Exhibit 10.1
EXPLORATION EARN-IN AGREEMENT
DATED EFFECTIVE
FEBRUARY 10, 2016
BETWEEN
LITHIUM CORP.
AND
1032701 B.C. LTD.
TABLE OF CONTENTS
PAGE
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1. REQUIRED APPROVALS................................................... 1
1.1 Stock Exchange Approval..................................... 1
1.2 Assistance.................................................. 1
1.3 Exclusivity................................................. 2
2. LOCATION OF CLAIMS AND GRANT OF EXPLORATION, DEVELOPMENT AND
EARN IN RIGHTS....................................................... 2
2.1 Property.................................................... 2
2.2 Grant of Earn-In Right...................................... 2
2.3 Timing, Manner, Nature and Extent of Activities at
Manager's Discretion........................................ 4
2.4 Execution of Agreement...................................... 4
3. ACQUISITION AND TRANSFER OF INTEREST AND NSR......................... 4
3.1 Completion of Initial Earn-In Option........................ 4
3.2 Nevada Subsidiary........................................... 5
3.3 Formation of Jointly Owned Company.......................... 5
3.4 Net Smelter Return.......................................... 5
3.5 NSR Buy-Back................................................ 5
3.6 NSR Transfer................................................ 6
4. REPRESENTATION, WARRANTIES, COVENANTS AND CONDITIONS................. 6
4.1 Representations of Lithium.................................. 6
4.2 Representations of Purchaser................................ 8
4.4 Mutual Conditions........................................... 9
4.5 Conditions of Purchaser..................................... 10
4.5 Conditions of Lithium....................................... 10
5. TERMINATION OF AGREEMENT............................................. 10
5.1 Termination by Purchaser.................................... 10
5.2 Default by Purchaser........................................ 11
6. PARTICIPATION FOLLOWING EARN-IN...................................... 11
6.1 Participation in Expenditures............................... 11
6.2 Dilution.................................................... 12
6.3 Joint Venture Manager....................................... 12
6.4 Annual Programs and Budgets................................. 12
6.5 Management Committee........................................ 12
6.6 Mine Construction........................................... 12
6.7 Data........................................................ 12
6.8 Contribution................................................ 12
6.9 Minority Party Review of Annual Programs and Budgets........ 12
6.10 Tax Partnership Option...................................... 13
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7. OPERATIONS DURING EARN-IN PERIOD..................................... 13
7.1 Operations.................................................. 13
7.2 Exploration and Development Decisions....................... 13
7.3 Compliance with Laws During Earn-In Period.................. 13
7.4 Timely Payment.............................................. 13
7.5 Claim Rights................................................ 13
7.6 Data........................................................ 14
7.7 Right to Visit Property..................................... 14
7.8 Title to the Property; Liens................................ 14
7.9 Reclamation Bonds........................................... 14
7.10 Standard of Care............................................ 15
8. FORCE MAJEURE........................................................ 15
9. AREA OF INTEREST..................................................... 15
9.1 Area of Interest............................................ 15
9.2 Property Acquisition Procedures............................. 15
9.3 Property Acquisition Costs.................................. 16
9.4 Additional Interests........................................ 16
9.5 Acquisition and Quitclaim of Property Interests............. 16
9.6 After-Acquired Interest Within Area of Interest............. 16
10. ASSIGNMENT........................................................... 16
10.1 Assignment by Purchaser..................................... 16
11. INDEMNIFICATION...................................................... 17
11.1 Indemnification by Purchaser................................ 17
11.2 Indemnification by Lithium.................................. 17
11.3 Indemnification Procedures.................................. 18
12. CONFIDENTIALITY...................................................... 19
12.1 Confidentiality............................................. 19
12.2 Disclosure.................................................. 19
12.3 Own Analysis................................................ 19
13. ENTIRE AGREEMENT..................................................... 19
14. DISPUTE RESOLUTION................................................... 19
15. GENERAL.............................................................. 20
15.1 Notice...................................................... 20
15.2 Further Assurances.......................................... 21
15.3 Counterparts................................................ 21
15.4 US Dollars.................................................. 21
15.5 Governing Law............................................... 21
15.6 Third Party Beneficiaries................................... 21
15.7 Severability................................................ 21
15.8 No Implied Covenants........................................ 22
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15.9 Amendment................................................... 22
15.10 Corporate Opportunity....................................... 22
15.11 Rule Against Perpetuities................................... 22
15.12 No Partnership.............................................. 23
EXHIBITS
Exhibit A - Claims
Exhibit B - Definitions
Exhibit C - Net Smelter Returns Royalty
Exhibit D - Area of Interest
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EXPLORATION EARN-IN AGREEMENT
THIS EXPLORATION EARN-IN AGREEMENT (the "Agreement") is made and entered into
effective as of February 10, 2016 (the "Agreement Date"), by and between LITHIUM
CORP. ("Lithium"), a Nevada corporation, whose address is 1031 Railroad Street,
Ste 102B, Elko, Nevada, 89801, United States and 1032701 B.C. LTD.,
("Purchaser"), a British Columbia corporation, whose address is 885 West Georgia
Street, Suite 900, Vancouver, British Columbia, V6C 3H1.
RECITALS
A. Lithium is the owner of exploration data, and has properly located and timely
filed the location certificates and required maps for twenty six existing 80
acre unpatented association placer claims covering a total of approximately 2080
acres and seventy two newly staked 80 acre unpatented association placer claims
covering approximately 5760 acres for a total of approximately 7840 acres
(collectively, the "Claims") all of which are located in Esmeralda County,
Nevada. The Claims are listed on Exhibit A hereto and the Claims and the other
property interests and all other assets and activities within the Area of
Interest (as defined in Section 9.1) form the Fish Lake Valley project (the
"Project").
B. Lithium desires to grant to and Purchaser desires to acquire, during the
period commencing on the Effective Date (as such term is defined in Exhibit B to
this Agreement) and for so long thereafter as this Agreement remains in effect
(the "Earn-In Period"), the exclusive right to explore, evaluate and develop the
Project, and to earn up to a 100% undivided interest in the Project, and all
easements, rights-of-way, water rights, after-acquired property, information,
data, contract rights and other real and personal property, tangible and
intangible, associated therewith (collectively, with the Project, the
"Property"), pursuant to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, for and in consideration of the Initial Payment (as defined in
Section 1.2(a)), and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confirmed, and the mutual
promises, covenants and conditions herein contained and recited, Lithium and
Purchaser agree as follows:
1. REQUIRED APPROVALS
1.1 Stock Exchange Approval The issuance of the Consideration Shares is
subject to the approval of the Exchange, and the completion of a Going Public
Transaction. Purchaser shall use its best efforts to complete a Going Public
Transaction, and obtain the approval of the Exchange, on or before May 6, 2016.
1.2 Assistance. Either party will use reasonable commercial efforts to
assist the party in obtaining all approvals required to be obtained, and with
the completion and filing of all reports and documents required to be completed
and filed, in respect of the transactions contemplated by this Agreement.
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1.3 Exclusivity. During the period following execution of this Agreement
until the Effective Date, Lithium agrees not to, directly or indirectly,
solicit, initiate, encourage, conduct or engage in any discussion or
negotiations or enter into any agreement or understanding with any party other
than Purchaser regarding the sale, transfer, assignment, encumbrance or other
disposition of any rights relating to the Property and the Project.
2. LOCATION OF CLAIMS AND GRANT OF EXPLORATION, DEVELOPMENT AND EARN IN RIGHTS
2.1 Property. On or before the date of this Agreement, Lithium has properly
located the Claims, timely recorded such locations in the records of the
appropriate county on twenty six of the Claims, and timely filed a location
certificate and required maps in the appropriate office of the Bureau of Land
Management for the same twenty six Claims. Lithium has validly staked the
remaining Claims comprising the Property, and will use its best efforts to
record those Claims with the Bureau of Land Management as soon as is reasonably
practicable, subject to the Purchaser advancing sufficient funds to Lithium as a
retainer to cover the expenses associated with recording.
2.2 Grant of Earn-In Right. As of the Effective Date, Lithium hereby grants
to Purchaser the exclusive right, for so long as this Agreement remains in
effect, (i) to enter upon the Property to explore, evaluate and develop and mine
the Property including the Claims, and (ii) to acquire, pursuant to two separate
earn-in options, up to a 100% undivided interest in the Property (the "Earn-In
Right"), as follows:
(a) INITIAL EARN-IN OPTION. The Purchaser may acquire an initial 80%
undivided interest in the Property (the "Initial Earn-In Option") through the
payment of an aggregate of US$300,000 in cash (the "Cash Consideration"),
completing a Going Public Transaction on or before the date which is sixty (60)
days from the Agreement Date, and subject to the completion of the Going Public
Transaction, arranging for the issuance of a total of 400,000 common shares in
the capital of the Resulting Issuer (the "Consideration Shares") as follows: (i)
within five Business Days following the Effective Date, the Purchaser shall pay
to Lithium the amount of US$100,000 plus US$30,000 for reimbursement of staking
and filing preparation of the new claims, and arrange for the issuance to
Lithium of 200,000 Consideration Shares; (ii) on or before the first anniversary
of the Effective Date, Purchaser shall pay to Lithium the amount of US$100,000
and arrange for the issuance to Lithium of 100,000 Consideration Shares; (iii)
on or before the second anniversary of the Effective Date, Purchaser shall pay
to Lithium the amount of US$100,000 and arrange for issuance to Lithium of
100,000 Consideration Shares; and (iv) payment by Purchaser of all amounts
required to keep the Claims in good standing including reimbursement costs for
Claim fees paid for the current assessment year and the payment of any
reclamation bond paid by Lithium and assigned to Purchaser.
(b) In addition, to complete the Initial Earn-In Option and acquire its 80%
interest in the Property, Purchaser is required to expend an aggregate of
US$1,100,000 (the "Aggregate Work Obligation") in Exploration and Development
Expenses (as defined in Exhibit B) as follows:
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1st Agreement Year US $200,000 Annual Work Commitment
2nd Agreement Year US $300,000 Annual Work Commitment
3rd Agreement Year US $600,000 Annual Work Commitment
"Agreement Year" means, during the Earn-In Period, each annual period with the
first Agreement Year commencing on the Effective Date and ending on the date
that is 12 months less one day from the Effective Date.
(c) Any Exploration and Development Expenses incurred by Purchaser in
excess of the Annual Work Commitment during any Agreement Year shall apply as a
credit toward the Annual Work Commitment for the subsequent Agreement Year(s)
and toward the Aggregate Work Obligation.
(d) If Purchaser fails to achieve the Annual Work Commitment during any
Agreement Year, and if such failure is not excused by an Event of Force Majeure
(as defined in Section 7), then, in order to keep this Agreement in full force
and effect, within 30 days after the end of such Agreement Year, Purchaser may
elect to make a payment to Lithium which shall equal the amount of the Annual
Work Commitment for that Agreement Year less the Exploration and Development
Expenses actually incurred by Purchaser during that Agreement Year. Any such
payment shall satisfy the Annual Work Commitment for the Agreement Year to which
the payment relates.
(e) If for any reason it is subsequently determined that the Annual Work
Commitment was not completed during any Agreement Year, then, in order to keep
its earn-in rights under this Agreement in good standing, Purchaser shall pay
the amount of any agreed-upon deficiency to Lithium within 30 days after the
parties reach agreement as to the amount of the deficiency, or as the parties
may otherwise agree.
(f) The Purchaser may in its sole discretion accelerate the timing of
incurring Exploration and Development Expenses to meet the Aggregate Work
Obligation and may exercise the Initial Earn-In Option at any time during the
period from the Effective Date to the third anniversary of the Effective Date.
(g) Lithium acknowledges that the Consideration Shares will be subject to
such resale restrictions and hold periods as may be imposed by applicable
securities legislation, and the rules and policies of the Exchange.
(h) SUBSEQUENT EARN-IN OPTION. The Purchaser may acquire an additional 20%
interest in the Property, in addition to the 80% interest that may be earned
pursuant to the Initial Earn-in Option (for an aggregate 100% interest) (the
"Subsequent Earn-In Option") by paying to Lithium, on or before the date that is
12 months after the exercise of the Initial Earn-In Option, the aggregate amount
of US$1,000,000. The Purchaser may terminate the Subsequent Earn-In Option at
any time by giving notice to Lithium or by not satisfying the requirements of
this Section, whereupon the Subsequent Earn-In Option will terminate and the
interests of Purchaser and Lithium will be 80% and 20%, respectively.
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(i) Purchaser shall be the exploration operator (the "Manager") during the
Earn-In Period. At the sole option and discretion of the Purchaser, Lithium will
provide consulting services, labor for Exploration and Development, supervision
of drilling, etc. and invoice the Purchaser for the services rendered.
2.3 Timing, Manner, Nature and Extent of Activities at Manager's
Discretion. The timing, manner, nature, and extent of any exploration,
development, or any other activities or operations undertaken on or for the
benefit of the Project or the Property under this Agreement shall be at the sole
discretion of the Manager, and there shall be no express or implied covenant
under this Agreement to begin or continue any such operations or activities
provided however that Purchaser shall be able to comply with its obligations in
Section 2.2(b) hereof.
2.4 Execution of Agreement. Upon execution of this Agreement, Lithium shall
make available to the Purchaser all records, information and data in its
possession or reasonably available to it relating to title to the Property or
environmental conditions at or pertaining to the Claims and all maps, assays,
surveys, technical reports, drill logs, samples, mine, mill, processing and
smelter records, and metallurgical, geological, geophysical, geochemical, and
engineering data, and interpretive reports derived therefrom, concerning the
Property, and Purchaser, at its expense, may copy any such records, information
and data that Purchaser desires. Lithium makes no representation or warranty as
to the accuracy, reliability or completeness of any such records, information or
data, and the Purchaser shall rely on the same at its sole risk.
3. ACQUISITION AND TRANSFER OF INTEREST AND NSR
3.1 Completion of Initial Earn-In Option. Upon Purchaser having made the
payments and share issuances in accordance with Section 2.2(a) the Purchaser
shall provide Lithium with written notice of such completion and exercise of the
Initial Earn-In Option. Lithium shall deliver to the Purchaser within 30 days of
receipt of such exercise notice (a) deeds and assignments (in form and substance
reasonably acceptable to Purchaser) conveying to Purchaser, or its assignee, an
80% undivided interest in the Property, and (b) appropriate conveyance documents
(in form and substance reasonably acceptable to Purchaser) conveying to
Purchaser an 80% undivided interest in any real property interests within the
Area of Interest acquired by Lithium during the relevant period, free and clear
of all liens, claims and encumbrances arising by, through or under Lithium.
3.2 Nevada Subsidiary. In order to complete the transfer of the 80%
interest from Lithium to Purchaser in accordance with the requirements of Nevada
law, Purchaser will, if required, incorporate, prior to or concurrently with
exercise of the Initial Earn-In Option, a Nevada subsidiary to hold its acquired
interest.
3.3 Formation of Jointly Owned Company. Upon Purchaser having exercised the
Initial Earn-In Option and acquired an 80% undivided interest in the Property
but having failed to exercise or having terminated the Subsequent Earn-In Option
as provided for in Section 2.2(g), a joint venture shall have been formed and
Purchaser and Lithium as of the date of failure to exercise or the date of
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termination of the Subsequent Earn-In Option, then as of the date of failure to
exercise or the date of termination of the Subsequent Earn-In Option, Purchaser
and Lithium shall either (a) enter into a formal joint venture agreement,
generally in accordance with the Rocky Mountain Mineral Law Foundation
Exploration, Development and Mine Operating Agreement (Model Form 5A), or, (b)
alternatively, if agreed to by both parties, an LLC Operating Agreement and
accompanying contribution agreements based on the Rocky Mountain Mineral Law
Foundation Form 5 LLC Operating Agreement, pursuant to which Lithium and
Purchaser would form a limited liability company of which they would be the
members, to which they would contribute their respective interests in the
Property. That agreement will govern the parties' ongoing activities at the
Project, in either case including the concepts set forth in Section 6 below, and
such other terms and provisions as are mutually agreeable to the parties.
Lithium will be manager of the joint venture or the LLC. The parties agree to
begin good faith negotiations of the applicable agreement at any time during the
Initial Earn-In Period, when requested by Purchaser. If Purchaser has exercised
the Initial Earn-In Option and either failed to exercise or terminate the
Subsequent Earn-In Option and the parties have not completed their negotiation
of and executed and delivered a joint venture agreement or an LLC Operating
Agreement, the provisions of Section 6 shall govern their relationship until the
appropriate agreement(s) are executed and delivered.
In the event Purchaser exercises the Subsequent Earn-in Right, the applicable
agreement entered into shall terminate.
3.4 Net Smelter Return(a) . If Purchaser exercises the Subsequent Earn-In
Option to acquire a 100% interest in the Property, Lithium shall be vested with
a 2.5% net smelter returns royalty on the production of minerals from the
Property (the "Lithium NSR"), as described in Exhibit C. Upon the exercise of
the Subsequent Earn-In Option, the Purchaser must promptly execute and deliver
to Lithium a royalty deed in form and substance reasonably acceptable to
Lithium.
3.5 NSR Buy-Back(a) . Purchaser shall have the right to purchase up to 50%
of the Lithium NSR at a cost of US$1,000,000, to reduce the Lithium NSR to
1.25%.
3.6 NSR Transfer(a) . Subject to the buy-back right set forth above,
Lithium shall have the right to sell, assign or transfer the Lithium NSR at any
time, upon the provision of 30 days' notice to Purchaser.
4. REPRESENTATION, WARRANTIES, COVENANTS AND CONDITIONS
4.1 Representations of Lithium. Lithium represents, warrants and covenants
to Purchaser that:
(a) Lithium is the owner of 100% of the Claims, free and clear of all
liens, claims and encumbrances, and such claims are validly staked in accordance
with the laws of the State of Nevada. Lithium is in exclusive possession of the
Property, free and clear of all liens, claims, and encumbrances.
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(b) As to each of the Claims, subject to the paramount title of the United
States of America: (i) the Claims have been properly located and monumented on
public domain land open to appropriation by mineral location, free and clear of
any conflicting claims of which Lithium is aware; (ii) location notices and
certificates and required maps have been properly posted, recorded and filed
with the appropriate governmental agencies for each of the Claims; (iii) all
filings and recordings required to maintain the Claims in good standing through
the Effective Date, including evidence of timely payment of required claim
maintenance fees, have been timely and properly made in the appropriate
governmental offices; and, (iv) all required annual claim maintenance fees,
Bureau of Land Management fees, Nevada county and state mining claim fees and
other payments necessary to maintain the Claims through the assessment year
ending August 31, 2016, have been timely and properly made.
(c) All operations and activities conducted by or on behalf of Lithium on
the Claims and the Property have been conducted in compliance with applicable
federal, state and local laws, rules and regulations, including without
limitation Environmental Laws (as defined in Exhibit B).
(d) Lithium is duly incorporated, validly existing and in good standing
under the laws of the State of Nevada and is qualified to do business in and is
in good standing under the laws of the State of Nevada. Lithium has the
requisite corporate power and capacity to carry on business as presently
conducted, to enter into this Agreement, and to perform all of its obligations
hereunder.
(e) There are no outstanding agreements, leases or options (whether oral or
written) which contemplate the acquisition of the Claims, or any other interest
in the Property or within the Area of Interest or any interest therein by any
other person or entity, or which limit or define in any way the activities that
may be conducted on the Claims or on any other part of the Property. Except for
the State of Nevada net proceeds of mines tax, there are no production royalties
or other payments based on mineral production payable on the Claims.
(f) The entering into of this Agreement and the performance by Lithium of
its obligations hereunder will not violate or conflict with its constating
documents, including its articles of incorporation or by-laws, any applicable
law or any order, decree or notice of any court or other governmental agency,
nor conflict with, or result in a breach of or default under any other contract
or other commitment to which Lithium is a party or by which it is bound.
(g) All requisite corporate actions on the part of Lithium, and on the part
of its officers and directors necessary for the execution, delivery, and
performance by it of this Agreement and all other agreements contemplated
hereby, have been taken. This Agreement and all agreements and instruments
contemplated hereby are, and when executed and delivered by it (assuming valid
execution and delivery by the other party), will be, legal, valid, and binding
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obligations of it enforceable against it in accordance with their respective
terms. Notwithstanding the foregoing, no representation is made as to the
availability of equitable remedies for the enforcement of this Agreement or any
other agreement contemplated hereby. Additionally, this representation is
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
affecting generally the rights and remedies of creditors and secured parties.
(h) To the best of the knowledge of Lithium, there are no adverse
environmental conditions at the Property which constitute a nuisance or that
have caused or could result in a violation of or liability under any
Environmental Laws. In conducting activities on the Property, Lithium has
complied with all applicable Environmental Laws as they relate to the Property
and there have been no breaches of or liabilities caused or permitted to arise
by Lithium under any Environmental Laws. Lithium has not (i) received
notification from any person, including without limitation, any governmental
authority, of any potential violation or alleged violation of any applicable
Environmental Laws relating to the Property or of any inspection or possible
inspection or investigation by any governmental authority under any applicable
Environmental Laws relating to the Property, (ii) received any notification of
or has knowledge of the presence or release of any Hazardous Materials (as
defined in Exhibit B), in the soil, subsurface strata or water in, on or under
the Property and (iii) been the subject of any claims or incurred any expenses
in respect of the presence of any contaminants in the soil, subsurface strata or
water in, on or under the Property.
(i) There is no circumstance that would prevent any and all governmental
licenses and permits required to carry out exploration, development, mining,
processing, and reclamation operations on the Property from being obtained, as
and when necessary.
(j) Lithium has obtained all consents required under any other agreement to
which it is a party and all required consents and approvals from governmental
agencies as necessary for it to execute, deliver and perform its obligations
under this Agreement.
(k) There are no actions, suits or proceedings pending or, to the knowledge
of Lithium, threatened against or affecting the Property or the interest of
Lithium in the Property or any portion of the Property, including any actions,
suits, or proceedings being prosecuted by any federal, state or local
department, commission, board, bureau, agency, or instrumentality. To the
knowledge of Lithium, it is not subject to any order, writ, injunction, judgment
or decree of any court or any federal, state or local department, commission,
board, bureau, agency, or instrumentality which relates to the Property.
(l) Lithium will assist Purchaser in making applications for required
permits or other required approvals from regulatory authorities required in
order to conduct exploration and development activities and operations and
related work on the Property.
(m) All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Lithium in such a manner as not to
give rise to any valid claim against the Purchaser or any third party for a
brokerage commission, finder's fee or other fee or commission arising by reason
of the transactions contemplated by this Agreement.
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(n) Lithium acknowledges that the Consideration Shares will not be
registered under the United States SECURITIES ACT OF 1933, as amended (the "U.S.
SECURITIES ACT") or the securities laws of any State of the United States and
may not be offered and sold, directly or indirectly, in the United States or by
or to or for the account or benefit of a U.S. Person (as defined in Regulation S
promulgated under the U.S. Securities Act) without registration under the U.S.
Securities Act and any applicable State securities laws, unless an exemption
from registration is available. Further, neither the Purchaser, nor the
Resulting Issuer, has any present intention and is not obligated under any
circumstances to register the Consideration Shares, or to take any other actions
to facilitate or permit any proposed resale or transfer thereof in the United
States or otherwise by or to or for the account or benefit of a U.S. Person, and
in particular Lithium further acknowledges and agrees that Purchaser is hereby
required to refuse to register any transfer of the Consideration Shares not made
in accordance with the provisions of Regulation S, pursuant to registration
under the U.S. Securities Act, or pursuant to an available exemption from
registration.
(o) Lithium is acquiring the Consideration Shares pursuant to the exemption
from registration provided by section 4(2) of the U.S. Securities Act in a
transaction not involving a "public offering".
4.2 Representations of Purchaser. The Purchaser represents, warrants and
covenants to Lithium that:
(a) The Purchaser is duly incorporated, validly existing and in good
standing under the laws of the Province of British Columbia, Canada, and is
qualified to do business in that province. Purchaser has the requisite corporate
power and capacity to carry on business as presently conducted, to enter into
this Agreement, and to perform all of its obligations hereunder.
(b) The entering into of this Agreement and the performance by the
Purchaser of its obligations hereunder will not violate or conflict with its
articles of incorporation or any applicable law or any order, decree or notice
of any court or other governmental agency, nor conflict with, or result in a
breach of, or accelerate the performance required by any contract or other
commitment to which the Purchaser is a party or by which it is bound.
(c) All requisite corporate actions on the part of the Purchaser, and on
the part of its officers, directors and shareholders, necessary for the
execution, delivery and performance by it of this Agreement and all other
agreements contemplated hereby, have been taken. This Agreement and all
agreements and instruments contemplated hereby are, and when executed and
delivered by it (assuming valid execution and delivery by the other party), will
be legal, valid and binding obligations of its enforceable against it in
accordance with their respective terms. Notwithstanding the foregoing, no
representation is made as to the availability of equitable remedies for the
enforcement of this Agreement. Additionally, this representation is limited by
applicable bankruptcy, insolvency, moratorium, and other similar laws affecting
generally the rights and remedies of creditors and secured parties.
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(d) The Purchaser has obtained all consents required under any agreement to
which it is a party and all required consents and approvals from governmental
agencies and any stock exchange, as necessary for it to execute, deliver and
perform its obligations under this Agreement.
(e) All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Purchaser in such manner as not to
give rise to any valid claim against Lithium or any third party for a brokerage
commission, finder's fee or other fee or commission arising by reason of the
transactions contemplated by this Agreement.
(f) The Consideration Shares will be, upon their issuance, duly authorized
and validly allotted and issued as fully paid and non-assessable shares in the
capital of the Resulting Issuer, free and clear of any and all mortgages, liens,
pledges, charges and other encumbrances excluding any restrictions other than
resale restrictions which may be imposed by securities regulatory bodies in
Canada and the United States.
(g) Subject to a Going Public Transaction, the Resulting Issuer will be a
"reporting issuer" (within the meaning of applicable securities laws) in at
least one province of Canada, and the Resulting Issuer's common shares will be
listed on the Exchange and no order ceasing or suspending trading in the
securities of the Resulting Issuer nor prohibiting sale of such securities shall
have been issued to the Resulting Issuer.
4.4 Mutual Conditions. The respective obligations of the Parties hereto to
consummate the transactions contemplated hereby are subject to the satisfaction
of the conditions any of which may be waived by the mutual consent of such
Parties without prejudice to their rights to rely on any other or others of such
conditions:
(a) The Parties shall have obtained all required regulatory approvals
including, but not limited to, the approval of the Exchange.
(b) The Purchaser shall have completed a Going Public Transaction.
(c) The Effective Date shall occurred on or before May 6, 2016, or such
later date as the Parties hereto agree to in writing.
4.5 Conditions of Purchaser. Purchaser's obligations to consummate the
transactions contemplated hereby are subject to the satisfaction of the
following conditions any of which may be waived by the consent of Purchaser
without prejudice to its rights to rely on any other or others of such
conditions:
(a) The representations and warranties of Lithium contained in this
Agreement shall be true and accurate on the date hereof and at the Effective
Date with the same force and effect as though such representations and
warranties had been made as of the Effective Date.
(b) There will have been no material adverse change in the condition of the
Claims, howsoever arising.
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(c) Purchaser shall have complied with all covenants and agreements herein
agreed to be performed or caused to be performed by it at or prior to the
Effective Time.
4.5 Conditions of Lithium. Lithium's obligations to consummate the
transactions contemplated hereby are subject to the satisfaction of the
following conditions any of which may be waived by the consent of Lithium
without prejudice to its rights to rely on any other or others of such
conditions:
(a) As of the Effective Date, the Resulting Issuer shall not have more than
22,900,000 common shares issued and outstanding on a non-diluted basis.
(b) There will have been no material adverse change in the business of
Purchaser howsoever arising.
(c) The representations and warranties of Purchaser contained in this
Agreement shall be true and accurate on the date hereof and at the Effective
Date with the same force and effect as though such representations and
warranties had been made as of the Effective Date.
(d) The Purchaser shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it at or prior to the
Effective Time.
5. TERMINATION OF AGREEMENT
5.1 Termination by Purchaser. The Purchaser may in its sole discretion
terminate this Agreement at any time by giving not less than 30 days prior
written notice to that effect to Lithium. Upon expiration of the applicable
notice period set forth in the preceding sentence, or if the Agreement is
terminated pursuant to any other provision of this Agreement, the Agreement will
be of no further force and effect. Upon such termination, Purchaser shall have
no further obligation to incur Exploration and Development Expenses on or for
the benefit of the Property and shall have no further obligations or liabilities
to Lithium under this Agreement or with respect to the Property (including
without limitation liability for lost profits or consequential, incidental or
punitive damages as a result of an election by Purchaser to terminate this
Agreement), other than (a) as set forth in the remainder of this paragraph, (b)
its indemnification obligations under Section 11.1, and (c) its obligation to
reclaim (in accordance with applicable law) any disturbances of the Property
made by the Purchaser. Lithium hereby agrees to grant Purchaser such access to
the Property as is reasonably necessary to complete any required reclamation. In
the event of such termination, Lithium's indemnification obligation under
Section 11.2 shall survive. At any time Purchaser may, at its option, terminate
its interest in some but less than all of the Property by written notice to
Lithium, provided that if such notice (or notice of termination of this
Agreement in its entirety) is received by Lithium after June 30th of any year,
Purchaser shall remain obligated to pay the claim maintenance fees (and make all
filings and recordings required in connection therewith) for those Claims to
which such termination applies for the upcoming assessment year. To the extent
the Purchaser terminates its interest in some but less than all of the Property,
this Agreement shall remain in full force and effect with respect to the
remaining Property. Notwithstanding the foregoing provisions of this Section
5.1, if, following termination of this Agreement by Purchaser, Lithium enters
into an agreement with a third party regarding exploration, development or
exploitation of all or any portion of the Property, the Purchaser's obligations
under this Section 5.1 shall terminate.
5.2 Default by Purchaser. In the event Purchaser is in default in the
observance or performance of any of Purchaser's covenants, agreements or
obligations under this Agreement, Lithium may give written notice of such
alleged default specifying the details of same. The Purchaser shall have 30 days
following receipt of said notice (or, in the event Purchaser in good faith
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disputes the existence of such a default, 30 days after a final, non-appealable
order of a court of competent jurisdiction finding that such a default exists)
within which to remedy any such default described therein, or to diligently
commence action in good faith to remedy such default. If the Purchaser does not
cure or diligently commence to cure such default by the end of the applicable
30-day period, then Lithium shall have the right to terminate this Agreement by
providing 30 days advance written notice to the Purchaser. In the event of such
termination, the provisions of Section 5.1 shall apply with respect to the
parties' ongoing obligations and liabilities.
6. PARTICIPATION FOLLOWING EARN-IN
6.1 Participation in Expenditures. At such time as the Purchaser earns an
80% undivided interest in the Property pursuant to the exercise of the Initial
Earn-In Option but has failed to exercise or has terminated the Subsequent
Earn-In Option, subject to the provisions of Section 2.2(h), the parties will
thereafter participate in expenditures on the Property in accordance with their
respective interests therein (or in the LLC), or have their interest diluted in
accordance with a straight line dilution formula, as set forth in the applicable
agreement.
6.2 Dilution. If through dilution the interest of a party is reduced to
less than 10%, then that party's interest shall automatically be converted to a
7.5% net smelter returns royalty (the "Dilution NSR"), as described in Exhibit
C. Should the Claims or any mining claims or other real property interests
acquired within the Area of Interest be burdened by production royalties payable
to third parties or the United States government, then with respect to those
properties the Dilution NSR would be reduced by the amount of such royalty but
not below 6.5%. The reduction, however, shall not apply to the Lithium NSR
payable to Purchaser described in Section 3.4.
6.3 Joint Venture Manager. The position of manager of the joint venture or
the LLC will be held by the Purchaser.
6.4 Annual Programs and Budgets. Annual programs and budgets will be
proposed by the manager and reviewed and approved by a management committee
comprised of members from the Purchaser and Lithium voting in proportion to
their respective percentage interests in the Property or the LLC.
6.5 Management Committee. The management committee will be formed generally
in accordance with the provisions of Model Form 5A or Model Form 5 LLC with
committee members of each party holding collectively votes in proportion to the
interests held by the party they represent.
6.6 Mine Construction. The decision to commence construction of a mine
shall be made by majority approval of the management committee.
6.7 Data. All exploration and related data generated by either party must
be provided to the other party. The manager will provide summary reports to the
other party on a quarterly basis.
6.8 Contribution. If either party defaults in its contributions to any
program and budget to which it has agreed and become obligated to contribute,
its interest will be diluted at a rate of 200% of the normal straight line
dilution rate, and other typical default remedies may be exercised by the
non-defaulting party.
6.9 Minority Party Review of Annual Programs and Budgets. Annual programs
and budgets must be presented to the minority party 60 days prior to funds being
required. This includes any amendments to any approved annual program and
budget.
6.10 Tax Partnership Option. At the option of Purchaser, the parties will
form a tax partnership on terms substantially similar to the applicable
provisions or exhibits of Model Form 5A or Model Form 5 LLC.
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7. OPERATIONS DURING EARN-IN PERIOD
During the Earn-In Period:
7.1 Operations. The Purchaser and its employees, agents, consultants and
independent contractors shall have the exclusive right to enter upon the
Property and to conduct such prospecting, exploration, development or other
related work thereon and thereunder as they desire and as is permitted by
federal and Nevada laws. The Purchaser's activities on the Property may include
any activities for which the costs would qualify as Exploration and Development
Expenses, as well as the removal of mineral samples for the purpose of, and in
amounts appropriate for, testing such mineral samples, including bulk sampling,
and in addition the Purchaser shall have the right to bring upon and erect upon
the Property such buildings, plants, machinery and equipment as the Purchaser
may deem necessary or desirable to carry out such activities.
7.2 Exploration and Development Decisions. The Manager in its sole
discretion will decide any matter concerning the conduct, timing and nature of
its prospecting, exploration, development or other mining activities on the
Property.
7.3 Compliance with Laws During Earn-In Period. The Manager shall conduct
its exploration, development and other activities on the Property in substantial
compliance with applicable laws and regulations, including laws and regulations
related to exploration, development and mining.
7.4 Timely Payment. The Purchaser, so long as it has not terminated this
Agreement in whole or in part, shall be responsible for timely payment of
required claim maintenance fees, property taxes, and any other payments required
to maintain the Claims.
7.5 Claim Rights. Subject to the prior consent of Lithium, the Manager
shall have the right to abandon, relocate, amend, defend contests or adverse
actions or suits and negotiate settlement thereof with respect to any and all of
the Claims, and Lithium shall cooperate with the Manager and shall execute any
and all documents necessary or desirable in the opinion of Manager to further
such amendments, relocations, contests, adverse actions or suits, or settlement
of such contests or adverse actions or suits. The Manager shall not be liable to
Lithium for the loss of any of the Claims as a result of such abandonments,
amendments, relocations, contests or adverse actions or suits, so long as the
same are undertaken in good faith and with the prior consent of Lithium.
7.6 Data. All exploration and related data generated by either party must
be provided to both parties in as close to near real time as reasonable.
7.7 Right to Visit Property. Either party and their authorized agents, at
their sole risk and expense, shall have the right, exercisable during regular
business hours, at a mutually convenient time, in compliance with Manager's
safety rules and regulations and applicable law, and in a reasonable manner so
as not to interfere with Manager's operations, to go upon the Property for the
purpose of confirming that the Purchaser is conducting its operations in the
manner required by this Agreement. The parties shall indemnify and hold Manager
harmless from all claims for damages arising out of any death, personal injury
or property damage sustained by them, their agents or employees, while in or
upon the Property, whether or not the party, its agents or employees are in or
upon the Property pursuant to this Section 7.7, unless such death, injury or
damage is due to Manager's gross negligence or willful misconduct.
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7.8 Title to the Property; Liens. The Purchaser and Lithium shall keep the
title to the Property free and clear of all liens and encumbrances resulting
from operations hereunder; provided, however, that each of the Purchaser and
Lithium may refuse to pay any claims asserted against it which it disputes in
good faith. At its sole cost and expense, the Purchaser or Lithium, as the case
may be, shall contest any suit, demand or action commenced to enforce such a
claim and, if the suit, demand or action is decided by a court or other
authority of ultimate and final jurisdiction against Purchaser, Lithium or the
Property, the applicable party shall promptly pay the judgment and shall post
any bond and take all other action necessary to prevent any sale or loss of the
Property or any part thereof.
7.9 Reclamation Bonds. During the Earn-in Period, (i) the Purchaser shall
reimburse Lithium for any existing reclamation bonds, and provide any additional
funds required for reclamation bonds related to its activities on the Property
and shall be entitled to receive the funds securing such bonds when such bonds
are released, and (ii) shall perform reclamation work required in connection
with its activities on the Property. If a joint venture or LLC is formed in
accordance with Section 3.2 hereof, the reclamation obligations associated with
any disturbances of the Property made by Purchaser during the Earn-In Period
shall become obligations of the joint venture or LLC, and the joint venture or
LLC shall reimburse Purchaser for the funds Purchaser previously provided for
reclamation bonds. If Purchaser terminates this Agreement prior to acquiring an
interest in the property, Purchaser shall complete reclamation work required as
a result of activities conducted on the Property in compliance with this
Agreement, or Lithium shall complete such reclamation work at Purchaser's
written request and at Purchaser's expense.
7.10 Standard of Care. Lithium and the Purchaser shall conduct all
operations in a good, workmanlike and efficient manner, in substantial
accordance with sound mining and other applicable industry standards and
practices, and in substantial accordance with the terms and provisions of
leases, licenses, permits, contracts and other agreements pertaining to
Property.
8. FORCE MAJEURE
If Purchaser should be delayed in or prevented from performing any of the
terms, covenants or conditions of this Agreement by reason of a cause beyond the
control of Purchaser, whether or not foreseeable, including fires, floods,
earthquakes, subsidence, ground collapse or landslides, interruptions or delays
in transportation or power supplies, strikes, lockouts or other labor disputes,
wars, acts of God, changes in laws, native title claims, inability to obtain
required governmental permits or approvals in a timely manner, curtailment or
suspension of activities to remedy or avoid an actual or alleged, present or
prospective violation of Environmental Laws, government regulation or
interference (but excluding a lack of funds), drought or other adverse weather
condition, actions by citizen groups including but not limited to environmental
organizations, or any other cause whether similar or dissimilar to the foregoing
(each an "Event of Force Majeure"), then any such failure on the part of
Purchaser to so perform shall not be deemed to be a breach of this Agreement and
the time within which Purchaser is obliged to comply with any terms, covenants
or conditions of this Agreement shall be extended by the period of all such
delays. Purchaser shall give notice in writing to Lithium forthwith and for each
Event of Force Majeure shall set out in such notice particulars of the cause,
and the date on which the same arose, and shall take all reasonable steps to
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remove the cause of such Event of Force Majeure (although Purchaser shall have
no obligation to settle any labor dispute on terms other than those acceptable
to it in its sole discretion), and shall also give notice immediately following
the date that such cause ceases to exist.
9. AREA OF INTEREST
9.1 Area of Interest. Any interest or rights to acquire (a) any interest in
mining claims or in other real property interests within the area described in
Exhibit D (the "Area of Interest"), or (b) contiguous claims that may extend
beyond the Area of Interest, acquired during the Earn-In Period by or on behalf
of any party or any affiliate or subsidiary of any party shall become subject to
the terms and provisions of this Agreement in accordance with the provisions of
Section 9.2.
9.2 Property Acquisition Procedures. Within 30 days after the acquisition
of such additional property, all or any portion of which lies within the Area of
Interest (or which constitutes contiguous claims that may extend beyond the Area
of Interest), the acquiring party shall notify the other party of such
acquisition. Such notice shall describe in detail the acquisition, the lands,
the nature of the interest therein, the mining claims or other real property
interest covered thereby, and the acquisition cost. In addition to such notice,
the acquiring party shall make any and all information it has concerning the
additional property available to the other party. The other party shall then
have 30 days after receipt of such notice and information to elect in its sole
discretion to include such additional interest in the Property and such interest
shall become part of the Property.
9.3 Property Acquisition Costs. Any unpatented mining claims staked by
Purchaser during the term of this Agreement should be staked under the name of
Lithium. Should Lithium be the acquiring party and should the additional
property become part of the Property, Purchaser shall reimburse Lithium for its
acquisition costs, and the amount of such reimbursement shall count as
Exploration and Development Expenses.
9.4 Additional Interests. If a party is entitled to and does elect not to
include such an additional interest as part of the Property, then with respect
to that additional interest, the acquiring party shall be free to take actions
with respect to and dispose of such interest without any obligation to the other
party.
9.5 Acquisition and Quitclaim of Property Interests. All real property
interests within the Area of Interest and any contiguous claims that extend
beyond the Area of Interest which are acquired by Purchaser and which are added
to the Property pursuant to Section 9.2 shall be quitclaimed by the Purchaser to
Lithium promptly after Lithium provides the notice referred to in Section 9.2.
9.6 After-Acquired Interest Within Area of Interest. Following termination
of this Agreement, Purchaser will not acquire any interest in or rights to real
property within the Area of Interest for two years from the termination date.
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10. ASSIGNMENT
10.1 Assignment by Purchaser. This Agreement shall be binding upon and
inure to the benefit of the parties and their permitted successors and assigns.
The Purchaser may, upon the prior written approval of Lithium, which approval
shall not be unreasonably withheld or delayed, assign its interest in this
Agreement to any third party that is not affiliated with Purchaser at any time,
provided that Lithium has declined to acquire the interest as provided in
Section 10.2 and further provided that the assignee agrees in writing to assume
all Purchaser's obligations under this Agreement. Upon such assignment, or an
assignment to an affiliate (as described below), Purchaser shall have no further
obligations or liabilities under this Agreement. Notwithstanding the foregoing,
at any time, and without the consent of Lithium, Purchaser may assign this
Agreement:
(a) to one or more of its affiliates upon the affiliate assuming all of
Purchaser's obligations under this Agreement (affiliate meaning any entity which
directly or indirectly controls or is controlled by, or under common control
with, Purchaser);
(b) in connection with a pledge by Purchaser for financing purposes;
(c) in connection with a corporate merger or reorganization involving
Purchaser or any affiliate;
(d) in connection with a Going Public Transaction;
(e) in connection with a sale of all or substantially all of Purchaser's
assets; or
(f) to a third party that is technically and financially capable of
performing Purchaser's obligations under this Agreement.
11. INDEMNIFICATION
11.1 Indemnification by Purchaser. Purchaser agrees to indemnify, defend
and hold harmless Lithium (and its officers, directors, successors, and assigns)
from and against any and all debts, liens, claims, causes of action,
administrative orders and notices, costs (including, without limitation,
response and/or remedial costs), personal injuries, losses, damages,
liabilities, demands, interest, fines, penalties and expenses, including
reasonable attorney's fees and expenses, consultant's fees and expenses, court
costs and all other out-of-pocket expenses, suffered or incurred by Lithium and
its successors as a result of:
(a) any breach by Purchaser of any of its representations, warranties,
covenants and obligations set forth in this Agreement; or
(b) any operations or activities engaged in by Purchaser on the Property,
including without limitation any matter, condition or state of fact involving
Environmental Laws or Hazardous Materials or Environmental Liabilities which may
arise after the Effective Date of this Agreement and that is caused by
Purchaser.
11.2 Indemnification by Lithium. Lithium agrees to indemnify, defend and
hold harmless Purchaser (and its officers, managers, members, successors, and
assigns) from and against any and all debts, liens, claims, causes of action,
administrative orders and notices, costs (including, without limitation,
response and/or remedial costs), personal injuries, losses, damages,
liabilities, demands, interest, fines, penalties and expenses, including
reasonable attorney's fees and expenses, consultant's fees and expenses, court
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costs, and all other out-of-pocket expenses suffered or incurred by Purchaser
and its successors as a result of:
(a) any breach by Lithium of any of its representations, warranties,
covenants and obligations set forth in this Agreement; or
(b) any operations or activities engaged in by Lithium on the Property,
including without limitation any matter, condition or state of fact involving
Environmental Laws or Hazardous Materials or Environmental Liabilities which may
exist prior to the Effective Date of this Agreement or which may arise after the
Effective Date of this Agreement and that is caused by Lithium.
11.3 Indemnification Procedures. The parties hereto, within 5 days after
the service of process upon either of them in a lawsuit, including any notices
of any court action or administrative action (or any other type of action or
proceeding), or promptly after either of them, to its respective knowledge,
shall become subject to, or possess actual knowledge of, any damage, liability,
loss, cost, expense, or claim to which the indemnification provisions of this
Section 10 relate, shall give written notice to the other party setting forth
the fact relating to the claim, damage, or loss, if available, and the estimated
amount of the same. "Promptly" for purposes of this paragraph shall mean giving
notice within 5 days. Failure to provide prompt notification shall not relieve
either party of its indemnification obligations hereunder unless such party is
materially prejudiced thereby. Upon receipt of such notice relating to a
lawsuit, the indemnifying party shall be entitled to:
(a) participate at its own expense in the defense or investigation of any
claim or lawsuit; or
(b) assume the defense thereof, in which event the indemnifying party shall
not be liable to the indemnified party for legal or attorney fees thereafter
incurred by such indemnified party in defense of such action or claim; provided,
that if the indemnified party may have any unindemnified liability out of such
claim, such party shall have the right to approve the counsel selected by the
indemnifying party, which approval shall not be withheld unreasonably.
If the indemnifying party assumes the defense of any claim or lawsuit, all
costs of defense of such claim or lawsuit shall thereafter be borne by such
party and such party shall have the authority to compromise and settle such
claim or lawsuit, or to appeal any adverse judgment or ruling with the cost of
such appeal to be paid by such party; provided, however, if the indemnified
party may have any unindemnified liability arising out of such claim or lawsuit
the indemnifying party shall have the authority to compromise and settle each
such claim or lawsuit only with the written consent of the indemnified party,
which shall not be withheld unreasonably. The indemnified party may continue to
participate in any litigation at its expense after the indemnifying party
assumes the defense of such action. In the event the indemnifying party does not
elect to assume the defense of a claim or lawsuit, the indemnified party shall
have authority to compromise and settle such claim or lawsuit only with the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld, or to appeal any adverse judgment or ruling, with all
costs, fees, and expenses indemnifiable under this Section 11 hereof to be paid
by the indemnifying party. Upon the indemnified party's furnishing to the
indemnifying party an estimate of any loss, damage, liability, or expense to
which the indemnification provisions of this Section 11 relate, the indemnifying
party shall pay to the indemnified party the amount of such estimate within 10
days after receipt of such estimate.
12. CONFIDENTIALITY
12.1 Confidentiality. All data and information coming into possession of
Lithium or Purchaser by virtue of this Agreement with respect to the business or
operations of the other party, or the Property generally, shall be kept
confidential and shall not be disclosed to any person not a party hereto without
the prior written consent of the other party, except:
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(a) as required by law, rule, regulation or policy of any stock exchange or
securities commission having jurisdiction over a party;
(b) as may be required by a party in the prosecution or defense of a
lawsuit or other legal or administrative proceedings;
(c) as required by a financial institution in connection with a request for
financing relating to development or mining activities; or
(d) as may be required in connection with a proposed conveyance to a third
party of an interest in the Property or this Agreement, provided such third
party agrees in writing in a manner enforceable by the other party to abide by
all of the provisions of this Section 11 with respect to such data and
information.
12.2 Disclosure. To the extent either party intends to disclose data or
information via press release or other similar format as described in Section
12.1(a), the disclosing party shall provide the other party with not less than
48 hours' notice (or such lesser period of time as the party reasonably
considers to be available before its failure to make such announcement or
statement will constitute a breach of applicable law or regulatory requirements)
of the text of the proposed disclosure, and the other party shall have the right
to comment on the same.
12.3 Own Analysis. Each party agrees with the other that in negotiating and
entering into this Agreement it has relied on its own analysis and estimates as
to the value of the Property and upon its own geologic and engineering
interpretations related thereto.
13. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties relating
to the Property, and supersedes the offer letter entered into between the
parties and dated February 10, 2016, in respect of the transactions contemplated
herein.
14. DISPUTE RESOLUTION
The parties hereby agree that any dispute arising under this Agreement
shall be subject to the informal dispute resolution procedure set forth in this
Section 14. For purposes of this Section 14, the party asserting the existence
of a dispute as to the interpretation of any provision of this Agreement or the
performance by the other party of any of its obligations hereunder shall notify
the other party of the nature of the asserted dispute. Within seven business
days after receipt of such notice, the President (or a designee) of Purchaser
and the President (or a designee) of Lithium shall arrange for a personal or
telephone conference in which they use good faith efforts to resolve such
dispute. If those individuals are unable to resolve the dispute, they shall each
17
prepare and, within seven business days after their conference, circulate to the
President (or a designee) of Purchaser and the President (or a designee) of
Lithium a memorandum outlining in reasonable detail the nature of the dispute.
Within five business days after receipt of the memoranda, the individuals to
whom the memoranda were addressed shall arrange for a personal or telephone
conference in which they attempt to resolve such dispute. If those individuals
are unable to resolve the dispute, either party may proceed with any legal or
equitable remedy available to it; provided, however, that the parties agree that
any statement made as to the subject matter of the dispute in any of the
conferences referred to in this Section 14 shall not be used in any legal
proceeding against the party that made such statement. Notwithstanding the
foregoing, if Purchaser has made an election in accordance with the provisions
of Sections 2.2(h) or 3.1, and Lithium refuses to execute and deliver the
appropriate deed as referred to therein, the parties agree that the Purchaser
may seek an order from a court requiring specific performance of that
obligation, as an appropriate and necessary remedy under such circumstances, in
addition to any other legal or equitable remedies that may be available.
15. GENERAL
15.1 Notice. Notice to Purchaser or to Lithium shall be sufficiently given
if delivered personally, or if sent by reputable overnight courier, or if
transmitted by facsimile to such party:
(a) in the case of a notice to Purchaser at:
1032701 B.C. Ltd.
885 West Georgia Street
Suite 900
Vancouver, British Columbia, Canada V6C 3H1
Attention: Gary Korzenowski
Email: ggkorz@gmail.com
And
(b) in the case of a notice to Lithium at:
Lithium Corp.
1031 Railroad Street, Suite 102B
Elko, NV 89801, United States
Attention: President and CEO
Email: info@lithiumcorporation.com
or at such other address or addresses as the party to whom such notice or other
writing is to be given shall have last notified the party giving the same in the
manner provided in this section. Any notice or other writing delivered to the
party to whom it is addressed as set forth above shall be deemed to have been
given and received on the day it is so delivered at such address, provided that
if such day is not a business day in the city where the notice is delivered,
then such notice or other writing shall be deemed to have been given and
received on the next following business day. Any notice or other writing
submitted by facsimile or other form of recorded communication shall be deemed
to have been given and received on the first business day after its
transmission.
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15.2 Further Assurances. Each of Purchaser and Lithium shall, with
reasonable diligence, do all such things and provide all such reasonable
assurances and assistance as may be required to consummate the transactions
contemplated by this Agreement and each party shall provide such further
documents or instruments required by the other party as may reasonably be
necessary or desirable in order to give effect to the terms and conditions of
this Agreement and carry out its provisions at, before or after the Effective
Date.
15.3 Counterparts. This Agreement may be executed by each of Purchaser and
Lithium in counterparts and by facsimile, or by electronic delivery, each of
which when so executed and delivered shall be an original, but both such
counterparts, whether executed and delivered in the original or by facsimile or
by electronic delivery, shall together constitute one and the same agreement.
15.4 US Dollars. All dollar references in this Agreement are to United
States dollars.
15.5 Governing Law. This Agreement, including all documents annexed hereto
and other agreements, documents and other instruments delivered in connection
herewith shall be governed by and construed in accordance with the laws of the
State of Nevada (other than its rules as to conflicts of law) and the federal
laws of the United States applicable therein.
15.6 Third Party Beneficiaries. The parties agree that this Agreement shall
be construed to benefit the parties hereto and their respective permitted
successors and assigns only, and shall not be construed to create any third
party beneficiary rights in any other party or in any governmental organization
or agency, except as specifically set forth in Section 10.
15.7 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument or agreement contemplated
hereby shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement or any such other instrument or
agreement contemplated hereby.
15.8 No Implied Covenants. No implied term, covenant, condition or
provision of any kind whatsoever except for good faith and fair dealing shall
affect any of the parties' respective rights and obligations hereunder,
including, without limitation, rights and obligations with respect to
exploration, development, mining, processing and marketing of minerals, and the
only terms, covenants, conditions or provisions which shall in any way affect
any of their respective rights and obligations shall be those expressly set
forth in this Agreement.
15.9 Amendment. This Agreement may not be amended or modified, nor may any
obligation hereunder be waived, except by writing duly executed on behalf of
both parties, and unless otherwise specifically provided in such writing, any
amendment, modification, or waiver shall be effective only in the specific
instance and for the purpose it is given.
15.10 Corporate Opportunity. This Agreement is, and the rights and
obligations of the parties are, strictly limited to the matters set forth
herein. Subject to the provisions of Section 9, each of the parties shall have
the free and unrestricted right to independently engage in and receive the full
benefits of any and all business ventures of any sort whatever, whether or not
competitive with the matters contemplated hereby, without consulting the other
or inviting or allowing the other to participate therein. The doctrines of
"corporate opportunity" or "business opportunity" shall not be applied to any
other activity, venture, or operation of either party, whether adjacent to,
19
nearby, or removed from the Property, and neither party shall have any
obligation to the other with respect to any opportunity to acquire any interest
in any property outside the Property at any time, or within the Property after
termination of this Agreement, regardless of whether the incentive or
opportunity of a party to acquire any such property interest may be based, in
whole or in part, upon information learned during the course of operations or
activities hereunder.
15.11 Rule Against Perpetuities. The parties do not intend that there be
any violation of the rule of perpetuities, the rule against unreasonable
restraints or the alienation of property, or any similar rule. Accordingly, if
any right or option to acquire any interest in the Property, or in any other
real property, exists under this Agreement, such right or option must be
exercised, if at all, so as to vest such interest within time periods permitted
by applicable rules. If, however, such violation should inadvertently occur, the
parties hereby agree that a court shall reform that provision in such a way as
to approximate most closely the intent of the parties within the limits
permissible under such rules.
15.12 No Partnership. Nothing contained in this Agreement shall be deemed
to constitute either party the partner of the other, nor, except as otherwise
herein expressly provided, to constitute either party the agent or legal
representative of the other, nor to create any fiduciary relationship between
them. It is not the intention of the parties to create, nor shall this Agreement
be construed to create, any mining, commercial, tax or other partnership.
Neither party shall have any authority to act for or to assume any obligation or
responsibility on behalf of the other party, except as otherwise expressly
provided herein.
IN WITNESS WHEREOF, the parties have executed this Exploration Earn-In
Agreement effective as of the date first set forth above.
LITHIUM CORP.,
a Nevada corporation
By: /s/ Brian Goss
-----------------------------
Printed Name: Brian Goss
Title: President & Director
1032701 B.C. LTD.,
a British Columbia corporation
By: /s/ Gary Korzenowski
-----------------------------
Printed Name: Gary Korzenowski
Title: Director
20
EXHIBIT A
To that Exploration Earn-In Agreement between LITHIUM CORP., and 1032701 B.C.
LTD., dated effective February 10, 2016.
CLAIMS
Esmeralda County, Nevada
County
Claim Location Date Filed BLM Serial Date Filed Document
Name Date BLM Number County Number Status Acres
FL #5 1/3/2009 NMC1006705 ACTIVE 80
FL #6 1/3/2009 NMC1006706 ACTIVE 80
FL #7 1/3/2009 NMC1006707 ACTIVE 80
FL #8 1/3/2009 NMC1006708 ACTIVE 80
FL #9 1/3/2009 NMC1006709 ACTIVE 80
FL #10 11/10/2012 NMC1087284 ACTIVE 80
FL #11 11/10/2012 NMC1087285 ACTIVE 80
FL #12 1/3/2009 NMC1006710 ACTIVE 80
FL #13 1/3/2009 NMC1006711 ACTIVE 80
FL #14 1/3/2009 NMC1006712 ACTIVE 80
FL #17 1/3/2009 NMC1006715 ACTIVE 80
FL #18 1/3/2009 NMC1006716 ACTIVE 80
FL #19 2/3/2009 NMC1006717 ACTIVE 80
FL #20 11/10/2012 NMC1087286 188202 ACTIVE 80
FL #21 2/3/2009 NMC1006718 ACTIVE 80
FL #22 2/3/2009 NMC1006719 ACTIVE 80
FL #23 2/3/2009 NMC1006720 ACTIVE 80
FL #24 2/3/2009 NMC1006721 ACTIVE 80
FL #26 2/3/2009 NMC1006741 ACTIVE 80
FL #27 2/3/2009 NMC1006742 ACTIVE 80
FL #28 2/3/2009 NMC1006743 ACTIVE 80
FL #29 2/3/2009 NMC1006744 ACTIVE 80
FL #30 2/3/2009 NMC1006745 ACTIVE 80
FL #31 2/3/2009 NMC1006746 ACTIVE 80
FL #37 3/4/2009 NMC1006752 ACTIVE 80
FL #90 11/10/2012 NMC1087287 188203 ACTIVE 80
FLS 1 12/22/2015 N/A N/A STAKED NOT 80
FILED
FLS 2 12/22/2015 N/A N/A STAKED NOT 80
FILED
FLS 3 12/22/2015 N/A N/A STAKED NOT 80
FILED
FLS 4 12/22/2015 N/A N/A STAKED NOT 80
FILED
A-1
FLS 5 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 6 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 7 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 8 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 9 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 10 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 11 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 12 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 13 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 14 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 15 12/23/2015 N/A N/A STAKED NOT 80
FILED
FLS 16 12/23/2015 N/A N/A STAKED NOT 80
FILED
Li 0010 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 0012 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 0016 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 0018 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 1 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 2 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 3 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 4 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 5 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 6 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 7 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 8 1/15/2016 N/A N/A STAKED NOT 80
FILED
A-2
Li 9 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 10 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 11 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 12 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 13 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 14 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 15 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 16 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 17 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 18 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 19 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 20 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 22 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 24 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 109 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 110 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 111 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 112 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 113 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 114 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 115 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 116 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 117 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 118 1/16/2016 N/A N/A STAKED NOT 80
FILED
A-3
Li 119 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 120 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 121 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 122 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 123 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 124 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 125 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 126 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 127 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 128 1/15/2016 N/A N/A STAKED NOT 80
FILED
Li 221 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 222 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 223 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 224 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 225 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 226 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 227 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 228 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 229 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 230 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 231 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 232 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 234 1/16/2016 N/A N/A STAKED NOT 80
FILED
Li 236 1/16/2016 N/A N/A STAKED NOT 80
FILED
A-4
EXHIBIT B
To that Exploration Earn-In Agreement between LITHIUM CORP., and 1032701 B.C.
LTD., dated effective February 10, 2016.
DEFINITIONS
A. "Effective Date" shall mean the date on which the Going Public
Transaction is completed, and approval of the Exchange to the issuance of the
Consideration Shares is received.
B. "Environmental Laws" shall mean all laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state and local governments (and all agencies thereof)
concerning pollution or protection of the environment, reclamation, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the existence, manufacture, processing, distribution, use, treatment, storage,
disposal, recycling, transport, or handling or reporting or notification to any
governmental authority in the collection, storage, use, treatment or disposal of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
C. "Environmental Liabilities" shall mean any liability arising out of,
based on or resulting from (i) the presence, release, threatened release,
discharge or emission into the environment of any Hazardous Materials or
substances existing or arising on, beneath or above such property and/or
emanating or migrating and/or threatening to emanate or migrate from such
property to other properties; (ii) disposal or treatment of or the arrangement
for the disposal or treatment of Hazardous Materials originating or transported
from such property to an off-site treatment, storage or disposal facility, (iii)
physical disturbance of the environment on or from such property; or (iv) the
violation or alleged violation of any Environmental Laws relating to such
property.
D. "Exchange" shall mean any of the Toronto Stock Exchange, the TSX Venture
Exchange, and the Canadian Securities Exchange, and following completion of a
Going Public Transaction shall refer to the public stock exchange on which the
Going Public Transaction was completed.
E. "Exploration and Development Expenses" shall mean and include all costs
or fees, expenses, liabilities and charges paid, incurred or accrued by
Purchaser which are related to exploration activities on or for the benefit of
the Property, including without limitation:
1. All costs and expenses incurred in conducting exploration and
prospecting activities on or in connection with the Property, including, without
limitation, the active pursuit of required federal, state or local
authorizations or permits and the performance of required environmental
protection or reclamation obligations, the negotiation and performance of
desirable agreements with local communities or governments, the building,
maintenance and repair of roads, drill site preparation, drilling, tracking,
sampling, trenching, digging test pits, shaft sinking, acquiring, diverting
and/or transporting water necessary for exploration, logging of drill holes and
B-1
drill core, completion and evaluation of geological, geophysical, geochemical or
other exploration data and preparation of interpretive reports, and surveying
and laboratory costs and charges (including assays or metallurgical analyses and
tests);
2. All expenses incurred in conducting development activities on or in
connection with the Property, the active pursuit of required federal, state or
local authorization or permits, the negotiation and performance of agreements
with local communities, and the performance of required environmental protection
or reclamation obligations, pre-stripping and stripping, the construction and
installation of a mill, leach pads or other beneficiation facilities for
valuable minerals, and other activities, operations or work performed in
preparation for the removal or testing of valuable minerals from the Property;
3. All costs of Purchaser in acquiring additional interests in real
property within the Area of Interest, to the extent such interests become
subject to this Agreement, including without limitation costs and expenses
incurred by Purchaser in conducting negotiations and due diligence, attorneys'
fees and all amounts paid by Purchaser to third parties in acquiring such
interests, and costs incurred by Lithium with the advance approval of Purchaser
and reimbursed by Purchaser;
4. All costs incurred in performing any reclamation or other restoration or
clean-up work required by any federal, state or local agency or authority or
agreements with the same or local communities, and all costs of insurance
obtained or in force to cover activities undertaken by or on Purchaser's behalf
on the Property;
5. Salaries, wages, expenses and benefits of Purchaser's employees or
consultants engaged in operations directly relating to the Property, including
salaries and fringe benefits of those who are temporarily assigned to and
directly employed on work relating to the Property for the periods of time such
employees are engaged in such activities and reasonable transportation expenses
for all such employees to and from their regular place of work to the Property;
6. All costs incurred in connection with the preparation of pre-feasibility
or feasibility studies, Bankable Feasibility Studies, and economic and technical
analyses pertaining to the Property, whether carried out by Purchaser or by
third parties under contract with Purchaser;
7. Taxes and assessments, other than income taxes, assessed or levied upon
or against the Property or any improvements thereon situated thereon for which
Purchaser is responsible or for which Purchaser reimburses Lithium;
8. Costs of material, equipment and supplies acquired, leased or hired, for
use in conducting exploration or development operations relating to the
Property; provided, however, that equipment owned and supplied by Purchaser
shall be chargeable at rates no greater than comparable market rental rates
available in the area of the Property;
9. Costs and expenses of establishing and maintaining field offices, camps
and housing facilities;
B-2
10. Costs incurred by Purchaser in examining and curing title to any part
of the Property, in maintaining the Property, whether through the performance of
assessment work, the payment of claim maintenance fees or otherwise, in making
required payments or performing other required obligations under any underlying
agreements, in exercising options or rights to acquire portions of the Property,
or in satisfying surface use or damage obligations to landowners, or in
conducting any analyses of the environmental conditions at the Property.
F. "Going Public Transaction" means (a) a listing of the common share
capital of the Purchaser on the Exchange; (b) the acquisition of the Purchaser
by an existing company listed on the Exchange, such that the resulting effect is
that holders of the common share capital of the Purchaser receive shares in the
capital of the resulting public company; (c) the assignment or transfer of the
rights granted under this Agreement by the Purchaser to an existing company
listed on the Exchange; or (d) any other type of transaction whatsoever which
results in the current holders of the common share capital of the Purchaser
receiving shares of a company listed on the Exchange in exchange for their
existing shares of the Purchaser, or which results in the rights granted under
this Agreement being held by a company listed on the Exchange.
G. "Hazardous Materials" means any substance: (a) the presence of which
requires reporting, investigation, removal or remediation under any
Environmental Law; (b) that is defined as "dangerous goods", a "hazardous
waste," "hazardous substance," "extremely hazardous substance" or "pollutant" or
"contaminant" under any Environmental Law; (c) that is toxic, explosive,
corrosive, flammable, ignitable, infectious, radioactive, reactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated under any
Environmental Law; (d) the presence of which on a property causes or threatens
to cause a nuisance upon the property or to adjacent properties or poses or
threatens to pose a hazard to the health or safety of persons on or about the
property; (e) that contains gasoline, diesel fuel or other liquid hydrocarbons;
or (f) that contains PCBs, asbestos or urea formaldehyde foam insulation.
H. "Resulting Issuer" means the resulting public company, listed on the
Exchange, following completion of a Going Public Transaction.
B-3
EXHIBIT C
To that Exploration Earn-In Agreement between LITHIUM CORP., and 1032701 B.C.
LTD., dated effective February 10, 2016.
NET SMELTER RETURNS ROYALTY
1. Calculation.
(a) As used herein, "Payor" means the Party obligated to pay the Production
Royalty (and its successors and assigns), and "Payee" means the Party entitled
to receive the Production Royalty (and its successors and assigns).
(b) As used herein, "Net Smelter Returns" means the Gross Returns from any
and all ores, metals, minerals and materials of every kind and character
("Valuable Minerals") found in, on or under the Claims, (as such term is defined
in the Agreement to which this Exhibit Cis attached) extracted, produced and
sold or deemed to have been sold from the Claims, less all Allowable Deductions.
(c) As used herein, "Gross Returns" has the following meanings for the
following categories of Valuable Minerals:
(i) If Payor causes refined gold that meets or exceeds the generally
accepted commercial standards for refined gold to be produced by an independent
third-party refinery from ores mined from the Claims, for purposes of
determining the Production Royalty, the refined gold shall be deemed to have
been sold in the calendar month in which it was produced at the refinery at the
Monthly Average Gold Price for that month. The Gross Returns from such deemed
sales shall be determined by multiplying Gold Production during the month by the
Monthly Average Gold Price. As used herein, "Gold Production" means the quantity
of refined gold that is outturned to Payor's account by the refinery during the
calendar month on either a provisional or final settlement basis. If outturn of
refined gold is made by the refinery on a provisional basis, the Gross Returns
shall be based upon the amount of such provisional settlement, but shall be
adjusted in subsequent statements to account for the amount of refined metal
established by final settlement by the refinery. As used herein, "Monthly
Average Gold Price" means the average London Bullion Market Association P.M.
Gold Fix, calculated by dividing the sum of all such prices reported for the
month by the number of days for which such prices were reported. If the London
Bullion Market Association P.M. Gold Fix ceases to be published, the Monthly
Average Gold Price shall be determined by reference to prices for refined gold
for immediate delivery in the most nearly comparable established market selected
by Payor as such prices are published in "Metals Week" or a similar publication.
(ii) If Payor causes refined silver that meets or exceeds the generally
accepted commercial standards for refined silver to be produced by an
independent third-party refinery from ore mined from the Claims, for purposes of
determining the Production Royalty, the refined silver shall be deemed to have
been sold in the calendar month in which it was produced at the Monthly Average
Silver Price for that month. The Gross Returns from such deemed sales shall be
C-1
determined by multiplying Silver Production during the calendar month by the
Monthly Average Silver Price. As used herein, "Silver Production" shall mean the
quantity of refined silver that is outturned to Payor's account by the refinery
during the calendar month on either a provisional or final settlement basis. If
outturn of refined silver is made by the refinery on a provisional basis, the
Gross Returns shall be based upon the amount of such provisional settlement, but
shall be adjusted in subsequent statements to account for the amount of refined
metal established by final settlement by the refinery. As used herein, "Monthly
Average Silver Price" shall mean the average New York Silver Price as published
daily by Handy & Harman, calculated by dividing the sum of all such prices
reported for the calendar month by the number of days for which such prices were
reported. If the Handy & Harman quotation ceases to be published, the Monthly
Average Silver Price shall be determined by reference to prices for refined
silver for immediate delivery in the most nearly comparable established market
selected by Payor as published in "Metals Week" or a similar publication.
(iii) If Payor sells refined metals (other than refined gold and refined
silver), dore or concentrates produced from Valuable Minerals from the Claims,
the Gross Returns for such refined metals shall be the proceeds actually
received by Payor from their sale. If such sales are to an Affiliate, the
refined metals, dore, or concentrates shall be deemed, solely for the purpose of
computing Gross Returns, to have been sold at prices and on terms no less
favorable to Payor than those which would have been received under similar
circumstances from an unaffiliated third party. As used herein, "Affiliate"
means any person, partnership, limited liability company, joint venture,
corporation, or other form of enterprise which Controls, is Controlled by, or is
under common Control with Purchaser, and "Control" means the ability, directly
or indirectly through one or more intermediaries, to direct or cause the
direction of the management and policies of such entity through (A) the legal or
beneficial ownership of voting securities or membership interests; (B) the right
to appoint managers, directors or corporate management; (C) contract; (D)
operating agreement; (E) voting trust; or (F) otherwise.
(d) As used herein, "Allowable Deductions" means the following costs,
charges, and expenses incurred or accrued by Payor:
(i) If Payor sells or is deemed to have sold refined gold or refined
silver:
(A) all costs, charges and expenses for smelting and refining dore or
concentrates to produce the refined gold or refined silver (including
handling, processing, and provisional settlement fees, sampling, assaying
and representation costs, penalties, and other processor deductions);
(B) all costs, charges, and expenses for weighing, sampling,
determining moisture content and packaging Valuable Minerals and for
loading and transportation of ores, minerals, dore or concentrates from the
Claims to the refinery or smelter and then to the place of sale (including
C-2
freight, insurance, security, transaction taxes, handling, port, demurrage,
delay, and forwarding expenses incurred by reason of or in the course of
such transportation); and
(C) actual sales and brokerage costs incurred by Payor.
(ii) If Payor sells refined metals (other than refined gold or refined
silver), dore, concentrate or ores:
(A) all costs, charges, and expenses for (I) beneficiation, processing
or treatment of such materials at any plant or facility not owned by Payor
and (II) smelting or refining to produce a refined metal (including
handling, processing, and provisional settlement fees, sampling, assaying
and representation costs, penalties, and other processor deductions);
(B) all costs, charges, and expenses for weighing, sampling,
determining moisture content and packaging Valuable Minerals and for
loading and transportation of ores, minerals, dore, concentrates or other
products from the Claims (I) to the place of sale, or (II) if such ores or
other materials are beneficiated, processed, treated, smelted or refined at
any plant or facility more than five (5) miles from the exterior boundary
of the Claims, to such plant of facility and then to the place of sale
(including freight, insurance, security, transaction taxes, handling, port,
demurrage, delay, and forwarding expenses incurred by reason of or in the
course of such transportation); and
(C) actual sales and brokerage costs.
(iii) All royalties payable to any governmental agency and all sales, use,
severance, Nevada net proceeds of mines and ad valorem taxes and any other tax
or governmental levy or fee on or measured by mineral production from the Claims
(other than taxes based on income).
(e) Payor shall have the right to market and sell or refrain from selling
refined gold, refined silver and other mineral products from the Claims in any
manner it may elect, including the right to engage in forward sales, future
trading or commodity options trading, and other price hedging, price protection,
and speculative arrangements ("Trading Activities") which may involve the
possible delivery of gold, silver or other mineral products from the Claims.
With respect to Production Royalty payable on refined gold and refined silver
and any other Valuable Minerals, Payee shall not be entitled to participate in
the proceeds or be obligated to share in any losses generated by Payor's actual
marketing or sales practices or by its Trading Activities and no such profits or
losses shall be included in Gross Returns.
2. Manner of Payment. Production Royalty payments shall be paid by Payor to
Payee (or notice of a credit against Production Royalties as provided above
shall be given to Payee) on or before thirty (30) days following the calendar
quarter during which Payor shall have received payment for Valuable Minerals
sold by Payor or during which Valuable Minerals are deemed sold as provided
above. Production Royalties shall accrue to Payee's account upon such final
payment or upon being credited to the account of Payor by the smelter, refinery
or other ore buyer to Payor for the Valuable Minerals sold and for which the
C-3
Production Royalty is payable. All Production Royalty payments shall be made at
Payor's election by Payor's check or by wire transfer. All Production Royalty
payments shall be accompanied by a statement and settlement sheet showing the
quantities and grades of Valuable Minerals mined and sold from the Claims, the
proceeds of sales, cost, assays and analyses, and other pertinent information in
reasonably sufficient detail to explain the calculation of the Production
Royalty payment.
3. Payments; Where Made. All payments hereunder shall be sent by certified
U.S. mail to Payee at its address as set forth above, or by wire transfer to an
account designated by and in accordance with written instructions from Payee.
The date of placing such payment in the United States mail by Payor, or the date
the wire transfer process is initiated, shall be the date of such payment.
Payments by Payor in accordance herewith shall fully discharge Payor's
obligation with respect to such payment, and Payor shall have no duty to
otherwise apportion or allocate any payment due to Payee or its successors or
assigns.
4. Audits; Objections to Payments. Payee, at its sole election and expense,
shall have the right to perform, not more frequently than once annually
following the close of each calendar year, an audit of Payor's accounts relating
to payment of the Production Royalty hereunder by any authorized representative
of Payee. Any such inspection shall be for a reasonable length of time during
regular business hours, at a mutually convenient time, upon at least five (5)
business days prior written notice by Payee. All royalty payments made in any
calendar year shall be considered final and in full accord and satisfaction of
all obligations of Payor with respect thereto, unless Payee gives written notice
describing and setting forth a specific objection to the calculation thereof
within six (6) months following the close of the annual audit for that calendar
year. Payor shall account for any agreed upon deficit or excess in Production
Royalty payments made to Payee by adjusting the next quarterly statement and
payment following completion of such audit to account for such excess.
5. Conduct of Operations. Payor shall have the sole and exclusive control
of all operations on or for the benefit of the Claims, and of any and all
equipment, supplies, machinery, and other assets purchased or otherwise acquired
or under its control in connection with such operations. Payor may carry out
such operations on the Claims as it may, in its sole discretion, determine to be
warranted, so long as such operations are conducted in accordance with
procedures acceptable in the mining and metallurgical industry. The timing,
nature, manner and extent of any exploration, development, mining or processing
operations carried out or in connection with the Claims shall be within the sole
discretion of Payor, and there shall be no implied covenant whatsoever to begin
or continue any such operations. If Payor at any time, and from time to time
after commencing operations, desires to shut down, suspend or cease operations
for any reason, it shall have the right to do so. Payor may use and employ such
methods of mining as it may desire or find most profitable. Payor shall not be
required to mine, preserve, or protect in its mining operations any ores,
leachates, precipitates, concentrates or other products containing Valuable
Minerals which cannot be mined or shipped at a reasonable profit to Payor. Any
decision as to the time, manner and form, if any, in which ores or other
products containing Valuable Minerals are to be sold shall be made by Payor in
its sole discretion.
6. Ore Processing. All determinations with respect to: (a) whether ore from
the Claims will be beneficiated, processed or milled by Payor or sold in a raw
state; (b) the methods of beneficiating, processing or milling any such ore; (c)
C-4
the constituents to be recovered therefrom, and (d) the purchasers to whom any
ore, minerals or mineral substances derived from the Claims may be sold, shall
be made by Payor in its sole and absolute discretion.
7. Ore Samples. The mineral content of all ore mined and removed from the
Claims (but excluding ore leached in place) and the quantities of constituents
recovered by Payor shall be determined by Payor, or with respect to such ore
which is sold, by the mill or smelter to which the ore is sold, in accordance
with standard sampling and analysis procedures, and shall be weighted average
based on the total amount of ore from the Claims crushed and sampled, or the
constituents recovered, during an entire calendar quarter. Upon reasonable
advance written notice to Payor, Payee shall have the right to have
representatives present at the time samples are taken for the purpose of
confirming that the sampling and analysis procedure is standard and acceptable
according to accepted industry practices.
8. Commingling of Ores. Payor shall have the right to mix or commingle,
either underground, at the surface, or at processing plants or other treatment
facilities, any material containing Valuable Minerals mined or extracted from
the Claims with ores or material derived from other lands or properties owned,
leased or controlled by Payor; provided, however, that before commingling, Payor
shall calculate from representative samples the average grade of the ore from
the Claims and shall either weigh or volumetrically calculate the number of tons
of ore from the Claims to be commingled. As products are produced from the
commingled ores, Payor shall calculate from representative samples the average
percentage recovery of products produced from the commingled ores during each
month. In obtaining representative samples, calculating the average grade of
commingled ores and average percentage of recovery, Payor may use any procedures
acceptable in the mining and metallurgical industry which Payor believes to be
accurate and cost-effective for the type of mining and processing activity being
conducted, and Payor's choice of such procedures shall be final and binding upon
Payee. In addition, comparable procedures may be used by Payor to apportion
among the commingled ores any penalty charges imposed by the smelter or refiner
on commingled ores or concentrates. The records relating to commingled ores
shall be available for inspection by Payee, at Payee's sole expense, at all
reasonable times, and shall be retained by Payor for a period of two (2) years.
9. Waste Rock, Spoil and Tailings. Any ore, mine waters, leachates,
pregnant liquors, pregnant slurries, and other products or compounds or metals
or minerals mined from the Claims shall be the property of Payor, subject to the
Production Royalty as provided for in Section 1. The Production Royalty shall be
payable only on metals, ores, or minerals recovered prior to the time waste
rock, spoil, tailings, or other mine waste and residue are first disposed of as
such, and Payor shall be free to use or dispose of such waste and residue in
whatever manner it sees fit in its sole discretion. Payor shall have the sole
right to dump, deposit, sell, dispose of, or reprocess such waste rock, spoil,
tailings, or other mine wastes and residues, and Payee shall have no claim or
interest therein other than for the payment of the Production Royalty to the
extent any Valuable Minerals are produced and sold therefrom.
10. No Covenants. The parties agree that in no event shall Payor have any
duty or obligation, express or implied, to explore for, develop, mine or produce
ores, minerals or mineral substances from the Claims, and the timing, manner,
method and amounts of such exploration, development, mining or production, if
any, shall be in the sole discretion of Payor. Payee acknowledges that the
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expenditures made by Payor to advance activities on the Claims and the right to
the Production Royalty are sufficient consideration for the conversion of its
Participating Interest. None of the provisions of this Section 10 or any other
provision of this Exhibit C shall be deemed to limit or restrict Payor's ability
to sell or otherwise convey or transfer to any third party all or any portion of
Payor's interest in the Claims.
11. Nature of Payee's Interest. The Production Royalty payable to Payee
shall payable only on production of Valuable Minerals from the Claims and any
real property interest within the Area of Interest acquired during the term of
the joint venture agreement or LLC operating agreement ("AOI Property), but not
production from any other properties adjacent to or in the vicinity of the
Claims or within the Area of Interest. With respect to the Claims and the AOI
Property, the Payee shall have only the rights and incidents of ownership of a
non-executive royalty owner. Payee shall not have any possessory or working
interest in the Claims or the AOI Property nor any of the incidents of such
interest. By way of example but not by way of limitation, Payee shall not have
(a) the right to participate in the execution of applications for authorities,
permits or licenses, mining leases, options, farm-outs or other conveyances, (b)
the right to share in bonus payments or rental payments received as the
consideration for the execution of such leases, options, farm-outs, or other
conveyances, or (c) the right to enter upon the Claims or the AOI Property and
prospect for, mine, drill for, or remove ores, minerals or mineral products
therefrom.
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EXHIBIT D
To that Exploration Earn-In Agreement between LITHIUM CORP., and 1032701 B.C.
LTD., dated effective February 10, 2016.
AREA OF INTEREST
The area within one mile of the outer border of the claims comprising the
Property, as defined in the Exploration Earn-In Agreement.
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