EXHIBIT 4.6
Purchase Agreement,
by and among
Halo Resources Ltd.,
and
Sheridan Platinum Group
dated
February 18, 2005
PURCHASE AGREEMENT
AMONG
THE SHERIDAN PLATINUM GROUP LTD.
AND
HALO RESOURCES LTD.
February 18, 2005
TABLE OF CONTENTS
PURCHASE AGREEMENT
ARTICLE 1 INTERPRETATION.......................................................1
1.1 DEFINITIONS...........................................................1
1.2 SCHEDULES.............................................................5
1.3 INTERPRETATION........................................................5
ARTICLE 2 PURCHASE AND SALE....................................................6
2.1 PURCHASE AND SALE.....................................................6
2.2 PURCHASE PRICE........................................................6
2.3 SECTION 85 ELECTION...................................................7
2.4 ALLOCATION OF PURCHASE PRICE AMONG ASSETS.............................7
2.5 GOODS AND SERVICES TAX ON PROPERTIES AND BUILDINGS....................7
2.6 TRANSFER TAXES........................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE VENDOR.........................7
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDOR..........................7
3.2 SURVIVAL.............................................................10
3.3 RELIANCE.............................................................10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................11
4.1 REPRESENTATIONS AND WARRANTIES.......................................11
4.2 SURVIVAL.............................................................12
4.3 RELIANCE.............................................................13
ARTICLE 5 COVENANTS OF THE VENDOR.............................................13
5.1 PRIOR TO CLOSING DATE................................................13
5.2 CONFIDENTIALITY......................................................14
ARTICLE 6 COVENANTS OF PURCHASER..............................................14
6.1 PURCHASER'S COVENANTS................................................14
ARTICLE 7 CONDITIONS OF THE PURCHASER.........................................15
7.1 PURCHASER'S CONDITIONS...............................................15
7.2 WAIVER/SURVIVAL......................................................16
ARTICLE 8 CONDITIONS OF THE VENDOR............................................16
8.1 VENDOR'S CONDITIONS..................................................16
8.2 WAIVER/SURVIVAL......................................................17
ARTICLE 9 CLOSING AND TERMINATION.............................................17
9.1 CLOSING DATE AND LOCATION............................................17
9.2 VENDOR'S CLOSING DOCUMENTS...........................................17
9.3 PURCHASER'S CLOSING DOCUMENTS........................................18
9.4 CONVEYANCE OF ASSETS.................................................19
9.5 TRUST REGARDING ASSETS NOT CONVEYED..................................19
9.7 EFFECT OF TERMINATION................................................20
ARTICLE 10 INDEMNITIES........................................................20
10.1 GENERAL INDEMNIFICATION OF PURCHASER.................................20
10.2 VENDOR'S LIMITATIONS.................................................20
10.3 GENERAL INDEMNIFICATION OF VENDOR....................................20
10.4 SPECIFIC INDEMNIFICATION OF PURCHASER IN RELATION
TO EARLY ENTRY AND DRILLING......................................21
10.5 PURCHASER'S LIMITATIONS..............................................21
10.6 CLAIMS UNDER VENDOR'S INDEMNITY......................................21
10.7 CLAIMS UNDER PURCHASER'S INDEMNITY...................................22
10.8 CERTIFICATES.........................................................22
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ARTICLE 11 POST CLOSING MATTERS...............................................23
11.1 PROPERTY MAINTENANCE.................................................23
11.2 RETURN OF ASSETS.....................................................23
11.3 CONDITION OF ASSETS..................................................23
11.4 REGISTRATION.........................................................23
11.5 RENEGOTIATION OF TERMS OF REGISTRATION...............................23
11.6 DISCHARGE OF SECURITY................................................24
ARTICLE 12 AREA OF INTEREST...................................................24
12.1 AREA OF INTEREST.....................................................24
ARTICLE 13 EVENTS OF DEFAULT..................................................24
13.1 EVENTS OF DEFAULT....................................................24
13.2 REMEDIES UPON DEFAULT................................................25
13.3 ESCROW ARRANGEMENT...................................................25
13.4 COVENANT NOT TO TRANSFER PROPERTIES..................................25
13.5 APPLICATION FOR SECTION 118 RESTRICTION..............................26
13.6 SURVIVAL............................................................ 26
ARTICLE 14 ARBITRATION........................................................26
14.1 SETTLING DISPUTES....................................................26
14.2 ARBITRATION..........................................................26
14.3 AVAILABILITY OF OFFICERS, EMPLOYEES, ETC.............................27
14.4 ARBITRATION DOES NOT APPLY...........................................27
ARTICLE 15 GENERAL............................................................27
15.1 TENDER...............................................................27
15.2 EXPENSES.............................................................28
15.3 TIME.................................................................28
15.4 ASSIGNMENT...........................................................28
15.5 NOTICES..............................................................28
15.6 ANNOUNCEMENTS........................................................29
15.7 MODIFICATIONS, APPROVALS AND CONSENTS................................29
15.8 GOVERNING LAW........................................................29
15.9 SEVERABILITY.........................................................29
15.10 ENTIRE AGREEMENT.....................................................29
15.11 FURTHER ASSURANCES...................................................29
15.12 ENUREMENT............................................................30
15.13 COUNTERPARTS.........................................................30
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THIS AGREEMENT is made as of February 18, 2005
AMONG:
THE SHERIDAN PLATINUM GROUP LTD., a company incorporated under the laws
of Canada, having a place of business at 14 Park Lane Circle, Toronto,
Ontario, M5B 1Z7
(the "VENDOR")
AND:
HALO RESOURCES LTD., a company continued under the laws of British
Columbia, having a registered office at 1305, 1090 West Georgia Street,
Vancouver, British Columbia, V1E 3V7
(the "PURCHASER")
WHEREAS:
The Vendor has agreed to sell and the Purchaser has agreed to purchase all of
the Assets on the terms and subject to the conditions hereinafter contained.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of one dollar and
the premises and mutual agreements and covenants herein contained (the receipt
and adequacy of such consideration being mutually acknowledged by each party),
the Parties covenant and agree with each other as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following words and phrases shall have the following
meanings:
"Action" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority;
"Applicable Laws" means, with respect to any Person, any national or foreign
federal, state, provincial or local Laws, ordinance, regulation, rule, code,
order, other requirement or rule of law or stock exchange rule applicable to
such Person or any of its respective properties, assets, officers, directors,
employees, independent contractors, consultants or agents;
"Area of Interest" has the meaning ascribed to it in Article 12;
"Assets" means:
(a) the Properties;
(b) the Buildings;
(c) the Equipment;
(d) the Inventory; and
(e) the Technical Information;
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"Buildings" means all plants, mills, hoists, buildings, structures, erections,
improvements, appurtenances and fixtures (including fixed machinery and fixed
equipment) situated on, under or in or forming part of the Properties;
"Business Day" means any day upon which banks and financial markets are open
during regular business hours in Toronto, Ontario;
"Closing" means the completion of the sale to, and the purchase by the Purchaser
of, the Assets and the completion of all other transactions contemplated by this
Agreement to occur contemporaneously therewith;
"Closing Date" means the date that is the earlier of the following (a) the
Business Day upon which conditions 7.1(h) and 8.1(e) are both completed or
waived by the Parties and the registrations and records are engrossed with such
registrations and do not reveal any encumbrances that are not Permitted
Encumbrances which the Purchaser is not willing to then waive; and (b) April 1,
2005. Notwithstanding the foregoing, if conditions 7.1(h) and 8.1(e) or any
other condition of Closing cannot be satisfied before or on April 1, 2005
because one or more of the Parties have constructive or actual notice of a Lien
which purports to affect any of the Properties, other than a Permitted
Encumbrance under this Agreement, and which is not acceptable to either
Purchaser or Vendor, then the Closing Date shall be extended as reasonably
required to deal with such Lien in a manner which is reasonably acceptable to
both Vendor and Purchaser.
"Closing Time" means 4:00 p.m. (Eastern Standard Time) or such other time as may
be agreed upon by the parties;
"Dispute" has the meaning ascribed to it in Section 14.1;
"Dividends" means the dividends payable on the Preferred Shares, the terms of
which are described in Schedule E attached hereto;
"Escrow Agreement" has the meaning given to it in Section 13.3;
"Employment Legislation" means, collectively, all Applicable Laws currently in
effect including respective regulations and orders promulgated thereunder, and
any similar federal, state or other legislation applicable in Ontario relating
to employment of Persons in Ontario;
"Equipment" includes all fixed assets and tangible personal property, wherever
situated, used in connection with the Properties;
"Event of Default" has the meaning given to it in Section 13.1;
"Governmental Authority" means any Canadian or foreign federal, state,
provincial, municipal or local governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or judicial or arbitral
body;
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award issued or entered by or with any
Governmental Authority;
"Inventory" means all inventories or ore, raw materials, minerals-in-progress,
stock-in-trade, concentrated or refined gold and supplies situated on the
Properties as of the Closing Date (including any tailings, tailings pond,
tailings dams and other tailings impound facilities);
"Laws" means any Canadian or foreign, federal, state, provincial or local law,
ordinance, regulation, rule, code, Order, principle of common and civil law and
equity, other requirement or rule of law or stock exchange rule, including any
judicial or administrative interpretation thereof;
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"Legal Proceeding" means any judicial, administrative or arbitral action, suit,
proceeding (public or private), claim or governmental proceeding;
"Liabilities" means any and all debts, trade accounts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or undeterminable, including, without limitation, those
arising under any Law, Action or Governmental Order and those arising under any
contract, agreement, arrangement, commitment or undertaking or otherwise,
including, without limitation, arising directly or indirectly under or pursuant
to any loan, credit agreement, loan or credit facility transaction or
arrangement or any off-balance sheet transaction or arrangement, in each case of
the Vendor affecting or relating to the Assets;
"Lien" means any encumbrance of any nature or kind whatever and includes a
security interest, mortgage, lien, hypothec, pledge, hypothecation, assignment,
charge or security, including arising under or by operation of any Applicable
Laws, including any banking legislation, trust or deemed trust (whether
contractual, statutory or otherwise arising), any easement, agreement,
reservation, right of way, restriction, encroachment, burden, bond, guarantee or
any other right or claim of others of any kind whatever or any restrictive
covenant or other agreement, restriction or limitation on title or use;
"Material Contracts" means those subsisting commitments, contracts, instruments,
leases and other agreements, oral or written, entered into by the Vendor, by
which it is bound or to which it or its assets are subject and which have total
payment obligations on the part of the Vendor which exceed $25,000 or are for a
term of or in excess of one year;
"Mining Rights" has the meaning given to it in Section 3.1(g);
"Minister" means the Ontario Minister of Northern Development and Mines;
"Mortgage" has the meaning given to it in Section 9.3(g);
"Order" means any order, (including any judicial or administrative order and the
terms of any administrative consent) injunction, judgment, decree, ruling, writ,
assessment or arbitration award;
"Ordinary course" or "normal course" means any action which constitutes an
ordinary day-to-day business activity or is consistent with past practices;
"Parties" means the Vendor and the Purchaser, and "Party" means any one of them;
"Permit" means any and all permits, licences, concessions, approvals,
certificates, consents, certificates of approval, rights, privileges or
franchises, registrations (including any required export/import approvals) and
exemptions of any nature and other authorizations, conferred or otherwise
granted by any Governmental Authority and related to any Asset;
"Permitted Encumbrances" means:
(a) in relation to the Assets, those Liens set out in Schedule B;
(b) security given to a public utility or any Governmental
Authority when required in the ordinary course;
(c) any reservations or exceptions contained in the concessions or
other original grant of rights underlying or related to the
Properties;
(d) easements and any registered restrictions or covenants that
run with the Properties that do not in the aggregate detract
from the value of the Properties;
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(e) rights of way for, or easements, reservations or rights of
others relating to, sewers, water lines, gas lines, pipelines,
electric lines, telegraph and telephone lines and other
similar products or services, provided that they do not in the
aggregate materially interfere with the use of the Properties
and which are on the Properties; and
(f) zoning by-laws, ordinances or other restrictions as to the use
of real property, and agreements with other Persons registered
against title to the Properties, provided that they do not in
the aggregate materially interfere with the use of the
Properties and which are on the Properties;
"Person" includes an individual, corporation, limited liability corporation,
body corporate, partnership, limited partnership, limited liability partnership,
unlimited liability company, joint stock company, joint venture, association,
trust or unincorporated organization or any trustee, executor, administrator or
other legal representative thereof;
"Preferred Shares" means the preferred shares in the capital of Purchaser to be
issued pursuant to Article 2 herein and to be created prior to Closing, the
terms of which are attached hereto as Schedule E;
"Properties" means the lands and mineral property interests in the Kenora Mining
Division, Ontario as set out in Schedule A hereto and any other properties
acquired within the Area of Interest;
"Purchase Price" has the meaning specified in Section 2.2;
"Purchaser" means Halo Resources Ltd.
"Purchaser's Solicitors" means, the law firm of Axium Law Group, 3350 - 1055
Dunsmuir Street, PO Box 49222, Vancouver, British Columbia V7X 1L2 and/or
Cassels Brock & Blackwell LLP of Toronto, Ontario, as the case may be;
"Royalty" means the net smelter return royalty payable to the Vendor in
accordance with Article 2 herein and having the terms set out in the Royalty
Agreement;
"Royalty Agreement" means the royalty agreement attached as Schedule F hereto;
"Section 118 Restriction" has the meaning specified in Section 13.5;
"Shares" means the 1,000,000 common shares without par value in the capital of
the Purchaser to be issued to the Vendor pursuant to Article 2 herein;
"Tax Return" means all reports, estimates, information statements and returns
relating to, or required to be filed in connection with, any Taxes pursuant to
the statutes, rules and regulations of any federal, state, local or foreign
government taxing authority;
"Taxes" means all taxes, including any interest or penalties that may become
payable in respect thereof, imposed by any federal, state, local or foreign
government or any agency or political subdivision of any such government, which
taxes shall include, without limitation, all income taxes, payroll taxes, sales
and use taxes, excise taxes, environmental taxes, franchise taxes, gross
receipts taxes, occupation taxes, real and personal property taxes, value added
taxes, stamp taxes, transfer taxes, withholding taxes, workers' compensation,
social security payments, health taxes, unemployment insurance payments, public
works payments and any other contributions under Applicable Laws and other
obligations of the same or of a similar nature;
"Technical Information" means all information and all know-how owned, leased or
licensed by the Vendor or in which the Vendor has a right, title or interest, or
which is otherwise related to the Properties, including:
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(a) information of a scientific, technical or business nature,
whether in written, graphic, machine readable, electronic or
physical form;
(b) maps, plans, designs, research data, research plans,
development plans, drill core samples, trade secrets,
processes, formulas, drawings, technology, computer software
and related manuals, unpatented blueprints, flow sheets,
equipment and parts lists, instructions, manuals, records and
procedures; and
(c) all geological reports, technical reports or similar
disclosure documents prepared in connection with the
Properties;
"TSX-V" means the TSX Venture Exchange Inc.;
"Vendor" means The Sheridan Platinum Group Ltd.; and
"Vendor's Solicitors" means the law firm of Stikeman Elliott LLP, 5300 Commerce
Court West, 199 Bay Street, Toronto, Ontario M5L 1B9.
1.2 SCHEDULES
The following are the schedules to this Agreement:
Schedule A - Properties
Schedule B - Liens
Schedule C - Material Contracts
Schedule D - Licences, Permits and Authorizations
Schedule E - Summary of Terms of Preferred Shares
Schedule F - Net Smelter Return Royalty Agreement
Schedule G - Escrow Agreement
Schedule H - Mortgage
Schedule I - GST Certificate and Indemnity
1.3 INTERPRETATION
For the purposes of this Agreement, except as otherwise expressly provided
herein:
(a) "this Agreement" means this Agreement, including the Schedules
hereto, as it may from time to time be supplemented or
amended;
(b) all references in this Agreement to a designated Article,
section, subsection, paragraph, clause, subclause or other
subdivision, or to a Schedule, is to the designated Article,
section, subsection, paragraph, clause, subclause or other
subdivision of or Schedule to this Agreement unless otherwise
specifically stated;
(c) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not
to any particular Article, section, subsection, paragraph,
clause, subclause or other subdivision or Schedule;
(d) the singular of any term includes the plural and vice versa
and the use of any term is equally applicable to any gender
and where applicable to a body corporate;
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(e) the word "or" is not exclusive and the word "including" is not
limiting (whether or not non-limiting language such as
"without limitation" or "but not limited to" or other words of
similar import are used with reference thereto);
(f) except as otherwise provided, any reference to a statute
includes and is a reference to such statute and to the
regulations made pursuant thereto with all amendments made
thereto and in force from time to time, and to any statute or
regulations that may be passed which have the effect of
supplementing or superseding such statute or such regulations;
(g) where the phrase "to the best of the knowledge of" or phrases
of similar import are used in this Agreement, it shall be a
requirement that the Person in respect of whom the phrase is
used shall have made such due enquiries as are reasonably
necessary to enable such person to make the statement or
disclosure;
(h) the headings to the Articles and other subdivisions of this
Agreement are inserted for convenience only and do not form a
part of this Agreement and are not intended to interpret,
define or limit the scope, extent or intent of this Agreement
or any provision hereof;
(i) any reference to a corporate entity includes and is also a
reference to any corporate entity that is a successor to such
entity;
(j) the Parties acknowledge that this Agreement is the product of
arm's length negotiation between the parties, each having
obtained its own independent legal advice, and that this
Agreement shall be construed neither strictly for nor strictly
against any party irrespective of which party was responsible
for drafting this Agreement; and
(k) the representations, warranties, covenants and agreements
contained in this Agreement shall not merge at the Closing and
shall continue in full force and effect from and after the
Closing Date for the applicable period set out in this
Agreement.
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE AND SALE
Relying on the warranties and representations in this Agreement and subject to
the Royalty and the terms and conditions hereof, on the Closing Date the
Purchaser will purchase from the Vendor and the Vendor will sell, assign and
transfer to the Purchaser the Assets free and clear of all Liens, except the
Permitted Encumbrances, in consideration for the Purchase Price.
2.2 PURCHASE PRICE
The Purchase Price is the fair market value of the Assets to be satisfied by:
(a) CAD$250,000 payable by cheque of the Purchaser;
(b) 1,000,000 common shares of the Purchaser; and
(c) Preferred Shares of the Purchaser with a face value of
CAD$8,000,000.
The Vendor acknowledges receipt of a payment of $250,000.00, satisfying Section
2.2(a), and a Preferred Share dividend for the month of February, 2005 of
$12,500.00, both of which amounts were paid by Purchaser to Vendor upon
execution of this Agreement and both of which amounts shall be non-refundable.
The Assets are being transferred subject to the Royalty.
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2.3 SECTION 85 ELECTION
The Purchaser and the Vendor covenant and agree to elect, in the prescribed form
and within the time specified in the relevant legislation for such election
pursuant to subsection 85(1) of the Income Tax Act (Canada) and the
corresponding provisions of any applicable provincial tax legislation in respect
of the transfer by the Vendor of the Assets under this Agreement. The elected
amount shall be determined by the Vendor and shall be not less than the adjusted
cost base to the Vendor of the Assets and not greater than the Purchase Price
for the Assets and the Parties agree to otherwise fully cooperate in such
regard.
2.4 ALLOCATION OF PURCHASE PRICE AMONG ASSETS
The Purchase Price shall be allocated among the Assets in such manner as the
Purchaser determines at Closing.
2.5 GOODS AND SERVICES TAX ON PROPERTIES AND BUILDINGS
To the extent GST is legally exigible, the Purchaser hereby represents and
warrants to the Vendor that: (i) it is registered for the purposes of Part IX of
the Excise Tax Act (Canada) in accordance with the requirements of Subdivision
(d) of Division V thereof; (ii) it will continue to be so registered at the time
of Closing; and (iii) it is buying the Properties on its own account and not as
agent. The Purchaser covenants to deliver to the Vendor upon Closing: (i) a
notarial copy of the certificate evidencing its registration for purposes of the
goods and services tax ("GST"), including the registration number assigned to
it; and (ii) the declaration and indemnity of the Purchaser confirming the
accuracy, as at Closing, of the representations and warranties set out in this
paragraph and agreeing to indemnify the Vendor for any amounts for which the
Vendor may become liable as a result of any failure by the Purchaser to pay the
GST payable in respect of the sale of the Properties and Buildings under Part IX
of the Excise Tax Act (Canada) in the form attached as Schedule I. Provided that
the Purchaser delivers a notarial copy of the certificate and the declaration
and indemnity as set out above, then the Purchaser shall not be required to pay
to the Vendor, nor shall the Vendor be required to collect from the Purchaser,
the GST in respect of the Properties and the Buildings. In the event that the
Purchaser shall fail to deliver the certificate, declaration and indemnity as
set out above, then the Purchaser shall be responsible for any GST which might
be exigible in respect of the Properties and the Buildings.
2.6 TRANSFER TAXES
Purchaser shall pay all land transfer taxes, sales taxes, GST and registration
fees or other like charges properly payable upon the transfer of the Assets from
the Vendor to the Purchaser hereunder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDOR
To induce the Purchaser to enter into and complete the transactions contemplated
by this Agreement, the Vendor hereby represents and warrants, as representations
and warranties that are true and correct as at the date of this Agreement and
that will be true and correct on the Closing Date as if such representations and
warranties were made on each of the date of this Agreement and the Closing Date
(except insofar as such representations and warranties are stated to be given as
of a particular date or for a particular period and relate solely to such date
or period), as follows:
(a) Organization and Good Standing - The Vendor is duly
incorporated, amalgamated, or continued, validly existing, and
in good standing with respect to the filing of annual reports
under the laws of its jurisdiction of incorporation,
amalgamation, or continuance, and has all the corporate power,
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authority and capacity to own its Assets and to carry on its
business as presently conducted;
(b) Authority to Sell - The execution and delivery of this
Agreement has been duly authorized by all necessary corporate
action on the part of the Vendor and this Agreement has been
duly and validly executed and delivered by the Vendor and
constitutes a legal, valid and binding obligation of the
Vendor enforceable against the Vendor in accordance with its
terms except as may be limited by laws of general application
affecting the rights of creditors;
(c) Sale will not cause Default - Neither the execution nor the
delivery of this Agreement, or the other agreements and
instruments contemplated hereby, nor the completion of the
transactions contemplated hereby will:
(i) constitute or result in a material breach of or a
material default under any terms, provisions or
conditions of, or conflict with, violate or cause
any, or give to any Person or Governmental Authority
any right of, after the giving of a notice or lapse
of time or otherwise, acceleration, termination or
cancellation in or with respect to any of the
following:
(A) any constating documents, charter documents
or by-laws of the Vendor or any resolution
of directors or shareholders of the Vendor;
(B) any indenture, mortgage, deed of trust,
agreement, contract, lease, franchise,
certificate, consent, Permit, license,
authority, registration or other instrument
or commitment to which the Vendor is a party
or is subject, or by which it is bound, or
from which it derives benefit; or
(C) to the best of the knowledge of the Vendor
any law, judgment, decree, order,
injunction, rule, statute or regulation of
any court, arbitrator or Governmental
Authority by which any of the Assets are
bound or to which any of the Assets are
subject; or
(ii) result in the creation of any Lien, except the
Permitted Encumbrances, on any of the Assets;
(d) Tax Liens - There are no Liens for Taxes upon any of the
Assets;
(e) Absence of Other Interests - Except for the interest of the
Vendor, no other Person has any interest in the Assets;
(f) Title to Assets - The Vendor has an undivided 100% legal and
beneficial good, valid, marketable and exclusive right, title
and interest in and to all of the Assets, free and clear of
all Liens except for Permitted Encumbrances and none of the
Assets are in the possession of or under the control of any
other Person;
(g) Property Rights
(i) Schedule A contains accurate descriptions of all
mineral concessions, mineral claims, patents,
licences of occupation, or mineral or mining rights
of whatsoever nature or kind (the "Mining Rights")
and options to acquire the mineral interests in
respect of which the Vendor holds an interest in the
Kenora Mining Division, Ontario in relation to the
Assets. All rental and other payments required to be
paid by the Vendor under such Mining Rights and
options to acquire the mineral interests have been
duly paid and the Vendor is not otherwise
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in default in meeting its obligations under any such
concessions and options to acquire the mineral
interests. All such mining concessions and/or Mining
Rights are in good standing;
(ii) All mining concessions and/or Mining Rights
underlying the Properties have been duly and validly
transferred to the Vendor;
(h) No Expropriation - The Vendor has not received any notice of
expropriation of all or any part of the Assets nor does the
Vendor have knowledge of any expropriation proceeding pending
or threatened against or affecting the Assets nor of any
discussions or negotiations which could lead to any such
expropriation;
(i) No Joint Venture Interests Etc. - None of the Assets,
including the Properties, are subject to any options or rights
of first refusal of any Person;
(j) Material Contracts - The Vendor is not party to or bound by
any Material Contract, whether oral or written with respect to
the Assets, except for the contracts and agreements listed in
Schedule C and the leases, licenses and staked claims referred
to in Schedule A, all of which are all valid and subsisting,
in full force and effect and unamended, and in respect of
which, no material default exists on the part of the Vendor
or, to the best of the knowledge of the Vendor, on the part of
any of the other parties thereto. The Vendor is not aware of
any intention on the part of any of the other parties to any
Material Contract to terminate or materially alter any of
them;
(k) Employees - There are no employees of the Vendor or other
individuals engaged on contract to provide employment or
similar services or who are sales or other agents or
representatives of the Vendor (in this subsection,
"employees") in relation to the Assets and there are no wages,
fees, severance or other similar obligations owing to past
employees of the Vendor under Employment Laws;
(l) Workers' Compensation - No employees are in receipt of
benefits under workers' compensation legislation. There are no
appeals pending involving the Vendor and all levies,
assessments and penalties made against the Vendor pursuant to
workers' compensation legislation have been paid. The Vendor
is not aware of any audit currently being performed by any
Governmental Authority, and all payments required to be made
in respect of termination or severance pay under Employment
Legislation in respect of former employees or employees have
been made;
(m) Union Contracts - The Vendor has not entered into any
collective agreement with any labour union or employee
association or made any commitments to or conducted any
negotiations with any labour union or employee association
with respect to any future collective agreement;
(n) Litigation - There is no Action, suit, litigation, Legal
Proceeding, arbitration proceeding, governmental proceeding,
investigation or claim, including appeals and applications for
review, in progress, or to the best of the knowledge of the
Vendor threatened or pending against, or relating to the
Vendor or affecting the Assets which might materially and
adversely affect the Assets, and there is no judgment, decree,
injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator
outstanding against the Vendor relating to the Assets, which
could in any way affect the Vendor's ownership of the Assets;
(o) Absence of Approvals Required - Other than the approval of the
Minister pursuant to the Mining Act (Ontario) to be obtained
by the Purchaser with the appropriate authorizations of the
Vendor, no authorization, approval, order, license, permit,
release, waiver or consent of any
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Governmental Authority, any municipal, regional, or other
authority, regulatory body, stock exchange or agency,
including any governmental department, commission, bureau,
board or administrative agency or court or any other Person
and, other than the registration or filing by the Purchaser of
any transfer/deed of land or other transfer document with
respect to the Properties with the appropriate land registry
office or mining recorder's office, no registration,
declaration or filing by the Vendor with any such Governmental
Authority, regulatory body, stock exchange, or agency, court
or any other Person is required in order for the Vendor:
(i) to consummate the transactions contemplated by this
Agreement,
(ii) to execute and deliver all of the documents and
instruments to be delivered by the Vendor under this
Agreement,
(iii) to duly perform and observe the terms and provisions
of this Agreement, and
(iv) to render this Agreement legal, valid, binding and
enforceable;
(p) Permits and Licences - All Permits or consents issued by any
Governmental Authority which are held by the Vendor in
connection with the ownership, leasing or use of the Assets as
the same are now owned, leased, used conducted or operated are
listed in Schedule D, and the Vendor is not in breach of or in
default under any of the terms or conditions thereof;
(q) Trade-marks - The Vendor does not have and do not use any
service marks, trade names, design marks or trade marks with
respect to the operation of the Assets; and
(r) Taxes - The Vendor will pay all of the Vendor's taxes if any
are payable in connection with the transfer of the Assets.
3.2 SURVIVAL
The representations and warranties of the Vendor hereunder shall survive the
Closing and the payment of the Purchase Price and, notwithstanding the Closing
and the payment of the Purchase Price, and notwithstanding the waiver of any
condition by the Purchaser, the representations, warranties, covenants and
agreements of the Vendor shall (except where otherwise specifically provided in
this Agreement) survive the Closing and shall continue in full force and effect
for a period of three years from the Closing Date for all matters except:
(a) the representations, warranties, covenants and agreements of
the Vendor with respect to the title to the Assets shall
survive the Closing and continue in full force and effect for
five years; and
(b) a claim for breach of any of the representations and
warranties made by the Vendor in or pursuant to this Agreement
involving fraud or fraudulent misrepresentation on the part of
the Vendor shall survive the Closing and continue in full
force and effect for five years, subject only to applicable
limitation periods imposed by law.
3.3 RELIANCE
The Vendor acknowledges and agrees that the Purchaser has entered into this
Agreement relying on the warranties and representations and other terms and
conditions of this Agreement notwithstanding any independent searches or
investigations that have been or may be undertaken by or on behalf of the
Purchaser and that no information which is now known or should be known or which
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may hereafter become known to the Purchaser or its officers, directors or
professional advisers shall limit or extinguish the right to indemnification
hereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 REPRESENTATIONS AND WARRANTIES
To induce the Vendor to enter into and complete the transactions contemplated by
this Agreement, the Purchaser hereby represents and warrants, as representations
and warranties that are true and correct as at the date of this Agreement and
that will be true and correct on the Closing Date as if such representations and
warranties were made on each of the date of this Agreement and the Closing Date
(except insofar as such representations and warranties are stated to be given as
of a particular date or for a particular period and relate solely to such date
or period), as follows :
(a) Organization and Good Standing - The Purchaser is a company
duly continued and validly existing and in good standing under
the laws of the Province of British Columbia;
(b) Authority Relative to this Agreement - The Purchaser has all
necessary corporate power, authority and capacity to acquire
the Assets and to perform its obligations hereunder. The
execution and delivery of this Agreement has been duly
authorized by all necessary corporate action on the part of
the Purchaser and this Agreement has been duly executed and
delivered by the Purchaser and constitutes a valid and binding
obligation of the Purchaser in accordance with its terms
except as may be limited by laws of general application
affecting the rights of creditors;
(c) Purchase will not cause Default - neither the execution nor
the delivery of this Agreement, or the other agreements and
instruments contemplated hereby, nor the completion of the
transactions contemplated hereby will constitute or result in
a material breach of or a material default under any terms,
provisions or conditions of, or conflict with, violate or
cause any, or give to any Person or Governmental Authority any
right of, after the giving of a notice or lapse of time or
otherwise, acceleration, termination or cancellation in or
with respect to any of the following:
(i) any constating documents, charter documents or
by-laws of the Purchaser or any resolution of
directors or shareholders of the Purchaser;
(ii) any indenture, mortgage, deed of trust, agreement,
contract, lease, franchise, certificate, consent,
Permit, license, authority, registration or other
instrument or commitment to which the Purchaser is a
party or is subject, or by which it is bound, or from
which it derives benefit; or
(iii) to the best of the knowledge of the Purchaser any
law, judgment, decree, order, injunction, rule,
statute or regulation of any court, arbitrator or
Governmental Authority by which any of the
Purchaser's assets are bound or to which any of the
Purchaser's assets are subject;
(d) No Approvals - Other than the approval of the TSX-V and the
Minister, no authorization, approval, order, licence, permit
or consent of any governmental authority of Canada, any
province of Canada, any municipal, regional or other
authority, regulatory body or agency, including any
governmental department, commission, bureau, board or
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administrative agency or court, and no registration,
declaration or filing by the Purchaser with any such
governmental authority, regulatory body or agency, or court is
required in order for the Purchaser:
(i) to consummate the transactions contemplated by this
Agreement,
(ii) to execute and deliver all of the documents and
instruments to be delivered by the Purchaser under
this Agreement,
(iii) to duly perform and observe the terms and provisions
of this Agreement,
(iv) to render this Agreement legal, valid, binding and
enforceable;
(e) Capitalization - The authorized capital stock of the Purchaser
consists of an unlimited number of common shares and an
unlimited number of preference shares of which 16,888,753
common shares and no preference shares are issued and
outstanding on the date hereof. All such issued and
outstanding shares are validly issued, fully paid and
non-assessable and free of pre-emptive rights. Except as
publicly disclosed by the Purchaser, there are no existing
options, warrants, calls, subscriptions or other rights or
other agreements or commitments which obligate the Purchaser
or any of its subsidiaries to issue, transfer or sell any
shares of the capital of the Purchaser. The issuance and
delivery by the Purchaser of the Shares in connection with the
transactions contemplated by this Agreement have been duly and
validly authorized by all necessary corporate action on the
part of the Purchaser;
(f) Issuance of Shares and Preferred Shares - The Shares and
Preferred Shares to be issued to the Vendor in connection with
the transactions contemplated by this Agreement will, when
issued in accordance with the terms of this Agreement, be
validly issued, fully paid and non-assessable and will be
freely tradeable subject to (a) a four month hold period under
applicable securities laws and (b) control block restrictions
(if applicable). Such issuance of Shares and Preferred Shares
will be effected in such a way that it is in compliance with
all applicable securities laws; and
(g) Taxes - The Purchaser will pay all land transfer taxes,
federal and provincial sales taxes and goods and services tax
and all other taxes, duties, registration charges or other
like charges properly payable by a buyer upon and in
connection with the conveyance and transfer of the Assets by
the Vendor to the Purchaser.
4.2 SURVIVAL
The representations and warranties of the Purchaser hereunder shall survive the
Closing and the payment of the Purchase Price and, notwithstanding the Closing
and the payment of the Purchase Price, and notwithstanding the waiver of any
condition by the Vendor the representations, warranties, covenants and
agreements of the Purchaser shall (except where otherwise specifically provided
in this Agreement) survive the Closing and shall continue in full force and
effect for a period of three years from the Closing Date for all matters except:
(a) the representations, warranties, covenants and agreements of
the Purchaser with respect to the Shares and Preferred Shares,
including those in Section 4.1(e) and (f), shall survive the
Closing and continue in full force and effect for five years;
and
(b) a claim for breach of any of the representations and
warranties made by the Purchaser in or pursuant to this
Agreement involving fraud or fraudulent misrepresentation on
the part of the Purchaser shall survive the Closing and
continue in full force and effect for five years, subject only
to applicable limitation periods imposed by law.
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4.3 RELIANCE
The Purchaser acknowledges and agrees that the Vendor has entered into this
Agreement relying on the warranties and representations and other terms and
conditions of this Agreement notwithstanding any independent searches or
investigations that have been or may be undertaken by or on behalf of the Vendor
and that no information which is now known or should be known or which may
hereafter become known to the Vendor or its officers, directors or professional
advisers shall limit or extinguish the right to indemnification hereunder.
ARTICLE 5
COVENANTS OF THE VENDOR
5.1 PRIOR TO CLOSING DATE
The Vendor covenants and agrees with the Purchaser that from and after the date
of execution of this Agreement to the Closing Date:
(a) As soon as the Vendor has determined that a state of facts
exist which results in or will result in:
(i) a representation or warranty contained in subsection
3.1 being untrue or incorrect in any material
respect; or
(ii) the non-fulfilment of any of the conditions precedent
set forth in subsection 8.1,
the Vendor will notify the Purchaser of such state of facts.
(b) Except with the prior written consent of the Purchaser the
Vendor shall not do or fail to do anything that would result
in any of the representations and warranties set forth in
subsection 3.1 not being true and correct in all material
respects at the time of Closing.
(c) The Vendor will obtain any release, waiver, consent or
approval that the Purchaser, acting reasonably, may advise is
required in order that none of the execution and delivery of
this Agreement, the completion of the transactions
contemplated hereby, or the observance and performance of the
obligations of the Vendor herein will:
(i) constitute or result in a material breach of or a
material default under, or an event which, with the
giving of notice or lapse of time or otherwise, would
constitute or result in a material breach of or
material default under, or
(ii) give to any other Person, after the giving of notice
or otherwise, any right of termination, cancellation
or acceleration in or with respect to,
any indenture, mortgage, deed of trust, agreement, contract,
lease, franchise, certificate, consent, Permit, licence or
other instrument or commitment to which the Vendor is a party
or is subject, or by which it is bound, or from which it
derives benefit, or which is required or desirable for the
conduct in the usual and ordinary course of the operation of
the business of the Vendor.
(d) The Vendor will take or cause to be taken all proper steps,
actions and corporate proceedings on its part (including the
approval of the sale by its directors) to enable the Vendor to
vest a good and marketable title in the Purchaser to the
Assets free and clear of all Liens, except the Permitted
Encumbrances.
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(e) The Vendor will not sell, consume, or dispose of or transfer
possession of any of the Assets.
(f) The Vendor will make all necessary, governmental and other
filings for which it is responsible under this Agreement in a
timely fashion and shall supply the Purchaser with whatever
consent or authorization Purchaser reasonably requires to
complete its filings.
5.2 CONFIDENTIALITY
The Vendor, and any and all of its agents, employees, representatives, relatives
and other persons who acted on behalf of the Vendor and were or are involved in
any negotiations relating to this Agreement, or had, have, will or may have any
knowledge about any part in such negotiations, will not, without the prior
written consent of the Purchaser, reveal or disclose any of the terms of this
Agreement, any portion of this Agreement or any of the transactions contemplated
hereby, and will keep strictly confidential the terms of this Agreement, all
information, communications, documents and material of any kind and in any form
whatsoever, whether written, oral, technical, copied or relating to this
Agreement and any of the transactions contemplated hereby; notwithstanding the
generality of the foregoing, the Vendor shall be permitted to disclose the terms
of this Agreement to any Governmental Authority which lawfully requires the
Vendor to do so, and the Vendor shall be permitted to disclose any information
which is within the public domain. The Vendor acknowledges that a breach of any
of the covenants contained in this paragraph will result in damage to the
Purchaser, that such damage will be difficult to determine and that the
Purchaser could not be adequately compensated for such damage by monetary award.
Accordingly, in the event of a breach of any of the covenants contained in this
paragraph, in addition to any and all other remedies available to the Purchaser
in law or in equity, the Vendor hereby consents to the covenants, and each of
them, contained in this paragraph being enforced by temporary or permanent
injunction, restraining order or declaration, or all of such relief, and to such
enforcement being without the necessity of a bond; the Vendor acknowledges and
agrees that the scope of this paragraph is reasonable and commensurate with the
protection of the legitimate interests of the Purchaser.
ARTICLE 6
COVENANTS OF PURCHASER
6.1 PURCHASER'S COVENANTS
The Purchaser covenants and agrees with the Vendor that from and after the date
of execution of this Agreement to the Closing Date:
(a) As soon as the Purchaser has determined that a state of facts
exist which results in or will result in:
(i) a representation or warranty contained in subsection
4.1 being untrue or incorrect in any material
respect; or
(ii) the non-fulfilment of any of the conditions precedent
set forth in subsection 7.1,
the Purchaser will notify the Vendor of such state of facts.
(b) The Purchaser, and any and all of its agents, employees,
representatives, relatives and other persons who acted on
behalf of the Purchaser and were or are involved in any
negotiations relating to this Agreement, or had, have, will or
may have any knowledge about any part in such negotiations,
will not, without the prior written consent of the Vendor
reveal or disclose any of the terms of this Agreement, any
portion of this Agreement or any of the transactions
contemplated hereby, and will keep strictly confidential the
terms of this Agreement, all information, communications,
documents and material of any kind and in any form whatsoever,
whether written, oral, technical, copied or relating to this
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Agreement and any of the transactions contemplated hereby;
notwithstanding the generality of the foregoing, the Purchaser
shall be permitted to disclose the terms of this Agreement to
any Governmental Authority which lawfully requires the
Purchaser to do so, and the Purchaser shall be permitted to
disclose any information which is within the public domain.
The Purchaser acknowledges that a breach of any of the
covenants contained in this paragraph will result in damage to
the Vendor, that such damage will be difficult to determine
and that the Vendor could not be adequately compensated for
such damage by monetary award. Accordingly, in the event of a
breach of any of the covenants contained in this paragraph, in
addition to any and all other remedies available to the Vendor
in law or in equity, the Purchaser hereby consents to the
covenants, and each of them, contained in this paragraph being
enforced by temporary or permanent injunction, restraining
order or declaration, or all of such relief, and to such
enforcement being without the necessity of a bond; the
Purchaser acknowledges and agrees that the scope of this
paragraph is reasonable and commensurate with the protection
of the legitimate interests of the Vendor.
(c) Except with the prior written consent of the Vendor, the
Purchaser will not do or fail to do anything that would result
in any of the representations and warranties set forth in
subsection 4.1 not being true and correct in all material
respects at the time of Closing.
(d) The Purchaser will take or cause to be taken all proper steps,
actions and corporate proceedings on its part (including
approval of such vesting by the directors of the Purchaser) to
enable the Purchaser to vest a good and marketable title in
the shares which comprise a portion of the Purchase Price to
the Vendor subject to the restrictions mentioned in this
Agreement.
(e) The Purchaser will make all necessary governmental filings for
which it is responsible under this Agreement in a timely
fashion and shall supply the Vendor with whatever consent or
authorization the Vendor requires to complete Vendor's
filings.
ARTICLE 7
CONDITIONS OF THE PURCHASER
7.1 PURCHASER'S CONDITIONS
The obligations of the Purchaser to complete the purchase of the Assets shall be
subject to the satisfaction of, or compliance with, at or before the Closing
Time, each of the following conditions precedent:
(a) Truth and Accuracy of Representations of the Vendor at Closing
- The representations and warranties of the Vendor contained
in this Agreement are true and correct and the covenants and
agreements of the Vendor to be performed on or before the
Closing Date pursuant to the terms of this Agreement have been
duly performed;
(b) Absence of Injunction - No Law or Governmental Order by any
Governmental Authority, nor any Order of any court under any
Applicable Law nor any Legal Proceeding or Action, shall have
been entered, issued or commenced which is in effect or is
outstanding and has the effect, or seeks an Order having the
effect, of making the sale of the Assets to the Purchaser
illegal, or otherwise prohibiting consummation thereof or of
any of the other transactions contemplated in this Agreement;
(c) Consents Obtained - The Purchaser where applicable, shall have
obtained all consents of Government Authorities, the TSX-V and
of all Persons, as are required, including shareholder
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approval to the creation of the Preferred Shares, to permit
the completion of the transactions contemplated in this
Agreement;
(d) Absence of Change of Conditions - No event shall have occurred
or condition or situation shall have arisen or legislation
(whether by statute, rule, regulation, by-law or otherwise)
shall have been introduced which might reasonably be expected
to have a materially adverse effect upon the Assets;
(e) Approval of the Board of Directors - The approval of the Board
of Directors of the Purchaser to complete the purchase of the
Assets on the terms and conditions of this Agreement shall
have been obtained;
(f) Closing Documentation - The Purchaser shall have received from
the Vendor the closing documentation listed in Article 9.2 of
this Agreement;
(g) Absence of Damages - No damage, destruction or loss to any
Assets, whether owned, leased or licensed, that is not
adequately covered by the Purchaser's insurance, and no
damage, destruction or loss to any Assets where the cost of
repairing or replacing all such Assets exceeds $50,000 in
total, shall have occurred other than as caused by the
Purchaser and those for whom it is at law responsible; and
(h) Registrations and Consents- Purchaser shall have confirmed
that it has made all public record filings and registrations
for the transfer of the Properties that are contemplated by
this Agreement. The Purchaser will act with due haste in
making all such registrations.
The Vendor and the Purchaser will cooperate in order that the registrations and
filings contemplated in Sections 7.1(h) and 8.1(e) are filed and/or registered,
as the case may be, consecutively in the following order:
(a) transfer of the Properties;
(b) notice of Royalty Agreement;
(c) Mortgage; and
(d) the Section 118 Restriction.
7.2 WAIVER/SURVIVAL
The conditions set forth in this Article are for the exclusive benefit of the
Purchaser and may be waived by the Purchaser in writing in whole or in part on
or before the Closing Date. Notwithstanding any such waiver, the completion of
the purchase and sale contemplated by this Agreement by the Purchaser shall not
prejudice or affect in any way the rights of the Purchaser in respect of the
warranties and representations of the Vendor in this Agreement.
ARTICLE 8
CONDITIONS OF THE VENDOR
8.1 VENDOR'S CONDITIONS
The obligations of the Vendor to complete the sale of the Assets shall be
subject to the satisfaction of, or compliance with, at or before the Closing
Time, each of the following conditions precedent:
(a) Truth and Accuracy of Representations of the Purchaser at
Closing - The representations and warranties of the Purchaser
contained in this Agreement are true and correct and the
covenants and agreements of the Purchaser to be performed on
or before the Closing Date pursuant to the terms of this
Agreement have been duly performed;
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(b) Absence of Injunctions - No injunction or restraining order of
any court or administrative tribunal of competent jurisdiction
shall be in effect prohibiting the transactions contemplated
by this Agreement and no action or proceeding shall have been
instituted or be pending before any court or administrative
tribunal to restrain or prohibit the transactions between the
Parties contemplated by this Agreement;
(c) Closing Documentation - The Vendor shall have received from
the Purchaser the closing documentation listed in section 9.3
of this Agreement;
(d) Consents Obtained - except for Ministerial approvals under the
Mining Act (Ontario), the Vendor shall have obtained all
consents of Governmental Authorities, and of all other
Persons, as are required to permit completion of the
transactions contemplated in this Agreement; and
(e) Registrations and Consents - Vendor will have confirmed to the
Purchaser that all public record filings and registrations
contemplated by this Agreement in its favour have been made,
including the Mortgage, notice of the Royalty Agreement, and
entries on the register for the Properties of the Section 118
Restriction to the effect that no transfer shall be made or
charge created unless (i) notice of an application for
transfer or for the creation of a charge has been transmitted
by registered mail to the Vendor at its address for notice
under this Agreement, and (ii) the consent of the Vendor has
been given to the transfer or the creation of the charge. The
Vendor will act with due haste to complete all such
registrations for which it is responsible.
The Vendor and the Purchaser will cooperate in order that the registrations and
filings contemplated in Sections 7.1(h) and 8.1(e) are filed and/or registered,
as the case may be, consecutively in the following order:
(a) transfer of the Properties;
(b) notice of Royalty Agreement;
(c) Mortgage; and
(d) the Section 118 Restriction.
8.2 WAIVER/SURVIVAL
The conditions set forth in this Article are for the exclusive benefit of the
Vendor and may be waived by the Vendor in writing in whole or in part on or
before the Closing Date. Notwithstanding any such waiver, completion of the
purchase and sale contemplated by this Agreement by the Vendor shall not
prejudice or affect in any way the rights of the Vendor in respect of the
warranties and representations of the Purchaser set forth in this Agreement.
ARTICLE 9
CLOSING AND TERMINATION
9.1 CLOSING DATE AND LOCATION
The transactions contemplated by this Agreement shall be completed at the
Closing Time on the Closing Date at the offices of Cassels Brock & Blackwell LLP
in Toronto, Ontario, or at such other time or at such other location as may be
mutually agreed upon in writing by the Parties.
9.2 VENDOR'S CLOSING DOCUMENTS
On the Closing Date, the Vendor shall deliver, or cause to be delivered, to the
Purchaser's Solicitors:
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(a) All deeds of conveyance, bills of sale, transfer and
assignments, duly executed, in form and content satisfactory
to the Purchaser's Solicitors, appropriate to effectively vest
good and marketable title to the Assets in the Purchaser to
the extent contemplated by this Agreement, and immediately
registerable in all places where registration of such
instruments is necessary or desirable;
(b) Possession of the Assets;
(c) A duly executed statutory declaration of the President of the
Vendor, dated the Closing Date, to the effect that the
representations and warranties of the Vendor contained in this
Agreement are true and correct and that the covenants and
agreements of the Vendor to be performed on or before the
Closing Date pursuant to the terms of this Agreement have been
duly performed;
(d) A certified copy of a resolution of the directors of the
Vendor duly passed, with a certification that it has not been
rescinded and continues to be in effect, authorizing the
execution, delivery and implementation of this Agreement and
of all transactions contemplated hereby and of all documents
to be delivered by the Vendor pursuant hereto;
(e) A certificate of an officer of the Vendor, dated as of the
Closing Date, in form and substance reasonably satisfactory to
the Purchaser, as to:
(i) the validity of the constating or other constituent
documents of the Vendor; and
(ii) the incumbency and validity of the signatures of the
officers of the Vendor who executed this Agreement or
any other Transaction Documents;
(f) Legal Opinions - an opinion of the Vendor's Solicitors in form
and substance satisfactory to the Purchaser's Solicitors as to
the validity of the incorporation of the Vendor and the due
authorization, execution and delivery of this document by the
Vendor;
(g) The Escrow Agreement duly executed by the Vendor; and
(h) Such other documents as the Purchaser may reasonably require
to perfect the purchase and sale intended hereby.
9.3 PURCHASER'S CLOSING DOCUMENTS
On the Closing Date, the Purchaser shall deliver to the Vendor's Solicitors:
(a) the certificates representing the Shares and the Preferred
Shares;
(b) a certified copy of a resolution of the directors of the
Purchaser authorizing the purchase of the Assets on the terms
and conditions set forth in this Agreement and the issuance of
the Shares and the Preferred Shares in accordance with the
terms of this Agreement;
(c) a certified copy of a resolution of the directors of the
Purchaser approving the creation of the Preferred Shares:
(d) a copy of the letter of the TSX-V approving the purchase of
the Assets;
(e) an opinion of the Purchaser's Solicitors in form and substance
satisfactory to the Vendor's Solicitors as to (i) the validity
of the incorporation of the Purchaser and the due
authorization, execution and delivery of this document by the
Purchaser, and (ii) the validity of the creation and issuance
of the Shares and the Preferred Shares;
(f) a certificate of an officer of the Purchaser, dated as of the
Closing Date, in form and substance reasonably satisfactory to
the Vendor, as to:
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(i) the validity of the constating or other constituent
documents of the Purchaser; and
(ii) the incumbency and validity of the signatures of the
officers of the Purchaser who executed this Agreement
or any other Transaction Documents;
(g) a first ranking mortgage substantially in the form set out in
Schedule H (the "Mortgage") of the Properties in registrable
form securing all obligations of the Purchaser to the Vendor
arising as a result of an Event of Default defined in Section
13.1 below;
(h) the Escrow Agreement duly executed by the Purchaser;
(i) the instruments of transfer referred to in Section 13.3 in
respect of the Properties; and
(j) such other documents as the Vendor may reasonably require to
perfect the purchase and sale intended hereby.
9.4 CONVEYANCE OF ASSETS
On completion of the Closing, except as provided for in section 9.5, this
Agreement shall, without further act or formality, operate as a transfer to the
Purchaser of all Assets to be sold and purchased hereunder. The Vendor shall
nevertheless, at the Closing and from time to time after the Closing, execute
and deliver to the Purchaser all such conveyances, transfers, assignments and
other instruments in writing and further assurances as the Purchaser or the
Purchaser's Solicitors shall reasonably require from the Vendor, and the
Purchaser shall execute and deliver to the Vendor all such agreements of
assumptions and other instruments in writing and further assurances as the
Vendor or the Vendor's Solicitors shall reasonably require, in order to give
effect to the provisions of this Agreement.
9.5 TRUST REGARDING ASSETS NOT CONVEYED
Should any of the Assets intended to be transferred hereunder not be transferred
to the Purchaser at the completion of the Closing on the Closing Date, the
Vendor shall hold all such assets as bare trustee in trust for the Purchaser
from the commencement of business on the Closing Date until such Assets are
effectively transferred.
9.6 TERMINATION RIGHTS
This Agreement may be terminated:
(a) By written agreement of the Parties; and
(b) By the Purchaser or the Vendor by notice in writing given to
the other Party:
i. If the Closing has not occurred on or before April 1,
2005, in which case this Agreement may be terminated
on any Business Day after April 1, 2005, unless
conditions 7.1(h) and 8.1(e) or any other condition
of Closing cannot be satisfied before or on April 1,
2005 because one or more of the Parties have
constructive or actual notice of a Lien which
purports to affect any of the Properties, other than
a Permitted Encumbrance under this Agreement, and
which is not acceptable to either Purchaser or
Vendor; or
ii. If conditions 7.1(h) and 8.1(e) or any other
condition of Closing cannot be satisfied before or on
April 1, 2005 because one or more of the Parties have
constructive or actual notice of a Lien which
purports to affect any of the Properties, other than
a Permitted Encumbrance under this Agreement, and
which is not acceptable to either Purchaser or
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Vendor, and the Closing Date has therefore been
extended as reasonably required to deal with such
Lien in a manner which is reasonably acceptable to
both Vendor and Purchaser, in which case this
Agreement may be terminated on the first Business Day
after such extended Closing Date if the Closing has
not occurred on or before such Closing Date.
9.7 EFFECT OF TERMINATION.
Each Party's right of termination under this Article is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. Nothing in this
Article limits or affects any other rights or causes of action any Party may
have with respect to the representations, warranties, covenants and indemnities
in its favour contained in this Agreement.
ARTICLE 10
INDEMNITIES
10.1 GENERAL INDEMNIFICATION OF PURCHASER
Subject to the limitations set out herein, the Vendor covenants and agrees with
the Purchaser to indemnify the Purchaser against all liabilities, claims,
demands, actions, causes of action, damages, losses, costs and expenses
(including legal fees on a solicitor and own client basis) suffered or incurred
by the Purchaser, directly or indirectly, by reason of or arising out of:
(a) any warranties or representations on the part of the Vendor
hereunder being untrue; or
(b) a breach of any agreement, term or covenant on the part of the
Vendor made or to be observed or performed under this
Agreement;
which liabilities, claims, demands, actions, causes of action, damages, losses,
costs and expenses are collectively referred to as the "Purchaser's Losses".
10.2 VENDOR'S LIMITATIONS
The indemnity obligations of the Vendor under section 10.1 shall be limited in
the following respects:
(a) the Vendor shall only be liable for the Purchaser's Losses in
respect of which a claim for indemnity is made by the
Purchaser on or before the applicable expiry dates for the
survival of such representations and warranties as set out in
section 3.2; and
(b) no obligation on the part of the Vendor to indemnify the
Purchaser for the Purchaser's Losses shall arise until the
aggregate amount of all Purchaser's Losses in respect of which
a claim for indemnity has been made by the Purchaser exceeds
CAD$25,000, and such obligation shall only apply to the
aggregate amount of such Purchaser's Losses in excess of
CAD$25,000.
10.3 GENERAL INDEMNIFICATION OF VENDOR
Subject to the limitations set out in herein, the Purchaser covenants and agrees
with the Vendor to indemnify the Vendor against all liabilities, claims,
demands, actions, causes of action, damages, losses, costs and expenses
(including legal fees on a solicitor and own client basis) suffered or incurred
by the Vendor, directly or indirectly, by reason of or arising out of:
(a) any warranties or representations on the part of the Purchaser
hereunder being untrue; or
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(b) a breach of any agreement, term or covenant on the part of the
Purchaser made or to be observed or performed under this
Agreement;
which liabilities, claims, demands, actions, causes of action, damages, losses,
costs and expenses are collectively referred to as the "Vendor's Losses".
10.4 SPECIFIC INDEMNIFICATION OF PURCHASER IN RELATION TO EARLY ENTRY AND
DRILLING
Whereas Vendor hereby agrees that Purchaser may enter onto any of the Properties
and drill for its purposes of testing only at any time before until the Closing
Date, the Purchaser covenants and agrees with the Vendor as follows:
(a) The Purchaser shall add the Vendor as an additional named
insured on any insurance policies of the Purchaser relating to
the Properties for the period ending on the Closing Date and
shall deliver a certificate of insurance evidencing same
forthwith; and
(b) The Purchaser shall indemnify the Vendor against all
liabilities, claims, demands, actions, causes of action,
damages, losses, costs and expenses (including legal fees on a
solicitor and own client basis) suffered or incurred by the
Vendor, directly or indirectly, by reason of or arising out
of, any occurrence in, on or under the Properties, during the
period commencing on February 1, 2005 and ending on the
Closing Date:
(i) that is caused by the Purchaser or its employees,
agents or contractors or those for whom it is
responsible at law or
(ii) that arises from the activity or directly from the
presence of the Purchaser or of its employees, agents
or contractors or those for whom it is responsible at
law, in, on or under the Properties;
except any such occurrence that arises directly from the
negligence of the Vendor.
10.5 PURCHASER'S LIMITATIONS
The indemnity obligations of the Purchaser under section 10.3 shall be limited
in the following respects:
(a) the Purchaser shall only be liable for the Vendor's Losses in
respect of which a claim for indemnity is made by the Vendor
on or before the applicable expiry dates for the survival of
such representations and warranties as set out in section 4.2;
and
(b) no obligation on the part of the Purchaser to indemnify the
Vendor for the Vendor's Losses shall arise until the aggregate
amount of all Vendor's Losses in respect of which a claim for
indemnity has been made by the Vendor exceeds CAD$25,000, and
such obligation shall only apply to the aggregate amount of
such Vendor's Losses in excess of CAD$25,000.
10.6 CLAIMS UNDER VENDOR'S INDEMNITY
If any claim is made by any Person against the Purchaser in respect of which the
Purchaser may incur or suffer damages, losses, costs or expenses that might
reasonably be considered to be subject to the indemnity obligation of the Vendor
in section 10.1, the Purchaser will notify the Vendor as soon as reasonably
practicable of the nature of such claim and the Vendor shall be entitled (but
not required) to assume the defence of any suit brought to enforce such claim.
The defence of any such claim (whether assumed by the Vendor or not) shall be
through legal counsel, and shall be conducted in a manner, acceptable to the
Purchaser and the Vendor acting reasonably, and no settlement may be made by the
Vendor or the Purchaser without the prior written consent of the others. If the
Vendor assumes the defence of any claim then:
(a) the Purchaser and the Purchaser's counsel shall co-operate
with the Vendor and its counsel in the course of the defence,
such co-operation to include providing or making available to
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the Vendor, and its counsel documents and information and
witnesses for attendance at examinations for discovery and
trials;
(b) the reasonable legal fees and disbursements and other costs of
such defence shall, from and after such assumption, be borne
by the Vendor; and
(c) if the Purchaser retains additional counsel to act on its
behalf, the Vendor and its counsel shall co-operate with the
Purchaser and its counsel, such co-operation to include
providing or making available to the Purchaser and its counsel
documents and information and witnesses for attendance at
examinations for discovery and trials; provided that all fees
and disbursements of such additional counsel shall be paid by
the Purchaser.
If the Vendor and the Purchaser are or become parties to the same action, and
the representation of all parties by the same counsel would be inappropriate due
to a conflict of interest, then the Purchaser and the Vendor shall be
represented by separate counsel and, subject to the indemnity obligations of the
Vendor as set out herein, the costs associated with the action shall be borne by
the parties incurring such costs.
10.7 CLAIMS UNDER PURCHASER'S INDEMNITY
If any claim is made by any Person against the Vendor in respect of which the
Vendor may incur or suffer damages, losses, costs or expenses that might
reasonably be considered to be subject to the indemnity obligation of the
Purchaser as provided in section 10.3 and 10.4, the Vendor will notify the
Purchaser as soon as reasonably practicable of the nature of such claim and the
Purchaser shall be entitled (but not required) to assume the defence of any suit
brought to enforce such claim. The defence of any such claim (whether assumed by
the Purchaser or not) shall be through legal counsel and shall be conducted in a
manner acceptable to the Vendor and the Purchaser, acting reasonably, and no
settlement may be made by the Purchaser, or the Vendor without the prior written
consent of the others. If the Purchaser assumes the defence of any claim, then:
(a) the Vendor and its counsel shall co-operate with the Purchaser
and its counsel in the course of the defence, such
co-operation to include providing or making available to the
Purchaser and its counsel documents and information and
witnesses for attendance at examinations for discovery and
trials;
(b) the reasonable legal fees and disbursements and other costs of
such defence shall be borne by the Purchaser; and
(c) if the Vendor retains additional counsel to act on its behalf,
the Purchaser and its counsel shall co-operate with the Vendor
and its counsel, such co-operation to include providing or
making available to the Vendor and its counsel documents and
information and witnesses for attendance at examinations for
discovery and trials, provided that all fees and disbursements
of such additional counsel shall be paid by the Vendor.
If the Purchaser and the Vendor are or become parties to the same action, and
the representation of all parties by the same counsel would be inappropriate due
to a conflict of interest, then the Vendor and the Purchaser shall be
represented by separate counsel and, subject to the indemnity obligations of the
Purchaser as set out herein, the costs associated with the action shall be borne
by the parties incurring such costs.
10.8 CERTIFICATES
Notwithstanding anything contained herein, the Purchaser shall be entitled to
fully pursue all rights or remedies available to it in law or in equity if a
certificate of the Vendor is untrue, and nothing contained in this Agreement
shall limit or restrict the claims or remedies of the Purchaser against the
persons declaring such certificates, it being acknowledged by the Parties that
the Purchaser shall be relying on the truth of the Vendor's certificates in
completing the transaction contemplated by this Agreement. Notwithstanding
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anything contained herein, the Vendor shall be entitled to fully pursue all
rights or remedies available to it in law or in equity if a certificate of the
Purchaser is untrue, and nothing contained in this Agreement shall limit or
restrict the claims or remedies of the Vendor against the persons declaring such
certificates, it being acknowledged by the Parties that the Vendor shall be
relying on the truth of the Purchaser's certificates in completing the
transaction contemplated by this Agreement.
ARTICLE 11
POST CLOSING MATTERS
11.1 PROPERTY MAINTENANCE
The Purchaser agrees to perform all work requirements including but not limited
to all repairs, renewals, replacements, additions and improvements and pay and
file when due (and maintain all documentary evidence of such performance,
payments and filings) all rents, fees, Taxes, local improvement charges, rates,
assurances, deposits, security, levies, royalties, registration and filing fees
and utilities charges or rates and all other payments to and assessments of any
Governmental Authority or any other Person, that are to be performed, paid or
filed with respect to the Assets for a period of five years from the Closing
Date or until the day which is six months following the date the Assets are
returned to the Vendor in accordance with Article 11.2 or 13.2 herein, whichever
date is the earlier.
11.2 RETURN OF ASSETS
Provided the Dividends payable pursuant to the terms of the Preferred Shares
have been paid to date, the Purchaser may, at any time within five years of
issuance of the Preferred Shares, redeem the Preferred Shares by returning the
Assets and all engineering and technical data to the Vendor or its assigns upon
not less than 90 days notice to the Vendor (and as otherwise described in
Section 29.4 of Schedule "E"), as a going concern, in which case the Vendor
shall return the Preferred Shares to the Purchaser and the Purchaser shall have
no further liability to the Vendor under this Agreement or in respect of the
Preferred Shares or the Royalty Agreement. Vendor shall indemnify Purchaser for
any claims against Purchaser, related, in any way, to the return of Assets as
contemplated by Section 29.4 of Schedule "E".
11.3 CONDITION OF ASSETS
Prior to returning the Assets under Section 11.2 or Section 13.2, the Purchaser
will remove all Liens that were not on the Assets as at Closing except for any
Liens that: (i) were not created by and did not result from any act of
commission or omission by the Purchaser, its agents, employees, contractors or
those for whom it is at law responsible and were not consented to by the
Purchaser; or (ii) resulted directly from any act or omission of the Vendor.
11.4 REGISTRATION
The Purchaser and the Vendor agree that the Royalty constitutes an interest in
land and claims and the Vendor may register notice of the Royalty Agreement and
of its interest in the Preferred Shares against the Properties in the
appropriate land registry office and the mining office.
11.5 RENEGOTIATION OF TERMS OF REGISTRATION
The Vendor agrees to negotiate with the Purchaser in good faith at any time
should the registration or its interest in the Preferred Shares, notice of the
Royalty Agreement or the Mortgage on title have the effect of impairing the
Purchaser's ability to conduct business including but not limited to arranging
joint venture agreements or debt financings.
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11.6 DISCHARGE OF SECURITY
Immediately upon redemption under Section 29.3 of Schedule E or retraction under
Section 29.5 of Schedule E, Vendor and/or its assignees, as applicable, will:
(a) discharge all of their security on the Assets and any other
registrations which limit the Purchaser's ability to mortgage,
transfer or otherwise deal with the Properties, save for the
Mortgage and the Royalty Agreement (except that the Parties
agree that after such discharge, the definition of Event of
Default in Section 13.1 hereof and in the Mortgage and all
related documentation shall no longer include Subsection
13.1(b) hereof and such definition will be deemed to be
amended by deleting such Subsection);
(b) without limiting the generality of the foregoing, the Vendor
will delete, or assist the Purchaser as may be necessary to
effect the deletion of, the Section 118 Restriction; and
(c) forthwith deliver, or execute and deliver a joint direction
with the Purchaser that directs the Escrow Agent under the
Escrow Agreement to deliver, as applicable, all transfers held
in escrow under section 13.3 to the Purchaser.
ARTICLE 12
AREA OF INTEREST
12.1 AREA OF INTEREST
The Parties agree that an area of interest (the "Area of Interest") shall
include all mineral property and surface interests within an area of one mile
from any point on the outer perimeter of the Properties. In the event that the
Vendor, or any "associate " or "affiliate" (as those terms are defined in the
Securities Act (Ontario)) of it acquires, an interest in the Area of Interest
within five years of the date of issuance of the Preferred Shares, such interest
shall be deemed to form a part of the Properties and shall be transferred to the
Purchaser at no cost to the Purchaser. In the event that the Purchaser acquires
an interest in the Area of Interest within five years of the date of issuance of
the Preferred Shares, such interest shall be deemed to form a part of the
Properties and the Purchaser shall pay the Royalty in respect of those
additional property interests and the Mortgage shall, without further action of
either Party, be amended to include the additional interests and the Vendor may
register the Mortgage against such additional properties.
ARTICLE 13
EVENTS OF DEFAULT
13.1 EVENTS OF DEFAULT
If any of the following occurs and is continuing it shall constitute an event of
default (an "Event of Default"):
(a) The Purchaser fails to pay any amount owing, including the
Dividends on the Preferred Shares, to the Vendor hereunder or
under the Royalty Agreement when that amount becomes due and
payable and the Purchaser has not rectified such default within
60 days of receipt of written notice of such default from the
Vendor;
(b) The Purchaser fails to perform, observe or comply with any of
the covenants contained in Section 11.1 and the Purchaser has
not rectified such default within 60 days of receipt of written
notice of such default from the Vendor;
(c) Except for a judgement or order arising from an event that
occurred prior to the Closing, or as a result of actions or
inactions of the Vendor, any judgment or order for the payment
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of money in excess of CAD$1,000,000 (the equivalent amount in
any other currency) is rendered against the Purchaser and
either (i) enforcement proceedings have been commenced by a
creditor upon the judgment or order, or (ii) there is any
period of fifteen consecutive days during which a stay of
enforcement of the judgment or order, by reason of a pending
appeal or otherwise, is not in effect; or
(d) The Purchaser (i) becomes insolvent or generally not able to
pay its debts as they become due, (ii) admits in writing its
inability to pay its debts generally or makes a general
assignment for the benefit of creditors, (iii) institutes or
has instituted against it any proceeding seeking (x) to
adjudicate it a bankrupt or insolvent, (y) liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or
relief of debtors including any plan of compromise or
arrangement or other corporate proceeding involving or
affecting its creditors, or (z) the entry of an order for
relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its
properties and assets, and in the case of any such proceeding
instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding
(including the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its properties
and assets) occurs, or (iv) takes any corporate action to
authorize any of the above actions.
13.2 REMEDIES UPON DEFAULT
Upon the occurrence of an Event of Default, the Vendor may either:
(a) register the transfer documentation with respect to the Assets
referred to in Section 13.3 below in order to effect the
transfer of such Assets and all engineering and technical data
back to the Vendor, require the Purchaser immediately to
return possession of such Assets with all improvements and
equipment on the Properties to the Vendor and the Purchaser
shall execute all such other documents and do all such other
things as are reasonable necessary to effect the transfer of
the Assets and all engineering and technical data to the
Vendor as contemplated in this paragraph, all in exchange for
the Preferred Shares, in which case no Party shall have any
further liability to any other Party hereunder or in respect
of the Preferred Shares or the Royalty Agreement; or
(b) pursue such other remedies as it, in its sole discretion,
wishes to pursue.
13.3 ESCROW ARRANGEMENT
The Purchaser will place executed documents in registerable form, transferring
the Properties back to the Vendor or its nominees in escrow subject to the terms
and conditions of the Escrow Agreement in the form attached hereto as Schedule
G.
13.4 COVENANT NOT TO TRANSFER PROPERTIES
The Purchaser shall not transfer, charge or grant any financial interest or
enter into an agreement to transfer, charge or grant any financial interest in
any or all of the Properties without the prior written consent of the Vendor,
and the Purchaser agrees to negotiate with the Vendor in good faith at any time
should the registration or the Vendor interest in the Preferred Shares, notice
of the Royalty Agreement or the Mortgage on title have the effect of impairing
the Purchaser's ability to conduct business including but not limited to
arranging joint venture agreements or debt financings.
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13.5 APPLICATION FOR SECTION 118 RESTRICTION
The Purchasers shall apply to the appropriate land registrar to make an entry on
the register for the Properties under Section 118 of the Land Titles Act (the
"Section 118 Restriction") to the effect that no transfer shall be made or
charge created unless (i) notice of an application for transfer or for the
creation of a charge has been transmitted by registered mail to the Vendor at
its address for notice under this Agreement, and (ii) the consent of the Vendor
has been given to the transfer or the creation of the charge.
13.6 SURVIVAL
Article 13 and any other provisions hereof that, by their terms, shall survive
the Closing and the payment of the Purchase Price shall, notwithstanding the
Closing and the payment of the Purchase Price, and notwithstanding the waiver of
any condition by the Purchaser, (except where otherwise specifically provided in
this Agreement) survive the Closing and shall continue in full force and effect.
ARTICLE 14
ARBITRATION
14.1 SETTLING DISPUTES
Subject to Section 14.4, if any dispute, claim, question or difference arises
with respect to this Agreement or its performance, enforcement, breach,
termination or validity (a "Dispute"); the Parties will use their reasonable
efforts to settle the Dispute.
14.2 ARBITRATION
Subject to Section 14.4, except as is expressly provided in this Agreement, if
the Parties do not reach a solution pursuant to Section 14.1 within a period of
30 Business Days following the first notice of the Dispute by any Party to the
other, then upon written notice by any Party to the other, the Dispute shall be
finally settled by arbitration in accordance with the provisions of the
Arbitration Act, 1991 (Ontario), based upon the following:
(a) The arbitration tribunal shall consist of one arbitrator
appointed by mutual agreement of the Parties, or in the event
of failure to agree within 10 Business Days following delivery
of the written notice to arbitrate, any Party may apply to a
judge of the Ontario Superior Court of Justice to appoint an
arbitrator. The arbitrator shall be qualified by education and
training to rule upon the particular matter to be decided.
(b) The arbitrator shall be instructed that time is of the essence
in the arbitration proceeding and, in any event, the
arbitration award must be made within 60 days of the
submission of the Dispute to arbitration.
(c) After written notice is given to refer any Dispute to
arbitration, the Parties will meet within 15 Business Days of
delivery of the notice and will negotiate in good faith any
changes in these arbitration provisions or the rules of
arbitration which are herein adopted, in an effort to expedite
the process and otherwise ensure that the process is
appropriate given the nature of the Dispute and the values at
risk.
(d) The Parties agree that s.52(1) of the Arbitrations Act
(Ontario) does not apply to any Dispute submitted to
arbitration.
(e) The arbitration shall take place in Toronto, Ontario.
(f) The arbitration award shall be given in writing and shall be
final and binding on the Parties, not subject to any appeal,
and shall deal with the question of costs of arbitration and
all related matters, subject to the next sentence. A Party to
a Dispute may, at any time, make an offer to the other Party
to the Dispute to settle all or any part of the Dispute. Any
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offer to settle shall be deemed to be an offer of compromise
made in confidence and without prejudice. The fact that an
offer to settle has been made shall not be communicated to the
arbitrator until the arbitrator has made a final determination
of all aspects of the Dispute other than costs. If an offer to
settle is not accepted and the arbitration award is no more
favourable to the Party to which the offer was made, the Party
making the offer shall be entitled to all of its costs in
connection with the arbitration in respect of the period from
the date the offer to settle was made to the making of the
arbitration award. The costs of arbitration include the
arbitrators' fees and expenses, the provision of a reporter
and transcripts, reasonable legal fees and reasonable costs of
preparation.
(g) Judgment upon any award may be entered in any Court having
jurisdiction or application may be made to the Court for a
judicial recognition of the award or an order of enforcement,
as the case may be.
(h) All Disputes referred to arbitration (including the scope of
the agreement to arbitrate, any statute of limitations,
set-off claims, conflict of laws rules, tort claims and
interest claims) shall be governed by the substantive law of
Ontario.
(i) The Parties agree that the arbitration shall be kept
confidential and that the existence of the proceeding and any
element of it (including any pleadings, briefs or other
documents submitted or exchanged, any testimony or other oral
submissions and any awards) shall not be disclosed beyond the
arbitrator, the Parties, their counsel and any person
necessary to the conduct of the proceeding, except as may
lawfully be required in judicial proceedings relating to the
arbitration or otherwise or as may be required by Law.
14.3 AVAILABILITY OF OFFICERS, EMPLOYEES, ETC.
Each Party to a Dispute agrees to use all reasonable efforts to make available
to the other Party to the Dispute, upon reasonable request, those current and
former officers, employees, agents and representatives of the Party or any of
its affiliates (as such term is defined in the Business Corporations Act
(Ontario)) whose assistance, testimony or presence is necessary or desirable to
assist the other Party in preparing for and participating in the arbitration of
the Dispute, but only for such purpose. The Party making the request shall be
responsible for paying all costs, including the salary and out-of-pocket
expenses, of the other Party and its affiliates associated with making such
individuals available.
14.4 ARBITRATION DOES NOT APPLY.
Section 14.1 and Section 14.2 do not apply to third party claims which will be
resolved in the manner set forth in Section 10.6 and Section 10.7. Nothing in
this Article 14 shall limit or prevent a Party from seeking to enforce the
performance of this Agreement by injunction or specific performance upon
application to a court of competent jurisdiction without proof of actual damage
(and without the requirement of posting a bond or other security).
ARTICLE 15
GENERAL
15.1 TENDER.
Any tender of documents or money hereunder may be made upon the Vendor or the
Purchaser or their respective solicitors on the day set for Closing.
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15.2 EXPENSES
(a) All costs and expenses incurred in connection with the
preparation of this Agreement and the transactions
contemplated by this Agreement shall be paid by the Party
incurring such expenses.
(b) All costs pertaining to the escrow arrangement referred to in
Section 13.3 hereof shall be paid by the Vendor.
15.3 TIME
Time shall be of the essence hereof.
15.4 ASSIGNMENT
This Agreement or any interest herein is personal to the Purchaser and cannot be
assigned, transferred or conveyed by the Purchaser without the prior written
consent of the Vendor. This Agreement or any interest herein, including without
limitation the Preferred Shares, is assignable by the Vendor to any Person
provided that:
(a) The Vendor provides written notice of such assignment to the
Purchaser; and
(b) No such assignment shall relieve the Vendor of any of its
obligations hereunder.
15.5 NOTICES
Any notice or other writing required or permitted to be given hereunder or for
the purposes hereof shall be sufficiently given if delivered or telecopied to
the party to whom it is given or, if mailed, by prepaid registered mail
addressed to such party at:
If to the Purchaser at:
Halo Resources Ltd.
Suite # 1305, 1090 West Georgia Street
Vancouver, B.C. VIE 3V7
Attention: Nick DeMare
Fax No.: 604-683-1585
with a copy to Purchaser's Solicitors at:
Cassels Brock & Blackwell LLP
2100 Scotia Plaza
40 King Street West
Toronto, Ontario, M5H 3C2
Attention: Jason Bullen
Fax No.: 416-360-8877
If to the Vendor at:
The Sheridan Platinum Group Ltd.
14 Park Lane Circle
Toronto, Ontario M5B 1Z7
Attention: Pat Sheridan
Fax No.: 416-447-1381
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with a copy to the Vendor's Solicitors at:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Attention: Brian Pukier
Fax No.: 416-947-0866
Or at such other address as the Party to whom such writing is to be given shall
have last notified to the Party giving the same in the manner provided in this
clause. Any notice mailed shall be deemed to have been given and received on the
fifth Business Day next following the date of its mailing unless at the time of
mailing or within five Business Days thereafter there occurs a postal
interruption which could have the effect of delaying the mail in the ordinary
and usual course, in which case any notice shall only be effectively given if
actually delivered or sent by telecopy. Any notice delivered or telecopied to
the Party to whom it is addressed shall be deemed to have been given and
received on the Business Day next following the day it was delivered or
telecopied.
15.6 ANNOUNCEMENTS
The Purchaser and the Vendor agree that neither Party will issue a press release
regarding the Properties or this Agreement without giving the other Party a
reasonable opportunity to comment on the press release.
15.7 MODIFICATIONS, APPROVALS AND CONSENTS
No amendment, modification, supplement, termination or waiver of any provision
of this Agreement will be effective unless in writing signed by the appropriate
Party and then only in the specific instance and for the specific purpose given.
15.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
Ontario and the parties submit and attorn to the jurisdiction of the courts of
Ontario.
15.9 SEVERABILITY
If a court or other tribunal of competent jurisdiction determines that any one
or more of the provisions contained in this Agreement is invalid, illegal or
unenforceable in any respect in any jurisdiction, the validity, legality and
enforceability of such provision or provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, unless in either case as a result of such
determination this Agreement would fail in its essential purpose.
15.10 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, oral or written, by and
between any of the Parties with respect to the subject matter hereof.
15.11 FURTHER ASSURANCES
The Parties shall with reasonable diligence, do all such things and provide all
such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party shall provide such further
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documents or instruments required by the other Party as may be reasonably
necessary or desirable to give effect to the purpose of this Agreement and carry
out its provisions whether before or after the Closing Date.
15.12 ENUREMENT
This Agreement and each of the terms and provisions hereof shall enure to the
benefit of and be binding upon the Parties and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.
15.13 COUNTERPARTS
This Agreement may be executed in as many counterparts as may be necessary or by
facsimile and each such counterpart agreement or facsimile so executed shall be
deemed to be an original and such counterparts and facsimile copies together
shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have duly executed this Agreement as of the day
and year first above written.
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THE SHERIDAN PLATINUM GROUP LTD.
Per:
_________________________________
Authorized Signatory
HALO RESOURCES LTD.
Per:
_________________________________
Authorized Signatory
SCHEDULES TO BE ATTACHED
SCHEDULE A - PROPERTIES
SCHEDULE B - LIENS
SCHEDULE C - MATERIAL CONTRACTS
SCHEDULE D - LICENCES, PERMITS AND AUTHORIZATIONS
SCHEDULE E - TERMS OF PREFERRED SHARES
SCHEDULE F - NET SMELTER RETURN ROYALTY AGREEMENT
SCHEDULE G - ESCROW AGREEMENT
SCHEDULE H - MORTGAGE
SCHEDULE I - GST CERTIFICATE AND INDEMNITY
SCHEDULE A
PROPERTIES
A. PATENTS
PARCEL NUMBERS CLAIM NUMBERS APPROX AREA
3457 JES96toJES105 172
10524 K1332 7
10525 K1333 17
10526 K1334 16
10527 K1335 24
30433 K13464, K13467 25
16650 K1328 20
16651 K1329 16
3922 McA11 16
16121 S158 1
3456 S170, S172 14
2063 S173 3
1420 S185 136
LEASEHOLD PARCEL NUMBERS
2440 K2554 16
2927 K268722 & K268728-K268732 86
2926 K268723-K268727 & K268733 76
2449 K2555, K2689, K2690, K2691 64
2450 K2556, K3026, K1330 41
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B. LICENCES OF OCCUPATION
LICENCES OF OCCUPATION
12126 K12113-K12120,K3014-K3015,K3028-K3029 133
12369 K13791-K13797&K13811 163
12548 K13802 2
2702 K2284, D493 16
2871 K2374 10
10381 K6127 16
10383 K6I28 16
10382 K6129 16
10385 K6130 16
10386 K6131, K3019 16
10387 K6132 18
10388 K6I33, K3018 15
C. STAKED CLAIMS
STAKED CLAIMS K3007239,K3007240,K3007250
(EXPIRY NOV 6/05)
K3007296-K300299
K3007303
K3007322-K3007326,K3007332 2256
K3007333-K3007334 224
TOTAL 93 Claims 3667 ha
(approximately)
SCHEDULE B
LIENS
None.
SCHEDULE C
MATERIAL CONTRACTS
None.
SCHEDULE D
LICENCES, PERMITS AND AUTHORIZATIONS
None.
SCHEDULE E
TERMS OF PREFERRED SHARES
Rights and Restrictions Attaching to Preferred Shares, Series 1
29. Provisions Attaching to Preferred Shares, Series 1
Subject to the provisions of the BUSINESS CORPORATIONS ACT (British Columbia),
there shall be attached to the Preferred Shares, Series 1 the following special
rights, privileges, restrictions and conditions:
Dividends
29.1 The holders of the Preferred Shares, Series 1 shall be entitled to
receive and the Corporation shall pay thereon out of the monies of the
Corporation properly applicable to the payment of dividends fixed cumulative
cash dividends, at the following rates:
for each of the two years commencing on November 1, 2004, an annual
dividend of $0.00625 per share payable in quarterly instalments of
$0.0015625 per share on February 1, May 1, August 1, and November 1 of
each year, commencing on February 1, 2005 and ending on November 1,
2006; and
for each of the three years commencing on November 1, 2006, an annual
dividend of $0.04 per share payable in quarterly instalments of $0.01
per share on February 1, May 1, August 1, and November 1, of each year,
commencing on February 1, 2007 and ending on November 1, 2009.
29.2 The Corporation may, in its sole discretion, upon written notice given
to the holders of the Preferred Shares, Series 1 at least 40 days before a
dividend is due, elect to pay such dividend in Common Shares of the Corporation.
If the Corporation so elects, the number of Common Shares issuable will be
determined by dividing the amount of the dividend due by the weighted average
trading price of the Common Shares of the Corporation on the TSX Venture
Exchange or such other stock exchange or quotation system on which the Common
Shares of the Corporation trade, for the 15 trading days immediately prior to
the date the dividend is due.
Redemption
29.3 The Corporation may at any time prior to November 1, 2009, redeem the
Preferred Shares, Series 1 in whole or in part without the consent of the
holders thereof on payment to the holders thereof of the amount of $1.05 per
share plus an amount equal to all accrued and unpaid dividends thereon which for
such purpose shall be calculated as if such dividends were accruing up to the
date of redemption (collectively the " Redemption Amount"). The Corporation, in
its sole discretion may elect to pay the Redemption Amount in cash or Common
Shares of the Corporation. If the Corporation elects to the pay the Redemption
Amount in Common Shares, the number of Common Shares issuable will be determined
by dividing the Redemption Amount by the weighted average trading price of the
Common Shares of the Corporation on the TSX Venture Exchange or such other stock
exchange or quotation system on which the Common Shares of the Corporation
trade, for the 15 trading days immediately prior to the date specified for
redemption in the Redemption Notice (defined below). The Corporation shall
provide the holders with not less than 15 days written notice (the "Redemption
Notice") sent to the holders' latest address on the Corporation's central
securities register, of its intention to redeem the Preferred Shares, Series 1
pursuant to this section 29.3. The Redemption Notice shall specify the number of
shares being redeemed and whether the Corporation has elected to pay the
Redemption Amount in cash or Common Shares. On or after the date so specified in
the notice for redemption, the Corporation shall pay or cause to be paid to the
holders, the Redemption Amount on presentation and surrender, at the
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Corporation's registered office or such other place specified in the Redemption
Notice, of the certificate(s) for the Preferred Shares, Series 1 being redeemed.
Notwithstanding the failure of the holders to present the aforesaid share
certificate, the redemption shall be effective as of the date specified for
redemption in the Redemption Notice, and the holders shall have no further
rights as a shareholder of the Corporation from and after such effective date,
other than the right to receive the Redemption Amount.
29.4 Provided all dividends payable on the Preferred Shares, Series 1 have
been paid up to date, the Corporation may at any time prior to November 1, 2009,
redeem the Preferred Shares, Series 1 without the consent of the holders thereof
by transferring to the holders thereof, in proportion to the percentage of
issued and outstanding Preferred Shares, Series 1, held by each holder, the
Corporation's title to the Assets (defined below). The Corporation shall provide
the holders with not less than 90 days written notice to each holders' latest
address on the Corporation's central securities register, of its intention to
redeem the Preferred Shares, Series 1 pursuant to this section 29.4. On or after
the date so specified in the notice for redemption, the Corporation shall
deliver all documentation, in registrable form, necessary to transfer title to
the Assets to the holders, on presentation and surrender, at the Corporation's
registered office or such other place specified in the notice of redemption, of
all certificates for the Preferred Shares, Series 1. If the Preferred Shares,
Series 1 are held by more than one holder, the title transfer documents will be
made out in the names of all holders as tenants in common with each holder's
undivided interest being equal to his/her percentage holdings of all outstanding
Preferred Shares, Series 1. Notwithstanding the failure of any holder to present
the aforesaid share certificate, the redemption shall be effective as of the
date specified for redemption in the notice, and no holder shall have any
further rights as a shareholder of the Corporation from and after such effective
date, other than the right to receive his, her or its proportionate share of
title to the Assets. For the purposes of this section 29.4, "Assets" shall have
the meaning set forth in the Purchase Agreement dated February ________, 2005
among The Sheridan Platinum Group Ltd. and the Corporation.
Retraction
29.5 If the Preferred Shares, Series 1 have not been redeemed by November 1,
2009, the Corporation will, effective November 1, 2009, retract the Preferred
Shares, Series 1 by payment to the holders thereof of the Retraction Amount
(defined below). The retraction amount (the "Retraction Amount") in respect of
each Preferred Share, Series 1 shall be $1.00 per share plus an amount equal to
all accrued and unpaid dividends thereon which for such purposes shall be
calculated as if such dividends were accruing up to the date of retraction. The
Corporation, in its sole discretion may elect to pay the Retraction Amount in
cash or Common Shares of the Corporation. If the Corporation elects to the pay
the Retraction Amount in Common Shares, the number of Common Shares issuable
will be determined by dividing the Retraction Amount by the weighted average
trading price of the Common Shares of the Corporation on the TSX Venture
Exchange or such other stock exchange or quotation system on which the Common
Shares of the Corporation trade, for the 15 trading days immediately prior to
the date specified for retraction. On or after the date specified for
retraction, the Corporation shall pay or cause to be paid to the holders, the
Retraction Amount on presentation and surrender, at the Corporation's registered
office or such other place specified by the Corporation, of the certificate(s)
for the Preferred Shares, Series 1 being retracted. Notwithstanding the failure
of the holders to present the aforesaid share certificate(s), the retraction
shall be effective as of the retraction date specified herein, and the holders
shall have no further rights as shareholders of the Corporation from and after
such date, other than the right to receive the Retraction Amount.
Return of Capital
29.6 In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or other distribution of its
property or assets among its shareholders for the purpose of winding up its
affairs, the holders of the Preferred Shares, Series 1 shall be entitled to
receive, before any distribution of any part of the property or assets of the
Corporation among the holders of any other shares, an amount equal to $1.00 per
share together with an amount equal to all accrued and unpaid dividends thereon
-3-
which for such purpose shall be calculated as if such dividends were accruing up
to the date of such distribution. Thereafter, the holders of the Preferred
Shares, Series 1 will not participate further in the capital of the Corporation.
Non-Voting
29.7 The holders of the Preferred Shares shall not as such be entitled to
receive notice of or to attend and vote at any meetings of the shareholders of
the Corporation unless a dividend payable on a due date specified in section
29.1 above remains unpaid for a period of 60 days past the date the dividend was
due, in which case each Preferred Share, Series 1 shall have one vote per share
at all meetings of shareholders until such dividend is paid.
Transfer of Preferred Shares, Series 1
29.8 No Preferred Shares, Series 1 shall be transferred unless the
transferee agrees in writing to be bound by the provisions of sections 4, 5, and
6 of the Escrow Agreement dated _____, 2005 among the Corporation, The Sheridan
Platinum Group Ltd. and McLean & Kerr LLP, as amended from time to time, as if
the transferee were the "Vendor" under such agreement.
SCHEDULE F
NET SMELTER RETURN ROYALTY AGREEMENT
AMONG
THE SHERIDAN PLATINUM GROUP LTD.
AND
HALO RESOURCES LTD.
DATED [CLOSING DATE]
ROYALTY AGREEMENT
THIS AGREEMENT dated as of the ___ day of ______, 2005.
AMONG:
HALO RESOURCES LTD.
(the "PURCHASER")
AND:
THE SHERIDAN PLATINUM GROUP LTD.
(the "VENDOR")
For good and valuable consideration, the receipt and sufficiency of which is
acknowledged by each of the Parties, the Parties covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless otherwise provided:
(v) "ACT" means the Securities Act (Ontario);
(vi) "AFFILIATE" has the meaning given such term under the Act;
(vii) "AGREEMENT" means this royalty agreement;
(viii) "ALLOWABLE DEDUCTIONS" means, for any Product, (i) the cost of
transportation of such Product to a smelter or other place of
treatment, and (ii) smelter and treatment charges but does not
include the costs of milling or concentration;
(ix) "AREA OF INTEREST" means all mineral property and surface
interests within an area of one mile from any point on the
outer perimeter of the Properties;
(x) "BUSINESS DAY" means a day on which banks are generally open
for business in Toronto, Ontario;
(xi) "DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION" shall be the
date upon which Ore from the Property is being consistently
milled on a continuous basis at 75% of the rate projected in
the final feasibility study, if any, prepared by or for the
Purchaser in respect of the Properties or 180 days after the
date on which Ore from the Properties is first mined,
whichever shall first occur, but in any event the Royalty
shall be payable on all production;
(xii) "GROSS PROCEEDS" means, for any Product, the aggregate
proceeds received by the Purchaser for the Sale of such
Product;
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(xiii) "NET SMELTER RETURN" means the Gross Proceeds received by the
Purchaser in any year from the sale of Product from the mining
operation on the Property less Allowable Deductions;
(xiv) "ORE" shall mean any material containing a mineral or minerals
of commercial economic value mined from the Properties or any
production sold from the Property of any nature whatsoever.
(xv) "PARTY" or "Parties" means one or more of the parties to this
Agreement;
(xvi) "PERSON" has the meaning given such term under the Act;
(xvii) "PRODUCT" means Ore mined from the Properties and any
concentrates or other materials or products derived therefrom,
provided, however, that if any such Ore, concentrates or other
materials or products are further treated as part of the
mining operation in respect of the Properties, such Ore,
concentrates or other materials or products shall not be
considered to be "Product" until after they have been so
treated;
(xviii) "PROPERTIES" means the mineral property interests in the
Kenora Mining Division, Ontario as set out in Schedule A
hereto and any other properties acquired within the Area of
Interest;
(xix) "PURCHASE AGREEMENT" means the purchase agreement among The
Sheridan Platinum Group Ltd. and Halo Resources Ltd., dated as
of ___, 2004.
(xx) "ROYALTY" has the meaning ascribed thereto in Section 2.2;
(xxi) "SALE" means a sale of a Product by or on behalf of the
Purchaser or any Affiliate of the Purchaser to any other
Person;
1.2 EXHIBITS
Exhibit A, which is attached to this Agreement, is incorporated into and forms
part of this Agreement:
1.3 GOVERNING LAW
This Agreement will in all respects be governed by and be construed in
accordance with the laws in force in the Province of Ontario and will be under
the exclusive jurisdiction of the courts of such jurisdiction.
1.4 SEVERABILITY
If any one or more of the provisions contained in this Agreement is held to be
invalid, illegal or unenforceable in any respect under the laws of any
jurisdiction, the validity, legality and enforceability of such provision will
not in any way be affected or impaired thereby under the laws of any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired thereby.
1.5 CALCULATION OF TIME
If any time period set forth in this Agreement ends of a day which is not a
Business Day, then notwithstanding any other provision of this Agreement, such
period will be extended until the end of the next following day which is a
Business Day.
-3-
1.6 HEADINGS
The headings to the articles and sections of this Agreement are inserted for
convenience only and will not affect the construction hereof.
1.7 OTHER MATTERS OF INTERPRETATION
In this Agreement:
(xxii) the singular includes the plural and vice versa;
(xxiii) the masculine includes the feminine and vice versa;
(xxiv) references to "article", "section" and "subsection" are to
articles, sections and subsections of this Agreement,
respectively;
(xxv) all provisions requiring a Party to do or refrain from doing
something will be interpreted as the covenant of that Party
with respect to that matter notwithstanding the absence of the
words "covenants" or "agrees" or "promises"; and
(xxvi) the words "hereto", "herein", "hereby", "hereunder", "hereof"
and similar expressions when used in this Agreement refer to
the whole of this Agreement and not to any particular article,
part, section, exhibit or portion thereof.
ARTICLE 2
ROYALTY
2.1 ROYALTY
Subject to paragraph 2.2 hereof, the Purchaser will pay to the Vendor a royalty
equal to 2.5% of Net Smelter Returns until 1,500,000 ounces of gold are produced
from the Properties and then shall pay a royalty equal to 5% of Net Smelter
Returns after 1,500,000 ounces of gold are produced from the Properties (the
"ROYALTY").
2.2 PURCHASER'S BUYBACK RIGHT
The Purchaser shall have the option to purchase from the Vendor a Royalty of 1%
by the payment of the sum of CDN$2,500,000 to the Vendor at any time until the
Date of Commencement of Commercial Production, and thereafter such option shall
no longer exist.
ARTICLE 3
OPERATION OF THE PROPERTIES
3.1 REMOVAL OF ORE
The Purchaser may remove reasonable quantities of Ore and rock from the
Properties for the purpose of bulk sampling and of testing, and there shall be
no Royalty payable to the Vendor with respect thereto unless revenues are
derived therefor.
3.2 COMMINGLING
The Purchaser shall have the right to commingle with Ores from the Property, ore
produced from other properties provided that prior to such commingling, the
Purchaser shall adopt and employ reasonable practices and procedures for
weighing, determination of moisture content, sampling and assaying, as well as
utilize reasonable accurate recovery factors in order to determine the amount of
-4-
products derived from, or attributable to Ore mined and produced from the
Properties. The Purchaser shall maintain accurate records of the results of such
sampling, weighing and analysis as pertaining to Ore mined and produced from the
Properties.
ARTICLE 4
ASSIGNMENT
4.1 ASSIGNMENT BY THE VENDOR
The Vendor may transfer, sell, assign or otherwise dispose of all or any part of
the Royalty on the Property, without the consent of the Purchaser.
4.2 ASSIGNMENT BY PURCHASER
The Purchaser may not transfer, sell, assign or otherwise dispose of all or any
portion of its interest in the Properties until the fifth anniversary of the
date of issue of the Preferred Shares without the prior written consent of the
Vendor and after such time, may transfer, sell, assign or otherwise dispose of
all or any portion of its interest in the Properties provided that such
disposition will not be effective as against the Vendor until the purchaser has
delivered to the Vendor a written and enforceable agreement agreeing to be
bound, to the extent of the interest disposed of, by all of the terms and
conditions of this Agreement.
ARTICLE 5
PAYMENTS
5.1 PAYMENTS
The obligation to pay the Royalty on any Product will accrue upon any Sale,
provided that where a Sale is made on a provisional basis, the amount of the
Royalty payable will be initially based upon the value of Product credited by
such provisional settlement, with later adjustment to account for the value of
Product established by final settlement.
5.2 TIMING OF PAYMENTS
Each Royalty payment shall be calculated by the Purchaser at the end of each
quarter and will be due and payable quarterly on the last day of the month next
following the end of the calendar quarter in which the same accrued.
5.3 STATEMENTS
On or before the last day of each quarter of each year after the Date of
Commencement of Commercial Production, the Purchaser shall deliver to the Vendor
a statement showing in reasonable detail for the quarter due:
(i) the quantities and grades of Product outturned to the
Purchaser's account and for all other Products for which there
has been a Sale in the quarter;
(ii) the Gross Proceeds received during such quarter;
(iii) the Allowable Deductions for such quarter; and
(iv) other pertinent information in sufficient detail to explain
the calculation of the Royalty payment due.
-5-
5.4 CURRENCY
All payments to be made under this Agreement will be made in Canadian dollars.
5.5 PAYMENT MECHANISM
Each payment hereunder will be made by wire transfer in immediately available
funds, to such account at a banking institution as the Vendor may designate
pursuant to instructions provided by the Vendor to the Purchaser not less than
three (3) Business Days prior to the date upon which such payment is to be made.
Payment by the Purchaser in accordance with this paragraph 5.5 will constitute
payment duly received by the Vendor. If the banking institution nominated by the
Vendor does not accept a payment prior to its due date from the Purchaser, then
the Purchaser will be entitled to make payment to the Vendor by delivery within
ten (10) Business Days of such due date of a bank draft to the Vendor at the
address specified under or in accordance with the paragraph 7.3 below.
5.6 BOOKS AND RECORDS
The Purchaser agrees to maintain for each mining operation on the Properties up
to date and complete records relating to the production and sale of Product
including accounts, records, statements and returns relating to treatment and
smelting arrangements of the Product, and the Vendor or its agents shall have
the right at all times, including for a period of twelve (12) months following
the expiration or termination of this Agreement, to inspect such records,
statements, and returns and make copies thereof at its own expense for the
purpose of verifying the amount of Royalty payments to be made by the Purchaser
to the Vendor pursuant hereto. The Vendor shall have the right to have such
account audited by independent auditors once a year. If such audit determines
that there has been a deficiency in the payment made to the Vendor, such
deficiency will be resolved by adjusting the next quarterly Royalty payment due
hereunder. If production has ceased, settlement will be made between the Parties
by cash payment. The Vendor will pay all costs of such audit unless a deficiency
of five percent or more of the amount due to the Vendor is determined to exist,
in which event the Purchaser will pay such costs.
5.7 AUDITED STATEMENT
The Purchaser shall have an audited statement prepared by its auditors for each
year with respect to the Royalty payable to the Vendor hereunder, by the 30th
day of July in the following year, and the Purchaser shall forthwith deliver a
copy of such statement to the Vendor.
ARTICLE 6
ARBITRATION
6.1 SETTLING DISPUTES
Subject to Section 6.4, if any dispute, claim, question or difference arises
with respect to this Agreement or its performance, enforcement, breach,
termination or validity (a "Dispute"), the Parties will use their reasonable
efforts to settle the Dispute.
6.2 ARBITRATION
Subject to Section 6.4, except as is expressly provided in this Agreement, if
the Parties do not reach a solution pursuant to Section 6.1 within a period of
30 Business Days following the first notice of the Dispute by any Party to the
other, then upon written notice by any Party to the other, the Dispute shall be
finally settled by arbitration in accordance with the provisions of the
Arbitration Act, 1991 (Ontario), based upon the following:
(a) The arbitration tribunal shall consist of one arbitrator
appointed by mutual agreement of the Parties, or in the event
of failure to agree within 10 Business Days following delivery
of the written notice to arbitrate, any Party may apply to a
-6-
judge of the Ontario Superior Court of Justice to appoint an
arbitrator. The arbitrator shall be qualified by education and
training to rule upon the particular matter to be decided.
(b) The arbitrator shall be instructed that time is of the essence
in the arbitration proceeding and, in any event, the
arbitration award must be made within 60 days of the
submission of the Dispute to arbitration.
(c) After written notice is given to refer any Dispute to
arbitration, the Parties will meet within 15 Business Days of
delivery of the notice and will negotiate in good faith any
changes in these arbitration provisions or the rules of
arbitration which are herein adopted, in an effort to expedite
the process and otherwise ensure that the process is
appropriate given the nature of the Dispute and the values at
risk.
(d) The Parties agree that s.52(1) of the Arbitrations Act
(Ontario) does not apply to any Dispute submitted to
arbitration.
(e) The arbitration shall take place in Toronto, Ontario.
(f) The arbitration award shall be given in writing and shall be
final and binding on the Parties, not subject to any appeal,
and shall deal with the question of costs of arbitration and
all related matters, subject to the next sentence. A Party to
a Dispute may, at any time, make an offer to the other Party
to the Dispute to settle all or any part of the Dispute. Any
offer to settle shall be deemed to be an offer of compromise
made in confidence and without prejudice. The fact that an
offer to settle has been made shall not be communicated to the
arbitrator until the arbitrator has made a final determination
of all aspects of the Dispute other than costs. If an offer to
settle is not accepted and the arbitration award is no more
favourable to the Party to which the offer was made, the Party
making the offer shall be entitled to all of its costs in
connection with the arbitration in respect of the period from
the date the offer to settle was made to the making of the
arbitration award. The costs of arbitration include the
arbitrators' fees and expenses, the provision of a reporter
and transcripts, reasonable legal fees and reasonable costs of
preparation.
(g) Judgment upon any award may be entered in any Court having
jurisdiction or application may be made to the Court for a
judicial recognition of the award or an order of enforcement,
as the case may be.
(h) All Disputes referred to arbitration (including the scope of
the agreement to arbitrate, any statute of limitations,
set-off claims, conflict of laws rules, tort claims and
interest claims) shall be governed by the substantive law of
Ontario.
(i) The Parties agree that the arbitration shall be kept
confidential and that the existence of the proceeding and any
element of it (including any pleadings, briefs or other
documents submitted or exchanged, any testimony or other oral
submissions and any awards) shall not be disclosed beyond the
arbitrator, the Parties, their counsel and any person
necessary to the conduct of the proceeding, except as may
lawfully be required in judicial proceedings relating to the
arbitration or otherwise or as may be required by Law.
6.3 AVAILABILITY OF OFFICERS, EMPLOYEES, ETC.
Each Party to a Dispute agrees to use all reasonable efforts to make available
to the other Party to the Dispute, upon reasonable request, those current and
former officers, employees, agents and representatives of the Party or any of
its affiliates (as such term is defined in the Business Corporations Act
(Ontario)) whose assistance, testimony or presence is necessary or desirable to
-7-
assist the other Party in preparing for and participating in the arbitration of
the Dispute, but only for such purpose. The Party making the request shall be
responsible for paying all costs, including the salary and out-of-pocket
expenses, of the other Party and its affiliates associated with making such
individuals available.
6.4 ARBITRATION DOES NOT APPLY.
Nothing in this Article 6 shall limit or prevent a Party from seeking to enforce
the performance of this Agreement by injunction or specific performance upon
application to a court of competent jurisdiction without proof of actual damage
(and without the requirement of posting a bond or other security).
ARTICLE 7
MISCELLANEOUS
7.1 FIRST CHARGE
The Purchaser and the Vendor agree that the Royalty constitutes an interest in
land and claims, and the Vendor may register notice of the Royalty Agreement on
title to the Properties in the appropriate land registry office and appropriated
mining office as a first charge on the Property.
The Vendor agrees to negotiate with the Purchaser in good faith at any time
should the registration of the Royalty on title have the effect of impairing the
Purchaser's ability to conduct business including but not limited to arranging
joint venture agreements or debt financings.
7.2 NO PARTNERSHIP
This Agreement is not intended to, and will not be deemed to, create any
partnership relation between the Parties including, without limitation, a mining
partnership or commercial partnership. The obligations and liabilities of the
Parties will be several and not joint and neither Party will have or purport to
have any authority to act for or to assume any obligations or responsibility on
behalf of the other Party except as expressly contemplated herein. Nothing
herein contained will be deemed to constitute a Party the partner, agent or
legal representative of the other Party or to create any fiduciary relationship
between the Parties.
7.3 NOTICE
Any notice, election, proposal, consent objection or other document required or
permitted to be given hereunder ("Notices") will be in writing addressed to the
Parties as follows:
Purchaser: HALO RESOURCES LTD.
Suite #1305, 1090 West Georgia Street,
Vancouver, BC V1E 3V7
Attention: Nick DeMare
Fax No.: 604-683-1585
with a copy to Purchaser's Solicitors at:
CASSELS BROCK & BLACKWELL LLP
2100 Scotia Plaza
40 King Street West
Toronto, Ontario, M5H 3C2
Attention: Jason Bullen
Fax No.: 416-360-8877
-8-
Vendor: THE SHERIDAN PLATINUM GROUP LTD.
14 Park Lane Circle
Toronto, ON M5B 1Z7
Attention: Patrick Sheridan
Fax No.: 416-447-1381
with a copy to the Vendor's Solicitors at:
STIKEMAN ELLIOTT LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Attention: Brian Pukier
Fax No.: 416-947-0866
All Notices will be given by personal delivery, facsimile transmission or
prepaid registered mail, return receipt requested. All Notices will be effective
and will be deemed delivered as follows:
(i) if by personal delivery, on the date of delivery if
delivered during normal business hours, and, if not
delivered during normal business hours, on the next
Business Day following delivery;
(ii) if by electronic communication, on the next Business
Day following receipt of the electronic
communication; and
(iii) if by mail, on the next Business Day after actual
receipt.
A Party may at any time change its address for future Notices hereunder by
Notice in accordance with this section.
7.4 FURTHER ASSURANCES
Each Party will, at the request of another Party and at the requesting Party's
expense, execute all such documents and take all such actions as may be
reasonably required to effect the purposes and intent of this Agreement.
7.5 ENTIRE AGREEMENT
Subject to the terms of the Purchase Agreement, this Agreement constitutes the
entire agreement of the Parties with respect to the subject matter hereof, all
previous agreements and promises in respect thereto being hereby expressly
rescinded and replaced hereby. There are no representations, warranties, terms,
conditions, undertakings or collateral agreements, express, implied or
statutory, between the Parties other than those expressly set forth in this
Agreement and the Purchase Agreement.
7.6 NO WAIVERS
No waiver of or with respect to any term or condition of this Agreement will be
effective unless it is in writing and signed by the waiving Party, and then such
waiver will be effective only in the specific instance and for the purpose of
which given. No course of dealing among the Parties, nor any failure to
exercise, nor any delay in exercising, any right, power, or privilege hereunder
will operate as a waiver thereof, nor will any single or partial exercise of any
specific waiver of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
-9-
7.7 TIME OF THE ESSENCE
Time is of the essence in the performance of any and all of the obligations of
the Parties, including, without limitation, the payment of monies.
7.8 COUNTERPARTS
This Agreement may be executed in multiple counterparts, each of which will
constitute an original, but all of which together will constitute one and the
same instrument.
7.9 PARTIES IN INTEREST
This Agreement will enure to the benefit of and be binding on the Parties and
their respective successors and permitted assigns.
IN WITNESS WHEREOF the parties have duly executed this Agreement as of the day
and year first above written.
THE SHERIDAN PLATINUM GROUP LTD.
Per:
_________________________________
Authorized Signatory
HALO RESOURCES LTD.
Per:
_________________________________
Authorized Signatory
SCHEDULE G
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of _____, 2005, by and among HALO RESOURCES
LTD. (the"PURCHASER") with an address at Suite 1305 - 1090 West Georgia Street,
Vancouver, British Columbia V6E 3V7, THE SHERIDAN PLATINUM GROUP LTD. (the
"VENDOR") with an address at 14 Park Lane Circle, Toronto, Ontario M5B 1Z7 and
McLEAN & KERR LLP (the "ESCROW AGENT") with an address at 130 Adelaide Street
West, Toronto, Ontario M5H 3P5.
WHEREAS:
A. The Vendor and the Purchaser have entered into an Asset Purchase
Agreement dated February ___, 2005 (the "ASSET PURCHASE AGREEMENT") whereby the
Vendor has agreed to sell to the Purchaser and the Purchaser has agreed to
purchase from the Vendor certain assets as described in the Asset Purchase
Agreement (the "ASSETS");
B. Under the Asset Purchase Agreement, the purchase price for the Assets
is to be satisfied in part by the issuance of the Preferred Shares (as such term
is defined in the Asset Purchase Agreement) in the capital of the Purchaser to
the Vendor;
C. Pursuant to section 11.2 of the Asset Purchase Agreement the Vendor and
the Purchaser agreed, subject to the provisions of the Asset Purchase Agreement,
that the Purchaser may, at any time until November 1, 2009, redeem the Preferred
Shares by returning the Assets to the Vendor.
D. Pursuant to section 13.2 of the Asset Purchase Agreement upon the
occurrence of an Event of Default (as such term is defined in the Asset Purchase
Agreement) the Vendor has the right to, among other things, have the Purchaser
transfer the Assets to the Vendor in exchange for the transfer by the Vendor of
the Preferred Shares to the Purchaser;
E. Pursuant to the rights and restrictions attached to the Preferred
Shares (attached as Schedule "E" to the Asset Purchase Agreement) the Purchaser
may redeem the Preferred Shares and may elect to pay the redemption amount in
common shares of the Purchaser;
F. Pursuant to the rights and restrictions attached to the Preferred
Shares, if the Preferred Shares have not been redeemed prior to November 1,
2009, the Purchaser will retract the Preferred Shares on November 1, 2009 and
may elect to pay the retraction amount in common shares of the Purchaser;
G. The Vendor and the Purchaser have agreed that on the closing of the
transaction contemplated in the Asset Purchase Agreement the Purchaser shall
deliver into trust to the Escrow Agent duly executed good and sufficient
transfers of the Properties (as such term is defined in the Asset Purchase
Agreement) comprising in part the Assets and all other documents (the "ESCROW
DOCUMENTATION") which in the opinion of counsel for the Vendor are necessary or
desirable to permit the registration or recording of such transfers into the
name of the Vendor free and clear of all liens, charges and encumbrances of
every nature and kind whatsoever, which documentation shall be held in
accordance with this agreement;
H. The Vendor and the Purchaser have also agreed that if any common shares
of the Purchaser are issued to the Vendor pursuant to the rights of retraction
or redemption attached to the Preferred Shares, the Purchaser shall, in certain
circumstances, deliver into trust to the Escrow Agent the certificates
representing such common shares (the "COMMON ESCROW SHARES") which shares shall
be held in escrow in accordance with this agreement; and
I. The parties desire to enter into this agreement to establish the
obligations and rights of the parties with respect to the Escrow Documentation
and the Common Escrow Shares.
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NOW THEREFORE in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. The Purchaser has delivered the Escrow Documentation to the Escrow
Agent.
2. The Escrow Agent hereby acknowledges receipt of the Escrow
Documentation and agrees that the Escrow Documentation and, when deposited
hereunder, the Common Escrow Shares, shall be held by the Escrow Agent in escrow
to be dealt with pursuant to the provisions of this agreement.
3. The Escrow Agent agrees to hold the Escrow Documentation in escrow
until receipt by the Escrow Agent of an irrevocable joint direction signed by
each of the Purchaser and the Vendor to release the Escrow Documentation to the
party named in such direction.
The Purchaser and the Vendor agree that if, as a result of the issuance of the
Common Escrow Shares, the Vendor becomes an "Insider" or "Control Person" of the
Purchaser (as such terms are defined in section 1.2 of Policy 1.1 of the TSX
Venture Exchange Company Manual) and the Purchaser's common shares are listed on
the TSX-V at such time, the Purchaser shall deliver the certificates respecting
the Common Escrow Shares, to the Escrow Agent, forthwith upon the issuance of
such shares.
4. The Escrow Agent agrees to hold the certificates representing any
Common Escrow Shares it receives in escrow to be dealt with pursuant to the
provisions of this agreement. The Escrow Agent will hold such certificates in
escrow until Patrick Sheridan (or if the Preferred Shares have been transferred,
a transferee of such shares) has filed a TSX-V Form 2A - Personal Information
Form with the TSX Venture Exchange, and the Escrow Agent has received a copy of
the written approval of the TSX Venture Exchange ("TSX Approval") to the release
of the Common Escrow Shares to the Vendor. Upon receipt of TSX Approval, the
Escrow Agent will release such certificates to the Vendor or as directed by it.
5. The Vendor shall not transfer the Preferred Shares unless the
transferee agrees in writing with the Purchaser and the Escrow Agent to be bound
by sections 4, 5, and 6 of this agreement as if they were the "Vendor"
hereunder.
6. The Vendor shall be liable to pay the Escrow Agent its reasonable fees,
disbursements and other charges in connection with the performance of its duties
hereunder.
7. The terms and conditions set out in Schedule A annexed hereto form part
of this agreement.
8. All notices and other communications which may be or are required to be
given under this agreement shall be in writing, shall be delivered personally or
sent by registered mail addressed to the parties at their respective addresses
set forth on the first page hereof or at such other place as such party may from
time to time designate by written notice to the other given in accordance with
this section, and shall conclusively be deemed received for all purposes hereof,
in the case of those personally delivered, on the day of such delivery and, in
the case of those given by registered mail on the fourth business day following
that upon which the notice or other communication was so mailed.
9. This agreement enures to the benefit of and is binding upon the parties
hereto and their successors and assigns. This agreement may not be amended nor
shall any waiver of any provisions hereof be effective, except only by an
instrument in writing and signed by all the parties.
10. This agreement may be executed in any number of counterparts, each of
which shall be determined to be an original and all of which taken together
shall be deemed to constitute one and the same instrument. Counterparts may be
executed either in original or facsimile form and the parties adopt any
signatures received by facsimile as original signatures of the parties; provided
however, that any party providing its signature in such manner shall promptly
forward to the others an original of the signed copy of this agreement which was
so provided by facsimile.
-3-
IN WITNESS WHEREOF the parties have executed this agreement as of the
date first above written.
HALO RESOURCES LTD.
Per:
_______________________________________
Name:
Title:
A.S.O.
THE SHERIDAN PLATINUM GROUP LTD.
Per:
_______________________________________
Name:
Title:
A.S.O.
MCLEAN & KERR LLP
Per:
_______________________________________
Name:
Title:
SCHEDULE A
STANDARD TERMS AND CONDITIONS FOR ESCROW AGREEMENT
Acceptance by MCLEAN & KERR LLP (the "ESCROW AGENT") of its duties under the
agreement to which this is attached (the "AGREEMENT") is subject to the
following terms and conditions, which the parties to the Agreement hereby agree
shall govern and control the rights, duties and privileges of the Escrow Agent
and shall be deemed incorporated by reference into the Agreement as if set forth
in full therein:
1. Capitalized terms not specifically defined in this Schedule shall have
the meanings given to such terms in the Agreement.
2. The duties of the Escrow Agent are to be determined solely by the
express provisions of the Agreement; accordingly, the Escrow Agent
shall only be responsible for the performance of those duties and
obligations as are specifically set forth in the Agreement.
3. The Escrow Agent shall be fully protected in acting on or relying upon
any written notice, direction, request, waiver, consent, receipt or
other paper or document which the Escrow Agent in good faith believes
to have been signed or presented by the proper party or parties as
contemplated by the Agreement.
4. The Escrow Agent shall be entitled to rely on any judgment, demand or
other writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any facts stated
therein, the validity thereof or the jurisdiction of a Court or duly
appointed arbitrator issuing any judgment. The Escrow Agent may act in
reliance upon any instrument, direction or signature believed by it in
good faith to be genuine and duly authorized and upon advice of counsel
in reference to any matters connected herewith.
5. The Escrow Agent shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it in good faith or for any
mistake in fact or law, or for anything which it may do or refrain from
doing in good faith in connection herewith, except its own wilful
misconduct or negligence.
6. In the event of any dispute or question as to the construction by the
Escrow Agent of its duties, neither party shall hold the Escrow Agent
liable with respect to any action taken or omitted by it in good faith.
7. In the event of any dispute between the parties, the Escrow Agent may
(at its option) transmit the escrow property to a court of competent
jurisdiction and upon doing so the Escrow Agent shall be relieved of
all further obligations under the Agreement.
8. Save and except as the parties may have expressly otherwise agreed to
in the Agreement, the parties, jointly and severally, agree to
indemnify and hold harmless the Escrow Agent from any and all loss,
cost, claim, liability and expense (including legal fees paid to
outside attorneys or amounts representing the fair value of legal
services rendered to itself) which may be incurred by reason of it
acting as Escrow Agent, provided that it acted in accordance with the
terms of the Agreement.
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9. The Escrow Agent shall not be bound or in any way affected by any
notice of any modification or cancellation of the Agreement or of any
fact or circumstance affecting or alleged to affect rights or
liabilities hereunder or otherwise other than as is hereinafter set
forth, unless notice of the same is delivered to the Escrow Agent in
writing signed by the parties to the Agreement.
10. The parties each acknowledge that the Escrow Agent is acting only in
the capacity of escrow agent and not as counsel to any of the parties
and that each party has retained independent legal representation in
connection with the Agreement and the related transactions.
11. The Escrow Agent and any successor escrow agent, as the case may be,
may resign its duties and be discharged from all further duties or
obligations hereunder at any time upon giving 30 days written notice to
the parties to the Agreement. The parties shall thereupon jointly
designate a successor escrow agent hereunder within said 30 day period
to whom the escrow property shall be delivered. In default of such
designation of a successor escrow agent, the Escrow Agent shall retain
the escrow property in escrow as custodian thereof until otherwise
jointly directed by the parties to the Agreement, without further
liability or responsibility.
SCHEDULE H
MORTGAGE
DEMAND DEBENTURE
HALO RESOURCES LTD.
(THE "OBLIGOR")
SECTION 1 ACKNOWLEDGEMENT AND PROMISE TO PAY.
For value received, the Obligor acknowledges itself indebted and promises to pay
ON DEMAND, to or to the order of the Holder the principal sum of THIRTY-THREE
MILLION DOLLARS ($33,000,000.00) in lawful money of Canada in accordance with
the terms of this Debenture. The Obligor promises to pay the principal amount
and other amounts owing under this Debenture at the offices of the Holder at
which any notice may be given to the Holder in connection with this Debenture or
at such other place as the Holder may designate by notice in writing to the
Obligor.
SECTION 2 DEFINED TERMS.
Terms defined in the Personal Property Security Act (Ontario) and used but not
otherwise defined in this Debenture have the same meanings. As used in this
Debenture, the following terms have the following meanings:
"BUSINESS DAY" means any day of the year, other than a Saturday, Sunday or any
day on which major banks are closed for business in Toronto, Ontario.
"CHARGED PREMISES" means the property and undertaking subject to the Security.
"DEBENTURE" means this demand debenture and all schedules attached to it, as it
may be amended, modified, extended, renewed, restated, replaced or supplemented
from time to time.
"HOLDER" means The Sheridan Platinum Group Ltd. and its successors and assigns,
and any subsequent holder or holders of this Debenture.
"LIEN" means (i) any mortgage, charge, pledge, hypothecation, security
interest, assignment by way of security, encumbrance, lien (statutory or
otherwise), hire purchase agreement, conditional sale agreement, deposit
arrangement, title retention agreement or arrangement, or any other assignment,
arrangement or condition that in substance secures payment or performance of an
obligation, (ii) any trust arrangement, (iii) any arrangement which creates a
right of set-off out of the ordinary course of business, or (iv) any agreement
to grant any such rights or interests.
"OBLIGOR" means Halo Resources Ltd., a corporation continued and existing under
the laws of British Columbia, and its successors and permitted assigns.
"PERSON" means a natural person, partnership, limited partnership, limited
liability partnership, corporation, limited liability corporation, unlimited
liability company, joint stock company, trust, unincorporated association, joint
venture or other entity or Governmental Entity, and pronouns have a similarly
extended meaning.
"PURCHASE AGREEMENT" means the purchase agreement dated as of February 18, 2005,
between the Obligor and the Holder as the same may be amended, modified,
extended, renewed, replaced, restated or supplemented from time to time.
"SECURITY" means the grants, mortgages, charges and security interests
constituted by this Debenture.
-2-
SECTION 3 INTERPRETATION
(1) In this Debenture the words "including", "includes" and "include" mean
"including (or includes or include) without limitation". The
expressions "Article", "Section" and other subdivision followed by a
number mean and refer to the specified Article, Section or other
subdivision of this Debenture.
(2) Any reference in this Debenture to gender includes all genders. Words
importing the singular number only include the plural and vice versa.
Except as otherwise provided in this Debenture, any reference to this
Debenture is a reference to this Debenture as the same may have been or
may from time to time be amended, modified, extended, renewed,
restated, replaced or supplemented and includes all schedules to it.
Except as otherwise provided in this Debenture, any reference in this
Debenture to a statute is a reference to such statute and all rules and
regulations made under it as the same may have been or may from time to
time be amended or re-enacted.
(3) The division of this Debenture into Articles, Sections and other
subdivisions and the insertion of headings are for convenient reference
only and do not affect its interpretation. The schedules attached to
this Debenture form an integral part of it for all purposes of it.
SECTION 4 GRANT OF SECURITY - FIXED CHARGE.
Subject to Section 6, as security for the due payment of the principal amount
and other amounts owing under this Debenture, the Obligor grants, assigns,
conveys, transfers, mortgages, pledges and charges, as and by way of a fixed and
specific mortgage, charge and pledge, to and in favour of the Holder and
otherwise grants to the Holder a security interest in, all of the Obligor's
right, title and interest in and to the real and immoveable property, both
freehold and leasehold, and other interests, including without limitation staked
claims and licences of occupation, in the property described in Schedule "A"
(collectively, the "Properties"); all rights, leases, licences, easements,
rights-of-way, profits a prendre and interests in real property with respect to
the Properties (and all renewals, extensions and amendments or substitutions
thereof); all facilities relating to or required for use in connection with the
Properties; and all buildings, erections, structures, improvements, underground
facilities, power, fuel and water supply, storage, waste disposal, roads and
other transportation facilities and fixed plant, machinery and equipment
presently situated on or under the Properties or which may at any time hereafter
be constructed or brought or placed on or under the Properties or used in
connection with the Properties.
SECTION 5 EFFECTIVENESS AND ATTACHMENT.
(1) The Security is effective whether or not any monies or liabilities so
secured are advanced or incurred before or after or at the same time as
this Debenture is issued. The Security will remain effective until such
time as this Debenture is discharged as provided in Section 19,
irrespective of whether, at any prior time, there may have been no
indebtedness, liabilities or obligations (direct, indirect, absolute,
contingent or otherwise) of the Obligor to the Holder outstanding.
(2) The Obligor acknowledges that (i) value has been given, (ii) it has
rights in the Charged Premises (other than after-acquired Charged
Premises), (iii) it has not agreed to postpone the time of attachment
of the Security and (iv) it has received a duplicate original copy of
this Debenture.
SECTION 6 SCOPE OF SECURITY.
(1) To the extent that an assignment of amounts payable and other proceeds
arising under or in connection with, or the grant of a security
interest in any agreement, licence, permit or quota of the Obligor
would result in the termination of such agreement, licence, permit or
quota (each, a "Restricted Asset"), the Security will constitute a
trust created in
-3-
favour of the Holder, pursuant to which the Obligor shall hold as
trustee all proceeds arising under or in connection with the Restricted
Asset in trust for the Holder.
(2) The Security does not extend or apply to the last day of the term of
any lease or sublease of real property or agreement for a lease or
sublease of real property, now held or hereafter acquired by the
Obligor, but the Obligor will stand possessed of any such last day upon
trust to assign and dispose of it as the Holder may direct.
SECTION 7 PROTECTIVE DISBURSEMENTS.
If the Obligor fails to perform any of its covenants in this Debenture or
otherwise, then the Holder may, in its absolute discretion, perform any covenant
capable of being performed by it and, if the covenant requires the payment or
expenditure of money, the Holder may make the payment but is under no obligation
to do so. All sums so paid or expended by the Holder shall be immediately
payable by the Obligor and shall be secured by this Debenture, having the
benefit of the Security in priority to the indebtedness evidenced by this
Debenture. No such performance or payment will relieve the Obligor from any
default under this Debenture or the consequences of such default.
SECTION 8 COVENANTS.
Subject to the terms of the Purchase Agreement, the Obligor will not sell,
assign, convey, exchange, lease, release or abandon or otherwise dispose of any
Charged Premises except as permitted by the Holder in writing. The Obligor will
not create or suffer to exist any Lien on the Charged Premises, except as
permitted by the Holder in writing. Enforcement.
SECTION 9 ENFORCEMENT.
The Security becomes and is enforceable against the Obligor if and when the
Obligor fails to repay the principal amount and other amounts owing under this
Debenture on demand or otherwise when the same become due and payable.
SECTION 10 REMEDIES.
Whenever the Security is enforceable, the Holder may realize upon the Charged
Premises and enforce its rights by:
(a) entry into possession of the Charged Premises by any method
permitted by law;
(b) sale, grant of options to purchase, or lease of all or any
part of the Charged Premises;
(c) holding, storing and keeping idle or operating all or any part
of the Charged Premises;
(d) collection of any proceeds arising in respect of the Charged
Premises;
(e) institution of proceedings in any court of competent
jurisdiction for the appointment of a receiver (which term as
used in this Debenture includes a receiver and manager) of all
or any part of the Charged Premises;
(f) institution of proceedings in any court of competent
jurisdiction for sale or foreclosure of all or any part of the
Charged Premises;
(g) filing of proofs of claim and other documents to establish
claims to the Charged Premises in any proceeding relating to
the Obligor;
-4-
(h) appointment by instrument in writing of a receiver or agent of
all or any part of the Charged Premises and removal or
replacement from time to time of any such receiver or agent;
and
(i) any other remedy or proceeding authorized or permitted in this
Debenture or otherwise by law or equity.
SECTION 11 ADDITIONAL RIGHTS.
In addition to the rights of the Holder set forth in Section 9, whenever the
Security is enforceable, the Holder may:
(a) require the Obligor, at the Obligor's expense, to assemble the
Charged Premises, to the extent reasonably practicable, at a
place or places designated by notice in writing and the
Obligor agrees to so assemble the Charged Premises immediately
upon receipt of such notice;
(b) require the Obligor, by notice in writing, to disclose to the
Holder the location or locations of the Charged Premises and
the Obligor agrees to make such disclosure when so required;
(c) repair, process, modify, complete or otherwise deal with the
Charged Premises, and prepare for the disposition of the
Charged Premises, whether on the premises of the Obligor or
otherwise;
(d) pay any liability secured by any Lien against any Charged
Premises other than Liens in existence at the time the Obligor
acquired the Charged Premises or arising out of action or
inaction by the Holder (the Obligor will immediately on demand
reimburse the Holder for all such payments);
(e) borrow for the maintenance, preservation or protection of the
Charged Premises and mortgage, charge or grant a security
interest in the Charged Premises, whether or not in priority
to the Security, to secure repayment;
(f) commence, continue or defend any judicial or administrative
proceedings for the purpose of protecting, seizing,
collecting, realizing or obtaining possession or payment of
the Charged Premises, and give good and valid receipts and
discharges and compromise or give time for the payment or
performance of all or any part of the accounts or any other
obligation of any third party to the Obligor; and
(g) at any public sale, and to the extent permitted by law on any
private sale, bid for and purchase any or all of the
Collateral offered for sale and upon compliance with the terms
of such sale, hold, retain and dispose of such Collateral
without any further accountability to the Obligor or any other
Person with respect to such holding, retention or disposition,
except as required by law. In any such sale to the Holder, the
Holder may, for the purpose of making payment for all or any
part of the Collateral so purchased, use any claim for Secured
Obligations then due and payable to it as a credit against the
purchase price.
SECTION 12 EXERCISE OF REMEDIES.
The remedies under Section 9 and Section 11 may be exercised from time to time
separately or in combination and are in addition to, and not in substitution
for, any other rights of the Holder however arising or created. The Holder is
not bound to exercise any right or remedy and the exercise of any right or
remedy is without prejudice to any other rights of the Holder including the
right to claim for any deficiency. The taking of any action or proceeding or
refraining from so doing, or any other dealings with any other security for the
monies secured by this Debenture shall not release or affect the Security.
-5-
SECTION 13 RECEIVER'S POWERS.
(1) Any receiver appointed by the Holder is vested with the rights and
remedies which could have been exercised by the Holder in respect of
the Obligor or the Charged Premises and such other powers and
discretions as are granted in the instrument of appointment and any
supplemental instruments. The identity of the receiver, any replacement
and any remuneration are within the sole and unfettered discretion of
the Holder.
(2) Any receiver appointed by the Holder will act as agent for the Holder
for the purposes of taking possession of the Charged Premises, but
otherwise and for all other purposes (except as provided below), as
agent for the Obligor. The receiver may sell, lease, or otherwise
dispose of the Charged Premises as agent for the Obligor or as agent
for the Holder as the Holder may determine in its discretion. The
Obligor agrees to ratify and confirm all actions of the receiver acting
as agent for the Obligor, and to release and indemnify the receiver in
respect of all such actions.
(3) The Holder, in appointing or refraining from appointing any receiver,
does not incur liability to the receiver, the Obligor or otherwise and
is not responsible for any misconduct or negligence of such receiver.
(4) All moneys from time to time received by the receiver may be applied as
follows (i) first, in discharge of all operating expenses and other
outgoings affecting the Charged Premises, (ii) second, in keeping in
good standing all charges and liens on the Charged Premises having
priority over the Security, (iii) third, in payment of the remuneration
and disbursements of the receiver, (iv) fourth, in payment to the
Holder of the moneys payable hereunder, and (v) the balance, if any,
shall be paid to the Obligor or as a court of competent jurisdiction
may otherwise direct.
SECTION 14 APPOINTMENT OF ATTORNEY.
The Obligor hereby irrevocably constitutes and appoints the Holder (and any
officer of the Holder) the true and lawful attorney of the Obligor. As the
attorney of the Obligor, the Holder has the power to exercise for and in the
name of the Obligor with full power of substitution, whenever the Security
becomes enforceable, any of the Obligor's right (including the right of
disposal), title and interest in and to the Charged Premises including the
execution, endorsement, delivery and transfer of the Charged Premises to the
Holder, its nominees or transferees, and the Holder and its nominees or
transferees are hereby empowered to exercise all rights and powers and to
perform all acts of ownership with respect to the Charged Premises to the same
extent as the Obligor might do. All acts of the attorney are ratified and
approved, and the attorney is not liable for any act, failure to act or any
other matter or thing, except for its own gross negligence or wilful misconduct.
This power of attorney is irrevocable, is coupled with an interest, has been
given for valuable consideration (the receipt and adequacy of which is
acknowledged) and survives, and does not terminate upon, the bankruptcy,
dissolution, winding up or insolvency of the Obligor. This power of attorney
extends to and is binding upon the Obligor's successors and permitted assigns.
The Obligor authorizes the Holder to delegate in writing to another Person any
power and authority of the Holder under this power of attorney as may be
necessary or desirable in the opinion of the Holder, and to revoke or suspend
such delegation.
SECTION 15 DEALING WITH THE CHARGED PREMISES.
(1) The Holder is not obliged to exhaust its recourse against the Obligor
or any other Person or against any other security it may hold before
realizing upon or otherwise dealing with the Charged Premises in such
manner as it may consider desirable.
-6-
(2) The Holder may grant extensions or other indulgences, take and give up
securities, accept compositions, grant releases and discharges and
otherwise deal with the Obligor and with other Persons, sureties or
securities as it may see fit without prejudice to the obligations and
liability of the Obligor or the rights of the Holder in respect of the
Charged Premises.
(3) The Holder is not (i) liable or accountable for any failure to collect,
realize or obtain payment in respect of the Charged Premises, (ii)
bound to institute proceedings for the purpose of collecting,
enforcing, realizing or obtaining payment of the Charged Premises or
for the purpose of preserving any rights of any Persons in respect of
the Charged Premises, (iii) responsible for any loss occasioned by any
sale or other dealing with the Charged Premises or by the retention of
or failure to sell or otherwise deal with the Charged Premises, or (iv)
bound to protect the Charged Premises from depreciating in value or
becoming worthless.
(4) The Holder has no obligation to keep the Charged Premises in its
possession identifiable.
(5) The Holder may, after the Security is enforceable, (i) notify any
Person obligated on an account or on chattel paper or any obligor on an
instrument to make payments to the Holder, whether or not the Obligor
was previously making collections on such accounts, chattel paper,
instruments, and (ii) assume control of any proceeds arising from the
Charged Premises.
SECTION 16 STANDARDS OF SALE.
Without prejudice to the ability of the Holder to dispose of the Charged
Premises in any manner which is commercially reasonable, the Obligor
acknowledges that:
(a) the Charged Premises may be disposed of in whole or in part;
(b) the Charged Premises may be disposed of by public auction,
public tender or private contract, with or without advertising
and without any other formality;
(c) any assignee of the Charged Premises may be a customer of the
Holder;
(d) any sale conducted by the Holder will be at such time and
place, on such notice and in accordance with such procedures
as the Holder, in its sole discretion, may deem advantageous;
(e) the Charged Premises may be disposed of in any manner and on
any terms necessary to avoid violation of applicable law
(including compliance with such procedures as may restrict the
number of prospective bidders and purchasers, require that the
prospective bidders and purchasers have certain
qualifications, and restrict the prospective bidders and
purchasers to Persons who will represent and agree that they
are purchasing for their own account for investment and not
with a view to the distribution or resale of the Charged
Premises) or in order to obtain any required approval of the
disposition (or of the resulting purchase) by any governmental
or regulatory authority or official;
(f) a disposition of the Charged Premises may be on such terms and
conditions as to credit or otherwise as the Holder, in its
sole discretion, deems advantageous; and
(g) the Holder may establish an upset or reserve bid or price in
respect of the Charged Premises.
SECTION 17 DEALINGS BY THIRD PARTIES.
No Person dealing with the Holder or its agent or a receiver is required to
determine (i) whether the Security has become enforceable, (ii) whether the
powers which the Holder or its agent or a receiver is purporting to exercise
have become exercisable, (iii) whether any money remains due upon the Security,
(iv) the necessity or expediency of the stipulations and conditions subject to
which any sale or lease is made, (v) the propriety or regularity of any sale or
any other dealing by the Holder or its agent or a receiver with the Charged
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Premises, or (vi) how any money paid to the Holder has been applied. Any bona
fide purchaser of all or any part of the Charged Premises from the Holder or any
receiver or agent will hold the Charged Premises absolutely, free from any claim
or right of whatever kind, including any equity of redemption, of the Obligor,
which it specifically waives (to the fullest extent permitted by law) as against
any such purchaser and all rights of redemption, stay or appraisal which the
Obligor has or may have under any rule of law now existing or hereafter adopted.
SECTION 18 NO RIGHT OF SET-OFF.
The principal and other amounts and liabilities secured by this Debenture will
be paid by the Obligor when due without regard to any equities existing between
the Obligor and any other party including the Holder and without regard to any
right of set-off or cross-claim or of any other claim or demand of the Obligor
against the Holder or otherwise.
SECTION 19 DISCHARGE.
The Security will be discharged upon, but only upon, full and indefeasible
payment of all principal and other amounts secured and performance of all
obligations of the Obligor to the Holder and the Holder having no obligations to
the Obligor. At the request and expense of the Obligor, the Holder will execute
and deliver to the Obligor such releases, discharges, financing statements and
other documents or instruments as the Obligor may reasonably require to effect
the discharge of the Security.
SECTION 20 NOTICES.
Any notice, direction or other communication (each a "Notice") given under this
Debenture must be in writing, sent by personal delivery, courier or facsimile
(but not by electronic mail) and addressed:
(a) to the Obligor at:
Suite #1305, 1090 West Georgia Street
Vancouver, British Columbia
V1E 3V7
Attention: Nick DeMare
Telephone: 604-685-9316
Facsimile: 604-683-1585
(b) to the Holder at:
14 Park Lane Circle
Toronto, Ontario
M5B 1Z7
Attention: Patrick Sheridan
-8-
With a copy to:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
Attention: Brian Pukier
A Notice is deemed to be delivered and received (i) if sent by personal
delivery, on the date of delivery if it is a Business Day and the delivery was
made prior to 4:00 p.m. (local time in place of receipt) and otherwise on the
next Business Day, (ii) if sent by same-day service courier, on the date of
delivery if sent on a Business Day and delivery was made prior to 4:00 p.m.
(local time in place of receipt) and otherwise on the next Business Day, (iii)
if sent by overnight courier, on the next Business Day, or (iv) if sent by
facsimile, on the Business Day following the date of confirmation of
transmission by the originating facsimile. The Obligor or the Holder may change
its address for notice from time to time by providing a Notice in accordance
with the foregoing. Any subsequent Notice must be sent to the Obligor or the
Holder at its changed address. Any element of an address that is not
specifically changed in a Notice will be assumed not to be changed.
SECTION 21 NO MERGER, SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
This Debenture does not operate by way of merger of any of the principal and
other amounts owing under this Debenture and no judgment recovered by the Holder
will operate by way of merger of, or in any way affect, the Security, which is
in addition to, and not in substitution for, any other security now or hereafter
held by the Holder in respect of the principal and other amounts owing under
this Debenture.
SECTION 22 REIMBURSEMENT OF HOLDER'S EXPENSES.
The Obligor is liable for and will pay on demand by the Holder any and all
Expenses. "Expenses" means all expenses, costs and charges incurred by or on
behalf of the Holder in connection with this Debenture, the Security or the
Charged Premises, including all legal fees, court costs, receiver's or agent's
remuneration and other expenses of taking possession of, repairing, protecting,
insuring, preparing for disposition, realizing, collecting, selling,
transferring, delivering or obtaining payment for the Charged Premises, and of
taking, defending or participating in any action or proceeding in connection wit
any of the foregoing matters or otherwise in connection with the Holder's
interest in any Charged Premises, whether or not directly relating to the
enforcement of this Debenture. All such sums shall be added to the indebtedness
secured by this Debenture and shall also be secured, together with all other
indebtedness, by this Debenture.
SECTION 23 FURTHER ASSURANCES.
The Obligor will do all acts and things and execute and deliver or cause to be
executed and delivered all deeds, transfers, assignments and instruments that
the Holder may require for (i) protecting the Charged Premises, (ii) perfecting
the Security, and (iii) exercising all powers, authorities and discretions
conferred upon the Holder. After the Security becomes enforceable the Obligor
will do all acts and things and execute and deliver all deeds, transfers,
assignments and instruments that the Holder may require for facilitating the
sale of the Charged Premises in connection with its realization.
SECTION 24 SUCCESSORS AND ASSIGNS.
This Debenture is binding upon the Obligor, its successors and assigns, and
enures to the benefit of the Holder and its successors and assigns. This
Debenture may be assigned by the Holder without the consent of the Obligor, to
such Person as the Holder may determine and, in such event, such Person will be
entitled to all of the rights and remedies of the Holder as set forth in this
-9-
Debenture or otherwise. The Holder will provide notice to the Obligor of any
such assignment, specifying the identity of the assignee and the date on which
the assignment took place. In any action brought by an assignee to enforce any
such right or remedy, the Obligor will not assert against the assignee any claim
or defence which the Obligor now has or may have against the Holder. The Obligor
may not assign, transfer or delegate any of its rights or obligations under this
Debenture without the prior written consent of the Holder which may be
unreasonably withheld.
SECTION 25 AMENDMENT.
This Debenture may only be amended, supplemented or otherwise modified by
written agreement executed by the Holder and the Obligor.
SECTION 26 SEVERABILITY.
If any court of competent jurisdiction from which no appeal exists or is taken,
determines any provision of this Debenture to be illegal, invalid or
unenforceable, that provision will be severed from this Debenture and the
remaining provisions will remain in full force and effect.
SECTION 27 WAIVERS, ETC.
No consent or waiver by the Holder is binding unless made in writing and signed
by an authorized officer of the Holder. Any consent or waiver given under this
Debenture is effective only in the specific instance and for the specific
purpose for which given. No waiver of any of the provisions of this Debenture
constitutes a waiver of any other provision. A failure or delay on the part of
the Holder in exercising a right under this Debenture does not operate as a
waiver of, or impair, any right of the Holder however arising. A single or
partial exercise of a right on the part of the Holder does not preclude any
other or further exercise of that right or the exercise of any other right by
the Holder. So long as The Sheridan Platinum Group Ltd. is the Holder of this
Debenture, the Obligor waives presentation and surrender of this Debenture
against payment. In any other case, the Holder of this Debenture is required to
present and surrender this Debenture against payment.
SECTION 28 GOVERNING LAW.
This Debenture will be governed by, interpreted and enforced in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein. The Obligor irrevocably attorns and submits to the exclusive
jurisdiction of any court of competent jurisdiction of the Province of Ontario
sitting in Toronto, Ontario in any action or proceeding arising out of or
relating to this Debenture. The Obligor irrevocably waives objection to the
venue of any action or proceeding in such court or that such court provides an
inconvenient forum. Nothing in this Section limits the right of the Holder to
bring proceedings against the Obligor in the courts of any other jurisdiction.
The Obligor hereby irrevocably consents to the service of any and all process in
any such action or proceeding by the delivery of copies of such process to the
Obligor at 1305, 1090 West Georgia Street, Vancouver, British Columbia, V1E 3V7.
Nothing in this Section affects the right of the Holder to serve process in any
manner permitted by law.
SECTION 29 NEGOTIABLE INSTRUMENT.
This Debenture is a negotiable instrument and all holders from time to time are
invited by the Obligor to treat it accordingly.
-10-
HALO RESOURCES LTD.
By:
--------------------------------------
Authorized Signing Officer
By:
--------------------------------------
Authorized Signing Officer
-11-
SCHEDULE "A"
THE PROPERTIES
A. PATENTS
PARCEL NUMBER CLAIM NUMBERS APPROX AREA
3457 JES96toJES105 172
10524 K1332 7
10525 K1333 17
10526 K1334 16
10527 K1335 24
30433 K13464, K13467 25
16650 K1328 20
16651 K1329 16
3922 McA11 16
16121 S158 1
3456 S170, S172 14
2063 S173 3
1420 S185 136
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LEASEHOLD PARCEL NUMBER
2440 K2554 16
2927 K268722 & K268728-K268732 86
2926 K268723-K268727 & K268733 76
2449 K2555, K2689, K2690, K2691 64
2450 K2556, K3026, K1330 41
B. LICENCES OF OCCUPATION
LICENCE OF OCCUPATION
12126 K121I3-K12I20,K3014-K3015,K3028-K3029 133
12369 K13791-KI3797&K13811 163
12548 K13802 2
2702 K2284, K3019 16
2871 K2374 10
10381 K6127 16
10383 K6I28 16
10382 K6129 16
10385 K6130 16
10386 K6131, D493 16
10387 K6132 18
10388 K6I33, K3018 15
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C. STAKED CLAIMS
STAKED CLAIMS K3007239,K3007240,K3007250
(EXPIRY NOV 6/05)
K3007296-K300299
K3007303
K3007322-K3007326,K3007332 2256
K3007333-K3007334 224
K3016925-K3016928 896
TOTAL 100 Claims 4563 ha
SCHEDULE I
GST CERTIFICATE AND INDEMNITY
GOODS AND SERVICES TAX
DECLARATION AND INDEMNITY
TO: THE SHERIDAN PLATINUM GROUP LTD. (the "VENDOR")
RE: Purchase by Halo Resources Ltd. (the "PURCHASER") from the
Vendor of the properties described in Schedule "B" (the
"PROPERTY") pursuant to an agreement of purchase and sale
dated as of__________________, as amended from time to time
________________________________________________________________________________
The undersigned hereby represents, warrants and agrees as follows:
1. The Purchaser is registered under Subdivision (d) of Division V of Part
IX of the EXCISE TAX ACT (Canada) for the collection and remittance of
the goods and services tax ("GST") and its registration number is
________________________, and such registration is in good standing and
has not been revoked or terminated;
2. Attached hereto as Schedule "A" is a notarial copy of the Purchaser's
Goods and Services Tax registration certificate;
3. The Property is being purchased by the Purchaser as principal for its
own account and is not being purchased by the Purchaser as an agent,
trustee, or otherwise on behalf of or for another person;
4. The Purchaser shall self-assess, be liable for and remit to the
appropriate governmental authority all GST which is payable in
connection with its purchase of the Property; and
5. The Purchaser shall indemnify and save harmless the Vendor from any
GST, penalty, costs, interest or other amount which may be payable by
or assessed against the Vendor under the EXCISE TAX ACT as a result of
or in connection with the Vendor's failure to collect and remit any GST
applicable in this transaction or as a result of any failure by the
Purchaser to comply with the provisions of this Declaration and
Indemnity.
DATED as of _____________________, 2005.
HALO RESOURCES LTD.
Per: _________________________________
Name:
Title