CLEAR LAKE PROPERTY OPTION AGREEMENT
THIS
AGREEMENT
dated
for reference May 31, 2005.
BETWEEN:
XXXXXX
XXX XXXXXXXX, P.O.
Box.
58, Xxxxxxxxx, Xxxxxxx, X0X 0X0;
("Cardinal")
OF
THE
FIRST PART
AND:
NEW
INVERNESS EXPLORATIONS, INC,
a body
corporate, duly incorporated under the laws of the State of Nevada and having
its head office at 00 Xxxxxxxx Xx., Xxxxxx Xxxx, Xxxxxxx, X0X 0X0;
("New
Inverness")
OF
THE
SECOND PART
W
H E R E
A S :
A.
Cardinal
is the registered and beneficial owner of the one mineral property claim
located
in Xxxxxxx Township, Larder Lake Mining Division, Ontario, which claim is
more
particularly described in Schedule "A" attached hereto which forms a material
part hereof (collectively, the "Claim");
B.
Cardinal
has agreed to grant to New Inverness the sole and exclusive right, privilege
and
option to explore the Claim together with the sole and exclusive right,
privilege and option to purchase the Claim upon the terms and conditions
hereinafter set forth;
NOW
THEREFORE THIS AGREEMENT WITNESSETH
that in
consideration of the mutual covenants and provisos herein contained,
THE
PARTIES HERETO AGREE AS FOLLOWS:
1.
OPTIONOR’S
REPRESENTATIONS
1.1
Cardinal
represents and warrants to New Inverness that:
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(a)
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Cardinal
is the registered and beneficial owner of the Claim and holds the
right to
explore and develop the Claim;
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(b)
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Cardinal
holds the Claim free and clear of all liens, charges and claims
of others,
and Cardinal has a free and unimpeded right of access to the Claim
and has
use of the Claim surface for the herein
purposes;
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(c)
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(d)
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There
are no adverse claims or challenges against or to the Cardinal's
ownership
of or title to the Claim nor to the knowledge of Cardinal is there
any
basis therefor, and there are no outstanding agreements or options
to
acquire or purchase the Claim or any portion
thereof;
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(e)
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Cardinal
has the full right, authority and capacity to enter into this Agreement
without first obtaining the consent of any other person or body
corporate
and the consummation of the transaction herein contemplated will
not
conflict with or result in any breach of any covenants or agreements
contained in, or constitute a default under, or result in the creation
of
any encumbrance under the provisions of any indenture, agreement
or other
instrument whatsoever to which Cardinal is a party or by which
he is bound
or to which he is subject; and
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(f)
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No
proceedings are pending for, and Cardinal is unaware of any basis
for, the
institution of any proceedings which could lead to the placing
of Cardinal
in bankruptcy, or in any position similar to
bankruptcy.
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1.2 The
representations and warranties of Cardinal set out in paragraph 1.1 above
form a
part of this Agreement and are conditions upon which New Inverness has relied
in
entering into this Agreement and shall survive the acquisition of any interest
in the Claim by New Inverness .
1.3 Cardinal
will indemnify New Inverness from all loss, damage, costs, actions and suits
arising out of or in connection with any breach of any representation, warranty,
covenant, agreement or condition made by Cardinal and contained in this
Agreement.
1.4 Cardinal
acknowledges and agrees that New Inverness has entered into this Agreement
relying on the warranties and representations and other terms and conditions
of
this Agreement and that no information which is now known or which may hereafter
become known to New Inverness shall limit or extinguish the right to indemnity
hereunder, and, in addition to any other remedies it may pursue, New Inverness
may deduct the amount of any such loss or damage from any amounts payable
by it
to Cardinal hereunder.
2.
NEW
INVERNESS' REPRESENTATIONS
New
Inverness warrants and represents to Cardinal that it is a body corporate,
duly
incorporated under the laws of the State of Nevada with full power and absolute
capacity to enter into this Agreement and that the terms of this Agreement
have
been authorized by all necessary corporate acts and deeds in order to give
effect to the terms hereof.
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3.
GRANT
OF OPTION
Cardinal
hereby gives and grants to New Inverness the sole and exclusive right and
option
to acquire a l00% undivided right, title and interest in and to the Claim
(the
"Option"), subject to a 3% net smelter returns royalty and a 2% gross overriding
royalty on diamond production on the Claims, as described respectively in
Schedules B and C attached to this Agreement, by performing the acts and
deeds
and paying the sums provided for in paragraph 4.
4.
CONSIDERATION
FOR THE GRANT OF OPTION
4.1 In
order
to keep the Option in respect of the Claim in good standing and in force
and
effect, New Inverness shall be obligated to:
Cash
Payment
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(a)
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Pay
to Cardinal a total of $33,000
as follows:
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| (i) |
$3,000
immediately upon execution of this agreement by all parties;
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| (ii) |
an
additional $5,000 by May 25, 2006;
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| (iii) |
an
additional $10,000 by May 25, 2007;
and
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| (iv) |
an
additional $15,000 by May 25, 2008.
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Expenditure
Commitments
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(b)
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Incur,
or cause to be incurred, exploration work on the Claims totalling
at least
$200,000 by May 25, 2008, which work shall be conducted by New
Inverness
under the direction of a qualified geologist or project engineer,
as
follows:
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| (i) |
$5,000
in
expenditures on the Claim by Dec 31, 2005. New Inverness’ completion of
these expenditures is mandatory;
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| (ii) |
No
less than a further $15,000
of
expenditures to be incurred on the Claim by May 25, 2006;
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| (iii) |
No
less than a further $30,000 of expenditures to be incurred on the
Claim by
May 25, 2007;
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| (iv) |
No
less than a further $50,000 of expenditures to be incurred on the
Claim by
May 25, 2008; and
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| (v) |
No
less than a further $100,000 of expenditures to be incurred on
the Claim
by May 25, 2009.
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Advance
Royalty Payments
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(c)
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Stonechurch
agrees to pay to Cardinal advance net smelter returns royalty payments
on
the Claim of $10,000 per year. Advance net smelter return royalty
payments
shall be due on the May 25 each year commencing May 31, 2010, and
continuing on May 25 of each calendar year thereafter until this
Agreement
is terminated. All such advance net smelter returns royalty payments
that
New Inverness makes to Cardinal shall be fully credited toward
any monies
due under the provisions of paragraph
10.
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Assessment
Work
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(d)
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Pay,
or cause to be paid, to Cardinal, or on Cardinal's behalf, as New
Inverness may determine, all Claims payments and assessment work
required
to keep the Claim and this Option in good standing during the term
of this
Agreement.
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4.3 New
Inverness shall deliver all consideration due to the Cardinal under paragraph
4.1
directly in his name.
5.
PERIPHERAL
INTEREST
New
Inverness agrees that any other right or interest acquired in any mineral
property claim group within a two kilometer distance of the boundaries of
the
Claim will form part of the Claim for the purpose of this agreement. Any
additional mineral property right or interest that New Inverness may acquire
shall be included under the provisions of paragraph 6.1.
6.
RIGHT
TO ABANDON PROPERTY INTERESTS
6.1 Should
New Inverness, in its sole discretion, determine that any part of the Claim
no
longer warrants further exploration and development, then New Inverness may
abandon such interest or interests without affecting its rights or obligations
under this Agreement, so long as New Inverness provides Cardinal with 30
days
notice of its intention to do so. Upon receipt of such notice, Cardinal may
request New Inverness to retransfer the title to such interest or interests
to
him, and New Inverness hereby agrees to do so, and upon expiry of the 30
days,
or upon the earlier transfer thereof, such interests shall cease to be part
of
the Claim for the purposes of this Agreement.
6.2 Any
Claim
that New Inverness returns to Cardinal in accordance with paragraph 6.1 shall
have a minimum of one year of assessment work credited against it at the
time of
return.
7.
TERMINATION
OF OPTION
7.1 Subject
to paragraph 7.2, the Option shall terminate if New Inverness fails to make
the
required cash payments, advance royalty payments or, fails to complete the
required assessment work in accordance with paragraph 4.1 herein within the
time
periods specified therein.
7.2 If
New
Inverness shall be in default of any requirement set forth in paragraph 4.1
herein, Cardinal shall give written notice to New Inverness specifying the
default and New Inverness shall not lose any rights granted under this
Agreement, unless within 30 days after the giving of notice of default by
Cardinal, New Inverness has failed to take reasonable steps to cure the default
by the appropriate performance.
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7.3 If
the
Option is terminated in accordance with paragraphs 7.1 and 7.2 herein, New
Inverness shall have no interest in or to the Claim, and all share issuances,
expenditures and payments made by New Inverness to or on behalf of Cardinal
under this Agreement shall be non-refundable by Cardinal to New Inverness
for
which New Inverness shall have no recourse. Within 60 days of such termination,
New Inverness shall transfer the Claim back to Cardinal, failing which, Cardinal
shall have the right to act as attorney for New Inverness for the purpose
of
such transfer.
8.
ACQUISITION
OF INTERESTS IN THE PROPERTY
At
such
time as New Inverness has made the required cash payments and exploration
expenditures in accordance with paragraph 4.1 herein, within the time periods
specified therein, then the Option shall be deemed to have been exercised
by New
Inverness, and New Inverness shall have thereby, without any further act,
acquired an undivided 100% interest in and to the Claim.
9.
RIGHT
OF ENTRY
For
so
long as the Option continues in full force and effect, New Inverness, its
employees, agents, permitted assigns and independent contractors shall have
the
sole and exclusive right and option to:
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(a)
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enter
upon the Claim;
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(b)
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have
exclusive and quiet possession of the
Claim;
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(c)
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incur
expenditure;
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(d)
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bring
upon and erect upon the Claim such mining facilities as New Inverness
may
consider advisable; and
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(e)
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remove
from the Claim and sell or otherwise dispose of mineral
products.
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10. NET
SMELTER RETURNS ROYALTY
10.1
On
the
date New Inverness commences commercial production on the Claim, Cardinal
shall
be entitled to receive and New Inverness shall pay to Cardinal 3% of net
smelter
returns. "Commercial production" shall not include milling of ores for the
purpose of testing or milling by a pilot plant or milling during an initial
tune-up period of a plant.
10.2
New
Inverness shall be under no obligation whatsoever to place the Claim into
commercial production and in the event they are placed into commercial
production, New Inverness shall have the right, at any time, to curtail or
suspend such production as it, in its absolute discretion, may determine.
10.2
New
Inverness shall be entitled to, but under no obligation whatsoever, purchase
up
to 2% of the 3% of net smelter returns held by Cardinal at a rate of $500,000
per 0.5% of net smelter return.
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11. OPERATOR
11.1
After
the
execution of this Agreement, New Inverness, or at New Inverness' option,
its
respective associate or nominee or such other unrelated entity as it may
determine, will act as the operator of the Claim under this Agreement. New
Inverness, if operator, may resign as the operator at any time by giving
30
calendar days prior written notice to Cardinal, and within such 30 day period,
New Inverness may appoint another party who covenants to act as the operator
of
the Claim upon such terms as New Inverness sees fit.
11.2
Notwithstanding
paragraph 11.1, Cardinal shall have the right to conduct and supervise all
of
New Inverness’ exploration and development work on the Claim and to be
compensated at competitive industry rates.
12. POWER
AND AUTHORITY OF THE OPERATOR
12.1
After
the
execution of this Agreement, the Operator shall have full right, power and
authority to do everything necessary or desirable in connection with the
exploration and development of the Claims and to determine the manner of
operation of the Claim as a mine.
12.2
Where
possible, the Operator shall insure that all field work is conducted, and
that
all assay and work program results are verified, by a third party independent
from New Inverness.
13. REGISTRATION
OF PROPERTY INTERESTS
Upon
the
request of New Inverness, Cardinal shall assist New Inverness to record this
Agreement with the appropriate mining recorder and, when required, Cardinal
shall further provide New Inverness with such recordable documents as New
Inverness and its counsel shall require to record its due interest in respect
of
the Claim.
14. FURTHER
ASSURANCES
The
parties hereto agree to do or cause to be done all acts or things necessary
to
implement and carry into effect the provisions and intent of this
Agreement.
15. FORCE
MAJEURE
If
New
Inverness is prevented from or delayed in complying with any provisions of
this
Agreement by reasons of strikes, labour disputes, lockouts, labour shortages,
power shortages, fires, wars, acts of God, governmental regulations restricting
normal operations or any other reason or reasons beyond the control of New
Inverness, the time limited for the performance of the various provisions
of
this Agreement as set out above shall be extended by a period of time equal
in
length to the period of such prevention and delay, and New Inverness, insofar
as
is possible, shall promptly give written notice to Cardinal of the particulars
of the reasons for any prevention or delay under this section, and shall
take
all reasonable steps to remove the cause of such prevention or delay and
shall
give written notice to Cardinal as soon as such cause ceases to
exist.
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16. CONFIDENTIAL
INFORMATION
No
information furnished by New Inverness to Cardinal hereunder in respect of
the
activities carried out on the Claim by Cardinal, or related to the sale of
mineral products derived from the Claim, shall be published by Cardinal without
the prior written consent of New Inverness, but such consent in respect of
the
reporting of factual data shall not be unreasonably withheld. Cardinal, shall
be
entitled to copies of all exploration work and development data that New
Inverness may acquire in conducting work on the Claim, in written and electronic
format, to be provided as the data is generated
17. ENTIRE
AGREEMENT
This
Agreement constitutes the entire agreement to date between the parties hereto
and supersedes every previous agreement, communication, expectation,
negotiation, representation or understanding, whether oral or written, express
or implied, statutory or otherwise, between the parties hereto with respect
to
the subject matter of this Agreement.
18. NOTICE
18.1
Any
notice required to be given under this Agreement shall be deemed to be well
and
sufficiently given if delivered, or if mailed by registered mail, in the
case of
Cardinal addressed to him as follows:
Xxxxxx
xxx Xxxxxxxx
X.X.
Xxx
00
Xxxxxxxxx,
Xxxxxxx
X0X
0X0
and
in
the case of New Inverness addressed as follows:
00
Xxxxxxxx Xxxxxx,
Xxxxxx
Xxxx, Xxxxxxx
X0X
0X0
Attention:
Xxxxxx Xxxxxxx, President
and
any
notice given as aforesaid shall be deemed to have been given, if delivered,
when
delivered, or if mailed by registered mail, on the fourth business day after
the
date of mailing thereof.
18.2
Either
party hereto may from time to time by notice in writing change its address
for
the purpose of this section.
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19. OPTION
ONLY
Until
the
Option is exercised, this is an option only and except as specifically provided
otherwise, nothing herein contained shall be construed as obligating New
Inverness to do any acts or make any payments hereunder and any acts or payments
made hereunder shall not be construed as obligating New Inverness to do any
further acts or make any further payments.
20. RELATIONSHIP
OF PARTIES
Nothing
contained in this Agreement shall, except to the extent specifically authorized
hereunder, be deemed to constitute either party hereto a partner, agent or
legal
representative of the other party.
21. TIME
OF ESSENCE
Time
shall be of the essence of this Agreement.
22. TITLES
The
titles to the respective sections hereof shall not be deemed a part of this
Agreement but shall be regarded as having been used for convenience
only.
23. CURRENCY
All
funds
referred to under the terms of this Agreement shall be funds designated in
the
lawful currency of the United Stares of America.
24. SEVERABILITY
In
the
event that any of the paragraphs contained in this Agreement, or any portion
of
thereof, is unenforceable or is declared invalid for any reason whatsoever,
such
unenforceability or invalidity shall not affect the enforceability or validity
of the remaining terms or portions thereof contained in this Agreement and
such
unenforceable or invalid paragraph, or portion thereof, shall be severable
from
the remainder of the Agreement.
25. APPLICABLE
LAW
The
situs
of the Agreement is Cobalt, Ontario, and for all purposes this Agreement
will be
governed exclusively by and construed and enforced in accordance with the
laws
prevailing in the Province of Ontario.
26. ENUREMENT
This
Agreement shall enure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
8
IN
WITNESS WHEREOF
this
Agreement has been executed as of the day and year first above
written.
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STONECHURCH,
INC.
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per:
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________________________________
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___________________________
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Xxxxxx
xxx Xxxxxxxx
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Xxxx
Xxxxxx, Director
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9
SCHEDULE
"A"
TO
THAT CERTAIN AGREEMENT MADE AS OF MAY 31, 2005 BETWEEN
XXXXXX
XXX XXXXXXXX AND NEW INVERNESS EXPLORATIONS, INC.
The
Clear
Lake Lake claim block consists of a total of 9 claim units located in the
Larder
Lake Mining Division, Canada with the following record number and
area:
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Township.
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Recording
Date
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Record
No.
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Acreage
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Xxxxxxx
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Xxxxx
25, 2005
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4203309
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360
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SCHEDULE
“B”
TO
THAT CERTAIN AGREEMENT MADE AS OF MAY 25, 2004 BETWEEN
XXXXXX
XXX XXXXXXXX AND NEW INVERNESS EXPLORATIONS, INC.
DEFINITION
OF GROSS OVERRIDING ROYALTY (“XXXX”)
(All
capitalized terms used herein shall have the definitions contained in the
Agreement, unless otherwise specified.)
Pursuant
to the Agreement to which this Appendix is attached, Cardinal is entitled
to a
royalty (the “XXXX”) equal to 2% of the Average Appraised Value (as hereinafter
defined) of all gem and industrial diamonds recovered, sorted and graded
from
the Claims (the “Diamonds”), free and clear of all costs of development and
operations.
“Average
Appraised Value”
means
the average of the valuations in Canadian dollars of the Diamonds determined
by
two independent graders, one appointed by New Inverness and one appointed
by
Cardinal. Such independent graders shall be duly qualified and accredited,
and
shall sort, grade and value the Diamonds in accordance with industry standards,
having regard to, but without limiting the generality of the foregoing, the
commercial demand for the Diamonds. Each independent valuator shall value
each
particular classification of the Diamonds in accordance with the industry
pricebooks, standards and formulas. The parties acknowledge that the intention
is that the XXXX is to be paid to Cardinal on this basis, regardless of the
price or proceeds actually received by New Inverness for or in connection
with
the Diamonds or the manner in which a sale of the Diamonds to a third party
is
made, and without deduction.
New
Inverness will calculate and pay the XXXX to Cardinal within 30 days of the
end
of each calendar quarter, based on all Diamonds from the Property which were
graded in such calendar quarter.
Cardinal
shall not be entitled to participate in the profits or be obligated to share
in
any losses generated by the Purchaser’s actual marketing or sales
practices.
Cardinal
shall also at his election have the right to take their XXXX in
kind.
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SCHEDULE
“C”
TO
THAT CERTAIN AGREEMENT MADE AS OF MAY 25, 2005 BETWEEN
XXXXXX
XXX XXXXXXXX AND NEW INVERNESS EXPLORATIONS, INC.
NET
SMELTER RETURNS
1. In
the
Agreement, “Net
Smelter Returns”
means
the net amount of money received by New Inverness for its own account from
the
sale of ore, or ore concentrates or any other products from the Claim to
a
smelter or other ore buyer after deduction of smelter and /or refining charges,
ore treatment charges, penalties and any and all charges made by the purchaser
of ore or concentrates, less any and all transportation costs which may be
incurred in connection with the transportation of ore or
concentrates.
2. Payment
of Net Smelter Returns by New Inverness to Cardinal shall be made quarterly
within 45 days after the end of each fiscal quarter of New Inverness and
shall
be accompanied by unaudited financial statements pertaining to the operations
carried out by New Inverness on the Claim. Within 120 days after the end
of each
fiscal year of New Inverness in which Net Smelter Returns are payable to
Cardinal, the records relating to the calculation of Net Smelter Returns
for
such year shall be audited and any resulting adjustments in the payment of
Net
Smelter Returns payable to Cardinal shall be made forthwith. A copy of the
said
audit shall be delivered to Cardinal within 30 days of the end of such 120-day
period.
3. Each
annual audit shall be final and not subject to adjustment unless the Cardinal
delivers to New Inverness written exceptions in reasonable detail within
one
month after Cardinal receives the report. Cardinal, or his representative
duly
authorized in writing, at his expense, shall have the right to audit the
books
and records of New Inverness related to Net Smelter Returns to determine
the
accuracy of the report, but shall not have access to any other books and
records
of New Inverness. The audit shall be conducted by a chartered or certified
public accountant of recognized standing. New Inverness shall have the right
to
condition access to its books and records on execution of a written agreement
by
the auditor that all information will be held in confidence and used solely
for
purposes of audit and resolution of any disputes related to the report. A
copy
of Cardinal’s report shall be delivered to New Inverness and the amount which
should have been paid according to Cadinal’s report shall be paid forthwith. In
the event that the said discrepancy is to the detriment of Cardinal and exceeds
5% of the amount actually paid by New Inverness, then New Inverness shall
pay
the entire cost of the audit.
4. In
the
event smelting or refining are carried out in facilities owned or controlled,
in
whole or in part, by New Inverness, charges, costs and penalties with respect
to
such operations, excluding transportation, shall mean reasonable charges,
costs
and penalties for such operations but not in excess of the amounts that New
Inverness would have incurred if such operations were carried out at facilities
not owned or controlled by New Inverness then offering comparable custom
services.
5. Cardinal
shall at his election have the right to take their Net Smelter Return as
it may
pertain to precious metals defined as gold and platinum group elements in
kind.
12
