STRATHY TOWNSHIP PROPERTY OPTION AGREEMENT
STRATHY
TOWNSHIP PROPERTY OPTION AGREEMENT
THIS
AGREEMENT
dated
for reference August 6, 2006.
BETWEEN:
XXXXXXXXX
XXXXX, X.X.
Xxx.
000, Xxxxxxxx, Xxxxxxx, X0X 0X0;
("Blake")
OF
THE
FIRST PART
AND:
HERITAGE
EXPLORATIONS, INC,
a body
corporate, duly incorporated under the laws of the State of Nevada and having
its head office at Suite 510, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxx Xxx, Xxxxxxx,
X0X
0X0;
(“Heritage")
OF
THE
SECOND PART
W
H E R E
A S :
X.
Xxxxx
is
the registered and beneficial owner of the two mineral property claims located
in Strathy Township, Sudbury Mining Division, Ontario, which claim is more
particularly described in Schedule "A" attached hereto which forms a material
part hereof (collectively, the "Property");
X.
Xxxxx
has
agreed to grant to Heritage the sole and exclusive right, privilege and option
to explore the Property together with the sole and exclusive right, privilege
and option to purchase the Property 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
|
Blake
represents and warrants to Heritage
that:
|
(a)
|
Blake
is the registered and beneficial owner of the Property and holds
the right
to explore and develop the
Property;
|
2
(b)
|
Blake
holds the Property free and clear of all liens, charges and claims
of
others, and Blake has a free and unimpeded right of access to the
Property
and has use of the Property surface for the herein
purposes;
|
(c)
|
(d)
|
There
are no adverse claims or challenges against or to the Blake's ownership
of
or title to the Property nor to the knowledge of Blake is there any
basis
therefor, and there are no outstanding agreements or options to acquire
or
purchase the Property or any portion
thereof;
|
(e)
|
Blake
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 Blake is a party or by which he is
bound or
to which he is subject; and
|
(f)
|
No
proceedings are pending for, and Blake is unaware of any basis for,
the
institution of any proceedings which could lead to the placing of
Blake in
bankruptcy, or in any position similar to
bankruptcy.
|
1.2
The
representations and warranties of Blake set out in paragraph 1.1 above form
a
part of this Agreement and are conditions upon which Heritage has relied in
entering into this Agreement and shall survive the acquisition of any interest
in the Property by Heritage .
1.3
Blake
will indemnify Hertiage 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 Blake and contained in this
Agreement.
1.4
Blake
acknowledges and agrees that Heritage 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 Heritage shall limit or extinguish the right to indemnity
hereunder, and, in addition to any other remedies it may pursue, Heritage may
deduct the amount of any such loss or damage from any amounts payable by it
to
Blake hereunder.
2.
|
HERITAGE'S
REPRESENTATIONS
|
Heritage
warrants and represents to Blake 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.
3
3.
|
GRANT
OF OPTION
|
Blake
hereby gives and grants to Heritage the sole and exclusive right and option
to
acquire a l00% undivided right, title and interest in and to the Property (the
"Option"), subject to a 3% net smelter returns royalty and a 2% gross overriding
royalty on diamond production on the Property, 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 Property in good standing and in force
and
effect, Heritage shall be obligated to:
Cash
Payment
(a)
|
Pay
to Blake a total of $40,000
as follows:
|
(i)
|
$2,500
immediately upon execution of this agreement by all parties;
|
(ii)
|
an
additional $7,500 by January 6, 2008;
|
(iii) |
an
additional $10,000 by January 6, 2009;
and
|
(iv)
|
an
additional $20,000 by January 6,
2010.
|
Expenditure
Commitments
(b)
|
Incur,
or cause to be incurred, exploration work on the Property totalling
at
least $145,000 by January 6, 2011, which work shall be conducted
by
Heritage under the direction of a qualified geologist or project
engineer,
as follows:
|
(i)
|
$6,000
in
expenditures on the Property by August 6, 2007. Heritage’s completion of
these expenditures is mandatory;
|
(ii)
|
No
less than a further $9,000
of
expenditures to be incurred on the Property by January 6, 2008;
|
(iii)
|
No
less than a further $25,000 of expenditures to be incurred on the
Property
by January 6, 2009;
|
(iv)
|
No
less than a further $45,000 of expenditures to be incurred on the
Property
by January 6, 2010; and
|
(v)
|
No
less than a further $60,000 of expenditures to be incurred on the
Property
by Janaury 6, 2011.
|
4
Assessment
Work
(c)
|
Pay,
or cause to be paid, to Blake, or on Blake's behalf, as Heritage
may
determine, all Property payments and assessment work required to
keep the
Property and this Option in good standing during the term of this
Agreement.
|
4.3 Heritage
shall deliver all consideration due to the Blake under paragraph 4.1 directly
in
his name.
5.
|
PERIPHERAL
INTEREST
|
Heritage
agrees that any other right or interest acquired in any mineral property claim
group within a two kilometer distance of the boundaries of the Property will
form part of the Property for the purpose of this agreement. Any additional
mineral property right or interest that Heritage may acquire shall be included
under the provisions of paragraph 6.1.
6.
|
RIGHT
TO ABANDON PROPERTY
INTERESTS
|
6.1
Should
Heritage, in its sole discretion, determine that any part of the Property no
longer warrants further exploration and development, then Heritage may abandon
such interest or interests without affecting its rights or obligations under
this Agreement, so long as Heritage provides Blake with 30 days notice of its
intention to do so. Upon receipt of such notice, Blake may request Heritage
to
retransfer the title to such interest or interests to him, and Heritage 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
Property that Heritage returns to Blake 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 Heritage 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
Heritage shall be in default of any requirement set forth in paragraph 4.1
herein, Blake shall give written notice to Heritage specifying the default
and
Heritage shall not lose any rights granted under this Agreement, unless within
30 days after the giving of notice of default by Blake, Heritage has failed
to
take reasonable steps to cure the default by the appropriate
performance.
7.3
If
the
Option is terminated in accordance with paragraphs 7.1 and 7.2 herein, Heritage
shall have no interest in or to the Property, and all share issuances,
expenditures and payments made by Heritage to or on behalf of Blake under this
Agreement shall be non-refundable by Blake to Heritage for which Heritage shall
have no recourse. Within 60 days of such termination, Heritage shall transfer
the Property back to Blake, failing which, Blake shall have the right to act
as
attorney for Heritage for the purpose of such transfer.
5
8.
|
ACQUISITION
OF INTERESTS IN THE
PROPERTY
|
At
such
time as Heritage 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
Heritage, and Heritage shall have thereby, without any further act, acquired
an
undivided 100% interest in and to the Property.
9.
|
RIGHT
OF ENTRY
|
For
so
long as the Option continues in full force and effect, Heritage, its employees,
agents, permitted assigns and independent contractors shall have the sole and
exclusive right and option to:
(a)
|
enter
upon the Property;
|
(b)
|
have
exclusive and quiet possession of the
Property;
|
(c)
|
incur
expenditure;
|
(d)
|
bring
upon and erect upon the Property such mining facilities as Heritage
may
consider advisable; and
|
(e)
|
remove
from the Property and sell or otherwise dispose of mineral
products.
|
10.
|
NET
SMELTER RETURNS ROYALTY
|
10.1
On
the
date Heritage commences commercial production on the Property, Blake shall
be
entitled to receive and Heritage shall pay to Blake 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
Heritage
shall be under no obligation whatsoever to place the Property into commercial
production and in the event they are placed into commercial production, Heritage
shall have the right, at any time, to curtail or suspend such production as
it,
in its absolute discretion, may determine.
10.2
Heritage
shall be entitled to, but under no obligation whatsoever, purchase up to 2%
of
the 3% of net smelter returns held by Blake at a rate of $500,000 per 0.5%
of
net smelter return.
11.
|
OPERATOR
|
11.1
After
the
execution of this Agreement, Heritage, or at Heritage's option, its respective
associate or nominee or such other unrelated entity as it may determine, will
act as the operator of the Property under this Agreement. Heriatge, if operator,
may resign as the operator at any time by giving 30 calendar days prior written
notice to Blake, and within such 30 day period, Heritage may appoint another
party who covenants to act as the operator of the Property upon such terms
as
Heritage sees fit.
6
11.2
Notwithstanding
paragraph 11.1, Blake shall have the right to conduct and supervise all of
Heritage’s exploration and development work on the Property 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 Property and to determine the manner of
operation of the Property 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 Heritage.
13.
|
REGISTRATION
OF PROPERTY INTERESTS
|
Upon
the
request of Heritage, Blake shall assist Heritage to record this Agreement with
the appropriate mining recorder and, when required, Blake shall further provide
Heritage with such recordable documents as Heritage and its counsel shall
require to record its due interest in respect of the Property.
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
Heritage 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 Heritage,
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 Heritage, insofar as is possible,
shall
promptly give written notice to Blake 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
Blake as soon as such cause ceases to exist.
16.
|
CONFIDENTIAL
INFORMATION
|
No
information furnished by Heritage to Blake hereunder in respect of the
activities carried out on the Property by Blake, or related to the sale of
mineral products derived from the Property, shall be published by Blake without
the prior written consent of Heritage, but such consent in respect of the
reporting of factual data shall not be unreasonably withheld. Blake, shall
be
entitled to copies of all exploration work and development data that Heritage
may acquire in conducting work on the Property, in written and electronic
format, to be provided as the data is generated
7
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
Blake addressed to him as follows:
XXXXXXXXX
XXXXX
X.X.
Xxx
000
Xxxxxxxx,
Xxxxxxx
X0X
0X0
and
in
the case of Heritage addressed as follows:
Xxxxx
000, 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxxx
Xxx, Xxxxxxx
X0X
0X0
Attention:
Xxxxx Xxxxxxxxxx, 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.
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 Heritage
to
do any acts or make any payments hereunder and any acts or payments made
hereunder shall not be construed as obligating Heritage 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.
8
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 Thunder Bay, 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.
9
IN
WITNESS WHEREOF
this
Agreement has been executed as of the day and year first above
written.
per:
|
|
___________________________ | ___________________________ |
Xxxxxxxxx
Xxxxx
|
President
|
10
SCHEDULE
"A"
TO
THAT CERTAIN AGREEMENT MADE AS OF AUGUST 6, 2006 BETWEEN
XXXXXXXXX
XXXXX AND HERITAGE EXPLORATIONS, INC.
The
Strathy Township property consists of a total of 2 claim units located in the
Sudbury Mining Division, Canada with the following record number and
area:
Township
|
Recording
Date
|
Record
No.
|
Acreage
|
Strathy
|
January
9, 1992
|
1118436
|
40
|
|
|||
Strathy
|
January
9, 1992
|
1179062
|
40
|
11
SCHEDULE
“B”
TO
THAT CERTAIN AGREEMENT MADE AS OF AUGUST 6, 2006 BETWEEN
XXXXXXXXX
XXXXX AND HERITAGE 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, Blake 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 Property (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 Heritage and one appointed by Blake.
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 Blake on this basis, regardless of the price or proceeds
actually received by Heritage 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.
Heritage
will calculate and pay the XXXX to Xxxxx within 30 days of the end of each
calendar quarter, based on all Diamonds from the Property which were graded
in
such calendar quarter.
Blake
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.
Blake
shall also at his election have the right to take their XXXX in
kind.
12
SCHEDULE
“C”
TO
THAT CERTAIN AGREEMENT MADE AS OF AUGUST 6, 2006 BETWEEN
XXXXXXXXX
XXXXX AND HERITAGE EXPLORATIONS, INC.
NET
SMELTER RETURNS
1.
In
the
Agreement, “Net
Smelter Returns”
means
the net amount of money received by Heritage for its own account from the sale
of ore, or ore concentrates or any other products from the Property 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 Heritage to Blake shall be made quarterly within
45
days after the end of each fiscal quarter of Heritage and shall be accompanied
by unaudited financial statements pertaining to the operations carried out
by
Heritage on the Property. Within 120 days after the end of each fiscal year
of
Heritage in which Net Smelter Returns are payable to Blake, 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 Blake
shall be made forthwith. A copy of the said audit shall be delivered to Blake
within 30 days of the end of such 120-day period.
3.
Each
annual audit shall be final and not subject to adjustment unless Blake delivers
to Heritage written exceptions in reasonable detail within one month after
Blake
receives the report. Blake, or his representative duly authorized in writing,
at
his expense, shall have the right to audit the books and records of Heritage
related to Net Smelter Returns to determine the accuracy of the report, but
shall not have access to any other books and records of Heritage. The audit
shall be conducted by a chartered or certified public accountant of recognized
standing. Heritage 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 Blake’s report shall be
delivered to Heritage and the amount which should have been paid according
to
Blake’s report shall be paid forthwith. In the event that the said discrepancy
is to the detriment of Blake and exceeds 5% of the amount actually paid by
Heritage, then Heritage 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 Heritage, 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 Heriatge
would have incurred if such operations were carried out at facilities not owned
or controlled by Heritage then offering comparable custom services.
5.
Blake
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.