EXHIBIT 4.10
LETTER OF INTENT
BY AND BETWEEN
HALO RESOURCES LTD.
AND
GOLDCORP INC.
DATED
APRIL 18, 2006
April 18, 2006
Goldcorp Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx XX X0X 0X0
ATTENTION: XXXXX XXXXXX
Dear Sirs:
RE: HALO RESOURCES LTD. ("HALO") OPTION TO EARN A 60% INTEREST IN
AND TO CERTAIN UNPATENTED MINING CLAIMS AND A 30% INTEREST IN
AND TO CERTAIN OTHER PATENTED MINING CLAIMS IN THE RED LAKE
DISTRICT OF ONTARIO
This Letter of Intent ("LOI") sets out the terms and conditions whereby Goldcorp
Inc. ("GOLDCORP") agrees to grant to Halo Resources Ltd. ("HALO") the sole and
exclusive right and option (the "OPTION") to acquire an undivided 60% legal and
beneficial interest in and to certain unpatented mining claims located in the
Red Lake District of Ontario and known as the Middle Property and the Pipestone
Property (collectively the "UNPATENTED PROPERTY") and an undivided 30% legal and
beneficial interest in and to certain patented mining claims located in the Red
Lake District of Ontario and known as the Xxxxx Bay Property (the "PATENTED
PROPERTY"), as such upatented and patented mining claims are set out and listed
on Schedule "A" hereto (the Unpatented Property and the Patented Property
collectively, the "PROPERTY"), in consideration of Halo performing certain
exploration work on the Property. The term of the Option (the "TERM") shall
commence on the date of the Definitive Agreement (as defined below) (the
"EFFECTIVE DATE") and end on the date that is the third (3rd) anniversary of the
Effective Date.
The general terms and conditions of this LOI are as follows:
1. (a) Halo shall have sixty (60) days from the date of this LOI (the
"DUE DILIGENCE PERIOD") to conduct legal, technical and
environmental due diligence with respect to the Property and
to completely satisfy itself in respect of such due diligence,
in its sole discretion. During the Due Diligence Period
Goldcorp shall maintain the title to the Property in good
standing and shall not grant any other right, title or
interest in and to the Property to any third party.
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(b) Subject to the terms and conditions of this LOI, Goldcorp and
Halo shall, as expeditiously as possible, negotiate in good
faith and, in the event that Halo confirms in writing that it
is satisfied in its sole discretion with its due diligence
review (the "DUE DILIGENCE WAIVER"), settle and execute a
formal option agreement (the "DEFINITIVE AGREEMENT") whereby
Goldcorp will grant the Option to Halo, within five (5) days
of Halo delivering the Due Diligence Waiver. Such Definitive
Agreement shall include the terms set out in this LOI and such
other mutually acceptable terms and conditions as the parties
may agree, including such terms, conditions, representations,
warranties and covenants as are customary in transactions
involving the grant of an option to acquire an interest in
mining properties.
(c) This LOI shall terminate and be of no further force or effect
at the expiry of the Due Diligence Period if Halo has not
delivered the Due Diligence Waiver to Goldcorp at or before
the expiry of the Due Diligence Period.
2. In consideration of Goldcorp entering into and delivering the
Definitive Agreement, and in order to maintain the Option in good
standing, Halo shall perform an exploration program on the Property at
the following minimum expenditures per year (on a non-cumulative
basis):
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YEAR OF TERM MINIMUM EXPENDITURE AMOUNT
(CANADIAN DOLLARS)
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1 Cdn. $750,000.00
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2 Cdn. $1,000,000.00
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3 Cdn. $1,250,000.00
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The first Cdn.$750,000.00 of expenditures shall be committed and Halo
shall not be entitled to terminate the Option or the Definitive
Agreement prior to incurring Cdn.$750,000.00 of exploration
expenditures in respect of the Property. For greater certainty, Halo
shall during the Option Period incur such expenditures and perform such
work commitments and pay Goldcorp's proportionate share of any taxes or
assessments payable as may be necessary in order to keep the Property
in good standing during the Option Period, and such expenditures,
payments or work commitments shall be credited against Halo's
commitment to incur expenditures pursuant to this Section 2.
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3. As soon as possible following the execution of this LOI, Goldcorp will
make available to Halo for review, as part of Halo's due diligence
review, copies of all records and data in its possession or control
respecting the Property, including all reports prepared by or for
Goldcorp in respect of the Property and Halo shall be entitled to make
copies of all such records, data and reports, provided that it shall
keep all such information confidential and shall not disclose it or use
it in any manner contrary to the intent of this LOI without the prior
written consent of Goldcorp. If Halo does not deliver the Due Diligence
Waiver to Goldcorp within the Due Diligence Period, Halo shall
immediately destroy or deliver to Goldcorp all copies of all
information related to the Property in the possession of Halo and a
senior officer of Halo shall deliver a certificate to Goldcorp
certifying that all such information has been destroyed or returned to
Goldcorp. Goldcorp does not represent or warrant the accuracy or
completeness of any records, data or reports provided to Halo in
accordance with this Section 3.
4. (a) During the Due Diligence Period, Halo, its employees, agents
and independent contractors shall have the right (subject to
the rights of the other co-owner of the Patented Property), at
its sole risk and expense, to enter in, on or under the
Property in order to conduct its due diligence review, but
shall not conduct any mining exploration activities or other
work on the Property during such time.
(b) From and after the Effective Date, Halo, its employees, agents
and independent contractors shall have the right (subject to
the rights of the other co-owner of the Patented Property):
(i) to enter in, on or under the Property;
(ii) to bring upon the Property such vehicles, equipment,
portable structures and other apparatus as the Halo
shall in its sole discretion deem advisable;
(iii) to do such work and conduct and manage such mining
programs on or under the Property as Halo shall in
its sole discretion deem advisable;
(iv) to remove from the Property such materials for
analysis and testing as Halo shall in it sole
discretion deem advisable; and
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(v) to have possession of the Property during the
currency of the Option Period.
In the event that Halo determines that it needs to reach agreement with
any person other than Goldcorp that holds an interest in and to the
Patented Property in order for Halo to meet its commitments and
exercise its rights under this LOI, Goldcorp shall take all such
reasonable actions as are reasonably required by Halo, or such other
person with an interest in the Patented Property, in order to assist
Halo to reach such agreement. Halo shall not be entitled to credit any
payments it may agree to make to such person in order to reach such
agreement, against Halo's commitment to incur expenditures pursuant to
Section 2.
5. Halo shall keep full and complete records of all exploration work and
development of the Property, together with the results of assays made,
and all such records and results shall be available for inspection by
Goldcorp prior to the exercise of the Option by Halo. If the Option is
terminated or otherwise not exercised by Halo, Halo shall deliver to
Goldcorp all such records and results and all such records and results
shall become the property of Goldcorp.
6. For a period of ninety (90) days following the date of the exercise of
the Option by Halo, Goldcorp shall, at its sole discretion, have the
right to elect by notice in writing delivered to Halo to exercise the
right (the "BACK-IN RIGHT") to acquire from Halo (i) a twenty-five
(25%) percent interest in and to the Unpatented Property such that
Goldcorp will thereafter have a sixty-five (65%) percent undivided
legal and beneficial interest in and to the Unpatented Property and
Halo will have a thirty-five (35%) percent undivided legal and
beneficial interest in and to the Unpatented Property and (ii) a twelve
and one-half (12.5%) percent interest in and to the Patented Property
such that Goldcorp will thereafter have a thirty-two and one-half
(32.5%) percent undivided legal and beneficial interest in and to the
Patented Property and Halo will have a seventeen and one half (17.5%)
percent undivided legal and beneficial interest in and to the Patented
Property, by giving notice of such election in writing to Halo and by
paying Halo Cdn. $6,000,000.00 on or before the expiration of such
ninety (90) day period. If Goldcorp advises Halo in writing that it
does not intend to exercise the Back-in Right or fails to give such a
notice and make such payment within the ninety (90) day time frame for
doing so, Halo shall issue and deliver one million (1,000,000) fully
paid and non-assessable common shares of Halo (the "OPTION SHARES") to
Goldcorp in accordance with and subject to Sections 7 and 8 below. Halo
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shall during the Due Diligence Period seek the regulatory and stock
exchange conditional pre-approval to the issuance and delivery of the
Option Shares.
7. For the purposes of Section 6, any Option Shares issued shall be deemed
to have a value per share equal to the volume-weighted average closing
price of Halo's common shares on the TSX Venture Exchange for the
thirty trading days immediately prior to the date that Goldcorp advises
Halo that it will not exercise the Back-in Right or otherwise fails to
exercise the Back-in-Right. If Goldcorp does not exercise the Back-in
Right Halo shall take all necessary corporate action to issue and
deliver the Option Shares to Goldcorp and to record the Option Shares
on the books of Halo in the name of Goldcorp. Halo shall comply with
applicable securities laws in connection with the issuance of such
Option Shares.
8. The Option Shares to be issued by Halo to Goldcorp shall be subject to
all applicable hold periods required by applicable securities laws and
the TSX Venture Exchange (not to exceed four months from the date of
issuance). The issuance of any Option Shares shall be conditional upon
Halo obtaining all regulatory consents or approvals being received,
including those of the TSX Venture Exchange and Halo will ensure that
all filings required to be made with all applicable securities
regulatory authorities are made in a prompt and timely manner to allow
for the issuance of the Option Shares on a basis that is exempt from
all prospectus and registration requirements under applicable
securities laws. In the event that Halo is unable to issue the Option
Shares to Goldcorp on an exempt basis within ten business days of the
date Goldcorp advises Halo that it will not exercise the Back-in Right
or otherwise fails to exercise the Back-in Right, Halo shall promptly
pay Goldcorp the cash value of the Option Shares, as determined in
accordance with Section 7, in cash, by certified cheque or wire
transfer in immediately available funds.
9. In the event Halo exercises the Option, Halo and Goldcorp shall
forthwith enter into a definitive joint venture agreement, on terms and
conditions usual in the mining industry and satisfactory to both
parties, acting reasonably, for the purpose of jointly further
exploring, developing and exploiting the Property (the "JOINT
VENTURE"). The parties shall share all future funding of exploration
and other expenditures and liabilities proportionately to their
respective interests in the Property (each, a "VENTURE INTEREST"). The
joint venture agreement shall include provisions pertaining to, INTER
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ALIA: (i) reciprocal rights of first refusal concerning each party's
Venture Interest; (ii) the manner in which decisions will be made
concerning the Property, including the approval of programs, budgets,
and the determination of amounts to be expended by the Joint Venture,
and (iii) dispute resolution procedures.
10. If either party elects not to fund its share of future Joint Venture
expenditures where the other party does fund its share, the non-funding
party's Venture Interest shall be diluted in accordance with standard
mining industry dilution provisions. If either party's Venture Interest
is reduced to ten (10%) percent or less, its Venture Interest shall be
converted to a one and a half (1.5%) percent Net Smelter Return Royalty
calculated and paid in the manner described in Schedule "B".
11. Subject to the committed expenditure requirements set out in Section 2
of this LOI, Halo may terminate the Option and its obligations to incur
expenditures at any time and return possession of all of the mining
claims forming the Property to Goldcorp by giving Goldcorp written
notice thereof.
12. Upon termination of the Option, Halo shall ensure that the Property
shall remain in good standing for at least six (6) months after the
date of such termination.
13. Upon the termination of the Option, Halo shall have the right for sixty
(60) days beyond the date of such termination to enter on, in or under
the Property in order, to remove therefrom such equipment, tools,
materials, structures, apparatus or supplies brought thereon by Halo or
on its behalf, and to the extent that Halo does not remove them they
shall become the property of Goldcorp.
14. The obligation of the parties to complete the transactions contemplated
by this LOI is subject to the following conditions precedent:
(i) Halo being completely satisfied, in its sole
discretion, with its legal, technical and
environmental due diligence undertaken with respect
to the Property during the Due Diligence Period; and
(ii) execution of the Definitive Agreement.
15. The terms of this LOI, including the terms of the transactions
contemplated hereby and the fact that Halo and Goldcorp are pursuing
the proposed transactions contemplated herein are confidential and
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neither Halo nor Goldcorp shall disclose any such information to any
person or entity without the prior written consent of the other, except
as may otherwise be required by applicable law, rule or regulation.
Notwithstanding the foregoing and for greater certainty, either party
may make a public announcement of the existence of this LOI and the
transactions contemplated hereby provided that the timing and content
thereof have been agreed upon by both parties, acting reasonably.
16. Halo and Goldcorp agree that all out-of-pocket expenses and
disbursements incurred in connection with this LOI and the completion
of the transactions contemplated herein, including fees and expenses
relating to legal, tax, accounting matters and financial advisor fees,
will be paid by the party incurring such expenses.
17. This LOI, the Definitive Agreement, the joint venture agreement and any
other agreement or instrument contemplated by this LOI shall be
governed by and construed in accordance with the laws of the Province
of Ontario and the federal laws of Canada applicable therein.
18. Any assignment of a party's interest hereunder may be assigned only
with the prior written consent of the other party.
19. This LOI shall enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
20. This LOI may be executed by facsimile transmission in counterparts,
each of which so executed and delivered shall be deemed to be an
original and such counterparts together shall constitute one and the
same document
Yours truly,
HALO RESOURCES LTD.
Per: /s/ MARC CERNOVITCH
----------------------------
Name: Marc Cernovitch
Title: President
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GOLDCORP HEREBY CONFIRMS ITS AGREEMENT WITH THE TERMS HEREOF AS EVIDENCED BY ITS
DUE EXECUTION BELOW, WITH EFFECT AS OF THE DATE OF THIS LOI.
GOLDCORP INC.
Per: /s/ XXXXXXX XXXX
-------------------------
Name: Xxxxxxx Xxxx
Title: VP and CFO
SCHEDULE "A"
THE PROPERTY
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OFFICIAL
PROPERTY TYPE TOWNSHIP NUMBER
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Xxxxx Bay Patent Ball 11077
Xxxxx Bay Patent Ball 11078
Xxxxx Bay Patent Ball 11079
Xxxxx Bay Patent Ball 11080
Xxxxx Bay Patent Ball 11081
Xxxxx Bay Patent Ball 11082
Xxxxx Bay Patent Ball 11083
Xxxxx Bay Patent Ball 11104
Xxxxx Bay Patent Ball 11105
Xxxxx Bay Patent Ball 11106
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ACTION OFFICIAL
PROPRTY TYPE DUE TOWNSHIP NUMBER
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Pipestone Bay STK 6/7/2007 Ball 1234170
Pipestone Bay STK 7/4/2008 Ball 1234140
Pipestone Bay STK 7/4/2008 Ball 1234141
Pipestone Bay STK 7/4/2007 Ball 1234142
Pipestone Bay STK 7/4/2006* Ball 1234143
Pipestone Bay STK 7/4/2007 Ball 1234144
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* Assessment ($6,000) required on these mineral claims by July 4, 2006
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ACTION OFFICIAL
PROPRTY TYPE DUE TOWNSHIP NUMBER
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Middle Bay LP 2/1/2008 Ball 40860
Middle Bay LP 2/1/2008 Ball 40861
Middle Bay LP 2/1/2008 Ball 40862
Middle Bay LP 2/1/2008 Ball 40863
Middle Bay LP 2/1/2008 Ball 40864
Middle Bay LP 2/1/2008 Ball 40865
Middle Bay LP 8/1/2014 Ball 46181
Middle Bay LP 8/1/2014 Ball 46182
Middle Bay LP 8/1/2014 Ball 46183
Middle Bay LP 8/1/2014 Ball 46184
Middle Bay LP 8/1/2014 Ball 47707
Middle Bay LP 8/1/2014 Ball 47708
Middle Bay LP 3/1/2011 Ball 49874
Middle Bay LP 3/1/2011 Ball 49875
Middle Bay LP 3/1/2011 Ball 49896
Middle Bay LP 3/1/2011 Ball 49897
Middle Bay LP 3/1/2011 Ball 49898
Middle Bay LP 3/1/2011 Ball 49899
Middle Bay LP 3/1/2019 Ball 49900
Middle Bay LP 3/1/2011 Ball 49901
Middle Bay LP 3/1/2011 Ball 49902
Middle Bay LP 3/1/2011 Ball 49903
Middle Bay LP 3/1/2011 Ball 49904
Middle Bay LP 12/1/2018 Ball 52174
Middle Bay LP 12/1/2018 Ball 52175
Middle Bay LP 3/1/2019 Ball 53397
Middle Bay LP 3/1/2011 Ball 53398
Middle Bay LP 3/1/2011 Ball 53399
Middle Bay STK 8/29/2007 Ball 870130
Middle Bay STK 8/29/2008 Ball 870131
Middle Bay STK 8/29/2007 Ball 870132
Middle Bay STK 5/31/2007 Ball 1143622
Middle Bay STK 5/31/2007 Ball 1143623
Middle Bay STK 5/31/2007 Ball 1143624
Middle Bay STK 5/31/2007 Ball 1143625
Middle Bay STK 5/31/2007 Ball 1143646
Middle Bay STK 5/31/2007 Ball 1143647
Middle Bay STK 3/17/2007 Ball 1184230
Middle Bay STK 6/1/2007 Ball 1184316
Middle Bay STK 6/1/2007 Ball 1184317
Middle Bay STK 6/4/2007 Ball 1185055
Middle Bay STK 6/28/2008 Ball 1234022
Middle Bay STK 6/28/2007 Ball 1234029
Middle Bay STK 6/28/2007 Ball 1234030
Middle Bay STK 6/28/2008 Ball 1234039
Middle Bay STK 6/28/2007 Ball 1234051
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ACTION OFFICIAL
PROPRTY TYPE DUE TOWNSHIP NUMBER
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Middle Bay STK 11/24/2008 Ball 1234081
Middle Bay STK 11/24/2007 Ball 1234082
Middle Bay STK 11/24/2008 Ball 1234083
Middle Bay STK 10/5/2007 Ball 1234155
Middle Bay STK 10/5/2007 Ball 1234156
Middle Bay STK 10/5/2008 Ball 1234157
Middle Bay STK 6/12/2006(1) Ball 1248154
Middle Bay STK 6/21/2007 Ball 1234259
Middle Bay STK 7/4/2008 Ball 1234245
Middle Bay STK 11/24/2006(2) Ball 1234084
Middle Bay STK 6/2/2006(1) Ball 3004674
Middle Bay STK 6/2/2006(1) Ball 3004676
Middle Bay STK 6/2/2006(1) Ball 1247933
Middle Bay STK 10/23/2007 Ball 1234401
Middle Bay STK 10/23/2007 Ball 1234402
Middle Bay STK 6/2/2006(1) Ball 1248171
Middle Bay STK 07/16/2007 Ball 1248129
Middle Bay STK 6/4/2006(3) Ball 1248169
(1) Assessment ($4,000) required on these mineral cliams by June 2, 2006.
(2) Assessment ($1,538) required on these mineral cliams by November 24, 2006.
(3) Assessment ($800) required on these mineral cliams by June 2, 2006.
SCHEDULE "B"
NET SMELTER RETURNS ROYALTY
1. INTERPRETATION
Where used in this Schedule "B":
(a) "Agreement" means the LOI and the Definitive Agreement to which this
schedule is or becomes attached, including any amendments thereto or
renewals or extensions thereof.
(b) "Property" means those mining Properties described in Schedule "A" of
the LOI to which this Schedule "B" is attached.
(c) "Fiscal Period" means each calendar year or other period of 12
consecutive months adopted by the payor of the Royalty Interest for
accounting and tax purposes.
(d) "Royalty Interest" means the 1.5% Net Smelter Returns royalty which may
become payable pursuant to the terms of the LOI to which this Schedule
"B" is attached.
2. NET SMELTER RETURNS
"Net Smelter Returns" shall mean the gross proceeds received by the payor of the
Royalty Interest in accordance with its proportionate ownership interest in and
to the Property from the sale or other disposition of minerals, ores, metals
(metals shall include, precious metals and metals other than precious metals) or
concentrates of metals produced from the Property and sold, less the following
expenses if actually incurred:
(a) taxes specifically based on mining production, but excluding any and
all taxes (i) based upon the net or gross income of the owner or other
operator of the Property or the payor of the Royalty Interest and (ii)
based upon the value of the Property, the privilege of doing business
and other similarly based taxes;
(b) charges and costs, if any, for transportation and insurance of ores,
metals (metals shall include, precious metals and metals other than
precious metals) or concentrates of metals produced from the Property
to any mint, smelter, or refinery; and
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(c) charges, costs (including assaying and sampling costs) and all
penalties, if any, charged by a smelter or refiner of ores, metals
(metals shall include, precious metals and metals other than precious
metals) or concentrates of metals produced from the Property.
3. PAYMENT
(a) The Royalty Interest shall be paid in cash only on a quarterly basis
within 45 days after the end of each fiscal quarter during the relevant
Fiscal Period;
(b) Each payment under subsection 3(a) shall be accompanied by a statement
indicating the calculation of Net Smelter Returns. The Royalty Interest
holder shall be entitled to audit, during normal business hours, such
books and records as are necessary to determine the correctness of the
payment of the Royalty Interest provided, however, that such audit may
be made once only on an annual basis and within 12 months of the end of
the Fiscal Period in respect of which such audit is made; and
(c) Payment of the Royalty Interest shall be made to the Royalty Interest
holder at such place or places as the Royalty Interest holder shall
advise the payor from time to time.
4. TRANSFER OF THE PROPERTY
The owner of the Property shall be entitled to transfer all or part of such
title in and to the Property to any third party, provided that such third party
shall agree in writing to be bound by the terms of the Royalty Interest to the
extent of such interest in the Property acquired and, in such circumstances, the
transferor of such interest in and to the Property shall be released from all
obligations in respect of the Royalty Interest accruing from and after the date
of such transfer.
