AGENCY AGREEMENT

AGENCY AGREEMENT

June 26, 2003

 

Fronteer Development Group Inc.

1066 West Hastings Street

Suite 1640

Vancouver, British Columbia

V6E 3X1

 

Attention:

Mark O'Dea, President and Chief Executive Officer

Dear Sir:

 

Paradigm Capital Inc. (the "Agent") understands that Fronteer Development Group Inc. (the "Corporation") proposes to issue by way of private placement (a) up to 2,410,853 flow-through common shares in the capital of the Corporation (collectively, the "Flow-Through Shares") at a price of $0.65 per Flow-Through Share; and (b) up to 2,500,000 units of the Corporation (collectively, the "Units", and together with the Flow-Through Shares, the "Offered Securities ^" ), each Unit consisting of one common share in the capital of the Corporation (a "Common Share") and one-half of one common share purchase warrant (each whole common share purchase warrant, a "Warrant"), at a price of $0.60 per Unit, and for maximum aggregate gross proceeds of up to approximately $3,000,000 (the "Offering"). Each Warrant entitles the holder to acquire one Common Share at an exercise price of $0.70 at any time on or before June 26, 2005, being the date which is two years following the Closing Date (as defined in Section 6).

 

Subject to the terms and conditions set forth below, the Corporation hereby appoints the Agent as the sole and exclusive agent of the Corporation to solicit, on a best efforts basis, offers to purchase the Offered Securities, and the Agent hereby agrees to act as such agent. The Corporation agrees that the Agent is under no obligation to purchase any Offered Securities.

Terms and Conditions

 

The terms and conditions relating to the purchase and sale of the Offered Securities are as follows:

Section 1

Offered Securities.

(1)

The Flow-Through Shares are common shares in the capital of the Corporation which are "flow-through shares" as defined in section 66(15) of the Income Tax Act (Canada) (the "ITA").

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(2)

The material attributes and characteristics of the Warrants shall be substantially as described in the warrant indenture to be dated the Closing Date between the Corporation and Equity Transfer Services Inc., as warrant agent (the "Warrant Indenture"), and shall be evidenced by, warrant certificates to be issued by the Corporation to each of the Purchasers.

 

Section 2

Offering.

(1)

The Agent will use its best efforts to arrange for purchasers (the "Purchasers") of the Offered Securities in the provinces of Ontario, British Columbia and Alberta (collectively, the "Qualifying Provinces") and the sale of the Units in such other jurisdictions outside of Canada as may be agreed to between the Agent and the Corporation (collectively, the "Qualifying Jurisdictions ^" ). The sale through the Agent of the Offered Securities to Purchasers in each of the Qualifying Provinces will ^. be effected in a manner exempt from the prospectus requirements of the securities legislation and the rules, regulations, policies and instruments made thereunder and the applicable published policy statements of the securities commissions (the "Securities Commissions") in such provinces. The sale through the Agent of the Units to Purchasers in the United States will be effected in a manner exempt from the registration requirements of the United States Securities Act of 1933. In addition, the sale through the Agent of the Units to Purchasers resident in a jurisdiction outside Canada and the United States will be effected in a manner exempt from applicable prospectus or registration requirements in such jurisdiction.

 

If, in the opinion of the Agent, it is necessary, the Agent will form, manage and participate in a group of sub-agents to offer and sell the Offered Securities as provided for hereunder. Each sub-agent shall be appropriately registered under the applicable securities laws of the Qualifying Jurisdiction in which such sub-agent offers and sells the Offered Securities so as to permit it to lawfully offer and sell the Offered Securities in such jurisdiction. In the event that a selling group is formed, the Agent will:

 

(a)

manage the selling group as and to the extent customary in the securities industry in Canada; and

 

(b)

require each member of the selling group to offer and sell the Offered Securities on the terms set forth in this agreement.

(2)

The Corporation agrees to pay to the Agent at the Time of Closing (as defined in Section 6) a commission equal to 7% of the gross aggregate proceeds of the Offering (the "Agent's Commission"). Additionally, the Corporation shall issue to the Agent at the Time of Closing common share purchase warrants of the Corporation (collectively, the "Agent's Warrants") entitling the Agent, or

3

the persons in whose the Agent directs that the Agent's Warrants be registered, to acquire that number of Common Shares equal to 7% of the number of Offered Securities sold pursuant to the Offering (each, an "Agent's Share") at an exercise price of $0.70 per Agent's Share for a period of two years from the Closing Date (being June 26, 2005, and if such date is not a business day, then the first business day after such date). The Agent's Commission is payable and the Agent's Warrants are to be issued by the Corporation at the Time of Closing in consideration of the services to be rendered by the Agent in connection with the Offering, which services shall include:

 

(a)

acting as agent of the Corporation to solicit, on a best efforts basis, offers to purchase the Offered Securities;

(b)

assisting in the preparation of the form of subscription agreements to be entered into by the Corporation and each of the Purchasers (collectively, the "Subscription Agreements");

 

(c)

assisting in the preparation of the form of Warrant certificate of the Corporation to be issued to the applicable Purchasers; and

 

(d)

advising the Corporation with respect to the private placement of the Offered Securities.

(3)

In the event that the Corporation is unable to issue the Agent's Warrants in accordance herewith, the parties agree that the Corporation shall pay the Agent other compensation of comparable value to the Agent's Warrants, which other compensation shall be agreed upon by the Corporation and the Agent, each acting reasonably.

 

(4)

The Agent covenants, represents and warrants to the Corporation that: (i) it will comply with the applicable securities laws of each of the Qualifying Jurisdictions in which it acts as agent of the Corporation in connection with the Offering; (ii) it will not offer or sell Offered Securities (A) in any jurisdiction except the Qualifying Jurisdictions; and (B) in any way so as to require registration thereof or filing of a prospectus or offering memorandum with respect thereto under the laws of any jurisdiction; (iii) the Agent will obtain from each Purchaser an executed Subscription Agreement in the form agreed upon by the Agent and the Corporation; (iv) it will offer and sell the Units in the United States only on a basis exempt from the registration requirements under the United States Securities Act of 1933 in accordance with the provisions of Schedule "A" which are incorporated by reference in and shall form part of this agreement; and (v) they will not make available to prospective Purchasers of the Offered Securities any documents which would constitute an offering memorandum as defined under the securities

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legislation of Ontario and not advertise the proposed sale of the Offered Securities in printed public media, radio, television or telecommunications, including electronic display.

Section 3

Representations and Warranties of the Corporation.

The Corporation represents and warrants to the Agent and the Purchasers, and acknowledges that the Agent and the Purchasers are relying upon such representations and warranties, as follows:

 (a)

the Corporation is, and will at the Time of Closing be, a reporting issuer or the equivalent in good standing under the securities laws of each of Ontario, Alberta and British Columbia and is in compliance with the by-laws, rules and regulation of the TSX Venture Exchange (the "Exchange") and no material change relating .to the Corporation has occurred with respect to which the requisite material change report has not been filed under the securities laws of Ontario and no such disclosure has been made on a confidential basis;

(b)

each of the Corporation and:

(i)

1209786 Ontario Inc.;

 

(ii)

1339384 Ontario Inc.;

 

(iii)

1262181 Ontario Inc.; and

 

(iv)

Berkley Homes (Pickering) Inc., a corporation incorporated pursuant to the laws of the Province of Ontario,

(individually, a "Subsidiary" and collectively, the "Subsidiaries") has been duly incorporated and organized and is validly subsisting under the laws of the Province of Ontario and has all requisite corporate power and authority and is duly qualified or authorized to carry on its respective businesses as now conducted and to own, lease and operate its property and assets in all jurisdictions where such qualification or authorization is required and, in the case of the Corporation, to enter into this agreement, the Warrant Indenture and the Subscription Agreements, to create, issue and sell the Offered Securities, to create and issue the Warrants (and the certificates representing the same) and the Agent's Warrants (and the certificates representing the same) (collectively, the "Documents") and to carry out its obligations hereunder and thereunder;

 

(c)

the Corporation will, at the Time of Closing be a "qualifying issuer" as such term is defined in Multilateral Instrument 45-102 of the Canadian

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Securities Administrators ("MI 45-102"), such that the Common Shares comprising part of the Units, the Warrants and the Flow-Through Shares will be subject, in each of the Qualifying Provinces, to a four month hold period from the Closing Date;

(d)

the Corporation has not received a notice from any securities regulatory authority that its current annual information form (as defined in MI 45-102), including any technical reports, is unacceptable;

 

(e)

the Corporation is the direct or indirect legal, beneficial and registered holder of all of the issued and outstanding shares of each of the Subsidiaries (except (i) Berkley Homes (Pickering) Inc., the shares of which it owns 50%; and (ii) 1339384 Ontario Inc. and 1262181 Ontario Inc. all the shares of which are owned by 1209786 Ontario Inc.) in each case, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands whatsoever and no person has any agreement or option or right or privilege (whether pre-emptive or contractual) capable of becoming an agreement for the purchase of all or any part of such securities, and all such securities have been validly issued and are outstanding as fully paid and non-assessable;

(f)

the Corporation has no subsidiaries (as that term is defined in the Securities Act (Ontario) (the "Ontario Act") which are material to the Corporation taken as a whole;

 

(g)

none of the Subsidiaries have any material assets or liabilities;

 

(h)

the Corporation and the Subsidiaries have conducted and are conducting their businesses in compliance in all material respects with all applicable laws, rules, regulations, tariffs, orders and directives, including without limitation, all laws, regulations and statutes relating to mining and to mining claims, concessions or leases, and environmental, health and safety legislation, regulations or by-laws or other lawful requirements of any governmental or regulatory bodies applicable to the Corporation and the Subsidiaries in each jurisdiction in which each of the Corporation and the Subsidiaries carries on a material portion of its business, and each of the Corporation and the Subsidiaries holds all material certificates, authorities, permits, licences, registrations and qualifications issued by the appropriate provincial, state, municipal, federal or other governmental or regulatory agency or body (collectively, the "Authorities") which are material for the Corporation on a consolidated basis in all jurisdictions in which each of the Corporation and the Subsidiaries carries on its

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business which are necessary or desirable to carry on the business of the Corporation on a consolidated basis as now conducted or contemplated to be carried on by it, and all the Authorities are valid and existing and in good standing and none of the Authorities contain any burdensome term, provision, condition or limitation which has or is likely to have any material adverse effect on the business of the Corporation on a consolidated basis as now conducted or as proposed to be conducted, and neither the Corporation nor any of the Subsidiaries has received any notice of proceedings relating to the revocation or modification of any of the Authorities which, singly or in the aggregate, if the subject of an unfavourable decision, ruling or finding, would materially and adversely affect the conduct of the business, operations, financial condition, or income of the Corporation on a consolidated basis or any notice of the revocation or cancellation of, or any intention to revoke or cancel, any of the mining claims, concessions, options, or leases of the Corporation as disclosed in the Public Record (collectively, the "Resource Properties"), including without limitation those comprising: (i) 117 claim units in 51 unpatented mineral claims in the Red Lake Birch Uchi Belt located approximately 60 kilometres east-northeast of Red Lake, Ontario (the "Dixie Lake Property"); (ii) the Achook Property, the Conjurer Property, the Flex Property and the McPhoo Property located in the Bear Structured Province of the Northwest Territories; and (iii) the seven properties comprising 22,375 hectares located in the Central Mineral Belt of Labrador;

 

any and all agreements pursuant to which the Corporation and the Subsidiaries hold their material assets and Resource Properties or have the right to acquire material assets, including without limitation the property option agreement between the Corporation and Perry English ("English") dated as of December 30, 2002, as amended on January 7, 2003 and on February 25, 2003 (the "English Option Agreement") and the exploration option agreement between the Corporation and Phelps Dodge Corporation of Canada, Limited dated as of October 4, 2002 (the "Phelps Option Agreement"), which English Option Agreement and Phelps Option Agreement have not been amended as at the date hereof, except to the extent noted in this subsection, and all such agreements are legal, valid and subsisting agreements, are in full force and effect, enforceable in accordance with their respective terms against the parties thereto and are in good standing except that: (i) the enforcement thereof may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights generally, (ii) rights of indemnity, contribution and waiver of contribution thereunder may be limited under applicable

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law and (iii) equitable remedies, including, without limitation, specific performance and injunctive relief, may be granted only in the discretion of a court of competent jurisdiction and neither the English Option Agreement nor the Phelps Option Agreement have been amended as of the date hereof, and neither the Corporation nor the Subsidiaries are in material default of any of the provisions of any such agreements nor has any such default been alleged and such material assets are in good standing under the applicable statutes and regulations of the jurisdictions in which they are situate, all leases, licences, concessions and claims, and options pursuant to which the Corporation or the Subsidiaries derive their interest in such material assets are in good standing and there has been no material default under any such leases and all real or other property taxes required to be paid with respect to such assets to the date hereof have been paid;

to the best of the Corporation's knowledge, none of the real property (and the buildings constructed thereon) in which the Corporation or any of the Subsidiaries has a direct or indirect interest whether leasehold or fee simple or otherwise (the "Real Property") or operations is subject to any judicial or administrative proceeding alleging the violation of any federal, provincial, state or municipal environmental, health or safety statute or regulation or is subject to any investigation concerning whether any remedial action is needed to respond to a release of any Hazardous Material (as defined below) into the environment that would have a material adverse effect on the Corporation and the Subsidiaries taken as a whole. Neither the Corporation nor, to the best of the Corporation's knowledge, any occupier of the Real Property, has filed any notice under any federal, provincial, state or municipal law indicating past or present treatment, storage or disposal of a Hazardous Material in any of the Real Property. Except in material compliance with applicable environmental laws, none of the Real Property has at any time been used by the Corporation or, to the best of the Corporation's knowledge by any other occupier, as a waste storage or waste disposal site or to operate a waste management business. The Corporation has no contingent liability of which it has knowledge or reasonably should have knowledge in connection with any release of any Hazardous Material on or into the environment from any of the Real Property and operations thereon. Neither the Corporation nor, to the best of the Corporation's knowledge, any occupier of the Real Property, generates, transports, treats, stores or disposes of any waste, subject waste, hazardous waste, deleterious substance, industrial waste (as defined in applicable federal, provincial, state or municipal legislation) on any of the Real Property in contravention of applicable federal,

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provincial, state or municipal laws or regulations enacted for the protection of the natural environment or human health. To the best of the Corporation's knowledge, no underground storage tanks or surface impoundments containing a petroleum product or Hazardous Material are located on any of the Real Property in contravention of applicable federal, provincial, state or municipal laws or regulations enacted for the protection of the natural environment or human health. For the purposes of this subparagraph, "Hazardous Material" means any contaminant, pollutant, subject waste, hazardous waste, deleterious substance, industrial waste, toxic matter or any other substance that when released into the natural environment is likely to cause, at some immediate or future time, material harm or degradation to the natural environment or material risk to human health and, without restricting . the generality of the foregoing, includes any contaminant, pollutant, subject waste, deleterious substance, industrial waste, toxic matter or hazardous waste as defined by applicable federal, provincial, state or municipal laws or regulations enacted for the protection of the natural environment or human health;

 

(k)

the Corporation and the Subsidiaries are the owners or authorized licensees of all the Intellectual Property (as defined below) necessary to properly conduct the business of the Corporation and the Subsidiaries, respectively. The Corporation is not aware of a claim of any infringement or breach of any industrial or intellectual property rights of any other entity by the Corporation or a Subsidiary, nor has the Corporation or any Subsidiary received any notice that the conduct of the business of the Corporation or a Subsidiary, including the use of the Intellectual Property, infringes upon or breaches any industrial or intellectual property rights of any other entity and the Corporation has no knowledge of any infringement or violation of any of its material rights in the Intellectual Property. To the best of its knowledge, the conduct of its consolidated business does not infringe upon in any material respect the patents, trade marks, licences, trade names, business names, copyright or other industrial or intellectual property rights, domestic or foreign, of any other entity. The Corporation is not aware of any state of facts that casts doubt on the validity or enforceability of any of the Intellectual Property. For the purposes of this subparagraph, "Intellectual Property" means (i) any trade marks, trade names, business names, brand names, service marks, computer software, computer programs, copyrights, including any performing, author or moral rights, designs, inventions, patents, franchises, formulae, processes, know-how, technology and related goodwill, (ii) any applications, registrations, issued patents, continuations in part, divisional applications or analogous rights or licence rights therefor,

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and (iii) other intellectual or industrial property, in each case owned or used by the Corporation or a Subsidiary;

 

the execution and delivery of each of the Documents and the performance and compliance with the terms of the Documents will not result in a breach of, and do not create a state of facts which, after notice or lapse of time or both, will result in a breach or default of and do not and will not conflict with: (i) any statute, rule or regulation applicable to the Corporation; (ii) any of the terms, conditions or provisions of the constating documents or by-laws or resolutions of the Corporation; (iii) any material mortgage, note, contract, trust indenture, agreement (written or oral), instrument, lease or other document to which the Corporation is a party or will be contractually bound as of the. Time of Closing; (iv) any judgment, decree or order binding on the Corporation, or any of its assets, which could have a material adverse effect on the condition (financial or otherwise), business, properties, net worth, or results of operations of the Corporation, on a consolidated basis; (v) do not and will not result in the violation of any law, or (vi) do not and will not give rise to any lien, mortgage, charge, pledge, hypothecation, security interest, assignment, charge, title retention agreement or restrictive covenant or other encumbrance of any nature;

 

the Corporation's audited annual consolidated financial statements as at, and for the year ended, December 31, 2002, together with the auditors' report thereon and the notes thereto, and the unaudited interim financial statements for the Corporation as at, and for the three month period ended March 31, 2003 and the notes thereto (collectively, the "Financial Statements") (i) have been prepared in accordance with Canadian generally accepted accounting principles applied on a basis consistent with prior periods (except as disclosed in the Financial Statements and except for the note disclosure contained in the interim financial statements for the Corporation as at, and for the three month period ended March 31, 2003); (ii) are, in all material respects, consistent with the books and records of the Corporation; (iii) contain and reflect all material adjustments for the fair presentation of the results of operations and the financial condition of the business of the Corporation on a consolidated basis for the periods covered thereby; and (iv) present fairly, on a consolidated basis, in all material respects, the financial position of the Corporation as at the dates thereof and the results of its operations and the changes in its financial position for the periods then ended;

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(n)

there has never been any reportable disagreement (within the meaning of National Policy Statement No. 31 of the Canadian Securities Administrators) with any present or former auditor of the Corporation;

 

(o)

there has not been any material change in the assets, liabilities or obligations (absolute, contingent or otherwise) of the Corporation on a consolidated basis, from the position set forth in the most recent Financial Statements or as otherwise disclosed in the Documents or in the information filed by or on behalf of the Corporation (the "Public Record") with the Ontario Securities Commission (the "OSC") in compliance, or intended compliance, with the Ontario Act, or in press releases disseminated by the Corporation and there has not been any material adverse change in the business; operations, capital, condition (financial or otherwise) or results of operations of the Corporation on a consolidated basis since December 31, 2002; and since that date there have been no material facts, transactions, events or occurrences, other than as disclosed in the Public Record with the OSC in compliance, or intended compliance, with the Ontario Act, that could reasonably be expected to materially adversely affect the capital, assets, liabilities (absolute, accrued, contingent or otherwise), business, operations or condition (financial or otherwise) or results of operations of the Corporation on a consolidated basis that have not been disclosed in the Public Record;

 

(p)

as of, or prior to, the date hereof, the Corporation is the absolute registered, legal and beneficial owner of and has all of the right, title and interest in and to that percentage of the material assets of the Corporation that is disclosed in the Public Record, including, without limitation, the mining claims, concessions and leases comprising each of the Resource Properties and Ontario mineral claim # KRL-1185143 (except that Ontario mineral claim # KRL1185143 is registered in the name of English in the records maintained by the Ontario Provincial Mining Recorder's Office (the "OPMRO")), free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands of any kind whatsoever other than as disclosed in the Public Record. No other property rights are necessary for the conduct of the Corporation's business in relation to the Resource Properties. There are no restrictions on the ability of the Corporation to use, transfer or otherwise exploit any such property rights except as disclosed in the Public Record, and the Corporation does not know of any claim or basis for a claim that may adversely affect such rights;

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(q)

the Dixie Lake Property is subject to the terms of the English Option Agreement and the Conjurer Property is subject to the terms of the Phelps Option Agreement and to the best of the Corporation's knowledge, neither English nor Phelps Dodge Corporation of Canada, Limited have sold, transferred, disposed of or encumbered their interests in the Dixie Lake Property and the Conjurer Property, respectively, and upon exercise by the Corporation of its option to acquire the Dixie Lake Property and the Conjurer Property under the English Option Agreement and the Phelps Option Agreement, respectively, the Corporation will be the absolute legal and beneficial owner of all of the right, title and interest in the mining claims comprising the Dixie Lake Property and the Conjurer Property, as the case may be, free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands of any kind whatsoever other than the Royalty (as defined in the English Option Agreement) and the Net Smelter Return (as defined in the English Option Agreement) set forth in the English Option Agreement and the Royalty (as defined in the Phelps Option Agreement) and the Net Smelter Return (as defined in the Phelps Option Agreement) set forth in the Phelps Option Agreement, respectively, and the Corporation is not in default of any of the terms or conditions of the English Option Agreement and the Phelps Option Agreement;

(r)

to the best of the Corporation's knowledge, English and William McNerney are the absolute legal and beneficial owners of and have 88% and 12%, respectively, of the right, title and interest in the mining claims comprising the Dixie Lake Property;

(s)

to the best of the Corporation's knowledge, Phelps Dodge Corporation of Canada, Limited is the absolute legal and beneficial owner of and has all of the right, title and interest in the mining claims comprising the Conjurer Property;

(t)

there are no actions, suits, proceedings or to the best of the Corporation's knowledge, inquiries, including pending or threatened against or affecting the Corporation or the Subsidiaries, at law or in equity or before or by any international, federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign;

(u)

the Corporation and each Subsidiary has filed all necessary tax returns and notices and has paid all applicable taxes of whatever nature for all tax years to the date hereof to the extent such taxes have become due or have been alleged to be due and the Corporation and each

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Subsidiary is not aware of any tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon with respect to itself where, in any of the above cases, it could reasonably be expected to result in any material adverse change in the condition, financial or otherwise, or in the earnings, business, affairs or prospects of the Corporation on a consolidated basis;

 

(v)

during the previous fifteen (15) months prior to the date hereof, other than as disclosed in the Public Record and as at the date hereof, the Corporation and the Subsidiaries have not:

(i)

incurred any obligation or liability, direct or indirect, contingent or otherwise, except in the ordinary course of business and which is not material;

(ii)

entered into any material transaction;

 

(iii)

approved or entered into any material agreement in respect of the purchase of any property or any interest therein or the sale, transfer or other disposition of any material property or any interest therein currently owned, directly or indirectly, by the Corporation or any of the Subsidiaries whether by asset sale, transfer of shares, or otherwise; or

(iv)

approved or entered into any agreement in respect of the change of control (by sale or transfer of shares or sale of all or substantially all of the assets of the Corporation or any of the Subsidiaries or otherwise) of the Corporation or any of the Subsidiaries;

(w)

the Common Shares are listed on the Exchange and the Common Shares comprising part of the Units, the Flow-Through Shares, the Common Shares issuable upon exercise of the Warrants and Agent's Shares have been or will be at the Time of Closing conditionally approved for listing on the Exchange, subject to the delivery of required documentation;

 

(x)

all necessary corporate action has been taken to duly authorize the issue, sale and delivery of the Offered Securities and, upon payment of the requisite consideration therefor, the Common Shares comprising part of the Units and the Flow-Through Shares will be validly issued as fully-paid and non-assessable Common Shares and the Warrants will be validly issued;

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(y)

all necessary corporate action has been taken to duly and validly allot and reserve for issuance, upon exercise of the Warrants, the Common Shares issuable upon exercise of the Warrants and, upon payment of the requisite consideration therefor, such Common Shares will be validly issued as fully-paid and non-assessable Common Shares;

 

(z)

all necessary corporate action has been taken to duly authorize the creation, issue and delivery of the Agent's Warrants;

(aa)

all necessary corporate action has been taken to duly and validly allot and reserve for issuance the Agent's Shares upon exercise of the Agent's Warrants and upon payment of the requisite consideration therefor, the Agent's Shares will be validly issued as fully-paid and non-assessable Common Shares;

(bb)

the offering and sale in the Qualifying jurisdictions of the Offered Securities, the compliance by the Corporation with the provisions of this agreement and the consummation of the transactions referred to herein do not require the consent, approval, authorization, registration or qualification of or with any governmental authority, stock exchange, securities regulatory authority or other third party, except (A) such as have been obtained, and (B) such as may be required (and have been obtained as provided in this agreement) under the applicable securities laws of each of the Qualifying Jurisdictions;

(cc)

as at June 26, 2003 the authorized capital of the Corporation consists of an unlimited number of Common Shares of which 15,207,312 Common Shares are issued and outstanding as at the date hereof, all of which are fully paid and non-assessable;

 

(dd)

all press releases, material change reports and all other documents filed by or on behalf of the Corporation within the past 24 months with the OSC or the Exchange or any other securities regulatory authority were true and correct in all material respects and did not contain any misrepresentation (as defined in the Ontario Act), as at the respective dates of such filings and complied, in all material respects, with the securities laws, regulations rules, policy statements, blanket orders and rulings applicable thereto;

 

(ee)

the Corporation is not party to and has not granted any agreement, warrant, option, right or privilege capable of becoming an agreement, for the purchase, subscription or issuance of any of the Common Shares or securities convertible into or exchangeable for the Common Shares other than: (i) 1,875,000 stock options, each entitling the holder thereof to purchase one Common Share; (ii) 1,740,334 Common Share

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purchase warrants, each entitling the holder thereof to purchase one Common Share; (iii) 156,101 compensation options, each exercisable into one unit consisting of one Common Share and one-half of one Common Share purchase warrant (each full Common Share purchase warrant entitling the holder thereof to purchase one Common Share); (iv) the issue of 50,000 Common Shares pursuant to the property option agreement with English dated November 5, 2001 regarding the Woman Lake Property (the "Woman Lake Agreement"); (v) the issue of 55,000 Common Shares pursuant to the property option agreement with English dated May 31, 2002 regarding the Spot Lake Property (the "Spot Lake Agreement"); (vi) the issue of Common Shares having a value of $100,000 pursuant to the Phelps Option Agreement; and (vii) the issue of 190,000 Common Shares pursuant to the English Option Agreement;

the minute books of the Corporation are true and correct as of the date hereof and contain all the resolutions of its directors and shareholders passed since the date of its incorporation;

each of the Documents has been, or will at the Time of Closing be, duly authorized, executed and delivered by the Corporation and constitutes, or has been duly authorized and will constitute when executed, a legal, valid and binding obligation of the Corporation, enforceable against the Corporation in accordance with its terms, except that: (i) the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, (ii) rights of indemnity, contribution and waiver of contribution thereunder may be limited under applicable law and (iii) equitable remedies, including, without limitation, specific performance and injunctive relief, may be granted only in the discretion of a _. court of competent jurisdiction;

 

(hh)

other than the Agent, there is no person, firm or corporation acting or purporting to act at the request of the Corporation, who is entitled to any brokerage or finder's fee in connection with the transactions contemplated herein;

(ii)

neither the Corporation nor any of the Subsidiaries has any responsibility or obligation to pay any commission, royalty or similar payment to any person with respect to their property rights other than as disclosed in the Financial Statements;

(jj)

no order ceasing or suspending trading in any securities of the Corporation or prohibiting the sale of securities by the Corporation has

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been issued and to the best of its knowledge no proceedings for this purpose have been instituted, or are, to the knowledge of the Corporation, pending, contemplated or threatened;

 

(kk)

during the previous 12 months prior to the date hereof, the Corporation has not, directly or indirectly, declared or paid any dividend or declared or made any other distribution on any of its shares or securities of any class, or, directly or indirectly, redeemed, purchased or otherwise acquired any of its shares or securities or agreed to do any of the foregoing;

 

(ll)

none of the directors or officers of the Corporation or the Subsidiaries or any associate or affiliate of any of the foregoing had, has or intends to have any material interest, direct or indirect, in the transactions contemplated by this agreement or in any proposed material transaction with the Corporation or the Subsidiaries which, as the case may be, materially affects, is material to or will or may reasonably be expected to materially affect the Corporation and the Subsidiaries taken as a whole;

 

(mm)

no order prohibiting the sale of the Offered Securities by the Corporation has been issued and to the best of the Corporation's knowledge, no proceedings for this purpose have been instituted, or are pending, contemplated or threatened;

(nn)

there is not, in the constating documents of the Corporation or in any agreement, mortgage, note, debenture, indenture or other instrument or document to which the Corporation is a party, any restriction upon or impediment to, the declaration or payment of dividends by the directors of the Corporation or the payment of dividends by the Corporation to the holders of Common Shares;

(oo)

Equity Transfer Services Inc., at its office in Toronto, has been duly appointed as the transfer agent and registrar for the Common Shares;

(pp)

to the best of the Corporation's knowledge, the Corporation has not withheld, and will not withhold from the Agent, any material facts or material changes (both as defined in the Ontario Act) relating to the Corporation; and

 

(qq)

he Corporation proposes to use an amount equal to the gross proceeds of the sale of the Flow-Through Shares to carry out or participate in an exploration program on the Resource Properties and other exploration properties for the purpose of determining the existence, location, extent and quality of the mineral resources and

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reserves located thereon (the "Program"). The expenses incurred in performing the Program will qualify as "Canadian exploration expense" as defined in paragraph (f) of the definition thereof in subsection 66.1(6) of the ITA or would be Canadian exploration expense described in paragraph (h) of the definition if the words "paragraphs (a) to (d) and (f) to (g.1)" were read as "paragraph (f)" (other than expenditures which constitute "Canadian exploration and development overhead expense" as prescribed for the purposes of paragraph 66(12.6)(b) of the ITA or the amount of any assistance received by the Corporation relating to specified expenses as described in subsection 66(12.6) of the ITA or specified expenses which are the cost of acquiring or obtaining the use of seismic data described in paragraph 66(12.6)(b.1) of the ITA) and will qualify as "flow-through mining expenditures" as defined in subsection 127(9) of the ITA ("Canadian Exploration Expenses"). The gross proceeds of the sale of the Units are proposed to be used by the Corporation for mineral exploration, general working capital purposes and the acquisition of new mineral properties.

Section 4

Covenants of the Corporation.

The Corporation hereby covenants to the Agent and the Purchasers that it will:

 

(a)

fulfil all legal requirements to permit the creation, issue, offering and sale of the Offered Securities and the creation and issue of the Agent's Warrants, including, without limitation, compliance with the applicable securities laws of each of the Qualifying Jurisdictions to enable the Offered Securities to be offered for sale and sold to the Purchasers without the necessity of filing a prospectus or an offering m