HINTON OPTION AGREEMENT
(the "Agreement")
THIS AGREEMENT dated effective the 7th day of July 2005,
BETWEEN:
HINTON SYNDICATE, a syndicate formed by Richard Ewing ("Ewing"), James
Smith ("Smith"), Robert Wagner ("Wagner") and J Malcolm Slack ("Slack")
to acquire and explore mineral claims in the Yukon Territory (Ewing,
Smith, Wagner and Slack) are hereinafter collectively referred to as
"Hinton")
- and -
YUKON GOLD CORP., a corporation formed pursuant to the laws of Ontario
and registered to carry on business in the Yukon Territory ("Yukon
Gold")
-and-
YUKON GOLD CORPORATION, INC. a Delaware USA corporation ("Yukon
Parent")
WITNESSETH THAT:
WHEREAS Hinton owned certain unpatented, mineral properties located in
the area of Mt. Hinton in the Mayo Mining District of the Yukon Territory, which
mineral properties are more particularly described in Schedule A attached hereto
as Hinton 1-34, Hinton 35, Hinton II 1-26, Hinton III 1-14, Hinton IV 1-6 and
Hinton V 1-7, and are hereinafter collectively referred to as the "Hinton
Claims";
AND WHEREAS Hinton and Yukon Gold entered into an option agreement (the
Hinton/Yukon Gold Agreement) dated July 7, 2002 wherein Hinton agreed that Yukon
Gold could acquire an interest in the Hinton Claims;
AND WHEREAS since the date of the Hinton/Yukon Gold Agreement, Yukon
Gold has acquired additional mineral claims adjoining the Hinton Claims in
accordance with the provisions of the Hinton/Yukon Gold Agreement which have
been added to the total claims and are collectively referred to herein as the
"Property";
AND WHEREAS since the date of the Hinton/Yukon Gold Agreement Yukon
Gold has become a wholly owned subsidiary of Yukon Parent;
AND WHEREAS this Agreement superceeds the Hinton/Yukon Gold Agreement
and all amendments thereto.
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NOW, THEREFORE, the parties hereby do evidence their agreement with
respect to the Property as follows, in consideration of the premises and the
mutual covenants hereinafter set out.
1. REPRESENTATIONS AND WARRANTIES
1.1 YUKON GOLD'S REPRESENTATIONS AND WARRANTIES
Yukon Gold hereby represents and warrants to Hinton that:
(a) it is a company duly incorporated under the laws of the Province of
Ontario, and it is duly organized and validly subsisting under such
laws and is qualified to carry on business in the Yukon Territory;
(b) it has the power and capacity to carry on its business and to enter
into this Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform all of
its obligations and duties hereunder and thereunder;
(c) it has duly obtained all necessary corporate authorizations for the
execution, delivery and performance of this Agreement and such
execution, delivery and performance and the consummation of the
transactions herein contemplated will not contravene any applicable
laws and will not conflict with or result in any breach of any
covenants or agreements contained in, or constitute a default under,
or result in the creation of any encumbrance, lien or charge under
the provisions of its constating documents or any shareholders' or
directors' resolution or any indenture, agreement or other
instrument whatsoever to which it is a party or by which it is bound
or to which it or the Property may be subject; and
(d) this Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms.
(e) Yukon Gold is the registered owner as recorded of a 100% right,
title and interest in and to the mineral properties comprising the
Property and no person has any proprietary or possessory interest in
the Property other than Hinton, and
(f) no person has any entitlement to any royalty or other payment in the
nature of rent or royalty on any minerals, metals or concentrates or
any other such products removed from the Property, other than Hinton
(g) the Property is properly and accurately described in Schedule A,
attached hereto, and, each of the unpatented claims embraced within
the Property (the "Claims") (A) has been properly located and
recorded in the Yukon Territory and (B) is in good standing under
all applicable laws and regulations with respect to the incurrence
of any expenditures and the payment of any monies or taxes and will
remain so until at least the date set out as the expiry date
opposite each claim on Schedule A;
(h) there are no outstanding or, to the best of its information,
knowledge and belief, proposed, threatened or contemplated actions
or suits which, if successful, would or could affect the market
value or ownership of the Property or any portion thereof;
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(i) conditions on and relating to the Property are in compliance with
all applicable laws, regulations and orders relating to
environmental matters, including, but not limited to, waste disposal
and storage;
(j) there are no outstanding work orders or actions required to be taken
relating to the condition of the Property, or any operations
thereon, as of the date hereof;
1.2 YUKON PARENT'S REPRESENTATIONS AND WARRANTIES
(a) it is a company duly incorporated under the laws of the State of
Delaware, and it is duly organized and validly subsisting under such
laws
(b) it has the power and capacity to carry on its business and to enter
into this Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform all of
its obligations and duties hereunder and thereunder;
(c) it has duly obtained all necessary corporate authorizations for the
execution, delivery and performance of this Agreement and such
execution, delivery and performance and the consummation of the
transactions herein contemplated will not contravene any applicable
laws and will not conflict with or result in any breach of any
covenants or agreements contained in, or constitute a default under,
or result in the creation of any encumbrance, lien or charge under
the provisions of its constating documents or any shareholders' or
directors' resolution or any indenture, agreement or other
instrument whatsoever to which it is a party or by which it is bound
or to which it or the Property may be subject; and
(d) this Agreement has been duly executed and delivered by it and is
valid and binding upon it in accordance with its terms.
1.3 HINTON'S REPRESENTATIONS AND WARRANTIES
Each of Ewing, Smith, Wagner and Slack, on his own behalf and not on
behalf of any of the others, hereby represents and warrants to Yukon Gold and
Yukon Parent that:
(a) he has the right, power, authority and capacity to enter into this
Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform all of
his obligations and duties hereunder and thereunder;
(b) this Agreement has been duly executed and delivered by him and is
valid and binding upon him in accordance with its terms;
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(c) the Hinton Claims were free and clear of all liens, charges and
encumbrances, recorded or, to the best of his information, knowledge
and belief, unrecorded when they were transferred to Yukon Gold;
(d) there are no outstanding or, to the best of his information,
knowledge and belief, proposed, threatened or contemplated actions
or suits which, if successful, would or could affect the market
value or ownership of the Property or any portion thereof;
(e) he is not a non-resident of Canada for the purpose of section 116 of
the Income Tax Act (Canada);
(f) Hinton has made available to Yukon Gold all information in its
possession or control relating to work done on or with respect to
the Property;
1.4 DURATION AND EFFECT OF REPRESENTATIONS AND WARRANTIES
(a) Ewing, Smith, Wagner and Slack each acknowledge and agree that Yukon
Gold and Yukon Parent are entering into this Agreement relying upon
the representations and warranties made to them herein and the
correctness of each such representation and warranty is a condition
upon which Yukon Gold and Yukon Parent are entering into this
Agreement, each of which conditions may be waived in whole or in
part solely by Yukon Gold and/or Yukon Parent and all such
representations and warranties shall survive the execution, delivery
and termination of this Agreement, the acquisition of any interest
in the Property by a party and the commencement and completion of
any of the transactions contemplated herein.
(b) Yukon Gold an Yukon Parent acknowledges and agrees that Ewing, Smith
Wagner and Slack are each entering into this Agreement relying upon
the representations and warranties made to them herein and the
correctness of each such representation and warranty is a condition
upon which each of Ewing, Smith, Wagner and Slack are entering into
this Agreement, each of which conditions may be waived in whole or
in part solely by an instrument in writing signed by each of Ewing,
Smith. Wagner and Slack and all such representations and warranties
shall survive the execution, delivery and termination of this
Agreement, the acquisition of any interest in the Property by a
party and the commencement and completion of any of the transactions
contemplated herein.
(c) Ewing, Smith, Wagner and Slack each jointly and severally agree to
indemnify and hold harmless Yukon Gold from all claims, actions,
damages and losses arising out of or in connection with a breach of
any representation or warranty made by Ewing, Smith. Wagner and
Slack contained herein.
(d) Yukon Gold and Yukon Parent agrees to indemnify and hold harmless
each of Ewing, Smith, Wagner and Slack from all claims, actions,
damages and losses arising out of or in connection with a breach of
any representation or warranty made by Yukon Gold and Yukon Parent
contained herein.
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2. OPTION
2.1 GRANT OF OPTION
Hinton hereby grants to Yukon Gold the sole and exclusive right and option
to acquire up to an undivided 75% (the "Earned Interest") right, title and
interest in and to the Property (the "Option") in accordance with the terms of
this Agreement.
2.2 TERMS OF OPTION
To exercise the Option and thereby earn an undivided 75% right, title and
interest in and to the Property, Yukon Gold shall incur costs in respect of the
Property and its exploration and development ("Costs"), or related thereto,
aggregating $6,075,000, in accordance with the following schedules:
PROPERTY PAYMENTS
a. On execution of the July 7, 2002 Agreement $ 25,000
b. On July 7, 2003 $ 75,000
c. On July 7, 2004 $150,000
d. On January 2, 2006 $150,000
e. On July 7, 2006 $150,000
f. On July 7, 2007 $150,000
g. On July 7, 2008 $150,000
TOTAL $850,000
WORK PROGRAM-expenses to be incurred in the following periods;
a. July 7/02 to July 6/03 $ 150,000
b. July 7/03 to July 6/04 $ 250,000
c. July 7/04 to July 6/05 $ 325,000
d. July 7/05 to Dec.31/06 $ 750,000
e. Jan. 1/07 to Dec 31/07 $1,000,000
f. Jan. 1/08 to Dec 31/08 $1,250,000
g. Jan 1/09 to Dec 31/09 $1,500,000
TOTAL $5,225,000
Hinton acknowledges that the Property Payments referred to in a, b, and c
above has been received and as of March 31, 2005 Yukon Gold had credit for
$803,226.94 against; Work Program expenses. Details of Work Program
expenditures are attached hereto as Exhibit 1.
provided, however that:
(a) Costs shall be deemed to have been incurred when Yukon Gold has
contractually obligated itself to pay for such Costs or such Costs
have been paid, whichever should first occur;
(b) Costs incurred in a particular period that exceed the Costs required
to be incurred in order to maintain the Option in good standing
beyond such period (the "Prepaid Costs") shall be credited as Costs
incurred in the next subsequent period, provided that Yukon Gold
may, at any time, increase its Prepaid Costs and accelerate its
interest earned;
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(c) that in calculating the amount of Costs incurred, Yukon Gold shall
be entitled to include therein an overhead fee which shall equal 10%
of the first $250,000 and 5% for additional Costs over $250,000
incurred in the exploration and development of the Property, or
related thereto (other than general corporate overhead costs); and
(d) each of Ewing, Smith, Wagner and Slack may, subject to receipt of
all necessary regulatory approvals, by notice to Yukon Gold, elect
to receive their pro-rata portion of the Property Payments in
respect of a particular year in common shares of Yukon Parent issued
at a price equal to 10% less than the market price as of the date of
receipt by Yukon Gold of the notice given hereunder provided that
after the January 2, 2006 payment if the shares of Yukon Parent are
listed on the TSX Venture Exchange or the TSX Exchange, Property
Payments may be made 60% in cash and 40% in common shares of Yukon
Parent at Yukon Gold's option.
(e) Work Program costs shall include cost of work on the Property to
accomplish site work, such as labour, materials, consultants,
workers on the Property, sub-contracts, room and board for site
personnel, but shall exclude travel costs to the Yukon, costs of
non-working visiting consultants and public relations. The Work
Program for the period between July 7, 2005 and December 31, 2006
will be submitted for approval by Yukon Gold to Hinton not later
than September 1, 2005 or such earlier date as may be agreed upon.
Hinton shall provide their approval or recommended changes within 10
days of receipt of the Work Program.
EARNED INTEREST
Provided all Property Payments have been made that are due prior to the
Work Program expenditure levels being attained, Yukon Gold shall have
earned a:
25% interest upon the Work Program expenditures of $1,500,000
50% interest upon the Work Program expenditures of $2,500,000
75% interest upon the Work Program expenditures of $5,225,000
(f) In the event Yukon Gold:
i. holds at least a 25% right, title and interest in the
Property;
ii. is unable to meet its next year's Work Program
expenditures as set out in this section 2.2 of the
Agreement;
iii. Yukon Gold shall be entitled to extend the time required
to incur the Work Program expenditures from year to year
by giving notice to Hinton to such effect provided that
the full amount of the Work Program expenditures has
been incurred by December 31, 2009 to earn the 75%
interest.
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2.3 TITLE
(a) Unless replaced in accordance with the terms hereof Yukon Gold will
hold the Property, as described in Schedule A, in trust in
accordance with the terms of this Agreement and for the benefit of
all the parties hereto as there interests may appear from time to
time.
(b) Subject to the foregoing, each of the parties shall be entitled to
record and register evidence of its right, title and interest in and
to the Property or any portion thereof, at any time and from time to
time, and each party agrees to execute and deliver all necessary
documents to facilitate such recordings and registrations.
2.4 DEFAULT AND TERMINATION
(a) All Costs specified in section 2.2 hereof may or may not be incurred
by Yukon Gold, at its option and in its sole discretion. Subject to
section 2.4(e), should Yukon Gold fail to or decide not to incur any
of the Costs specified in section 2.2 within the specified periods
or as provided for in 2.2 (f), this Agreement shall terminate.
(b) This Agreement shall terminate if Yukon Gold does not demonstrate on
or before May 16, 2006 that it has sufficient funds in place to meet
the $750,000 Work Program expenditures due by December 31, 2006
(c) This Agreement may be terminated by Yukon Gold, at any time by Yukon
Gold giving notice to Hinton to that effect and, in such event, the
termination shall be effective on the date such notice is received
by Hinton.
(d) In the event this Agreement is terminated under the provisions of
2.4 (a), (b) or (c) above and Yukon Gold has not earned any interest
in the Property, Yukon Gold shall at its cost transfer the Claims to
the Hinton Syndicate immediately following such termination.
(e) Should this Agreement be terminated after Yukon Gold has obtained an
Earned Interest;
i. Yukon Gold shall retain the right, title or interest in
or to the Earned Interest held by Yukon Gold as of the
date of termination, provided that if when this
Agreement is terminated and Yukon Gold holds a 50%
right, title and interest in or to the Property, Yukon
Gold's Earned Interest in the Property shall
automatically be reduced to 45%;
ii. Yukon Gold shall cause to be executed, within 60 days of
such termination, any documentation reasonably requested
by Hinton in order to evidence the forfeiture of its
unearned right, title and interest in and to the
Property and, if applicable, to retransfer the Property
to Hinton to be held in accordance with Section 2.3 (a);
iii. Yukon Gold shall advance sufficient funds to
governmental authorities, file sufficient work for
assessment work credit and take all other reasonable
steps to ensure that the Property is in good standing
for a period of at least 1 year following the date of
such termination;
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iv. Yukon Gold shall ensure that the Property is free and
clear of all liens, charges and encumbrances arising
from its activities hereunder; and
v. Yukon Gold shall have the right to remove from the
Property all machinery, equipment, buildings,
structures, supplies and other property placed thereon
by Yukon Gold or its agents within a period of twelve
(12) months following the date of such termination,
provided, however, that Yukon Gold shall remove any such
property at Yukon Gold's cost if specifically requested
by Hinton within such twelve (12) month period.
vi. In the event of termination of this Agreement under the
provisions of this Section 2.4 (e), the Property shall
be operated as a Joint Venture in accordance with the
provisions of Section 3 hereof.
2.5 EXCLUSION OF CLAIMS
(a) During the Option Period, should Yukon Gold wish to abandon any of
the Claim, that make up the Property from time to time (the
"Abandoned Property"), the following provisions shall apply. Yukon
Gold shall give Hinton 30 days notice of its intention to abandon
such Claims and Hinton may thereafter give notice to Yukon Gold
electing to have all of Yukon Gold's right, title and interest in
and to the Abandoned Property transferred to it. Should Hinton give
such notice to Yukon Gold, Yukon Gold shall forthwith execute, at
its cost, any documentation necessary to transfer all of its right,
title and interest in and to the Abandoned Property to Hinton and
Yukon Gold shall take such action as is reasonably necessary, at its
cost, to ensure that the Abandoned Property will remain in good
standing for a period of at least 1 year from the date of Yukon
Gold's notice. If Hinton does not so elect or fails to respond to
Yukon Gold's notice within such 30 day period, then Yukon Gold may
abandon or exclude the Abandoned Property.
(b) Subsequent to the abandonment, transfer or exclusion of an Abandoned
Property, or interest therein, pursuant to this section 2.5, the
definition of Property hereunder shall no longer include the
Abandoned Property and Yukon Gold shall have no further obligations
or responsibilities in respect of the Abandoned Property, except for
those obligations and responsibilities in respect of environmental
laws and arising in respect of operations conducted by Yukon Gold
prior to such abandonment, transfer or exclusion irrespective of
whether costs in respect of such obligations and responsibilities
accrued before or after such abandonment, transfer or exclusion.
2.6 OPTION PERIOD RIGHTS AND OBLIGATIONS
(a) During the Option Period:
i. Yukon Gold shall perform and file assessment work
necessary to maintain, and otherwise keep the Property
in good standing, provided however, that Yukon Gold
shall file all drilling and other qualified expenditures
for assessment work credit even if not necessary to keep
the Property in good standing;
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ii. Yukon Gold shall be entitled to all income and other tax
deductions, allowances and credits, and to all incentive
grants or other benefits available pursuant to
exploration incentive programs or similar programs,
insofar as such work, deductions, allowances, credits,
grants and benefits relate to the Property;
iii. Yukon Gold shall have the exclusive right to conduct
exploration and development work on the Property with
the right to remove mineral samples therefrom, including
bulk mineral samples, for the purpose of assays and
tests provided that any revenue in excess of costs from
the disposition of such samples shall be shared by
Hinton as to 25% and Yukon Gold as to 75%;
iv. Yukon Gold shall have the right to erect, bring and
install all such buildings, machinery, equipment and
supplies on the Property as Yukon Gold shall deem
necessary and proper; and
v. all work done by Yukon Gold on the Property shall be
done in accordance with good mining practice and in
compliance with the applicable laws of the Yukon
Territory;:
vi. Hinton shall have access to the Property and to the
records of Yukon Gold, at its sole risk and expense, to
review work being carried out on the Property or to
review results obtained from work carried out on the
Property, as the case may be, provided however, that
reasonable notice is given and that such access shall
not unduly interfere with or disrupt the activities of
Yukon Gold;
vii. Ewing, Smith and Wagner shall be entitled to carry out
any work required on the Property if the price for their
proposed work is competitive to that typical in the
industry for work done on properties substantially the
same as the Property;
viii. Equipment work provided by Ewing is to be based on Third
Party Equipment Rental Rates for the Yukon Territory
Government, with allowance for off-road work (i.e.
mountain) and this entitlement shall continue after the
formation of the joint venture;
ix. Yukon Gold shall provide Hinton with monthly reports
indicating the status of work being conducted on the
Property, along with an estimate of the costs incurred
during such month, provided, however, that such reports
shall not be required during those periods in which
there is no work being conducted in respect of the
Property; and
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x. Yukon Gold shall provide Hinton with copies of reports
disclosing any significant technical data learned or
obtained in connection with work in respect of the
Property within 30 day of receipt of such report.
xi. Yukon Gold shall provide Hinton with a detailed
breakdown of all expenditures incurred on Work Programs
on the Property within 90 days following completion of a
Work Program or December 31, which ever is the latter,
of each year when Work Programs have been carried out.
(b) Yukon Gold shall indemnify and save harmless each of Ewing, Smith,
Wagner and Slack from and against all suits, claims, demands, losses
and expenses which they may each suffer by reason of any act or
thing done or omitted to be done during the Option Period by or on
behalf of Yukon Gold in relation to its exploration and development
operations on the Property, including any consequences arising from
the non-payment of workmen and wage earners employed by it or its
contractors on or in connection with the Property or suppliers of
materials purchased in connection therewith. During the Option
Period, Yukon Gold shall keep the Property free from claims for
liens, charges and encumbrances and, in the event of a lien, charge
or encumbrance being recorded, it will on this fact becoming known
to it forthwith take proceedings to have such lien, charge or
encumbrance removed as soon as possible. Yukon Gold may, however,
dispute and contest any suit, claim, demand, loss or expense which
forms the basis of a recorded lien, charge or encumbrance.
2.7 EXERCISE OF OPTION
(a) If Yukon Gold should incur payments in respect of the Property and
exploration and development costs thereon aggregating $6,075,000, in
accordance with section 2.2, Yukon Gold shall have exercised the
Option and thereby earned an undivided 75% right, title and interest
in and to the Property. Yukon Gold may thereupon give notice to
Hinton that it has exercised the Option. Yukon Gold and Hinton shall
be deemed to have formed a joint venture (the "Joint Venture") for
the further exploration and development of the Property, which shall
be governed by Article 3 of this Agreement upon the exercise of the
Option.
(b) Yukon Gold Shall be entitled, at any time prior to earning its 75%
interest and the formation of that Joint Venture, to put forward a
proposal to put the Property into production (a "Production
Decision") provided
i. such Production Decision is supported by a feasibility
study prepared by an independent engineer; and
ii. the operation of the portion of the Property covered by
the Production Decision shall continue as a Joint
Venture as set out in section 3; and
iii. Yukon Gold shall not be relieved of continuing to incur
Work Program Costs in accordance with section 2.2 with
Work Programs being carried out on areas of the Property
that are not included in the Production Decision; and
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iv. Yukon Gold and Hinton shall share costs and income from
productions as to 75% Yukon Gold and 25% Hinton subject
to the provisions of section 3.
(c) Provided Hinton may elect not to contribute to the costs related to
the Production Decision and Hinton shall not suffer any dilution
subject to:
(i) Yukon Gold shall be entitled to apply the costs incurred
on Hinton's behalf to the balance of any amount it is
required to spend on Work Programs in section 2.2; or
(ii) Hinton may elect to allow Yukon Gold to recover 150% of
the cost funded on Hinton's behalf from the production
revenue before Hinton is entitled to receive its share
of production revenue and Yukon Gold shall continue to
incur the Work Program costs in accordance with section
2.2.
(iii) Once Yukon Gold has paid or incurred all the Work
Program Costs Hinton shall be subject to all of the
terms and conditions of section 3. for all of the
Property
(d) Upon the formation of a Joint Venture each party shall have, subject
to the terms of this Agreement its respective undivided right, title
and interest in and to that portion of the Property (the
"Participating Interest") covered by the specific Joint Venture, the
right to participate in the Joint Venture and the corresponding
obligation to fund further exploration and development of the
Property. The Participating Interests, at the time of the formation
of a Joint Venture, shall be:
Yukon Gold 75%, and
Hinton 25%,
provided, however, that should Yukon Gold incur and pay for costs in
respect of the Work Programs on the Property, or related thereto,
prior to the formation of the Joint Venture, in excess of
$5,225,000, then Yukon Gold may give notice to Hinton to such effect
prior to or upon the formation of that Joint Venture and, upon
receipt of such notice by Hinton, Yukon Gold's deemed costs pursuant
to section 3.4(d) shall be equal to Yukon Gold's incurred costs and,
within 90 days of Hinton's receipt of such notice, Hinton shall
provide the funds required (the "Required Funds") so that when: the
Required Funds are added to its deemed costs of $1,741,666 as set
forth in section 3.4(d) (such result hereinafter referred to as the
"Total"), the Total is divided by the product obtained when Yukon
Gold's deemed costs pursuant to section 2.7(a) are divided by 0.75
(such result hereinafter being referred to as the "Total Division")
and the Total Division is expressed as a percentage (such result
hereinafter referred to as the "Resulting Percentage"), the
Resulting Percentage is 25% and, in such event, Hinton's deemed
costs shall be equal to the product obtained when the Required Funds
are added to $1,741,666; otherwise Hinton shall be subject to
dilution in accordance with the provisions of section 3.4(d).
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3. THE JOINT VENTURE
3.1 JOINT VENTURE RELATIONSHIP
Except as provided in this Agreement, the parties shall share all
benefits, costs, expenses, liabilities and obligations in respect of the Joint
Venture severally in proportion to their respective Participating Interests at
the time that such benefits, costs, expenses, liabilities and obligations were
earned, received or incurred, as the case may be. The parties agree that the
relationship between them shall be governed solely by the provisions of this
Agreement.
3.2 JOINT VENTURE COMMITTEE
(a) Upon formation of a Joint Venture, a joint venture committee shall
be forthwith established consisting of one representative of each of
Yukon Gold and Hinton (the "Joint Venture Committee"). Each of the
parties shall also nominate an alternate representative to the Joint
Venture Committee who shall represent it in the absence of an
appointed representative. Either of the parties may give notice to
the other party and replace any of its representatives to the Joint
Venture Committee, from time to time, and such replacement shall be
effective on the date of such other party's receipt of such notice.
(b) The Joint Venture Committee shall be responsible for approving work
plans and budgets (the "Work Plans" and "Budgets") and shall
determine the general policies and direction to be adopted by the
operator (the "Operator") in the conduct of operations in respect to
the Property. Each Work Plan and Budget shall be prepared in respect
of a period of time which is equal to or less than one year, shall
contain an itemized projection of costs to be incurred thereunder,
and shall detail the nature of the work to be performed thereby, the
expected schedule of implementation thereof and the expected
schedule of payments thereunder. The Operator shall be entitled to
submit, and the Joint Venture Committee shall be entitled to
approve, phased Work Plans and Budgets in which the implementation
of successive phases shall be dependent upon the results of previous
phases.
(c) The Joint Venture Committee shall meet on 20 days notice given by
the Operator and on 30 days notice given by the party which is not
the Operator (the "Non-Operator") and the Joint Venture Committee
shall meet at least once in each calendar year. Any notice in
respect of such meeting shall include an agenda of items to be
discussed at the meeting. Upon receipt of such notice, a party may
give notice to the other party of items to be added to the agenda,
provided, however, that an item may not be added to the agenda,
unless such notice to add such item is given on or before the tenth
day prior to such meeting. Except by a unanimous vote of both
parties, the Joint Venture Committee shall not decide upon matters
at a meeting not included in the agenda for such meeting.
(d) Decisions of the Joint Venture Committee shall be by majority vote.
Each party's representative shall be entitled to a vote equal to the
percentage Participating Interest held by such party. In the event
of a deadlocked vote, the Operator shall cast a deciding vote.
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3.3 OPERATOR
(a) Yukon Gold shall be the Operator of the Property upon formation of a
Joint Venture. After Yukon Gold has had its full opportunity to earn
the 75% interest, if the Non-Operator holds a greater Participating
Interest than the Operator, it shall be entitled to give notice to
the Operator and replace the Operator, provided, however, that such
replacement shall not be effective until the 30th day following the
receipt of such notice by the Operator.
(b) The Operator shall have exclusive charge of all operations and shall
conduct such operations in accordance with Work Plans and Budgets
approved by the Joint Venture Committee, provided that Ewing, Smith
and Wagner shall be entitled to carry out any work required on the
Property if the price for their proposed work is competitive to that
typical in the industry for work done on properties substantially
the same as the Property. All work done by the Operator on the
Property shall be done in accordance with good mining practice and
in compliance with all applicable laws and regulations.
(c) (i) The Operator shall be entitled to include in each Work
Plan and Budget and charge to the Joint Venture Account
an overhead fee for the performance of its obligations
and the discharge of its functions hereunder, which
shall equal 5% of all costs in respect of the Property.
(ii) In the event that commercial production is commenced
upon the Property, the overhead fee shall be negotiated
by the parties based upon the usual business practice
for an operating mine, it being the intention of the
parties that the Operator should neither procure a
profit nor suffer a loss as a result of its acting as
Operator hereunder.
(d) The Operator shall submit Work Plans and Budgets to the Joint
Venture Committee for approval within 90 days subsequent to the
formation of the Joint Venture or within 90 days subsequent to the
expiration of the Work Plan and Budget last in effect, as the case
may be. If the Joint Venture Committee should fail to approve the
Work Plan and Budget proposed by the Operator or the Operator should
fail to submit a Work Plan and Budget within such 90 day time
period, then a party which is not the Operator may, not more than 60
days thereafter, propose a Work Plan and Budget for the ensuing year
for consideration and approval by the Joint Venture Committee.
Should the Joint Venture Committee approve the Work Plan and Budget
proposed by such party, then the party which is not the Operator
shall temporarily replace the Operator for the purpose of forthwith
implementing and carrying out such approved Work Plan and Budget.
13
(e) A party that temporarily replaces the Operator pursuant to section
3.3(d) (the "Temporary Operator") shall be deemed to be the Operator
during the currency of the Work Plan and Budget in respect of which
the Temporary Operator is first operating (the "Temporary Operator's
First Work Plan and Budget") and shall perform all of the
obligations of the Operator during such period, including the
obligation of the Operator to submit a Work Plan and Budget to the
Joint Venture Committee for approval within 90 days subsequent to
the expiration of the Temporary Operator's First Work Plan and
Budget. The provisions of this section 3.3 shall apply mutatis
mutandis after the expiration of the Temporary Operator's First Work
Plan and Budget with the Temporary Operator continuing to act as the
Operator unless replaced in accordance with the provisions of this
section 3.3.
(f) The Operator shall provide the Non-Operator with monthly reports
during the term of this Agreement indicating the status of the work
being conducted on the Property, provided, however, that such
reports shall not be required during those periods in which there is
no work being conducted in respect of the Property. The Operator
shall provide the Non-Operator with reports within 70 days
subsequent to the end of each Work Plan summarizing significant
information acquired or learned as a result of such Work Plan. Such
reports shall include a statement of costs incurred and monies spent
in respect of such Work Plan. In the event that the Operator
receives, obtains or discovers any information in respect of the
Property that would significantly affect the value of the Property,
such information shall be forthwith disclosed to the Non-Operator.
After the commencement of commercial production, the Operator shall
provide the Non-Operator with monthly statements of ore and
minerals, if any, produced from the Property together with ores or
minerals, if any, in storage. Such reports shall indicate the share
of production and production in storage attributable to each party.
(g) The Non-Operator shall have access to the Property and to the
records of the Operator, at its sole risk and expense, to review
work being carried out on the Property or to review results obtained
from work carried out on the Property, as the case may be, provided,
however, that reasonable notice is given to the Operator and that
such access shall not unduly interfere with or disrupt the
activities of the Operator.
(h) The Operator shall pay all fees, annual rentals, assessments and
taxes, other than income taxes, in respect of the Property, which
shall be accounted for in the Work Plans and Budgets, and shall keep
the Property in good standing, free and clear of all liens, charges
and encumbrances arising from its activities and shall take and
continue such proceedings as are reasonable in the circumstances to
remove any liens, charges and encumbrances not arising from its
activities. The Operator shall also maintain such insurance coverage
protecting the parties from third party claims as may be required by
the Joint Venture Committee, provided, however, that should the
Joint Venture Committee fail to require the Operator to maintain any
particular insurance coverage the Operator shall maintain insurance
coverage in accordance with normal industry standards and practice
specifying the parties as named insured.
(i) The Non-Operator shall indemnify and save harmless the Operator from
and against a portion of all third party liabilities, in accordance
with its Participating Interest at the time such liabilities are
incurred. Such indemnification and saving harmless of the Operator
shall not be provided in respect of losses or damages arising from
the Operator's failure to maintain such insurance coverage as may be
required in accordance with section 3.3(h) or arising from the bad
faith, wilful misconduct or gross negligence of the Operator,
provided, however, that the Operator shall in no event be considered
to be grossly negligent in respect of the interpretation of any
results in respect of a Work Plan. The reduction or conversion to a
royalty interest of a party's Participating Interest shall not
relieve a party of its share of such third party liabilities arising
out of operations conducted prior to such reduction or conversion,
including long term reclamation or remediation obligations,
irrespective of whether costs in respect of such liabilities accrued
before or after such reduction or conversion. A party's share of any
such liability shall be equal to its Participating Interest at the
time that such liability was incurred.
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3.4 PARTICIPATION, DILUTION AND CONVERSION
(a) Each party shall elect, within 30 days of receipt of an approved
Work Plan and Budget, whether or not to participate in the Work Plan
and Budget and fund its share of the costs. Failure to elect within
such 30 day time period shall be deemed to be an election not to
participate.
(b) The Operator shall provide, on a quarterly basis at least 30 days in
advance, monthly expenditure projections under each Work Plan and
Budget to the Non-Operator, provided the Non-Operator has elected to
contribute to such Work Plan and Budget. Each party that has elected
to contribute to such Work Plan and Budget (the "Participating
Party") shall advance funds representing its share of the projected
expenditures to a separate and new account to be designated by the
Operator (the "Joint Venture Account") on or before the later of the
first day of the month in which such funds are scheduled to be
expended and the expiry of the 30 day advance notice period. Failure
by a Participating Party to provide its share of such funds by such
date shall result in such party being deemed to have elected not to
participate in the current Work Plan and Budget and to have not
advanced any funds in respect of such Work Plan and Budget. The
expenditure projections shall include a description of the work
being proposed as well as the estimated costs required to fully
complete such work.
(c) If the Operator should incur expenditures in a month exceeding the
expenditure projection for that month then the Operator shall
provide an account of such overrun to the Non-Operator, provided the
Non-Operator is a Participating Party. Upon receipt of such account,
the Participating Parties shall advance to the Joint Venture
Account, within 30 days, funds representing their share of such
overrun, provided, however, that any expenditures made by the
Operator in excess of 120% of the total expenditure projection for
the Work Plan and Budget then in effect (the "Excess Expenditures")
shall be the sole responsibility of, and for the sole account of,
the Operator unless approved pursuant to this section 3.4(c). Excess
Expenditures shall be deemed to be approved if (i) unanimously
approved by the Joint Venture Committee, (ii) pertaining to a
Development Work Plan and Budget as defined in section 3.5(d) or
(iii) resulting from expenditures relating to matters that were
unanticipated or not certain to arise at the time of preparation of
the applicable Work Plan and Budget, including expenditures relating
to environmental or safety concerns and litigation with respect to
contractors retained by the Operator but excluding expenditures
relating to changes in a Work Program that have not been approved by
the Joint Venture Committee. Excess Expenditures approved pursuant
to this section 3.4(c) shall be included in the calculations
provided for under section 3.4(d).
15
(d) If either party (the "Defaulting Party") elects not to participate
or is deemed to have elected not to participate in a Work Plan and
Budget then the Defaulting Party shall have its Participating
Interest diluted, in accordance with the following formula, and such
party shall be entitled to participate in subsequent Work Plans and
Budgets only to the extent of its Participating Interest at the time
such subsequent Work Plans and Budgets are approved by the Joint
Venture Committee. A party's Participating Interest can be
calculated by dividing A by B and expressing the result as a
percentage, where A is the total of all funds advanced by that party
in respect of Work Plans and Budgets and such party's deemed
expenditures and B is the total of all funds advanced by both
parties in respect of Work Plans and Budgets and such parties'
deemed expenditures. Subject to section 2.7, the parties deemed
expenditures upon formation of the Joint Venture shall be as
follows:
Yukon Gold: $5,225,000
Hinton: $1,741,666
(e) Notwithstanding section 3.4(d), if a Defaulting Party had the right
to elect to participate and elected not to participate or was deemed
to have elected not to participate in a Work Plan and Budget and,
upon completion of such Work Plan, the Operator has not incurred
expenditures equal to at least 80% of the Budget, the Operator shall
forthwith notify the Defaulting Party of the Operator's failure to
incur such minimum expenditures under such Work Plan and Budget and
the Defaulting Party shall be entitled to pay its proportionate
share of the expenditures incurred by the Operator under such Work
Plan and Budget in accordance with its Participating Interest prior
to the implementation of such Work Plan and Budget. If such
proportionate share of such expenditures under such Work Plan and
Budget is paid by the Defaulting Party within 30 days of its receipt
of such notice from the Operator, the dilution suffered by the
Defaulting Party pursuant to the provisions of section 3.4(d), as a
result of the Defaulting Party's election or deemed election not to
participate in such Work Plan and Budget shall be deemed to have
never occurred and the Defaulting Party shall be deemed to have
paid, and the Operator shall be deemed not to have paid, such
proportionate share of such expenditures under such Work Plan and
Budget.
(f) Should Ewing, Smith, Wagner and Slack collectively, or Yukon Gold
have its Participating Interest reduced to a percentage less than
10%, then:
(i) such party (the "Royalty Holder") shall have its
Participating Interest converted to a 1.0% net smelter
returns royalty to be calculated and paid in accordance
with the provisions of Schedule B, attached hereto,
provided that a decision has been made to put the
Property into production;
(ii) the non-converting party (the "Owner") shall become the
owner of a 100% right, title and interest in and to the
Property, subject only to the Royalty Holder's 1.0% net
smelter returns royalty, Hinton's 2% net smelter returns
royalty as set out in section 4.1 of the Agreement; and
(iii) the Joint Venture shall be dissolved and the Joint
Venture Committee shall be disbanded, as of the date of
such conversion.
16
3.5 PROPERTY MATTERS
(a) Each party waives and renounces the benefit of all provisions of
law, as now in effect or as enacted in the future, relating to
actions of partition of real and personal property, and agrees that
it will not resort to any actions in law or in equity to partition
the real and personal property subject to this Agreement. In
addition, each party acknowledges (i) that dilution and conversion
of a Participating Interest is a fair means of measuring the
anticipated economic impact of non-participation in the applicable
circumstances referred to herein and (ii) that conversion to a
royalty can lead to an interest of greater value than the originally
held Participating Interest.
(b) The parties shall be entitled to (i) record their Participating
Interests in respect to the Claims comprising the Property and (ii)
register their Participating Interests in the Property. The parties
shall execute such documentation as may be required, from time to
time, to effect such transfers of title.
(c) Should the Operator wish to abandon any of the Claims comprising the
Property, it shall give the Non-Operator notice of its intention to
do so and the Non-Operator may thereafter give notice to the
Operator, within 30 days of the Operator's notice, electing to have
such Claims transferred to it. Should the Non-Operator make such an
election, the Operator shall forthwith execute any documentation
necessary to transfer such Claims to the Non-Operator and such
mineral properties shall be in good standing for a period of at
least 90 days from the date of the Operator's notice. If the
Non-Operator does not make such an election within such 30 day
period, the Operator may abandon such mineral properties. Subsequent
to such 30 day period, the definition of Property shall exclude such
Claims, and the Operator shall have no further obligations or
responsibilities in respect of such mineral properties, except for
those obligations and responsibilities in respect of environmental
laws arising in respect of operations conducted by the Operator
prior to such abandonment or transfer.
(d) Notwithstanding any other provision of this Agreement, the following
provisions of this section 3.5(d) shall apply in the event the
Operator recommends to the Joint Venture Committee, at any time, to
place any part of the Property into production. In the event the
Operator makes such recommendation, the Operator shall make
available to the Non-Operator all of the data and information relied
upon by the Operator in making such recommendation and the Joint
Venture Committee shall meet to consider such recommendation within
a period which is not less than 30 days and not more than 120 days
after the date on which the Operator's recommendation is received by
the Joint Venture Committee. The Joint Venture Committee shall
either approve or disapprove such recommendation or direct that
further study into the matter be undertaken by the Operator. If the
Joint Venture Committee should approve such recommendation then:
(i) the Joint Venture Committee shall forthwith determine
and approve a Work Plan and Budget that appears adequate
for purposes of bringing the Property into commercial
production (the "Development Work Plan and Budget"), and
17
(ii) each party shall have 90 days from the date of the
meeting of the Joint Venture Committee of which the
Development Work Plan and Budget was determined to elect
whether or not to contribute to the Development Work
Plan and Budget.
If a party elects not to participate or fails to elect within such
90 day period to contribute to a Development Work Plan and Budget,
then such party shall be deemed to have withdrawn as a Participating
Party and its Participating Interest shall be converted to a 1.0%
net smelter returns royalty to be calculated and paid in accordance
with the provisions of Schedule B attached hereto. Should a party
elect to participate in a Development Work Plan and Budget and
subsequently become a Defaulting Party pursuant to section 3.4(d),
then a Participating Party may elect (A) to have the Defaulting
Party's Participating Interest diluted, in accordance with section
3.4(d), (B) to give notice to the Defaulting Party insisting upon
participation by the Defaulting Party, in which event the
Participating party (1) shall have a lien and charge on the
Defaulting Party's share of all products produced from the Property
and on the Defaulting Party's Participating Interest to the extent
of the Defaulting Party's share of the applicable Budget (the
"Debt"), (2) shall have the right to collect the Debt as a debt by
any procedure authorized by law, including the right of foreclosure,
and (3) shall be paid interest on the Debt, which shall form part of
the Debt, at a rate per annum equal to the rate of interest (the
"Prime Rate") from time to time quoted by the Toronto Dominion Bank
as the reference rate of interest used by it to determine rates of
interest chargeable on Canadian dollar loans to its best commercial
customers payable on demand, plus 2% until paid, and the Prime Rate
for each month shall be deemed for the entire month to be the Prime
Rate on the first day of such month or (C) to have the fair market
value of the Defaulting Party's Participating Interest determined by
an independent appraiser appointed by mutual agreement of the
parties or, failing such agreement, by arbitration pursuant to the
Arbitration Act (Ontario) and to purchase such interest, if
satisfied that such determination is fair in the Participating
Party's sole discretion.
(e) Each party shall own and have the right, privilege and power to take
in kind and separately dispose of a portion of all products produced
from the Property, in accordance with its Participating Interest.
The Operator shall designate and notify the Non-Operator of the
points of delivery situate on the Property for the parties'
respective shares of such product and all costs in respect of such
product shall be for the joint account of the parties, until such
product is delivered to such points. After such product is delivered
to such points each party shall pay its own costs in respect of such
product. The Operator shall use its best efforts to ensure that each
party receives product of like quality.
3.6 WITHDRAWAL FROM JOINT VENTURE
(a) Either Yukon Gold or Hinton (the "Withdrawing Party") may, at any
time during the currency of the Joint Venture, voluntarily withdraw
from the Joint Venture and forfeit its right, title and interest in
and to the Property and its rights under this Agreement by giving
written notice of such withdrawal to the other party (the "Remaining
Party"), which notice shall indicate an effective date for such
withdrawal of not earlier than 90 days subsequent to the delivery of
such notice. In such event, subject to section 3.6(b).
18
(i) The Withdrawing Party shall:
(A) remain liable for its share of all amounts chargeable to
it, as well as its share of any liabilities and
obligations incurred hereunder by the Operator on behalf
of the Joint Venture up to the effective date of the
withdrawal,
(B) secure to the satisfaction of the Remaining Party its
share of the costs of reclaiming the Property, as
estimated at the effective date of withdrawal
considering all applicable laws and regulations and the
policies of any governmental, regulatory or other body
having jurisdiction,
(C) remain obligated under section 5.2 for a period of two
years after the effective date of the withdrawal,
(D) remain obligated to execute and deliver such documents
as may be necessary to evidence the forfeiture of its
Participating Interest to the Remaining Party, and
(E) not be entitled to any royalty hereunder;
(i) the Remaining Party shall become the owner of a
100% right, title and interest in and to the
Property as of the effective date of the
withdrawal; and,
(ii) the Joint Venture shall be terminated and the
Joint Venture Committee shall be disbanded, as of
the effective date of the withdrawal,
(iii) provided if Hinton is the Withdrawing Party and
provided it has satisfied the provisions of 3.6
(a) (i) (A) and (B), it shall be entitled to
retain the 2% net smelter royalty set out in
Schedule B hereto as long as it continues to
honour any other provisions of this agreement that
extend beyond withdrawal.
(b) Upon receipt of a notice of withdrawal pursuant to section 3.6(a),
the Remaining Party may give notice to the Withdrawing Party prior
to the effective date of the withdrawal electing to join in the
withdrawal, in which event the Joint Venture shall be terminated on
receipt of such notice by the Withdrawing Party, the assets of the
Joint Venture shall be forthwith liquidated and the proceeds
obtained from such liquidation shall be distributed in proportion to
each party's Participating Interest.
4. MISCELLANEOUS
4.1 HINTON ROYALTY
Hinton shall retain a 2.0% net smelter returns royalty to be calculated
and paid in accordance with the provisions of Schedule B attached hereto.
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4.2 YUKON PARENT BOARD OF DIRECTORS
While this Agreement remains in effect, Hinton shall be entitled to
recommend for appointment one member to the board of directors of Yukon Parent.
5. GENERAL PROVISIONS
5.1 NATURE OF RELATIONSHIP
In every case, the obligations of each party under this Agreement shall be
several and shall not be construed to be either joint or joint and several and
nothing herein shall be construed as creating a partnership between the parties.
Subject to sections 5.7 and 5.8(a), nothing contained in this Agreement shall be
construed so as to constitute a party an agent or legal representative of
another party. Except as otherwise specifically provided in this Agreement, a
party shall not have any authority to act for, or to assume any obligation or
responsibility on behalf of, any other party. Except as expressly provided in
this Agreement, each party shall have the free and unrestricted right to
independently engage in and receive the full benefits of any and all business
endeavours of any sort whatsoever not related to the Property and the area of
interest, whether or not competitive with the endeavours contemplated herein,
without consulting or inviting or allowing the other party any interest therein
and the legal doctrines of "corporate opportunity" or "business opportunity"
sometimes applied to joint venturers shall not apply in the case of such other
endeavours, as all fiduciary duties arising from the Joint Venture and owed by
one party to another have been specifically outlined in this Agreement
5.2 AREA OF INTEREST
The area of interest shall be deemed to comprise that area which is
included within ten (10) kilometres of the outermost boundary of the mineral
properties, which constitute the Property.
5.3 ADDITIONAL ACQUISITION
If at any time during the subsistence of this Agreement any party (in this
Article only called the "Acquiring Party") stakes directly or indirectly or
purchases any mining claim, licence, lease, grant, concession, permit, patent,
or other mineral property (in this Article 5 a "Mineral Property") located
wholly or partly within the area of interest referred to in Section 5.2, the
Acquiring Party shall forthwith give notice to the other parties of that staking
or acquisition and proof of the cost thereof and all details in the possession
of that party with respect to the nature of the property and the known
mineralization..
5.4 ELECTION TO ACQUIRE
Each other party may, within thirty (30) days of receipt of the Acquiring
Party's notice, elect, by notice to the Acquiring Party, to require that the
Mineral Property which was staked or otherwise acquired be included in and
thereafter form part of the Property for all purposes of this Agreement. If the
election is made, all the other parties shall reimburse the Acquiring Party for
that portion of the cost of staking or acquiring which is equivalent to their
respective Interests. If no other party makes the election within that period of
thirty (30) days, the Mineral Property, which was staked or acquired, shall not
form part of the Property and the Acquiring Party shall be solely entitled
thereto. Should any party acquire mineral claims that fall within the Area of
Interest prior to Yukon Gold earning a 75% interest in the Property, and should
Yukon Gold elect to have the claims included and form part of the Property if
acquired by other parties, the cost shall be born 100% by Yukon Gold and shall
be part of the Work Program Costs.
20
5.5 CONFIDENTIAL INFORMATION
All data and information provided to or received by the parties with
respect to the Property shall be treated as confidential. A party shall not
disclose such information to third parties whether by way of press release or
otherwise, unless the disclosure is required by law, stock exchange rules or a
regulatory authority having jurisdiction or the disclosure is consented to by
the other party (the "Non-Disclosing Party"); consent of such Non-Disclosing
Party shall not be unreasonably withheld or delayed in view of the parties'
timely disclosure obligations. Without limiting the foregoing, the
Non-Disclosing Party may reasonably withhold its consent to the issuance of a
press release where it has not been provided with an advance draft copy of such
press release. Where disclosure is required by law, stock exchange rules or a
regulatory authority having jurisdiction, a party shall, if permitted by such
law, stock exchange rule or regulatory authority, use its reasonable best
efforts to provide a copy of the information to be disclosed (the "Disclosure
Statement") to the Non-Disclosing Party in advance of its disclosure and make
reasonable changes to such Disclosure Statement as may be requested by the
Non-Disclosing Party.
5.6 GEOLOGICAL INTERPRETATIONS
No party (the "Reporting Party") shall be liable to another party (the
"Receiving Party") in respect of any opinions, findings, conclusions or other
non-factual information included by the Reporting Party in any report or other
document provided to the Receiving Party, whether included by negligence or
otherwise. Each party hereby indemnifies and saves harmless the other from and
against all suits, claims, demands, losses and expenses arising in respect of
the release by a Receiving Party of such non-factual information in such report
or other document to third parties, irrespective of whether such release was
consented to by the Reporting Party.
5.7 GST
Although each of the parties to this Agreement recognizes that it is
responsible to separately account and, where necessary, register for the federal
Goods and Services Tax (the "GST"), it is agreed and the parties hereto elect
that the Operator shall be the registrant for the GST with respect to this
Agreement and shall account for the GST on all properties, mineral interests and
goods and services acquired or supplied pursuant to the terms of this Agreement
with all such actions deemed to have been made by the Operator. The parties
hereto authorize the Operator to do such acts and execute such documents, and
shall themselves do such further acts and execute and deliver such further
documents, as may be reasonably necessary and desirable to give effect to the
election contained in this section 5.7.
5.8 ASSIGNEES, SUCCESSORS AND RELEASES
(a) (i) No party shall sell, transfer, assign or otherwise dispose of
(the "Sell") all or any portion of its right, title and
interest in and to the Property or its rights and obligations
under this Agreement (the "Interest") except:
21
(A) pursuant to an agreement in which the consideration is
expressed wholly in lawful money of Canada;
(B) as a single transaction not directly or indirectly part
of some other sale or purchase or agreement of any
nature whatsoever; and,
(C) otherwise in accordance with this section 5.8.
(ii) If any of Ewing, Smith, Wagner or Slack (the "Sellor")
receives a bona fide offer from a third party to Sell all or
any portion of its Interest (the "Offered Interest") and
intends to accept such offer (the "Offer"), the Sellor, prior
to accepting the Offer, shall give notice in writing to Yukon
Gold (the "Purchaser") of the Offer together with a copy of
the Offer, which shall be in written form (the "Offer
Notice"). Ewing, Smith, Wagner and Slack may sell to each
other without complying with this provision.
(iii) An Offer Notice shall be deemed to constitute an offer (the
"1st Offer") by the Sellor to the Purchaser to Sell the
Offered Interest on the terms and conditions set out in the
Offer Notice and shall be open for acceptance by the Purchaser
for a period of 60 days from the date of its receipt by the
Purchaser. Such Offer Notice shall clearly identify the person
or persons making the Offer and include such information as is
known by the Sellor about such person or persons.
(iv) If the Purchaser gives notice to the Sellor electing to accept
the 1st Offer within the 60 day period, such acceptance shall
constitute a binding agreement of purchase and sale between
the Sellor and the Purchaser in respect of the Offered
Interest on the terms and conditions set out in the Offer
Notice.
(v) If the Purchaser does not accept the 1st Offer within the 60
day period, the Sellor may complete a sale and purchase of the
Offered Interest to the person or persons making the Offer on
the terms and conditions set out in the Offer Notice and such
sale and purchase shall be completed within 100 days of the
expiration of the right of the Purchaser to accept the 1st
Offer provided for in this section 5.8(a), failing which the
Sellor must again comply with the provisions of this section
5.8(a) in respect to a sale and purchase of the Offered
Interest.
(vi) The Sellor may Sell all or any portion of its Interest to an
affiliate of the Sellor. For purposes of clarity, such sale,
transfer, assignment or disposal is not subject to section
5.8(a), provided, however, that if control over such affiliate
is immediately transferred to a third party or if such
transaction is merely an attempt at avoiding the provisions of
section 5.8(a) then the provisions of section 5.8(a) shall be
deemed to apply to such transaction and such transaction shall
have no effect, unless the Purchaser subsequently declines to
exercise its right to acquire the Offered Interest pursuant to
section 5.8(a).
22
(vii) For purposes of this Agreement, "affiliate" is used to
indicate a relationship between: (A) corporations where one of
them owns or holds, directly or indirectly, voting securities
carrying a majority of the voting rights attached to all
outstanding voting securities of the other (if two
corporations ==== are affiliated with another corporation by
reason of the percentage of their voting securities held or
owned, directly or indirectly, by such other corporation, then
they shall be deemed to be affiliated with each other); (B) a
person and a corporation where the person, the person's = =
spouse or, if living in the same home as the person, the
person or the spouse's relative, beneficially owns, directly
or indirectly, voting securities carrying a majority of the
voting rights attached to all outstanding voting securities of
the corporation; and (C) one person and another person where
the other person is the spouse, or any relative of the person
or the spouse where the spouse or relative has the same home
as the person.
(b) This Agreement shall be binding upon and enure to the benefit of the
parties' successors and permitted assignees, provided, however, that
any assignment by the Sellor of all or any portion of its rights or
obligations hereunder shall include a provision whereby the New
Party agrees to abide by the terms of this Agreement, including the
provisions of this section 5.8, and assume all of the liabilities
and obligations of the Sellor under this Agreement, whether accruing
before or becoming due after such assignment. The Sellor and New
Party shall execute such agreements or documents as may be
reasonably required in this regard by the other party to this
Agreement (the "Other Party").
(c) No assignment shall serve to release or discharge the Sellor from
any of the said liabilities or obligations, unless all of the rights
and obligations of the Sellor have been assigned to the New Party
and the Other Party has released the Sellor.
(d) Nothing in this section 5.8 shall prevent a party from soliciting
offers from third parties to purchase its Interest. Notwithstanding
the foregoing part of this section 5.8(d) and for purposes of
clarity, neither Yukon Gold nor any of Ewing, Smith Wagner or Slack
shall make offers to third parties to sell its Interest if the
effect of such an offer would avoid the application of the
provisions of section 5.8(a).
5.9 FORCE MAJEURE
(a) No party hereto shall be liable under this Agreement to another
party for any failure to perform any of its obligations caused by or
arising out of any act not within the control of the party,
excluding lack of funds, but including, without limitation, acts of
God, strikes, lockouts or other industrial disputes, acts of a
public enemy, riots, fire, storm, flood, explosion, government
restriction, failure to obtain any approvals required from
regulatory authorities, including environmental protection agencies,
unavailability of equipment, interference of persons primarily
concerned about environmental or native rights issues and any other
cause, whether of the kind enumerated above or otherwise, which is
not reasonably within the control of the party (the "Event of Force
Majeure").
(b) No right of a party shall be affected, and no party shall be found
in default, under this Agreement by the failure of such party to
meet any term or condition of this Agreement where such failure is
caused by an Event of Force Majeure and, in such event, all times
specified or provided for in this Agreement shall be extended by a
period commensurate with the period during which the Event of Force
Majeure causes such failure.
23
(c) A party affected by an Event of Force Majeure shall take all
reasonable steps within its control to remedy the failure caused by
such event, provided, however, that nothing contained in this
section 5.9 shall require any party to settle any labour or
industrial dispute or to test the constitutionality of any law
enacted by any Legislature or Parliament of or within Canada.
(d) Any party relying on the provisions of this section 5.9 shall
forthwith give notice to the other party of the commencement of an
Event of Force Majeure and of its end.
5.10 NOTICES
(a) Any notice, direction or other communication (the "Notice") given
hereunder, irrespective of whether such Notice was required,
permitted or otherwise provided pursuant to or in respect of this
Agreement, shall be in writing and:
(i) if delivered, shall be deemed to have been given and received
on the day it was delivered;
(ii) if mailed, shall be deemed to have been given and received on
the seventh business day following the day of mailing, except
in the event of disruption of postal services in which event
such Notice shall be deemed to have been given and received
only when actually received;
(iii) if sent by facsimile shall be deemed to have been given and
received on the day it was so sent, except where sent outside
of normal business hours (9:00 a.m. to 5:00 p.m. local time at
the place of receipt), in which event such Notice shall be
deemed to have been given and received on the next following
business day; and
(iv) for greater clarity, Hinton will be deemed to have been given
and received Notice effective upon the first of Ewing, Smith,
Wagner and Slack receiving Notice pursuant to this section
5.10.
(b) Notices in each case shall be addressed as follows:
(i) if to Yukon Gold or Yukon Parent, at:
Suite 408, 347 Bay Street
Toronto, Ontario, M5H 2R7
Attention: President
Fax: (416) 865-1250
24
with a copy to:
Macleod Dixon LLP
Suite 3900, Canada Trust Tower
BCE Place, 161 Bay Street
Toronto, Ontario M5J 2S1
Attention: Richard Lachcik
Fax: (416) 360-8277
(ii) if to Hinton, to each of:
Richard Ewing
Box 111
Mayo, Yukon M0B 1M0
Fax: (867) 996-2927
James B. Smith
2726 Mara Drive
Coquitlam, BC V3C 5R9
Fax: (604) 942-3905
Robert Wagner
Site 1, Box 7
Keno City, Yukon Y0B 1J0
Fax: (867) 995-2892
J. Malcolm Slack
5920 Winston Churchill Blvd., R.R. #1
Erin, Ontario N0B 1T0
Fax: (519) 833-7515
25
Any party may give, at any time, notice in writing to the other
party of any change of address of the party giving such Notice and,
from and after the giving of such Notice, the address or addresses
therein specified shall be deemed to be the address of such party
for the purpose of giving Notice hereunder.
(c) Any Notice given hereunder to the Joint Venture Committee shall be
in writing and shall be delivered, mailed or sent to Yukon Gold and
Hinton, in accordance with this section 5.10.
5.11 INTERPRETATION
(a) This Agreement shall be interpreted and governed according to the
laws of the Province of Ontario. The parties hereby attorn to the
jurisdiction of the courts of the Province of Ontario and agree to
submit any disputes in respect of this Agreement to the courts of
the Province of Ontario.
(b) All references in this Agreement to monetary amounts are expressed
in Canadian currency.
(c) In this Agreement, headings have been inserted for ease of reference
and may not accurately describe the provisions that follow them.
Consequently, headings shall not be used for purposes of
interpreting this Agreement.
(d) In this Agreement, the singular encompasses the plural and vice
versa, and the masculine encompasses the feminine and vice versa.
(e) In this Agreement, mining properties, rights or interests into which
any of the Claims are converted by process of law or otherwise are
included in the definition of Property.
5.12 OPTION TO PURCHASE
At anytime following the formation of the Joint Venture as defined
in Article 2.7 hereof and provided Yukon Gold has a 75% Earned
Interest in the Property, Yukon Gold shall have the option to
purchase the remaining 25% interest held by the Hinton Syndicate.
The purchase price shall be $5,000,000 and the Hinton Syndicate's
NSR shall be increased from 2% to 3% following the buy out. This
option shall remain in effect until the Hinton Syndicate is required
to commit to funding their interest in the Joint Venture at which
time Yukon Gold must exercise the option or it shall expire and be
of no further force or effect.
5.13 WHOLE AGREEMENT AND FURTHER ASSURANCES
(a) This Agreement, including Schedules [A, B, and C] attached hereto,
constitutes the whole of this Agreement and encompasses the entire
agreement between Yukon Gold, Yukon Parent and Hinton pertaining to
the Property. This Agreement supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or
written, between Yukon Gold and Hinton, and there are no warranties,
representations or other agreements between Yukon Gold and Hinton in
connection with the Property, except as specifically set forth
herein.
26
(b) The parties agree to execute and cause to be executed such other
documents, and take and cause to be taken such other actions, as are
reasonably necessary:
i. to secure and give effect to the rights and obligations
granted and assumed hereunder; and
ii. to maintain the Property in good standing.
5.14 ENVIRONMENTAL RECLAMATION
(a) Notwithstanding any other provision in this Agreement, Hinton shall
remain liable and Yukon Gold shall have no obligations in respect of
environmental liabilities incurred or arising as a result of the
state or condition of the Hinton Claims prior to the effective date
of the Hinton/Yukon Gold Agreement.
(b) For purposes of section 5.13(a), environmental liabilities shall
mean any and all damages (including but not ==== limited to
exemplary and punitive damages), losses, costs, expenses,
liabilities and obligations of whatsoever kind, direct or indirect
(including but not limited to fines, penalties, interest, lawyers'
fees and expenses, damages for personal injury, death, property
damage and economic loss, including but not limited to reduction in
the value of the Property (or any other person's property)) incurred
or arising as a result of the state or condition of the Property,
including costs relating to the removal, treatment, storage and
disposal of hazardous substances and the remediation, clean-up,
restoration, abatement, reclamation or other securing or remedial
action in respect of the Property (or any other person's property)
under or for breach of or failure to comply with any and all
environmental laws, whether statutory, in contract or in tort,
including negligence and strict liability, or howsoever otherwise
arising.
(c) For purposes of sections 2.5(b), 3.5(c) and 5.13(b):
(i) environmental laws shall mean any and all federal, territory
and local laws, statutes, rules, regulations, ordinances,
bylaws, orders, permits, licences, approvals, policies and
consents and the common law to the extent that any of the
foregoing regulate, ascribe, provide for or pertain to
liabilities or obligations in relation to the existence, use,
production, manufacture, processing, distribution, production,
transport, handling, storage, removal, treatment, disposal,
emission, discharge, migration, seepage, leakage, spillage or
release of hazardous substances or the construction,
alteration, use or operation, demolition or decommissioning of
any facilities or other real or personal property in relation
to the foregoing or otherwise in relation to the protection of
the life, health or safety of persons, or to the protection of
property or the environment, including but not limited to air,
soil, surface water, ground water, biota, wildlife and
personal or real property; and
(ii) hazardous substances shall mean any substance that:
(A) when released to the natural environment is likely to
cause or does cause, immediately or at some future time,
material harm or degradation to the natural environment
or any risk to human health and, without restricting the
generality of the foregoing, includes any pollutant,
contaminant, waste or hazardous waste, or any "dangerous
goods", "hazardous chemical", "hazardous substance" or
"hazardous waste", as may be defined by environmental
laws; or
27
(B) exhibits characteristics of flammability, corrosivity,
reactivity or toxicity.
5.15 SUPERSEDES
This Agreement supersedes all prior agreements between the parties
relating to the Property or part thereof.
5.16 COUNTERPARTS
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument. Execution and delivery of this Agreement by exchange of
facsimile copies bearing facsimile signature of a party shall constitute a valid
and binding execution and delivery of this Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF the parties have executed this Agreement effective
as of the date first written above,
On his own behalf and on behalf of the YUKON GOLD CORP.
Hinton Syndicate:
By:
- ------------------------------ --------------------------------
Richard Ewing Warren Holmes
President
- ------------------------------
James Smith
- ------------------------------
Robert Wagner YUKON GOLD CORPORATION, INC
By:
- ------------------------------ --------------------------------
J. Malcolm Slack Warren Holmes, Chairman and CEO
28
SCHEDULE A
New Claims List
Claim Status Report June 29, 2005
Claim Name & No. Grant No. Expiry Date Registered Owner % Owned NTS No's
Lock 1 - 64 YC32229 - YC32292 8/23/2005 Yukon Gold Corporation 100.00 105M14
R Moon 1 YC10957 9/9/2005 Yukon Gold Corp 100.00 105M14 F
R Moon 2 - 12 YC10958 - YC10968 9/9/2005 Yukon Gold Corp 100.00 105M14
R Red 1 - 9 YC10948 - YC10956 9/9/2005 Yukon Gold Corp 100.00 105M14
Hinton 31 - 32 YC00431 - YC00432 11/1/2007 Yukon Gold Corp 100.00 105M14 F
Hinton 33 - 34 YC00433 - YC00434 11/1/2007 Yukon Gold Corp 100.00 105M14
Hinton III 8 YC01159 11/1/2007 Yukon Gold Corp 100.00 105M14
Hinton V 7 YC01423 11/1/2007 Yukon Gold Corp 100.00 105M14
Hinton III 1 - 7 YC01152 - YC01158 11/1/2008 Yukon Gold Corp 100.00 105M14
Hinton III 9 - 14 YC01160 - YC01165 11/1/2008 Yukon Gold Corp 100.00 105M14
Hinton IV 2 - 6 YC01425 - YC01429 11/1/2008 Yukon Gold Corp 100.00 105M14
Hinton V 1 - 4 YC01417 - YC01420 11/1/2008 Yukon Gold Corp 100.00 105M14
Hinton V 5 YC01421 11/1/2008 Yukon Gold Corp 100.00 105M14 P
Hinton V 6 YC01422 11/1/2008 Yukon Gold Corp 100.00 105M14
Hinton IV 1 YC01424 11/1/2009 Yukon Gold Corp 100.00 105M14
Key 16 YC10624 11/1/2009 Yukon Gold Corp 100.00 105M14
Key 18 YC10626 11/1/2009 Yukon Gold Corp 100.00 105M14
Key 27 - 28 YC10627 - YC10628 11/1/2009 Yukon Gold Corp 100.00 105M14
Key 30 YC10630 11/1/2009 Yukon Gold Corp 100.00 105M14
Key 35 - 42 YC10635 - YC10642 11/1/2009 Yukon Gold Corp 100.00 105M14
R Granite 1 - 23 YC11769 - YC11791 3/9/2010 Yukon Gold Corp. Inc. 100.00 105M14
Hinton II 12 YC01137 11/1/2010 Yukon Gold Corp 100.00 105M14
Hinton II 23 YC01148 11/1/2010 Yukon Gold Corp 100.00 105M14
Key 29 YC10629 11/1/2010 Yukon Gold Corp 100.00 105M14
Hinton 1 - 2 YC00401 - YC00402 11/1/2011 Yukon Gold Corp 100.00 105M14 F
Hinton 3 - 30 YC00403 - YC00430 11/1/2011 Yukon Gold Corp 100.00 105M14
Hinton 35 YC01091 11/1/2011 Yukon Gold Corp 100.00 105M14 P
Hinton II 1 - 11 YC01126 - YC01136 11/1/2011 Yukon Gold Corp 100.00 105M14
Hinton II 13 - 22 YC01138 - YC01147 11/1/2011 Yukon Gold Corp 100.00 105M14
Hinton II 24 - 26 YC01149 - YC01151 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 11 - 12 YC10619 - YC10620 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 14 YC10622 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 43 YC10643 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 45 YC10645 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 47 YC10647 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 49 - 50 YC10649 - YC10650 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 57 - 62 YC10651 - YC10656 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 89 YC10677 11/1/2011 Yukon Gold Corp 100.00 105M14
Key 1 - 10 YC10609 - YC10618 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 13 YC10621 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 15 YC10623 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 17 YC10625 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 31 - 34 YC10631 - YC10634 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 44 YC10644 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 46 YC10646 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 48 YC10648 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 63 - 82 YC10657 - YC10676 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 90 - 92 YC10678 - YC10680 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 100 - 101 YC10693 - YC10694 11/1/2012 Yukon Gold Corp 100.00 105M14 F
Key 102 - 103 YC10695 - YC10696 11/1/2012 Yukon Gold Corp 100.00 105M14
Key 104 YC10697 11/1/2012 Yukon Gold Corp 100.00 105M14 F
CLAIM STATUS: ACTIVE & PENDING OWNER(S): YUKON GOLD CORP REGULATION TYPE: QUARTZ
Total claims selected: 273
Left column indicator legend: Right column indicator legend:
R - Indicates the claim is on one or L - Indicates the Quartz Lease. D- Indicates Placer Discovery
more pending renewal(s).
P - Indicates the claim is pending. F - Indicates Full Quartz fraction (25+ acres) C - Indicates Placer
Codiscovery
P - Indicates Partial Quartz fraction (<25 acres) B - Indicates Placer Fraction
SCHEDULE B
TO
HINTON / YUKON GOLD AGREEMENT
DATED July 7, 2002
Net Smelter Return Royalty
1. The NSR which may be payable to a party (the "Payee") by a party (the
"Payor") shall be calculated and paid to the Payee in accordance with the terms
of this Schedule.
2. The NSR shall be calculated on a calendar quarterly basis.
3. The following words shall have the following meanings:
3.1 "Gross Revenue" shall mean the aggregate of the following amounts
received in each quarterly period:
(a) (i) all revenue received by the Payor in such quarter
from arm's length purchasers of mineral products, or
(ii) the fair market value of all mineral products sold by
the Payor in such quarter to persons not dealing at
arm's length with the Payor; and
(b) any proceeds of insurance received in such quarter due to
losses or damages in respect to mineral products.
3.2 "Permissible Deductions" shall mean the aggregate of the
following charges (to the extent not previously deducted or
accrued in computing Gross Revenue) that are paid in each
quarterly period:
(a) sales charges levied by any sales agent in respect to the sale
of mineral products;
(b) all costs, expenses and charges of any nature whatsoever which
are either paid or incurred by the Payor in connection with
the refinement or beneficiation of mineral products after
leaving the Property, including all weighing, sampling,
assaying and representation costs, metal losses, any umpire
charges and any penalties charged by the processor, refinery
or smelter, and;
(c) all other insurance costs in respect of mineral products;
provided: (i) that where a cost or expense otherwise constituting a
Permissible Deduction is incurred by the Payor in a transaction with a
party with whom it is not dealing at arm's length (as that term is
defined in the Income Tax Act (Canada)), such costs or expenses may be
deducted, but only as to the lesser of the actual cost incurred by the
Payor and the fair market value thereof considering the time of such
transaction and under all the circumstances thereof; and (ii)
transportation costs and milling costs at another site, prior to the
smelting and refining shall not be included in the definition of
Permissible Deductions.
3.3 "Net Smelter Returns" shall mean Gross Revenue less
Permissible Deductions in respect to such quarter.
3.4 "NSR" shall mean Net Smelter Returns.
4. The NSR shall be calculated and paid within 30 days after the end of each
calendar quarter ending March 31, June 30, September 30 and December 31 of each
year. Smelter settlement sheets, if any, and a statement setting forth
calculations in sufficient detail to show how the payment was derived (the
"Statement") shall be submitted with the payment.
5. In the event that final amounts required for the calculation of the NSR are
not available within the time period referred to in paragraph 4 of this
Schedule, then provisional amounts shall be established, the NSR shall be paid
on the basis of such provisional amounts and positive or negative adjustments
shall be made to the payment in the succeeding quarter, as necessary.
6. All NSR payments shall be considered final and in full satisfaction of all
obligations of the Payor with respect thereto, unless the Payee delivers to the
Payor a written notice (the "Objection Notice") describing and setting forth a
specific objection to the calculation thereof within 60 days after receipt by
the Payee of the Statement. If the Payee objects to a particular Statement as
herein provided, the Payee shall, for a period of 60 days after the Payor's
receipt of such Objection Notice, have the right, upon reasonable notice and at
a reasonable time, to have the Payor's accounts and records relating to the
calculation of the NSR in question audited by the auditors of the Payor. If such
audit determines that there has been a deficiency or an excess in the payment
made to the Payee, such deficiency or excess will be resolved by adjusting the
next monthly NSR payment due hereunder. The Payee shall pay all the costs and
expenses of such audit unless a deficiency of 2 1/2% or more of the amount due
is determined to exist. The Payor shall pay the costs and expenses of such audit
if a deficiency of 2 1/2% or more of the amount due is determined to exist. All
books and records used and kept by the Payor to calculate the NSR due hereunder
shall be kept in accordance with Canadian generally accepted accounting
principles. Failure on the part of the Payee to make claim against the Payor for
adjustment in such 60 day period by delivery of an Objection Notice shall
conclusively establish the correctness and sufficiency of the Statement and NSR
payment in respect of the applicable quarter.
7. All profits and losses resulting from the Payor engaging in any commodity
futures trading, option trading, metals trading, gold loans or any combination
thereof, and any other hedging transactions with respect to mineral products
(collectively, "Hedging Transactions") are specifically excluded from
calculations of the NSR pursuant to this Schedule, it being understood by the
parties that both the Payor and Payee may engage in speculative hedging trading
activities for their own account. All Hedging Transactions by the Payor and all
profits or losses associated therewith, if any, shall be solely for the Payor's
account, irrespective of whether or not mineral products are delivered in
fulfilment of such obligations. When necessary to give effect to the provisions
of this paragraph 7, Gross Revenue from mineral products subject to Hedging
Transactions by the Payor shall be determined pursuant to subclause 3.1(a)(ii),
rather than 3.1(a)(i) hereof.
2
8. Fair market value shall be determined by using, for gold, the quarterly
average price of gold which shall be calculated by dividing the sum of all
London Bullion Market Association P.M. Gold Fix prices reported for the calendar
quarter in question by the number of days for which such prices were quoted and,
for silver and other metals, the quarterly average price which shall be
calculated by dividing the sum of all New York Commodity Exchange ("COMEX")
prices reported for silver and the other metal quoted by and at the closing of
COMEX for the calendar quarter in question by a number of days for which such
prices were quoted, less, in each case, an amount reasonably equivalent to the
deductions permitted by clause 3.2 hereof.
3
SCHEDULE C
PERCENTAGE INTEREST OF THE MEMBERS OF THE HINTON SYNDICATE
Richard Ewing 51%
James Smith 16%
Robert Wagner 17%
J. Malcolm Slack 16%
TOTAL 100%
EXHIBIT 1
HINTON SYNDICATE REPORT
JULY 7, 2002 TO MARCH 31, 2005
JULY 7/02 TO JULY JULY 7/03 TO JULY
6/03 6/04 JULY 7/04 TO MARCH 31/05
TYPE TOTAL TOTAL
WAGES-FIELD 24,300.00 78,817.27 95,400.17
WAGES-OFFICE & EXPEDITING 7,110.95 11,900.02
MANAGEMENT 78.25 11,727.56
OFFICE-DRAFTING & PRINTING 1,113.87 505.08
OFFICE-GENERAL 748.86 275.95 163.13
FIELD-EQUIPMENT 6,984.92 10,691.28 36,424.17
FIELD-TRAVEL & FREIGHT 3,779.09 2,904.69 3,258.38
FIELD-ROOM & BOARD 6,619.19 4,433.08 12,117.29
FIELD-TRUCK 4,644.05 4,017.51 3,607.33
ASSAYING 28,084.87 3,374.47 28,807.57
CLAIM COSTS-FEES 10,192.75 2,756.59 359.52
MAY 28/04 BAL OF CASH CALL PAYMENT 73,496.93 (73,496.93)
JUNE 28/04 CASH CALL PAYMENT 200,000.00 (200,000.00)
FINAL REPORTS 12,065.93
TOTAL 85,353.73 389,070.84 (57,160.78)
ARCHER CATHRO ARCHER CATHRO
ROAD BUILDING 5,780.68 80,678.00 105,639.49
TRENCHING 37,856.60 5,457.00
CAMP 8,720.50 7,032.48
SUPERVISION 3,424.00 6,059.00
MOB 1,177.00 0.00
EQUIPMENT 160.50 0.00
MOB & DEMOBING 42,393.09 1,498.00 1,476.60
CLAIM STAKING 2,808.75 0.00
EQUIPMENT RENTAL 927.30 1,765.50
TOTAL 48,173.77 137,250.65 127,430.07
EWING TRANSPORT EWING TRANSPORT
JARDINE LLOYD THOMPSON CANADA INC.
INSURANCE Sep/02-Sep/05 5,000.00 7,020.00 6,480.00
NUINSCO RESOURCES LTD
CLAIM COSTS-ASSESSMENT FILING 2,375.00 0.00
MEDALLION CAPITAL CORP.
CLAIM COSTS-FEES 2,080.00 0.00
TOTAL EXPENDITURES 138,527.50 537,796.49 76,749.29 753,073.28
ADMINISTRATION-PROJECT 10% on first $250,000 25,000.00
ADMINISTRATION-PROJECT 5% on $503,073.28 25,153.66
TOTAL JULY 7/02 TO MARCH 31/05 803,226.94