GOLDEN PROMISE OPTION AND JOINT VENTURE AGREEMENT BETWEEN CROSSHAIR EXPLORATION & MINING CORP. AND PARAGON MINERALS CORPORATION DATED AS OF APRIL April 8, 2009
EXHIBIT
4.21
GOLDEN
PROMISE
BETWEEN
CROSSHAIR
EXPLORATION & MINING CORP.
AND
PARAGON
MINERALS CORPORATION
DATED AS
OF APRIL April 8, 2009
50651077.7
TABLE
OF CONTENTS
PAGE
|
1. DEFINITIONS
|
|
50651077.7
i
Schedules
50651077.7
ii
THIS
OPTION AND JOINT VENTURE AGREEMENT is dated as of the 8th day
of April, 2009
BETWEEN:
CROSSHAIR EXPLORATION & MINING
CORP., a British Columbia company having an office at Suite 1240, 1140
West Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0
(“Crosshair”)
AND:
PARAGON MINERALS CORPORATION,
a company incorporated under the Canada Business Corporations Act having an
office at Suite 1500 – 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxxxx, X0X 0X0
(“Paragon”)
WHEREAS:
|
A.
|
Paragon
is the legal holder of an undivided 100% title and interest (subject to
the Underlying Agreements, Joint Venture Agreement and Purchase and Sale
Agreement) in the listed interests in the mining claims and associated
assets set out in Schedule 1.1(90) attached hereto (collectively, the
“Properties”);
|
|
B.
|
Paragon
wishes to grant Crosshair the exclusive right and option to acquire up to
a 70% interest in the Properties;
and
|
|
C.
|
Paragon
and Crosshair wish to enter into this Agreement in connection with the
exploration and development of the Properties and other related
matters.
|
NOW,
THEREFORE, THIS AGREEMENT WITNESSES that in consideration of the payment by each
Participant to the other of the sum of $10.00 and other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged by
each participant) and of the mutual covenants and agreements contained herein,
the Participants agree as follows:
|
1.
|
|
1.1
|
In
this Agreement and in the Schedules and the recitals hereto, unless the
context otherwise requires, the following expressions will have the
following meanings:
|
|
|
(1)
|
“Acquiring Participant”
shall have the meaning provided in
section 17.1;
|
|
|
(2)
|
“Additional Exploration
Costs” shall have the meaning provided in section
4.1;
|
|
|
(3)
|
“Additional Option” shall
have the meaning provided in section
4.1;
|
50651077.7
- 1
-
|
|
(4)
|
“Additional Properties”
shall have the meaning provided in section 17.2;
|
|
|
(5)
|
“Agreement” means this
Option and Joint Venture Agreement as it may be amended from time to
time;
|
|
|
(6)
|
“Applicable Law” means
any applicable domestic or foreign, federal, provincial or local law
including any statute or subordinate legislation or treaty and any
applicable rule, regulation, ordinance, requirement, order, permit,
judgment, injunction, award or decree or other binding requirement of a
Governmental Authority or arbitrator having the force of
law;
|
|
|
(7)
|
“Area of Common Interest”
means the area on the ground outlined on Schedule 17.1 which extends
two kilometres from the boundaries of the Properties; provided that any
mining claims which would otherwise be within the Area of Common Interest
in which, on the date hereof, Crosshair or Paragon has any interest, or
any right to acquire an interest is excluded from the Area of Common
Interest;
|
|
|
(8)
|
“Assets” mean the
Properties, Other Tenements, Product, Facilities, Supplies, Contingency
Fund the contents of the Business Account and all other assets acquired or
held by the Participants with respect to such assets or pursuant to this
Agreement as the same may exist from time to
time;
|
|
|
(9)
|
“Associated Company”
means:
|
|
|
(a)
|
any
corporation which owns directly or through any other means not less than
50% of the outstanding capital stock of a
Participant;
|
|
|
(b)
|
any
corporation of which a Participant owns directly or through any other
means not less than 50% of the outstanding capital stock; or
|
|
|
(c)
|
any
corporation of which either of the corporations referred to in
paragraphs (a) and (b) owns directly or through any other means not
less than 50% of the outstanding capital
stock.
|
|
|
(10)
|
“Auditing
Participant” shall have the
meaning provided in
section 16.2;
|
|
|
(11)
|
“Auditor” means an
independent firm of chartered accountants appointed as the auditor of the
Joint Venture by the Executive
Committee;
|
|
|
(12)
|
“Budget” means, in
respect of any Program, a detailed budget document which shall stipulate
all Costs and other estimated monthly and cumulative cash expenditures for
such Program and which is approved by the Executive Committee and such
budget document as amended and approved by the Executive Committee from
time to time;
|
|
|
(13)
|
“Business” means the
contractual relationship of the Participants under this
Agreement;
|
50651077.7
- 2
-
|
|
(14)
|
“Business Account” shall
have the meaning provided in
section 13.10;
|
|
|
(15)
|
“Canadian GAAP” means
Canadian generally accepted accounting principles consistently applied and
shall be deemed to mean International Financial reporting Standards
(“IFRS”) to the extent that IFRS replace Canadian GAAP during the term of
this Agreement;
|
|
|
(16)
|
“Chairman” means the
person appointed, from time to time, to be chairman of the Executive
Committee pursuant to
section 6.4;
|
|
|
(17)
|
“Change of Control”
means, in respect of any corporation,
either:
|
|
|
(a)
|
a
transaction:
|
|
|
(i)
|
the
effect of which is that a person or combination of persons acting in
concert becomes the holder of more than 50% of the shares in the capital
stock of such corporation which carry a voting right either under all
circumstances or under certain circumstances that have occurred and are
continuing; and
|
|
|
(ii)
|
such
person or combination of persons did not previously hold such number of
shares; or
|
|
|
(b)
|
a
merger, arrangement, share exchange, take-over bid or other similar
transaction resulting in the shareholders of a corporation or other entity
holding less than 50% of such corporation’s aggregate issued and
outstanding shares which carry a voting right either under all
circumstances or under certain circumstances that have occurred and are
continuing to occur;
|
|
|
(18)
|
“Chargee” shall have the
meaning provided in
section 19.1.
|
|
|
(19)
|
“CIM Val” means the
Standards and Guidelines For Valuation of Mining Properties of the Special
Committee of the Canadian Institute of Mines, Metallurgy and Petroleum on
Valuation of Mineral Properties;
|
|
|
(20)
|
“Commercial Production”
means the commercial exploitation of Ore but does not include milling for
the purpose of testing or milling by a pilot plant or during the initial
tune-up period of a plant. Commercial Production will be deemed
to have commenced:
|
|
|
(a)
|
if
a plant is located on the Properties, on the first day of the month
following the first period of 30 consecutive days during which Ore has
been processed through such plant at an average rate of not less than 60%
of the milling rate specified in the Full Feasibility Study recommending
placing the Properties into Commercial Production;
or
|
50651077.7
- 3
-
|
|
(b)
|
if
no plant is located on the Properties, on the first day of the month
following the first period of 30 consecutive days during which Ore has
been shipped from the Properties on a commercially reasonably regular
basis for the purpose of earning
revenue;
|
|
|
(21)
|
“Contingency Fund” means
the fund which will be established by the Operator pursuant to
section 12.3, the moneys in which will be used to satisfy all legal
obligations of the Operator in connection with the permanent or temporary
shutdown in whole or in part of any of the Facilities on the Properties;
including, without limitation, posting any reclamation bonds or deposits
required by any Governmental Authority, all anticipated costs of
Environmental Compliance and dealing with any Environmental Liabilities
and Continuing Obligations, and any obligation for severance pay, pensions
and similar payments to employees and all of which obligations are to be
recognized in the accounts of the
Operator;
|
|
|
(22)
|
“Continuing Obligations”
mean obligations or responsibilities that are reasonably expected to
continue or arise after Operations on a particular area of the Properties
have ceased or are suspended, such as future monitoring, stabilization, or
Environmental Compliance;
|
|
|
(23)
|
“Contributing Budget”
means any Program and Budget (including any revision or amendments
thereto) in respect of which each Participant has an obligation to fund
its Cost Share pursuant to this
Agreement;
|
|
|
(24)
|
“Contributing
Participant” shall have the meaning provided in
section 13.9;
|
|
|
(25)
|
“Cost Share” means the
respective share of Costs and other liabilities to be borne by each
Participant in respect of the Properties in accordance with the terms of
this Agreement and, except as otherwise provided herein, will be
proportionate to the respective Interests of each Participant as
determined from time to time;
|
|
|
(26)
|
“Costs” means Exploration
Costs, Feasibility Costs, Development Costs and Operating Costs, as
applicable;
|
|
|
(27)
|
“Crosshair Shares” means
common shares in the capital of
Crosshair;
|
|
|
(28)
|
“Development Costs” means
the sum of adding (A) the aggregate amount of all direct costs, outlays
and expenses of whatever kind or nature spent or incurred by the
Participants in accordance with all Programs and Budgets during the
Development Period in order to prepare the Properties (or any portion
thereof) for Commercial Production; including, without limitation, all
insurance costs, all permitting costs, costs associated with
rehabilitation including, without limitation, reclamation funds and other
costs associated with compliance with Environmental Laws, all associated,
non-recoverable sales taxes, the reasonable costs incurred by
representatives of the Participants in attending meetings of the Executive
Committee during the Development Period, an amount equal to the estimated
working capital required for the two months immediately following
achievement of Commercial Production and contributions to the Contingency
Fund required by
|
50651077.7
- 4
-
the
Operator pursuant to section 12.3 and any and all costs, payments,
royalties, interests, or similar arrangements arising at any time during the
Development Period associated with compensation to local groups including as
compensation for native land claims, and (B) an amount in respect of Indirect
Costs equal to 1.5% of all direct Development Costs which are incurred by the
Operator during the Development Period;
|
|
(29)
|
“Development Decision”
means a decision made by the Executive Committee, based on the Full
Feasibility Study, to proceed with the development of a mine on the
Properties or a portion thereof;
|
|
|
(30)
|
“Development Finance”
means the financing arrangements required to fund the Development
Costs;
|
|
|
(31)
|
“Development Finance
Expense” means, for any period, in respect of each Participant, the
sum of all principal, interest, fees and other costs associated with the
Development Finance obtained by such Participant which is payable by such
Participant to the lender of such Development Finance in respect of such
period;
|
|
|
(32)
|
“Development Finance
Notice” shall have the meaning provided in
section 11.5;
|
|
|
(33)
|
“Development Period”
means the period commencing when a Development Decision has been made and
ending upon the commencement of Commercial
Production;
|
|
|
(34)
|
“Diluted Participant”
shall have the meaning provided in
section 14.1;
|
|
|
(35)
|
“Diluted Participant’s
Interest” shall have the meaning provided in
section 14.1;
|
|
|
(36)
|
“Effective Date” means
April 8, 2009;
|
|
|
(37)
|
“Eligible Matter” means,
in respect of matters considered by the Executive Committee, those matters
that arise from a dispute between the Participants other than in respect
of one Participant being out-voted upon any motion considered by the
Executive Committee;
|
|
|
(38)
|
“Encumbrances” means all
interests, mortgages, charges, royalties, security interests, liens,
encumbrances, actions, claims, demands and equities of any nature
whatsoever or however arising and any rights or privileges capable of
becoming any of the foregoing;
|
|
|
(39)
|
“Environmental
Compliance” means actions performed during or after Operations to
comply with the requirements of all Environmental Laws or contractual
commitments related to reclamation of the Properties or other compliance
with Environmental Laws;
|
50651077.7
- 5
-
|
|
(40)
|
“Environmental Laws”
means all applicable federal, provincial, municipal and local laws,
statutes, ordinances, by-laws, regulations, orders, directives and
decisions, rendered by any Governmental Authority relating to the
protection of the environment, or the control of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous wastes or
substances;
|
|
|
(41)
|
“Environmental
Liabilities” means any and all claims, actions, causes of action,
damages, losses, liabilities, obligations, penalties, judgments, amounts
paid in settlement, assessments, costs, disbursements, or expenses
(including, without limitation, attorneys’ fees and costs, experts’ fees
and costs, and consultants’ fees and costs) of any kind or of any nature
whatsoever that are asserted against any Participant, by any person or
entity other than the other Participants, alleging liability (including,
without limitation, liability for studies, testing or investigatory costs,
cleanup costs, response costs, removal costs, remediation costs,
containment costs, restoration costs, corrective action damages, business
losses, personal injuries, penalties or fines) arising out of based on or
resulting from (i) the presence, release, threatened release,
discharge or emission into the environment of any hazardous materials or
substances existing or arising on, beneath or above the Properties and/or
emanating or migrating and/or threatening to emanate or migrate from the
Properties to off-site properties; (ii) physical disturbance of the
environment; or (iii) the violation or alleged violation of any
Environmental Laws;
|
|
|
(42)
|
“Executive Committee”
means the committee formed pursuant to section 6 to supervise the
activities on the Properties;
|
|
|
(43)
|
“Expansion” means, at any
time, as the context requires either (i) an increase in excess of 10%
in the Stated Capacity of all Facilities on the Properties which, as of
such time, have entered into Commercial Production, or (ii) the
opening and equipping of any additional Facility on the
Properties;
|
|
|
(44)
|
“Exploration Costs” means
the sum of adding (A) the aggregate amount of all direct costs,
outlays and expenses of whatever kind or nature spent or incurred by the
Operator in accordance with all Programs and Budgets, in connection with
the exploration of the Properties in the Exploration Period including
without limitation, moneys expended in maintaining the Properties in good
standing and costs incurred in connection with complying with
Environmental Laws, all costs relating to the securing of good relations
with communities in the area surrounding the Properties, including,
without limitation, all costs associated with the negotiation and
implementation of any impact and benefit agreement or access agreement and
any services provided in aid of consultation between aboriginal people and
Governmental Authorities relating to Operations, all insurance costs,
moneys expended in doing and filing assessment work, expenses paid for or
incurred in connection with any program of surface or underground
prospecting, exploring, geophysical, geochemical and geological surveying,
drilling, drifting, raising and other underground work, assaying and
engineering, bulk sampling, environmental studies, data preparation and
analysis, submissions to
|
50651077.7
- 6
-
Governmental
Authorities, all associated, non-recoverable sales taxes, the reasonable costs
incurred by no more than one representative of each of Crosshair and Paragon
attending meetings of the Executive Committee, paying the fees, wages, salaries,
travelling expenses and fringe benefits, including, without limitation, medical
and dental benefits provided by Crosshair, of all persons engaged in work with
respect to and for the benefit of the Properties, and (B) an amount in
respect of Indirect Costs equal to 8% of all direct Exploration Costs which are
incurred by the Operator during the Exploration Period. For greater certainty,
any issuances of Crosshair Shares pursuant to sections 3.4 or 4.1(6) shall not
considered to be Exploration Costs;
|
|
(45)
|
“Exploration Period”
means the period commencing on the Effective Date and ending on the
Feasibility Date;
|
|
|
(46)
|
“Facilities” means all
mines and plants including, without limitation, all pits, shafts, haulage
ways and other underground workings, and all buildings, plants and other
structures, fixtures and improvements, mobile equipment, stores of a
capital and consumable nature, and all other property, whether fixed or
moveable, as the same may exist at any time, in or on the Properties or
outside the Properties if it materially benefits the
Properties;
|
|
|
(47)
|
“Fair Market Value” shall
have the meaning set out in
Schedule 1.1(47);
|
|
|
(48)
|
“Feasibility Costs” means
the sum of adding (A) the aggregate amount of all direct costs, outlays
and expenses of whatever kind or nature spent or incurred by the Operator
in accordance with all Programs and Budgets in connection with the
production of a Full Feasibility Study including, without limitation, all
costs, outlays and expenses of whatever kind or nature spent or incurred
in preparation of the Full Feasibility Study during the Feasibility
Period, and (B) an amount in respect of Indirect Costs equal to 8% of all
direct Feasibility Costs which are incurred by the Operator during the
Feasibility Period;
|
|
|
(49)
|
“Feasibility Date” means
the date the Executive Committee determines to commence the preparation of
the Full Feasibility Study in accordance with
section 6;
|
|
|
(50)
|
“Feasibility Period”
means the period commencing on the Feasibility Date and ending on the date
on which the Executive Committee make a Development
Decision;
|
|
|
(51)
|
“Fiscal Year” means the
period commencing on May 1 of each year and ending on the next succeeding
April 30;
|
|
|
(52)
|
“Full Feasibility Study”
means a comprehensive study approved by the Executive Committee in
accordance with this Agreement that covers all material aspects of a
proposed Program and Budget to investigate the technical and economic
viability of commencing Commercial Production on the Properties,
or
|
50651077.7
- 7
-
any part
thereof, in sufficient detail and to a degree of accuracy that is accepted by
Crosshair and:
|
|
(a)
|
is
sufficiently detailed in content and presented in a form that would be
normally acceptable to a provider of development finance as a basis for
providing the Development Finance on commercially reasonable
terms;
|
|
|
(b)
|
is
based on work conducted in accordance with the Program and
Budget;
|
|
|
(c)
|
is
based on appropriate sampling programmes and provides estimates of the
tonnes and grade of proven and probable Ore reserves and resources
expressed on both a mineable and recoverable
basis;
|
|
|
(d)
|
provides
details of all technical or other work and analysis on which the study is
based including but not limited to geological, geotechnical, hydrological,
metallurgical, processing, mining, survey, waste disposal, power and water
requirements;
|
|
|
(e)
|
includes
studies of environmental, archaeological, social, cultural, community and
aboriginal title and treaty impacts of sufficient detail to be acceptable
to the relevant authorities;
|
|
|
(f)
|
sets
out the details of and analyses the security and adequacy of tenure and
ownership;
|
|
|
(g)
|
includes
a study and analysis of relevant infrastructure, infrastructure access,
ore beneficiation, waste disposal, product price forecasting and financial
aspects;
|
|
|
(h)
|
includes
sufficient details of official arrangements for the purchase of all
Product as to be acceptable to a provider of Development
Finance;
|
|
|
(i)
|
plans
for and provides a Budget for the implementation of Commercial Production
and includes but is not limited to a schedule
of:
|
|
|
(i)
|
relevant
government, statutory and any other approval necessary;
and
|
|
|
(ii)
|
activities,
resources personnel, equipment, materials etc. and
expenditures;
|
|
|
(j)
|
includes
estimates of both capital and operating costs likely to be incurred in
establishing and conducting development and operations, including costs to
be incurred in development, construction, pre-production, mining, crushing
and treatment or other beneficiation, as the case may be, and all working
capital requirements;
|
50651077.7
- 8
-
|
|
(k)
|
analyses
how to proceed with development and operations to economically and
commercially maximize the return on funds invested on the assumption that
the Properties will be funded solely on an equity
basis;
|
|
|
(l)
|
includes
a financial model for, and states the commercial viability, including risk
and sensitivity analysis of the proposed development and operations on the
assumption that the Properties will be funded solely on an equity
basis;
|
|
|
(m)
|
is
of such detail and scope as to be acceptable to any Governmental Authority
to which reports must be provided or applications must be
made;
|
|
|
(n)
|
contemplates
and identifies additional resources, any potential further project
expansion and/or exploration potential (if
applicable);
|
|
|
(o)
|
includes
estimates of further exploration costs for ongoing exploration of the
Properties both during the Feasibility Period and Development Period and
after the commencement of Commercial Production within and outside the
boundaries of the Subject Area;
|
|
|
(p)
|
includes
a description of that part of the Properties to be covered by the proposed
mine contemplated in the Full Feasibility
Study;
|
|
|
(q)
|
is
prepared or independently reviewed by an internationally recognized and
mutually agreed to engineering
firm;
|
|
|
(r)
|
includes
estimates of all ongoing capital costs such as the purchase and
replacement of equipment, tailings dam replacements and items of a similar
nature;
|
|
|
(53)
|
“Governmental Authority”
means any domestic or foreign, federal, provincial, municipal or local
legislative, executive, judicial or administrative body or person having
jurisdiction in the relevant
circumstances;
|
|
|
(54)
|
“Gross Revenue” in
respect of any period shall mean the sum of adding (A) gross receipts
from sale of Product, less any charges for sampling, assaying, or
penalties for such period; (B) gross receipts from the sale or other
disposition of Assets for such period; (C) insurance proceeds for
such period; (D) compensation for expropriation of Assets for such
period; and (E) judgment proceeds for such
period.
|
|
|
(55)
|
“Independent Valuator”
has the meaning provided in
Schedule 1.1(47);
|
|
|
(56)
|
“Indirect Costs” means
all costs incurred by the Operator associated with secretarial support,
offices and facilities, selected field support equipment, accounting
services, computers, administration, health and safety, legal
support,
|
50651077.7
- 9
-
- -
lands
department support, printers and plotters and other similar indirect costs
associated with the Costs;
|
|
(57)
|
“Indemnified Participant”
has the meaning set out in
section 5.4;
|
|
|
(58)
|
“Indemnifying
Participant” has the meaning set out in
section 5.4;
|
|
|
(59)
|
“Initial Deemed
Investment” means the sum of
$2.3 Million;
|
|
|
(60)
|
“Initial Exploration
Costs” has the meaning set out in section
3.3;
|
|
|
(61)
|
“Initial Option” has the
meaning set out in section 3.2;
|
|
|
(62)
|
“Interest” means, at any
time, the undivided beneficial percentage interest representing the
ownership interest of a Participant in the Assets, at such time and all
other rights and obligations arising under this Agreement, as such
interest may from time to time be adjusted
hereunder. Participating Interests shall be calculated to three
decimal places and rounded to two decimal places as
follows: Decimals of .005 or more shall be rounded up (e.g.,
1.519% to 1.52%); decimals of less than .005 shall be rounded down (e.g.,
1,514% rounded to 1.51%).
|
|
|
(63)
|
“Intervening Event” shall
have the meaning provided in
section 26.1;
|
|
|
(64)
|
“Joint Venture” means the
joint venture created pursuant to this
Agreement;
|
|
|
(65)
|
“Joint Venture Agreement”
means the May 1, 2006 Golden Promise Property Agreement between Rubicon
Minerals Corporation and Crosshair, as amended on April 18, 2008, as
assigned from Rubicon Minerals Corporation to Paragon effective December
8, 2006;
|
|
|
(66)
|
“Material Loss” has the
meaning set out in
section 5.4;
|
|
|
(67)
|
“Net Cash Flow” for any
period means the sum of adding:
|
|
|
(a)
|
cash
and cash equivalents of the Joint Venture (which for the avoidance of
doubt includes any overdrafts) at the beginning of such period;
and
|
|
|
(b)
|
the
difference resulting from the
subtracting:
|
|
|
(i)
|
Operating
Costs paid during such period, from
|
|
|
(ii)
|
Gross
Revenue received during such
period;
|
|
|
(68)
|
“Net Smelter Royalty”
shall have the meaning set out in Schedule 1.1(68) attached
hereto;
|
|
|
(69)
|
“Non-Acquiring
Participant” shall have the meaning provided in
section 17.1;
|
|
|
(70)
|
“Non-Approving
Participant” shall have the meaning provided in
section 6.9;
|
50651077.7
- 10
-
|
|
(71)
|
“Non-Contributing
Participant” shall have the meaning provided in
section 13.9;
|
|
|
(72)
|
“Offer” shall have the
meaning provided in
section 20.4;
|
|
|
(73)
|
“Offeror” shall have the
meaning provided in
section 20.3;
|
|
|
(74)
|
“Offeree” shall have the
meaning provided in
section 20.3;
|
|
|
(75)
|
“Operations” means the
activities carried out under this
Agreement;
|
|
|
(76)
|
“Operating Costs” means,
for any period after commencement of Commercial Production, the result of
subtracting the sum of (a) and the sum of (b) from the sum of
(c):
|
|
|
(a)
|
all
direct costs, outlays and expenses of whatsoever kind or nature actually
incurred or chargeable directly by the Operator in connection with the
operation of the Properties as a mine during such period, which costs,
expenses, obligations, liabilities and charges include, without
duplication and without limitation, the
following:
|
|
|
(i)
|
all
costs of or related to the mining and processing of the Ore and the
operation of the Facilities and all costs of or related to the Product,
including marketing, transportation, commissions and/or discounts at rates
which are normal and customary in the
industry;
|
|
|
(ii)
|
all
costs and expenses of replacing, expanding, modifying, altering or
changing from time to time the Facilities. Costs and expenses
of improvements (such as haulage ways or mill facilities) that are also
used in connection with workings other than the Properties shall be
charged to the Properties only in the proportion that their use in
connection with the Properties bears to their total
use;
|
|
|
(iii)
|
such
amount of cash for working capital as is required for the operation of the
Properties as a mine pursuant to
section 13.11;
|
|
|
(iv)
|
all
costs of or related to operating employee facilities, including
housing;
|
|
|
(v)
|
all
duties, charges, levies, royalties, interests, taxes (excluding taxes
levied on the income of the Participants) applicable to mining of the
Properties, including, without limitation, all provincial mining taxes,
non-recoverable sales taxes, severance taxes, licence fees and
governmental levies of a similar nature, and other payments imposed by any
Governmental Authority upon or in connection with operating the Properties
as a mine or which are paid or payable to any local groups including as
benefits to be
|
50651077.7
- 11
-
provided
or paid in respect of any aboriginal claims to aboriginal or treaty rights or
payable to any other third party;
|
|
(vi)
|
fees,
wages, salaries, travelling expenses and fringe benefits (whether or not
required by law) of all persons directly engaged in respect of and for the
benefit of the Properties and all costs involved in paying for the food,
lodging and other reasonable needs of such
persons;
|
|
|
(vii)
|
all
costs of consulting, legal, accounting, insurance and other services
incurred by the Operator and directly related to the operation of the
Facilities;
|
|
|
(viii)
|
all
approved exploration expenditures incurred with respect to the Properties
after commencement of Commercial Production from a mine on the Properties
including both exploration within the area of such mine and outside the
area of such mine;
|
|
|
(ix)
|
all
annual capital costs for the normal efficient operation of the Properties
as a mine including, without limitation, all costs of construction,
equipment and mine development including maintenance, repairs and
replacements and all costs, including capital costs, associated with an
Expansion;
|
|
|
(x)
|
all
costs in connection with or as a result of Environmental Laws incurred by
the Operator;
|
|
|
(xi)
|
any
costs or expenses incurred by the Operator relating to the termination of
the operation of the Properties as a mine, including all contributions to
the Contingency Fund pursuant to
section 12.3;
|
|
|
(xii)
|
the
reasonable costs incurred by the representatives of the Participants
attending meetings of the Executive
Committee;
|
|
|
(xiii)
|
allowance
for overhead;
|
|
|
(xiv)
|
all
amounts payable to the Participants during
mining;
|
|
|
(xv)
|
interest
on monies borrowed or advanced for costs and expenses, but in no event in
excess of the maximum permitted by
law;
|
|
|
(xvi)
|
costs
of funding the Contingency Fund as provided in section 12.3;
and
|
|
|
(xvii)
|
rental,
royalty, production, and purchase
payments.
|
50651077.7
- 12
-
|
|
(b)
|
an
amount in respect of Indirect Costs equal to 2.5% of all direct Operating
Costs which are incurred by the Operator during the Operating
Period.
|
|
|
(c)
|
the
amount of all insurance recoveries and settlements received during such
period to the extent such recoveries and settlements were not deducted in
any previous period; provided that, except where specific provision is
made otherwise, all Operating Costs will be determined in accordance with
Canadian GAAP but such costs shall not include any amount in respect of
amortization of Costs, depletion or
depreciation;
|
|
|
(77)
|
“Operating Period” means
the period commencing on the date on which Commercial Production is
commenced on the Properties or a portion thereof and terminating upon the
termination of such Commercial
Production;
|
|
|
(78)
|
“Operator” means the
Participant acting as Operator with respect to the Properties pursuant to
this Agreement and the “Non-Operator” means any
Participant that is not the Operator at any given
time;
|
|
|
(79)
|
“Ore” means all minerals
from the Properties, the nature and composition of which provides economic
justification for mining or removing from place and shipping and selling
such material, or delivering such material to a plant for further
processing;
|
|
|
(80)
|
“Other Tenements” means
all surface rights of and to any lands within or outside the Properties
including surface rights held in fee or under lease, licence, easement,
right of way or other rights of any kind (and all renewals, extensions and
amendments thereof or substitutions therefor) acquired by or on behalf of
the Participants with respect to the
Properties;
|
|
|
(81)
|
“Overruns” means, in
respect of any Budget, all Costs which exceed those estimated under such
Budget;
|
|
|
(82)
|
“Participant” means
either of Crosshair or Paragon and their successors and permitted assigns
and any other entity which becomes a party to this Agreement pursuant to
section 20 and the successors and permitted assigns thereof that may
own an Interest from time to time, as the case may be, and “Participants” means
together Crosshair, Paragon, any such additional Participant and their
successors and permitted assigns, as the case may
be;
|
|
|
(83)
|
“Participants’ Net Cash
Flow” has the meaning provided in
section 12.4(6);
|
|
|
(84)
|
“Parties” means Crosshair
and Paragon;
|
|
|
(85)
|
“Periods” means
collectively the Exploration Period, the Development Period and the
Feasibility Period;
|
50651077.7
- 13
-
|
|
(86)
|
“Permitted Encumbrances”
means the Encumbrances described on Schedule
1.1(86);
|
|
|
(87)
|
“Product” means Ore at
its highest stage of processing as effected by or on behalf of the Joint
Venture constituted with respect to the
Properties;
|
|
|
(88)
|
“Program” means a
document approved by the Executive Committee outlining the work proposed
to be carried out during a given period of
time;
|
|
|
(89)
|
“Program/Budget Phase”
shall have the meaning provided in
section 13.1;
|
|
|
(90)
|
“Properties” means,
collectively, the mining claims described in
Schedule 1.1(90);
|
|
|
(91)
|
“Purchase and Sale
Agreement” means the Purchase and Sale Agreement between Gemini
Metals Corp., Crosshair and Paragon dated June 4th,
2008;
|
|
|
(92)
|
“Recommendation” means
the recommendation of Crosshair to the Executive Committee based on the
results of and delivered with a Full Feasibility Study
to:
|
|
|
(a)
|
proceed
to develop a mine on a Subject
Area;
|
|
|
(b)
|
postpone,
delay or abandon development of such a mine;
or
|
|
|
(c)
|
undertake
or continue further work to provide further information as a basis for the
Full Feasibility Study;
|
|
|
(93)
|
“Remaining Participant”
shall have the meaning provided in
section 14.1;
|
|
|
(94)
|
“Revenue” means cash
received from the sale of the
Product;
|
|
|
(95)
|
“Rights” shall have the
meaning provided in
section 20.1;
|
|
|
(96)
|
“Stated Capacity” shall
have the meaning provided in the Full Feasibility
Study;
|
|
|
(97)
|
“Subject Area” means the
portion of the Properties covered by a Full Feasibility Study which shall
include sufficient area for all Facilities and rights of access and which
for the avoidance of doubt will have boundaries in three dimensions
including boundaries indicating the depth of such portion of the
Properties;
|
|
|
(98)
|
“Supplies” means all
tangible personal property of a non-capital nature (other than Product or
Facilities) acquired or held by the Participants with respect to a
Properties;
|
|
|
(99)
|
“Transfer” shall have the
meaning provided in
section 20.1;
|
|
|
(100)
|
“Transferee” shall have
the meaning provided in
section 20.2;
|
|
|
(101)
|
“Transferor” shall have
the meaning provided in
section 20.1;
|
50651077.7
- 14
-
|
|
(102)
|
“Underlying Agreements”
means the agreements with various optionors relating to Crosshair and
Paragon’s interests in the Properties described in Schedule 1.1(102);
and
|
|
|
(103)
|
“Vesting Time” means the date on
which Crosshair earns a 60% Interest pursuant to
section 3.2.
|
|
1.2
|
Interpretation
in this Agreement, unless something in the subject matter or context is
inconsistent therewith:
|
|
|
(1)
|
“this Agreement” means
this agreement as it may from time to time be supplemented or amended and
in effect and includes the schedules
hereto;
|
|
|
(2)
|
all
references in this Agreement to “Articles”, “sections” and other
subdivisions or Schedules are to the designated articles, sections or
other subdivisions or Schedules of or attached to this
Agreement;
|
|
|
(3)
|
the
words “herein”,
“hereof” and
“hereunder” and
other words of similar import refer to this Agreement as a whole and not
to any particular section or other
subdivision;
|
|
|
(4)
|
the
headings are for convenience only and do not form part of this Agreement
and are not intended to interpret, define or limit the scope, extent or
intent of this Agreement;
|
|
|
(5)
|
the
singular of any term includes the plural, and vice versa, the use of any
term is equally applicable to any gender and, where applicable, a body
corporate, the word “or” is not exclusive and
the word “including” is not
limiting (whether or not non-limiting language is used with reference
thereto);
|
|
|
(6)
|
the
words “written” or
“in writing”
include printing, typewriting or any electronic means of communication
capable of being visibly reproduced at the point of reception including
telex, telegraph or telecopy;
|
|
|
(7)
|
any
reference to a statute is a reference to the applicable statute and to any
regulations made pursuant thereto and includes all amendments made thereto
and in force from time to time and any statute or regulation that has the
effect of supplementing or superseding such statute or
regulation;
|
|
|
(8)
|
all
accounting terms not defined in this Agreement have those meanings
generally ascribed to them in accordance with Canadian GAAP;
and
|
|
|
(9)
|
a
“day” shall refer
to a calendar day and in calculating all time periods the first day of a
period is not included and the last day is included and references to a
“business day”
shall refer to days on which banks are ordinarily open for business in
Vancouver, British Columbia, but if a period ends on a day on which the
banks are not open for business in Vancouver, British Columbia, the
period
|
50651077.7
- 15
-
will be
deemed to expire on the next calendar day on which banks are open for business
in Vancouver, British Columbia.
|
2.1
|
Paragon
hereby grants to Crosshair the exclusive right and option to acquire up to
70% Interest (which Interest may be adjusted to a lesser or greater
Interest as set out in this Agreement) in the Assets, free and clear of
all Encumbrances other than the Permitted Encumbrances, in accordance with
the terms of this Agreement.
|
|
2.2
|
The
participants are hereby associated for the following limited functions and
purposes:
|
|
|
(1)
|
to
explore and, if deemed warranted as herein provided, to develop the
Properties and develop all or any part thereof for Commercial
Production;
|
|
|
(2)
|
to
operate the Properties as one or more mines;
and
|
|
|
(3)
|
to
engage in such other activities as may be considered by the Participants
to be necessary or desirable in connection with the
foregoing.
|
|
2.3
|
All
transactions, contracts, employments, purchases, operations, negotiations
with any person and any other matter or act undertaken on behalf of the
Participants in connection with the Assets will be done, transacted,
undertaken or performed in the name of the Operator only and no
Participant will do, transact, perform or undertake anything in the name
of the Operator or any other Participant or in the joint names of the
Participants except as expressly stipulated in this
Agreement.
|
|
2.4
|
Except
as otherwise expressly stipulated in this Agreement, the rights and
obligations of the Participants will be, in each case, several, and will
not be or be construed to be either joint or joint and
several. Nothing contained in this Agreement will, except to
the extent specifically authorized hereunder, be deemed to constitute a
Participant a partner, an agent or legal representative of the other
Participants. It is intended that this Agreement will not
create the relationship of a partnership among the Participants and that
no act done by any Participant pursuant to the provisions hereof will
operate to create such a
relationship.
|
|
2.5
|
Each
of the Participants will devote such efforts and resources as maybe
required to fulfil any obligation assumed by them
hereunder. Except as specifically provided
hereunder:
|
|
|
(1)
|
each
Participant will be at liberty to engage, for its own account and without
duty to account to the other Participants, in any other business or
activity outside the subject matter of this Agreement, including, without
limitation, the ownership and operation of any other mining permits,
licences, claims and leases wherever located except in the Properties or
the Area of Common Interest;
|
|
|
(2)
|
no
Participant will be under any fiduciary or other duty or obligation to the
other Participant which will prevent or impede such Participant from
participating in, or enjoying the benefits of competing endeavours of a
nature similar to the Business
|
50651077.7
- 16
-
or
activity undertaken by the Participants wherever vested except in respect of the
Properties and the Area of Common Interest; and
|
|
(3)
|
the
legal doctrines of “corporate opportunity”
or “business
opportunity” sometimes applied to persons occupying a relationship
similar to that of the Participants as contemplated in this Agreement will
not apply to any business activities or endeavours of one of the
Participants carried on with respect to lands located outside of the
Properties and the Area of Common Interest, and that does not relate to
the Joint Venture, and, without limitation, a Participant will not be
accountable to the other Participants for participation in any such
business activity or endeavour outside the subject matter of this
Agreement which is in direct competition with the business activities or
endeavours undertaken by the Joint
Venture.
|
|
2.6
|
Any rebate
of taxes, fees or other payments by a Governmental Authority and any
credits granted by any Governmental Authority in respect of such taxes,
fees or other payments, shall be entirely to the credit of Crosshair at
any time that Crosshair is self-funding the Operations but shall be shared
to the credit of Crosshair and Paragon in accordance with their respective
Interests at any time that the Participants are sharing funding of the
Operations; provided that such Interests shall be calculated for purposes
of determination of the allocation of such rebates, credits, or proceeds
at any time that the Participants are sharing funding of the Operations
after any change in such Interests which results from one Participant not
funding its share of any Budget after such change of
Interest.
|
|
2.7
|
Each
Participant shall, from time to time, take all necessary actions,
including execution of appropriate agreements, to pledge and subordinate
its Interest, any hypothecs, liens or security interests it may hold which
are created under this Agreement, and any other right or interest it holds
with respect to the Assets (other than any statutory lien of the Operator)
to any secured borrowings for Operations approved by the Executive
Committee.
|
|
2.8
|
Subject
to Section 2.6, each Participant, in proportion to its Interest, from time
to time:
|
|
|
(1)
|
will
own its share of all Product to be disposed of pursuant to
section 15; and
|
|
|
(2)
|
will
severally bear all expenditures, debts, losses (including capital losses),
obligations and liabilities of the Joint
Venture.
|
|
2.9
|
Each
Participant expressly waives every right which it may have to call for the
partition or transfer of any of the
Assets.
|
|
2.10
|
Paragon
shall be the registered holder of the Properties until the Vesting Time.
At the Vesting Time, Paragon will cause the Properties to be recorded in
Crosshair’s name in trust for the Participants in proportion to their
respective Interests.
|
|
2.11
|
Except
as otherwise provided in this Agreement, the Assets are owned by the
Participants in undivided shares as tenants in common in proportion to
their respective Interests.
|
50651077.7
- 17
-
Each
Participant must make available its Interest in the Assets for the purposes of
the Joint Venture.
|
2.12
|
If,
at any time, any of the Assets are not owned by the Participants in
proportion to their respective Interests but are owned by one of the
Participants, the Participant that owns those Assets must hold those
respective Assets for the use and benefit of the Participants in
proportion to their Interests and, if determined by the Executive
Committee, must (at the expense of the Participants in proportion to their
respective Interests) take all such steps as may be necessary to vest
those Assets in the Participants in proportion to their respective
Interests.
|
|
2.13
|
All
property (real or personal) held, developed, constructed or acquired under
this Agreement by or on behalf of the Operator for or on behalf of the
Participants, or any of them, will be Assets. The Operator will
not have any interest in any of the Assets or in any money collected by
the Operator for the Participants except as the trustee of the
Participants.
|
|
2.14
|
Assets
other than the Properties may be held by the Operator as nominee for the
Participants as tenants in common in proportion to their respective
Interests.
|
|
2.15
|
As
far as reasonably practical, all contracts entered into by the Operator
with third parties in respect of the Joint Venture shall specify that the
Operator is acting as agent for the Participants involved in an
unincorporated joint venture comprising the Participants the liabilities
of which are several in proportion to their respective
Interests.
|
|
2.16
|
Upon
the Effective Date of this Agreement, the Joint Venture Agreement and
Purchase and Sale Agreement shall be terminated. Crosshair
shall cause Gemini Metals Corp. to execute and deliver to Paragon, an
acknowledgement that the Purchase and Sale Agreement is terminated as of
the Effective Date.
|
|
3.1
|
The
Participants will each have such Interest as is determined from time to
time in accordance with this
Agreement.
|
|
3.2
|
In
order for Crosshair to acquire a 60% Interest (the “Initial Option”) it
shall, within 30 days of the Effective Date issue 2,655,000 Crosshair
Shares to Paragon and upon issuance of such Crosshair Shares, Crosshair
shall earn a 60% Interest and Paragon shall have its Interest reduced to
40% and the Joint Venture between Paragon and Crosshair will be
formed.
|
|
3.3
|
Crosshair
shall use its commercially reasonable efforts to incur a minimum of
$2,000,000 in Exploration Costs (the “Initial Exploration
Costs”) on or before the date that is 48 months after the Vesting
Time. Crosshair shall also be responsible for all Costs required in order
to maintain the Properties in good standing during this
period. During this period, Paragon’s Interest shall be a
carried Interest and accordingly Paragon shall not be required to
contribute its Cost Share of any Programs and
Budgets.
|
50651077.7
- 18
-
|
3.4
|
If
Crosshair has not incurred the Initial Exploration Costs on or before the
date that is 48 months after the Vesting Time, then Crosshair shall issue
250,000 Crosshair Shares to Paragon and shall then have an additional 12
months to incur the Initial Exploration Costs. If Crosshair has
not completed the Initial Exploration Costs after the 12 month extension,
the Additional Option automatically
expires.
|
|
4.1
|
Crosshair
has an option to earn an additional 10% Interest (the “Additional Option”) and
in order to obtain such additional 10% Interest it
must:
|
|
|
(1)
|
exercise
the Initial Option;
|
|
|
(2)
|
incur
the Initial Exploration Costs;
|
|
|
(3)
|
if
required by section 3.4, issue 250,000 Crosshair Shares to
Paragon;
|
|
|
(4)
|
provide
notice to Paragon within 90 days of Crosshair’s incurrence of the Initial
Exploration Costs that it desires to earn the additional 10%
Interest;
|
|
|
(5)
|
incur
a minimum of $1,000,000 in additional Exploration Costs (the “Additional Exploration
Costs”); and
|
|
|
(6)
|
if
Crosshair has not incurred the Additional Exploration Costs on or before
the date that is 24 months after the date it gives notice to Paragon in
accordance with section 4.1(4), Crosshair shall be required to issue
100,000 Crosshair Shares to Paragon and
shall then have a further 12 months to incur the
Additional Exploration Costs. If Crosshair has not fully
incurred the Additional Exploration Costs, after the 12 month extension,
it, may purchase the additional 10% Interest by (i) paying in cash to
Paragon the difference between the $1,000,000 in Additional Exploration
Costs and actual Additional Exploration Costs incurred by Crosshair, and
(ii) issuing 50,000 Crosshair Shares to Paragon. If Crosshair
does not elect to purchase the additional 10% Interest in accordance with
this Section 4.1(6), the Additional Option shall
expire.
|
|
|
(7)
|
Crosshair
shall also be responsible for all Costs required in order to maintain the
Properties in good standing during this period. During this
period, Paragon’s Interest shall be a carried Interest and accordingly
Paragon shall not be required to contribute its Cost Share of any Programs
and Budgets.
|
|
5.1
|
Crosshair
represents and warrants to Paragon that, as of the date of this
Agreement:
|
|
|
(1)
|
it
is a valid and subsisting corporation duly existing under the laws of the
Province of British Columbia;
|
50651077.7
- 19
-
|
|
(2)
|
it
has full corporate power and authority to execute and deliver this
Agreement any agreement or instrument referred to or contemplated in this
Agreement and to carry out and perform its covenants and obligations
hereunder;
|
|
|
(3)
|
it
has taken all necessary corporate proceedings and obtained all necessary
approvals in respect thereof;
|
|
|
(4)
|
upon
execution and delivery of this Agreement by Crosshair, this Agreement will
constitute a legal, valid and binding obligation of Crosshair enforceable
against Crosshair in accordance with its terms except
that:
|
|
|
(a)
|
enforceability
may be limited by bankruptcy, insolvency or other laws affecting
creditors’ rights generally;
|
|
|
(b)
|
equitable
remedies, including the remedies of specific performance and injunctive
relief are available only in the discretion of the applicable
court;
|
|
|
(c)
|
a
court may stay proceedings before them by virtue of equitable or statutory
powers; and
|
|
|
(d)
|
rights
of indemnity and contribution hereunder may be limited under applicable
law;
|
|
|
(5)
|
execution,
delivery and performance of this Agreement does not and will not conflict
with, accelerate the performance required by, result in any breach or
contravention of, constitute a default under or result in the creation of
any encumbrance, lien or charge under or pursuant to the provisions of
(i) its constating documents of any resolutions of its shareholders
or directors, or any indenture, agreement or other instrument whatsoever
to which it is a party, by which it is bound or to which it may be subject
or (ii) any Applicable Laws;
and
|
|
|
(6)
|
no
representation or warranty made by it in this Agreement or any statement,
schedule, certificate or other document delivered by it pursuant to or in
connection with this Agreement or in connection with any transaction
contemplated hereby contains any untrue statement of a material fact or
omits to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading.
|
|
5.2
|
Paragon
represents and warrants to Crosshair that, as of the date of this
Agreement:
|
|
|
(1)
|
it
is a valid and subsisting corporation duly existing under the federal laws
of Canada;
|
|
|
(2)
|
it
has full corporate power and authority to execute and deliver this
Agreement and any agreement or instrument referred to or contemplated in
this Agreement and to carry out and perform its covenants and obligations
hereunder;
|
50651077.7
- 20
-
|
|
(3)
|
it
has taken all necessary corporate proceedings and obtained all necessary
approvals in respect thereof;
|
|
|
(4)
|
upon
execution and delivery of this Agreement by it, this Agreement will
constitute a legal, valid and binding obligation of it enforceable against
it in accordance with its terms except
that:
|
|
|
(a)
|
enforceability
may be limited by bankruptcy, insolvency or other laws affecting
creditors’ rights generally;
|
|
|
(b)
|
equitable
remedies, including the remedies of specific performance and injunctive
relief; are available only in the discretion of the applicable
court;
|
|
|
(c)
|
a
court may stay proceedings before them by virtue of equitable or statutory
proceedings; and
|
|
|
(d)
|
rights
of indemnity and contribution hereunder may be limited under applicable
law;
|
|
|
(5)
|
execution,
delivery and performance of this Agreement does not and will not conflict
with, accelerate the performance required by, result in any breach or
contravention of, constitute a default under or result in the creation of
any encumbrance, lien or charge under or pursuant to the provisions of
(i) its constating documents or any resolutions of its shareholders
or directors, or any indenture, agreement or other instrument whatsoever
to which it is a party, by which it is bound or to which it may be subject
or (ii) any Applicable Laws;
|
|
|
(6)
|
Schedule
1.1(90) accurately sets out all the lands, mineral claims and other
interests that comprise the
Properties;
|
|
|
(7)
|
it
is lawfully authorized to hold mineral claims in the Province of
Newfoundland & Labrador;
|
|
|
(8)
|
all
the mineral claims constituting the Properties have been duly and properly
staked and recorded, and have been and are validly held in accordance with
the laws of Newfoundland &
Labrador;
|
|
|
(9)
|
except
as set out in the Underlying Agreements, Joint Venture Agreement and
Purchase and Sale Agreement, Paragon is the beneficial and registered
owner of a 100% undivided interest in the Properties which
are in good standing under the laws of Newfoundland &
Labrador up to and including the date hereof and are free and clear of all
liens, charges, encumbrances or other rights of third parties, except for
Permitted Encumbrances;
|
|
|
(10)
|
the
parties hereto may enter the Properties for all purposes of this Agreement
without making any payment or accounting to, or obtaining the permission
of, any other person;
|
50651077.7
- 21
-
|
|
(11)
|
other
than as disclosed to Crosshair, there is no adverse claim or challenge by
any person against or to the ownership of or entitlement to the Properties
and no basis therefor, and there are no outstanding agreements or options
to acquire or purchase the Properties and no other person has any royalty
or other interest whatsoever in production or profits
therefrom;
|
|
|
(12)
|
full
and complete copies of all exploration information and data, including all
geological, geophysical and geochemical information and data (including
all drill, sample and assay results and all maps) concerning the
Properties in its possession or control have been provided to
Crosshair;
|
|
|
(13)
|
there
are no actions, suits or proceedings pending or to its knowledge,
threatened, against or adversely affecting or which could adversely affect
the Properties before any federal, provincial, municipal or other
Governmental Authority, court, department, commission, board, bureau,
agency or instrumentality, domestic or foreign, whether or not insured,
and which might involve the possibility of any judgement or liability
against the Properties;
|
|
|
(14)
|
all
work carried out on the Properties by it and, to its knowledge, by any
person has been carried out in compliance with all Applicable Laws,
including Environmental Laws, and neither it, nor to its knowledge any
person, has received any notice of any breach of any such law and it has
no knowledge of any facts which would lead a well informed operator in the
mining industry to believe there are any Environmental Liabilities
associated with the Properties and, to its knowledge, there are no
environmental audits, evaluations or studies relating to
it;
|
|
|
(15)
|
no
consent or approval is required to permit the execution and delivery of
this Agreement by it or the performance of its obligations
hereunder;
|
|
|
(16)
|
it
has all material permits, authorizations, licences, registrations and
certificates necessary to carry on its business as currently conducted and
as contemplated by this agreement;
|
|
|
(17)
|
no
representation or warranty made by it in this Agreement or any statement,
schedule, certificate or other document delivered by it pursuant to or in
connection with this Agreement or in connection with any transaction
contemplated hereby contains any untrue statement of a material fact or
omits to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not
misleading;
|
|
|
(18)
|
there
is no claim, complaint or other proceeding initiated by or on behalf of
any aboriginal group or to which any aboriginal group is legally a
necessary party pending or, to the knowledge of Paragon, threatened by any
aboriginal group with respect to Paragon’s exploration of the Properties
and the Other Tenements or the proposed Operations and Paragon has not
engaged in any negotiations with any aboriginal group in respect of the
Properties and the Other Tenements or
entered
|
50651077.7
- 22
-
into any
impact and benefits agreement with any aboriginal group in respect of the
Properties and Other Tenements; and
|
|
(19)
|
Paragon
has made full disclosure to Crosshair of all material facts of which
Paragon has knowledge relating to the Assets and all relevant information
that Paragon possesses which relates to the Assets which could have any
effect upon Crosshair determining whether it shall enter into this
Agreement and this Agreement does not contain any untrue statement by
Paragon of a material fact of which Paragon has knowledge and Paragon has
not omitted to state in this Agreement a material fact necessary in order
to make the statements contained herein not
misleading.
|
|
5.3
|
The
representations, warranties and covenants hereinbefore set out are
conditions on which the Participants have relied in entering into this
Agreement and each of the Participants will indemnify and save the other
harmless 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 it and contained in this
Agreement.
|
|
5.4
|
(1)
|
Each
Participant shall indemnify the other Participants, their respective
directors, officers, employees, agents and representatives (collectively
“Indemnified
Participant”) from and against the entire amount of any Material
Loss. A “Material Loss” shall
mean all costs, expenses, damages or liabilities, including lawyers’ fees
and other costs of litigation (either threatened or pending) arising out
of or based on a breach by a Participant (“Indemnifying
Participant”) of any representation, warranty or covenant contained
in this Agreement, including without
limitation:
|
|
|
(a)
|
failure
of a Participant or its Affiliates to comply with the Area of Interest
provisions of section 17; and
|
|
|
(b)
|
failure
of a Participant or its Affiliates to comply with the restrictions on
alienation under section 20.
|
A
Material Loss shall not be deemed to have occurred until, in the aggregate, an
Indemnified Participant incurs losses, costs, damages or liabilities in excess
of $100,000 relating to breaches of warranties, representations and covenants
contained in this Agreement.
|
|
(2)
|
If
any claim or demand is asserted against an Indemnified Participant in
respect of which such Indemnified Participant may be entitled to
indemnification under this Agreement, written notice of such claim or
demand shall promptly be given to the Indemnifying
Participant. The Indemnifying Participant shall have the right,
but not the obligation, by notifying the Indemnified Participant within 30
days after its receipt of the notice of the claim or demand, to assume the
entire control of (subject to the right of the Indemnified Participant to
participate, at the Indemnified Participant’s expense and with counsel of
the Indemnified Participant’s choice), the defence, compromise, or
settlement of the matter,
|
50651077.7
- 23
-
including,
at the Indemnifying Participant’s expense, employment of counsel of the
Indemnifying Participant’ s choice.
|
|
(3)
|
Any
damages to the assets or business of the Indemnified Participant caused by
a failure by the Indemnifying Participant to defend, compromise, or settle
a claim or demand in a reasonable and expeditious manner requested by the
Indemnified participant, after the Indemnifying Participant has given
notice that it will assume control of the defence, compromise, or
settlement of the matter, shall be included in the damages for which the
Indemnifying Participant shall be obligated to indemnify the Indemnified
Participant.
|
|
|
(4)
|
Any
settlement or compromise of a matter by the Indemnifying Participant shall
include a full release of claims against the Indemnified Participant which
has arisen out of the indemnified claim or
demand.
|
|
6.1
|
The
Executive Committee will supervise the activity pursuant to this Agreement
of the Joint Venture. At anytime that Crosshair shall have an
Interest of at least 50%, the Executive Committee shall consist of two
members appointed by Crosshair and one member appointed by
Paragon. At anytime that Crosshair does not have an Interest of
at least 50%, the Executive Committee shall consist of two members
appointed by Paragon and one member appointed by Crosshair. The
voting rights of the members will be as set out by this
section 6.
|
|
6.2
|
Except
as otherwise stipulated in this Agreement, all resolutions of the
Executive Committee shall be passed if approved by a simple majority of
the members of the Executive Committee or their alternates present at the
meeting at which the motion in respect of such resolution is moved,
considered and voted on. Subject to section 6.6, if, at
any time, the members of the Executive Committee become deadlocked in
their consideration of a matter being considered by them as evidenced by a
vote upon a motion which results in an equal number of votes for and
against such motion, the Chairman shall have a second, additional or
casting vote.
|
|
6.3
|
Prior
to the Vesting Time, the Participants’ nominees shall have an equal number
of votes (i.e. the nominees of Crosshair shall have in the aggregate 50%
of the votes and the nominee of Paragon shall have 50% of the
votes). Subsequent to the Vesting Time, the Participants’
nominees shall have a number of votes pro rata to the Participants’
respective Interests at such time. (i.e. immediately after the Vesting
Time, the nominees of Crosshair shall have in the aggregate 60% of the
votes and the nominee of Paragon shall have 40% of the
votes).
|
|
6.4
|
Prior
to the Vesting Time, one of the Crosshair representatives shall serve as
the Chairman of the Executive Committee. Subsequent to the
Vesting Time, the Chairman will be a representative of Crosshair at any
time that Crosshair shall have an Interest of at least 50% but if, at any
time, Crosshair does not have an Interest of at least 50%, a
representative of Paragon shall be the
Chairman.
|
50651077.7
- 24
-
|
6.5
|
The
Executive Committee shall, without limiting any of its powers as specified
elsewhere in this Agreement, have the obligation and the exclusive right,
power and authority to:
|
|
|
(1)
|
ensure
that all work is carried out in accordance with sound industry practice
and in adherence to a safety, health and environmental policy which is
approved by the Executive Committee and in adherence to applicable
law;
|
|
|
(2)
|
approve,
modify, or reject or request the revision of, any Program and Budget, as
maybe amended from time to time;
|
|
|
(3)
|
approve
a form of accounting procedure;
|
|
|
(4)
|
consider
those items specified in
section 6.6;
|
|
|
(5)
|
commence
a scoping study, pre-feasibility study and the Full Feasibility
Study;
|
|
|
(6)
|
make
the Development Decision; and
|
|
|
(7)
|
subject
to the limitations contained in section 8.5(12), prosecute or defend
all litigation arising out of operations conducted hereunder, or settle
any lawsuit, claim or demand.
|
|
6.6
|
Notwithstanding
anything else in this Agreement except sections 6.7 and 6.8, the
following decisions of the Executive Committee shall require the approval
of 100% of the votes cast by the Participants’ representatives on such
Executive Committee:
|
|
|
(1)
|
any
additional program of capital expenditures during a period that is at
least 20% above the capital expenditures previously approved as part of
the Program in respect of such period and in the Budget for such
period;
|
|
|
(2)
|
any
cessation of Operations in respect of any mine developed on the Properties
for a period exceeding 20 business days other than as a result of an
Intervening Event;
|
|
|
(3)
|
any
re-commencement of Operations of any mine developed on the Properties
after a cessation of Operations described in
section 6.6(2);
|
|
|
(4)
|
incurring
any Overruns which exceed more than 10% of any Contributing
Budget;
|
|
|
(5)
|
the
disposition of any Assets or obligations not in the ordinary course of
business which have a value in excess of $5 million;
and
|
|
|
(6)
|
any
Expansion.
|
|
6.7
|
If
a matter referred to in sections 6.6(1) to (3), inclusive, receives
the approval of less than 100% of the votes cast but more than 0% of the
votes cast, the members of the Executive Committee shall use good faith
efforts for 20 days to reach a consensus on
the
|
50651077.7
- 25
-
matter.
If such good faith efforts are not successful, the resolution approving of such
matter shall be deemed to be passed.
|
6.8
|
If
a matter referred to in sections 6.6(4) or (5) receives the approval
of less than 100% of the votes cast but more than 0% of the votes cast,
the matter shall be referred to the consideration of the Chief Executive
Officers of the Parties who shall use good faith efforts to reach a
consensus on the matter for a period of 20 days. If such good faith
efforts are not successful, the resolution approving of such matter shall
be deemed to be passed.
|
|
6.9
|
If
a matter referred to in sections 6.6(1) or (5), inclusive, is deemed
to be passed pursuant to either of sections 6.7 or 6.8, the
Participant, the representatives of which are not approving such matter
(the “Non-Approving
Participant”), shall have the option during a period of 180 days
following such 20-day period to require the other Participant, by written
notice, to purchase the Non-Approving Participant’s Interest for the Fair
Market Value of such Interest. Upon the exercise of that
option, the other Participant shall complete the purchase of the Interest
of the Non-Approving Participant within 180 days of receipt of notice of
the exercise of such option. Upon the closing of such
transaction of purchase and sale, the Non-Approving Participant will
execute and deliver to the other participant all such documents as may
reasonably be necessary to transfer to the other Participant all the
interest of the Non-Approving Participant and the other Participant shall
deliver to the Non-Approving Participant the cash amount in immediately
available funds determined in accordance with
Schedule 1.1(47).
|
|
7.1
|
Either
Participant may, from time to time, revoke in writing the appointment of
its nominees to the Executive Committee and appoint in writing others in
their place. Either Participant may, from time to time, in
writing appoint an alternate member who may attend as an alternate for a
member of the Executive Committee previously appointed by such
Participant. Representatives or agents of the Participants may
attend meetings of the Executive Committee but shall have no voting
rights. Alternate members may attend meetings of the Executive
Committee, and in the absence of a member, the alternate of such member of
the Executive Committee may vote and otherwise act in the stead and place
of such member of the Executive Committee. Whenever any such
member or such alternate member votes or acts, his votes or actions will
for all purposes of this Agreement be considered the actions of the
Participant whom he represents. The Participants will give
written notice to each other, from time to time, as to names, addresses
and telephone numbers of their respective members and alternates on the
Executive Committee.
|
|
7.2
|
Meetings
of the Executive Committee will be held as required but in any event not
less frequently than every three months. A meeting of the
Executive Committee may take place by means of conference telephones or
other communication facilities by which means the members or their
alternates participating in the meeting can hear each
other. The persons participating in a meeting in accordance
with this section 7 will be
deemed
|
50651077.7
- 26
-
to be
present at the meeting and to have so agreed and will be counted in the quorum
thereof and be entitled to speak and vote thereat.
|
7.3
|
Voting
by the Executive Committee may be conducted by verbal, written, electronic
or facsimile ballot. A resolution in writing approving a matter
to be acted upon by the Executive Committee, signed by all the members of
the Executive Committee or their alternates, is as valid as if it had been
passed at a meeting of the Executive Committee. Electronic and
facsimile signatures evidencing consent to any such written resolution
shall be accepted to be as valid as original signatures in such
documents.
|
|
7.4
|
A
quorum of any meeting of the Executive Committee will consist of not less
than one member from Crosshair and one member from Paragon. If
a quorum is not present within 120 minutes after the time fixed for
holding any such meeting, such meeting will be adjourned to the next
following business day at the same time and place. At the
adjourned meeting, the members or alternate members present (which may be
only one person) will form a quorum and may transact the business for
which the meeting was originally
convened.
|
|
7.5
|
Meetings
of the Executive Committee may be called by any Participant by giving ten
business days’ written notice to the other Participant. The
Participants may unanimously agree to abridge this notice period and any
member of the Executive Committee attending a meeting called with less
than ten business days’ notice shall be deemed to have waived the notice
requirement unless such member states that his sole purpose for attending
such meeting is to object to the lack of adequate notice. All
meetings will be held in Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx unless
otherwise unanimously agreed to by both
Participants. There will be included with a notice of
meeting such material and data as may be reasonably required to enable the
members of the Executive Committee to determine the position they should
take in respect of any matter to be discussed or determined at such
meeting. Any member of the Executive Committee may request, at
any time prior to a meeting, such additional information from the Operator
as is reasonably required for the purposes of the meeting and such
information shall be provided by the Operator to all member’s of the
Executive Committee.
|
|
7.6
|
The
Operator will have the responsibility of preparing and distributing
notices and agendas of meetings and keeping records of the proceedings at
such meetings and distributing such records to the
Non-Operator. The Operator shall have the responsibility of
keeping records of the proceedings. Draft minutes of meetings
of the Executive Committee shall be distributed within five business days
after any meeting. If a member of the Executive Committee has
any material comments on, or proposed material revisions to, the draft
minutes they shall be sent to the Operator within five business days of
the receipt of the draft minutes. The Operator shall circulate
revised minutes within five business days thereafter. If a
member of the Executive Committee does not provide material comments on
draft minutes or revised minutes within five business days then such
member shall be deemed to have approved such
minutes.
|
50651077.7
- 27
-
|
8.
|
|
8.1
|
Subject
to section 8.2, Crosshair shall be the
Operator:
|
|
|
(1)
|
during
the Exploration Period (provided that Crosshair earns the Initial Option
pursuant to section 3.2 and continues to have an Interest of at least
50%); and
|
|
|
(2)
|
at
any time in any other Period during which Crosshair has an Interest of at
least 50%;
|
however,
if at any time during any other Period, Crosshair ceases to have an Interest of
at least 50%, then Paragon shall become the Operator for so long as the Interest
of Crosshair remains less than 50%.
|
8.2
|
If
Crosshair transfers its Interest to a person that is not an Associated
Company pursuant to section 20, Crosshair may resign as the Operator
upon not less than 60 days’ prior written notice to the Non-Operator, in
which case the successor Operator shall be appointed by a simple majority
vote at a subsequently called meeting of the Executive
Committee.
|
|
8.3
|
The
Operator shall be responsible for the preparation for submission to the
Executive Committee, and, for the execution of each Program and Budget to
be considered and, if so determined by the Executive Committee, approved
by the Executive Committee
|
|
8.4
|
The
Operator shall consult freely with the Non-Operator and keep it advised of
all material developments and
results.
|
|
8.5
|
Subject
to the control and direction of the Executive Committee, the Operator
shall have full authority as agent acting for and on behalf of the
Participants to do everything necessary or desirable in accordance with
good practice in connection with the exploration, development or
operations of the Properties. Without limitation, the Operator
shall have the authority and the obligation
to:
|
|
|
(1)
|
implement
the Programs and Budgets approved by the Executive Committee in accordance
with this Agreement;
|
|
|
(2)
|
provide
all information regarding operations necessary to allow the Participants
to meet their continuous disclosure obligations under applicable
law;
|
|
|
(3)
|
proceed
with the testing, assaying and analysis of all samples in an expeditious
manner;
|
|
|
(4)
|
employ
and engage such employees, agents, and independent contractors as the
Operator may consider necessary or advisable to carry out his duties and
obligations hereunder;
|
50651077.7
- 28
-
|
|
(5)
|
manage,
direct and control all exploration, development and production operations
in, on and under the Properties in a prudent and workmanlike manner, and
in compliance with all applicable laws, rules, orders, regulations and
policies;
|
|
|
(6)
|
prepare
and deliver to each of the members of the Executive
Committee:
|
|
|
(a)
|
within
ten business days of the end of each calendar month, written monthly
progress reports of the work undertaken in the prior calendar month and
results obtained in a form acceptable to the Executive Committee, which
form shall require a comparison, and analysis of any material variance
between actual and cumulative progress relative to the Program and
Budget;
|
|
|
(b)
|
an
annual summary on or before the day which is 60 business days following
the end of the Fiscal Year describing the Operations of the results
obtained during the Fiscal Year immediately preceding, accompanied by such
copies of data, reports and other information on or with respect to the
Properties as are acceptable to the Executive Committee;
and
|
|
|
(c)
|
during
periods of active field work, timely information on any material matters,
results obtained, accompanied by copies of relevant data, reports and
other information concerning such results; provided that the Non- Operator
shall have the right at any time, upon at least 24 hours’ written notice
to the Operator to attend upon the offices of the Operator in order to
review and take copies of all relevant data, reports and other information
concerning the Operations;
|
|
|
(7)
|
account
to the Participants for all contributions to
Costs;
|
|
|
(8)
|
maintain,
in accordance with Canadian GAAP consistently applied, true and correct
books, accounts and records of operations hereunder and such other
information as a Participant may reasonably request in order to allow it
to prepare its financial statements in accordance with its regulatory
requirements and to cause to be prepared and delivered to the relevant
Executive Committee, as applicable, audited financial statements of the
Joint Venture on or before 45 business days following the end of each
Fiscal Year;
|
|
|
(9)
|
permit
each Participant or its professional advisors upon reasonable notice, at
its own expense, access to the Properties and the Facilities to inspect,
take abstracts from or audit any or all of the records and accounts during
normal business hours;
|
|
|
(10)
|
keep
the Properties in good standing free and clear of all Encumbrances except
Permitted Encumbrances arising from operations
hereunder;
|
|
|
(11)
|
obtain
and maintain, or cause any contractor or consultant engaged hereunder to
obtain and maintain, adequate insurance coverage with respect to
activities on or with respect to the Properties, and to provide proof of
such insurance coverage to
|
50651077.7
- 29
-
the
Participants on request, and to reflect the addition of any mortgagee as
permitted by this Agreement;
|
|
(12)
|
after
giving notice to the Participants, prosecute or defend all litigation
arising out of operations conducted hereunder, but the Operator will not
incur legal expenses in excess of $100,000 without the approval of the
Non-Operator;
|
|
|
(13)
|
permit
each Participant or its representatives duly appointed in writing, at its
own expense and risk, access to all data derived from carrying out work
hereunder;
|
|
|
(14)
|
arrange
for and maintain workers’ compensation or equivalent coverage for all
eligible employees engaged by the Operator on behalf of the Participants
in accordance with local statutory requirements;
and
|
|
|
(15)
|
perform
its duties and obligations in a manner consistent with good exploration
and mining industry practices.
|
|
8.6
|
Notwithstanding
the foregoing, the Operator shall have full authority to take such action
as it in its professional judgement deems necessary or advisable in order
to safeguard and protect the environment, life or the
Assets.
|
|
8.7
|
The
Operator may only engage an Associated Company of itself to provide
services, supplies, equipment or machinery hereunder with the prior
written approval of the Non- Operator, such approval not to be
unreasonably withheld. For the avoidance of doubt, the
Non-Operator shall not withhold its approval if the Operator demonstrates
that the Associated Company has been engaged on terms no more favourable
to the Associated Company than those that could be obtained from a
participant dealing at arm’s length to the Operator and with substantially
the same experience and expertise as the Associated
Company.
|
|
9.1
|
Exploration
Costs will only be incurred under and pursuant to a Program and Budget
approved by the Executive Committee in accordance with section 6;
provided,
however,
that the Initial Exploration Costs and Additional Exploration Costs will
be incurred as determined by Crosshair in its sole
discretion.
|
|
9.2
|
Crosshair
will provide Paragon with details of its plan for the Initial Exploration
Costs and Additional Exploration Costs in a form similar to a Program and
Budget and Paragon may provide its comments on the proposed Initial
Exploration Costs and Additional Exploration Costs within 15 business days
of being received by Paragon. It is in Crosshair’s sole discretion, acting
reasonably, as to whether it makes any modifications to its proposed
Initial Exploration Costs and Additional Exploration Costs based on
Paragon’s comments.
|
|
9.3
|
Crosshair
shall be solely responsible for funding the Initial Exploration Costs and
the Additional Exploration Costs and Crosshair and Paragon shall be
jointly responsible to
|
50651077.7
- 30
-
fund
their respective Cost Shares of all other Exploration Costs which are contained
in respect of Programs and Budgets in the Exploration Period.
|
9.4
|
During
the period that Crosshair is required to incur the Initial Exploration
Costs, and if it makes the election pursuant to section 4.1, the
Additional Exploration Costs, Crosshair shall be solely responsible for
making any royalty or other payments required under the Underlying
Agreements and such payments shall be included in the Initial Exploration
Costs and Additional Exploration Costs, as
applicable.
|
|
10.1
|
The
Feasibility Period will comprise the following
stages:
|
|
|
(1)
|
preparation
of such scoping and pre-feasibility studies and the undertaking of such
further exploration as the Executive Committee may deem
advisable;
|
|
|
(2)
|
preparation
and delivery of a Full Feasibility Study;
and
|
|
|
(3)
|
making
the Development Decision.
|
|
10.2
|
Feasibility
Costs will only be incurred pursuant to a Program and Budget approved by
the Executive Committee in accordance with section 6. Each
Participant shall be responsible for its Cost Share of all Feasibility
Costs.
|
|
10.3
|
Crosshair
may deliver a Full Feasibility Study to the Executive Committee at any
time. Crosshair shall also deliver with such Full Feasibility
Study its Recommendation to the Executive Committee based on the results
of the Full Feasibility Study. A meeting of the Executive
Committee will be held 10 days following the delivery to Paragon of the
Full Feasibility Study to consider the
Recommendation.
|
|
11.1
|
Development
Costs will only be incurred pursuant to a Program and Budget approved by
the Executive Committee in accordance with section 6. Each
Participant shall be responsible for its Cost Share of all Development
Costs.
|
|
11.2
|
Upon
a Development Decision, Paragon may elect either
to:
|
|
|
(1)
|
obtain
its own Development Finance; or
|
|
|
(2)
|
request
Crosshair to use commercially reasonable endeavours to arrange Development
Finance for Paragon’s Cost Share of Development Costs. Such
Development Finance will be at a level which is consistent with finance
coverage, ratios and maturities prevailing in the market at that time for
a conventional mining project finance funding similar for the project
being contemplated. Crosshair shall have satisfied its
obligation to use reasonable endeavours to arrange Development Finance if
Crosshair:
|
50651077.7
- 31
-
|
|
(a)
|
provides
the applicable Full Feasibility Study to not less than three financial
institutions who are in the business of providing project finance for
projects similar to the project being
contemplated;
|
|
|
(b)
|
provides
such financial institutions details of the planned construction, operation
and other technical information regarding the project in sufficient detail
to enable the financial institutions to make a decision as to whether it
will provide financing for Paragon’s Cost Share of Development
Costs;
|
|
|
(c)
|
assists
in the negotiation of term sheets and if applicable, definitive
agreements, between Paragon and the financial
institutions;
|
|
|
(d)
|
assists
in meetings between Paragon and those financial institutions who are
interested in providing project finance in order to provide information
regarding the project which the financial institutions may reasonably
require; and
|
|
|
(e)
|
assists
Paragon in arranging due diligence site visits requested by financial
institutions, including providing access to key Crosshair personnel, and
to field data including drill logs and drill
core.
|
|
11.3
|
For
the avoidance of doubt, if Crosshair is requested by Paragon to use
reasonable endeavours to arrange Development Finance for Paragon,
Crosshair shall not be obligated, without limitation,
to:
|
|
|
(1)
|
provide
any guarantees, including performance or completion
guarantees;
|
|
|
(2)
|
enter
into forward sales, hedging contracts, puts, calls or similar derivative
contracts for any reason including in order to obtain Development Finance;
or
|
|
|
(3)
|
provide
price support, political risk insurance or title
insurance.
|
|
11.4
|
The
Participants agree to use reasonable endeavours to ensure that the terms
of any Development Finance shall allow for 10% of Net Cash Flow to be
available for distribution to the Participants pro rata to their
respective Interests.
|
|
11.5
|
Within
60 days of receiving notice from Paragon of any election it makes to
request Crosshair to use reasonable endeavours to arrange Development
Finance for Paragon under section 11.2, Crosshair shall send a notice
to Paragon stating whether it has been able to obtain Development Finance
for Paragon’s Cost Share of all Development Costs and, if it has, the
notice shall contain a description of the terms of such Development
Finance in sufficient detail to enable Paragon to decide whether it shall
accept the Development Finance (the “Development Finance
Notice”).
|
|
11.6
|
If,
having used reasonable endeavours to obtain Development Finance for
Paragon in response to any request made by Paragon pursuant to
section 11.2 during the 60 days before Crosshair is required to send
the notice to Paragon pursuant to
section 11.5,
|
50651077.7
- 32
-
Crosshair
does not obtain such Development Finance and provides a Development Finance
Notice to Paragon to that effect pursuant to section 11.5, Crosshair shall
have no further duty to take any steps to obtain such Development Finance for
Paragon.
|
11.7
|
Within
30 days of Paragon receiving the Development Finance Notice in a form that
describes Development Finance that Crosshair has found to be obtainable
for Paragon, Paragon shall send a written notice to Crosshair electing
to:
|
|
|
(1)
|
accept
the terms of any Development Finance described in the Development Finance
Notice; or
|
|
|
(2)
|
arrange
its own Development Finance; or
|
|
|
(3)
|
not
fund its Cost Share of Development Costs and be diluted in accordance with
the terms of section 14.
|
A failure
by Paragon to provide notice to Crosshair of its election under this
section 11.7 shall result in Paragon being deemed to have made the election
described in section 11.7(3).
|
11.8
|
Each
Participant must have raised its Cost Share of the Development Costs, and
provided the other Participant with evidence of such, within 180 days of
the Development Decision. If a Participant has not raised its
Cost Share of Development Costs, and provided the other Participant with
evidence of such within such period, it shall lose its right to contribute
to the Development Costs and shall be diluted in accordance with
section 14.
|
|
11.9
|
Subject
to section 19, any Development Finance may be secured by one or more
Encumbrances on the Properties, provided that the extent of the security
interest of the lender of Development Finance over the Properties to any
Participant shall be limited to the pro rata Interest of
such Participant.
|
|
11.10
|
Any
Development Finance obtained by Paragon, whether it is found by Crosshair
or by Paragon, shall be entirely with recourse to Paragon and entirely
without recourse to Crosshair.
|
|
11.11
|
Any
Development Finance obtained by Crosshair, whether it is found by
Crosshair or by Paragon, shall be entirely with recourse to Crosshair and
entirely without recourse to
Paragon.
|
|
11.12
|
The
Participants shall inform the Operator of their respective Development
Finance Expenses as soon as they can be ascertained and promptly
thereafter upon any change thereof.
|
50651077.7
- 33
-
|
12.
|
|
12.1
|
Operating
Costs will only be incurred pursuant to a Program and Budget approved by
the Executive Committee in accordance with section 6. Each
Participant shall be responsible for its Cost Share of all Operating
Costs.
|
|
12.2
|
Each
Program and Budget in the operating Period will
contain:
|
|
|
(1)
|
a
plan of Proposed Operations;
|
|
|
(2)
|
an
estimate of the quantity of Product to be produced and available for
sale;
|
|
|
(3)
|
a
detailed estimate of all monthly Revenue and monthly Operating Costs plus
a reasonable allowance for
contingencies;
|
|
|
(4)
|
such
other facts and figures as may be necessary to give the Non-Operator a
reasonably complete picture of the results the Operator plans to achieve,
and the Operator will promptly supply to the Non-Operator any additional
or supplemental information which the Non-Operator may reasonably require
in respect of the Program and
Budget;
|
|
|
(5)
|
a
forecast for the results of the current Fiscal Year;
and
|
|
|
(6)
|
an
indicative forecast of the annual Revenue and, annual Operating Costs and
results for the next two Fiscal
Years.
|
|
12.3
|
The
Operator will establish and administer a Contingency Fund to which the
Participants will be obligated to contribute in accordance with their
respective Interests and as specified in the approved Programs.
Contingency Fund moneys, if any, will be invested and re-invested by the
Operator in such liquid investments as the Executive Committee may, from
time to time, authorize. To the extent possible under then
existing tax laws, the Contingency Fund xxxx be set up and administered in
such a manner as to provide the most beneficial tax treatment to the
Participants.
|
|
12.4
|
If
the Net Cash Flow for any month is positive, such Net Cash Flow will be
dedicated in accordance with the respective Interests of the Parties as
follows:
|
|
|
(1)
|
to
make the required payments of the sum of the Development Finance
Expenses;
|
|
|
(2)
|
to
make any payments in arrears in connection with
section 12.5;
|
|
|
(3)
|
to
satisfy each Participant’s obligations under section 13.9 for the
next month;
|
|
|
(4)
|
with
respect to a Participant’s pro rata share of the Net Cash Flow, to satisfy
that Participant’s obligations to the other Participant under this
Agreement including, without limitation, the Cost Share of Paragon in
respect of all other amounts funded by Crosshair hereunder on behalf of
Paragon;
|
50651077.7
- 34
-
|
|
(5)
|
to
satisfy the Business Account set out in section 13.11;
and
|
|
|
(6)
|
to
be distributed to the Participants pro rata to the respective Interests of
the Participants, (the amounts available for distribution pursuant to this
section 12.4(6) are collectively referred to as the “Participants’ Net Cash
Flow”).
|
|
12.5
|
If
the Net Cash Flow for any month is negative, each Participant must
contribute its Cost Share of such shortfall together with its Cost Share
of any required payments of interest, fees and other costs associated with
the Development Finance. If a Participant fails to make such a
contribution within 30 days, it will be diluted in accordance with
section 14.
|
|
13.1
|
The
Operator shall:
|
|
|
(1)
|
on
or before 75 days prior to the end of each Fiscal Year, prepare and submit
to the Executive Committee all Programs and Budgets (other than that for
the Initial Exploration Costs and Additional Exploration Costs) after
consultation with the members of the Executive Committee, for the
immediately following Fiscal Year;
|
|
|
(2)
|
notwithstanding
anything else in this Agreement, call a meeting of the Executive Committee
to be held on or before 45 days prior to the end of each Fiscal Year;
and
|
|
|
(3)
|
present
for consideration at such meeting the Program and Budget for the
immediately following Fiscal Year, the forecast for the then current
Fiscal Year and an indicative forecast for the immediately following
Fiscal Year; provided that any Program and its associated Budget may be
prepared on the basis of two or more distinct phases, the commencement and
termination of which shall be stipulated by the Operator (each, a “Program/Budget
Phase”).
|
|
13.2
|
All
Programs and Budgets commencing on the first day of each Fiscal Year shall
be approved by the 30th
day prior to the end of the immediately preceding Fiscal
Year.
|
|
13.3
|
Each
Participant must elect whether to fund its Cost Share of any approved
Program and Budget in which it is required by this Agreement to share the
Costs by the 15th
day prior to the end of the Fiscal Year immediately preceding that to
which such Program and Budget shall apply and a failure to make such
election shall be deemed to be an election not to fund such Cost Share of
such Budget.
|
|
13.4
|
With
respect to the Program and Budget for the Development Period and the first
Program and Budget for the Operating Period, the Operator will submit the
Programs and Budgets sufficiently in advance of the anticipated
commencement of, respectively, the Development Period and the Operating
Period to provide each of the Participants a reasonable amount of time to
consider the same and raise its Cost Share of anticipated
Costs.
|
50651077.7
- 35
-
|
13.5
|
Each
Participant will have 15 business days after receipt of a proposed Program
and Budget to consider it, following which a meeting of the Executive
Committee will be held to address any objections to such Program and
Budget or alternative proposals. A Participant that objects to a Program
or Budget must specify the reasons for its objections and promptly provide
the suggested amendments or modifications in writing to the Operator and
Executive Committee. The Executive Committee will instruct the
Operator to make any amendments and resubmit the proposed Program and
Budget. The Operator shall immediately notify the Participants
and call a meeting of the Executive Committee pursuant to section 7.5
to consider such amendment. Such amendment may also be agreed
to in writing by the members of the Executive Committee pursuant to
section 7.3.
|
|
13.6
|
If
a Participant elects not to participate in a Program in which the other
Participants may participate as contemplated in this Agreement by the
deadline described in section 13.3, the other Participant may elect
within l5 business days to bear that Participant’s Cost Share to be funded
by the Participant which chose not to fund its Cost Share, in which event
such Participant will have its Interest diluted pursuant to
section 14. A Program which is not fully subscribed shall
not proceed. If a Program does not proceed on that basis, the
Participants shall remain responsible for the costs of the care and
maintenance of the Properties and the Assets in accordance with the terms
of this Agreement. Failure to give notice pursuant to this
section within such 15 business day period will be deemed to be an
election by a Participant not to contribute its Cost Share of such
Contributing Budget.
|
|
13.7
|
An
election to fund a Contributing Budget will make a Participant liable to
pay its Cost Share of all of the Costs actually incurred under or pursuant
to such Contributing Budget, including Overruns. The Operator
may not incur Overruns exceeding 10% of the applicable Contributing Budget
unless such Overruns are approved by the Executive Committee in accordance
with section 6.6.
|
|
13.8
|
Based
upon the projection to implement an approved Program and Budget submitted
to and approved by the Executive Committee as the same may be revised from
time to time, the Operator will submit to the Non-Operator on or before
the 15th day of each month an estimate of the cash requirements for the
next month which will show:
|
|
|
(1)
|
separately,
the estimated cash disbursements which the Participants will be required
to make for Costs and any other approved
expenditures;
|
|
|
(2)
|
the
extent, if any, to which such disbursements will be satisfied out of cash
in the Operating Fund after allowing for the cash balance to be maintained
in the Operating Fund;
|
|
|
(3)
|
the
amounts, if any, which were credited to each Participant in the
immediately preceding month;
|
|
|
(4)
|
the
Cost Share of the Costs which each Participant will be required to furnish
for such disbursements, or to be advanced by the Operator on
behalf of the Non- Operators; and
|
50651077.7
- 36
-
|
|
(5)
|
the
account into which the required funds are to be
deposited.
|
|
13.9
|
Within
10 days after the receipt of each such cash estimate, the Participants
will each remit their respective Cost Share and if one Participant fails
to pay all or any part of its Cost Share (the “Non-Contributing
Participant”) the other Participant (the “Contributing
Participant”), will be entitled to pay the unpaid Cost Share of
that Non- Contributing Participant. If the Contributing
Participant pays such unpaid share, the Non-Contributing Participant will
be diluted in accordance with
section 14.
|
|
13.10
|
Prior
to incurring any Costs pursuant to a Contributing Budget hereunder or as
soon as reasonably practicable thereafter, the Operator will open an
account or accounts with bank(s) approved by the Executive Committee for
the purpose of establishing and maintaining therein at all times a cash
fund (the “Business
Account) from which Costs will be paid by the Operator or from
which the Operator may be reimbursed for Costs spent by
it.
|
|
13.11
|
All
money contributed by the Participants will be deposited in the Business
Account. The total amount of deposits in the Business Account,
regardless of the source thereof will be equal to the estimated gross
Costs of the Operator for the then current and next succeeding month as
estimated in the Program and Budget then in
effect.
|
|
13.12
|
If
a Participant has elected not to contribute its Cost Share of a
Contributing Budget pursuant to section 13.1 and 13.6 then within 90
days after the conclusion of the period covered by the Program and Budget,
the Operator shall report the total amount of Costs incurred for such
Program and Budget. If less than 80% of the Costs specified in
a Program and Budget were expended, the Participant who elected not to
contribute its Cost Share may notify in writing the other Participant
within 15 days of receipt of the notification of the total amount of the
Operating Costs incurred of its election to reimburse the other
Participant for 120% of its own Cost Share of the Costs expended in order
to maintain the Interest it had in the Properties prior to being diluted
as a result of its failure to contribute its Cost Share of such Program
and Budget. All recalculations under this section 13.12 shall be
effective as of the first day of the applicable Program and
Budget. The Operator on behalf of the Participants shall make
such reimbursements, reallocations, contributions and other adjustments as
are necessary so that each Participant will be placed in the same position
had it originally paid its Cost Share of the applicable Program and
Budget. For the purposes of future calculations under
section 14, each participant will be deemed to have contributed its
Cost Share (and only its Cost Share) of the relevant Program and
Budget.
|
|
13.13
|
The
Operator shall promptly submit to the Executive Committee monthly
statements of account reflecting in reasonable detail the charges and
credits to the Business Account during the preceding
month.
|
|
13.14
|
The
Operator shall record all funds received pursuant to section 13.9 in
the Business Account. All funds in excess of immediate cash
requirements shall be invested by the Operator for the benefit of the
Business in cash management accounts and
investments
|
50651077.7
- 37
-
selected
at the discretion of the Operator, which accounts may include, but are not
limited to, money market investments and money market funds.
|
14.1
|
The
level of the respective Interests of the Participants in the Properties
will be as determined by section 3.1 of this Agreement so long as each
Participant contributes its Cost Share of every Contributing
Budget. At any time and from time to time after a participant
(the “Diluted
Participant”) has elected or is deemed to have elected not to
contribute its Cost Share of a Contributing Budget pursuant to
section 13.3, 13.6 and 13.9 or, if a Participant fails to remit its
Cost Share of the monthly cash requirements of a Contributing Budget in
which it elected to participate in accordance with section 13.7, the
percentage level of such Participant’s Interest in the Properties (the
“Diluted Participant’s
Interest”) will be calculated in accordance with the following
formula:
|
|
|
(1)
|
DPI
|
=
|
A + B + C
x100
|
|
D +
E + F
|
|
Where:
|
||||
|
DPI
|
=
|
Diluted
Participant’s Interest in the Properties after each calculation expressed
as a percentage.
|
||
|
A
|
=
|
The
expenditures deemed to be incurred by the Diluted Participant in respect
of the Initial Deemed Investment, Exploration Costs and Feasibility Costs
expended on the Properties;
|
||
|
B
|
=
|
The
expenditures incurred by the Diluted Participant in connection with the
Properties in funding all Contributing Budgets other than the current
contributing Budget under which the Non-Contributing Participant’s
Interest is being diluted.
|
||
|
C
|
=
|
The
expenditures incurred by the Diluted Participant in connection with the
Properties in funding the current Contributing Budget under which the
Diluted Participant’s Interest is being diluted.
|
||
|
D
|
=
|
The
total Initial Deemed Investment, Exploration Costs, Feasibility Costs
incurred by all the Participants in connection with the
Properties.
|
||
|
E
|
=
|
The
total expenditures incurred by all the Participants in connection with the
Properties in funding all Contributing Budgets other than the current
contributing Budget under which
|
- 38
-
|
|
|
the
Diluted Participant’s Interest is being diluted.
|
|
|
F
|
=
|
The
total expenditures incurred by all the Participants in connection with the
Properties in funding the current contributing Budget under which the
Diluted Participant’s Interest is being
diluted;
|
|
|
(2)
|
The
Participant that is not the Diluted Participant (the “Remaining Participant”)
shall have its Interest in the Properties increased by the transfer to it
of that part of the Diluted Participant’s Interest equal to the percentage
by which the Diluted Participant’s Interest is decreased by virtue of this
section 14.1.
|
|
|
(3)
|
For
the purposes of this
section 14.1,
|
|
|
(a)
|
if
Crosshair exercises the Initial Option, it will be deemed to have incurred
60% of the Initial Deemed Investment and Paragon shall be deemed to have
incurred 40% of the Initial Deemed Investment;
and
|
|
|
(b)
|
if
Crosshair exercises the Additional Option, it will be deemed to have
incurred 70% of the Initial Deemed Investment and Paragon shall be deemed
to have incurred 30% of the Initial Deemed
Investment.
|
|
|
(4)
|
For
the purposes of this section 14.1, the amount of the Initial
Exploration Costs and Additional Exploration Costs shall not be included
in the amount of Exploration Costs.
|
|
14.2
|
Following
a recalculation of Participants’ Interests under this Article 14, the
Properties and any other Assets the legal title to which is held by the
Participants as tenants in common, shall forthwith be transferred among
the Participants as tenants in common in accordance with their revised
Interests.
|
|
14.3
|
The
consideration for any transfer referred to in section 14.2 is, for
each Participant to which such transfer occurs, the advances made by such
Participant under sections 13.3, 13.6 or
13.9.
|
|
14.4
|
If
as a result of an adjustment pursuant to section 14.1, the Interest
of the Diluted Participant is reduced to 10% or less, the Diluted
Participant will transfer its Interest to the Remaining Participant in
consideration for, at the Diluted Participant’s election provided
forthwith, either:
|
|
|
(1)
|
the
Net Smelter Royalty; or
|
|
|
(2)
|
the
fair market value of the Net Smelter Royalty on the day the Diluted
Participant had its Interest reduced to 10%, as determined definitively by
an Independent Valuator selected by the Participants acting unanimously
or, failing agreement within 10 days, by the President of the Canadian
Institute of Mining, Metallurgy and
Petroleum.
|
50651077.7
- 39
-
Upon such
transfer, the Diluted Participant will forthwith execute and deliver to the
Remaining Participant all such documents as may reasonably be necessary to
transfer to the Remaining Participant all the Interest of the Diluted
Participant and if the Diluted Participant made the election under
section 14.4(2),the Remaining Participants shall deliver the cash amount in
immediately available funds determined by this section 14.2.
|
14.5
|
Any
reduction or elimination of a Diluted Participant’s Interest pursuant to
this Agreement shall not relieve that Diluted Participant of its share of
any liability, including, without limitation, Continuing Obligations,
Environmental Liabilities and Environmental Compliance, whether arising,
before or after such reduction or elimination, out of acts or omissions
occurring or conditions existing prior to the Effective Date or out of
Operations conducted during the term of this Agreement but prior to such
reduction or elimination, regardless of when any funds may be expended to
satisfy such liability. For purposes of this section 14.5,
such Diluted Participant’s share of such liability shall be equal to its
Interest at the time the act or omission giving rise to the liability
occurred, after first taking into account any reduction, readjustment and
restoration of Interests under this Agreement (or, as to such liability
arising out of acts or omissions occurring or conditions existing prior to
the Effective Date, equal to such Diluted Participant’s initial
Interest). Should the cumulative cost of satisfying Continuing
Obligations be in excess of cumulative amounts accrued or otherwise
charged to the Contingency Fund, each of the Participants shall be liable
for its proportionate share (i.e., Interest at the time of the act or
omission giving rise to such liability occurred), after first taking into
account any reduction, readjustment and restoration of Participating
Interests under this Agreement, of the cost of satisfying such Continuing
Obligations, notwithstanding that any Participant has previously withdrawn
from the Business or that its Interest has been reduced or converted to
the Net Smelter Royalty.
|
|
14.6
|
An
adjustment to an Interest need not be evidenced during the term of this
Agreement by the execution and recording of appropriate instruments, but
each Participant’s Interest will be shown in the books of the
Operator. However, any Participant, at any time upon the
request of another Participant, will execute and acknowledge instruments
necessary to evidence such adjustment in form sufficient for recording in
the jurisdiction where the Property is
located.
|
|
14.7
|
The
operation of the formula contained in section 14.1 is demonstrated in
Schedule 14.7.
|
|
15.1
|
Crosshair
shall, as agent and for the account and at the expense and risk of the
Participants, sell all Product from the Properties in accordance with
section 15.2, to Crosshair and/or other persons, or, in accordance
with section 15.3, to Crosshair and/or other persons and
Paragon. In that capacity, the Operator shall calculate Net
Cash Flow for each calendar month and distribute such Net Cash Flow in
accordance with section 12.4 including, without limitation,
distribution of the Participants’ Net Cash Flow for such calendar month,
if any, within 10 days of the end of such calendar
month.
|
50651077.7
- 40
-
|
15.2
|
Subject
to section 15.3, Crosshair shall have the right to purchase all or
any portion of the Product sold under section 15.1 on terms no more
favourable to Crosshair than terms available from third
Parties.
|
|
15.3
|
Notwithstanding
anything else in this Agreement, the provisions of sections 15.1 will
not apply and each Participant shall have the right to purchase Product in
proportion to its Interest on terms no more favourable to it than terms
available from third parties in the following
circumstances:
|
|
|
(1)
|
Crosshair
or its permitted assigns and successors cease to be a Participant;
or
|
|
|
(2)
|
there
is a Change of Control of Paragon;
or
|
|
|
(3)
|
Paragon
sells its Interest in the Subject Area to a third party within 120 days of
the Development Decision with respect to such Subject
Area.
|
|
16.
|
|
16.1
|
The
Operator’s records relating to the Joint Venture will be audited in
accordance with Canadian GAAP annually at the end of the Fiscal Year by
the Auditor and upon completion of such
audit:
|
|
|
(1)
|
any
adjustments required by such audit will be made
forthwith;
|
|
|
(2)
|
a
copy of the audited statements will be delivered to the Participants
within 45 business days of the end of the Fiscal Year, and all such
accounts and records will be deemed to be correct and accurate unless
questioned by a Participant within 45 days following the delivery of such
audited statements; and
|
|
|
(3)
|
all
information required by any Participant to this Agreement in order for
such Participant to prepare its financial actuarials in accordance with
Applicable Law shall be provided to such Participant at the expense of
such Participant.
|
|
16.2
|
Each
Participant that is a Non-Operator (the “Auditing Participant”),
at reasonable times and upon not less than seven days’ written notice to
the other Participant, will have the right to inspect, audit and copy the
Operator’s accounts and records relating to the Joint Venture for any
Fiscal Year within 15 days from the receipt of the audited financial
statements for such Fiscal Year at its own expense. The
Auditing Participant will make all reasonable efforts to conduct audits in
a manner which will result in a minimum of inconvenience to the
Operator. If the audit by an Auditing Participant is concluded
within two months from the end of the Fiscal Year in question and
indicates a difference of more than 2% of Costs prior to Commercial
Production or 2% of Net Cash Flow after commencement of Commercial
Production, before interest and tax from the amount determined by the
Auditor, then the accounts will be re-audited by a third independent firm
of chartered accountants, the decision of which will be
final. If the results of the third audit indicate a difference
of more than 2% of Costs prior to Commercial production or 2% of Net Cash
Flow after commencement of Commercial Production, before interest and tax
from the amount determined by the Auditor, then
appropriate
|
50651077.7
- 41
-
adjustments
to the audited financial statements will be made. Any audit made on
behalf of the Auditing Participant of the audited financial statements of the
Joint Venture for any Fiscal Year will be at the expense of the Auditing
Participant unless an adjustment to the audited financial statements for such
Fiscal Year is made in accordance with this section in which case the expenses
will be Costs.
|
17.1
|
If
any Participant, directly or indirectly, has the opportunity to stake or
otherwise acquires any mineral interest or right of any nature whatsoever,
located wholly or in part in the Area of Common Interest, the Participant
who has such opportunity (the “Acquiring Participant”)
shall promptly notify the other Participant (the “Non- Acquiring
Participant”) in writing of that opportunity, including the terms
on which such interest or right is able to be acquired and an assessment
of the likely benefits to the Joint Venture. An Acquiring
Participant may stake or otherwise acquire such interest or right in its
own name if the Acquiring Participant believes it is necessary to do so in
order to preserve the opportunity to acquire such interest or
right. In such event, the Acquiring Participant will be staking
or acquiring such interest or right subject to the rights of the
Participant who is not the Acquiring Participant under this section and if
a favourable decision is made pursuant to section 17.2, such interest
or right shall become subject to this Agreement and form part of the
Properties on the basis contemplated by
section 17.2.
|
|
17.2
|
The
Non-Acquiring Participant shall, within 20 days from the date that the
notice is given by the Acquiring Participant pursuant to
section 17.1, decide whether such interest or right should become
subject to the terms of this Agreement. If a favourable
decision is made, the Participants shall use reasonable endeavours to
acquire or stake such interest or right which shall become subject to this
Agreement and form part of the Properties (the “Additional
Properties”). If it is determined to stake or otherwise
acquire such interest or right, the costs associated with staking or
acquiring the Additional Properties shall be costs of the Joint Venture
which shall be Exploration Costs if the acquisition occurs during the
Exploration Period, Feasibility Costs if the acquisition occurs during the
Feasibility Period, Development Costs if the acquisition occurs during the
Development Period and Operating Costs if the acquisition occurs during
the Operating Period.
|
|
17.3
|
If
the members of the Executive Committee who are nominees of the
Non-Acquiring Participant decide not to participate in the acquisition or
staking of such right or interest pursuant to section 17.2, the
Acquiring Participant may itself acquire or stake such interest or right
on terms not more favourable to the Acquiring Participant than those
specified in the notice referred to in section 17.1 within 90 days of
the giving of such notice.
|
|
17.4
|
The
provisions of this section 17 shall continue to be binding on each
Participant for a period of six months following the date on which this
Agreement terminates.
|
50651077.7
- 42
-
|
18.1
|
Subject
to section 18.2, each Participant agrees that all information
obtained or generated hereunder and the terms of this Agreement will be
the exclusive property of the Participants and will not be publicly
disclosed and this Agreement will not be provided to any third parties or
used other than for the activities contemplated hereunder except as
required by law or by the rules and regulations of any regulatory
authority or stock exchange having jurisdiction (in which case the
Participant being compelled to disclose such information shall give the
other Participant reasonable notice), or with the written consent of the
other Participant, such consent not to be unreasonably
withheld.
|
|
18.2
|
Consent
to disclosure of information pursuant to section 18.1 will not be
unreasonably withheld where a Participant wishes to disclose any such
information to a third party for the purpose of arranging financing for
its contributions hereunder or for the purpose of selling its Interest or
its rights as contemplated in this Agreement, provided that such third
party first enters into a written agreement with the disclosing
Participant that any such information not theretofore publicly disclosed
will be kept confidential and not disclosed to
others.
|
|
19.
|
LIMITED
CHARGING
|
|
19.1
|
Notwithstanding
the provisions of section 20, but solely following the commencement
of the Development Period, a Participant may, at any time, hypothec,
mortgage, charge or otherwise encumber the whole or any part of its
Interest but only upon the condition that the holder of such Encumbrance
(the “Chargee”),
first enters into a written agreement with the other Participant in a form
satisfactory to counsel for such other Participant, binding upon the
Chargee, as set out in sections 19.2 and
19.3.
|
|
19.2
|
If
the Chargee is not engaged, directly or indirectly, in metal mining or
exploration:
|
|
|
(1)
|
the
Chargee may take possession of the encumbering Participant’s Interest
subject to the terms of this Agreement;
and
|
|
|
(2)
|
any
disposition by the Chargee of the encumbering Participant’s Interest will
be conducted in accordance with
section 20.
|
|
19.3
|
If
the Chargee is engaged, directly or indirectly, in metal mining or
exploration:
|
|
|
(1)
|
the
Chargee will not enter into possession or institute any proceedings for
foreclosure or partition of the encumbering Participant’s Interest unless
the Chargee’s Encumbrance has become subject to the provisions of this
Agreement; and
|
|
|
(2)
|
the
Chargee’s remedies under such Encumbrance will be limited to the sale of
the whole (but only of the whole) of the encumbering Participant’s
Interest to the other Participant in accordance with section 20, or
failing such disposition, at a public auction to be held after 90 days
prior notice to the other Participant, such sale to be subject to the
purchaser entering into a written agreement with the
other
|
50651077.7
- 43
-
Participant
whereby such purchaser assumes all obligations of the encumbering Participant
under the terms of this Agreement.
|
20.1
|
No
Participant (the “Transferor”) will,
directly or indirectly, transfer, convey, assign, hypothec, mortgage or
grant an option in respect of or grant a right to purchase or in any
manner transfer or alienate or agree to transfer or alienate (a “Transfer”) any or all of
its Interest or its rights under this Agreement or in the Properties
(collectively, the “Rights”) except as
provided in this section 20.
|
|
20.2
|
No
Transfer of Rights will be effective unless the Transferor has given
notice of the Transfer as required by this section 20, is not in
default of any term or provision of this Agreement at the time of Transfer
and until any proposed assignee, transferee, purchaser, grantee or
encumbrancer of such Interest or rights under this Agreement (“Transferee”) has
executed and delivered, in the case of the Transfer of all of a
Participant’s Interest or rights under this Agreement, to the remaining
Participant:
|
|
|
(1)
|
An
agreement in form and substance satisfactory to counsel for the remaining
Participants, related to this Agreement, as applicable,
containing:
|
|
|
(a)
|
a
covenant by such Transferee with the remaining Participants to perform all
of the obligations of the Transferor to be performed under this Agreement,
as applicable, in respect of the Interest or rights under this Agreement
as applicable, to be received by the
Transferee;
|
|
|
(b)
|
a
provision subjecting any further Transfer of such Interest or rights under
this Agreement, as applicable, to the provisions of this section 20;
and
|
|
|
(c)
|
unless
consented to by the remaining Participants (such consent can include
reasonable conditions for the protection of the remaining Participants),
the Transferor will remain liable for the performance of all obligations
assumed by the Transferee in default of the performance thereof by the
Transferee. For greater certainty, any transfer of one
Participant’s Interest must include an acknowledgement that the other
Participants have an Interest and other rights under this
Agreement.
|
|
|
(2)
|
No
transfer permitted by this section 20 will relieve the Transferor of
any liability, whether accruing before or after such Transfer, which
arises out of operations conducted prior to such
Transfer.
|
|
20.3
|
Any
Participant (the “Offeror”) intending to
Transfer its Rights will first give notice to the other Participant (the
“Offeree”) of such
intention together with the terms and conditions on which the Offeror is
willing to Transfer its Rights; provided that the disposition of all of
the issued and outstanding shares in the capital stock of either
Participant to one or more third parties shall not constitute a Transfer
subject to the right of first refusal contemplated in this section
20.3.
|
50651077.7
- 44
-
|
20.4
|
Any
communication of an intention to sell pursuant to section 20 (the
“Offer”) will be
delivered in accordance with section 24 and will set out fully and
clearly all of the terms and conditions of any intended
Transfer.
|
|
20.5
|
Any
Offer made as contemplated in section 20.4 will be open for
acceptance by the Offeree for a period of 50 days from the date of receipt
of the Offer by the Offeree.
|
|
20.6
|
If
the Offeree accepts the Offer within the required time, such acceptance
will constitute a binding agreement between the Offeror and the Offeree to
Transfer the Rights on the terms and conditions set out in such
Offer.
|
|
20.7
|
If
the Offeree does not accept the Offer within the required time, the
Offeror may complete a Transfer of Rights on terms and conditions no more
beneficial to the transferee thereof than those set out in the
Offer. The Transfer must be completed within 90 days from the
expiration of the right of the Offeree to accept such Offer or the Offeror
must again comply with the provisions of this
section 20.
|
|
20.8
|
While
any Offer is outstanding, no other Offer may be made until the first
mentioned Offer is disposed of and any sale resulting therefrom completed
in accordance with the provisions of this
section 20.
|
|
20.9
|
If
the Transfer is the grant of a security interest by hypothec, mortgage,
deed of trust, pledge, lien or other encumbrance of the Interest of a
Participant to secure a loan or other indebtedness, such security interest
shall be expressly subordinate to the terms of this Agreement and the
rights and interests of the other Participants hereunder in that the
transferee pursuant to such Transfer shall covenant with the other
Participants in the document evidencing such transfer or in a separate
document ancillary thereto that upon any foreclosure or other enforcement
of rights in the security interest, such transferee shall be deemed to
have assumed the position of the encumbering Participant with respect to
this Agreement and the other Participants, and such transferee shall
comply with and be bound by the terms and conditions of this
Agreement.
|
|
20.10
|
Each
Participant agrees that its failure to comply with the restrictions set
out in this section 20 would constitute an injury and damage to the
other Participants impossible to measure monetarily and, in the event of
any such failure the other Participants will, in addition and without
prejudice to any other rights and remedies at law or in equity, be
entitled to injunctive relief restraining or enjoining any Transfer of its
Rights save in accordance with the provisions of this section 20, and
a Participant intending to make a Transfer or making a Transfer contrary
to the provisions of this section 20 hereby waives any defence it
might have in law to such injunctive
relief.
|
|
20.11
|
Notwithstanding
anything else in this Agreement, a Participant may Transfer its Rights, or
part thereof, to an Associated Company without the consent of the other
Participants but otherwise in compliance with this section 20
provided that the Transferor and the Transferee are jointly and severally
liable for the obligations of the Associated Company under this
Agreement.
|
50651077.7
- 45
-
|
20.12
|
In
the event that Crosshair undergoes a Change of Control, the surviving or
acquiring corporation or entity shall be responsible for and assume
Crosshair’s obligation to issue Crosshair Shares under sections 3.4 and
4.1, and, Paragon shall be entitled to receive, and shall accept, in lieu
of the number of Crosshair Shares to which Paragon was theretofore
entitled under sections 3.4 and 4.1, the kind and amount of shares and
other securities or property which Paragon would have been entitled to
receive as a result of such Change of Control if, on the effective date
thereof, Paragon had been the registered holder of the number of Crosshair
Shares to which Paragon was theretofore entitled under sections 3.4 and
4.1.
|
|
20.13
|
Notwithstanding
anything else in this section 20, nothing in this Agreement shall
prevent or restrict a Change of Control in either Participant or prevent
either Participant from issuing securities and there will be no
consequence to a Participant who issues securities or undergoes a Change
of Control.
|
|
21.1
|
The
Operator will indemnify and save the other Participant harmless from and
against any loss, cost, liability, claim, demand, damage, expense, injury
and death (including, without limitation, legal fees and disbursements)
resulting from fraud, negligence or wilful misconduct of the Operator or
its directors, officers, employees, contractors or agents in conducting
operations pursuant to this
Agreement.
|
|
21.2
|
The
Operator will be indemnified by the Participants in accordance with their
respective Interests, as part of the Costs, from the acts and omissions of
the Operator and its directors, officers, contractors and agents provided
that an Operator will not be indemnified nor held harmless by the other
Participants from, and will be liable to the other Participants only for,
any loss, cost, liability, claim, demand, damage, expense, injury or death
(including, without limitation, legal fees and disbursements) resulting
from fraud, negligence or wilful misconduct of the Operator or its
directors, officers, employees, contractors or
agents.
|
|
21.3
|
An
act or omission of the Operator or its directors, officers, employees,
contractors or agents done or omitted to be
done:
|
|
|
(1)
|
at
the unanimous direction, or within the scope of the unanimous direction,
of the relevant Executive Committee;
or
|
|
|
(2)
|
with
the unanimous concurrence of the relevant Executive Committee;
or
|
|
|
(3)
|
unilaterally
and in good faith by the Operator to protect life or property, will be
deemed not to be negligent or resulting from wilful
misconduct.
|
|
21.4
|
The
obligations of the Operator to indemnify and save harmless the other
Participant pursuant to this section 21 will be in proportion to such
other Participant’s Interest as at the date that the loss, cost,
liability, claim, demand, damage, expense, injury or death occurred or
arose.
|
50651077.7
- 46
-
|
22.1
|
If
any Eligible Matter is referred to the provisions of this section 22,
such Eligible Matter shall be referred to an executive of each Participant
that has been appointed by their respective chief executive officers and
such appointed executives shall use their best efforts to resolve the
dispute within 20 business days of such appointment. If such
appointed executives cannot resolve the dispute within that period, the
chief executive officer of each Participant shall use their reasonable
best efforts to resolve the matter amicably within 30 business days after
commencement of such chief executive officer’s resolution
efforts. All time periods contemplated will be suspended during
the time that this non-binding dispute mechanism is
invoked.
|
|
23.
|
ENCUMBRANCE, PARTITION AND
INDEMNIFICATION
|
|
23.1
|
Except
as otherwise provided in this Agreement, a Participant will not encumber
or permit or suffer to exist any hypothec, lien, charge or other
encumbrance on its Interest.
|
|
23.2
|
No
Participant will partition or seek partition, whether through order of any
court or otherwise, of the
Properties.
|
|
23.3
|
A
Participant will not have authority to act for or assume any obligations
or liabilities on behalf of the other Participants except such as are
specifically authorized pursuant to and in accordance with the terms of
this Agreement, and each Participant will defend, indemnify and hold
harmless the other Participants, and their directors, officers, employees,
contractors and agents, from and against any and all losses, expenses,
claims, damages, suits and demands whatsoever arising out of any act or
any assumption of any obligations by it done or undertaken on behalf of
the other Participants other than as provided
herein.
|
|
23.4
|
Each
Participant indemnifies each other Participant from and against any loss,
damage, claim or expense which such other Participant may suffer or incur
as a result of any negligence of, or material breach of this Agreement by,
the first mentioned Participant, in connection with the Joint
Venture. This indemnity will continue after the expiry or
termination of this Agreement for any
reason.
|
|
24.
|
NOTICES
|
|
24.1
|
Any
notice, direction or other instrument required or permitted to be given
under this agreement will be in writing and may be given by the delivery
of the same or by mailing the same by prepaid registered or certified mail
or by sending the same by telegram, telex, telecommunication, facsimile or
other similar form of communication, in each case addressed as
follows:
|
|
|
(1)
|
If
to Paragon at:
|
Suite
1500 – 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
50651077.7
- 47
-
Attention:
Xxxxxxx X. Xxxxx Guchte
Facsimile
No.: 000-000-0000
|
|
(2)
|
If
to Crosshair at:
|
Suite
1240 - 0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxx Xxxxxxxx, Xxxxxx X0X 0X0
Attention:
Xxxx X. Xxxxxxxx
Facsimile
No.: 000-000-0000
|
24.2
|
Any
notice, direction or other instrument
will:
|
|
|
(1)
|
if
delivered, be deemed to have been given and received on the day it was
delivered; and
|
|
|
(2)
|
if
sent by telecommunication, facsimile or other similar form of
communication, be deemed to have been given and received on the business
day following the day it was so
sent.
|
|
24.3
|
A
Participant may at any time give to the other Participant notice in
writing of any change of address of the Participant giving such notice and
from and after the giving of such notice the address or addresses therein
specified will be deemed to be the address of such Participant for the
purposes of giving notice
hereunder.
|
|
25.
|
|
25.1
|
Other
than sections 17, 18, 21, 24 and 28.7 which provisions explicitly
survive termination according to their terms, this Agreement will
terminate in any of the following
circumstances:
|
|
|
(1)
|
the
written agreement by the Participants to
terminate;
|
|
|
(2)
|
pursuant
to section 27.1;
|
|
|
(3)
|
if
Crosshair does not earn the Initial Option in accordance with section 3.2;
or
|
|
|
(4)
|
such
time as there is only one
Participant.
|
|
25.2
|
On
termination of this Agreement, the Participants will remain liable for
continuing obligations in respect of the Properties until final settlement
of all accounts and for any liability, whether it accrues before or after
termination, if it arises out of operations in respect of the Properties
during the term of the Agreement.
|
|
25.3
|
Unless
terminated pursuant to section 25.1(2) or 26.1(4), promptly after
termination of this Agreement, the Operator will take all action necessary
to wind up the activities of the Joint Venture and all costs and expenses
incurred in connection with the termination of the Joint Venture will be
chargeable to the Joint Venture. The Assets of the
Joint
|
50651077.7
- 48
-
Venture
shall first be paid, applied, or distributed in satisfaction of all liabilities
of the Joint Venture to third parties and then to satisfy any debts,
obligations, or liabilities owed to the Participants. Before
distributing any Assets to Participants, the Operator may segregate amounts
which, in the Operator’s reasonable judgment, are necessary to discharge
continuing obligations or to purchase for the account of Participants, bonds or
other securities for the performance of such obligations. Thereafter,
any remaining cash and Assets will be distributed in undivided interests unless
otherwise provided herein or otherwise agreed. Each Participant will have an
ongoing obligation to fund its share of any liabilities or obligations
(including, without limitation, to fund or contribute to the Contingency
Fund). The share of a Participant’s obligation or liability shall be
pro rata to its
Interest on the date such liability or obligation was caused.
|
25.4
|
Unless
terminated pursuant to section 25.1(2) or 26.1(4), on termination of
this Agreement, the Operator will have the power and authority in respect
of the Properties, subject to control of the relevant Executive Committee,
to do all things on behalf of the Participants which are reasonably
necessary or desirable to:
|
|
|
(1)
|
wind-up
operations of this joint venture;
and
|
|
|
(2)
|
complete
any transaction and satisfy any obligation unfinished or unsatisfied at
the time of such termination, if the transaction or obligation arises out
of operations prior to such
termination.
|
The
Operator will have the power and authority to grant or receive extensions of
time or change the method of payment of any already existing liability or
obligation, prosecute and defend actions on behalf of the Participants and the
Joint Venture, hypothec or mortgage Assets, and take any other reasonable action
in any matter with respect to which the former Participants continue to have, or
appear or are alleged to have, a common interest or a common
liability.
|
26.
|
|
26.1
|
The
obligations of a Participant pursuant to this Agreement shall be suspended
to the extent and for the period that performance of any obligation of
such Participant is prevented by any cause, whether foreseeable or
unforeseeable, and beyond its reasonable control, including, without
limitation:
|
|
|
(1)
|
labour
disputes (however arising and whether or not employee demands are
reasonable or within the power of the Participant to
grant);
|
|
|
(2)
|
Acts
of God, including, without limitation, excessive cold or warm temperatures
or consistent periods of fog which prevent or render impractical the
conduct of exploration or development activity on the Properties for a
period of 30 days during any period of 90 consecutive
days;
|
|
|
(3)
|
laws,
instructions or requests of any Governmental
Authority;
|
|
|
(4)
|
any
litigation or administrative process which reasonably has the effect of
delaying Operations and judgments or orders of any court or
tribunal;
|
50651077.7
- 49
-
|
|
(5)
|
inability
to obtain on reasonably acceptable terms any public or private licence,
permit or other authorisation;
|
|
|
(6)
|
curtailment
or suspension of activities to remedy or avoid an actual or alleged,
present or prospective violation of Environmental
Laws;
|
|
|
(7)
|
action
or inaction by any Governmental Authority that delays or prevents the
issuance or granting of any approval or authorization required to conduct
operations beyond the reasonable expectations of a Participant seeking
such approval or authorisation;
|
|
|
(8)
|
acts
of war or conditions arising out of or attributable to war, whether
declared or undeclared;
|
|
|
(9)
|
riot;
|
|
|
(10)
|
civil
strife, terrorism, insurrection or rebellion; including, without
limitation, any steps taken by any Governmental Authorities in response to
any such matters;
|
|
|
(11)
|
fire,
explosion, earthquake;
|
|
|
(12)
|
delay
or failure by suppliers or transporters of materials, parts, supplies,
services or equipment or by contractors’ or subcontractors’ shortage of,
or inability to obtain, labour, transportation, materials, machinery,
equipment, supplies, utilities or
services;
|
|
|
(13)
|
accidents;
|
|
|
(14)
|
breakdown
of equipment, machinery or
facilities;
|
|
|
(15)
|
inability
to obtain contractors or sub-contractors to provide materially time
critical goods and services due to shortages of competent and competitive
contractors or sub-contractors;
|
|
|
(16)
|
actions
by aboriginal groups, native rights groups, environmental groups, or other
similar special interest groups, or any other cause whether similar or
dissimilar to the foregoing,
|
(each, an
“Intervening
Event”). For greater certainty, the failure of any party to
obtain financing in and of itself shall not be an Intervening
Event.
|
26.2
|
A
Participant relying on the provisions of section 26.1 will promptly
give written notice to the other Participant of the particulars of the
Intervening Event and all time limits imposed by this Agreement will be
extended from the date of delivery of such notice by a period equivalent
to the period of delay resulting from an Intervening
Event,
|
|
26.3
|
Any
Participant that receives a notice of an Intervening Event pursuant to
section 26.4 shall have 30 days to dispute the validity of the
substance of Intervening Event
|
50651077.7
- 50
-
documented
in such notice. If such a notice is disputed, such dispute shall be
an Eligible Matter for the purposes of sections 22.
|
26.4
|
If
an Intervening Event is not disputed pursuant to section 26.3 or if
it is upheld in the processes under sections 22, then it will be
entered in a register of Intervening Events to be maintained by the
Operator which will set out all relevant details of each such Intervening
Event including the time and date of its commencement and the time and
date of its termination. The contents of such register for each
Fiscal Year shall form part of the project record approved by the
Executive Committee after the completion of such Fiscal
Year. The Operator shall also maintain all supporting
documentation relating to any Intervening Event until at least six years
after the date that the Development Decision is made or, if any
Intervening Event occurs after such date, for at least six years after
such Intervening Event.
|
|
26.5
|
A
Participant relying on the provisions of section 26.1 will take all
reasonable steps to eliminate any Intervening Event and, if possible, will
perform its obligations under this Agreement as far as commercially
practicable, but nothing herein will require such Participant to settle or
adjust any labour dispute or to question or to test the validity of any
law, rule, regulation or order of any duly constituted Governmental
Authority or to complete its obligations under this Agreement if an
Intervening Event renders completion commercially
impracticable.
|
|
26.6
|
A
Participant relying on the provisions of section 26.1 will give
written notice to the other Participant as soon as such Intervening Event
ceases to exist.
|
|
27.
|
|
27.1
|
Notwithstanding
anything in this Agreement to the contrary, if any Participant (a “Defaulting Participant”)
is in default of any requirement herein set forth the Participant or
Participants affected by such default will give written notice to the
Defaulting Participant specifying the default and the Defaulting
Participant will not lose any rights under this Agreement, unless within
30 days after the giving of the first notice of default by an affected
Participant the Defaulting Participant has failed to take reasonable steps
to cure the default by the appropriate performance and if the Defaulting
Participant fails within such period to take reasonable steps to cure any
such default, the affected Participant will be entitled to seek any remedy
it may have on account of such default including terminating this
Agreement and/or seeking the remedies of specific performance, injunction
or damages.
|
|
28.
|
|
28.1
|
The
Participants will execute such further and other documents and do such
further and other things as may be necessary or convenient to carry out
and give effect to the intent of this
Agreement.
|
|
28.2
|
All
references to moneys hereunder will be in Canadian funds and all
obligations will be in Canadian funds. All payments to be made
to any Participant hereunder may be made by cheque or bank draft mailed or
delivered to such Participant at its address for
notice
|
50651077.7
- 51
-
purposes
as provided herein, or deposited for the account of such Participant at such
bank or banks as such Participant may designate from time to time by notice to
the paying Participant. Said bank or banks will be deemed the agent
of the designating Participant for the purpose of receiving, collecting and
receipting such payment.
|
28.3
|
Time
is of the essence in the performance of this
Agreement.
|
|
28.4
|
The
headings of the sections of this agreement are for convenience only and do
not form a part of this Agreement nor are they intended to affect the
construction or meaning of anything herein contained or govern the rights
and liabilities of the
Participants.
|
|
28.5
|
This
Agreement will enure to the benefit of and be binding upon the
participants hereto and their respective successors and permitted assigns,
provided that any Transfer not made in accordance with this Agreement will
be null and void and of no force or
effect.
|
|
28.6
|
This
Agreement (including the schedules thereto) and the Underlying Agreements
constitute the entire agreement between the Participants and replaces and
supersedes all prior agreements, memoranda, correspondence,
communications, negotiations and representations, whether oral or written,
express or implied, statutory or otherwise between the Participants with
respect to the subject matter herein. There are no implied covenants
contained in this Agreement other than those of good faith and fair
dealing.
|
|
28.7
|
This
Agreement will be governed by and construed according to the laws of the
Province of British Columbia and the federal laws of Canada applicable
therein and the Participants irrevocably submit to the exclusive
jurisdiction of the courts of the Province of British
Columbia.
|
|
28.8
|
This
Agreement may be executed by facsimile or other means of electronic
communication and in one or more counterparts, each of which will be
deemed to be an original, but all of which will constitute one and the
same instrument.
|
50651077.7
- 52
-
|
28.9
|
This
Agreement may only be amended by the written agreement of all the
Participants hereto and their permitted successors and
assigns.
|
IN
WITNESS WHEREOF the participants hereto have executed these presents as of the
day and year first above written,
|
CROSSHAIR
EXPLORATION & MINING CORP.
|
|
|
By:
|
“Xxxx
X. Xxxxxxxx”
|
|
Xxxx
X. Xxxxxxxx
|
|
|
President
and Chief Executive Officer
|
|
|
PARAGON
MINERALS CORPORATION
|
|
|
By:
|
“Xxxxxxx
X. Xxxxx Guchte”
|
|
Xxxxxxx
X. Xxxxx Guchte
|
|
|
President
and Chief Executive
Officer
|
|
50651077.7
- 53
-
Fair
Market Value
|
1.
|
The
Fair Market Value of any Interest shall be calculated as the after tax net
present value of such Interest. The calculation shall assume
the then prevailing market price of any applicable metals, and a nominal
discount rate of 10%. The Fair Market Value shall be calculated
as of the date the notice is received by one party from the other that it
intends to exercise its rights, to sell all or any part of its Interest to
the other party under this
Agreement.
|
|
2.
|
Fair
Market Value shall be calculated with reference to CIM Val as the
applicable principles of valuation by a panel of two qualified independent
valuators who are employees of an international mining consultancy or
engineering firm (each an “Independent Valuator”)
retained by the Participants, one of which shall be designated by Paragon
and the other of which shall be designated by Crosshair and each such
Independent Valuator will base its determination on the life of a mine
plan approved by a Qualified Person (as defined in National Instrument
43-101) the identity of whom shall be agreed upon by the
Participants. If the Participant cannot agree as to the
identity of the Qualified Person within 10 days, the President of the
Canadian Institute of Mining, Metallurgy and Petroleum shall make such
selection. Such designation shall be made as soon as practicable and if a
Participant fails to appoint an Independent Valuator within 30 days of the
Appraisal Date, the one appointed by the other Participant shall determine
the Fair Market Value.
|
|
3.
|
Each
Participant shall upon reasonable notice, provide to each Independent
Valuator and its representatives full access during normal business hours
to the Subject Area, the books and records of the Joint Venture that
pertain to the Subject Area and shall cause such additional financial and
operating data and other information as the Independent Valuators and
their representatives shall from time to time reasonably request to be
provided.
|
|
4.
|
Each
Independent Valuator shall submit its written determination on the Fair
Market Value to each Participant within 60 days after the date of its
retention.
|
|
5.
|
If
the higher determination of the two Independent Valuators is not greater
than 110% of the lower determination, the Fair Market Value shall be the
average of such two determinations. If the higher determination
is greater than 110% of the lower determination, then such two Independent
Valuators shall attempt in good faith to alter their determinations of
Fair Market Value so that the greater determination is within 110% of the
lower determination.
|
|
6.
|
If
the two Independent Valuators are unsuccessful they shall jointly select
within 10 days after the date on which they were informed of such
difference, a third Independent Valuator to be retained by the
Participants. Such third Independent Valuator shall deliver its
written determination of the Fair Market Value in 30 days after its
retention and the
|
50651077.7
- 1
-
Fair
Market Value of the Interest shall be the average to the two closest
determinations or, if there are not two closest determinations, the average of
all three determinations.
|
7.
|
The
fees and expenses of such Independent Valuators shall be shared equally by
the Participants.
|
50651077.7
- 2
-
Net
Smelter Royalty
DEFINITION,
CALCULATION AND PAYMENT OF NSR ROYALTY
The Net
Smelter Royalty is the percentage provided in this Schedule attached and
calculated and paid by Payor (as defined below) to the Royalty Holder (as
defined below) in accordance with the following provisions:
1. DEFINITIONS
Unless
otherwise set forth below, all capitalized terns used in this Schedule shall
have the meaning ascribed to them in the Agreement.
"Calendar Quarter" means each
three-month period ending March 31st, June
30th,
September 30th and
December 31st of each
calendar year.
"Mineral Content" means all
marketable ores, concentrates, metals and minerals contained in Subject Ore as
separately estimated by the Payor using head grade or assays taken prior to
entering mill or heap xxxxx facilities, mill or heap xxxxx operation recovery
levels, and recoveries and other adjustments at the refinery, as key components
in the calculation of Mineral Content.
"Mineral Price Quotation" for a
Product means the final sale price as quoted for the Product on the London
Metals Exchange, as published in Metals Week or a similar
publication. If publication of the final quotation on the London Metals Exchange
shall be discontinued, the parties shall select a comparable commodity quotation
for purposes of calculating the Smelter Returns. If such selection has not been
completed prior to the end of the calendar month following the month in which
the quotation is discontinued, the average quotation for the calendar month in
which the quotation is discontinued shall be used on an interim basis pending
such selection.
"Net Smelter Royalty" for a
Calendar Quarter in respect of all of the Product means the sum of (i) for each
of the Products, the average Mineral Price Quotation for the Product for a
Calendar Quarter multiplied by the total number of appropriate units of
measurement of the Product beneficiated by the Payor or credited by the smelter,
refiner or other bona fide purchaser to the Payor during that Calendar Quarter;
less (ii) the deductions, adjustments and credits set forth in section 3, with
such sum multiplied by 1%.
"Payor" means the Party who
produces and sells Products from the Properties from which the Royalty Holder is
entitled to a Royalty as provided in the agreement.
"Product" shall have the
definition provided in the agreement.
"Properties" shall have the
definition provided in the agreement.
"Royalty Holder" means the
party or its successors or assigns that becomes entitled to a Royalty, as
provided in the Agreement.
50651077.7
- 1
-
"Smelter Returns" for a
Calendar Quarter in respect of all of the Products means, for each of the
Products, the average Mineral Price Quotation for the Product for a Calendar
Quarter multiplied by the total number of appropriate units of measurement of
the Product beneficiated by the Payor or credited by the smelter, refiner or
other bona fide purchaser to the Payor during that Calendar
Quarter.
"Subject Ore" means all Ore
mined by the Payor from the Properties.
2. RESERVATION
OF ROYALTY
The Payor
shall pay and the Royalty Holder shall be entitled to receive as the royalty, 1%
of Smelter Returns except as such percent is reduced pursuant to the
Agreement.
3. NSR
DEDUCTIONS
In
calculating the Net Smelter Royalty, the Payor shall be entitled to deduct from
Smelter Returns the following costs, to the extent incurred and borne by the
Payor:
|
|
(a)
|
all
smelting, minting and refining costs, and treatment charges and penalties
at the smelter or refinery including, but without being limited to,
deductions charged for metal losses and penalties for
impurities;
|
|
|
(b)
|
all
costs of transporting the Products from the Properties to a smelter, mint
or refinery including, without restricting the generality of the
foregoing, any and all costs of insurance in respect
thereto;
|
|
|
(c)
|
all
sampling, assaying and representation charges in connection with sampling
and assaying carried out after the Products have left the
Properties;
|
|
|
(d)
|
costs
and expenses of marketing the Products, if any;
and
|
|
|
(e)
|
taxes
levied by any government on the value of Products produced or sold, but
excluding income taxes if such charges are actual costs payable out of the
proceeds received from a bona fide purchaser or are shown as deductions
therefrom.
|
4. GENERAL
PROVISIONS
|
|
(a)
|
Arm's
Length Provision
|
If
smelting and/or refining are carried out in facilities owned or controlled by
the Payor, charges, costs and penalties for such operations, including
transportation, shall mean the amount that the Payor would have incurred if such
operations were carried out at facilities not owned or controlled by the Payor
then offering similar custom services for comparable products on prevailing
terms.
|
|
(b)
|
Payment
of the Royalty
|
50651077.7
- 2
-
All
royalty or provisional royalty payments will be payable on or before the 30th
day following each Calendar Quarter. Each such quarterly payment to the Royalty
Holder shall be accompanied by a statement in reasonable detail showing the
calculation of the payment. Each such quarterly payment shall be subject to
adjustment as provided below in the next quarterly payment or when the final
report for the year is issued as specified below.
|
|
(c)
|
Provisional
Payments
|
If any
payment becomes due and payable to the Royalty Holder prior to the Payor's final
estimates of the total amount payable, then the Payor shall pay the Royalty
Holder a provisional royalty payment using the Payor's then current estimates of
the amount payable for Products produced during the Calendar
Quarter.
|
|
(d)
|
Adjustments
|
The
following adjustments shall be taken into account in determining the royalty
payments or provisional royalty payments and shall be specified in a statement
which will accompany each payment:
|
|
(i)
|
Any
adjustments to charges, costs, deductions or expenses imposed upon or
given to the Payor but not taken into account in determining previous
royalty payments;
|
|
|
(ii)
|
Any
adjustments in the number of appropriate units of measurement of Products,
beneficiated by the Payor, or previously credited to the Payor by a
smelter, refiner or bona fide purchaser of Products shipped or sold by the
Payor;
|
|
|
(iii)
|
Any
adjustments in Mineral Content and average percentage recovery;
and
|
|
|
(iv)
|
Any
payments that have not otherwise been credited against previous royalty
payments.
|
|
|
(e)
|
Annual
Final Report
|
Within 90
days after the end of each calendar year, the Payor shall deliver or cause to be
delivered to the Royalty Holder a final report for the year certified as being
accurate by a responsible officer of the Payor showing in reasonable detail the
calculation of the royalty due the Royalty Holder for the prior year and all
adjustments to the quarterly or other periodic reports and payments for the
year. With such final report, the Payor shall, if applicable, make such
additional royalty payment as is required by the report. If such report
indicates that the Royalty Holder has received more than it should have been
paid in respect of the royalty due to the Royalty Holder, then the excess shall
be deducted from the next payment obligation owed pursuant to the provisions of
this Schedule or, in the
50651077.7
- 3
-
event
of a temporary or permanent cessation of production, the Royalty Holder shall
repay the excess within 15 days of the annual report.
|
|
(f)
|
Assignment
by Payor
|
Upon any
assignment, conveyance, termination or abandonment of the Properties or any
portion thereof, as the case may be, by the Payor, the Payor shall have no
further obligation to the Royalty Holder in respect of the Properties or such
portion, as the case may be; provided that, in the case of assignment or
conveyance, it shall be a condition of any assignment or conveyance that the
assignee or transferee shall have agreed to assume the Payor's obligation to the
Royalty Holder to pay the royalty in respect of that portion of the Properties
acquired by such assignee or transferee.
|
|
(g)
|
Assignment
by Royalty Holder
|
Notwithstanding
anything to the contrary herein contained, if any part of the right to receive
the Royalty is assigned by the Royalty Holder, it shall be a condition of such
assignment that the assignee agrees with the Payor and all other parties
entitled to receive any part of the Royalty as follows:
|
|
(i)
|
the
amount of any royalty payable hereunder shall be settled only with the
Royalty Holder or an authorized nominee (herein collectively called the
“Nominee”) as
designated by notice to the Payor (such notice to be executed by all
parties entitled to receive any part of the Royalty), and such settlement
shall be final and binding upon all interested parties and the Payor shall
not be required to make any accounting to any person save such
Nominee;
|
|
|
(ii)
|
payment
of the royalty shall be made only to or to the order of the Nominee “In Trust” and such
payment shall constitute a full and complete discharge to the Payor and it
shall have no obligation to see to the distribution of any such
payment;
|
|
|
(iii)
|
the
Payor may settle disputes arising hereunder with the Nominee and such
settlement shall be final and binding upon all interested
parties;
|
|
|
(iv)
|
the
Payor may rely upon any direction, advice or authorization signed by the
Nominee and may act thereon as if the same was signed by all interested
parties; and
|
|
|
(v)
|
the
Payor shall not be required to deal with any person except the Nominee.
Each interested party shall exercise all of their respective rights only
through the Nominee and shall require each of their respective assignees
to agree in writing to be bound by the provisions
hereof.
|
50651077.7
- 4
-
|
|
(h)
|
Records
and Provision for Audit to Resolve
Objections
|
All books
and records used by the Payor to calculate the royalty due hereunder shall be
kept in accordance with Canadian GAAP varied only by the specific provisions
hereof. The Payor shall maintain up-to-date and complete records of the
production of all Mineral Products. If treatment or smelting of Mineral Products
is performed off the Properties, accounts records, statements and returns
relating to such treatment and smelting arrangements shall be maintained by the
Payor. The Royalty Holder shall have the right at all reasonable times during
normal business hours to inspect such accounts, records, statements and returns
and make copies thereof at its own expense for the sole purpose of verifying the
amount of the royalty.
All
payments of the royalty made pursuant to the final report that is to be issued
within 90 days of the end of each calendar year shall be considered final and in
full satisfaction of all obligations of the Payor with respect thereto, unless
the Royalty Holder gives the Payor written notice describing and setting forth a
specific objection to the calculation thereof within 90 days after receipt by
the Royalty Holder of the annual final report herein provided in subsection
4(e). If the Royalty Holder objects to a particular quarterly or annual
statement delivered hereunder, the Royalty Holder shall, for a period of 90 days
after the Payor's receipt of notice of such objection, have the right, upon
reasonable notice and at a reasonable time, to have the royalty payment in
question audited by a firm of chartered accountants acceptable to the Royalty
Holder and to the Payor (and if they cannot agree on a firm, by a firm of
chartered accountants selected by the auditors of the Royalty Holder). If such
audit determines that there has been a deficiency or an excess in the payment
made to the Royalty Holder such deficiency or excess shall be resolved by
adjusting the next quarterly payment due hereunder. The Royalty Holder shall pay
all costs of such audit unless a deficiency of 5% or more of the amount due for
the year under audit or $30,000, whichever is greater, is determined to exist.
The Payor shall pay the costs of such audit if a deficiency of 5% or more of the
amount due for the year under audit or $30,000, whichever is greater, is
determined to exist. Failure on the part of the Royalty Holder to make claim on
the Payor for adjustment in such 90-day period shall establish the correctness
of the final report and preclude the filing of exceptions thereto or making of
claims for adjustment thereon.
|
|
(i)
|
Royalty
Running With the Properties
|
The
royalty created herein shall be a real property interest in all portions of the
Properties to which the royalty applies sufficient to secure the royalty
payments herein provided.
50651077.7
- 5
-
Permitted
Encumbrances
1. 2.0%
Net Smelter Return Royalty (“NSR”), of which 1.0% of the NSR is purchasable for
$1,000,000 (or $500,000 for each 0.5% NSR) with a right of first refusal on the
remaining 1% NSR, and annual advance royalty payments of $20,000 commencing June
1, 2007, to Xxxxxxx Xxxxxx under the May 22, 2002 Letter Agreement between
Xxxxxxx Xxxxxx and Rubicon Minerals Corporation on the Golden Promise Property,
as amended on July 17, 2003, July 27, 2003, and September 1, 2003. Areas of
interest (AOI’s) exist on the property.
2. 2.0%
NSR granted to Xxxxxxx Xxxxxxxx and Newfoundland & Labrador Minerals Ltd.
under the June 14, 2004 Purchase and Royalty Letter Agreement between Xxxxxxx
Xxxxxxxx and Newfoundland & Labrador Minerals Ltd. and Rubicon Minerals
Corporation on the OB Property, NL. 1.0% of the NSR is purchasable for
$1,000,000 with a right of first refusal on the remaining 1% NSR.
50651077.7
- 1
-
Description
of Properties
|
Property
|
Licence
|
Claims
|
Sq. Km
|
Hectares
|
NTS AREA
|
Issuance Date
|
Renewal Date
|
Report Due
|
|
GP
|
15169M
|
256
|
64
|
6400
|
12A/16
|
June 21, 2002
|
June 21, 2012
|
August 20, 2009
|
|
GP
|
15170M
|
254
|
63.5
|
6350
|
12A/16
|
June 21, 2002
|
June 21, 2012
|
August 20, 2009
|
|
GP
|
15171M
|
256
|
64
|
6400
|
12A/16
|
June 21, 2002
|
June 21, 2012
|
August 20, 2009
|
|
GP
|
15172M
|
225
|
56.25
|
5625
|
2D/13, 12A/16
|
June 21, 2002
|
June 21, 2012
|
August 20, 2009
|
|
GP
|
11057M
|
42
|
10.5
|
1050
|
12A/16
|
October 28, 2004
|
October 28, 2009
|
December 28, 2009
|
|
Totals:
|
1033
|
258.25
|
25,825
|
50651077.7
- 1
-
Underlying
Agreements
|
1.
|
May
22, 2002 Letter Agreement between Xxxxxxx Xxxxxx and Rubicon Minerals
Corporation on the Golden Promise Property, as amended on July 17, 2003,
July 27, 2003, and September 1,
2003.
|
|
2.
|
June
14, 2004 Purchase and Royalty Letter Agreement between Xxxxxxx Xxxxxxxx
and Newfoundland & Labrador Minerals Ltd. and Rubicon Minerals
Corporation on the OB Property, NL.
|
50651077.7
- 1
-
Dilution
Formula Illustration
Example
1
|
DPI =
|
A + B +
C
|
| D + E + F |
|
|
(a)
|
Assume
that the parties maintain their respective 70% and 30% Interests and the
Initial Deemed Investment + Exploration Costs + Feasibility Cost = $30
million Crosshair will be deemed to have spent 0.7 x $30 million = $21
million
|
|
|
Paragon
will be deemed to have spent 0.3 x $30 million = $9
million.
|
|
|
(b)
|
Assume
development is complete and each Participant funded its pro rata share of
a $200 million budget so Crosshair contributed $140 million and Paragon
contributed $60 million.
|
|
|
(c)
|
Assume
the first budget for the Operating Period is $20 million, $20 million in
costs is incurred and Paragon elects not to
contribute.
|
Then in
calculating Paragon' s Interest:
A = $9
million
B = $60
million
C =
0
D = $30
million
E = $200
million
F = $20
million
|
DPI
=
|
$9 million + $60 million + 0
|
x 100 =
27.6% =
Paragon's Interest
|
|
$30 million + $200
million + $20 million
|
Crosshair's
Interest =
100% - 27.6% =
72.4%
Example
2
|
|
(d)
|
Make
same assumptions as in (a) and (b) in Example
1.
|
|
|
(e)
|
Assume
the first Budget for the Operating Period is $20 million and Paragon only
funds $3 million of its $6 million Cost
Share.
|
Then in
calculating Paragon' s Interest:
A = $9
million
50651077.7
- 1
-
B = $60
million
C = $3
million
D = $30
million
B = $200
million
F = $20
million
| DPI = |
$9
million + $60 million +$3 million
|
x 100 = 28.8% = Paragon's Interest
|
|
$30
million + $200 million + $20 million
|
Crosshair’s
Interest = 100% - 28.8% = 71.2%
50651077.7
- 2
-
Area
of Common Interest
50651077.7
- 1 -
