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OPTION AGREEMENT
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Made as of July 7, 2009
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Between
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YALE RESOURCES
LTD.
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and
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CANDEV RESOURCE EXPLORATION,
INC.
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TABLE OF
CONTENTS
(i)
OPTION
AGREEMENT
This Agreement is made as of the
7 th day of July, 2009, between
YALE
RESOURCES LTD., a
corporation organized under the l
aws of the Province of British Columbia, Canada
(herein
called “Yale”)
OF THE FIRST PART
and
CANDEV RESOURCE EXPLORATION, INC.
, a corporation
organized under the laws of the State of Nevada, United States
of
America
(herein
called “Candev”)
OF THE SECOND PART
RECITALS
A. Yale is the owner of a 100%
undivided right, title and interest in and to the Dos Naciones
property legally described as the “ Property ”
in Schedule A annexed hereto.
B. Yale desires sell a 50%
interest in and to grant an option to Candev for Candev to acquire
an additional 30% interest in the Property for a combined total of
80%.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants expressed herein the Parties agree as
follows:
SECTION 1 –
REPRESENTATIONS AND WARRANTIES
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1.1
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Representations and warranties
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(1) Yale represents and warrants
to Candev that on the date hereof and on the Effective Date, as
defined in Section 6.1 herein:
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(a)
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Yale is the beneficial owner of a
100% undivided right, title and interest in and to the
Property;
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(b)
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Yale has rights and necessary
lawful authority to explore for precious metals on the
Property;
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(c)
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Yale has the right to enter into
this Agreement and the subsequent Joint Venture Agreement and to
dispose, grant an option, transfer its interest and Legal Rights in
the Property to Candev in accordance with the terms of this
Agreement and the subsequent Joint Venture;
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(d)
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There are no outstanding
agreements or options to acquire or purchase the Property and Legal
Rights, or any portion thereof, or any production therefrom,
granted by it and other than outlined herein no other person has
any royalty or other interest whatsoever in the Property or Legal
Rights or in production therefrom;
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(e)
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Yale has disclosed to Candev all
technical information and data related to the Property, and all
material contractual and legal requirements related to the Property
and Legal Rights and Yale’s interest therein;
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(f)
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The Property is accurately
described in Schedule A annexed hereto and a form of executed
version of the Joint Venture Agreement is attached in Schedule B
annexed hereto;
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(g)
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All taxes, assessments, rentals,
levies or other payments relating to the Property and required to
be made to any governmental instrumentality have been
made;
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(h)
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The Property is free and clear of
any and all Encumbrances, agreements, obligations, adverse claims
(including, without limitation, any order or judgment relating to
the Property or any legal proceedings in process, pending or
threatened which might result in any such order or judgment),
royalties, profit interests or other payments in the nature of a
rent or royalty, or other interests of whatsoever nature or kind,
recorded or unrecorded;
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(i)
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Yale has not received from any
governmental instrumentality any notice of, or communication
relating to, any actual or alleged Environmental Claims, and there
are no outstanding work orders or actions required to be taken
relating to Environmental matters respecting the Property or any
operations carried out thereon;
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(j)
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There are no actions, suits or
proceedings (whether or not purportedly on behalf of Yale)
(including Environmental Claims) pending or threatened against or
materially adversely affecting, or which could materially adversely
affect, the Property or before or by any federal, provincial,
municipal or other governmental authority, department, court,
commission, board, bureau, agency or instrumentality, domestic or
foreign, whether or not insured, and which might involve the
possibility of any Encumbrance or any other right of another
against the Property;
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(k)
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The execution and delivery of
this Agreement and the subsequent Joint Venture Agreement, and the
agreements and transactions contemplated hereby will not violate or
result in the breach of the laws of Mexico or any other
jurisdiction applicable or pertaining thereto, and Yale agrees to
deliver, prior to closing a Mexican legal opinion as to the proper
title of the Property and material laws applicable to the
agreements and
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transactions contemplated in this
Agreement and the subsequent Joint Venture Agreement;
and
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(l)
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Yale is unaware of any material
facts or circumstances, which have not been disclosed in this
Agreement nor the subsequent Joint Venture Agreement that should be
disclosed to Candev in order to prevent the representations and
warranties in this Agreement and the Joint Venture Agreement from
being materially misleading.
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(2) Each Party represents and
warrants to the other that at the date of execution of this
Agreement:
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(a)
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all requisite corporate acts and
proceedings have been done and taken by it with respect to entering
into this Agreement and it has the right to enter into this
Agreement and to perform the obligations hereunder; and
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(b)
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the execution and delivery of
this Agreement and the performance from time to time of the rights
and obligations arising hereunder do not and will not conflict with
the terms of the constating instruments of it or with any agreement
or other instrument or regulatory provision by which it is
bound.
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(3) The representations and
warranties hereinbefore set out are conditions on which the Parties
have relied in entering into this Agreement and shall survive the
acquisition of any additional interest in the Property by Candev
and the termination of this Agreement and the conversion to the
Joint Venture Agreement, and each of the Parties will indemnify and
save the other harmless from all loss, damage, costs, actions and
suits arising out of or in connection with any breach of any
representation, warranty, covenant, agreement or condition made by
it and contained in this Agreement.
SECTION 2 – SALE AND
OPTION TO ACQUIRE INTEREST
Yale hereby agrees
to sell to Candev a 50% interest in the Property, including the
Legal Rights and, except as disclosed in Schedule A, free and clear
of all Encumbrances and all royalties, profit interests or other
payments in the nature of a rent or royalty or other interests of
whatsoever nature or kind, subject to the provisions of this
Agreement.
Yale agrees to sell to Candev or
its designated nominee a 50% undivided interest in the Property, in
consideration of which Candev will make the following payments to
Yale:
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(i)
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Pay to a deposit in the amount of
CDN $17,500 to Yale, and
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(ii)
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Pay an additional CND $ 17,500 to
Yale on the Effective Date.
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2.2
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Option to
Acquire an Additional Interest
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Yale agrees to grant to Candev an
option (the “Option”) to acquire a further 30% interest
in the Property(for a total of 80%). To exercise the Option, Candev
shall issue securities of Candev as well as fund exploration,
development and other expenditures (the “Expenditures”)
on the Property as outlined below.
For clarity, all Expenditures and
maintenance of the Property and agreements will be the
responsibility of Candev until such time as the Option is exercised
or terminated.
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2.2.1
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To exercise the
Option, Candev shall issue securities of Candev in the following
manner:
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(i)
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on or before the date which is
one (1) year after the Effective Date, Candev will issue 200,000
shares of common stock of Candev to Yale;
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(ii)
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on or before the date which is
two (2) years after the Effective Date, Candev will issue an
additional 250,000 shares of common stock of Candev to Yale;
and
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(iii)
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on or before the date which is
three (3) years after the Effective Date, Candev will issue an
additional 350,000 shares of common stock of Candev to
Yale.
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2.2.2
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To exercise the
Option, Candev shall fund Expenditures in the following
manner:
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(i)
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on or before the date which is
one (1) year after the Effective Date, Candev fund Expenditures
aggregating CDN $150,000 on the Property;
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(ii)
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on or before the date which is
two (2) years after the Effective Date, Candev fund additional
Expenditures aggregating CDN $250,000 on the Property;
and
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(iii)
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on or before the date which is
three (3) years after the Effective Date, Candev will fund
additional Expenditures aggregating CDN $400,000 on the
Property.
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Any excess in Expenditures
incurred in any period described above may be carried forward
against Expenditures due to be incurred in the next
period.
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2.3
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Termination
of Option
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The
right of Candev to exercise the Option or the portion thereof which
has not been previously exercised, as applicable, shall become null
and void and the Option held by Candev shall terminate
if:
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(a)
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Candev gives ninety (90) days
prior written notification to Yale at any time of its intention not
to exercise the Option or the portion thereof which has not been
previously exercised, as applicable; or
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(b)
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After thirty (30) days of
receiving written notice from Yale that Candev is in material
default of this Agreement, Candev remains in material default of
its obligations under this Agreement, including but not limited to
paying the consideration described in Section 2.2; or
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(c)
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Candev fails to implement Phase I
of the work program acceptable to Yale within six (6) months after
the Effective Date; or
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(d)
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Candev fails to incur all of the
Expenditures described in Section 2.2 as scheduled and in the
manner described above and shall have failed to either incur
Expenditures in the amount of the deficiency or pay the amount of
such deficiency to Yale within thirty (30) days after receipt of
written notice from Yale of such failure.
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On the
termination of the Option Period in accordance with Section 2.3,
Yale will have the right to purchase all of Candev’s interest
in the Property for a period of one year for CDN $17,500,
and;
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(a)
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the Property shall be free of all
Encumbrances and debts created by or through Candev;
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(b)
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all plant, machinery, equipment
and supplies owned by Candev and brought and placed upon the
Property shall remain the exclusive property of the owner thereof
and, if the Option Period terminates without Candev exercising the
Option, shall be removed by the owner thereof, at any time or times
within a period of six (6) months next following the termination of
the Option Period; provided that if the owner thereof has not
removed all such plant, machinery, equipment or supplies within the
said six (6) month period, then such plant, machinery, equipment
and supplies not so removed thereafter shall become the property of
Yale or, at Yale’s option, may within a further six (6)
months be removed by Yale at the expense of the owner thereof. All
plant, machinery, equipment and supplies, until it becomes
Yale’s property or is removed from the Property, shall be the
sole responsibility of the owner thereof and Yale shall have no
liability with regard thereto;
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(c)
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if the Option Period terminates
without the Option being exercised, Candev shall forthwith deliver
to Yale all data and factual information generated by Candev
through their exploration activities on the Property;
and
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(d)
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Candev shall be solely liable for
all costs and expenses accrued by it to third parties as a result
of its activities on the Property during the Option Period up to
the date of termination of the Option Period.
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The
provisions of Sections 5, 9, 11, 12 and 13 and Section 2.6 (if
applicable) shall survive the termination of the Option
Period.
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2.5
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Exercise of
Option to Earn an additional 30% Interest
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If
Candev incurs the Expenditures during the Option Period in the
manner described in Section 2.2 and pays the consideration
described in Section 2.2, then Candev shall earn a 80% undivided
right, title and interest in and to the Property which interest
shall automatically and immediately vest in Candev without any
further act by any Party. Yale represents and warrants that upon
completion of the Option Agreement that Yale will transfer an
additional 30% interest in the property to Candev and will be
deemed to have entered into a Joint Venture with Yale.
For
further clarity, upon completion of the Option and transfer of the
additional interest to Candev the Joint Venture Agreement will come
into affect and will supersede this agreement.
Upon Candev
exercising the option in accordance with this Section 2 and subject
to compliance with applicable Mexican law, for a sum no greater
than 5,000 Mexican Pesos, Yale shall forthwith transfer the
registered title to the Property to Candev, to be held by
Candev’s Mexican subsidiary in its own name in trust for the
parties as their interests may from time to time appear, except
where a transfer of title is required therein. Any Party shall be
entitled to record its interest in the Property and in this
Agreement on the title to the Property. Each Party shall pay its
own costs (including taxes payable) associated with the transfer of
title to the Property from Yale to Candev.
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2.7
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Deemed
Exploration Expenditures Entering the Joint Venture
Agreement
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Upon completion of the Option and
on the date of the formation of the Joint Venture, the parties
shall be deemed to have incurred the following costs under this
Agreement and to have the following undivided percentage interests
in the Joint Venture:
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Percentage
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Deemed Costs
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Interest
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(CND $)
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Candev
80%
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$
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815,000
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Yale
20%
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$
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203,750
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2.11
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Joint
Venture Agreement
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Yale and Candev
agree with, warrant and represent that upon exercise of the Option
the Joint Venture Agreement will be executed and delivered in the
form as attached hereto as Schedule “B”.
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2.12
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Operator of
this Agreement and Voting Control of Joint Venture
Agreement
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(a)
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During the Option Period, the
operator of all operations on the Property to be undertaken
pursuant to this Agreement (the “ Operator ”)
shall be Yale from the Effective Date for a period of at least one
year – afterwhich, at its choosing, Candev may become
operator. The Operator may delegate to perform any management
duties and responsibilities it deems necessary for the efficient
operation of the Property and will be paid a management fee equal
to fifteen percent (15%) of the Expenditures incurred on the
Property provided that such payments to Yale may be offset by any
management fees that Yale receives under the Joint Venture
Agreement such that Yale will only receive total management fees
under the Joint Venture Agreement and this Agreement equal to
fifteen percent (15%) of Expenditures incurred on the Property. The
Operator agrees to provide to the other party an accounting of such
management fees on a regular basis or whenever requested by the
other party.
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(b)
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During the Option Period, Yale
and Candev agree they will have mutual voting power. During the
Option Period Yale agrees not to make any decisions with respect to
the Property and its Legal Rights under the Joint Venture Agreement
without the prior written approval of Candev, which approval may be
unreasonably withheld in the sole and absolute discretion of
Candev.
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2.13
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Negative
Covenants of Yale
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During the Option
Period, except as contemplated by this Agreement, Yale will not,
without the prior written consent of Candev:
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(a)
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create, assume or permit to exist
any new mortgage, deed of trust, security interest or pledge, or
subject to any lien or encumbrance any of the Property, whether now
owned or hereafter acquired;
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(b)
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sell, assign, lease or otherwise
transfer or dispose of any of the Property, whether now owned or
hereafter acquired, except in the usual and ordinary course of
business;
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(c)
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knowledgably breach any law or
any regulatory filing requirements with respect to maintaining the
Property in good standing with the applicable government authority;
and
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(d)
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cancel any consultancy or agency
relationship, except in the usual and ordinary course of
business.
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2.15
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The National
Instrument 43-101 Report
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As
Candev’s due diligence on the property, Candev shall initiate
and prepare a National Instrument 43-101 compliant technical report
(the “43-101 Report”) on the subject Property within
thirty (30) days after the execution of this Agreement. Candev
shall be responsible for payment of all costs related to the
preparation of the 43-101 Report. The 43-101 Report means
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comprehensive report, prepared in
good faith and signed by a Qualified Person. “ Qualified
Person ” means an individual who:
(a) is an engineer or
geoscientist with at least five years experience in mineral
exploration, mine development or operation or project assessment,
or any combination of these;
(b) has experience relevant to
the subject matter of the Property and the Technical Report;
and,
(c) is a member in good standing
of a professional association.
The Parties acknowledge and agree
that the definition of “Qualified Person” under this
Agreement will be deemed to be automatically modified if the
definition of that term is modified in the Canadian National
instrument 43-101 “Standards of Disclosure for Mineral
Projects” applicable to all companies listed on a Canadian
stock exchange.
SECTION 3 –
CANDEV’S RIGHT TO PLACE THE CANDEV SHARES
If
at any time Yale desires to sell, assign, or transfer shares it
holds in the capital of Candev (the “Candev Shares”)
that exceeds a single block of 50,000 shares, then Candev shall
have a pre-emptive right to place the Candev Shares with purchasers
it has located as follows:
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(a)
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Yale shall promptly notify Candev
of its intentions. The Notice shall state the price in cash (the
“Candev Shares Purchase Price”) and all other pertinent
terms and conditions of the intended transfer. Yale need not have
any offer in hand, but if it does, then the Notice shall be
accompanied by a copy of the offer or contract for sale. Candev
shall have ten (10) Business Days after the date such Notice is
delivered to notify Yale whether it elects to place the offered
Candev Shares with purchasers that it has located the same Candev
Shares Purchase Price and on the same terms and conditions as set
forth in the notice. If such an election is made, then the transfer
shall be consummated promptly after Notice of such election is
delivered to Yale.
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(b)
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If Candev elects not to acquire
the offered Candev Shares or fails to so elect within the ten (10)
Business Day period provided above, Yale shall have forty-five (45)
days following the earlier of (i) the date of expiration of the
above mentioned ten (10) Business Day period or (ii) the last date
when Candev elected not to place the Candev Shares, to consummate
the transfer to a third party at a price at least equal to the
Purchase Price and on terms no less favourable to Yale than those
offered by the Yale to Candev in the Notice required herein;
and
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(c)
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If Yale fails to consummate the
transfer to a third party within the said forty-five (45) day
period, then the right of Candev in such offered Candev Shares
shall be deemed to be revived. Any subsequent proposal to transfer
such Candev Shares shall be conducted in accordance with all the
procedures set forth in this Section 3.
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SECTION 4 - MANAGEMENT
COMMITTEE
A
Management Committee composed of one (1) representative of each
Party, shall be established on the Effective Date. Each Party
shall, within fifteen (15) days after the Effective Date, notify
the other Party in writing of the name of its representative (the
“ Representative ”) and alternative
Representative (“ Alternate ”) who may from time
to time act in the absence of the Representative. Each Party shall
also be free to bring to all meetings at its own cost such
technical and other advisors as it may deem appropriate; provided
that such advisors are bound by the provisions of Section 9. Each
Party shall have the right at any time and from time to time to
change it’s Representative or Alternate by written notice
given to the other Party. Each Party shall incur all costs (which
shall not be deemed to be Expenditures) for its
Representative’s and Alternate’s activities
hereunder.
The
Management Committee shall be constituted during the Option Period
for the following purposes:
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(a)
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to review the on-going activities
of the Operator on the Property and to review reports submitted by
the Operator on the progress of its activities;
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(b)
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to discuss in good faith any
changes, alterations or recommendations to the activities
undertaken by the Operator on the Property; and
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(c)
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to review proposed exploration
operations on the Property to be undertaken by the
Operator.
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(1) Meetings of the Management
Committee shall be held no less than once annually. In lieu of
holding meetings of the Management Committee, the Management
Committee may convene telephone conferences with the unanimous
consent of both Parties.
(2) The Management Committee
shall establish at its first meeting such procedures and rules
governing the meetings and convening of the meetings of the
Management Committee as the Parties may unanimously
agree.
(3) On any matter to be approved
by the Management Committee, the Operator shall have final and
binding power on both Parties to decide on a decision in case of
dispute between the Parties.
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SECTION 5 -
INDEMNITIES
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5.1
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Indemnities
of Candev
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Candev shall
indemnify Yale from all liability, however arising, in respect of
all debts, liabilities, costs and obligations of every kind and
nature, including damage to property and personal injury, arising
out of or related to the conduct by it of activities on the
Property, which were incurred or arose during the Option Period.
For further clarity, the Parties intend that, pursuant to the
preceding sentence, Candev shall be liable for its liabilities,
known or unknown, contingent or otherwise, which were incurred or
arose during the Option Period, relating to or arising out
of:
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(a)
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the conduct of activities by it
or on its behalf in, on or under the Property; and
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(b)
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the Environmental protection,
clean-up, remediation, and reclamation of the Property resulting
from or relating to its activities referred to in Section 5.1(a)
including, but not limited to, the obligations and liabilities
arising out of or related to:
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(i)
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the disturbance or contamination
of land, water (above or below surface) or the Environment by
exploration, mining, processing or waste disposal
activities;
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(ii)
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any failure to comply with all
past, current or future governmental or regulatory authorizations,
licenses, permits, and orders and all non-governmental
prohibitions, covenants, contracts and indemnities; and
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(iii)
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any act or omission causing or
resulting in the spill, discharge, leak, emission, ejection,
escape, dumping or release of hazardous or toxic substances,
materials, or wastes as defined in any federal, provincial, or
local law or regulation in connection with or emanating from the
Property.
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Yale shall
indemnify Candev from all liability, however arising, in respect of
all debts, liabilities, costs and obligations of every kind and
nature, including damage to property and personal injury, arising
out of or related to the Property or the conduct by Yale of
activities on the Property, arising before the Effective Date and
while Yale is the Operator. For further clarity, the Parties intend
that Yale shall be liable for its liabilities, known or unknown,
contingent or otherwise, arising before the Effective Date,
relating to or arising out of:
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(a)
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the conduct of activities in, on
or under the Property; and
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(b)
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the Environmental protection,
clean-up, remediation, and reclamation of the Property including,
but not limited to, the obligations and liabilities arising out of
or related to:
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(i)
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the disturbance or contamination
of land, water (above or below surface) or the Environment by
exploration, mining, processing or waste disposal
activities;
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(ii)
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any failure to comply with all
past, current or future governmental or regulatory authorizations,
licenses, permits, and orders and all non-governmental
prohibitions, covenants, contracts and indemnities; and
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(iii)
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any act or omission causing or
resulting in the spill, discharge, leak, emission, ejection,
escape, dumping or release of hazardous or toxic substances,
materials, or wastes as defined in any federal, provincial, or
local law or regulation in connection with or emanating from the
Property.
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SECTION 6 - EFFECTIVE
DATE
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(1)
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This Agreement is conditional
upon:
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(a)
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the approval of the board of
directors of Yale and Candev;
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(b)
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Yale delivering to Candev a
Mexican legal title opinion described in Section 1.1(1)(n) and in a
form satisfactory to Candev to be determined by Candev in its sole
and absolute discretion;
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(c)
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Candev conducting a due diligence
review of the Property, title and the licenses related thereto and
being satisfied of the results of such due diligence to be
determined by Candev in its sole and absolute discretion;
and
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(d)
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Candev initiating and preparing
the 43 – 101 Report and Candev being satisfied, in
Candev’s sole and absolute discretion, with the results of
such report,
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in each case in form and
substance satisfactory to the affected Party, as the case may
be.
(2) The “ Effective
Date ” means the date on which the Parties shall have
acknowledged, in writing, that all of the conditions set out in
this Section 6.1 have been met, or have been waived in writing by
the party benefiting from the condition.
SECTION 7 - OPERATIONS DURING
THE OPTION PERIOD
Subject to the
other terms of this Agreement, during the Option Period, the
Operator shall have the following rights:
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(a)
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the sole and exclusive right to
enter upon the Property to carry on exploration and related
operations thereon in accordance with the existing Access Agreement
with the owner of the surface rights that cover the Property
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(b)
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the right to remove from the
Property such reasonable amounts of ore and mineralized material as
the Operator may deem necessary for the purposes of making assays
and tests;
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(c)
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the right to erect buildings and
other improvements and install such machinery and equipment on the
Property as the Operator deems advisable or necessary in connection
with the activities contemplated by this Section 7.1;
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(d)
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the right of access to all of
Yale’s data and information concerning the Property including
mining records and drill cores;
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(e)
|
be allowed to review and copy
data relevant to the Property in Yale’s possession; provided
that the confidentiality provisions of Section 9 shall apply with
respect to such data; and
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(f)
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acquire any license granting
rights to third parties with respect to the Property.
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7.2
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Duties of
the Operator
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Subject to the
other terms of this Agreement, during the Option Period, the
Operator shall be responsible for the following duties and
shall:
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(a)
|
cause to be done all things that
may be required to keep the Property in good standing under the
laws of the country of Mexico;
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(b)
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conduct all exploration and other
operations in, on and under the Property in a good and workmanlike
manner in accordance with good mining and engineering practices and
in compliance with all applicable laws, regulations and
orders;
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(c)
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agrees to leave the Property in a
safe condition with all openings safeguarded in accordance with the
applicable mining laws and regulations;and,
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(d)
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prepare and submit to Yale, at
the Operator’s election, monthly progress reports and
statements of Expenditures and an annual report within sixty (60)
days of the end of each calendar year.
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(e)
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DELETED.
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(1) During the Option Period, the
Operator shall use its commercially reasonable best efforts to
provide, maintain and pay for the following insurance which shall
be placed with an insurance company or companies and in a form as
may be acceptable to both parties (acting reasonably):
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(a)
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comprehensive general liability
insurance protecting each of the Parties and their respective
employees, agents, contractors, invitees and licencees against
damages arising from personal injury (including death) and from
claims for property damage which may
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- 13 -
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arise directly or indirectly out
of the operations of the Operator under this Agreement;
and
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(b)
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automobile insurance on the
Operator’s owned and non-owned vehicles, if any, protecting
its employees, agents, contractors, invitees and licencees against
damages arising from bodily injury (including death) and from
claims for property damage arising out of the operations of the
Operator under this Agreement.
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(2) Each policy of insurance
contemplated in this Section 7.3 shall be in an amount that is
reasonable for the scale of exploration and development conducted
on the Property inclusive of any one occurrence. The policy of
insurance referred to in Section 7.3(1)(a) shall:
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(a)
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include a standard form of
cross-liability clause;
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(b)
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indicate that the insurer will
give the Operator thirty (30) days’ prior written notice of
cancellation or termination of the coverage. If such termination is
received, the Operator agrees to forward the termination notice to
the other party within 48 hours.
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(3) The Operator shall provide
Yale with such evidence of insurance as Yale may, acting
reasonably, request.
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7.4
|
Access to
Mining Operations
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The
other party may, at its own risk and expense and at reasonable
times agreed to by the Operator enter on the Property and examine
the Operator’s operations; provided, that the other party is
not, in the opinion of the Operator, interfering with such
operations.
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7.5
|
Yale and
Candev Obligations for License Renewals and property
access agreements
|
Candev agrees to
pay for the cost of license renewals for the Property and Yale will
be responsible for applying for the license renewals until such
time as the Option has either been fulfilled or
terminated.
Yale agrees to
provide Candev with copies of all agreements for the access to the
Property and that it will involve Candev in any negotiations
regarding access to the Property.
SECTION 8 - SALE OF
INTEREST
Except as
otherwise provided in Section 8.2 and Section 8.3, if at any time a
Party (the “ Offeror ”) desires to sell, assign,
or transfer all or any part of its interest in this Agreement and
the Property (the “ Sale Interest ”), then the
other Party (each, an “ Offeree ”) shall have a
preemptive right to acquire such Sale Interest as
follows:
- 14 -
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(a)
|
the Offeror shall promptly notify
the Offeree of its intentions. The Notice shall state the price in
cash or cash equivalent in the form of marketable securities (the
“ Purchase Price ”) and all other pertinent
terms and conditions of the intended transfer. The Purchase Price
may be stated in whole or in part in the form of publicly
marketable securities provided that the Offeror delivers together
with its Notice given under this subsection 8.1 a certificate
signed by a duly qualified and reputable securities analyst
certifying as to the cash equivalent value of the publicly
marketable securities on the date of such Notice. The Offeror need
not have any offer in hand, but if it does, then the Notice shall
be accompanied by a copy of the offer or contract for sale. The
Offeree shall have fifteen (15) days after the date such Notice is
delivered to notify the Offeror whether it elects to acquire the
offered Sale Interest at the same Purchase Price and on the same
terms and conditions as set forth in the Notice. If such an
election is made, then the transfer shall be consummated promptly
after Notice of such election is delivered to the
Offeror;
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(b)
|
if the Offeree elects not to
acquire the offered Sale Interest or fails to so elect within the
fifteen (15) day period provided above, the Offeror shall have
ninety (90) days following the earlier of (i) the date of
expiration of the above mentioned fifteen (15) day period or (ii)
the last date when the Offeree elected not to purchase the Sale
Interest, to consummate the transfer to a third party at a price at
least equal to the Purchase Price and on terms no less favourable
to the Offeror than those offered by the Offeror to the Offeree in
the Notice required herein; and
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(c)
|
if the Offeror fails to
consummate the transfer to a third party within the said ninety
(90) day period, then the pre-emptive right of the Offeree in such
offered Sale Interest shall be deemed to be revived. Any subsequent
proposal to transfer such Sale Interest shall be conducted in
accordance with all the procedures set forth in this Section
8.
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8.2
|
General
Exceptions to Pre-emptive Right.
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Section 8.1 shall not apply to
the following:
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(a)
|
a transfer by the Offeror of all
or any part of its interest in this Agreement and the Property to
an Affiliate; provided that:
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(i)
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the transferee remains an
Affiliate indefinitely thereafter;
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(ii)
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the subsequent transfer of
Control of such Affiliate, other than to an Affiliate of the
original Offeror, whether through the issuance or transfer of
shares in the capital of the Affiliate or otherwise (such that it
no longer conforms to the definition of an Affiliate) shall be
subject to Section 8.1;
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(iii)
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the Affiliate agrees in writing
to be bound by the provisions hereof; and
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(iv)
|
a transfer to an Affiliate shall
not relieve the Offeror of any of its liabilities and obligations
arising under this Agreement; or
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- 15 -
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(b)
|
a corporate merger,
consolidation, amalgamation, or reorganization of the Offeror by
which the surviving entity shall be subject to all of the
liabilities and obligations of the Offeror hereunder, including an
amalgamation or reorganization involving Candev.
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8.3
|
Candev’s Exception to the Pre-emptive
Right.
|
Notwithstanding
the above, the pre-emptive rights described in Section 8.1 of this
Agreement do not apply to Candev prior to Candev exercising the
Option. For greater certainty this means that prior to Candev
exercising the Option pursuant to Section 2.6, Candev, and only
Candev, can sell, assign, or transfer all or any part of its
interest in this Agreement to a third party without offering the
pre-emptive rights set forth in Section 8.1 of this Agreement as
long the third party is bound by the terms of this Option Agreement
and the subsequent Joint Venture Agreement. Prior to Candev
exercising the Option, Yale must still comply with the pre-emptive
rights described in Section 8.1 hereof.
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8.4
|
Prohibition
Against Yale
|
Yale shall not be entitled
to:
|
(a)
|
sell, assign, transfer or
otherwise deal with all or any part of its interest in this
Agreement, the Joint Venture Agreement or the Property, except as
permitted by this Section 8; or
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(b)
|
encumber its interest in this
Agreement, the Joint Venture Agreement or in the Property in any
manner whatsoever.
|
Any
permitted assignee of a Party shall, upon such assignment taking
place, be deemed to be a Party as though the assignee had been an
original signatory to this Agreement. All Parties, including such
assignee, shall execute a novation agreement to evidence the
assignee’s commitments on such terms as the Parties may
reasonably agree.
SECTION 9 -
CONFIDENTIALITY
(1) The Parties shall keep
confidential all information, documentation, reports, including
without limitation all records obtained from each other with
respect to the Property or in connection with this Agreement
(collectively, “ Confidential Information ”).
Subject to Section 9.2, neither party shall use any Confidential
Information for any purposes not related to the Property, or in any
way detrimental to the other party. Nothing herein contained shall
restrict or prohibit the parties from disclosing the Confidential
Information to their respective consultants, agents, bankers,
lenders, advisors and solicitors as long as such parties agree to
keep such Confidential Information confidential. The Confidential
Information referred to in this Section shall not
include:
- 16 -
|
(a)
|
Public information or information
in the public domain at the time of receipt by a party or its
consultants, agents, advisors and solicitors;
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(b)
|
Information which becomes public
through no fault or act of a party or its consultants, agents,
bankers, lenders, advisors or solicitors;
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(c)
|
Information in the possession of
a party not provided by the other party or its consultants, agents,
bankers, lenders, advisors and solicitors;
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(d)
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Information required to be
disclosed by law; or
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(e)
|
Information received in good
faith from a third party lawfully in possession of the information
and not in breach of any confidentiality obligations.
|
(2) If either party is required
or requested by legal process to disclose any Confidential
Information, such party will provide the other party with prompt
notice of such requirement or request so that the other party may
seek an appropriate protective order or waive compliance with the
provisions of this requirement or both. If either party is
compelled to disclose Confidential Information to any court or
tribunal or else stand liable for contempt or suffer other censures
or penalty, such party may disclose same without liability
hereunder provided that it shall give the other party advance
written notice of the information to be disclosed and, at the
request of the other party, shall seek to obtain assurances that
such information will be accorded confidential
treatment.
(3) Yale and Candev each agree
that prior to making any press release concerning the transactions
contemplated herein, each of them shall consult with the other and
obtain the other’s written approval with respect to such
press release, which approval shall not be unreasonably or
arbitrarily withheld or delayed, it being acknowledged that it is
intended that no press release will be made until after the
completion of Closing, unless required by law or any applicable
stock exchange.
Notwithstanding
the generality of the foregoing, each Party shall be free to
utilize information or knowledge obtained pursuant to the Agreement
in connection with the conduct by such Party for exploration or
mining operations for its own benefit and account or for the
benefit and account of any partnership, joint venture or
corporation of which it is a partner or member.
SECTION 10 – FORCE
MAJEURE
Neither party
shall be liable or deemed to be in default of its obligations
hereunder for any delay or failure in performance under this
Agreement or other interruption of service resulting, directly or
indirectly, from acts of God, acts of governmental, civil or
military authority, acts of war, terrorist acts, accidents, natural
disasters or catastrophes, power outages,
- 17 -
strikes, or other work stoppages
or any other causes beyond the reasonable control of the party
affected thereby (“ Force Majeure ”). However,
each party shall use its best good faith efforts to perform such
obligations to the extent of its ability to do so in the event of
any such occurrence or circumstances. If a Force Majeure occurs
rendering the performance of an obligation to be performed
hereunder reasonably impractical, the date by which such obligation
was to be completed shall be extended by the number of days that
the obligation has been delayed by reason of the Force
Majeure.
SECTION 11-
NOTICE
Any
notice which may be or is required to be given under the terms of
this Agreement shall be in writing and shall be
effective:
|
(a)
|
when personally delivered upon
any Party at the address designated by it for such
service;
|
|
|
|
|
(b)
|
on production of a facsimile
transmission report by a machine from which the facsimile was sent
which indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient being notified for the purposes
of this clause; or
|
|
|
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|
(c)
|
five (5) business days after the
same shall have been deposited in the mail properly addressed,
certified or registered with return receipt requested and postage
prepaid, unless at the time of such posting or within five (5)
working days thereafter, any strike, labour dispute or similar
disruption of mail service shall come into effect, in which event
such notice shall not be valid.
|
The addresses for such notices
shall be as follows:
|
|
To
Yale:
|
YALE RESOURCES
LTD.
|
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|
Suite 400
– 409 Granville Street
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Vancouver,
BC
|
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V6C
1K4
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Attention:
|
Ian Foreman,
P.Geo., President
|
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|
Facsimile:
|
(604)
678-2532
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AND A COPY
TO:
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Tupper Jonsson
& Yeadon
|
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|
1710 –
1177 West Hastings Street
|
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Vancouver,
British Columbia
|
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V6E
2L3
|
|
- 18 -
|
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|
Attention:
|
Lee
Tupper
|
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|
Facsimile:
|
(604)
681-0139
|
|
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|
|
If to
Candev:
|
CANDEV RESOURCE
EXPLORATION INC.
|
|
|
|
2200 - 1177
West Hastings Street
|
|
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|
Vancouver,
British Columbia
|
|
|
|
V6E
2K3
|
|
|
|
|
|
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|
|
|
Attention:
|
Mark A.
McLeary, President
|
|
|
|
Facsimile:
|
(604)
647-0631
|
|
|
|
|
|
|
|
|
AND A COPY
TO:
|
|
|
|
|
|
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|
|
Clark Wilson
LLP
|
|
|
|
800 - 885 West
Georgia Street
|
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|
Vancouver,
British Columbia
|
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|
V6C
3H1
|
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|
Attention:
|
Conrad
Nest
|
|
|
|
Facsimile:
|
(604)
687-6314
|
Any Party may change the
addresses for such notice by giving the other Parties notice of
such change in accordance with the foregoing.
SECTION 12 –
INJUNCTION
Yale acknowledges
and agrees that Candev will suffer serious and irreparable harm,
which could not be adequately compensated for in damages in the
event Yale breaches or there will be an anticipatory breach by Yale
of this Agreement, and Yale hereby consents to an injunction and an
Order by Consent being entered in the British Columbia Supreme
Court being issued against Yale restraining Yale from such breach
or anticipatory breach and/or requiring Yale to deliver specific
performance and any other equitable remedy deemed desirable by
Candev in its absolute discretion under the terms and conditions of
this Agreement, but such action shall not be construed so as to be
in derogation of any other remedy which may be available in the
event of such breach or anticipatory breach. This section shall
survive the termination of this Agreement.
SECTION 13 -
INTERPRETATION
In
this Agreement unless the context otherwise requires, the following
words and terms set forth in this Section 13.1 shall have the
meanings respectively assigned to them:
- 19 -
(1) Affiliate means
any person, partnership, venture, corporation, or other form of
enterprise which directly or indirectly Controls, is Controlled by
or is under common Control of a Party.
(2) Agreement means
this agreement and all amendments made hereto in accordance with
the provisions hereof.
(3) Business Day
means any day on which banks are open for business in the City of
Vancouver, British Columbia, but does not include a Saturday,
Sunday or holiday in the Province of British Columbia.
(4) Confidential
Information has the meaning given to it in Section 9.1(1)
.
(5) Control means
possession directly or indirectly of the power to direct or cause
direction of management and policies through ownership of the
voting securities, contract voting trust and otherwise.
(6) Effective Date
has the meaning given to it in Section 6.1.
(7) Encumbrance
means any claim, restriction, charge, mortgage, security interest,
lien, option, right of pre-emption or first refusal, equity, power
of sale, hypothecation, servitude or other third party right, and
“ Encumber ” and “
Encumbered ” shall be construed
accordingly.
(8) Environmental
Claims means any and all administrative, regulatory or
judicial actions, suits, demands, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law or any permit issued under any
such Environmental Law, including, without limitation:
|
(a)
|
any and all claims by
governmental or regulatory authorities for enforcement, clean-up,
removal, response, remedial or other actions or damages pursuant to
any applicable Environmental Law; and
|
|
|
|
|
(b)
|
any and all claims by any third
party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive or other relief resulting from
hazardous materials, including any release thereof, or arising from
alleged injury or threat of injury to human health or safety
(arising from Environmental matters) or the Environment.
|
(9) Environmental
Law means all requirements of the common law or of
Environmental, health or safety statutes, regulations, rules,
ordinances, policies, orders, approvals, notices, licenses, permits
or directives of any federal, territorial, provincial, state or
local judicial, regulatory or administrative agency, board or
governmental authority including, but not limited to those relating
to:
|
(a)
|
noise;
|
|
|
|
|
(b)
|
pollution or protection of the
air, surface water, ground water or land;
|
- 20 -
|
(c)
|
solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or
transportation;
|
|
|
|
|
(d)
|
exposure to hazardous or toxic
substances; or
|
|
|
|
|
(e)
|
the closure, decommissioning,
dismantling or abandonment of any facilities, mines or workings and
the reclamation or restoration of any lands.
|
(10) Expenditures
means the sum of all monies spent in prospecting, exploring,
geological, geophysical and geochemical surveying, sampling,
examining, diamond and other types of drilling, developing,
dewatering, assaying, testing, constructing, maintaining and
operating roads, trails and bridges upon or across the Property,
buildings, equipment, plant and supplies, salaries and wages
(including fringe benefits) of employees and contractors directly
engaged therein, insurance premiums, and all other expenses
ordinarily incurred in prospecting, exploring and developing mining
lands and also includes monies spent in acquiring additional claims
or concessions which shall form part of the Property. Expenditures
shall also include any tax payments, option payments and legal
costs and fees related to the registration and maintenance of
titles and agreements in the Mexico Mining Registry together with
any value added taxes accruing after the date of this Agreement as
well as any of those costs related to the acquisition of properties
from third parties. Expenditures will also include any and all
agreements with third parties for access to the
Property.
(11) Force Majeure
has the meaning given to it in Section 10.1.
(12) Joint Venture
means the joint venture formed between Yale and Candev pursuant to
the Joint Venture Agreement.
(13) Joint Venture
Agreement means the agreement entered into by Yale and
Candev with respect to the joint venture exploration, development
and production of the Property and attached hereto as Schedule
“B”.
(14) Legal Rights
means such contractual and legal rights of Yale and Candev as
described in the Joint Venture Agreement.
(15) Mining
Operations means all activities carried out in, on or under
or in connection with the Property related to or necessary for the
development and construction of a mine(s) thereon, the mining,
extraction, treatment, storage and processing of minerals located
therein, thereon or thereunder and the acquisition or construction
of any improvements, personal property, fixtures or equipment
reasonably necessary therefor.
(16) Notice means
any notice, approval, demand, direction, consent, designation,
request, document, instrument, certificate or other communication
required or permitted to be given under this Agreement.
(17) Operator has
the meaning given to it in Section 2.11
- 21 -
(18) Option has the
meaning given to it in Section 2.1.
(19) Option Period
means that period of time commencing on the Effective Date and
terminati
