before the arbitrator(s) shall
take place in Vancouver, British Columbia, or such other place as
the Parties may determine;
(e) Each Party to this Agreement expressly agrees with each other
Party that the arbitrators appointed hereunder shall have all the
rights and obligations provided for in the Arbitration Provisions
and additionally that the arbitrators shall be entitled to
finally determine all questions of law, fact and mixed fact and
law without reference or appeal to any court;
(f) The fees and expenses of the prevailing Party is determined by
the arbitrator(s) shall be paid by the other Party; and
(g) None of the Parties concerned shall be deemed to be in default of
any matter being arbitrated until ten (10) days after the
decision of the arbitrator(s) is delivered to all of them.
11.21 CURRENCY
All monetary figures used in this Agreement are in Canadian currency.
- 26 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
XXXXXX DODGE CORPORATION OF
CANADA, LIMITED
Per: /s/
-----------------------------------
FRONTEER DEVELOPMENT GROUP INC.
Per: /s/ XXXX X'XXX
-----------------------------------
Xxxx X'Xxx
President
SCHEDULE A - PART 1
PROPERTY LIST
Conjuror Properties, Mining Division, Northwest Territories
SCHEDULE A - PART 2
LOCATION MAP
--------------------------------------------
This is Schedule B to an Option and Joint
Venture Agreement between Xxxxxx Dodge
Corporation of Canada, Limited ("PDC") and
Fronteer Development Group Inc. ("FRG")
dated as of October 4th, 2002
--------------------------------------------
DEFINITIONS, CALCULATIONS AND PAYMENT OF ROYALTY
The Royalty is two percent (2%) on all By-Products and Other Mineral Products as
set out in Section 6.1 of the Agreement (subject to exercise of the provisions
of Sections 6.2 and 6.3 of the Agreement) to which this Schedule is attached and
calculated and paid by FRG or its successors or assigns (the "Payor") to PDC or
its successors or assignees (the "Royalty Holder") in accordance with the
following provisions:
A. DEFINITIONS
Unless otherwise set forth, all capitalized terms used in this Schedule shall
have the meaning ascribed to them in the Agreement to which this Schedule is
attached (the "Agreement"):
"Allowable Taxes" shall mean production taxes, severance taxes, and
sales, privilege and other taxes (excepting income
taxes) imposed, levied, assessed, or measured by
or on the value of production of Subject Minerals
from the Properties.
"Allowable Transportation
Costs" shall mean the actual costs of transportation of
By-Products or Other Mineral Products (as such
terms are herein defined) from the mine site to a
mill or processing facility and from a mill or
processing facility to the point of sale
(including, without limitation, packaging,
freight, insurance, transportation taxes,
handling, port, demurrage, delay, and forwarding
expenses incurred by reason of or in the course of
such transportation).
"By-Products" shall mean all Subject Minerals (as hereinafter
defined) in the form of ores, mine waters,
leachates, pregnant liquors, pregnant slurries,
concentrated slurries, precipitates, whether in
dry or slurry state, concentrates, or products
beneficiated, upgraded, or refined further than
concentrates.
"Calendar Quarter" means each three-month period ending March 31st,
June 30th, September 30th and December 31st of
each calendar year.
"Commercial Production" shall mean the production of Subject Minerals from
the Properties by continuous conventional,
solution or any other mining operations producing
Subject Minerals in commercial quantities and
grades.
"Gross Value" has the meaning given to it in Part C hereof.
- 2 -
"Mineral Content" means all marketable ores, metals and minerals
contained in Subject Minerals and Other Ore as
separately estimated by the Payor using head grade
or assays taken prior to entering mill or heap
xxxxx facilities, mill or heap xxxxx operation
recovery levels, and adjustments at the refinery,
as key components in the calculation of Mineral
Content.
"Mineral Price Quotation" for a By-Product or Other Mineral Product means
the final sale price as quoted on the London
Metals Exchange, as published in Metals Week or a
similar publication. If publication of the final
quotation on the London Metals Exchange shall be
discontinued, the parties shall select a
comparable commodity quotation for purposes of
calculating the Smelter Returns and Net Smelter
Returns. If such selection has not been completed
prior to the end of the calendar month following
the month in which the quotation is discontinued,
the average quotation for the calendar month in
which the quotation is discontinued shall be used
on an interim basis pending such selection.
"Net Smelter Returns"
or "NSR" for a Calendar Quarter in respect of all of the
By-Products or Other Mineral Products means the
sum of (i) for each of the By-Products or Other
Mineral Products, the average Mineral Price
Quotation for the By-Product or Other Mineral
Product for a Calendar Quarter multiplied by the
total number of appropriate units of measurement
of the By-Product or Other Mineral Product
beneficiated by the Payor or credited by the
smelter, refiner or other bona fide purchaser to
the Payor during that Calendar Quarter; less (ii)
the deductions, adjustments and credits set forth
in Section D below.
"Other Mineral Products" shall mean all Subject Minerals (as hereinafter
defined) mined or extracted primarily for values
derived from their content of minerals in the form
of ores, mine waters, leachates, pregnant liquors,
pregnant slurries, concentrated slurries,
precipitates, whether in dry or slurry state,
concentrates or products beneficiated, upgraded or
refined further than concentrate, including
mineral products produced from waste dumps,
tailings or other stockpiled material.
"Other Ore" means all ore mined from real property other than
the Properties.
"Payor" means FRG or its successor or assign that produces
and sells Subject Minerals from the Properties
from which the Royalty Holder is entitled to a
Royalty, as provided in the Agreement.
"Property" shall mean the Properties as defined in the
Agreement.
- 3 -
"Royalty Holder" means PDC or its successors or assigns
that become entitled to a Royalty as provided in
the Agreement.
"Smelter Returns" for a Calendar Quarter in respect of all of the
By-Products or Other Mineral Products means for
each of By-Products or Other Mineral Products, the
average Mineral Price Quotation for the Product
for a Calendar Quarter multiplied by the total
number of appropriate units of measurement of the
Product beneficiated by the Payor or credited by
the smelter, refiner or other bona fide purchaser
to the Payor during that Calendar Quarter.
"Subject Minerals" shall mean all metals, minerals, ores, mine
waters, leachates, pregnant liquors, pregnant
slurries, concentrated slurries, precipitates, or
concentrates in whatever form, found in or on the
Property excepting coal, oil, gas and associated
hydrocarbons. Subject Minerals shall include
By-Products and Other Mineral Products.
B. RESERVATION OF ROYALTY
The Royalty Holder shall be entitled to receive and the Payor shall pay:
in respect of By-Products or Other Mineral Products produced from the
Properties, as a Net Smelter Return Royalty, such percentage of Net Smelter
Returns as is calculated from time to time as set out in the opening
paragraph of this Schedule.
C. BY-PRODUCTS; OTHER MINERAL PRODUCTS
In the event By-Products or Other Mineral Products are sold, in calculating the
Net Smelter Return Royalty, the Payor shall be entitled to deduct from Smelter
Returns the following costs, to the extent incurred and borne by the Payor in
respect of By-Products and Other Mineral Products:
(a) all custom milling, smelting, minting and refining costs,
treatment charges and penalties including, but without being
limited to, metal losses and penalties for impurities as well as
any costs for weighing, sampling and assaying of By-Products and
Other Mineral Products in preparation for shipment to a smelter,
refinery or purchaser;
(b) all costs of transporting the By-Products and Other Mineral
Products from the Properties to places of treatment and,
ultimately, to bona fide purchasers, including, without
restricting the generality of the foregoing, any and all costs of
insurance in respect thereto;
(c) all costs and expenses of converting xxxxx solutions into
cathodes, dore or other similar products, including without
limitation, costs of electrowinning;
- 4 -
(d) all sampling, assaying and representation charges in connection
with sampling and assaying carried out after the By-Products and
Other Mineral Products have left the Properties;
(e) all costs and expenses of marketing the By-Products and Other
Mineral Products; and
(f) taxes of any kind, including any and all royalties levied by any
government, sales taxes levied on the By-Products and Other
Mineral Products or on their production or sale, but excluding
income taxes; if such charges are actual costs payable out of the
proceeds received from a bona fide purchaser or are shown as
deductions therefrom.
D. FURTHER BENEFICIATION
The Operator, in its sole discretion and for its sole benefit, risk and account,
may take concentrates of By-Products or Other Mineral Products and treat,
beneficiate, upgrade, refine or enrich the same further than the concentrate
state, either in its own facilities or in facilities owned or controlled by
others.
E. GENERAL PROVISIONS
1. Arm's Length Provision
If smelting and/or refining are carried out in facilities owned or controlled by
the Payor, charges, costs and penalties for such operations, including
transportation, shall mean the amount that the Payor would have incurred if such
operations were carried out at facilities not owned or controlled by the Payor
then offering similar custom services for comparable products on prevailing
terms.
2. Payment of the Royalty
All Royalty or provisional royalty payments will be payable on or before the
45th day following each Calendar Quarter. Each such quarterly payment to the
Royalty Holder shall be accompanied by a statement in reasonable detail showing
the calculation of the payment. Each such quarterly payment shall be subject to
adjustment as provided below in the next quarterly payment or when the final
report for the year is issued as specified below.
3. Provisional Payments
If any Royalty becomes due and payable to the Royalty Holder prior to the
Payor's final estimates of the total amount payable, then the Payor shall pay
the Royalty Holder a provisional royalty payment using the Payor's then current
estimates of the amount payable for Products produced during the Calendar
Quarter.
- 5 -
4. Adjustments
The following adjustments shall be taken into account in determining the Royalty
or provisional royalty payments and shall be specified in a statement which will
accompany each payment:
(a) Any adjustments to charges, costs, deductions or expenses imposed
upon or given to the Payor but not taken into account in
determining previous Royalty payments;
(b) Any adjustments in the number of appropriate units of measurement
of Products produced by the Payor, or previously credited to the
Payor by a smelter, refiner or bona fide purchaser of Products
shipped or sold by the Payor;
(c) Any adjustments in Mineral Content and average percentage
recovery; and
(d) Any payments that have not otherwise been credited against
previous Royalty payments.
5. Annual Final Report
Within 90 days after the end of each calendar year, the Payor shall deliver or
cause to be delivered to the Royalty Holder a final report for the year
certified as being accurate by a responsible officer of the Payor showing in
reasonable detail the calculation of the Royalty due the Royalty Holder for the
prior year and all adjustments to the quarterly or other periodic reports and
payments for the year. With such final report, the Payor shall, if applicable,
make such additional Royalty payment as is required by the report. If such
report indicates that the Royalty Holder has received more than it should have
been paid in respect of the Royalty due to the Royalty Holder, then the excess
shall be deducted from the next payment obligation owed pursuant to the
provisions of this Schedule B or, in the event of a temporary or permanent
cessation of production, the Royalty Holder shall repay the excess within 15
days of the annual report.
6. Assignment by Payor
Upon any assignment, conveyance, termination or abandonment, as the case may be,
by the Payor, the Payor shall have no further obligation to the Royalty Holder
in respect thereof; provided that, in the case of assignment or conveyance, it
shall be a condition of any assignment or conveyance that the assignee or
transferee shall have agreed to assume the Payor's obligation to the Royalty
Holder to pay the Royalty in respect of that portion of the Properties acquired
by such assignee or transferee.
7. Assignment by Royalty Holder
Notwithstanding anything to the contrary herein contained, if any part of the
right to receive the Royalty is assigned by the Royalty Holder, it shall be a
condition of such assignment that the assignee agree with the Payor and all
other parties entitled to receive any part of the Royalty as follows:
- 6 -
(a) the amount of any Royalty payable hereunder shall be settled only
with the Royalty Holder or an authorized nominee (herein
collectively called the "Nominee") as designated by notice to the
Payor (such notice to be executed by all parties entitled to
receive any part of the Royalty), and such settlement shall be
final and binding upon all interested parties and the Payor shall
not be required to make any accounting to any person save such
Nominee;
(b) payment of the Royalty shall be made only to or to the order of
the Nominee "In Trust" and such payment shall constitute a full
and complete discharge to the Payor and it shall have no
obligation to see to the distribution of any such payment;
(c) the Payor may settle disputes arising hereunder with the Nominee
and such settlement shall be final and binding upon all
interested parties;
(d) the Payor may rely upon any direction, advice or authorization
signed by the Nominee and may act thereon as if the same was
signed by all interested parties; and
(e) the Payor shall not be required to deal with any person except
the Nominee. Each interested party shall exercise all of their
respective rights only through the Nominee and shall require each
of their respective assignees to agree in writing to be bound by
the provisions hereof.
8. Records and Provision for Audit to Resolve Objections
All books and records used by the Payor to calculate the Royalty due hereunder
shall be kept in accordance with generally accepted accounting principles varied
only by the specific provisions hereof. The Payor shall maintain up-to-date and
complete records of the production of all Mineral Products. If treatment or
smelting of Mineral Products is performed off the Properties, accounts records,
statements and returns relating to such treatment and smelting arrangements
shall be maintained by the Payor. The Royalty Holder shall have the right at all
reasonable times during normal business hours to inspect such accounts, records,
statements and returns and make copies thereof at its own expense for the sole
purpose of verifying the amount of the Royalty.
All payments of the Royalty made pursuant to the final report that is to be
issued within 90 days of the end of each calendar year shall be considered final
and in full satisfaction of all obligations of the Remaining Party with respect
thereto, unless the Royalty Holder gives the Remaining Party written notice
describing and setting forth a specific objection to the calculation thereof
within 90 days after receipt by the Royalty Holder of the annual final report
herein provided in subsection E.5. If the Royalty Holder objects to a particular
quarterly statement delivered hereunder, the Royalty Holder shall, for a period
of 90 days after the Payor's receipt of notice of such objection, have the
right, upon reasonable notice and at a reasonable time, to have the Royalty
payment in question audited by a firm of chartered accountants acceptable to the
Royalty Holder and to the Payor. If such audit determines that there has been a
deficiency or an excess in the payment made to the Royalty Holder such
deficiency or excess shall be resolved by adjusting the next quarterly payment
due hereunder. The Royalty Holder shall pay all costs of
- 7 -
such audit unless a deficiency of 5% or more of the amount due is determined to
exist. The Payor shall pay the costs of such audit if a deficiency of 5% or more
of the amount due is determined to exist. Failure on the part of the Royalty
Holder to make claim on the Payor for adjustment in such 90-day period shall
establish the correctness of the final report and preclude the filing of
exceptions thereto or making of claims for adjustment thereon.
9. Royalty Running With the Properties
As soon as the Properties constitute "real property", Payor grants and conveys
to Royalty Holder an interest in all portions of the Properties to which the
Royalty applies sufficient to secure the Royalty payments herein provided for.
