EXHIBIT 10.5
THIS AGREEMENT dated effective the 7th day of July 2002,
BETWEEN:
XXXXXX SYNDICATE, a syndicate formed by Xxxxxxx Xxxxx ("Xxxxx"),
Xxxxx Xxxxx ("Xxxxx") and Xxxxxx Xxxxxx ("Xxxxxx") to acquire and
explore mineral claims in the Yukon Territory (Xxxxx, Xxxxx and
Xxxxxx are hereinafter collectively referred to as "Xxxxxx")
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YUKON GOLD CORP., a corporation formed pursuant to
the laws of Ontario ("Yukon Gold")
AND REFERENCED AS THE:
XXXXXX/YUKON GOLD AGREEMENT
WITNESSETH THAT:
WHEREAS Xxxxxx owns certain unpatented, mineral properties located
in the area of Mt. Xxxxxx in the Mayo Mining District of the Yukon Territory,
which mineral properties are more particularly described in Schedule A, attached
hereto, and are hereinafter collectively referred to as the "Property";
AND WHEREAS Xxxxx has assigned a portion of his interest to another
party the details of which and the percentage interest held by each party is
described in Schedule C attached hereto;
AND WHEREAS Xxxxxx has agreed that Yukon Gold may acquire an
interest in the Property, subject to the terms of this written agreement (the
"Agreement");
NOW, THEREFORE, the parties hereby do evidence their agreement with
respect to the Property as follows, in consideration of the premises and the
mutual covenants hereinafter set out.
1. REPRESENTATIONS AND WARRANTIES
1.1 YUKON GOLD'S REPRESENTATIONS AND WARRANTIES
Yukon Gold hereby represents and warrants to Xxxxxx that:
(a) it is a company duly incorporated under the laws of the Province of
Ontario, and it is duly organized and validly subsisting under such
laws and is qualified to carry on business in the Yukon Territory;
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(b) it has the power and capacity to carry on its business and to enter
into this Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform all of
its obligations and duties hereunder and thereunder;
(c) it has duly obtained all necessary corporate authorizations for the
execution, delivery and performance of this Agreement and such
execution, delivery and performance and the consummation of the
transactions herein contemplated will not contravene any applicable
laws and will not conflict with or result in any breach of any
covenants or agreements contained in, or constitute a default under,
or result in the creation of any encumbrance, lien or charge under
the provisions of its constating documents or any shareholders' or
directors' resolution or any indenture, agreement or other
instrument whatsoever to which it is a party or by which it is bound
or to which it or the Property may be subject; and
(d) this Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms.
1.2 XXXXXX'X REPRESENTATIONS AND WARRANTIES
Each of Xxxxx, Xxxxx and Xxxxxx, on his own behalf and not on behalf
of any of the others, hereby represents and warrants to Yukon Gold that:
(a) he has the right, power, authority and capacity to enter into this
Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform all of
his obligations and duties hereunder and thereunder;
(b) this Agreement has been duly executed and delivered by him and is
valid and binding upon him in accordance with its terms;
(c) (i) Xxxxx and Xxxxxx are the beneficial and recorded or registered
owners of a 100% right, title and interest in and to the
mineral properties comprising the Property and no person has
any proprietary or possessory interest in the Property other
than Xxxxx, Xxxxx and Xxxxxx, and
(ii) no person has any entitlement to any royalty or other payment
in the nature of rent or royalty on any minerals, metals or
concentrates or any other such products removed from the
Property, except as shown in Schedule A, attached hereto;
(d) the Property is properly and accurately described in Schedule A,
attached hereto, and, each of the unpatented claims embraced within
the Property (the "Claims") (A) has been properly located and
recorded in the Yukon Territory and (B) is in good standing under
all applicable laws and regulations with respect to the incurrence
of any expenditures and the payment of any monies or taxes and will
remain so until at least the date set out as the expiry date
opposite each claim on Schedule A;
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(e) the Property is free and clear of all liens, charges and
encumbrances, recorded or, to the best of his information, knowledge
and belief, unrecorded;
(f) there are no outstanding or, to the best of his information,
knowledge and belief, proposed, threatened or contemplated actions
or suits which, if successful, would or could affect the market
value or ownership of the Property or any portion thereof;
(g) he is not a non-resident of Canada for the purpose of section 116 of
the Income Tax Act (Canada);
(h) conditions on and relating to the Property are in compliance with
all applicable laws, regulations and orders relating to
environmental matters, including, but not limited to, waste disposal
and storage;
(h) there are no outstanding work orders or actions required to be taken
relating to the condition of the Property, or any operations
thereon, as of the date hereof;
(j) Xxxxxx has made available to Yukon Gold all information in its
possession or control relating to work done on or with respect to
the Property;
1.3 DURATION AND EFFECT OF REPRESENTATIONS AND WARRANTIES
(a) Xxxxx, Xxxxx and Xxxxxx each acknowledge and agree that Yukon Gold
is entering into this Agreement relying upon the representations and
warranties made to it herein and the correctness of each such
representation and warranty is a condition upon which Yukon Gold is
entering into this Agreement, each of which conditions may be waived
in whole or in part solely by Yukon Gold and all such
representations and warranties shall survive the execution, delivery
and termination of this Agreement, the acquisition of any interest
in the Property by a party and the commencement and completion of
any of the transactions contemplated herein.
(b) Yukon Gold acknowledges and agrees that Xxxxx, Xxxxx and Xxxxxx are
each entering into this Agreement relying upon the representations
and warranties made to them herein and the correctness of each such
representation and warranty is a condition upon which each of Xxxxx,
Xxxxx and Xxxxxx is entering into this Agreement, each of which
conditions may be waived in whole or in part solely by an instrument
in writing signed by each of Xxxxx, Xxxxx and Xxxxxx and all such
representations and warranties shall survive the execution, delivery
and termination of this Agreement, the acquisition of any interest
in the Property by a party and the commencement and completion of
any of the transactions contemplated herein.
(c) Xxxxx, Xxxxx and Xxxxxx each jointly and severally agree to
indemnify and hold harmless Yukon Gold from all claims, actions,
damages and losses arising out of or in connection with a breach of
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any representation or warranty made by Xxxxx, Xxxxx and Xxxxxx
contained herein.
(d) Yukon Gold agrees to indemnify and hold harmless each of Xxxxx,
Xxxxx and Xxxxxx from all claims, actions, damages and losses
arising out of or in connection with a breach of any representation
or warranty made by Yukon Gold contained herein.
2. OPTION
2.1 GRANT OF OPTION
Xxxxxx hereby grants to Yukon Gold the sole and exclusive right and
option to acquire up to an undivided 75% (the "Earned Interest") right, title
and interest in and to the Property (the "Option") in accordance with the terms
of this Agreement.
2.2 TERMS OF OPTION
To exercise the Option and thereby earn an undivided 75% right,
title and interest in and to the Property, Yukon Gold shall incur costs in
respect of the Property and its exploration and development ("Costs"), or
related thereto, aggregating $5,600,000, in accordance with the following
schedule:
PROPERTY PAYMENTS
a. On execution of this Agreement $ 25,000
b. On the first anniversary of this Agreement $ 75,000
c. On the second anniversary of this Agreement $150,000
d. On the third anniversary of this Agreement $150,000
e. On the fourth anniversary of this Agreement $200,000
TOTAL $600,000
WORK PROGRAM
a. During 2002 $ 150,000
b. During 2003 $ 250,000
c. During 2004 $ 325,000
d. During 2005 $1,500,000
e. During 2006 $2,750,000
TOTAL $5,000,000
EARNED INTEREST
Yukon Gold shall have earned a:
25% interest upon the Work Program expenditures of $1,500,000
50% interest upon the Work Program expenditures of $2,500,000
75% interest upon the Work Program expenditures of $5,000,000
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provided, however that: (a) funding for each calendar year Work Program is
available by July 7 in 2004 and by May 15 of the following calendar years in
which the expenditure is to be incurred; (b) Costs shall be deemed to have been
incurred when Yukon Gold has contractually obligated itself to pay for such
Costs or such Costs have been paid, whichever should first occur; (c) Costs
incurred in a particular period that exceed the Costs required to be incurred in
order to maintain the Option in good standing beyond such period (the "Prepaid
Costs") shall be credited as Costs incurred in the next subsequent period,
provided that Yukon Gold may, at any time, increase its Prepaid Costs and
accelerate its interest earned; (d) that in calculating the amount of Costs
incurred, Yukon Gold shall be entitled to include therein an overhead fee which
shall equal 10% of the first $250,000 and 5% for additional Costs over $250,000
incurred in the exploration and development of the Property, or related thereto
(other than general corporate overhead costs); and (e) each of Xxxxx, Xxxxx and
Xxxxxx may, subject to receipt of all necessary regulatory approvals, by notice
to Yukon Gold, elect to receive their pro-rata portion of the Property Payments
in respect of a particular year in common shares of Yukon Gold (or its
successor) issued at a price equal to 10% less than the market price as of the
date of receipt by Yukon Gold of the notice given hereunder.
Costs shall include cost of work on the Property to accomplish site
work, such as labour, materials, consultants, workers on the Property,
sub-contracts, room and board for site personnel, but shall exclude travel costs
to the Yukon, costs of non-working visiting consultants and public relations.
The initial proposed work programme will be submitted for approval by Yukon Gold
to Xxxxxx prior to the execution of this Agreement.
2.3 TITLE
(a) The parties hereto acknowledge that title to the Property has been
transferred to Yukon Gold and that additional claims have been
included in the Property in accordance with Article 5.4. The
Property now consists of the claims set out in Schedule A1.
(b) Subject to the foregoing, each of the parties shall be entitled to
record and register evidence of its right, title and interest in and
to the Property or any portion thereof, at any time and from time to
time, and each party agrees to execute and deliver all necessary
documents to facilitate such recordings and registrations.
2.4 DEFAULT AND TERMINATION
(a) All costs specified in section 2.2 hereof may or may not be incurred
by Yukon Gold, at its option and in its sole discretion. Subject to
section 2.4(d), should Yukon Gold fail to incur any of the costs
specified in section 2.2 within the specified corresponding periods,
this Agreement shall terminate.
(b) This Agreement may be terminated by Yukon Gold, at any time by Yukon
Gold giving notice to Xxxxxx to that effect and, in such event, the
termination shall be effective on the date such notice is received
by Xxxxxx.
(c) Should this Agreement be terminated pursuant to the provisions of
this section 2.4: (xxxv) Yukon Gold shall retain the right, title or
interest in or to the Earned Interest held by Yukon gold as of the
date of termination, provided that if when this Agreement is
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terminated Yukon Gold holds a 50% right, title and interest in or to
the Property, Yukon Gold's Earned Interest in the Property shall
automatically be reduced to 45%; (xxxvi) Yukon Gold shall cause to
be executed, within 60 days of such termination, any documentation
reasonably requested by Xxxxxx in order to evidence the forfeiture
of its unearned right, title and interest in and to the Property
and, if applicable, to retransfer the Property to Xxxxxx to be held
in accordance with Section 2.3 (a); (xxxvii) Yukon Gold shall
advance sufficient funds to governmental authorities, file
sufficient work for assessment work credit and take all other
reasonable steps to ensure that the Property is in good standing for
a period of at least 1 year following the date of such termination;
(xxxviii) Yukon Gold shall ensure that the Property is free and
clear of all liens, charges and encumbrances arising from its
activities hereunder; and (xxxix) Yukon Gold shall have the right to
remove from the Property all machinery, equipment, buildings,
structures, supplies and other property placed thereon by Yukon Gold
or its agents within a period of twelve (12) months following the
date of such termination, provided, however, that Yukon Gold shall
remove any such property at Yukon Gold's cost if specifically
requested by Xxxxxx within such twelve (12) month period.
(d) In the event Yukon Gold: (xli) holds at least a 25% right, title and
interest in the Property; (xlii) is unable to meet its next year's
payments and expenditures as set out in section 2.2 of this
Agreement; and (xliii) has not previously extended its obligations
under section 2.2 of the Agreement pursuant to this section 2.4(d),
Yukon Gold may postpone each of the remaining years' payments set
out in section 2.2 of this Agreement by a period of time not to
exceed one year by giving notice to Xxxxxx to such effect.
2.5 EXCLUSION OF CLAIMS
(a) During the Option Period, should Yukon Gold wish to abandon
or, with respect to a Claim, held by Xxxxxx or Yukon Gold in
trust pursuant to section 2.3(a), exclude from the definition
of Property any of the Claims, then comprising part of the
Property (the "Abandoned Property"), the following provisions
shall apply. Yukon Gold shall give Xxxxxx 30 days notice of
its intention to abandon or exclude such property and Xxxxxx
may thereafter give notice to Yukon Gold electing to have all
of Yukon Gold's right, title and interest in and to the
Abandoned Property transferred to it. Should Xxxxxx give such
notice to Yukon Gold, Yukon Gold shall forthwith execute, at
its cost, any documentation necessary to transfer all of its
right, title and interest in and to the Abandoned Property to
Xxxxxx and Yukon Gold shall take such action as is reasonably
necessary, at its cost, to ensure that the Abandoned Property
will remain in good standing for a period of at least 1 year
from the date of Yukon Gold's notice. If Xxxxxx does not so
elect or fails to respond to Yukon Gold's notice within such
30 day period, then Yukon Gold may abandon or exclude the
Abandoned Property.
(b) Subsequent to the abandonment, transfer or exclusion of an
Abandoned Property, or interest therein, pursuant to this
section 2.5, the definition of Property hereunder shall no
longer include the Abandoned Property and Yukon Gold shall
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have no further obligations or responsibilities in respect of
the Abandoned Property, except for those obligations and
responsibilities in respect of environmental laws and arising
in respect of operations conducted by Yukon Gold prior to such
abandonment, transfer or exclusion irrespective of whether
costs in respect of such obligations and responsibilities
accrued before or after such abandonment, transfer or
exclusion.
2.6 OPTION PERIOD RIGHTS AND OBLIGATIONS
(a) During the Option Period: (xlix) Yukon Gold shall perform and
file assessment work necessary to maintain, and otherwise keep
the Property in good standing, provided however, that Yukon
Gold shall file all drilling and other qualified expenditures
for assessment work credit even if not necessary to keep the
Property in good standing; (l) Yukon Gold shall be entitled to
all income and other tax deductions, allowances and credits,
and to all incentive grants or other benefits available
pursuant to exploration incentive programs or similar
programs, insofar as such work, deductions, allowances,
credits, grants and benefits relate to the Property; (li)
Yukon Gold shall have the exclusive right to conduct
exploration and development work on the Property with the
right to remove mineral samples therefrom, including bulk
mineral samples, for the purpose of assays and tests provided
that any excess revenue from the disposition of such samples
shall be shared by Xxxxxx as to 25% and Yukon Gold as to 75%;
(lii)Yukon Gold shall have the right to erect, bring and
install all such buildings, machinery, equipment and supplies
on the Property as Yukon Gold shall deem necessary and proper;
and (liii) all work done by Yukon Gold on the Property shall
be done in accordance with good mining practice and in
compliance with the applicable laws of the Yukon Territory.
(b) During the Option Period: (lv) Xxxxxx shall have access to the
Property and to the records of Yukon Gold, at its sole risk
and expense, to review work being carried out on the Property
or to review results obtained from work carried out on the
Property, as the case may be, provided however, that
reasonable notice is given and that such access shall not
unduly interfere with or disrupt the activities of Yukon Gold;
(lvi) Xxxxx, Xxxxx and Xxxxxx shall be entitled to carry out
any work required on the Property if the price for their
proposed work is competitive to that typical in the industry
for work done on properties substantially the same as the
Property; (lvii) Equipment work provided by Xxxxx is to be
based on Third Party Equipment Rental Rates for the Yukon
Territory Government, with allowance for off-road work (i.e.
mountain) and this entitlement shall continue after the
formation of the joint venture; (lviii) Yukon Gold shall
provide Xxxxxx with monthly reports indicating the status of
work being conducted on the Property, along with an estimate
of the costs incurred during such month, provided, however,
that such reports shall not be required during those periods
in which there is no work being conducted in respect of the
Property; and (lix) Yukon Gold shall provide Xxxxxx with
annual reports disclosing any significant technical data
learned or obtained in connection with work in respect of the
Property, as well as a breakdown of the costs incurred in
carrying out such work, provided, however, that annual reports
shall be provided in respect of a calendar year on or before
the first day of April following the end of such calendar
year.
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(c) Yukon Gold shall indemnify and save harmless each of Xxxxx,
Xxxxx and Xxxxxx from and against all suits, claims, demands,
losses and expenses which they may each suffer by reason of
any act or thing done or omitted to be done during the Option
Period by or on behalf of Yukon Gold in relation to its
exploration and development operations on the Property,
including any consequences arising from the non-payment of
workmen and wage earners employed by it or its contractors on
or in connection with the Property or suppliers of materials
purchased in connection therewith. During the Option Period,
Yukon Gold shall keep the Property free from claims for liens,
charges and encumbrances and, in the event of a lien, charge
or encumbrance being recorded, it will on this fact becoming
known to it forthwith take proceedings to have such lien,
charge or encumbrance removed as soon as possible. Yukon Gold
may, however, dispute and contest any suit, claim, demand,
loss or expense which forms the basis of a recorded lien,
charge or encumbrance.
2.7 EXERCISE OF OPTION
(a) If Yukon Gold should incur payments in respect of the Property
and exploration and development costs thereon aggregating
$5,600,000, in accordance with section 2.2, Yukon Gold shall
have exercised the Option and thereby earned an undivided 75%
right, title and interest in and to the Property. Yukon Gold
may thereupon give notice to Xxxxxx that it has exercised the
Option. Yukon Gold and Xxxxxx shall be deemed to have formed a
joint venture (the "Joint Venture") for the further
exploration and development of the Property, which shall be
governed by Article 3 of this Agreement upon the exercise of
the Option.
(b) Yukon Gold Shall be entitled, at any time prior to the
formation of the Joint Venture, to put forward a proposal to
put the Property into production (a "Production Decision")
provided (lxiv) such Production Decision is supported by a
feasibility study prepared by an independent engineer; and
(lxv) the operation of the portion of the Property covered by
the Production Decision shall continue as a Joint Venture as
set out in section 3; and (lxvi) Yukon Gold shall not be
relieved of continuing to incur Costs in accordance with
section 2.2 with Work Programs being carried out on areas of
the Property that are not included in the Production Decision;
and (lxvii) Yukon Gold and Xxxxxx shall share costs and income
from productions as to 75% Yukon Gold and 25% Xxxxxx.
Provided Xxxxxx may elect not to contribute to the costs
related to the Production Decision and Xxxxxx shall not suffer
and dilution subject to:
(i) Yukon Gold shall be entitled to apply the costs incurred
on Xxxxxx'x behalf to the balance of any amount it is
required to spend on Work Programs in section 2.2; OR
(ii) Xxxxxx may elect to allow Yukon Gold to recover 150% of
the cost funded on Xxxxxx'x behalf from the production
revenue before Xxxxxx is entitled to receive its share
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of production revenue and Yukon Gold shall continue to
incur the Work Program costs in accordance with section
2.2.
(iii) Once Yukon Gold has paid or incurred all the Costs
Xxxxxx shall be subject to all of the terms and
conditions of section 3.
(c) Upon the Joint Venture being formed, each party shall have,
subject to the terms of this Agreement and its respective
undivided right, title and interest in and to the Property
(the "Participating Interest"), the right to participate in
the Joint Venture and the corresponding obligation to fund
further exploration and development of the Property. The
Participating Interests, at the time of the formation of the
Joint Venture, shall be:
Yukon Gold 75%, and
Hinton 25%,
provided, however, that should Yukon Gold incur and pay for
costs in respect of the Work Programs on the Property, or
related thereto, prior to the formation of the Joint Venture,
in excess of $5,000,000, then Yukon Gold may give notice to
Xxxxxx to such effect prior to or upon the formation of the
Joint Venture and, upon receipt of such notice by Xxxxxx,
Yukon Gold's deemed costs pursuant to section 3.4(d) shall be
equal to Yukon Gold's incurred costs and, within 90 days of
Xxxxxx'x receipt of such notice, Xxxxxx shall provide the
funds required (the "Required Funds") so that when: the
Required Funds are added to its deemed costs of $1,666,666 as
set forth in section 3.4(d) (such result hereinafter referred
to as the "Total"), the Total is divided by the product
obtained when Yukon Gold's deemed costs pursuant to section
2.7(a) are divided by 0.75 (such result hereinafter being
referred to as the "Total Division") and the Total Division is
expressed as a percentage (such result hereinafter referred to
as the "Resulting Percentage"), the Resulting Percentage is
25% and, in such event, Xxxxxx'x deemed costs shall be equal
to the product obtained when the Required Funds are added to
$1,666,666; otherwise Xxxxxx shall be subject to dilution in
accordance with the provisions of section 3.4(d).
3. THE JOINT VENTURE
3.1 JOINT VENTURE RELATIONSHIP
Except as provided in this Agreement, the parties shall share all
benefits, costs, expenses, liabilities and obligations in respect of the Joint
Venture severally in proportion to their respective Participating Interests at
the time that such benefits, costs, expenses, liabilities and obligations were
earned, received or incurred, as the case may be. The parties agree that the
relationship between them shall be governed solely by the provisions of this
Agreement.
3.2 JOINT VENTURE COMMITTEE
(a) Upon formation of the Joint Venture, a joint venture committee
shall be forthwith established consisting of one
representative of each of Yukon Gold and Xxxxxx (the "Joint
Venture Committee"). Each of the parties shall also nominate
an alternate representative to the Joint Venture Committee who
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shall represent it in the absence of an appointed
representative. Either of the parties may give notice to the
other party and replace any of its representatives to the
Joint Venture Committee, from time to time, and such
replacement shall be effective on the date of such other
party's receipt of such notice.
(b) The Joint Venture Committee shall be responsible for approving
work plans and budgets (the "Work Plans" and "Budgets") and
shall determine the general policies and direction to be
adopted by the operator (the "Operator") in the conduct of
operations in respect to the Property. Each Work Plan and
Budget shall be prepared in respect of a period of time which
is equal to or less than one year, shall contain an itemized
projection of costs to be incurred thereunder, and shall
detail the nature of the work to be performed thereby, the
expected schedule of implementation thereof and the expected
schedule of payments thereunder. The Operator shall be
entitled to submit, and the Joint Venture Committee shall be
entitled to approve, phased Work Plans and Budgets in which
the implementation of successive phases shall be dependent
upon the results of previous phases.
(c) The Joint Venture Committee shall meet on 20 days notice given
by the Operator and on 30 days notice given by the party which
is not the Operator (the "Non-Operator") and the Joint Venture
Committee shall meet at least once in each calendar year. Any
notice in respect of such meeting shall include an agenda of
items to be discussed at the meeting. Upon receipt of such
notice, a party may give notice to the other party of items to
be added to the agenda, provided, however, that an item may
not be added to the agenda, unless such notice to add such
item is given on or before the tenth day prior to such
meeting. Except by a unanimous vote of both parties, the Joint
Venture Committee shall not decide upon matters at a meeting
not included in the agenda for such meeting.
(d) Decisions of the Joint Venture Committee shall be by majority
vote. Each party's representative shall be entitled to a vote
equal to the percentage Participating Interest held by such
party. In the event of a deadlocked vote, the Operator shall
cast a deciding vote.
3.3 OPERATOR
(a) Yukon Gold shall be the Operator of the Property upon
formation of the Joint Venture. After Yukon Gold has had its
full opportunity to earn the 75% interest, if the Non-Operator
holds a greater Participating Interest than the Operator, it
shall be entitled to give notice to the Operator and replace
the Operator, provided, however, that such replacement shall
not be effective until the 30th day following the receipt of
such notice by the Operator.
(b) The Operator shall have exclusive charge of all operations and
shall conduct such operations in accordance with Work Plans
and Budgets approved by the Joint Venture Committee, provided
that Xxxxx, Xxxxx and Xxxxxx shall be entitled to carry out
any work required on the Property if the price for their
proposed work is competitive to that typical in the industry
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for work done on properties substantially the same as the
Property. All work done by the Operator on the Property shall
be done in accordance with good mining practice and in
compliance with all applicable laws and regulations.
(c) (i) The Operator shall be entitled to include in each Work
Plan and Budget and charge to the Joint Venture Account
an overhead fee for the performance of its obligations
and the discharge of its functions hereunder, which
shall equal 5% of all costs in respect of the Property.
(ii) In the event that commercial production is commenced
upon the Property, the overhead fee shall be negotiated
by the parties based upon the usual business practice
for an operating mine, it being the intention of the
parties that the Operator should neither procure a
profit nor suffer a loss as a result of its acting as
Operator hereunder.
(d) The Operator shall submit Work Plans and Budgets to the Joint
Venture Committee for approval within 90 days subsequent to
the formation of the Joint Venture or within 90 days
subsequent to the expiration of the Work Plan and Budget last
in effect, as the case may be. If the Joint Venture Committee
should fail to approve the Work Plan and Budget proposed by
the Operator or the Operator should fail to submit a Work Plan
and Budget within such 90 day time period, then a party which
is not the Operator may, not more than 60 days thereafter,
propose a Work Plan and Budget for the ensuing year for
consideration and approval by the Joint Venture Committee.
Should the Joint Venture Committee approve the Work Plan and
Budget proposed by such party, then the party which is not the
Operator shall temporarily replace the Operator for the
purpose of forthwith implementing and carrying out such
approved Work Plan and Budget.
(e) A party that temporarily replaces the Operator pursuant to
section 3.3(d) (the "Temporary Operator") shall be deemed to
be the Operator during the currency of the Work Plan and
Budget in respect of which the Temporary Operator is first
operating (the "Temporary Operator's First Work Plan and
Budget") and shall perform all of the obligations of the
Operator during such period, including the obligation of the
Operator to submit a Work Plan and Budget to the Joint Venture
Committee for approval within 90 days subsequent to the
expiration of the Temporary Operator's First Work Plan and
Budget. The provisions of this section 3.3 shall apply mutatis
mutandis after the expiration of the Temporary Operator's
First Work Plan and Budget with the Temporary Operator
continuing to act as the Operator unless replaced in
accordance with the provisions of this section 3.3.
(f) The Operator shall provide the Non-Operator with monthly
reports during the term of this Agreement indicating the
status of the work being conducted on the Property, provided,
however, that such reports shall not be required during those
periods in which there is no work being conducted in respect
of the Property. The Operator shall provide the Non-Operator
with reports within 70 days subsequent to the end of each Work
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Plan summarizing significant information acquired or learned
as a result of such Work Plan. Such reports shall include a
statement of costs incurred and monies spent in respect of
such Work Plan. In the event that the Operator receives,
obtains or discovers any information in respect of the
Property that would significantly affect the value of the
Property, such information shall be forthwith disclosed to the
Non-Operator. After the commencement of commercial production,
the Operator shall provide the Non-Operator with monthly
statements of ore and minerals, if any, produced from the
Property together with ores or minerals, if any, in storage.
Such reports shall indicate the share of production and
production in storage attributable to each party.
(g) The Non-Operator shall have access to the Property and to the
records of the Operator, at its sole risk and expense, to
review work being carried out on the Property or to review
results obtained from work carried out on the Property, as the
case may be, provided, however, that reasonable notice is
given to the Operator and that such access shall not unduly
interfere with or disrupt the activities of the Operator.
(h) The Operator shall pay all fees, annual rentals, assessments
and taxes, other than income taxes, in respect of the
Property, which shall be accounted for in the Work Plans and
Budgets, and shall keep the Property in good standing, free
and clear of all liens, charges and encumbrances arising from
its activities and shall take and continue such proceedings as
are reasonable in the circumstances to remove any liens,
charges and encumbrances not arising from its activities. The
Operator shall also maintain such insurance coverage
protecting the parties from third party claims as may be
required by the Joint Venture Committee, provided, however,
that should the Joint Venture Committee fail to require the
Operator to maintain any particular insurance coverage the
Operator shall maintain insurance coverage in accordance with
normal industry standards and practice specifying the parties
as named insured.
(i) The Non-Operator shall indemnify and save harmless the
Operator from and against a portion of all third party
liabilities, in accordance with its Participating Interest at
the time such liabilities are incurred. Such indemnification
and saving harmless of the Operator shall not be provided in
respect of losses or damages arising from the Operator's
failure to maintain such insurance coverage as may be required
in accordance with section 3.3(h) or arising from the bad
faith, wilful misconduct or gross negligence of the Operator,
provided, however, that the Operator shall in no event be
considered to be grossly negligent in respect of the
interpretation of any results in respect of a Work Plan. The
reduction or conversion to a royalty interest of a party's
Participating Interest shall not relieve a party of its share
of such third party liabilities arising out of operations
conducted prior to such reduction or conversion, including
long term reclamation or remediation obligations, irrespective
of whether costs in respect of such liabilities accrued before
or after such reduction or conversion. A party's share of any
such liability shall be equal to its Participating Interest at
the time that such liability was incurred.
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3.4 PARTICIPATION, DILUTION AND CONVERSION
(a) Each party shall elect, within 30 days of receipt of an approved
Work Plan and Budget, whether or not to participate in the Work Plan
and Budget and fund its share of the costs. Failure to elect within
such 30 day time period shall be deemed to be an election not to
participate.
(b) The Operator shall provide, on a quarterly basis at least 30 days in
advance, monthly expenditure projections under each Work Plan and
Budget to the Non-Operator, provided the Non-Operator has elected to
contribute to such Work Plan and Budget. Each party that has elected
to contribute to such Work Plan and Budget (the "Participating
Party") shall advance funds representing its share of the projected
expenditures to a separate and new account to be designated by the
Operator (the "Joint Venture Account") on or before the later of the
first day of the month in which such funds are scheduled to be
expended and the expiry of the 30 day advance notice period. Failure
by a Participating Party to provide its share of such funds by such
date shall result in such party being deemed to have elected not to
participate in the current Work Plan and Budget and to have not
advanced any funds in respect of such Work Plan and Budget. The
expenditure projections shall include a description of the work
being proposed as well as the estimated costs required to fully
complete such work.
(c) If the Operator should incur expenditures in a month exceeding the
expenditure projection for that month then the Operator shall
provide an account of such overrun to the Non-Operator, provided the
Non-Operator is a Participating Party. Upon receipt of such account,
the Participating Parties shall advance to the Joint Venture
Account, within 30 days, funds representing their share of such
overrun, provided, however, that any expenditures made by the
Operator in excess of 120% of the total expenditure projection for
the Work Plan and Budget then in effect (the "Excess Expenditures")
shall be the sole responsibility of, and for the sole account of,
the Operator unless approved pursuant to this section 3.4(c). Excess
Expenditures shall be deemed to be approved if (xciv) unanimously
approved by the Joint Venture Committee, (xcv) pertaining to a
Development Work Plan and Budget as defined in section 3.5(d) or
(xcvi) resulting from expenditures relating to matters that were
unanticipated or not certain to arise at the time of preparation of
the applicable Work Plan and Budget, including expenditures relating
to environmental or safety concerns and litigation with respect to
contractors retained by the Operator but excluding expenditures
relating to changes in a Work Program that have not been approved by
the Joint Venture Committee. Excess Expenditures approved pursuant
to this section 3.4(c) shall be included in the calculations
provided for under section 3.4(d).
(d) If either party (the "Defaulting Party") elects not to participate
or is deemed to have elected not to participate in a Work Plan and
Budget then the Defaulting Party shall have its Participating
Interest diluted, in accordance with the following formula, and such
party shall be entitled to participate in subsequent Work Plans and
Budgets only to the extent of its Participating Interest at the time
such subsequent Work Plans and Budgets are approved by the Joint
Venture Committee. A party's Participating Interest can be
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calculated by dividing A by B and expressing the result as a
percentage, where A is the total of all funds advanced by that party
in respect of Work Plans and Budgets and such party's deemed
expenditures and B is the total of all funds advanced by both
parties in respect of Work Plans and Budgets and such parties'
deemed expenditures. Subject to section 2.7, the parties deemed
expenditures upon formation of the Joint Venture shall be as
follows:
Yukon Gold: $5,000,000
Xxxxxx: $1,666,666
(e) Notwithstanding section 3.4(d), if a Defaulting Party had the right
to elect to participate and elected not to participate or was deemed
to have elected not to participate in a Work Plan and Budget and,
upon completion of such Work Plan, the Operator has not incurred
expenditures equal to at least 80% of the Budget, the Operator shall
forthwith notify the Defaulting Party of the Operator's failure to
incur such minimum expenditures under such Work Plan and Budget and
the Defaulting Party shall be entitled to pay its proportionate
share of the expenditures incurred by the Operator under such Work
Plan and Budget in accordance with its Participating Interest prior
to the implementation of such Work Plan and Budget. If such
proportionate share of such expenditures under such Work Plan and
Budget is paid by the Defaulting Party within 30 days of its receipt
of such notice from the Operator, the dilution suffered by the
Defaulting Party pursuant to the provisions of section 3.4(d), as a
result of the Defaulting Party's election or deemed election not to
participate in such Work Plan and Budget shall be deemed to have
never occurred and the Defaulting Party shall be deemed to have
paid, and the Operator shall be deemed not to have paid, such
proportionate share of such expenditures under such Work Plan and
Budget.
(f) Should Xxxxx, Xxxxx and Xxxxxx, collectively, or Yukon Gold have its
Participating Interest reduced to a percentage less than 10%, then:
(i) such party (the "Royalty Holder") shall have its Participating
Interest converted to a 1.0% net smelter returns royalty to be
calculated and paid in accordance with the provisions of
Schedule B, attached hereto, provided that a decision has been
made to put the Property into production;
(ii) the non-converting party (the "Owner") shall become the owner
of a 100% right, title and interest in and to the Property,
subject only to the Royalty Holder's 1.0% net smelter returns
royalty, Xxxxxx'x 2% net smelter returns royalty as set out in
section 4.1 of the Agreement; and
(iii) the Joint Venture shall be dissolved and the Joint Venture
Committee shall be disbanded, as of the date of such
conversion.
3.5 PROPERTY MATTERS
(a) Each party waives and renounces the benefit of all provisions of
law, as now in effect or as enacted in the future, relating to
actions of partition of real and personal property, and agrees that
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it will not resort to any actions in law or in equity to partition
the real and personal property subject to this Agreement. In
addition, each party acknowledges (cv) that dilution and conversion
of a Participating Interest is a fair means of measuring the
anticipated economic impact of non-participation in the applicable
circumstances referred to herein and (cvi) that conversion to a
royalty can lead to an interest of greater value than the originally
held Participating Interest.
(b) The parties shall be entitled to (cviii) record their Participating
Interests in respect to the Claims comprising the Property and (cix)
register their Participating Interests in the Property. The parties
shall execute such documentation as may be required, from time to
time, to effect such transfers of title.
(c) Should the Operator wish to abandon any of the Claims comprising the
Property, it shall give the Non-Operator notice of its intention to
do so and the Non-Operator may thereafter give notice to the
Operator, within 30 days of the Operator's notice, electing to have
such Claims transferred to it. Should the Non-Operator make such an
election, the Operator shall forthwith execute any documentation
necessary to transfer such Claims to the Non-Operator and such
mineral properties shall be in good standing for a period of at
least 90 days from the date of the Operator's notice. If the
Non-Operator does not make such an election within such 30 day
period, the Operator may abandon such mineral properties. Subsequent
to such 30 day period, the definition of Property shall exclude such
Claims, and the Operator shall have no further obligations or
responsibilities in respect of such mineral properties, except for
those obligations and responsibilities in respect of environmental
laws arising in respect of operations conducted by the Operator
prior to such abandonment or transfer.
(d) Notwithstanding any other provision of this Agreement, the following
provisions of this section 3.5(d) shall apply in the event the
Operator recommends to the Joint Venture Committee, at any time, to
place any part of the Property into production. In the event the
Operator makes such recommendation, the Operator shall make
available to the Non-Operator all of the data and information relied
upon by the Operator in making such recommendation and the Joint
Venture Committee shall meet to consider such recommendation within
a period which is not less than 30 days and not more than 120 days
after the date on which the Operator's recommendation is received by
the Joint Venture Committee. The Joint Venture Committee shall
either approve or disapprove such recommendation or direct that
further study into the matter be undertaken by the Operator. If the
Joint Venture Committee should approve such recommendation then:
(i) the Joint Venture Committee shall forthwith determine and
approve a Work Plan and Budget that appears adequate for
purposes of bringing the Property into commercial production
(the "Development Work Plan and Budget"), and
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(ii) each party shall have 90 days from the date of the meeting of
the Joint Venture Committee of which the Development Work Plan
and Budget was determined to elect whether or not to
contribute to the Development Work Plan and Budget.
If a party elects not to participate or fails to elect within such
90 day period to contribute to a Development Work Plan and Budget,
then such party shall be deemed to have withdrawn as a Participating
Party and its Participating Interest shall be converted to a 1.0%
net smelter returns royalty to be calculated and paid in accordance
with the provisions of Schedule B attached hereto. Should a party
elect to participate in a Development Work Plan and Budget and
subsequently become a Defaulting Party pursuant to section 3.4(d),
then a Participating Party may elect (A) to have the Defaulting
Party's Participating Interest diluted, in accordance with section
3.4(d), (B) to give notice to the Defaulting Party insisting upon
participation by the Defaulting Party, in which event the
Participating party (1) shall have a lien and charge on the
Defaulting Party's share of all products produced from the Property
and on the Defaulting Party's Participating Interest to the extent
of the Defaulting Party's share of the applicable Budget (the
"Debt"), (2) shall have the right to collect the Debt as a debt by
any procedure authorized by law, including the right of foreclosure,
and (3) shall be paid interest on the Debt, which shall form part of
the Debt, at a rate per annum equal to the rate of interest (the
"Prime Rate") from time to time quoted by the Toronto Dominion Bank
as the reference rate of interest used by it to determine rates of
interest chargeable on Canadian dollar loans to its best commercial
customers payable on demand, plus 2% until paid, and the Prime Rate
for each month shall be deemed for the entire month to be the Prime
Rate on the first day of such month or (C) to have the fair market
value of the Defaulting Party's Participating Interest determined by
an independent appraiser appointed by mutual agreement of the
parties or, failing such agreement, by arbitration pursuant to the
Arbitration Act (Ontario) and to purchase such interest, if
satisfied that such determination is fair in the Participating
Party's sole discretion.
(e) Each party shall own and have the right, privilege and power to take
in kind and separately dispose of a portion of all products produced
from the Property, in accordance with its Participating Interest.
The Operator shall designate and notify the Non-Operator of the
points of delivery situate on the Property for the parties'
respective shares of such product and all costs in respect of such
product shall be for the joint account of the parties, until such
product is delivered to such points. After such product is delivered
to such points each party shall pay its own costs in respect of such
product. The Operator shall use its best efforts to ensure that each
party receives product of like quality.
3.6 WITHDRAWAL FROM JOINT VENTURE
(a) Either Yukon Gold or Xxxxxx (the "Withdrawing Party") may, at any
time during the currency of the Joint Venture, voluntarily withdraw
from the Joint Venture and forfeit its right, title and interest in
and to the Property and its rights under this Agreement by giving
written notice of such withdrawal to the other party (the "Remaining
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Party"), which notice shall indicate an effective date for such
withdrawal of not earlier than 90 days subsequent to the delivery of
such notice. In such event, subject to section 3.6(b).
(i) The Withdrawing Party shall:
(A) remain liable for its share of all amounts chargeable to
it, as well as its share of any liabilities and
obligations incurred hereunder by the Operator on behalf
of the Joint Venture up to the effective date of the
withdrawal,
(B) secure to the satisfaction of the Remaining Party its
share of the costs of reclaiming the Property, as
estimated at the effective date of withdrawal
considering all applicable laws and regulations and the
policies of any governmental, regulatory or other body
having jurisdiction,
(C) remain obligated under section 5.2 for a period of two
years after the effective date of the withdrawal,
(D) remain obligated to execute and deliver such documents
as may be necessary to evidence the forfeiture of its
Participating Interest to the Remaining Party, and
(E) not be entitled to any royalty hereunder;
(i) the Remaining Party shall become the owner of a
100% right, title and interest in and to the
Property as of the effective date of the
withdrawal; and,
(ii) the Joint Venture shall be terminated and the
Joint Venture Committee shall be disbanded, as of
the effective date of the withdrawal,
(iii) provided if Xxxxxx is the Withdrawing Party and
provided it has satisfied the provisions of 3.6
(a) (i) (A) and (B), it shall be entitled to
retain the 2% net smelter royalty set out in
Schedule B hereto as long as it continues to
honour any other provisions of this agreement that
extend beyond withdrawal.
(b) Upon receipt of a notice of withdrawal pursuant to section 3.6(a),
the Remaining Party may give notice to the Withdrawing Party prior
to the effective date of the withdrawal electing to join in the
withdrawal, in which event the Joint Venture shall be terminated on
receipt of such notice by the Withdrawing Party, the assets of the
Joint Venture shall be forthwith liquidated and the proceeds
obtained from such liquidation shall be distributed in proportion to
each party's Participating Interest.
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4. MISCELLANEOUS
4.1 XXXXXX ROYALTY
Xxxxxx shall retain a 2.0% net smelter returns royalty to be
calculated and paid in accordance with the provisions of Schedule B attached
hereto.
4.2 YUKON GOLD BOARD OF DIRECTORS
While this Agreement remains in effect, Xxxxxx shall be entitled to
recommend for appointment not less than one member to the board of directors of
Yukon Gold.
5. GENERAL PROVISIONS
5.1 NATURE OF RELATIONSHIP
In every case, the obligations of each party under this Agreement
shall be several and shall not be construed to be either joint or joint
and several and nothing herein shall be construed as creating a
partnership between the parties. Subject to sections 5.7 and 5.9(a),
nothing contained in this Agreement shall be construed so as to constitute
a party an agent or legal representative of another party. Except as
otherwise specifically provided in this Agreement, a party shall not have
any authority to act for, or to assume any obligation or responsibility on
behalf of, any other party. Except as expressly provided in this
Agreement, each party shall have the free and unrestricted right to
independently engage in and receive the full benefits of any and all
business endeavours of any sort whatsoever not related to the Property and
the area of interest, whether or not competitive with the endeavours
contemplated herein, without consulting or inviting or allowing the other
party any interest therein and the legal doctrines of "corporate
opportunity" or "business opportunity" sometimes applied to joint
venturers shall not apply in the case of such other endeavours, as all
fiduciary duties arising from the Joint Venture and owed by one party to
another have been specifically outlined in this Agreement
5.2 AREA OF INTEREST
The area of interest shall be deemed to comprise that area which is
included within ten (10) kilometres of the outermost boundary of the mineral
properties, which constitute the Property.
5.3 ADDITIONAL ACQUISITION
If at any time during the subsistence of this Agreement any party
(in this Article only called the "Acquiring Party") stakes directly or
indirectly or purchases any mining claim, licence, lease, grant, concession,
permit, patent, or other mineral property (in this Article 5 a "Mineral
Property") located wholly or partly within the area of interest referred to in
Section 5.2, the Acquiring Party shall forthwith give notice to the other
parties of that staking or acquisition and proof of the cost thereof and all
details in the possession of that party with respect to the nature of the
property and the known mineralization..
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5.4 ELECTION TO ACQUIRE
Each other party may, within thirty (30) days of receipt of the
Acquiring Party's notice, elect, by notice to the Acquiring Party, to require
that the Mineral Property which was staked or otherwise acquired be included in
and thereafter form part of the Property for all purposes of this Agreement. If
the election is made, all the other parties shall reimburse the Acquiring Party
for that portion of the cost of staking or acquiring which is equivalent to
their respective Interests. If no other party makes the election within that
period of thirty (30) days, the Mineral Property, which was staked or acquired
shall not form part of the Property and the Acquiring Party shall be solely
entitled thereto. Should any party acquire mineral claims that fall within the
Area of Interest prior to Yukon Gold earning a 75% interest in the Property, and
should Yukon Gold elect to have the claims included and form part of the
Property if acquired by other parties, the cost shall be born 100% by Yukon Gold
and shall be part of the Work Program Costs.
5.5 CONFIDENTIAL INFORMATION
All data and information provided to or received by the parties with
respect to the Property shall be treated as confidential. A party shall not
disclose such information to third parties whether by way of press release or
otherwise, unless the disclosure is required by law, stock exchange rules or a
regulatory authority having jurisdiction or the disclosure is consented to by
the other party (the "Non-Disclosing Party"); consent of such Non-Disclosing
Party shall not be unreasonably withheld or delayed in view of the parties'
timely disclosure obligations. Without limiting the foregoing, the
Non-Disclosing Party may reasonably withhold its consent to the issuance of a
press release where it has not been provided with an advance draft copy of such
press release. Where disclosure is required by law, stock exchange rules or a
regulatory authority having jurisdiction, a party shall, if permitted by such
law, stock exchange rule or regulatory authority, use its reasonable best
efforts to provide a copy of the information to be disclosed (the "Disclosure
Statement") to the Non-Disclosing Party in advance of its disclosure and make
reasonable changes to such Disclosure Statement as may be requested by the
Non-Disclosing Party.
5.6 GEOLOGICAL INTERPRETATIONS
No party (the "Reporting Party") shall be liable to another party
(the "Receiving Party") in respect of any opinions, findings, conclusions or
other non-factual information included by the Reporting Party in any report or
other document provided to the Receiving Party, whether included by negligence
or otherwise. Each party hereby indemnifies and saves harmless the other from
and against all suits, claims, demands, losses and expenses arising in respect
of the release by a Receiving Party of such non-factual information in such
report or other document to third parties, irrespective of whether such release
was consented to by the Reporting Party.
5.7 GST
Although each of the parties to this Agreement recognizes that it is
responsible to separately account and, where necessary, register for the federal
Goods and Services Tax (the "GST"), it is agreed and the parties hereto elect
that the Operator shall be the registrant for the GST with respect to this
Agreement and shall account for the GST on all properties, mineral interests and
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goods and services acquired or supplied pursuant to the terms of this Agreement
with all such actions deemed to have been made by the Operator. The parties
hereto authorize the Operator to do such acts and execute such documents, and
shall themselves do such further acts and execute and deliver such further
documents, as may be reasonably necessary and desirable to give effect to the
election contained in this section 5.7.
5.8 TIME
This Agreement shall be effective from and as of the 30th day of May 2002.
5.9 ASSIGNEES, SUCCESSORS AND RELEASES
(a) (i) No party shall sell, transfer, assign or otherwise dispose of
(the "Sell") all or any portion of its right, title and
interest in and to the Property or its rights and obligations
under this Agreement (the "Interest") except:
(A) pursuant to an agreement in which the consideration is
expressed wholly in lawful money of Canada;
(B) as a single transaction not directly or indirectly part
of some other sale or purchase or agreement of any
nature whatsoever; and,
(C) otherwise in accordance with this section 5.9.
(ii) If any of Xxxxx, Xxxxx or Xxxxxx (the "Sellor") receives a
bona fide offer from a third party to Sell all or any portion
of its Interest (the "Offered Interest") and intends to accept
such offer (the "Offer"), the Sellor, prior to accepting the
Offer, shall give notice in writing to Yukon Gold (the
"Purchaser") of the Offer together with a copy of the Offer,
which shall be in written form (the "Offer Notice"). Xxxxx,
Xxxxx and Xxxxxx may sell to each other without complying with
this provision.
(iii) An Offer Notice shall be deemed to constitute an offer (the
"1st Offer") by the Sellor to the Purchaser to Sell the
Offered Interest on the terms and conditions set out in the
Offer Notice and shall be open for acceptance by the Purchaser
for a period of 60 days from the date of its receipt by the
Purchaser. Such Offer Notice shall clearly identify the person
or persons making the Offer and include such information as is
known by the Sellor about such person or persons.
(iv) If the Purchaser gives notice to the Sellor electing to accept
the 1st Offer within the 60 day period, such acceptance shall
constitute a binding agreement of purchase and sale between
the Sellor and the Purchaser in respect of the Offered
Interest on the terms and conditions set out in the Offer
Notice.
(v) If the Purchaser does not accept the 1st Offer within the 60
day period, the Sellor may complete a sale and purchase of the
Offered Interest to the person or persons making the Offer on
the terms and conditions set out in the Offer Notice and such
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sale and purchase shall be completed within 100 days of the
expiration of the right of the Purchaser to accept the 1st
Offer provided for in this section 5.9(a), failing which the
Sellor must again comply with the provisions of this section
5.9(a) in respect to a sale and purchase of the Offered
Interest.
(vi) The Sellor may Sell all or any portion of its Interest to an
affiliate of the Sellor. For purposes of clarity, such sale,
transfer, assignment or disposal is not subject to section
5.9(a), provided, however, that if control over === such
affiliate is immediately transferred to a third party or if
such transaction is merely an attempt at avoiding the
provisions of section 5.9(a) then the provisions of ===
section 5.9(a) shall be deemed to apply to such ===
transaction and such transaction shall have no effect, unless
the Purchaser subsequently declines to exercise its right to
acquire the Offered Interest pursuant to section 5.9(a). ===
(vii) For purposes of this Agreement, "affiliate" is used to
indicate a relationship between: (A) corporations where one of
them owns or holds, directly or indirectly, voting securities
carrying a majority of the voting rights attached to all
outstanding voting securities of the other (if two
corporations are affiliated with another corporation by reason
of the percentage of their voting securities held or owned,
directly or indirectly, by such other corporation, then they
shall be deemed to be affiliated with each other); (B) a
person and a corporation where the person, the person's spouse
or, if living in the same home as the person, the person or
the spouse's relative, beneficially owns, directly or
indirectly, voting securities carrying a majority of the
voting rights attached to all outstanding voting securities of
the corporation; and (C) one person and another person where
the other person is the spouse, or any relative of the person
or the spouse where the spouse or relative has the same home
as the person.
(b) This Agreement shall be binding upon and enure to the benefit of the
parties' successors and permitted assignees, provided, however, that
any assignment by the Sellor of all or any portion of its rights or
obligations hereunder shall include a provision whereby the New
Party agrees to abide by the terms of this Agreement, including the
provisions of this section 5.9, and ==== assume all of the
liabilities and obligations of the Sellor under this Agreement,
whether accruing before or becoming due after such assignment. The
Sellor and New Party shall execute such agreements or documents as
may be reasonably required in this regard by the other party to this
Agreement (the "Other Party").
(c) No assignment shall serve to release or discharge the Sellor from
any of the said liabilities or obligations, unless all of the rights
and obligations of the Sellor have been assigned to the New Party
and the Other Party has released the Sellor.
(d) Nothing in this section 5.9 shall prevent a party from soliciting
offers from third parties to purchase its Interest. Notwithstanding
the foregoing part of this section 5.9(d) and for purposes of
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clarity, neither Yukon Gold nor any of Xxxxx, Xxxxx or Xxxxxx shall
make offers to third parties to sell its Interest if the effect of
such an offer would avoid the application of the provisions of
section 5.9(a).
5.10 FORCE MAJEURE
(a) No party hereto shall be liable under this Agreement to another
party for any failure to perform any of its obligations caused by or
arising out of any act not within the control of the party,
excluding lack of funds, but including, without limitation, acts of
God, strikes, lockouts or other industrial disputes, acts of a
public enemy, riots, fire, storm, flood, explosion, government
restriction, failure to obtain any approvals required from
regulatory authorities, including environmental protection agencies,
unavailability of equipment, interference of persons primarily
concerned about environmental or native rights issues and any other
cause, whether of the kind enumerated above or otherwise, which is
not reasonably within the control of the party (the "Event of Force
Majeure").
(b) No right of a party shall be affected, and no party shall be found
in default, under this Agreement by the failure of such party to
meet any term or condition of this Agreement where such failure is
caused by an Event of Force Majeure and, in such event, all times
specified or provided for in this Agreement shall be extended by a
period commensurate with the period during which the Event of Force
Majeure causes such failure.
(c) A party affected by an Event of Force Majeure shall take all
reasonable steps within its control to remedy the failure caused by
such event, provided, however, that nothing contained in this
section 5.10 shall require any party to settle any labour or
industrial dispute or to test the constitutionality of any law
enacted by any Legislature or Parliament of or within Canada.
(d) Any party relying on the provisions of this section 5.10 shall
forthwith give notice to the other party of the commencement of an
Event of Force Majeure and of its end.
5.11 NOTICES
(a) Any notice, direction or other communication (the "Notice") given
hereunder, irrespective of whether such Notice was required,
permitted or otherwise provided pursuant to or in respect of this
Agreement, shall be in writing and:
(i) if delivered, shall be deemed to have been given and received
on the day it was delivered;
(ii) if mailed, shall be deemed to have been given and received on
the seventh business day following the day of mailing, except
in the event of disruption of postal services in which event
such Notice shall be deemed to have been given and received
only when actually received;
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(iii) if sent by telefacsimile shall be deemed to have been given
and received on the day it was so sent, except where sent
outside of normal business hours (9:00 a.m. to 5:00 p.m. local
time at the place of receipt), in which event such Notice
shall be deemed to have been given and received on the next
following business day; and
(iv) for greater clarity, Xxxxxx will be deemed to have been given
and received Notice effective upon the first of Xxxxx, Xxxxx
and Xxxxxx receiving Notice pursuant to this section 5.11.
(b) Notices in each case shall be addressed as follows:
(i) IF TO YUKON GOLD, AT:
Yukon Gold Corp.
Xxxxx 000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attention: President
Fax: (000) 000-0000
WITH A COPY TO:
Xxxxxxx Xxxxx LLP
Suite 3900, Canada Trust Tower
BCE Place, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
(ii) if to Xxxxxx, to each of:
Xxxxxxx Xxxxx
Xxx 000
Xxxx, Xxxxx X0X 0X0
Fax: (000) 000-0000
Xxxxx X. Xxxxx
0000 Xxxx Xxxxx
Xxxxxxxxx, XX X0X 0X0
Fax: (000) 000-0000
Xxxxxx Xxxxxx
Xxxx 0, Xxx 0
Xxxx Xxxx, Xxxxx X0X 0X0
Fax: (000) 000-0000
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Any party may give, at any time, notice in writing to the other
party of any change of address of the party giving such Notice and,
from and after the giving of such Notice, the address or addresses
therein specified shall be deemed to be the address of such party
for the purpose of giving Notice hereunder.
(c) Any Notice given hereunder to the Joint Venture Committee shall be
in writing and shall be delivered, mailed or sent to Yukon Gold and
Xxxxxx, in accordance with this section 5.11.
5.12 INTERPRETATION
(a) This Agreement shall be interpreted and governed according to the
laws of the Province of Ontario. The parties hereby attorn to the
jurisdiction of the courts of the Province of Ontario and agree to
submit any disputes in respect of this Agreement to the courts of
the Province of Ontario.
(b) All references in this Agreement to monetary amounts are expressed
in Canadian currency.
(c) In this Agreement, headings have been inserted for ease of reference
and may not accurately describe the provisions that follow them.
Consequently, headings shall not be used for purposes of
interpreting this Agreement.
(d) In this Agreement, the singular encompasses the plural and vice
versa, and the masculine encompasses the feminine and vice versa.
(e) In this Agreement, mining properties, rights or interests into which
any of the Claims are converted by process of law or otherwise are
included in the definition of Property.
5.13 OPTION TO PURCHASE
At anytime following the formation of the Joint Venture as defined
in Article hereof and provided Yukon Gold has a 75% Earned Interest
in the Property, Yukon Gold shall have the option to purchase the
remaining 25% interest held by the Xxxxxx Syndicate.
The purchase price shall be $5,000,000 and the Xxxxxx Syndicate's
NSR shall be increased from 2% to 3% following the buy out. This
option shall remain in effect until the Xxxxxx Syndicate is required
to commit to funding their interest in the Joint Venture at which
time Yukon Gold must exercise the option or it shall expire and be
of no further force or effect.
5.14 WHOLE AGREEMENT AND FURTHER ASSURANCES
(a) This letter, including Schedules [A, A1, B, and C] attached hereto,
constitutes the whole of this Agreement and encompasses the entire
agreement between Yukon Gold and Xxxxxx pertaining to the Property.
This Agreement supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, between Yukon
-25-
Gold and Xxxxxx, and there are no warranties, representations or
other agreements between Yukon Gold and Xxxxxx in connection with
the Property, except as specifically set forth herein.
(b) The parties agree to execute and cause to be executed such other
documents, and take and cause to be taken such other actions, as are
reasonably necessary: (clxvi) to secure and give effect to the
rights and obligations granted and assumed hereunder; and (clxvii)
to maintain the Property in good standing.
5.15 ENVIRONMENTAL RECLAMATION
(a) Notwithstanding any other provision in this Agreement, Xxxxxx shall
remain liable and Yukon Gold shall have no obligations in respect of
environmental liabilities incurred or arising as a result of the
state or condition of the Property prior to the effective date of
this Agreement.
(b) For purposes of section 5.14(a), environmental liabilities shall
mean any and all damages (including but not limited to exemplary and
punitive damages), losses, costs, expenses, liabilities and
obligations of whatsoever kind, direct or indirect (including but
not limited to fines, penalties, interest, lawyers' fees and
expenses, damages for personal injury, death, property damage and
economic loss, including but not limited to reduction in the value
of the Property (or any other person's property)) incurred or
arising as a result of the state or condition of the Property,
including costs relating to the removal, treatment, storage and
disposal of hazardous substances and the remediation, clean-up,
restoration, abatement, reclamation or other securing or remedial
action in respect of the Property (or any other person's property)
under or for breach of or failure to comply with any and all
environmental laws, whether statutory, in contract or in tort,
including negligence and strict liability, or howsoever otherwise
arising.
(c) For purposes of sections 2.5(b), 3.5(c) and 5.14(b):
(i) environmental laws shall mean any and all federal, provincial
and local laws, statutes, rules, regulations, ordinances,
bylaws, orders, permits, licences, approvals, policies and
consents and the common law to the extent that any of the
foregoing regulate, ascribe, provide for or pertain to
liabilities or obligations in relation to the existence, use,
production, manufacture, processing, distribution, production,
transport, handling, storage, removal, treatment, disposal,
emission, discharge, migration, seepage, leakage, spillage or
release of hazardous substances or the construction,
alteration, use or operation, demolition or decommissioning of
any facilities or other real or personal property in relation
to the
-26-
foregoing or otherwise in relation to the protection of the
life, health or safety of persons, or to the protection of
property or the environment, including but not limited to air,
soil, surface water, ground water, biota, wildlife and
personal or real property; and
(ii) hazardous substances shall mean any substance that:
(A) when released to the natural environment is likely to
cause or does cause, immediately or at some future time,
material harm or degradation to the natural environment
or any risk to human health and, without restricting the
generality of the foregoing, includes any pollutant,
contaminant, waste or hazardous waste, or any "dangerous
goods", "hazardous chemical", "hazardous substance" or
"hazardous waste", as may be defined by environmental
laws; or
(B) exhibits characteristics of flammability, corrosivity,
reactivity or toxicity.
5.16 COUNTERPARTS
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument. Execution and delivery of this Agreement by
exchange of facsimile copies bearing facsimile signature of a party shall
constitute a valid and binding execution and delivery of this Agreement by such
party. Such facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF the parties have executed this Agreement
effective as of the date first written above,
ON HIS OWN BEHALF AND ON BEHALF OF THE YUKON GOLD CORP.
XXXXXX SYNDICATE:
by:
------------------------------------ ---------------------------------
Xxxxxxx Xxxxx Xxxxx Xxxxx
President
by:
------------------------------------ ---------------------------------
Xxxxx Xxxxx Xxxxxxxx Xxxxxx
Treasurer
------------------------------------
Xxxxxx Xxxxxx
SCHEDULE A
TO
XXXXXX / YUKON GOLD AGREEMENT
DATED JULY 7, 2002
DESCRIPTION OF XXXXXX PROPERTIES
CLAIM NAME CLAIM NO. RECORD NO. EXPIRY DATE
Xxxxxx Claims 1 - 34 YC00401-434 Xxxxxxx Xxxxx - Exp. 2002/09/10
Xxxxxx 35 YC01091 Xxxxxxx Xxxxx - Exp. 2002/09/10
Hinton II Claims 1 - 26 YC01126-151 Xxxxxx Xxxxxx - Exp. 2002/09/10
Xxxxxx III Claims 1 - 14 YC01152-165 Xxxxxx Xxxxxx - Exp. 2002/09/10
Hinton IV Claims 1 - 6 YC01424-429 Xxxxxx Xxxxxx - Exp. 2002/09/10
Xxxxxx V Claims 1 - 7 YC01417-423 Xxxxxx Xxxxxx - Exp. 2002/09/10
A TOTAL OF 88 CLAIMS
SCHEDULE A1
NEW CLAIMS LIST
CLAIM STATUS REPORT 29 OCTOBER 2003
CLAIM NAME AND NBR GRANT NO. EXPIRY DATE REGISTERED OWNER % OWNED NTS #'X
X Xxxxxx 0 - 0 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx 0 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx 00 - 00 XX00000 - XX00000 2007/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx 00 - 00 XX00000 - XX00000 2007/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx 35 YC01091 2011/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx XX 0 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 12 YC01137 2010/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XX 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 23 YC01148 2010/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XX 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XXX 0 - 0 XX00000 - XX00000 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx III 8 YC01159 2007/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XXX 0 - 00 XX00000 - XX00000 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton IV 1 YC01424 2009/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx XX 0 - 0 XX00000 - XX00000 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx V 1 - 4 YC01417 - YC01420 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx V 5 YC01421 2008/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx V 6 YC01422 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx V 7 YC01423 2007/11/01 Yukon Gold Corp 100.00 105M14
R Xxx 0 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 13 YC10621 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 14 YC10622 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 15 YC10623 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 16 YC10624 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 17 YC10625 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 18 YC10626 2009/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 29 YC10629 2010/11/01 Yukon Gold Corp 100.00 105M14
R Key 30 YC10630 2009/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 43 YC10643 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 44 YC10644 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 45 YC10645 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 46 YC10646 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 47 YC10647 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 48 YC10648 2012/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
Total claims selected: 186
Left column indicator legend: Right column indicator legend:
R - Indicates the claim is on one L - Indicates the Quartz Lease. D - Indicates Placer Discovery
or more pending renewal(s). F - Indicates Full Quartz fraction (25+ acres) C - Indicates Placer Codiscovery
P - Indicates the claim is pending. P - Indicates Partial Quartz fraction (<25 acres) B - Indicates Placer Fraction
PAGE 1 OF 2
CLAIM STATUS REPORT 29 OCTOBER 2003
CLAIM NAME AND NBR GRANT NO. EXPIRY DATE REGISTERED OWNER % OWNED NTS #'S
R Key 57 - 62 YC10651 - YC10656 2011/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 89 YC10677 2011/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 000 - 000 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14 F
R Key 000 - 000 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 104 YC10697 2012/11/01 Yukon Gold Corp 100.00 105M14 F
Moon 1 YC10957 2004/09/09 Yukon Gold Corp 100.00 105M14 X
Xxxx 0 - 00 XX00000 - XX00000 2004/09/09 Yukon Gold Corp 100.00 105M14
Xxx 0 - 0 XX00000 - XX00000 2004/09/09 Yukon Gold Corp 100.00 105M14
CRITERIA(S) USED FOR SEARCH:
CLAIM STATUS: ACTIVE & PENDING OWNER(S): YUKON GOLD CORP REGULATION TYPE: QUARTZ
Total claims selected: 186
Left column indicator legend: Right column indicator legend:
R - Indicates the claim is on one L - Indicates the Quartz Lease. D - Indicates Placer Discovery
or more pending renewal(s). F - Indicates Full Quartz fraction (25+ acres) C - Indicates Placer Codiscovery
P - Indicates the claim is pending. P - Indicates Partial Quartz fraction (<25 acres) B - Indicates Placer Fraction
Page 2 of 2
SCHEDULE B
TO
XXXXXX / YUKON GOLD AGREEMENT
DATED JULY 7, 2002
NET SMELTER RETURN ROYALTY
1. The NSR which may be payable to a party (the "PAYEE") by a party (the
"PAYOR") shall be calculated and paid to the Payee in accordance with the terms
of this Schedule.
2. The NSR shall be calculated on a calendar quarterly basis.
3. The following words shall have the following meanings:
3.1 "GROSS REVENUE" shall mean the aggregate of the following amounts
received in each quarterly period:
(a) (i) all revenue received by the Payor in such quarter from
arm's length purchasers of mineral products, or
(ii) the fair market value of all mineral products sold by
the Payor in such quarter to persons not dealing at
arm's length with the Payor; and
(b) any proceeds of insurance received in such quarter due to
losses or damages in respect to mineral products.
3.2 "PERMISSIBLE DEDUCTIONS" shall mean the aggregate of the following
charges (to the extent not previously deducted or accrued in
computing Gross Revenue) that are paid in each quarterly period:
(a) sales charges levied by any sales agent in respect to the sale
of mineral products;
(b) all costs, expenses and charges of any nature whatsoever which
are either paid or incurred by the Payor in connection with
the refinement or beneficiation of mineral products after
leaving the Property, including all weighing, sampling,
assaying and representation costs, metal losses, any umpire
charges and any penalties charged by the processor, refinery
or smelter, and;
(c) all other insurance costs in respect of mineral products;
provided: (i) that where a cost or expense otherwise constituting a
Permissible Deduction is incurred by the Payor in a transaction with
a party with whom it is not dealing at arm's length (as that term is
defined in the Income Tax Act (Canada)), such costs or expenses may
be deducted, but only as to the lesser of the actual cost incurred
-2-
by the Payor and the fair market value thereof considering the time
of such transaction and under all the circumstances thereof; and
(ii) transportation costs and milling costs at another site, prior
to the smelting and refining shall not be included in the definition
of Permissible Deductions.
3.3 "NET SMELTER RETURNS" shall mean Gross Revenue less Permissible
Deductions in respect to such quarter.
3.4 "NSR" shall mean Net Smelter Returns.
4. The NSR shall be calculated and paid within 30 days after the end of each
calendar quarter ending March 31, June 30, September 30 and December 31 of each
year. Smelter settlement sheets, if any, and a statement setting forth
calculations in sufficient detail to show how the payment was derived (the
"STATEMENT") shall be submitted with the payment.
5. In the event that final amounts required for the calculation of the NSR are
not available within the time period referred to in paragraph 4 of this
Schedule, then provisional amounts shall be established, the NSR shall be paid
on the basis of such provisional amounts and positive or negative adjustments
shall be made to the payment in the succeeding quarter, as necessary.
6. All NSR payments shall be considered final and in full satisfaction of all
obligations of the Payor with respect thereto, unless the Payee delivers to the
Payor a written notice (the "OBJECTION NOTICE") describing and setting forth a
specific objection to the calculation thereof within 60 days after receipt by
the Payee of the Statement. If the Payee objects to a particular Statement as
herein provided, the Payee shall, for a period of 60 days after the Payor's
receipt of such Objection Notice, have the right, upon reasonable notice and at
a reasonable time, to have the Payor's accounts and records relating to the
calculation of the NSR in question audited by the auditors of the Payor. If such
audit determines that there has been a deficiency or an excess in the payment
made to the Payee, such deficiency or excess will be resolved by adjusting the
next monthly NSR payment due hereunder. The Payee shall pay all the costs and
expenses of such audit unless a deficiency of 2 1/2% or more of the amount due
is determined to exist. The Payor shall pay the costs and expenses of such audit
if a deficiency of 2 1/2% or more of the amount due is determined to exist. All
books and records used and kept by the Payor to calculate the NSR due hereunder
shall be kept in accordance with Canadian generally accepted accounting
principles. Failure on the part of the Payee to make claim against the Payor for
adjustment in such 60 day period by delivery of an Objection Notice shall
conclusively establish the correctness and sufficiency of the Statement and NSR
payment in respect of the applicable quarter.
7. All profits and losses resulting from the Payor engaging in any commodity
futures trading, option trading, metals trading, gold loans or any combination
thereof, and any other hedging transactions with respect to mineral products
(collectively, "HEDGING TRANSACTIONS") are specifically excluded from
calculations of the NSR pursuant to this Schedule, it being understood by the
parties that both the Payor and Payee may engage in speculative hedging trading
activities for their own account. All Hedging Transactions by the Payor and all
profits or losses associated therewith, if any, shall be solely for the Payor's
account, irrespective of whether or not mineral products are delivered in
fulfilment of such obligations. When necessary to give effect to the provisions
-3-
of this paragraph 7, Gross Revenue from mineral products subject to Hedging
Transactions by the Payor shall be determined pursuant to subclause 3.1(a)(ii),
rather than 3.1(a)(i) hereof.
8. Fair market value shall be determined by using, for gold, the quarterly
average price of gold which shall be calculated by dividing the sum of all
London Bullion Market Association P.M. Gold Fix prices reported for the calendar
quarter in question by the number of days for which such prices were quoted and,
for silver and other metals, the quarterly average price which shall be
calculated by dividing the sum of all New York Commodity Exchange ("COMEX")
prices reported for silver and the other metal quoted by and at the closing of
COMEX for the calendar quarter in question by a number of days for which such
prices were quoted, less, in each case, an amount reasonably equivalent to the
deductions permitted by clause 3.2 hereof.
SCHEDULE C
PERCENTAGE INTEREST OF THE MEMBERS OF THE XXXXXX SYNDICATE
Xxxxxxx Xxxxx 51%
Xxxxx Xxxxx 16%
Xxxxxx Xxxxxx 17%
J. Xxxxxxx Xxxxx 16%
TOTAL 100%
