EXHIBIT 4.3
HEADS OF AGREEMENT BY AND AMONG
HALO RESOURCES LTD.
AND
WORLDEN RESOURCES INC.
DATED
NOVEMBER 12, 2004.
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HEADS OF AGREEMENT ("HOA")
BETWEEN
HALO RESOURCES LTD.
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AND
WOLFDEN RESOURCES INC.
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RE: OPTION TO EARN A 50% INTEREST OF THE ▇▇▇▇▇▇▇▇▇ LAKE PROPERTY IN QUEBEC,
CANADA
This HOA sets out the terms and conditions whereby Wolfden Resources Inc.
("WOLFDEN") will transfer, assign, convey and set over to Halo Resources Ltd.
("HALO"), and HALO will accept and assume and agrees to be bound by and observe
and perform, all of the rights, benefits, liabilities and obligations of WOLFDEN
under and pursuant to an option agreement between WOLFDEN and Geonova
Explorations Inc. ("GEONOVA") dated April 24, 2003 (the "Option Agreement"). The
Option Agreement provides, among other things, that WOLFDEN has the right to
acquire a 50% undivided legal and beneficial interest in and to certain
exploration and mining concessions located in ▇▇▇▇▇▇▇ Township of the Abitibi
region of Quebec, Canada known as the ▇▇▇▇▇▇▇▇▇ Lake Property (the "Property"),
as listed in the attached Schedule A and accompanying map, by performing $3
million in exploration work on the Property and making certain payments to
GEONOVA, in accordance with the terms of the Option Agreement (the "Option").
The general terms and conditions of this HOA are as follows:
1. WOLFDEN represents and warrants that:
(a) the Option Agreement has been duly executed and delivered by
each of WOLFDEN and GEONOVA, is in good standing and
constitutes legal, valid and binding obligations of WOLFDEN
AND GEONOVA enforceable against each of them in accordance
with its terms;
(b) it has performed all of its obligations required to be
performed to date by it under the Option Agreement and that no
party to the Option Agreement is in default under or in breach
of, any provision of the Option Agreement;
(c) the Option Agreement has been duly registered or recorded
against title to the Properties and it has the right to assign
the Option Agreement and all of its rights, benefits,
liabilities and obligations thereunder to HALO;
(d) upon the exercise of the option, the holder of the option will
be entitled to a 50% legal and beneficial interest in and to
the Property;
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(e) GEONOVA is the 100% legal and beneficial owner of its right,
title and interest in and to the mining claims and mining
concessions that comprise the Property and has good and
marketable title thereto; and
(f) there are no significant (over $5,000) outstanding tax
liabilities on the Property.
2. Subject to the terms and conditions of this HOA, WOLFDEN and HALO shall
negotiate in good faith to settle and execute a formal agreement on the
terms set out in this HOA (the "Definitive Agreement") and otherwise on
mutually acceptable terms and conditions as expeditiously as possible
whereby WOLFDEN will transfer, assign, convey and set over to HALO, and
HALO will accept and assume and agrees to be bound by and observe and
perform, all of the rights, benefits, liabilities and obligations of
WOLFDEN under and pursuant to the Option Agreement. For greater
certainty, the Definitive Agreement shall contain the representations
and warranties contained in Section 1 of this HOA and such terms,
conditions, representations, warranties, covenants and indemnities as
are customary in transactions involving the assignment and assumption
of an option to acquire an interest in mining properties.
3. WOLFDEN shall be responsible for and continue to perform all of its
obligations under the Option Agreement, including its expenditure and
payment obligations under Section 1.1 of the Option Agreement, until
the date on which WOLFDEN and HALO enter into Definitive Agreement (the
"Effective Date"); provided that all amounts expended by WOLFDEN under
and pursuant to Section 1.1 of the Option Agreement from the date of
this HOA until the Effective Date (the "Interim Period Expenditures")
shall be reimbursed and paid by HALO to WOLFDEN within 60 days of the
Effective Date, less the amount of any flow-through tax credits that
WOLFDEN is entitled to in respect of the Interim Period Expenditures.
HALO agrees to assume the expenditure and payment obligations WOLFDEN
currently has under the Option Agreement by making cash payments to the
third parties in the amounts described in Schedule B attached (the
"Option Payments"). A copy of the Option Agreement is attached hereto
as Schedule C.
4. HALO acknowledges that GEONOVA is currently in the process of
negotiating the transfer, assignment, conveyance and/or sale of the
Property and the Option Agreement to Metanor Resources Inc.
("METANOR"). Upon the completion of this transaction, WOLFDEN will use
commercially reasonable efforts to provide HALO with evidence
indicating that all of GEONOVA's rights, title and interests in and to
the Property have been transferred, assigned, conveyed and sold to
METANOR and that the Option Agreement and all of GEONOVA's rights and
obligations thereunder have been transferred and assigned to METANOR.
5. In consideration of WOLFDEN entering into and delivering the Definitive
Agreement, HALO shall:
(a) issue to WOLFDEN on the Effective Date 800,000 units of HALO,
each of which unit entitles the holder thereof to 1 common
share in the capital of HALO and 1/2 common share purchase
warrant. Each whole common share purchase warrant entitles the
holder thereof to purchase an additional common share of HALO
at a price of $1.50 per share during the period commencing on
the Effective Date and ending at the close of business on, the
date which is 2 years from the Effective Date; and
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(b) pay to WOLFDEN on the Effective Date $1,250,000.
6. On the Effective Date, WOLFDEN and HALO will enter into a net smelter
returns royalty agreement (the "Royalty Agreement") on terms mutually
satisfactory to both parties, pursuant to which HALO will issue and
grant to WOLFDEN a 0.5% net smelter returns royalty calculated and
payable in accordance with Schedule D attached (the "NSR") on HALO's
share of any gold and silver production from the Property following
commencement of commercial production, with the price of gold being
determined on the basis of the monthly average price of gold,
calculated by dividing the sum of all London Bullion Market Association
P.M. Gold Fix prices reported for the calendar month in question by the
number of days for which such prices were quoted, and for silver on the
basis of the monthly average price of silver, calculated by dividing
the sum of all London Bullion Market Association prices for silver
reported for the calendar month in question by the number of days for
which such prices were quoted. All royalty payments will be paid in
cash only. Notwithstanding this Section 6, if HALO is the operator or
manager or the Property, HALO will be under no obligation whatsoever to
place the Property into commercial production, and if the Property is
placed into commercial production by HALO, HALO will have the right at
any time to curtail, suspend or terminate such commercial production as
HALO in its sole discretion deems advisable.
7. Bonus Payments:
(a) If HALO exercises the Option in accordance with the terms of
the Option Agreement, as a bonus payment, HALO shall issue to
WOLFDEN 400,000 common shares in the capital of HALO promptly
upon the exercise of the Option.
(b) If project financing is arranged for commercial production of
the Property and the Property goes into production, as a bonus
payment, HALO will issue to WOLFDEN $250,000 and 250,000 fully
paid common shares in the capital of HALO after 50,000 ounces
of gold or gold equivalent have been produced from the
Property, 25,000 of which ounces have been credited to HALO's
account.
8. WOLFDEN will provide to HALO copies of all records and data respecting
the Property and all reports prepared by or for WOLFDEN in respect to
the Property as soon as possible following the execution of this HOA
and HALO will keep all such information confidential and not disclose
it or use it in any manner contrary to the intent of this HOA without
the prior written consent of WOLFDEN.
9. All shares, warrants, units and other securities issued or to be issued
by HALO to WOLFDEN under and pursuant to this HOA (the "Halo
Securities") shall be subject to all applicable hold periods required
by applicable securities laws and the TSX Venture Exchange. In addition
to such hold periods, WOLFDEN hereby agrees that it will enter into an
agreement with HALO as at the Effective Date (the "Lock-Up Agreement")
whereby WOLFDEN will agree to not sell any Halo Securities issued to it
from and after the Effective Date for a period of one (1) year from the
date on which any such Halo Securities are issued to it.
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10. Conditions to the completion of the transactions contemplated by this
HOA shall include:
(a) HALO being completely satisfied, in its sole discretion, with
its due diligence undertaken with respect to the Option
Agreement and the Property;
(b) all regulatory and third party consents or approvals being
received, including those of the TSX Venture Exchange and
GEONOVA or METANOR, as the case may be;
(c) there being no material adverse changes in or to the Option
Agreement or the Property;
(d) completion by HALO of an equity financing of $7 million, on
terms and conditions satisfactory to HALO; and
(e) execution of all requisite definitive agreements.
11. The terms of this HOA, including the terms of the transactions
contemplated hereby and the fact that HALO and WOLFDEN are pursuing the
proposed transactions contemplated herein are confidential and neither
HALO nor WOLFDEN shall disclose any such information to any person or
entity without the prior written consent of the other. Notwithstanding
the foregoing and for greater certainty, no public announcement of the
existence of this HOA or the transactions contemplated hereby shall be
made by either party unless the timing and content thereof have been
agreed upon by both parties, acting reasonably, except as may otherwise
be required by applicable law, rule or regulation.
12. HALO and WOLFDEN agree that all out-of-pocket expenses and
disbursements incurred in connection with this HOA and 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.
13. This HOA, the Definitive Agreement, the Royalty Agreement, the Lock-Up
Agreement and any other agreement or instrument contemplated by this
HOA shall be governed by and construed in accordance with the laws of
the Province of British Columbia and the federal laws of Canada
applicable therein.
TERMS AGREED AND ACCEPTED THIS 12TH DAY OF NOVEMBER, 2004
HALO RESOURCES LTD. WOLFDEN RESOURCES INC.
Per: Per:
/s/ Marc Cernovitch /s/ ▇▇▇▇ ▇▇▇▇
------------------------------ ------------------------------
Authorized Signatory Authorized Signatory
Marc Cernovitch, VP.Corp. Dev.
/s/ ▇. ▇▇▇▇▇▇, CFO
------------------------------
Authorized Signatory
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SCHEDULE A
"THE PROPERTY"
CLAIMS MAP OF BACHELOR LAKE PROPERTY
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SCHEDULE B
"OPTION AGREEMENT"
ASSIGNMENT OF ROYALTIES
AS OF SEPTEMBER 21, 2001
CED-OR CORPORATION
AND
CONCOPPER ENTERPRISES INC,
AND
GEONOVA EXPLORATIONS INC.
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SCHEDULE C
NET SMELTER RETURNS ROYALTY
1. INTERPRETATION
Where used herein:
(a) "Agreement" means the agreement to which this schedule is
attached, including any amendments thereto or renewals or
extensions thereof.
(b) "The Property" means those mining Properties described in
Schedule "A" of the Agreement.
(c) "Fiscal Period" means each calendar year or other period of 12
consecutive months adopted by HALO for tax purchases during
the term of the Agreement.
(d) "Royalty Interest" means the 0.5% Net Smelter Returns which
may become payable by HALO to WOLFDEN under the Agreement.
2. NET SMELTER RETURNS
"Net Smelter Returns" shall mean the gross proceeds payable to WOLFDEN from the
sale or other disposition of ores, metals (metals shall include bullion,
precious metals and other than precious metals) or concentrates produced from
The Property and sold by HALO, less the following expenses if actually incurred
by HALO:
2.1. Taxes specifically based on mining production, but excluding any and
all taxes (a) based upon the net or gross income of HALO or other
operator of "The Property" and (b) based upon the value of The
Property, the privilege of doing business and other similarly based
taxes; and
2.2. Charges and costs, if any, for transportation and insurance of ores,
metals (metals shall include bullion, precious metals and other than
precious metals) or concentrates produced from The Property to any
mint, smelter, or refinery.
2.3. Charges, costs (including assaying and sampling costs) and all
penalties, if any, charged by a smelter or refiner of ores, metals
(metals shall include bullion, precious metals and other than precious
metals) or concentrates produced from The Property.
3. PAYMENT
(a) The Royalty Interest shall be paid on a quarterly basis within
45 days after the end of each fiscal quarter in respect of the
actual proceeds received in such fiscal quarter.
(b) Each payment under subsection 3(a) shall be accompanied by a
statement indicating the calculation of Net Smelter Return
Royalty hereunder. WOLFDEN 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 shall be made only
on an annual basis and within 12 months of the end of the
Fiscal Period in respect of which such audit is made.
(c) Payment of the Royalty Interest shall be made to WOLFDEN at
such place or places as it shall advise HALO from time to
time.
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