July 5, 2002
WOOL BAY PROPERTY OPTION AGREEMENT
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BETWEEN
4763 NWT LTD.
AND
NORTH AMERICAN GENERAL RESOURCES CORPORATION
TABLE OF CONTENTS
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1. DEFINITIONS 2
2. OPTION 3
3. TITLE 4
4. GROSS OVERRIDING ROYALTY 5
5. EARN-IN OBLIGATIONS 5
6. ACCELERATION, FORCE MAJEURE 6
7. PERFORMANCE OF WORK 6
8. VESTING OF INTEREST 7
9. TERMINATION 7
10. RESTRICTION ON ASSIGNMENT 8
11. NOTICES 9
12. REPRESENTATIONS AND WARRANTIES 9
13. CONFIDENTIALITY 11
14. MISCELLANEOUS 12
SCHEDULE A PROPERTY
SCHEDULE B GROSS OVERRIDING ROYALTY
SCHEDULE C JOINT VENTURE AGREEMENT
-i-
WOOL BAY PROPERTY OPTION AGREEMENT
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THIS AGREEMENT is made the 5th day of July, 2002.
BETWEEN:
4763 NWT LTD., a company incorporated under the laws of the Northwest
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Territories
(hereinafter called the "Optionor")
AND:
NORTH AMERICAN GENERAL RESOURCES CORP., a Company incorporated under
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the laws of British Columbia
(hereinafter called "NAGR")
THIS AGREEMENT WITNESSES that in consideration of the sum of $10 now paid by
NAGR to the Optionor (the receipt and sufficiency of which is hereby
acknowledged) and the covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
1. DEFINITIONS
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1.1 "Affiliate" means a corporation which directly or indirectly controls,
or is controlled by or is under common control with, a party. The term
"control" as used herein means the rights to the exercise of, directly or
indirectly, more than 50% of the voting rights attributable to the shares of the
controlled company.
1.2 "Expenditures" means without duplication all direct and indirect
expenses of or incidental to Operations after April 10, 2002 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 or
any part of it. For greater certainty, the costs, fees and expenses of
recording work for assessment credit under applicable legislation are included
in Expenditures. There shall be added to and included in "Expenditures"
reasonable charges by NAGR for services provided in connection with Operations
by geologists or others in the employment of NAGR and reasonable charges for
machinery, tools, equipment and camp facilities owned by NAGR and used or
employed in Operations. There shall be added to and included in "Expenditures"
a charge for NAGR's
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administrative expenses equal to 10% of all direct and indirect expenses and
charges.
1.3 "Force Majeure" means any cause beyond NAGR's reasonable control,
including law or regulation, action or inaction of civil or military authority,
interference by Natives, Native rights groups, environmentalists or other
activists, inability to obtain any licence, permit or other authorization that
may be required, unusually severe weather, fire, explosion, flood, insurrection,
riot, labour dispute, inability after diligent effort to obtain workmen or
material, delay in transportation and acts of God, but not including lack of
funds.
1.4 "GOR" or Gross Overriding Royalty" means the royalty in favour of the
Optionor described in Section 4.1, in the form attached hereto as Schedule B.
1.5 "Operations" includes any and every kind of work which NAGR in its sole
discretion elects to do or to have done on or in respect of the Property or the
products derived therefrom and all expenditures in respect of or incidental to
such work.
1.6 "Property" means the mining claims described in Schedule A to this
Agreement, and all rights, licences and permits incidental or ancillary thereto
and any substitutions or replacements therefor including any mining leases that
may replace such mining claims, all of which are located in Mackenzie District,
Nunavut, Canada.
1.7 "$" means Canadian dollars.
1.8 Attached to and forming part of this Agreement are the following
Schedules:
Schedule A - Property
Schedule B - Gross Overriding Royalty
Schedule C - Joint Venture Agreement
2. OPTION
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2.1 The Optionor hereby grants to NAGR the sole and exclusive right and
option (the "Option") exercisable in the manner described in Section 8, to
acquire a 70% undivided interest in the Property, free and clear of all liens,
charges, encumbrances, security interests and adverse claims except for the GOR,
and any Aboriginal rights or interests, all of which shall be borne by the
Optionor and NAGR in proportion to their respective Participating Interests from
time to time under the Joint Venture Agreement.
2.2 The Optionor hereby grants to NAGR, its servants, agents and independent
contractors, the sole and exclusive right and option to:
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2.2.1 enter upon and have immediate possession of the Property;
2.2.2 carry out Operations on the Property as NAGR may in its sole
discretion determine;
2.2.3 bring and install on the Property and remove from time to time
such buildings, plant, machinery, equipment, tools, appliances
and supplies as NAGR may deem necessary; and
2.2.4 remove from the Property reasonable quantities of rocks, ores,
minerals and metals and to transport the same for the purpose of
sampling, testing and assaying.
2.2.5 NAGR will be the exclusive operator of the Property as provided
in this Agreement; and
2.3 Any diamonds and samples from the Property may be used by NAGR for
exploration, development and valuation purposes. If NAGR does not exercise the
Option, any diamonds taken from samples from the Property that have not been
destroyed by processing or testing will be returned to the Optionor.
3. TITLE
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3.1 The Optionor shall hold the Property in trust for the parties in
accordance with their respective interests therein and subject to the terms of
this Agreement.
3.2 If the Optionor's title to the Property is now or at any time hereafter
deficient, defective or encumbered in any way other than as provided by Section
2.1 then, without limiting NAGR's rights and remedies provided hereunder or by
law, such deficiency, defect or encumbrance may be remedied or removed by NAGR
in which event the cost and related expenses thereof may at NAGR's option be
deducted from any amounts or payments which may be or become due or payable to
the Optionor hereunder or may be credited against the Expenditures contemplated
by Section 5.1.
3.3 NAGR may at any time and from time to time during the currency of the
Option abandon, surrender, allow to lapse, reduce the area of or otherwise deal
with any part or parts of the Property as it may determine, provided that NAGR
shall give to the Optionor not less than 90 days' notice of its intention to do
so and shall ensure that the mining claims then comprised in the Property shall
be in good standing for 180 days at a minimum, commencing at the expiry of the
90 day notice period. If requested by the Optionor by notice to NAGR within that
period of time, NAGR shall deliver forthwith to the Optionor duly executed
transfers of the part or parts of the Property so intended to be dealt with.
Any part or parts of the Property so dealt with shall cease to be included in
the Property and shall cease to be subject to this Agreement for all purposes.
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3.4 NAGR shall:
3.4.1 record for assessment credit under the Canada Mining Regulations
sufficient work to maintain the Property in good standing until
at least 180 days subsequent to notice of termination of the
Option as provided in Section 9 of this Agreement; and
3.4.2 subject to section 3.3 keep the Property free of all liens and
encumbrances arising out of Operations on the Property.
4. GROSS OVERRIDING ROYALTY
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4.1 In addition to the consideration provided in Section 5.1, the Optionor
reserves for itself and shall be entitled to receive a gross overriding royalty
equal to 2.5% of all products mined and removed from the Property, to be
calculated and paid in accordance with Schedule B to this Agreement. At the
discretion of NAGR, it may buy down 1% of the Gross Overriding Royalty for $2.5
million, leaving a 1.5% Gross Overriding Royalty to the Optionor.
5. EARN-IN OBLIGATIONS
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5.1 5.1 NWT, in consideration of the sum of $10, the receipt and
sufficiency of which is hereby acknowledged, hereby grants to the Optionors the
exclusive right and option (the Option") to acquire a 70% undivided interest in
and to the Property in consideration of:
5.2 In order to exercise the Option as to an undivided 70% interest in
consideration of exploration and mining rights to the Property NAGR must:
5.2.1 pay the sum of $5000.00 to the Optionor on or before July 5,
2002;
5.2.2 incur, as operator, Expenditures on the Property totalling
$4000.00 per year for four years after the date of this
Agreement; and
5.2.3 issue to the Optionor 20,000 common shares of NAGR on signing of
this Agreement; all such shares to be subject to such
restrictions as to their transferability by the Optionor as may
be applicable.
6. ACCELERATION, FORCE MAJEURE
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6.1 NAGR may accelerate any or all of the activities, Expenditures or share
issuances contemplated by Sections 5.2. NAGR may at any time from time to time
pay to the Optionor money in lieu of conducting activities, issuing shares or
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incurring Expenditures under Section 5.2 in which event NAGR shall be deemed to
have incurred additional Expenditures in the same amount as the amount of any
such activity or payment and in satisfaction of such of the provisions of
Section 5.2 as indicated by NAGR at the time of the making of such payment. Any
excess payments or Expenditures made or incurred in any period will be carried
forward and applied as a credit against the payment or Expenditures, as the case
may be, to be made in the next succeeding period or periods.
6.2 If from time to time NAGR is prevented by Force Majeure from conducting
activities or incurring Expenditures in the amounts and times provided in
Section 5.1 then NAGR shall have such additional time as is reasonable in the
circumstances to conduct activities, issue shares or incur Expenditures in such
amounts and times, the amount of such additional time not to exceed the duration
of the Force Majeure.
7. PERFORMANCE OF WORK
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7.1 In exercising its rights under Section 2.2 NAGR shall comply with all
applicable laws, rules and regulations and shall carry out Operations in a good
and workmanlike manner in accordance with generally accepted mining practice.
7.2 NAGR shall indemnify and save harmless the Optionor and its officers,
directors, employees, agents and representatives from and against any and all
claims, debts, demands, suits, actions and causes of action whatsoever which may
be brought or made against the Optionor and its officers, directors, employees,
agents and representatives by any person, firm or corporation and all loss,
cost, damages, expenses and liabilities which may be suffered or incurred by the
Optionor and its officers, directors, employees, agents and representatives
arising out of or in connection with or in any way referable to, whether
directly or indirectly, the entry on, presence on, or activities on the Property
or the approaches thereto by NAGR or its servants or agents including without
limitation bodily injuries or death at any time resulting therefrom or damage to
property, unless and to the extent due to the acts or omissions of the Optionor
or its servants, agents or representatives.
7.3 The Optionor shall at all reasonable times have access to the Property
on reasonable notice to NAGR, provided that the Optionor shall not interfere
with NAGR's operations hereunder and that NAGR shall be under no liability to
the Optionor for any personal injuries including death or for any damage to the
property of the Optionor unless such injury or damage is due to the gross
negligence or wilful default of NAGR, its servants, agents or representatives.
The Optionor shall have access to all technical data pertaining to the property.
7.4 NAGR will provide to the Optionor quarterly reports showing in
reasonable detail the work performed in connection with the Property, the
results obtained and the Expenditures incurred. NAGR will provide a summary
report of all such
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activities annually within 60 days of the conclusion of each program of work.
NAGR will not be required to disclose or report information or data that
pertains to mining claims that do not form part of the Property.
8. VESTING OF INTEREST
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8.1 Upon NAGR satisfying the conditions in Section 5.2 and giving notice to
the Optionor, NAGR 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 70% undivided right, title and interest in the
Property free and clear of all liens, charges, encumbrances, security interests
and adverse claims, except as provided in Section 2.1.
8.2 Upon receipt of notice from NAGR stating that NAGR has incurred
Exploration Expenditures required per section 5.2.2 of this agreement and
delivering the shares to NWT as required by article 5.2.3 their future
relationship shall be governed by a Joint Venture Agreement among the parties,
as attached hereto as Schedule "C", which shall come into effect without it
having been executed by any party. The joint venture shall be determined
mutually by both parties at a future date. A principal element of the Joint
Venture Agreement will be that once the Joint Venture is achieved then the
parties will participate in future expenditures on the property proportional to
each party's interest.
8.3 Once the Joint Venture is in effect, if 4763 NWT Ltd chooses not to
participate in proposed programs under the Joint Venture Agreement, they will
dilute and once diluted to 10% or less they will revert to a 2.5% G.O.R.
8.4 The dilution formula in the Joint Venture Agreement, to be detailed in
Schedule "C", will be based on the expenditure of approximately $16,000.00.
9. TERMINATION
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9.1 The parties acknowledge and agree that NAGR has the right and option but
not the obligation to conduct the activity and incur the Expenditures referred
to in Section 5.2 and neither anything which NAGR might do nor any payment which
it makes or Expenditure which it incurs will obligate it to do anything more or
to incur any further Expenditures.
9.2 Subject to Section 9.1, NAGR may at any time let the Option lapse by
notice to the Optionor or by not satisfying any of the conditions referred to in
Section 5.1 whereupon this Agreement except Sections 3.3 and 9.3 shall
terminate.
9.3 If this Agreement is terminated pursuant to Section 9.2 before NAGR has
exercised the Option as described in Section 5.2, NAGR shall:
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9.3.1 within 180 days remove from the Property any machinery,
buildings, structures, facilities, equipment and all other
property of every nature and description erected, placed or
situated thereon by NAGR; any property not so removed at the end
of the 180 day period shall at the option of the Optionor become
the property of the Optionor; and
9.3.2 within the said 180 days leave the working and camp site in a
clean and environmentally acceptable condition.
9.4 If NAGR is prevented from or delayed in performing its obligations in
Subsections 9.3.1or 9.3.2 by Force Majeure, the relevant period of 180 days
referred to therein shall be extended by the period of Force Majeure.
10. RESTRICTION ON ASSIGNMENT
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10.1 Neither party shall sell, assign, transfer, convey or otherwise dispose
of or deal with or agree to sell, assign, transfer, convey or otherwise dispose
of or deal with its rights and interests in or with respect to the Property or
under or by virtue of this Agreement in whole or in part without the prior
written consent of the other party, not to be unreasonably withheld.
10.2 A party shall have the right without restriction under Section 10.1 to
assign, transfer, convey or otherwise dispose of all its rights and interests to
an Affiliate of such party.
10.3 In the event of an assignment, conveyance, transfer or other
disposition as contemplated in Section 10.2, the party making the same shall not
be relieved or discharged of any of its obligations or liabilities hereunder,
and the other party may continue to look to it for the performance thereof.
10.4 A party transferring its rights and interests as permitted hereby shall
require any transferee to execute a counterpart of this Agreement and thereby to
agree to be bound by the terms hereof in the same manner and to the same extent
as though a party hereto in the first instance, all without in any way
derogating from the provisions of Section 10.3.
11. NOTICES
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11.1 All notices, payments and other required communications ("Notices") to
one of NAGR or the Optionor by the other shall be in writing and shall be
addressed respectively as follows:
If to NAGR:
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X.X. Xxx 00000
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#620 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
If to the Optionor:
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0000 Xxxxxxx Xxxx
Xxxxxxxxxxx, XXX X0X 0X0
All Notices shall be given (1) by personal delivery to the addressee, or (2) by
electronic communication, with a confirmation sent by registered or certified
mail return receipt requested, or (3) by registered or certified mail or
commercial carrier return receipt requested. All Notices shall be effective and
shall be deemed delivered (1) 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, (2) if by
electronic communication on the next business day following receipt of the
electronic communication, and (3) if solely by mail or commercial carrier on the
next business day after actual receipt. A party may change its address by
Notice to the other party.
12. REPRESENTATIONS AND WARRANTIES
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12.1 The Optionor represents and warrants to NAGR that:
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12.1.1 4763 NWT Ltd. owns and possesses and has good and marketable
title to the Property free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances or other
claims whatsoever except for the GOR. Without limiting the
generality of the foregoing, 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 except as provided in Section 2.3;
12.1.2 the mining 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 the information in Schedule A is accurate; and no
person has protested and there is no basis for protesting the
recording of any such claims pursuant to section 28 of the Canada
Mining Regulations;
12.1.3 to the best of the Optionor's knowledge after due inquiry all
activities on or in relation to the Property up to the date
hereof have been in compliance with all applicable laws,
regulations and permits including those for the protection of the
environment and no conditions exist which could give rise to the
making of a remediation order or similar order in respect of the
Property or which could subject NAGR to liability;
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12.1.4 the Optionor has full power and authority to grant to NAGR the
----
rights provided in this Agreement;
12.1.5 the execution and delivery of this Agreement and the exercise
by NAGR of the rights granted to it under this Agreement will not
----
conflict with or be in contravention of any law, regulation or
order of any government, government department or other competent
authority including Ministerial orders and Orders-in-Council or
conflict with rights of third parties or result in a breach of or
default under any agreement or other instrument of obligation to
which the Optionor is a party or by which the Optionor or the
Property may be bound;
12.1.6 this Agreement constitutes a legal, valid and binding
obligation of the Optionor;
12.1.7 to the best of the Optionor's knowledge after due inquiry,
there are not any material suits, actions, prosecutions,
investigations or proceedings, actual, pending or threatened,
against or affecting the Optionor or that relates to or has a
material adverse effect on the Property;
12.1.8 to the best of the Optionor's knowledge after due inquiry, all
taxes, rates or other levies of every nature and kind heretofore
levied against the Property have been fully paid and satisfied;
12.1.9 neither the granting of the Option nor the exercise of it
constitutes a disposition by the Optionor of all or substantially
all of its property or undertaking; and
12.1.10 the Optionor is unaware of any material facts or circumstances
which have not been disclosed in this Agreement, which should be
disclosed to NAGR in order to prevent the representations in this
----
Section 12.1 from being materially misleading.
12.2 NAGR represents and warrants to the Optionor that:
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12.2.1 NAGR has full power and authority to enter into this Agreement
----
and the execution and delivery of this Agreement and the exercise
by the Optionor of the rights granted to it under this Agreement
will not conflict with or result in a breach of or default under
any agreement or other instrument of obligation to which NAGR is
----
a party or by which it may be bound; and
12.2.2 this Agreement constitutes a legal, valid and binding
obligation of NAGR.
----
12.3 The representations and warranties contained in Section 12.1 are
provided for the exclusive benefit of NAGR and a breach of any one or more of
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them may be waived by NAGR in writing in whole or in part at any time without
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prejudice to its rights in respect of any other breach of the same or any other
representation or warranty.
12.4 The representations and warranties contained in Section 12.2 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 representation or warranty.
12.5 It is agreed between the parties that any technical, economic or
geological information of any nature, including without limitation any studies,
reports, mining models, assays, drill hole data, geochemical reports, recovery
reports and other information concerning the Property and the existence,
location, quantity, quality or value of any minerals thereon or therein,
provided to, or made available by one party to the other under this Agreement or
prior to the effective date hereof, is provided without representation or
warranty and is at the sole risk of the party receiving the same. Such
information is provided "AS IS, WHERE IS" and EACH PARTY EXPRESSLY DISCLAIMS ALL
EXPRESS OR IMPLIED WARRANTIES CONCERNING THE SAME, AND EXPRESSLY EXCLUDING ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
13. CONFIDENTIALITY
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13.1 Subject to Section 13.2 all information received or obtained by NAGR or
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the Optionor hereunder or pursuant hereto shall be kept confidential by it and
no part thereof may be disclosed or published without the prior written consent
of the other except such information as may be required to be disclosed or
published by regulatory bodies having jurisdiction; provided that a party may
disclose in confidence information to any person or persons with whom it
proposes to contract pursuant to Section 10.1.
13.2 Confidential information shall not include the following:
13.2.1 information that, at the time of disclosure, is in the public
domain;
13.2.2 information that, after disclosure, is published or otherwise
becomes part of the public domain through no fault of the
recipient;
13.2.3 information that the recipient can show already was in the
possession of the recipient at the time of disclosure;
13.2.4 information that the recipient can show was received by it
after the time of disclosure, from a third party who was under no
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obligation of confidence to the disclosing party at the time of
disclosure.
13.3 Except as required by law or regulatory authority, neither NAGR nor the
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Optionor shall make any public announcements or statements concerning this
Agreement or the Property without the prior approval of the other, not to be
unreasonably withheld.
13.4 The text of any public announcements or statements including any news
release which the Optionor intends to make pursuant to the exception in Section
13.2 shall be made available to NAGR not less than 24 hours prior to publication
----
and NAGR shall have the right to make suggestions for changes therein. If NAGR
---- ----
is identified in such public announcement or statement it shall not be released
without the consent of NAGR in writing, not to be unreasonably withheld.
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14. MISCELLANEOUS
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14.1 Applicable Law. The terms and provisions of this Agreement shall be
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interpreted in accordance with the laws of British Columbia.
14.2 Regulatory Approval. This Agreement is subject to regulatory approval.
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14.3 Entire Agreement. This Agreement terminates and replaces all prior
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agreements, either written, oral or implied, between NAGR and the Optionor with
----
respect to the Property, and constitutes the entire agreement between the
parties with respect to the Property.
14.4 Void or Invalid Provision. If any term, provision, covenant or
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condition of this Agreement, or any application thereof, should be held by a
court of competent jurisdiction to be invalid, void or unenforceable, all
provisions, covenants and conditions of this Agreement, and all applications
thereof not held invalid, void or unenforceable shall continue in full force and
effect and in no way be affected, impaired or invalidated thereby.
14.5 Additional Documents. The parties shall do and perform all such acts
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and things, and execute all such deeds, documents and writings, and give all
such assurances, as may be necessary to give effect to this Agreement.
14.6 Good Faith. All parties shall act in good faith to fulfil their
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respective duties and obligations under this Agreement.
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14.7 Binding Effect. This Agreement shall enure to the benefit of and be
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binding upon the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NORTH AMERICAN GENERAL RESOURCES CORP.
By: /s/ Xxxxxx Xxxxx
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Title:
By: /s/ Xxxxxxxx Xxxxx
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Title:
4763 NWT LTD.
By: /s/ Xxxx Xxxxxx VP - NWT
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Title:
By: /s/ Xxx Xxxxxxx
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Title: President
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SCHEDULE A
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Description of Property
Claim Name Tag No. NTS
WLB1 F74601 85 J/08
The WLB1 claim was staked March 29, 2002 and recorded April 30, 2002 under the
terms of the Canadian Mining Regulations by the Miming Recorders Office in
Yellowknife, NWT. The WLB1 claim consists of 206 acres and is located
approximately 24 kilometres southeast of Yellowknife, NWT.
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SCHEDULE B
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Definition of Gross Overriding Royalty
Base Metals
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In respect of base metals, the phrase "Gross Overriding Royalty" means 2.5% of
NAGR's interest in the Base Net Smelter Returns from all ores mined from any of
the Properties which have a base metal or combination of base metals as the
contained element of greatest economic value and all concentrates and other
mineral products, metals or minerals which are derived therefrom prior to their
sale (the "Base Products"), where Base Net Smelter Returns equals the Base Gross
Proceeds from sales of such Base Products less Base Allowable Deductions, where:
(a) "Base Gross Proceeds" for any Base Product means the actual proceeds
received for the sale of such Base Product (for greater certainty,
including insurance proceeds in respect of any loss); and
(b) "Base Allowable Deductions" for any Base Product means the following costs,
charges and expenses paid, incurred, or deemed incurred by or on behalf of
NAGR with respect to such Base Product:
(i) charges for treatment in the smelting, refining and other beneficiation
process (including handling, processing, interest, and provisional
settlement fees, weighing, sampling, assaying umpire and representation
costs, penalties, and other processor deductions);
(ii) actual costs of transportation (including loading, freight, insurance,
security, transaction taxes, handling, port, demurrage, delay, and
forwarding expenses incurred by reason of or in the course of
transportation) of Base Product from the Properties to the place of
treatment;
(iii) costs or charges of any nature for or in connection with insurance,
storage, or representation at a facility where Base Product is treated; and
(iv) sales, use, severance, excise, net proceeds of mine, and ad valorem
taxes and any tax on or measured by mineral production, insofar as such
taxes are attributable to Base Product, but not including income taxes of
NAGR;
provided that when Base Product is treated, whether on or off the
Properties, in a facility wholly or partially owned by NAGR or an affiliate
of NAGR, Base Allowable Deductions will not include any costs that are in
excess of those which
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would be incurred on an arm's length basis, or which would not be Base
Allowable Deductions if those Base Products were treated by an independent
third party .
Precious Metals
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In respect of precious metals, the phrase "Gross Overriding Royalty" means 2.5%
of NAGR's interest in the Precious Net Smelter Returns from all ores mined from
the Properties and having a precious metal or combination of precious metals as
the contained element of greatest economic value, and all dor , concentrates and
other mineral products, metals or minerals which are derived therefrom prior to
their sale (the "Precious Products"), where Precious Net Smelter Returns equals
the Xxxxxxxx Xxxxx Proceeds from sales of such Precious Products less Precious
Allowable Deductions, where:
(a) "Xxxxxxxx Xxxxx Proceeds" for any Precious Product means the proceeds
received or deemed to have been received for the sale of such Precious
Product, determined as follows:
(i) if there is a sale of Precious Product in the form of refined gold,
then such gold will be deemed to have been sold at the average London
Bullion Market Association of P.M. Gold Fix, calculated by dividing the sum
of all such prices reported for the month in which it was produced by the
number of days in that month for which such prices were reported;
(ii) if there is a sale of Precious Product in the form of refined silver,
then such silver will be deemed to have been sold at the average New York
Silver Price as published daily by Handy & Xxxxxx (or, should that
publication cease, another similar publication acceptable 4763 NWT Ltd. and
NAGR, acting reasonably), calculated by dividing the sum of all such prices
reported for the calendar month in which it was produced by the number of
days in that month for which such prices were reported; and
(iii) if there is any other sale of Precious Product including, without
limitation, a sale in the form of raw ore, dor , concentrates, refined
metals other than gold or silver, and any loss of Precious Product in any
form, then the Xxxxxxxx Xxxxx Proceeds will be equal to the amount of the
proceeds actually received from the sale (for greater certainty , including
insurance proceeds in respect of any loss).
(b) "Precious Allowable Deductions" for any Precious Product means the
following costs, charges and expenses paid, incurred, or deemed incurred by
or on behalf of NAGR with respect to such Precious Product:
(i) charges for treatment in the smelting, refining and other beneficiation
process (including handling, processing, interest, and
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provisional settlement fees, weighing, sampling, assaying umpire and
representation costs, penalties, and other processor deductions);
(ii) actual costs of transportation (including loading, freight, insurance,
security, transaction taxes, handling, port, demurrage, delay, and
forwarding expenses incurred by reason of or in the course of
transportation) of Precious Product from the Properties to the place of
treatment and then to the place of sale;
(iii) costs or charges of any nature for or in connection with insurance,
storage, or representation at a facility where Precious Product is treated;
(iv) actual sales and brokerage costs; and
(v) sales, use, severance, excise, net proceeds of mine, and ad valorem
taxes and any tax on or measured by mineral production, insofar as such
taxes are attributable to Precious Product, but not including income taxes
of NAGR or 4763 NWT Ltd.;
provided that when Precious Product is treated, whether on or off the
Properties, in a facility wholly or partially owned by NAGR or an affiliate
of NAGR, Precious Allowable Deductions will not include any costs that are
in excess of those which would be incurred on an arm's length basis, or
which would not be Precious Allowable Deductions if those Precious Products
were treated by an independent third party.
Diamonds
--------
In respect of diamonds, the phrase "Gross Overriding Royalty" means 2.5 % of
NAGR's interest in the Diamond Net Sales Returns from all diamonds mined from
any of the Properties ("Diamonds"), where Diamond Net Sales Returns equals the
Diamond Gross Proceeds less Diamond Allowable Deductions, where:
(a) "Diamond Gross Proceeds" for any Diamond Product means the actual proceeds
received for the sale of such Diamonds (for greater certainty, including
insurance proceeds in respect of lost or damaged Diamonds); and
(b) "Diamond Allowable Deductions" means the following costs, charges and
expenses paid, incurred, or deemed incurred by NAGR:
(i) cost and expenses for preparing rough Diamonds for sale including,
without limitation, for sorting, weighing, grading, valuing, pricing,
parceling ( any or all of the foregoing, "sorting") and cleaning;
(ii) actual costs of shipping and transporting (including packaging,
insurance, security , transaction taxes, handling, port, demurrage, xxxxx,
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and forwarding expenses incurred by reason of or in the course of
transportation) Diamonds from the Properties to the place of sale;
(iii) costs and expenses for or in connection with insurance, security,
packing, storage or representation at a facility where the sorting or
cleaning of Diamonds takes place;
provided that when there is sorting or cleaning of Diamonds, whether on or off
the Properties, in a facility wholly or partially owned by NAGR or an Affiliate
of NAGR, Diamond Allowable Deductions will not include any costs that are in
excess of those which would be incurred on an arm's length basis, or which would
not be Diamond Allowable Deductions if the sorting or cleaning of the Diamonds
was being done by an independent third party.
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SCHEDULE C
-----------
JOINT VENTURE AGREEMENT
Between
4763 NWT LTD. ("OPTIONOR"), a company incorporated under the laws of the
Northwest Territories
and
NORTH AMERICAN GENERAL RESOURCES CORP. ("OPTIONEE"), a company duly incorporated
under the laws of British Columbia.
Dated this 5th day of July, 2002.
Upon the exercise of the option, North American General Resources Corp. (NAGR)
and 4763 NWT LTD. (4763) will be deemed to have formed a joint venture with
respect to further exploration, development and, if warranted, commercial
production of the Property, with the following initial interests:
NAGR (70%) and 4763 (30%)
Once the Joint Venture is in effect the following terms will apply:
1 a) Relationship of the Parties.
i. The relationship of the participants will be as tenants-in-common in
their respective participating interests. The liabilities of each of
them and their responsibilities for costs in relation to the Property
will be several and not joint nor joint and several and will be borne
severally in proportion to their respective participating interests.
Each participant will be entitled to its share of mineral production
from the Property.
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1b) Manager and Operator.
i. A management committee will be constituted with responsibility for
overseeing joint venture operations. Each of the participants will be
entitled to appoint two representatives to the management committee,
with each representative being entitled to vote in proportion to the
participating interest of the participant that appointed him. A
representative of the party who is the operator of the joint venture
will be the chairman of the management committee.
ii. The participant with the largest participating interest will be the
operator.
iii. The operator will have the right to cash call in advance to cover
anticipated approved program expenditures, including a reasonable
amount of working capital.
iv. The operator will report to the management committee periodically as
to the progress of work upon and the development of the Property.
v. The operator will have a lien on the participants' interests to secure
cost shares of committed expenditures, and the right to advance the
cost of the share of a participant in default.
vi. The operator will market all diamonds produced from the Property on
behalf of the Joint Venture.
1c) Initiation and Approval of Programmes.
i. The operator will propose and carry out programs as approved by the
management committee.
ii. Each of the participants may elect to participate in any such program
and if it does so will be obliged to contribute to the costs and
expenses of the program according to its respective participating
interest.
iii. If a participant elects not to participate in an approved program, its
interest will be diluted so as to be proportionate to the amount it
has contributed as compared with the aggregate amounts contributed by
all participants. If it elects to contribute and fails to do so, then
its participating interest will be diluted doubly.
iv. If a participating interest of a participant has been diluted to 10%
or less, then the participating interest will be automatically
converted to a royalty of 2.5% of the Net Smelter Returns on base
and/or precious metals and 2.5% Gross Over-riding Royalty on diamonds.
The NSR and GOR are explained within the Option Agreement.
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1d) Transfer Restrictions.
i. No participant will be entitled to dispose of its participating
interest (other than to affiliate) without first offering it to the
other participant.
ii. No encumbrance of any participating interest will be permitted except
for financing of development of the Property and then only subject to
the joint venture agreement and the operator's lien.
1e) The Joint Venture Agreement will be subject to laws of British Columbia.
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