DRAFT: MAY 16, 2002
WOOL BAY PROPERTY OPTION AGREEMENT
--------------------------------------
BETWEEN
4763 NWT LTD.
AND
NORTH AMERICAN GENERAL RESOURCES CORPORATION
TABLE OF CONTENTS
-------------------
1. DEFINITIONS 2
2. OPTION 3
3. TITLE 4
4. GROSS OVERRIDING ROYALTY 5
5. EARN-IN OBLIGATIONS 5
6. ACCELERATION, FORCE MAJEURE 5
7. PERFORMANCE OF WORK 6
8. VESTING OF INTEREST 7
9. TERMINATION 7
10. RESTRICTION ON ASSIGNMENT 8
11. NOTICES 8
12. REPRESENTATIONS AND WARRANTIES 9
13. CONFIDENTIALITY 11
14. MISCELLANEOUS 12
SCHEDULE A PROPERTY
SCHEDULE B GROSS OVERRIDING ROYALTY
- i -
DRAFT: MAY 16, 2002
THIS AGREEMENT is made the * day of May, 2002.
BETWEEN:
4763 NWT LTD., a company incorporated under the laws of the Northwest
Territories
(hereinafter called the "Optionor")
AND:
NORTH AMERICAN GENERAL RESOURCES CORP., a Company incorporated under 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
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
- 4 -
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
2. OPTION
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:
2.2.1 enter upon and have immediate possession of the Property;
- 3 -
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
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.
- 4 -
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
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. GRANT OF OPTION
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 to the optioner the sum of $5000.00 on signing of this
agreement and $5000.00 to the Optionor on or before June15, 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
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
- 5 -
time pay to the Optionor money in lieu of conducting activities, issuing shares
or 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
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
- 6 -
and the Expenditures incurred. NAGR will provide a summary report of all such
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
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
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:
- 7 -
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
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
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:
-----------
P. O. Box 11604
- 8 -
#620 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X. X. X0X 0X0
If to the Optionor:
---------------------
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
12.1 The Optionor represents and warrants to NAGR that:
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;
- 9 -
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:
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
- 10 -
them may be waived by NAGR 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.
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
13.1 Subject to Section 13.2 all information received or obtained by NAGR or
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
- 11 -
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
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.
14. MISCELLANEOUS
14.1 Applicable Law. The terms and provisions of this Agreement shall be
interpreted in accordance with the laws of British Columbia.
14.2 Regulatory Approval. This Agreement is subject to regulatory approval.
14.3 Entire Agreement. This Agreement terminates and replaces all prior
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
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
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
respective duties and obligations under this Agreement.
- 12 -
14.7 Binding Effect. This Agreement shall enure to the benefit of and be
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
-----------------
Title:
By: /s/ Xxxxxxx Xxxxx
-----------------
Title:
4763 NWT LTD.
By: /s/ Louis
-----------------
Title: President
By: /s/ Xxxx
-----------------
Title: V.P. NWT
- 13 -
