UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Uranium Power Corporation
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(Name of small business issuer in its charter)
Colorado None
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
206-475 Howe Street, Vancouver, B.C., V6C-2B3, CANADA
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(Address of principal executive offices)
Issuer's telephone number: (604) 685-8355
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS
Business.
Uranium Power Corporation (the "Company") is a Colorado corporation formed
on April 3, 1998. The Company is a Canada-based company engaged in the
exploration and development of high-grade, low cost uranium properties. It was
formed as a result of management's perception of the upcoming worldwide shortage
of uranium. The Company intends to identify, acquire and develop high-grade, low
production cost uranium properties in the Athabasca Basin in northern
Saskatchewan, Canada.
On April 13, 1998, the Company acquired a 100% interest in two uranium
properties located in northern Saskatchewan, Canada, pursuant to an Acquisition
Agreement (the "Acquisition Agreement") with Athabasca Uranium Syndicate, a
syndicate formed in British Columbia, Canada ("Athabasca"). Under the terms of
the Acquisition Agreement, the Company acquired all of Athabasca's assets, the
majority of which comprised the "Hocking Lake Property" and the "Henday Lake
Property." The Hocking Lake Property consists of five mining claims in two
groups totaling 49,924 acres located west of Black Lake, Saskatchewan. The
Henday Lake Property consists of three contiguous mining claims totaling 28,428
acres in the Henday and Mallen Lakes area. The Company intends to further
identify uranium prospects and explore and develop the Hocking Lake and the
Henday Lake Properties.
The Company entered into a letter agreement dated July 29, 1998 with J. R.
Billingsley, the registered owner of claim #S-106087 (the "Billingsley Claim")
in Northern Mining District, Saskatchewan, regarding property known as the "Hump
Lake Property." Under the letter agreement, the Company had until October 1,
1998 to notify Mr. Billingsley whether it wanted to proceed with exploring and
developing the Billingsley Claim. The Company's deadline has been extended from
October 1, 1998 to December 31, 1999. If the Company desires to proceed with
exploring and developing the claim, Mr. Billingsley will transfer his 100%
ownership of the Billingsley Claim to the Company upon (i) the issuance of
50,000 shares of the Company's $0.001 par value common stock to Mr. Murray
Swetz, (ii) the payment of U.S. $13,375 to Mr. Billingsley, (iii) an agreement
by the Company to pay Mr. Billingsley U.S. $0.35 per pound of uranium bearing
minerals mined from the claim when the price is U.S. $18.00 per pound or less,
and U.S. $0.50 per pound when the price is more than U.S. $18.00 per pound, plus
3% of net smelter returns on other minerals mined from the claim, (iv) an
agreement by the Company to use its best efforts to bring the property to
production, and (v) the execution of a formal agreement based on the terms set
forth in the letter agreement. If the Company determines not to explore and
develop the claim, it will be entitled to file its exploration expenditures on
the claim as assessment work and will provide Mr. Billingsley the results of its
exploration activities.
On December 16, 1998, the Company executed an Exploration Option and
Operating Joint Venture Agreement ("Joint Venture Agreement") with Phelps Dodge
Corporation of Canada, Ltd., a Delaware corporation ("PDC"), under which PDC
granted the Company an option to acquire an interest in six uranium properties
("PDC Properties") in Saskatchewan totaling 74,756 acres. A portion of these six
properties are located close to what Saskatchewan Energy and Mines, the
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provincial agency governing mining claims and operations, has determined to be
some of the richest known remaining uranium deposits in the world, such as Cigar
Lake (353 million pounds uranium oxide), MacArthur River (213.8 million pounds
uranium oxide) and Key Lake (24.4 million pounds uranium oxide). In order to
exercise its option to acquire a 100% interest in the six PDC Properties under
the Joint Venture Agreement, the Company must incur expenditures of at least
U.S. $338,000 ($500,000 Can. (Canadian dollars)) by December 31, 1999, and an
additional U.S. $1,690,000 ($2,500,000 Can.) in expenditures by December 31,
2002 from prospecting, exploring, developing and mining the six properties. PDC
will be entitled to a royalty from the uranium produced from the PDC Properties
if the Company exercises its option.
Under the Joint Venture Agreement, if the Company exercises its option to
acquire the PDC Properties, the Company grants PDC an earn back option. The earn
back option gives PDC the option to surrender its right to royalties and obtain
a 35% interest in the PDC Properties if PDC incurs expenditures of at least U.S.
$2,028,000 ($3,000,000 Can.) by December 31, 2006 from prospecting, exploring,
developing and mining the six properties.
On March 24, 1999, the Company entered into a Property Option Agreement
with Pacific Amber Resources Ltd., a British Columbia corporation ("Pacific
Amber"), under which the Company granted Pacific Amber an option to acquire a
50% interest in the Company's rights to be obtained under the Joint Venture
Agreement with PDC. Pacific Amber will be entitled to exercise its option if it
incurs the U.S. $338,000 ($500,000 Can.) in expenditures by December 31, 1999
that are required to be expended by the Company under the Joint Venture
Agreement. The Company issued 200,000 of its shares of common stock to Pacific
Amber upon execution of the Property Option Agreement. All decisions to be taken
with respect to the initial program to expend U.S. $338,000 ($500,000 Can.)
under the Joint Venture Agreement are to be handled by a management committee,
with the Company and Pacific Amber each appointing two members to the four
member committee. Pacific Amber has a deciding vote in the event of a split of
votes.
If Pacific Amber satisfies its expenditure obligations by December 31, 1999
under the Property Option Agreement, then subsequent to December 31, 1999, the
Company's and Pacific Amber's interests in the PDC Properties will be
proportionately adjusted based on the amount of expenditures that each company
incurs between January 1, 2000 and the December 31, 2002 deadline to incur an
additional U.S. $1,690,000 ($2,500,000 Can.) under the Joint Venture Agreement
with PDC. In the event that either the Company's or Pacific Amber's
proportionate interests are adjusted based on expenditures to a percentage that
is less than 15%, then that company's interest will be converted to a 5% net
profit interest.
With the ability to explore a total of more than 158,000 acres in one of
the richest uranium belts in the world, the Company's management believes it is
well positioned to identify and develop a significant amount of uranium.
However, there is no assurance that the Company will be able to discover,
develop and produce sufficient uranium reserves in the Hocking Lake Property,
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the Henday Lake Property, the Hump Lake Property or elsewhere. Further, there
can be no assurance that the Company will recover the expenses incurred when it
explores its properties or claims, or that it will achieve profitability.
The Company's management believes it's key strengths lie in the
acquisition, financing and exploration of world class uranium properties, and in
the principals' extensive industry contacts worldwide. Together with the
experience in the uranium industry of Thornton Donaldson, the Company's
President, the Company is positioning itself to become a significant player in
the field of uranium exploration and development.
General Statements on Uranium.
Uranium occurs as uranium oxide in minerals such as pitchblende. Most of
the world's richest uranium deposits occur in the Athabasca Basin of northern
Saskatchewan and are contained in unconformities (breaks in the geological
record) between Archean aged basement rocks (very old rocks) and younger,
Proterozoic aged sedimentary layers at depths of less than 1,640 feet. Major
faults near the unconformities are also important features enhancing the chance
for discovery.
Uranium is an unusual metal compared to base and precious metals in that
its value has really only been recognized in the past 60 years. Uranium ore is
the basic resource for the production of electrical energy through nuclear
power. Commercial nuclear power generation is a technology that has become
mature and well-understood. The industry began to see increased commercial
demand for uranium in 1973, partially as a result of the OPEC-induced "energy
crisis" which caused a sharp rise in crude oil prices. In response, many
countries began development of nuclear power programs as an alternative to
fossil fuels for electricity generation. As of September, 1997, there were
approximately 439 commercial nuclear reactors operating in more than 30
countries, producing about 17% of the world's electricity.
The United Nations has predicted that the world's population will grow from
the present 5.5 billion to 8.5 billion in the next 27 years and the demand for
electricity is expected to double by 2020. Nuclear power joins hydro-electric
power as the only proven greenhouse gas free technology capable of meeting the
large scale electrical generation demands of the next century. With the Nuclear
Energy Institute's current estimates of carbon dioxide emissions from fossil
fuels growing 36% to 50% higher than 1990 levels, the need to limit pollutants
will also increase the demand for nuclear power. Nuclear generation of
electricity can and should be a major part of the solution to slowing climactic
changes through controlling gas emission levels. The use of nuclear generated
power has already proven to be a major factor in reducing greenhouse gas
emissions around the world. The Nuclear Energy Institute has determined that
every 25 tons of uranium used to generate electrical power reduces carbon
dioxide emissions, relative to coal and other fossil fuels, by one million tons.
It was stated by the Nuclear Energy Institute at the 1997 Kyoto conference on
global warming that clean air objectives cannot be obtained without maintaining
and expanding the existing number of commercial nuclear generators in the world.
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Clearly the key factor in determining demand for uranium is reactor fuel
requirements for meeting the world's growing energy demands.
Mineral Properties.
The Company's properties are located in areas geologically favorable for
the occurrence of uranium deposits. Exploration in the western sector of the
Hocking Lake Property has discovered boulders assaying up to 2.36% uranium. The
Henday Lake Property is located within a few miles of four major deposits, two
of which are in production, with the other two planning to commence operations
within the next three years. The Billingsley Claim is a 3.1 by 2.5 mile area
located at Hump Lake, 14.3 miles northwest of Uranium City. Uranium City was the
site of extensive development and a uranium "boom" - including the renowned
Eldorado Mines - in the mid-1950's. Exploration has shown that the Athabasca
Basin-type arkose and coarse conglomerate Martin formation extends further into
the area than was previously thought and underlies the Hump Lake Property. A
drill hole sample from the property returned 1.42% uranium oxide over 22 feet in
the Martin arkose, a rich assay over a large intersection.
In December of 1998, the Company obtained an option to acquire six
properties totaling 74,756 acres in the Athabasca Basin under the Joint Venture
Agreement with PDC. A diamond drill intersection of 9.02 feet at one property
assayed 0.62% uranium oxide and most of the holes at this location intersected
significant alteration. Five of the properties are located between the Key Lake
mine to the south, a producing uranium mine, and the MacArthur River deposit to
the north, the richest known uranium deposit in the world. The MacArthur River
deposit has ore reserves of 457,000 tons grading l8.7% uranium oxide, and is
scheduled to commence production in December 1999. The sixth property is located
9.3 miles east of the Cigar Lake uranium deposit, which has ore reserves of
1,176,000 tons grading 13.6% uranium oxide, and is expected to be placed into
production in 2001.
Markets.
Canada is the largest producer of uranium in the world. In 1997,
Saskatchewan's mines produced 12,033 tons of uranium, which Saskatchewan Energy
and Mines reported was 100% of Canadian and 33.6% of total world uranium output,
valued at approximately $557 million Can. This production was attained from
three mines in northern Saskatchewan. Saskatchewan Energy and Mines estimates
1998 production amounts to be similar to 1997 levels, although the 1998 actual
amounts are not yet available. By the year 2003, four new mines are scheduled to
be in production in this area for an estimated total production of 23,828 tons
of uranium annually, which will be approximately 55% of projected world mine
production.
In 1997, mines supplied 35,810 tons of uranium and 439 uranium reactors
world wide required approximately 64,250 tons of uranium. In the past the
deficit has been made up from stockpiles, which are now largely depleted. Demand
continues to grow 1% to 2% annually. By the year 2020, the World Energy Council
estimates electricity demand will be at least 50% higher than now, and that
nuclear energy will be required to contribute a large portion of this demand. It
is generally considered that only Canada, and to a somewhat lesser extent,
Australia, will be in a position to expand production to meet increases in the
world uranium demand in the next two decades.
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Uranium oxide prices increased from U.S. $7.00 to $8.00 per pound in the
early 1970's to more than U.S. $40.00 per pound in the late 1970's and
thereafter decreased to the U.S. $8.00 to $10.00 range in the early 1990's. As
stockpiles became depleted, the price increased to over U.S. $16.00 per pound
from January 1995 to mid 1996, and then declined to approximately U.S. $10.00.
Currently, the price of uranium is approximately U.S. $12.00 per pound.
Considering the current shortfall of supply of approximately 30,000 tons
per year, which can only be made up from new mine production, and to a minor
extent by recycling nuclear weapons and reprocessing used reactor fuel, it is
generally accepted that the price of uranium oxide will increase, which will
encourage more active exploration for the mineral. Estimates of U.S. $20.00 to
$40.00 per pound over the next few years have been made by U.S. Energy Corp. and
A.R. Rule Investments, a uranium advisory service.
Supply and Demand.
Over the past decade, the world has consumed more uranium than it has
produced from mines. As reported by the Uranium Institute in London, England,
world uranium fuel consumption has increased from 25,401 tons in 1980 to 64,250
tons in 1997, with production below reactor requirements since 1990. In 1997,
worldwide production of primary source (mined) uranium was 35,810 tons. This
resulted in an approximate 30,000 ton gap between supply and demand. The
decreasing surplus makes it imperative that new, economically competitive
uranium be found and developed for the future. Industry experts estimate that
production from new mines must be in place in the very near future or shortages
will exist.
In 1997, Saskatchewan Energy and Mines reported that Canadian mining
operations produced 33.6%, or 12,033 tons, of the world's uranium output, making
it the global leader, followed by Australia. Since the mid 1980's, a minimal
amount of mine development has taken place, except for those engaged in
recovering ore from the very high grade deposits in northern Saskatchewan.
Substantial investments are now being made by uranium production companies to
increase production capacity enormously by early in the next century. A number
of exploration and development projects in northern Saskatchewan are currently
underway, that when in operation are projected by the Uranium Institute in
London, England to increase Canadian production to a total of 23,828 tons of
uranium annually, approximately 55% of projected global mine production. But
even with this increase in production, there appears to be a shortfall in the
uranium supply.
Exploration and Development.
Exploration for the discovery of uranium mineralization uses techniques
similar to that used in other types of mineral exploration. In northern
Saskatchewan, tracing of uranium rich boulders dropped by continental glaciers
and scintillometer surveys may locate deposits near the surface, however deeply
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buried deposits require other more sophisticated geophysical and geochemical
methods to delineate favorable anomalous target areas. Diamond drilling then
tests priority zones located through the geophysical and geochemical testing.
Once a deposit is discovered, many drill holes are required to outline the
tonnage and grade for purposes of a feasibility study to a production decision.
Should production occur, the mineralized rock is crushed, ground and processed
to produce yellowcake (U3O8), which is then sent to a refinery for conversion to
UO3,UO2 or UF6, comprising the products used as fuel for nuclear power reactors.
The Company has expended (through Pacific Amber's expenditures)
approximately U.S. $249,000 ($368,000 Can.) on exploration of its optioned PDC
Properties in 1999. The Company has not expended any amounts on the Billingsley
Claim. The Company has expended nominal amounts in checking assessment work
files of previous operators of the Hocking Lake and Henday Lake Properties.
Financial Market Overview.
Currently the price of uranium is approximately U.S. $12.00 per pound. When
estimates of available secondary (non-commercial stockpile) supplies are
combined with estimates of future primary production, the market will likely
stay reasonably well balanced in the short term. However, as the secondary
supply declines and becomes a smaller factor in the marketplace and new and
expanded production comes on-line, the gap between these contrasting forces will
be a critical factor, resulting in a predicted rise in market prices in the next
year or two.
Competition.
The process of mineral exploration and prospecting for uranium, and the
process of developing, operating and mining uranium for the purpose of
commercial production is a highly competitive and speculative business. In
seeking available opportunities, the Company will compete with a number of other
companies, including large multi-national companies, that may have more
experience and resources than the Company.
Within northern Saskatchewan, as well as globally, the Company competes
with both major uranium companies and independent producers for, among other
things, rights to develop available uranium properties, procurement of available
materials and resources and hiring qualified international and local personnel.
Regulation.
In order to commence exploration on any of its uranium properties or
claims, the Company must obtain an exploration permit, which can take up to 30
days to obtain. When the Company approaches the production stage of developing
its properties, the Company will be required to obtain both Canadian and
provincial governmental approval of the tailings process, mining methods and
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environmental consequences of the mine production, which approval process can
take up to two years. The environmental impact study that must be obtained on
each property in order to obtain governmental approval to mine on the properties
is a part of the overall operating costs of a mining company, and will not by
itself have an adverse effect on the Company.
Employees.
As of September 24, 1999, the Company had no full-time or part-time
employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Plan of Operation.
The Company is in the development stages and does not currently have any
income from operating activities. The Company intends to engage in the
prospecting, exploration, acquisition and development of properties in northern
Saskatchewan for the recovery of low-cost, high-grade uranium.
In early 1998, the Company entered into the Acquisition Agreement with the
Athabasca Uranium Syndicate, acquiring a l00% interest in two properties (the
Hocking Lake and Henday Lake Properties) located in the uranium-rich Athabasca
Basin of Saskatchewan and separately acquired an option to explore and develop a
third property (the Hump Lake Property) located close to Uranium City in the
Athabasca Basin. In December 1998, the Company was granted an option to acquire
an interest in six additional properties from PDC in the Athabasca Basin. Since
1968, the Athabasca Basin, a sandstone formation area covered by glacial
deposits of boulder till and sand, has hosted discoveries of some 18 uranium
deposits varying in grade from 0.12% to the exceptionally high grade 18.7%
uranium oxide. The area has not yet been fully explored and many areas
previously explored deserve reevaluation due to greater geological knowledge
acquired in the interim, and improved exploration techniques.
In the next 12 months, the Company plans to initiate a first phase
exploration program consisting of an airborne deep penetrating state-of-the-art
electromagnetic and cesium vapor magnetometer survey at the Hocking Lake, Henday
Lake and Hump Lake Properties, in order to determine priority target areas for
detailed ground geophysics and geology, prior to a diamond drilling program. A
thorough study of all past work in the area will be carried out and data
compiled and correlated with the new surveys as part of the first phase.
Management of the Company estimates the cost of the first phase exploration
program that will be incurred in the next 12 months for the Hocking Lake, Henday
Lake and Hump Lake Properties to be approximately U.S. $270,000.
The six PDC Properties optioned in December under the Joint Venture
Agreement with PDC have undergone extensive geophysical surveys,
lithogeochemical boulder sampling and diamond drilling within the past three
years and the Company has committed significant resources to further explore and
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develop the properties by second stage geophysics and diamond drilling. The
Company has initiated an exploration program on the PDC Properties, which
consists of further ground geophysics at a cost of U.S. $249,000 ($368,000 Can.)
to delineate target areas and diamond drilling of previously delineated and
newly defined target zones. Management of the Company estimates the cost of the
exploration that will be incurred by December 31, 1999 on the PDC Properties to
be approximately U.S. $338,000 ($500,000 Can.).
Pursuant to the terms of the Joint Venture Agreement with PDC, the Company
must incur exploration and development expenditures on the PDC Properties of at
least U.S. $338,000 ($500,000 Can.) by December 31, 1999 in order to avoid the
expiration of its option. The Company entered into an agreement with Pacific
Amber in March of 1999, under which the Company will grant Pacific Amber a 50%
interest of the Company's interest in the PDC Properties if Pacific Amber incurs
the U.S. $338,000 ($500,000 Can.) in expenditures by December 31, 1999. Pacific
Amber has expended U.S. $249,000 ($368,000 Can.) so far in 1999. The Company is
optimistic that Pacific Amber will incur the remaining expenditure of U.S.
$89,232 ($132,000 Can.) prior to the December 31, 1999 deadline, although there
can be no assurance that Pacific Amber will incur such expenditures.
In addition to current projects, the Company is engaged in the active
examination of other potentially significant properties for the purpose of
optioning or acquiring an interest in them in the future. The Company plans to
continue ground geophysical and geological surveys and diamond drilling on the
PDC Properties over the next 12 months. During this period, aerial geophysical
surveys will be conducted on the Hocking Lake, Henday Lake and Hump Lake
Properties, to be followed by ground geophysical and geological surveys and
diamond drilling. The Company will require additional funds to support its
operations over the next 12 months, and plans to raise funds by offering its
common stock in private placements. The Company has no employees, and does not
expect to have any for the next 12 months. All operations will be conducted
utilizing consultants.
Year 2000 Issues.
The "Year 2000" issue is the result of the inability of hardware, software
and control systems to correctly identify two-digit references to specific
years, beginning with the Year 2000. The "Year 2000" problem is pervasive and
complex as virtually every computer operation will be affected in some way by
the rollover of the two-digit year value to "00". The failure of computer
systems to properly recognize date-sensitive information when the year changes
to 2000 could result in system failures or miscalculations causing disruptions
of the Company's operations.
The Company does not currently utilize computer hardware or software as an
integral part of performing its geophysical and geological surveys and diamond
drilling. The Company will not be engaged in any significant development work
until after the Year 2000 has commenced. The Company does not have any major
suppliers, and therefor has not made any inquiries of third parties' Year 2000
compliance issues.
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To date, management believes that the costs of Year 2000 compliance will
not be material and does not anticipate any material adverse effects on its
operations.
Forward-Looking Statements.
The following cautionary statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 in order for the Company to avail
itself of the "safe harbor" provisions of that Act. Discussions and information
in this document which are not historical facts should be considered
forward-looking statements. With regard to forward-looking statements, including
those regarding the potential revenues from the mining and development of
uranium properties, and the business prospects or any other aspect of the
Company, actual results and business performance may differ materially from that
projected or estimated in such forward-looking statements. The Company has
attempted to identify in this document certain of the factors that it currently
believes may cause actual future experience and results to differ from its
current expectations. In addition to the risks cited above specific to the
exploration and mining of uranium, differences may be caused by a variety of
factors, including but not limited to, adverse economic conditions, entry of new
and stronger competitors, inadequate capital and the inability to obtain funding
from third parties, unexpected costs, inability to obtain or keep qualified
personnel, and the volatility of uranium markets and prices.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's properties are located in the Athabasca Basin of northern
Saskatchewan, Canada. The Athabasca Basin is one of the world's largest
producers of uranium, supplying over 30% of the world's production needs. Since
1968, 18 uranium deposits varying in grade from 1.2% to 18.7% uranium oxide have
been discovered in the Athabasca Basin.
The Company acquired two properties (the Hocking Lake Property and the
Henday Lake Property) located in the Athabasca Basin of northern Saskatchewan,
as part of the Acquisition Agreement with Athabasca. The Company's ownership of
the properties includes the rights to all minerals or reserves located on and
extracted from the properties.
The Hocking Lake Property is geographically located approximately 600 miles
north of the regional capital city of Regina. The closest city to the Hocking
Lake Property is Uranium City, located 95 miles west of the property. The region
has a dry, continental climate, with 30 inches of snowfall covering the ground
during five months of each year. Mean temperatures range from minus 30 degrees
Fahrenheit in the month of January to plus 75 degrees Fahrenheit in the month of
August. The Hocking Lake Property may be accessed by float or ski equipped
aircraft or helicopter from the village of Stoney Rapids located approximately 7
miles to the north.
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The Hocking Lake Property consists of five mining claims in two groups
totaling 20,203 hectares (49,924 acres) west of Black Lake, Saskatchewan. The
claims are located on N.T.S. sheets 74-O-1 and 74-P-4 of northern Saskatchewan.
The claims are designated S106048 through S106052 inclusive.
The Henday Lake Property is geographically located approximately 500 miles
north of the regional capital city of Regina. The closest city to the Henday
Lake Property is La Ronge located 200 miles south of the property. The region
has a dry, continental climate, with 30 inches of snowfall covering the ground
during five months of each year. Mean temperatures range from minus 30 degrees
Fahrenheit in the month of January to plus 75 degrees Fahrenheit in the month of
August. The Henday Lake Property may be accessed by gravel road from the town of
La Ronge or by float or ski equipped aircraft or helicopter from La Ronge or
Stoney Rapids.
The Henday Lake Property consists of three continuous mining claims
totaling 11,504 hectares (28,428 acres) in the Henday and Mallen Lake area,
N.T.S. 74-I-8 and 74-L-5, northern Saskatchewan. The claims are designated
S106053, S106054 and S106055.
There have been no previous mining operations on either the Henday Lake or
the Hocking Lake Properties. However, portions of properties have been explored
by prospecting, geophysics and possibly some diamond drilling by various
operators mainly during the 1970's and 1980's. Both properties have been sitting
idle since the late 1980's. These properties are largely undeveloped and do not
have an infrastructure of roads.
Both the Hocking Lake and the Henday Lake Properties are in the exploration
stage where the Company is in the process of locating mineral deposits or
reserves. The Company has not yet begun to extract uranium or other mineral
deposits from the properties and therefore has not engaged in the exploitation
of the mineral deposits or reserves from the Hocking Lake or the Henday Lake
Properties.
The area has not been fully explored and many areas previously explored
deserve reevaluation due to geological knowledge acquired over the years and
improved exploration techniques. The Company's ability to realize the carrying
value of its assets is dependent on the Company being able to extract and
transport uranium oxide deposits and finding appropriate markets for their sale.
The Hocking Lake and Henday Lake Properties are located in areas considered
to be geologically favorable for occurrence of uranium deposits having the
following criteria:
1. Located on the unconformity (the highest grade uranium deposits are
known to occur in unconformity type deposits between Archean basement rocks
and Proterozoic sedimentary sequences) between the Athabasca group and
basement rocks, at depths less than 1,640 feet. The unconformity occurs at
the break in the geological record where the younger sediments overlay the
very old basement rocks.
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2. Active exploration surrounding both properties.
3. Boulders at the nose of a drumlin in the western sector of the
Hocking Lake Property grading up to 2.36% uranium oxide, which is an
acceptable percentage for production purposes.
4. The Henday Lake Property is located within a few miles of four
major deposits, two of which are in production and the other two of which
are scheduled for production in the next three years. Two additional major
deposits located further to the southwest in the Athabasca Basin, MacArthur
River and Cigar Lake, are expected to be in production in December 1999 and
2001, respectively.
As described under Description of Business, the Company owns an option on
the Hump Lake Property from J.R. Billingsley, the registered owner. The Hump
Lake Property is geographically located approximately 650 miles northwest of the
regional capital city of Regina. The closest city to the Hump Lake Property is
Uranium City, located 12 miles southeast of the property. The region has a dry,
continental climate, with 30 inches of snowfall covering the ground during five
months of each year. Mean temperatures range from minus 30 degrees Fahrenheit in
the month of January to plus 75 degrees Fahrenheit in the month of August.
Exploratory radiometric prospecting, trenching and diamond drilling were
conducted on the Hump Lake Property in the late 1960's and 1970's, however, the
property is without known reserves and the proposed programs are exploratory in
nature. The Hump Lake Property is largely undeveloped and may be reached by
float or ski equipped aircraft from Uranium City.
On December 16, 1998, the Company executed a Joint Venture Agreement with
PDC under which the Company was granted an option to gain an ownership interest
in six uranium properties totaling 74,756 acres located in the Athabasca Basin.
Five of the properties are located between the Key Lake mine to the south, a
producing uranium mine, and the MacArthur River mine to the north, one of the
richest known uranium deposits in the world. The sixth property is located 9.3
miles east of the equally high grade Cigar Lake uranium deposit. Approximately
$1,900,000 Can. has been spent on these properties between 1995 and 1997 on
geophysical surveys, lithogeochemical boulder sampling and diamond drilling. All
six properties are largely undeveloped, with little or no infrastructure of
roads.
1. The Crawford Property, located 15.5 miles northwest of the Key Lake
mine, has been explored by geophysics and reconnaissance and detailed
lithogeochemical boulder sampling. Three sub-parallel electromagnetic
conductors were detected, and one conductor in the area of a large intense
kaolin anomaly was partially drilled. There is also enrichment of chlorite,
boron, lead and uranium in several sectors in proximity to the conductors.
Two of the holes did not adequately test the alteration zone as they did
not reach basement. Two holes were drilled on another conductor which
12
<PAGE>
indicated a second stronger alteration zone. The most westerly hole is
anomalous in lead, boron and uranium. Kaolin is anomalous throughout the
sandstone section. Due to the presence of the favorable alteration minerals
and anomalous values mentioned above, further exploration work is
warranted. The property may be reached by bush road (Fox Lake Road)
year-round from Provincial Highway 914 or by float or ski equipped
aircraft.
2. The Perpete Property is located 24.8 miles west-northwest of the
Key Lake mine. This property can be reached by winter road from Provincial
Highway 914. Summer access is restricted to all terrain vehicles. The most
convenient access is by float or ski equipped aircraft from La Ronge,
approximately 161.5 miles to the south.
The Perpete Property has been explored by geophysics,
lithogeochemistry and drilling. Previous work indicated moderate to strong
alteration and erratic enrichment of lead and uranium. A later
electromagnetic survey indicates the conductor coinciding with the east
edge of the previous "conductive zone" is east of the northern fence of
drill holes. Thus, the conductor was not adequately tested and further
diamond drilling is required.
3. The Brown Property, located 12.4 miles northwest of the Key Lake
mine, adjoins the Crawford Property to the south. The property can be
reached by 4x4 trucks by bush road (Fox Lake Road) from Provincial Highway
914. The most convenient access is by float or ski equipped aircraft from
La Ronge, which is approximately 161 miles to the south.
Other than on the east-central edge of the Brown Property, very little
work has been carried out. A total of 68 holes were drilled in this area in
two locations. In one of the locations, a drill intersection of 9.02 feet
assayed 0.62% uranium oxide and most of the holes in this area intersected
significant alteration.
A lithogeochemical reconnaissance survey was conducted over the
property subsequent to the drill program. This survey indicates the
presence of two strongly anomalous areas southwest of Colquhoun Lake to the
northeast and southwest of the previously drilled zone. Evidence of
hydrothermal alteration is characterized by chloritization and
dravitization, and trace alteration including uranium, lead, arsenic and
yttrium.
The strongest and most consistent clay alteration trends are in the
southern portion of the property, between Brown Lake and MacArthur River
Road. Although it is possible that some of this alteration is derived from
the previously known area of uranium mineralization near Shift Lake, some
of the anomalous trends are situated a few miles away, both along and
across the ice direction, suggesting that other sources may exist to the
west and the southwest of Shift Lake. The strongest and most consistent
trace element enrichment anomalous zone occurs in the northeast sector
extending south - southwest of the tip of the Colquhoun Lake. This zone is
characterized by weak to moderate chloritization and dravitization, but
relatively strong and consistent enrichment of uranium, arsenic, lead and
yttrium.
Additional geophysical surveys carried out by the Company in 1999 with
limited diamond drilling have outlined a significant anomalous zone with
favorable geology, which the Company intends to further explore by diamond
drilling.
13
<PAGE>
4. The Jasper Property, located 9.3 miles east of the Cigar Lake
Uranium Deposit, contains a lithogeochemical anomaly east of Woodstock
Lake. This anomaly contains strong illite and weak boron enrichment, with
weak to moderate lead and uranium anomalies. Additional lithogeochemical
surveys are recommended. The Jasper Property can be accessed by float or
ski equipped aircraft.
5. The Morin Lake Property is located 18.6 miles west-northwest of the
Key Lake mine. The property can be reached by winter road from Provincial
Highway 914. Summer access is restricted to all terrain vehicles. The most
convenient access is by float or ski equipped aircraft from La Ronge, which
is approximately 161.4 miles to the south. The property has uranium
anomalies occurring in several portions of the property. Detailed
lithogeochemical sampling is required to further define the anomalous
areas.
6. The Marean Property is located 31.1 miles north-northeast of the
Key Lake mine. The property can be reached by winter road from Provincial
Highway 914. Summer access is restricted to all terrain vehicles. The most
convenient access is by float or ski equipped aircraft from La Ronge, which
is approximately 173.9 miles to the south. The property has been explored
by geophysics and boulder sampling, which indicated weak conductors and
boulder anomalies. Subsequent lithogeochemical surveys show the presence of
boron, weak chloritization, and significant illite enrichment, indicating
hydrothermal alteration. Further geophysical and lithogeochemical surveys
should be conducted prior to drilling.
All six of the PDC Properties are without known reserves and the proposed
programs are exploratory in nature. Each of these properties exhibit encouraging
features such as geophysical conductors, faulting, and various types of
alteration indicative of hydrothermal systems favorable for the occurrence of
uranium mineralization. All of the properties merit further exploration
including geophysics, lithogeochemical surveys and diamond drilling.
Exploration Program.
The Company will conduct work on its wholly-owned properties, the Hocking
Lake and Henday Lake Properties, utilizing an exploration program consisting of
an airborne, deep penetrating, state-of-the-art electromagnetic and cesium vapor
magnetometer survey in order to determine priority target areas for detailed
ground geophysics and geology, prior to a diamond drilling program.
The first phase of the Company's exploration program ("Phase I") is
intended to consist of an airborne deep penetrating state-of-the-art
electromagnetic and Cesium vapor magnetometer survey in order to determine
priority target areas for detailed ground geophysics and geology, prior to a
diamond drilling program. A thorough study of all past work in the area will be
carried out and data compiled and correlated with the new surveys as well as
limited ground geophysics as part of Phase I. The Company expects to begin Phase
I in the near future. Management of the Company estimates the cost of the Phase
I program to be approximately U.S. $270,000.
14
<PAGE>
The Company is not aware of any known reserves and its proposed exploration
and development programs are currently exploratory in nature. A Phase II program
will consist of diamond drilling, if warranted, to outline a mineral deposit.
The Company plans to finance these programs by offering its common stock through
private placements.
The Company will be required to perform extensive geological and/or
geophysical surveys on all of its wholly-owned and optioned properties. The
Company will be subject to all risks inherent in performing surveys, exploring
and extracting uranium. Any of the risks could result in the Company being
liability for damages from loss of life and property. The Company is not fully
insured against these risks. Many of these risks are not insurable.
Management of the Company believes the risk-to-reward considerations
involved with the development of the properties are very positive and may lead
to substantial growth of the Company over the next several years. However, the
Company can provide no assurances that the properties or any of them will
produce uranium oxide in any specific amounts or that the Company will ever
realize a profit as a result of the Company's exploration, extraction,
development or production of the properties.
Reserves.
The Company's claims have no proven reserves as of September 24, 1999.
Corporate Offices.
The Company currently maintains its corporate headquarters at 475 Howe
Street, Suite 206, Vancouver, B.C., Canada. The Company will sublease office
space as required for operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of October 8, 1999, the number of shares
of the Company's outstanding $0.001 par value common stock beneficially owned by
each of the Company's current directors and the Company's executive officers,
the number of shares beneficially owned by all of the Company's current
directors and named executive officers as a group, and the number of shares
owned by each person who owned of record, or was known to own beneficially, more
than 5% of the Company's outstanding shares of common stock:
<TABLE>
<CAPTION>
Amount and Percent of
Name of Nature of Beneficial Common
Beneficial Owner Position Ownership Stock
---------------- -------- -------------------- ----------
<S> <C> <C> <C>
Thornton J. Donaldson
206 - 475 Howe Street President and 397,000(1) 5.77%
Vancouver, B.C. V6C 2B3 Director
15
<PAGE>
<CAPTION>
Amount and Percent of
Name of Nature of Beneficial Common
Beneficial Owner Position Ownership Stock
---------------- -------- -------------------- ----------
<S> <C> <C> <C>
William G. Timmins Secretary and 250,000(2) 3.64%
410 - 455 Granville Street Director
Vancouver, B.C. V6C 1T1
James R. Billingsley Director 100,000(3) 1.45%
3157 West 33rd Avenue
Vancouver, B.C. V6N 2G6
E.G. (Ed) Mowatt Director 100,000(4) 1.45%
4217 Coventry Way
N. Vancouver, B.C. V7N 4M9
All directors and executive 847,000(5) 12.32%
officers as a group
(four persons)
Pacific Amber Resources, Ltd. -- 650,000 9.45%
1818 - 701 West Georgia Street
Vancouver, B.C. V7Y 1C6
Pandora Industries Inc. -- 450,000 6.54%
1818 - 701 West Georgia Street
Vancouver, B.C. V6P 4X6
Mark T. Smith -- 600,000 8.72%
5090 Warwick Terrace
Pittsburgh, PA 15213
</TABLE>
- -------------------
(1) Includes 22,000 shares owned by Mr. Donaldson's spouse and 275,000 shares
owned by United Corporate Advisors, Ltd., of which Mr. Donaldson is the
President, a Director and shareholder.
(2) Includes 150,000 shares owned by Mr. Timmins' spouse.
(3) Includes 50,000 shares owned by Mr. Billingsley's spouse.
(4) Includes 30,000 shares owned Mr. Mowatt's spouse and 30,000 shares owned
Mr. Mowatt's daughter.
(5) Includes securities reflected in footnotes 1 - 5.
There are no current arrangements or agreements pledging securities which
could in the future result in a change of control of the Company.
16
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The following table sets forth as of September 24, 1999, the names and ages
of the current directors and executive officers of the Company, and the
principal offices and positions with the Company held by each person and the
date such person became a director or executive officer of the Company. The
executive officers of the Company are elected annually by the board of
directors. Executive officers serve terms of one year or until their death,
resignation or removal by the board of directors. The present term of office of
each director will expire at the next annual meeting of shareholders. Each
executive officer will hold office until his successor duly is elected and
qualified, until his resignation or until he is removed in the manner provided
by the Company's bylaws.
<TABLE>
<CAPTION>
Name of Director or Officer Director
and Position in the Company Since Age Principal Occupation
- --------------------------- -------- --- --------------------
<S> <C> <C> <C>
Thornton J. Donaldson 1998 70 President of the Company since its inception in April
President 1998. Secretary of the Company from April 1998
July 1998. President of Rich Coast, Inc., an
industrial waste treatment company located in
Dearborn, Michigan from 1984 to 1993, and a Director
of Rich Coast, Inc. from 1993 to 1999. Director of
Lorex Resources, Ltd., a mineral exploration company
located in Vancouver, British Columbia since July
1999. President and sole director of United Corporate
Advisers Ltd., a geological and financial consulting
business founded by Mr. Donaldson in 1970.
Self-employed as a consulting geologist and financial
advisor from 1978 through the present.
William G. Timmins 1998 62 Secretary of the Company since July 1998. Self-
Secretary employed as President of WGT Consultants, Ltd. from
to present as a geological consultant for numerous
mining companies in Canada, the United States, Central
and South America, Australia and New Zealand. Director
of Monalta Resources Ltd., a mineral exploration
company located in West Vancouver, British Columbia
from April 1998 to present.
James R. Billingsley 1998 76 President and Chief Executive Officer of Glamis Gold,
a public company engaged in gold mining, from August
1988 through December 1998. Vice President-
Administration of Glamis Gold from August 1993
through August 1998.
17
<PAGE>
<CAPTION>
Name of Director or Officer Director
and Position in the Company Since Age Principal Occupation
- --------------------------- -------- --- --------------------
<S> <C> <C> <C>
E.G. (Ed) Mowatt 1998 46 Chief Financial Officer and a Director of Tracer
Petroleum Corporation, a British Columbia based
international oil and gas company with interests in
Indonesia and Canada, from 1994 through January 1999.
Secretary of Tracer Petroleum Corporation from 1996
through January 1999. Chartered accountant since
1989.
</TABLE>
Except as indicated in the above table, no director of the Company is a
director of an entity that has its securities registered pursuant to Section 12
of the Securities Exchange Act of 1934.
There are no other arrangements or understandings between any executive
officer and any director or other person pursuant to which any person was
selected as a director or an executive officer.
ITEM 6. EXECUTIVE COMPENSATION
Compensation and Other Benefits of Executive Officers.
The Company's President and other executive officers did not receive any
compensation or other benefits between the inception of the Company (April 3,
1998) and April 30, 1999, its last fiscal year end.
Stock Option Plan.
The Board of Directors of the Company has adopted a stock option plan
effective August 31, 1999, subject to shareholder approval by August 31, 2000.
The stock option plan was adopted in order to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to the Company's employees and to promote the success of
the Company's business. The Company has reserved 1,200,000 shares of its Common
Stock under the stock option plan. As of the date hereof, no options have been
granted under the stock option plan.
Compensation of Directors.
No pension or retirement benefit plan has been instituted by the Company
and none is proposed at this time and there is no arrangement for compensation
with respect to termination of the directors in the event of change of control
of the Company.
18
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James R. Billingsley, a director of the Company, is the registered owner of
the entire Billingsley Claim, and therefor has an interest in the Company's
option to acquire rights to explore and develop the Billingsley Claim. In
addition, Mr. Billingsley is the Chairman of the Board of Directors of Pacific
Amber Resources Ltd., and therefore has an interest in the Company's Property
Option Agreement with Pacific Amber Resources Ltd. with respect to the PDC
Properties. The Board of Directors of the Company is aware of Mr. Billingsley's
interests in the Billingsley Claim and in Pacific Amber Resources Ltd., and both
agreements involving the Company and Mr. Billingsley's interests have been
handled as arms-length transactions.
Other than the transactions stated above, none of the directors or
executive officers of the Company, nor any person who owned of record or was
known to own beneficially more than 5% of the Company's outstanding shares of
its Common Stock, nor any associate or affiliate of such persons or companies,
has any material interest, direct or indirect, in any transaction that has
occurred since its inception on April 3, 1998, or in any proposed transaction,
which has materially affected or will affect the Company.
ITEM 8. DESCRIPTION OF SECURITIES
The Company has two classes of equity securities, namely, its $0.001 par
value common stock ("Common Stock") and its $0.001 par value preferred stock
("Preferred Stock"). As of October 8, 1999, the Company has authorized
40,000,000 shares of its Common Stock, of which 6,877,500 are issued and
outstanding. The holders of the Company's Common Stock have and possess all
rights as shareholders of a corporation, except as may be limited by the
preferences, privileges and voting powers, and the restrictions and limitations
of the Company's Preferred Stock. As of July 30, 1999, the Company has
authorized 10,000,000 shares of its Preferred Stock, but no shares of its
Preferred Stock are issued or outstanding.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information.
The Company's Common Stock is not currently traded in the over-the-counter
market or any other market. Therefore, since the inception of the Company in
April 1998, there has been no established trading market for the Company's
Common Stock, and the Company has been unable to obtain reliable information as
to quoted prices with respect to the Common Stock.
Holders.
As of September 24, 1999, there were approximately 107 holders of the
Company's Common Stock, who collectively held 6,277,500 issued and outstanding
shares.
19
<PAGE>
Dividends.
The Company did not declare or pay cash or other dividends on its Common
Stock between the inception of the Company (April 3, 1998) and April 30, 1999,
its last fiscal year end. The Company does not expect to pay any dividends in
the near future.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings required to be reported
hereunder.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On April 13, 1998, the Company acquired all of the assets of Athabasca
Uranium Syndicate, a syndicate formed in British Columbia, Canada, in exchange
for issuing 6,000,000 shares of the Company's Common Stock to the following
Athabasca Uranium Syndicate ownership interest holders:
Number
Name of Shares
---- ---------
AGT Financial Corporation 300,000
United Corporate Advisers, Ltd. 300,000
E.G. (Ed) Mowatt 150,000
G.W. Hornby 150,000
Rockford Resources, Inc. 300,000
Mark A. Donaldson 300,000
G.R.W. Financial Corporation 300,000
Hiro Ogata 300,000
Pacific Amber Resources, Ltd. 900,000
J.R. Billingsley 300,000
Harold M. Jones 300,000
W.L. McCullagh 300,000
3415 Investments, Ltd. 300,000
David Parfitt 150,000
Andy Crookbain 150,000
James G. Allison 150,000
Penelope Allison 150,000
Tom S.T. Heah 300,000
Derek Van Laare 300,000
William G. Timmins 300,000
Thornton J. Donaldson 300,000
---------
Total 6,000,000
20
<PAGE>
These securities were offered pursuant to the exemption from registration
contained in Section 3(b) of the Securities Act of 1933, as amended, and Rule
504 promulgated thereunder. No underwriter was involved in the transaction.
On March 24, 1999, the Company issued 200,000 shares of its Common Stock to
Pacific Amber upon execution of the Property Option Agreement. These securities
were offered pursuant to the exemption from registration contained in Section
3(b) of the Securities Act of 1933, as amended, and Rule 504 promulgated
thereunder.
Between January 15, 1999 and February 25, 1999, the Company sold 77,500
shares of its Common Stock to the following accredited investors at $0.65 per
share, for a total capital contribution of $50,375:
Number
Name of Shares
---- ---------
Morris Ergas 20,000
Roger Dean Terhune 5,000
Marilyn E. Grandy 5,000
Double M Productions 5,000
Georgina Bresolin 5,000
S. Rodgers 5,000
Columbia Meat Market 5,000
Jure Uremovic 4,000
Douglas Yen 3,000
Stephen D. Granger 2,500
Trish Hodgson 2,000
Mark Bradley 2,000
Cindy Schoenhaar 1,000
Jessmar Investments Ltd. 13,000
-------
Total 77,500
These securities were offered to a limited number of accredited investors
pursuant to the exemption from registration contained in Section 3(b) of the
Securities Act of 1933, as amended, and Rule 504 promulgated thereunder. No
underwriter was involved in the transaction.
21
<PAGE>
On October 7, 1999, the Company issued 600,000 shares of its Common Stock
to Mark T. Smith, an accredited investor, at $0.50 per share, for a total
capital contribution of $300,000. These securities were offered pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended. No underwriter was involved in the transaction.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation and the Colorado Business
Corporation Act provide that the Company will indemnify, to the fullest extent
permitted by law, any person, and the estate and personal representative of any
such person, against all liability and expense (including attorneys' fees)
incurred by reason of the fact that he or she is or was a director or officer of
the Company or, while serving at the request of the Company as a director,
officer, partner, trustee, employee, fiduciary, or agent of, or in any similar
managerial or fiduciary position of, another domestic or foreign corporation or
other individual or entity or of an employee benefit plan. Further, the Articles
of Incorporation provide that the Company also shall indemnify any person who is
serving or has served the Company as director, officer, employee, fiduciary, or
agent, and that person's estate and personal representative, to the extent and
in the manner provided in any bylaw, resolution of the shareholders or
directors, contract or otherwise, so long as such provision is legally
permissible.
The Company's Articles of Incorporation also provide that a director of the
Company shall not be personally liable to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
to its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for acts
specified under Section 7-108-403 of the Colorado Business Corporation Act or
any amended or successor provision thereof, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Colorado
Business Corporation Act is amended after the provisions in the Company's
Articles of Incorporation are adopted to authorize corporate action further
eliminating or limiting the personal liability of directors, then the Articles
of Incorporation provide that the liability of a director of the Company will be
eliminated or limited to the fullest extent permitted by the Colorado Business
Corporation Act, as so amended.
PART F/S
Financial Statements.
The Company's balance sheets as of April 30, 1999 and 1998 and the
statements of operations and statements of cash flows for the years then ended
are attached following the signature page of this Form 10-SB, together with the
audit report by the Company's independent chartered accountants. The Company's
unaudited balance sheet as of July 31, 1999 and unaudited statement of
operations for the three months ended July 31, 1999, are also attached following
the signature page of this Form 10-SB.
22
<PAGE>
PART III
ITEM 1. EXHIBITS
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Stock Option Plan.
10.1 Letter Agreement with J.R. Billingsley dated July 29, 1998.
10.2 Extensions to Letter Agreement with J.R. Billingsley.
10.3 Joint Venture Agreement with Phelps Dodge Corporation of Canada, Ltd.,
dated December 16, 1998.
10.4 Property Option Agreement with Pacific Amber Resources Ltd. dated
March 24, 1999.
10.5. Amendment to Property Option Agreement with Pacific Amber Resources
Ltd. dated October 7, 1999.
27.1 Financial Data Schedule.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
URANIUM POWER CORPORATION
Date: October 8, 1999 By: /s/ Thornton J. Donaldson
------------------------------------
Thornton J. Donaldson, President and
Director
Date: October 8, 1999 By: /s/ William G. Timmins
------------------------------------
William G. Timmins, Secretary and
Director
24
<PAGE>
URANIUM POWER CORPORATION
Financial Statements
April 30, 1999
(U.S. Dollars)
INDEX Page
----- ----
Report of Independent Chartered Accountants F-2
Financial Statement
Balance Sheet F-3
Statements of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7-F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE DIRECTORS
OF URANIUM POWER CORPORATION
We have audited the accompanying balance sheets of Uranium Power Corporation (a
development stage company) as at April 30, 1999 and 1998 and the related
statements of operations, stockholders' equity and statements of cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements presents fairly, in all material
respects, the financial position of the Company as at April 30, 1999 and 1998
and the results of its operations and the cash flows for the years then ended in
conformity with generally accepted accounting principles in the United States.
/s/ "Smythe Ratcliffe"
Chartered Accountants
Vancouver, British Columbia
June 25, 1999
F-2
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Balance Sheets
April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
1999 1998
Asset
Current
Cash ............................................... $ 3,149 $ 37,675
========== =========
Liabilities
Accounts Payable and Accrued Liabilities ............. $ 3,082 $ 0
Stockholders' Equity (Deficiency)
Capital Stock
Authorized
40,000,000 Common stock with a par value of $0.001 each
10,000,000 Preferred stock with a par value of $0.001 each
Issued
6,000,000 shares in 1998 and 6,277,500
shares in 1999 ................................... 6,278 6,000
Additional Paid-In Capital ........................... 280,270 91,834
Deficit Accumulated During Development Stage ......... (286,481) (60,159)
Total Stockholders' Equity ........................... 67 37,675
---------- ---------
$ 3,149 $ 37,675
========== =========
See notes to financial statements.
F-3
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Statements of Operations
Years Ended April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
Cumulative
Amounts
During
Development
Stage
(Since
1999 1998 04/03/98)
Expenditures
Deferred exploration and
development costs (note 3) .......... $ 136,796 $ 59,459 $ 196,255
Advertising and promotion ............. 29,900 0 29,900
Professional fees ..................... 18,732 0 18,732
Travel ................................ 17,909 0 17,909
Financing costs ....................... 15,586 0 15,586
Office ................................ 5,873 0 5,873
Rent .................................. 875 0 875
Incorporation cost written off ........ 0 700 700
Transfer agent fee .................... 651 0 651
---------- ---------- ----------
Net Loss for Year ....................... $ 226,322 $ 60,159 $ 286,481
Loss Per Share .......................... $ 0.04 $ 0.21
Weighted Average Number of
Shares Outstanding .................... 6,026,541 279,452
See notes to financial statements.
F-4
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
Years Ended April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-Up Development Stockholders'
Shares Par Value Capital Stage Equity
<S> <C> <C> <C> <C> <C>
Common stock issued
For cash ............................... 6,000,000 $ 6,000 $ 91,834 $ 0 $ 97,834
Net loss ................................. 0 0 0 (60,159) (60,159)
---------- ---------- ---------- ---------- ----------
Balance, April 30, 1998 .................. 6,000,000 6,000 91,834 (60,159) 37,675
Common stock issued
For subscriptions ...................... 1,000,000 1,000 606,005 0 607,005
For resource properties ................ 200,000 200 137,131 0 137,331
Net loss ................................. 0 0 0 (226,322) (226,322)
---------- ---------- ---------- ---------- ----------
Balance, April 30, 1999 .................. 7,200,000 7,200 834,970 (286,481) 555,689
Common stock returned to
treasury for cancellation
subsequent to April 30, 1999 ........... (922,500) (922) (554,700) 0 (555,622)
---------- ---------- ---------- ---------- ----------
Balance .................................. 6,277,500 $ 6,278 $ 280,270 $ (286,481) $ 67
</TABLE>
See notes to financial statements.
F-5
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Statements of Cash Flows
Years Ended April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Amounts
During
Development
Stage
(Since
1999 1998 04/30/98)
<S> <C> <C> <C>
Operating Activities
Net loss ...................................... $(226,322) $ (60,159) $(286,481)
Adjustments to reconcile net
loss to net cash used in operating activities
Exploration costs acquired for shares ..... 137,268 0 137,268
Change in Operating Assets and Liabilities
Accounts payable .............................. 3,082 0 3,082
--------- --------- ---------
Net Cash Used in Operating Activities ........... (85,972) (60,159) (146,131)
Financing Activity
Issuance of shares
For cash .................................... 51,446 97,834 149,280
Inflow (Outflow) of Cash ........................ (34,526) 37,675 3,149
Cash, Beginning of Year ......................... 37,675 0 0
Cash, End of Year ............................... $ 3,149 $ 37,675 $ 3,149
</TABLE>
See notes to financial statements.
F-6
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS
The Company was incorporated on April 3, 1998 under the laws of the State
of Colorado. The principal business activity is the exploration and
development of natural resource properties.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Foreign currency translation
Amounts recorded in foreign currency are translated into U.S. dollars
as follows:
(i) Monetary assets and liabilities at the rate of exchange in effect
as at the balance sheet date;
(ii) Non-monetary assets and liabilities at the exchange rates
prevailing at the time of the acquisition of the assets or
assumption of the liabilities; and,
(iii)Revenues and expenses at the average rate of exchange for the
year.
Gains and losses arising from this translation of foreign currency are
included in net income.
(b) Loss per share
Loss per share calculations are based on the weighted average number
of shares outstanding during the year.
(c) Financial instruments
The Company's financial instruments consist of cash and accounts
payable and accrued liabilities. It is management's opinion that the
Company is not exposed to significant interest, currency, or credit
risks arising from these financial instruments. The fair value of
these financial instruments approximates their carrying value, unless
otherwise noted.
F-7
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
3. RESOURCE PROPERTIES AND DEFERRED COSTS
(a) Hocking Lake Property and Henday Lake Property
By agreement dated April 13, 1998, the Company acquired all assets of
Athabasca Uranium Syndicate (a British Columbia, Canada syndicate)
which consists of the Hocking Lake Property and Henday Lake Property.
Consideration given to the members of the syndicate was 6,000,000
common shares of the Company at a par value of $0.001 each (issued)
and a stated value of $0.025 each.
(b) Saskatchewan Uranium Properties
By agreement dated December 16, 1998, the Company has options to
acquire a 100% interest in 11 mining claims in Saskatchewan, Canada,
upon incurring cumulative expenditures of $338,000 (Cdn. $500,000) by
December 31, 1999 and an additional $1,690,000 (Cdn. $2,500,000) by
December 31, 2002. The optioner can earn back a 35% interest by
incurring cumulative expenditures of not less than $2,028,000 (Cdn.
$3,000,000) before December 31, 2006.
By an agreement dated March 24, 1999, between the Company and Pacific
Amber Resources Ltd., the latter will earn a 50% interest in the
Saskatchewan Uranium Properties and all of the Company's rights,
licences and permits pertinent thereto held for the specific use and
enjoyment thereof by completing the initial program and incurring
$338,000 (Cdn. $500,000) in expenditures on or before December 31,
1999 ($129,355 (Cdn. $191,354) was incurred as at April 30, 1999 and
another $99,658 (Cdn. $147,123) was incurred to June 25, 1999). In
return, the Company issued to the optionee 200,000 common shares at a
deemed value of $1 each.
(c) Northern mining property
By agreement dated July 29, 1998 (subsequently extended to July 1,
1999) the Company has an option to acquire 100% interest in a mining
claim in Northern Mining District, Saskatchewan by issuing 50,000 free
trading shares and paying $13,375 to the owner of the property. This
is contingent upon completion of certain specified exploration work.
The owner has the right to receive $0.35 per pound of the product from
the claim if the price of the product is $18.00 per pound or less and
$0.50 per pound where the price of the product is $18.00 per pound or
more.
F-6
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Years Ended April 30
(U.S. Dollars)
- --------------------------------------------------------------------------------
4. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000 and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the issue affecting the Company, including
those related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
F-9
<PAGE>
URANIUM POWER CORPORATION
Financial Statements
July 31, 1999
(Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
INDEX Page
----- ----
Financial Statement
Balance Sheet F-11
Statements of Operations F-12
Statement of Stockholders' Equity F-13
Statement of Cash Flows F-14
Notes to Financial Statements F-15-F-16
F-10
<PAGE>
URANIUM POWER CORPORATION (A Development Stage Company) Balance Sheets July 31,
1999 and April 30, 1999 (Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
July 31, April 30,
1999 1999
Asset
Current
Cash ........................................ $ 8,389 $ 3,149
========= =========
Liabilities
Accounts Payable and Accrued Liabilities ...... $ 2,656 $ 3,082
Loan Payable .................................. 19,916 0
--------- ---------
Total Liabilities ............................. 22,572 3,082
Stockholders' Equity (Deficiency)
Capital Stock
Authorized
40,000,000 Common stock with a par value of
$0.001 each 10,000,000 Preferred stock with
a par value of $0.001 each
Issued
6,277,500 Common stock ...................... 6,278 6,278
Treasury Stock ................................ (11) 0
Additional Paid-In Capital .................... 272,975 280,270
Deficit Accumulated During Development Stage .. (293,425) (286,481)
--------- ---------
Total Stockholders' Equity .................... (14,183) 67
--------- ---------
$ 8,389 $ 3,149
========= =========
See notes to financial statements.
F-11
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Statements of Operations
Three Months Ended July 31, 1999 and Years Ended April 30, 1999 and 1998
(Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Amounts
During
Development
Three Stage
Months Ended Years Ended April 30, (Since
July 31, 1999 1999 1998 04/03/98)
<S> <C> <C> <C> <C>
Expenditures
Deferred exploration and
development costs (note 3) ...... $ 1,660 $ 136,796 $ 59,459 $ 197,915
Advertising and promotion ......... 0 29,900 0 29,900
Professional fees ................. 7,411 18,732 0 26,143
Travel ............................ 0 17,909 0 17,909
Financing costs ................... 0 15,586 0 15,586
Office ............................ (3,283) 5,873 0 2,590
Rent .............................. 1,005 875 0 1,880
Incorporation cost written off .... 0 0 700 700
Transfer agent fee ................ 151 651 0 802
----------- ----------- ----------- -----------
Net Loss for Period ................. $ 6,944 $ 226,322 $ 60,159 $ 293,425
Loss Per Share ...................... $ 0.00 $ 0.04 $ 0.21
Weighted Average Number of
Shares Outstanding ................ 6,266,500 6,026,541 279,452
</TABLE>
See notes to financial statements.
F-12
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficiency)
Three Months Ended July 31, 1999 and Years Ended April 30, 1998 and 1999
(Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Treasury Stock
Shares Par Value Shares Par Value
<S> <C> <C> <C> <C>
Common stock issued
For cash ....................................................... 6,000,000 $ 6,000 $ 0 $ 0
Net loss ......................................................... 0 0 0 0
---------- ---------- ---------- ----------
Balance, April 30, 1998 .......................................... 6,000,000 6,000 0 0
Common stock issued
For subscriptions .............................................. 1,000,000 1,000 0 0
For resource properties ........................................ 200,000 200 0 0
Net loss ......................................................... 0 0 0 0
---------- ---------- ---------- ----------
Balance, April 30, 1999 .......................................... 7,200,000 7,200 0 0
Common stock returned to
treasury for cancellation
subsequent to April 30,1999 .................................... (922,500) (922) 0 0
Common stock returned to
treasury ......................................................... 0 0 (11,000) (11)
Net loss ......................................................... 0 0 0 0
---------- ---------- ---------- ----------
Balance, July 31, 1999 ........................................... 6,277,500 $ 6,278 (11,000) $ (11)
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Paid-Up Development Equity
Capital Stage (Deficiency)
<S> <C> <C> <C>
Common stock issued
For cash ....................................................... $ 0 $ 0 $ 97,834
Net loss ......................................................... 0 (60,159) (60,159)
---------- ---------- ----------
Balance, April 30, 1998 .......................................... 91,834 (60,159) 37,675
Common stock issued
For subscriptions .............................................. 606,005 0 607,005
For resource properties ........................................ 137,131 0 137,331
Net loss ......................................................... 0 (226,322) (226,322)
---------- ---------- ----------
Balance, April 30, 1999 .......................................... 834,970 (286,481) 555,689
Common stock returned to
treasury for cancellation
subsequent to April 30,1999 .................................... (554,700) 0 (555,622)
Common stock returned to
treasury ......................................................... (7,295) 0 (7,306)
Net loss ......................................................... 0 (6,944) (6,944)
---------- ---------- ----------
Balance, July 31, 1999 ........................................... $ 272,975 $ (293,425) $ (14,183)
</TABLE>
See notes to financial statements.
F-13
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Statements of Cash Flow
Three Months Ended July 31, 1999 and Years Ended April 30, 1999 and 1998
(Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Amounts
Three During
Months Development
End Stage
July 31, Years Ended April 30, (Since
1999 1999 1998 04/30/98)
<S> <C> <C> <C> <C>
Operating Activities
Net loss ........................................... $ (6,944) $(226,322) $ (60,159) $(293,425)
Adjustments to reconcile net
loss to net cash used in operating activities
Exploration costs acquired for shares .......... 0 137,268 0 137,131
Change in Operating Assets and
Liabilities
Accounts payable ................................... (426) 3,082 0 2,656
--------- --------- --------- ---------
Net Cash Used in Operating Activities ................ (7,370) (85,972) (60,159) (153,638)
Financing Activities
Loan payable ....................................... 19,916 0 0 19,916
Issuance of shares
For cash ......................................... (7,306) 51,446 97,834 141,974
--------- --------- --------- ---------
Net Cash Provided By Financing Activities ............ 12,610 51,446 97,834 161,890
Inflow (Outflow) of Cash ............................. 5,240 (34,526) 37,675 8,252
Cash, Beginning of Year .............................. 3,149 37,675 0 0
--------- --------- --------- ---------
Cash, End of Year .................................... $ 8,389 $ 3,149 $ 37,675 $ 8,252
</TABLE>
See notes to financial statements.
F-14
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Three Months Ended July 31, 1999 and Years Ended April 30, 1999 and 1998
(Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
These unaudited financial statements have been prepared in accordance with
generally accepted accounting principles in the United States for interim
financial information. These financial statements are condensed and do not
include all disclosures required for annual financial statements. The
organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the
Company's audited financial statements.
In the opinion of the Company's management, these financial statements
reflect all adjustments necessary to present fairly the Company's financial
position at July 31, 1999 and April 30, 1999 and the consolidated results
of operations and the statement of cash flows for the three months ended
July 31, 1999. The results of operations for the three months ended July
31, 1999 are not necessarily indicative of the results to be expected for
the entire fiscal year.
2. LOSS PER SHARE
Net loss per share computations are based on the weighted average number of
shares outstanding during the period.
F-15
<PAGE>
URANIUM POWER CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Three Months Ended July 31, 1999 and Years Ended April 30, 1999 and 1998
(Unaudited - Prepared by Management)
(U.S. Dollars)
- --------------------------------------------------------------------------------
3. INVESTMENTS IN RESOURCE PROPERTIES
(a) Hocking Lake Property and Henday Lake Property
By agreement dated April 13, 1998, the Company acquired all assets of
Athabasca Uranium Syndicate (a British Columbia, Canada syndicate)
which consists of the Hocking Lake Property and Henday Lake Property.
Consideration given to the members of the syndicate was 6,000,000
common shares of the Company at a par value of $0.001 each (issued)
and a stated value of $0.025 each.
(b) Saskatchewan Uranium Properties
By agreement dated December 16, 1998, the Company has options to
acquire a 100% interest in 11 mining claims in Saskatchewan, Canada,
upon incurring cumulative expenditures of $338,000 (Cdn. $500,000) by
December 31, 1999 and $1,690,000 (Cdn. $2,500,000) by December 31,
2002. The optioner can earn back a 35% interest by incurring
cumulative expenditures of not less than $2,028,000 (Cdn. $3,000,000)
before December 31, 2006.
By an agreement dated March 24, 1999, between the Company and Pacific
Amber Resources Ltd., the latter will earn a 50% interest in the
Saskatchewan Uranium Properties and all of the Company's rights,
licences and permits pertinent thereto held for the specific use and
enjoyment thereof by completing the initial program and incurring
$338,000 (Cdn. $500,000) in expenditures on or before December 31,
1999 ($229,013 (Cdn. $338,777) was incurred as at July 31, 1999). In
return, the Company issued to the optionee 200,000 common shares at a
deemed value of $1 each.
(c) Northern mining property
By agreement dated July 29, 1998 (subsequently extended to December 1,
1999) the Company has an option to acquire 100% interest in a mining
claim in Northern Mining District, Saskatchewan by issuing 50,000 free
trading shares and paying $13,375 to the owner of the property. This
is contingent upon completion of certain specified exploration work.
The owner has the right to receive $0.35 per pound of the product from
the claim if the price of the product is $18.00 per pound or less and
$0.50 per pound where the price of the product is $18.00 per pound or
more.
F-16
ARTICLES OF INCORPORATION
OF
URANIUM POWER CORPORATION
The undersigned incorporator, being a natural person of the age of 18 years
or more, and desiring to form a corporation under the laws of the State of
Colorado, does hereby sign, verify and deliver to the Secretary of State of the
State of Colorado these Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation shall be: Uranium Power Corporation
ARTICLE II
CAPITAL
The aggregate number of shares of all classes of capital stock which this
corporation shall have authority to issue is 50,000,000 shares, of which
10,000,000 shares shall be shares of Preferred Stock, par value $.001 per share,
and 40,000,000 shares shall be shares of Common Stock, $.001 par value per
share.
Preferred Stock. The designations and the powers, preferences and rights,
and the qualifications, limitations or restrictions of the Preferred Stock, and
variations in the relative rights and preferences as between different series
shall be established in accordance with the Colorado Business Corporation Act by
the Board of Directors.
Except for such voting powers with respect to the election of directors or
other matters as may be stated in the resolutions of the Board of Directors
creating any series of Preferred Stock, the holders of any such series shall
have no voting power whatsoever.
Common Stock. The holders of Common Stock shall have and possess all rights
as shareholders of the corporation, including such rights as may be granted
elsewhere by these Articles of Incorporation, except as such rights may be
limited by the preferences, privileges and voting powers, and the restrictions
and limitations of the Preferred Stock.
Subject to preferential dividend rights, if any, of the holders of
Preferred Stock, dividends on the Common Stock may be declared by the Board of
Directors and paid out of any funds legally available therefor at such times and
in such amounts as the Board of Directors shall determine.
<PAGE>
The capital stock, after the amount of the subscription price has been paid
in, shall not be subject to assessment to pay the debts of the corporation.
Any stock of the corporation may be issued for money, property, services
rendered, labor done, cash advances for the corporation, or for any other assets
of value in accordance with the action of the Board of Directors, whose judgment
as to value received in return therefor shall be conclusive and said stock when
issued shall be fully paid and nonassessable.
ARTICLE III
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
right to purchase, subscribe for, or otherwise acquire any unissued or treasury
shares of stock of the corporation, or any options or warrants to purchase,
subscribe for or otherwise acquire any such unissued or treasury shares, or any
shares, bonds, notes, debentures, or other securities convertible into or
carrying options or warrants to purchase, subscribe for or otherwise acquire any
such unissued or treasury shares.
ARTICLE IV
CUMULATIVE VOTING
A shareholder of the corporation shall not be entitled to cumulative
voting.
ARTICLE V
OFFICES AND AGENT
The initial registered office of the corporation shall be at 4643 South
Ulster Street, Suite 900, Denver, CO 80237 and the name of the initial
registered agent at such address is Theresa M. Mehringer, Esq. Either the
registered office or the registered agent may be changed in the manner provided
by law.
The address of the corporation's initial principal office is 206-475 Howe
St, Vancouver, B.C. Canada, V6C-2B3.
ARTICLE VI
INITIAL BOARD OF DIRECTORS
The initial Board of Directors of the corporation shall consist of one
director, and the name and address of the person who shall serve as director
until the first annual meeting of shareholders or until his successors are
elected and shall qualify are:
2
<PAGE>
Thornton J. Donaldson 206-475 Howe St.
Vancouver, B.C.
Canada, V6C-2B3
The number of directors shall be fixed in accordance with the bylaws.
ARTICLE VII
INDEMNIFICATION
The corporation shall indemnify, to the fullest extent permitted by
applicable law, any person, and the estate and personal representative of any
such person, against all liability and expense (including attorneys' fees)
incurred by reason of the fact that he is or was a director or officer of the
corporation or, while serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of, or in any similar
managerial or fiduciary position of, another domestic or foreign corporation or
other individual or entity or of an employee benefit plan. The corporation also
shall indemnify any person who is serving or has served the corporation as
director, officer, employee, fiduciary, or agent, and that person's estate and
personal representative, to the extent and in the manner provided in any bylaw,
resolution of the shareholders or directors, contract, or otherwise, so long as
such provision is legally permissible.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (I) for any breach of the director's
duty of loyalty to the corporation or to its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for acts specified under Section 7-108-403 of the
Colorado Business Corporation Act or any amended or successor provision thereof,
or (iv) for any transaction from which the director derived an improper personal
benefit. If the Colorado Business Corporation Act is amended after this Article
is adopted to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent permitted by
the Colorado Business Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
3
<PAGE>
ARTICLE IX
MEETINGS OF SHAREHOLDERS
Meetings of shareholders shall be held at such time and place as provided
in the bylaws of the corporation. At all meetings of the shareholders, one-third
of all shares entitled to vote at the meeting shall constitute a quorum.
4
<PAGE>
ARTICLE X
INCORPORATOR
The name and address of the incorporator is as follows:
Theresa M. Mehringer, Esq.
Smith McCullough, P.C.
4643 S. Ulster Street
Suite 900
Denver, CO 80237
Signed this 3rd day of April, 1998.
/s/ Theresa M. Mehringer
--------------------------------------
Theresa M. Mehringer, Incorporator
The undersigned consents to the appointment as the initial registered agent
of Uranium Power Corporation.
/s/ Theresa M. Mehringer
--------------------------------------
Theresa M. Mehringer, Registered Agent
5
BYLAWS
OF
URANIUM POWER CORPORATION
As Adopted April 6, 1998
ARTICLE I
OFFICES
Section 1.1 Principal Office. The principal office of the corporation shall
be located as designated by the Board of Directors, either within or without the
State of Colorado. The corporation may have such other offices, either within or
without the State of Colorado, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
Section 1.2 Registered Office. The registered office of the
corporation, required by the Colorado Business Corporation Act to be maintained
in the State of Colorado, may be, but need not be, identical with the principal
office if located in the State of Colorado, and the address of the registered
office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 2.1 Annual Meeting. The annual meeting of the shareholders shall be
held at such time on such day as shall be fixed by the Board of Directors, for
the purpose of electing directors and for the transacting of such other business
as may come before the meeting. If the election of directors shall not be held
on the date designated herein for any annual meeting of the shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of the shareholders as soon thereafter as may be
convenient.
Section 2.2 Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than one-tenth of all outstanding
shares of the corporation entitled to vote at the meeting.
Section 2.3 Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Colorado, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Colorado,
<PAGE>
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the corporation in the State of Colorado.
Section 2.4 Notice of Meeting. Written notice stating the place, day and
hour of the meeting of shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than 50 days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or other persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided, however, that if the authorized shares of the corporation are
to be increased, at least 30 days notice shall be given. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
Section 2.5 Meeting of all Shareholders. If all of the shareholders shall
meet at any time and place, either within or without the State of Colorado, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid with out call or notice, and at such meeting any corporate action may
be taken.
Section 2.6 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other purpose, the Board of Directors of the corporation
may provide that the share transfer books shall be closed for a stated period
but not to exceed, in any case, 50 days. If the share transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
days immediately preceding such meeting. In lieu of closing the share transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than 50 days and, in case of a meeting of shareholders, not less than ten days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. If the share transfer books are not closed and
no record date is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
2
<PAGE>
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 2.7 Voting Record. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten days
before such meeting of shareholders, a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. The record, for a period of ten days prior to such meeting, shall
be kept on file at the principal office of the corporation, whether within or
without the State of Colorado, and shall be subject to inspection by any
shareholder for any purpose germane to the meeting at any time during usual
business hours. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be the prima facie evidence as to
the identity of the shareholders entitled to examine the record or transfer
books or to vote at any meeting of shareholders.
Section 2.8 Quorum. One-third of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, except as otherwise provided by the Colorado
Business Corporation Act and the Articles of Incorporation. In the absence of a
quorum at any such meeting, a majority of the shares so represented may adjourn
the meeting from time to time for a period not to exceed 60 days. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
Section 2.9 Manner of Acting. If a quorum is present, the affirmative vote
of the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater proportion or number or voting by classes is otherwise required by
statute or by the Articles of Incorporation or these Bylaws.
Section 2.10 Proxies. At all meetings of shareholders a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless otherwise provided in the
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proxy. Proxies shall be in such form as shall be required by the Board and as
set forth in the notice of meeting and/or proxy or information statement
concerning such meeting.
Section 2.11 Voting of Shares. Unless otherwise provided by these Bylaws or
the Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, and each fractional share shall be entitled to a corresponding
fractional vote on each such matter.
Section 2.12 Voting of Shares by Certain Shareholders. Shares standing in
the name of another corporation may be voted by such officer, agent or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such other corporation may determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian or conservator, either in person or by proxy without a transfer of such
shares into the name of such administrator, executor, court appointed guardian
or conservator. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority so to do is contained in
an appropriate order of the court by which the receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock belonging to this corporation, nor
shares of its own stock held by it in a fiduciary capacity, nor shares of its
own stock held by another corporation if the majority of the shares entitled to
vote for the election of directors of such other corporation is held by the
corporation, may be voted, directly or indirectly, at any meeting and shall not
be counted in determining the total number of outstanding shares at any given
time.
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Redeemable shares which have been called for redemption shall not be
entitled to vote on any matter and shall not be deemed outstanding shares on and
after the date on which written notice of redemption has been mailed to
shareholders and a sum sufficient to redeem such shares has been deposited with
a bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of certificates
therefor.
Shares held of record by a shareholder but which are held for the account
of a specified person or persons may be voted by such person or persons,
provided the shareholder has certified to the corporation in writing that all or
a portion of the shares registered in the name of the shareholder are held for
the account of such person or persons, as provided in Article VI, Section 6.6 of
these Bylaws.
Section 2.13 Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof. Signature by facsimile shall be given the same force and effect
as original signatures, and any consent in writing may be executed in
counterparts.
Section 2.14 Voting by Ballot. Voting on any question or in any election
may be by voice vote unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
Section 2.15 No Cumulative Voting. No shareholder shall be permitted to
cumulate his votes by giving one candidate as many votes as the number of such
directors multiplied by the number of his shares shall equal, or by distributing
such votes on the same principle among any number of candidates.
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ARTICLE III
BOARD OF DIRECTORS
Section 3.1 General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 3.2 Number, Tenure and Qualifications. The initial number of
directors shall be one. The number of directors fixed by these bylaws may be
increased or decreased from time to time by resolution of the board of
directors. The tenure of a director shall not be affected by any decrease or
increase in the number of directors so made by the board. Each director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified.
Section 3.3 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Colorado, for the holding of additional regular meetings, without other
notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman, if there be one, the
President, any of the directors, or by such persons as are authorized to call
special meetings under the Colorado Business Corporation Act. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Colorado, as the place for
holding any special meeting of the Board of Directors called by them.
Section 3.5 Notice. Written notice of any special meeting of directors
shall be given by mail to each director at his business address at least three
days prior to the meeting or by personal delivery, fax or telegram at least 24
hours prior to the meeting to the business address of each director, or in the
event such notice is given on a Saturday, Sunday or holiday, to the residence
address of each director, or on such shorter notice as the person or persons
calling the meeting, acting in good faith, may deem necessary or appropriate in
the circumstances. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon prepaid.
If notice is given by fax, such notice shall be deemed to be delivered when
confirmation (either by electronic means or by the person receiving the fax) of
such fax is received by the sender. If notice be given by telegram, such notice
shall be deemed to be delivered when the telegram is delivered to the telegraph
company.
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Any director may waive notice of any meeting. The attendance of a director
at any meeting shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 3.6 Quorum. A majority of the directors shall constitute a quorum
for the transaction of business at any meeting of the Board of Directors.
Section 3.7 Manner of Acting. Except as otherwise required by law or by the
Articles of Incorporation, the act of the majority of the directors present at a
meeting at which a quorum is present shall be an act of the Board of Directors.
Section 3.8 Action by Directors Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or by a committee thereof at a
meeting may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors or all of the
committee members entitled to vote with respect to the subject matter thereof.
Signatures may be original signatures or by fax. Signatures on such consent may
be made in counterparts.
Section 3.9 Participation by Electronic Means. Any members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board of Directors or committee by means of telephone conference or
similar communications equipment by which all persons participating in the
meeting can hear each other at the same time. Such participation shall
constitute presence in person at the meeting.
Section 3.10 Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office continuing only until the next election of directors by the shareholders.
Section 3.11 Resignation. Any director of the corporation may resign at any
time by giving written notice to the President or the Secretary of the
corporation. The resignation of any director shall take effect upon receipt of
notice thereof or at any such later time as shall be specified in such notice;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. When one or more directors shall
resign from the Board, effective at a future date, a majority of the directors
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then in office, including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective.
Section 3.12 Removal. Any director or directors of the corporation may be
removed at any time, with or without cause, in the manner provided in the
Colorado Business Corporation Act.
Section 3.13 Committees. By resolution adopted by a majority of the Board
of Directors, the directors may designate two or more directors to constitute a
committee, any of which shall have such authority in the management of the
corporation as the Board of Directors shall designate and as shall not be
proscribed by the Colorado Business Corporation Act.
Section 3.14 Compensation. By resolution of the Board of Directors and
irrespective of any personal interest of any of the members, each director may
be paid his expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated salary as director or a fixed sum for
attendance at each meeting of the Board of Directors, or both. No such payment
shall preclude any director from serving the corporation in any other capacity
and receiving compensation therefor.
Section 3.15 Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
the dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
OFFICERS
Section 4.1 Number. The officers of the corporation shall be a President,
who shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. Any two or more offices may be held by the same person.
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Section 4.2 Election and Term of Office. The officers of the corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after the annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as practicable.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
Section 4.3 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 4.5 Chairman of the Board. If the directors so desire, they may
elect a Chairman of the Board from among themselves. The chairman of the board
shall preside at all meetings of the stockholders and of the Board of Directors.
He shall have such other powers and duties as may be prescribed by the Board of
Directors.
Section 4.6 President. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors, shall
in general supervise and control all of the business and affairs of the
corporation. He shall, if no Chairman be elected, be the chief executive officer
of the corporation and shall preside at all meetings of the shareholders and of
the Board of Directors. He may sign, with the Secretary or any other proper
officer of the corporation thereunto authorized by the Board of Directors,
certificates for shares of the corporation and deeds, mortgages, bonds,
contracts or equipment leases entered into in the ordinary course of business,
and other contracts or instruments which the Board of Directors has authorized
to be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board of
Directors from time to time.
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Section 4.7 The Vice Presidents. If elected or appointed by the Board of
Directors, the Vice President (or in the event there be more than one vice
president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall, in the absence of the President or in the event of his death or
inability to act, perform all duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the corporation, and contracts or
equipment leases entered into in the ordinary course of business; and shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 4.8 The Secretary. If elected or appointed by the Board of
Directors, the Secretary shall: (a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation and see that the seal of
the corporation is affixed to all documents the execution of which on behalf of
the corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; (e) sign with the President, or a Vice President,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general charge
of the stock transfer books of the corporation; (g) in general per form all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
Section 4.9 The Treasurer. If elected or appointed by the Board of
Directors, the Treasurer shall: (a) have charge and custody of and be
responsible for all funds and securities of the corporation; (b) receive and
give receipts for monies due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article V of these Bylaws; and (c) in general perform all
of the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the President or by the Board of
Directors.
Section 4.10 Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
President or a Vice President certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Secretaries and Assistant Treasurers, in general, shall
perform such duties as shall be assigned to them by the Secretary or the
Treasurer, respectively, or by the President or the Board of Directors.
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Section 4.11 Bonds. If the Board of Directors by resolution shall so
require, any officer or agent of the corporation shall give bond to the
corporation in such amount and with such surety as the Board of Directors may
deem sufficient, conditioned upon the faithful performance of their respective
duties and offices.
Section 4.12 Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 5.1 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances. The President or any
Vice-President may enter into contracts or equipment leases entered into in the
ordinary course of business,
Section 5.2 Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 5.3 Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money, notes or other evidence of indebtedness issued in the name of
the corporation shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
Section 5.4 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
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ARTICLE VI
SHARES, CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
Section 6.1 Regulations. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 6.2 Certificates for Shares. Certificates representing shares of
the corporation shall be respectively numbered serially for each class of
shares, or series thereof, as they are issued, shall be impressed with the
corporate seal or a facsimile thereof (is the corporation has a corporate seal),
and shall be signed by the President or Vice President and by the Secretary or
an Assistant Secretary; provided that such signatures may be facsimile if the
certificate is counter signed by a transfer agent, or registered by a registrar
other than the corporation itself or its employee. Each certificate shall state
the name of the corporation, the fact that the corporation is organized or
incorporated under the laws of the State of Colorado, the name of the person to
whom issued, the date of issuance, the class (or series of any class), the
number of shares represented thereby and the par value of the shares represented
thereby or a statement that such shares are without par value. A statement of
the designations, preferences, qualifications, limitations, restrictions and
special or relative rights of the shares of each class shall be set forth in
full or summarized on the face or back of the certificates which the corporation
shall issue, or in lieu thereof, the certificate may set forth that such a
statement or summary will be furnished to any shareholder upon request without
charge. Each certificate shall be otherwise in such form as may be prescribed by
the Board of Directors and as shall conform to the rules of any stock exchange
on which the shares may be listed.
The corporation shall not issue certificates representing fractional shares
and shall not be obligated to make any transfers creating a fractional interest
in a share of stock. The corporation may, but shall not be obligated to, issue
scrip in lieu of any fractional shares, such scrip to have terms and conditions
specified by the Board of Directors.
Section 6.3 Cancellation of Certificates. All certificates surrendered to
the corporation for transfer shall be canceled and no new certificates shall be
issued in lieu thereof until the former certificate for a like number of shares
shall have been surrendered and canceled, except as herein provided with respect
to lost, stolen or destroyed certificates.
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Section 6.4 Lost, Stolen or Destroyed Certificates. Any shareholder
claiming that his certificate for shares is lost, stolen or destroyed may make
an affidavit or affirmation of that fact and lodge the same with the Secretary
of the corporation, accompanied by a signed application for a new certificate.
Thereupon, and upon the giving of a satisfactory bond of indemnity to the
corporation not exceeding an amount double the value of the shares as
represented by such certificate (the necessity for such bond and the amount
required to be determined by the President and Treasurer of the corporation), a
new certificate may be issued of the same tenor and representing the same
number, class and series of shares as were represented by the certificate
alleged to be lost, stolen or destroyed.
Section 6.5 Transfer of Shares. Subject to the terms of any shareholder
agreement relating to the transfer of shares or other transfer restrictions
contained in the Articles of Incorporation or authorized therein, shares of the
corporation shall be transferable on the books of the corporation by the holder
thereof in person or by his duly authorized attorney, upon the surrender and
cancellation of a certificate or certificates for a like number of shares. Upon
presentation and surrender of a certificate for shares properly endorsed and
payment of all taxes therefor, the transferee shall be entitled to a new
certificate or certificates in lieu thereof. As against the corporation, a
transfer of shares can be made only on the books of the corporation and in the
manner hereinabove provided, and the corporation shall be entitled to treat the
holder of record of any shares as the owner thereof and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by the statutes of the State of Colorado.
Section 6.6 Shares Held for the Account of a Specified Person or Persons.
The Board of Directors may adopt by resolution a procedure whereby a shareholder
of the corporation may certify in writing to the corporation that all or a
portion of the shares registered in the name of such shareholder are held for
the account of a specified person or persons. The resolution shall set forth:
(a) The classification of shareholder who may certify;
(b) The purpose or purposes for which the certification may be made;
(c) The form of certification and information to be contained therein;
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(d) If the certification is with respect to a record date or closing
of the stock transfer books, the time after the record date or closing of
the stock transfer books within which the certification must be received by
the corporation; and
(e) Such other provisions with respect to the procedure as are deemed
necessary or desirable.
Upon receipt by the corporation of a certification complying with the
procedure, the persons specified in the certification shall be deemed, for the
purpose or purposes set forth in the certification, to be the holders of record
of the number of shares specified in place of the shareholder making the
certification.
ARTICLE VII
TAXABLE YEAR
The taxable year of the corporation shall be determined by resolution of
the Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE IX
CORPORATE SEAL
The Board of Directors may provide a corporate seal which shall be circular
in form and shall have inscribed thereon the name of the corporation and the
state of incorporation and the word "Seal."
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of these
Bylaws or under the provisions of the Articles of Incorporation or under the
provisions of the Colorado Business Corporation Act, or otherwise, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the event or other circumstance requiring such notice,
shall be deemed equivalent to the giving of such notice.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by a majority of the directors present at any meeting of the Board of
Directors of the corporation at which a quorum is present.
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ARTICLE XII
EXECUTIVE COMMITTEE
Section 12.1 Appointment. The Board of Directors by resolution adopted by a
majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such Committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 12.2 Authority. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the Executive Committee and except also
that the Executive Committee shall not have the authority of the Board of
Directors in reference to amending the Articles of Incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders the sale,
lease or other disposition of all or substantially all of the property and
assets of the corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
corporation or a revocation thereof, or amending the Bylaws of the corporation.
Section 12.3 Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and qualified.
Section 12.4 Meetings. Regular meetings of the Executive Committee may be
held without notice at such time and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than one day's notice stating the
place, date and hour of the meeting, which notice may be written or oral, and if
mailed, shall be deemed to be delivered when deposited in the United States mail
addressed to the member of the Executive Committee at his business address. Any
member of the Executive Committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the Executive Committee need not state the business
proposed to be transacted at the meeting.
Section 12.5 Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
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Section 12.6 Action by Executive Committee Without a Meeting. Any action
required or permitted to be taken by the Executive Committee at a meeting may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the members entitled to vote with respect to
the subject matter thereof.
Section 12.7 Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 12.8 Resignations and Removal. Any member of the Executive
Committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the Executive
Committee may resign from the Executive Committee at any time by giving written
notice to the President or Secretary of the corporation, and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 12.9 Procedure. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
ARTICLE XIII
EMERGENCY BYLAWS
The Emergency Bylaws provided in this Article XIII shall be operative
during any emergency in the conduct of the business of the corporation resulting
from an attack on the United States or any nuclear or atomic disaster,
notwithstanding any different provision in the preceding articles of the Bylaws
or in the Articles of Incorporation of the corporation or in the Colorado
Business Corporation Act. To the extent not inconsistent with the provisions of
this article, the Bylaws provided in the preceding articles shall remain in
effect during such emergency and upon its termination the Emergency Bylaws shall
cease to be operative.
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During any such emergency:
(a) A meeting of the Board of Directors may be called by any officer or
director of the corporation. Notice of the time and place of the meeting shall
be given by the person calling the meeting to such of the directors as it may be
feasible to reach by any available means of communication. Such notice shall be
given at such time in advance of the meeting as circumstances permit in the
judgment of the person calling the meetings.
(b) At any such meeting of the Board of Directors, a quorum shall consist
of the number of directors in attendance at such meeting.
(c) The Board of Directors, either before or during any such emergency,
may, effective in the emergency, change the principal office or designate
several alternative principal offices or regional offices, or authorize the
officers so to do.
(d) The Board of Directors, either before or during any such emergency, may
provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the corporation shall
for any reason be rendered incapable of discharging their duties.
(e) No officer, director or employee acting in accordance with these
Emergency Bylaws shall be liable except for willful misconduct.
(f) These Emergency Bylaws shall be subject to repeal or change by further
action of the Board of Directors or by action of the shareholders, but no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action taken prior to the time of such repeal or change. Any
amendment of these Emergency Bylaws may make any further or different provision
that may be practical and necessary for the circumstances of the emergency.
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URANIUM POWER CORPORATION
1999 STOCK OPTION PLAN
1. Purposes of this Plan. The purposes of this 1999 Stock Option Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants and
to promote the success of the Company's business. Options granted hereunder may
be either "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, or "nonstatutory stock options," at the
discretion of the Board and as reflected in the terms of the written stock
option agreement.
2. Definitions. As used herein, the following definitions shall apply:
a. "Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company if no Committee is appointed.
b. "Code" shall mean the Internal Revenue Code of 1986, as amended.
c. "Common Stock" shall mean the $0.001 par value common stock of the
Company.
d. "Company" shall mean Uranium Power Corporation, a Colorado
corporation.
e. "Committee" shall mean the Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of this Plan, if one is
appointed, or the Board if no committee is appointed.
f. "Consultant" shall mean any person who is engaged by the Company or
by any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, but does not include a director
of the Company who is compensated for services as a director only with the
payment of a director's fee by the Company.
g. "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
<PAGE>
h. "Employee" shall mean any person, including officers and directors,
employed by the Company or by any Parent or Subsidiary. The payment of a
director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
i. "Incentive Stock Option" shall mean an Option which is intended to
qualify as an incentive stock option within the meaning of Section 422 of
the Code and which shall be clearly identified as such in the written Stock
Option Agreement provided by the Company to each Optionee granted an
Incentive Stock Option under this Plan.
j. "Non-Employee Director" shall mean a director who:
(i) Is not currently an officer (as defined in Section 16a-1(f)
of the Securities Exchange Act of 1934, as amended) of the Company or
of a Parent or Subsidiary or otherwise currently employed by the
Company or by a Parent or Subsidiary.
(ii) Does not receive compensation, either directly or
indirectly, from the Company or from a Parent or Subsidiary, for
services rendered as a Consultant or in any capacity other than as a
director, except for an amount that does not exceed the dollar amount
for which disclosure would be required pursuant to Item 404(a) of
Regulation S-K adopted by the United States Securities and Exchange
Commission.
(iii) Does not possess an interest in any other transaction for
which disclosure would be required pursuant to Item 404(a) of
Regulation S-K adopted by the United States Securities and Exchange
Commission.
k. "Nonstatutory Stock Option" shall mean an Option granted under this
Plan which does not qualify as an Incentive Stock Option and which shall be
clearly identified as such in the written Stock Option Agreement provided
by the Company to each Optionee granted a Nonstatutory Stock Option under
this Plan. To the extent that the aggregate fair market value of Optioned
Stock to which Incentive Stock Options granted under Options to an Employee
are exercisable for the first time during any calendar year (under this
Plan and all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options under
this Plan. The aggregate fair market value of the Optioned Stock shall be
determined as of the date of grant of each Option and the determination of
which Incentive Stock Options shall be treated as qualified incentive stock
options under Section 422 of the Code and which Incentive Stock Options
exercisable for the first time in a particular year in excess of the
$100,000 limitation shall be treated as Nonstatutory Stock Options shall be
determined based on the order in which such Options were granted in
accordance with Section 422(d) of the Code.
2
<PAGE>
l. "Option" shall mean an Incentive Stock Option, a Nonstatutory Stock
Option or both as identified in a written Stock Option Agreement
representing such stock option granted pursuant to this Plan.
m. "Optioned Stock" shall mean the Common Stock subject to an Option.
n. "Optionee" shall mean an Employee or other person who is granted an
Option.
o. "Parent" shall mean a "parent corporation" of the Company, whether
now or hereafter existing, as defined in Section 424(e) of the Code.
p. "Plan" shall mean this 1999 Stock Option Plan.
q. "Share" shall mean a share of the Common Stock of the Company, as
adjusted in accordance with Section 11 of this Plan.
r. "Stock Option Agreement" shall mean the agreement to be entered
into between the Company and each Optionee which shall set forth the terms
and conditions of each Option granted to each Optionee, including the
number of Shares underlying such Option and the exercise price of each
Option granted to such Optionee under such agreement.
s. "Subsidiary" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(f) of the
Code.
3. Stock Subject to this Plan. Subject to the provisions of Section 11 of
this Plan, the maximum aggregate number of Shares which may be optioned and sold
under this Plan is 1,200,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares which were subject thereto shall, unless this Plan shall
have been terminated, become available for future grant under this Plan.
4. Administration of this Plan.
a. Procedure. This Plan shall be administered by the Board or a
Committee appointed by the Board consisting of two or more Non-Employee
Directors to administer this Plan on behalf of the Board, subject to such
terms and conditions as the Board may prescribe.
(i) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board (which for purposes of this paragraph
(a)(i) of this Section 4 shall be the Board of Directors of the
Company). From time to time the Board may increase the size of the
3
<PAGE>
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer this Plan.
(ii) Members of the Board who are granted, or have been granted,
Options may vote on any matters affecting the administration of this
Plan or the grant of any Options pursuant to this Plan.
b. Powers of the Board. Subject to the provisions of this Plan, the
Board shall have the authority, in its discretion:
(i) To grant Incentive Stock Options, in accordance with Section
422 of the Code, and Nonstatutory Stock Options or both as provided
and identified in a separate written Stock Option Agreement to each
Optionee granted such Option or Options under this Plan; provided
however, that in no event shall an Incentive Stock Option and a
Nonstatutory Stock Option granted to any Optionee under a single Stock
Option Agreement be subject to a "tandem" exercise arrangement such
that the exercise of one such Option affects the Optionee's right to
exercise the other Option granted under such Stock Option Agreement;
(ii) To determine, upon review of relevant information and in
accordance with Section 8(b) of this Plan, the fair market value of
the Common Stock;
(iii) To determine the exercise price per Share of Options to be
granted, which exercise price shall be determined in accordance with
Section 8(a) of this Plan;
(iv) To determine the Employees or other persons to whom, and the
time or times at which, Options shall be granted and the number of
Shares to be represented by each Option;
(v) To interpret this Plan;
(vi) To prescribe, amend and rescind rules and regulations
relating to this Plan;
(vii) To determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option;
(viii) To accelerate or defer (with the consent of the Optionee)
the exercise date of any Option, consistent with the provisions of
Section 7 of this Plan;
4
<PAGE>
(ix) To authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option
previously granted by the Board; and
(x) To make all other determinations deemed necessary or
advisable for the administration of this Plan.
c. Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other permissible holders of any Options granted under this Plan.
5. Eligibility.
a. Persons Eligible. Options may be granted to any person selected by
the Board. Incentive Stock Options may be granted only to Employees. An
Employee, who is also a director of the Company, its Parent or a
Subsidiary, shall be treated as an Employee for purposes of this Section 5.
An Employee or other person who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
b. No Effect on Relationship. This Plan shall not confer upon any
Optionee any right with respect to continuation of employment or other
relationship with the Company nor shall it interfere in any way with his
right or the Company's right to terminate his employment or other
relationship at any time.
6. Term of Plan. This Plan became effective on August 31, 1999. It shall
continue in effect until August 31, 2009, unless sooner terminated under Section
13 of this Plan.
7. Term of Option. The term of each Option shall be 10 years from the date
of grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, if the Option is an Incentive Stock Option, the term of the Option
shall be five years from the date of grant thereof or such shorter time as may
be provided in the Stock Option Agreement.
5
<PAGE>
8. Exercise Price and Consideration.
a. Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is
determined by the Board, but the per Share exercise price under an
Incentive Stock Option shall be subject to the following:
(i) If granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than 10% of
the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall not be less than
110% of the fair market value per Share on the date of grant.
(ii) If granted to any other Employee, the per Share exercise
price shall not be less than 100% of the fair market value per Share
on the date of grant.
b. Determination of Fair Market Value. The fair market value per Share
on the date of grant shall be determined as follows:
(i) If the Common Stock is listed on the New York Stock Exchange,
the American Stock Exchange or such other securities exchange
designated by the Board, or admitted to unlisted trading privileges on
any such exchange, or if the Common Stock is quoted on a National
Association of Securities Dealers, Inc. system that reports closing
prices, the fair market value shall be the closing price of the Common
Stock as reported by such exchange or system on the day the fair
market value is to be determined, or if no such price is reported for
such day, then the determination of such closing price shall be as of
the last immediately preceding day on which the closing price is so
reported;
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or so quoted, the fair market value shall be the
average of the last reported highest bid and the lowest asked prices
quoted on the National Association of Securities Dealers, Inc.
Automated Quotations System or, if not so quoted, then by the National
Quotation Bureau, Inc. on the day the fair market value is determined;
or
(iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges or so quoted, and bid and asked prices are
not reported, the fair market value shall be determined in such
reasonable manner as may be prescribed by the Board.
c. Consideration and Method of Payment. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Board and may consist
entirely of cash, check, other shares of Common Stock having a fair market
value on the date of exercise equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, or any combination of
such methods of payment, or such other consideration and method of payment
for the issuance of Shares to the extent permitted under the Colorado
Business Corporation Act.
6
<PAGE>
9. Exercise of Option.
a. Procedure for Exercise: Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of
this Plan.
In the sole discretion of the Board, at the time of the grant of an
Option or subsequent thereto but prior to the exercise of an Option, an
Optionee may be provided with the right to exchange, in a cashless
transaction, all or part of the Option for Common Stock of the Company on
terms and conditions determined by the Board.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Stock Option Agreement by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised
has been received by the Company. Full payment, as authorized by the Board,
may consist of a consideration and method of payment allowable under
Section 8(c) and this Section 9(a) of this Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of the
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for
a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 11 of this
Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
this Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
b. Termination of Status as an Employee. In the case of an Incentive
Stock Option, if any Employee ceases to serve as an Employee, he may, but
only within such period of time not exceeding three months as is determined
by the Board at the time of grant of the Option after the date he ceases to
be an Employee of the Company, exercise his Option to the extent that he
was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.
c. Disability of Optionee. In the case of an Incentive Stock Option,
notwithstanding the provisions of Section 9(b) above, in the event an
Employee is unable to continue his employment with the Company as a result
of his total and permanent disability (as defined in Section 22(e)(3) of
7
<PAGE>
the Code), he may, but only within such period of time not exceeding 12
months as is determined by the Board at the time of grant of the Option
from the date of termination, exercise his Option to the extent he was
entitled to exercise it at the date of such termination. To the extent that
he was not entitled to exercise the Option at the date of termination, or
if he does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.
d. Death of Optionee. In the case of an Incentive Stock Option, in the
event of the death of the Optionee:
(i) During the term of the Option if the Optionee was at the time
of his death an Employee and had been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the
Option may be exercised, at any time within 12 months following the
date of death, by the Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only
to the extent that the right to exercise would have accrued had the
Optionee continued living and remained in Continuous Status as an
Employee 12 months after the date of death; or
(ii) Within such period of time not exceeding three months as is
determined by the Board at the time of grant of the Option after the
termination of Continuous Status as an Employee, the Option may be
exercised, at any time within 12 months following the date of death,
by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent
that the right to exercise had accrued at the date of termination.
10. Nontransferability of Options. Unless permitted by the Code, in the
case of an Incentive Stock Option, the Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under this Plan but as to which no Options have yet been granted or
which have been returned to this Plan upon cancellation or expiration of any
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
8
<PAGE>
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of the proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another entity in a transaction in
which the Company is not the survivor, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of such a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of 30 days from the date of such notice, and the Option will terminate
upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or other
person to whom an Option is so granted within a reasonable time after the date
of such grant. Within a reasonable time after the date of the grant of an
Option, the Company shall enter into and deliver to each Employee or other
person granted such Option a written Stock Option Agreement as provided in
Sections 2(r) and 16 hereof, setting forth the terms and conditions of such
Option and separately identifying the portion of the Option which is an
Incentive Stock Option and/or the portion of such Option which is a Nonstatutory
Stock Option.
13. Amendment and Termination of this Plan.
a. Amendment and Termination. The Board may amend or terminate this
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
this Plan:
(i) An increase in the number of Shares subject to this Plan
above 1,200,000 Shares, other than in connection with an adjustment
under Section 11 of this Plan;
9
<PAGE>
(ii) Any change in the designation of the class of Employees
eligible to be granted Incentive Stock Options; or
(iii) Any material amendment under this Plan that would have to
be approved by the shareholders of the Company for the Board to
continue to be able to grant Incentive Stock Options under this Plan.
b. Effect of Amendment or Termination. Any such amendment or
termination of this Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, applicable state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of legal counsel for the Company with
respect to such compliance.
As a condition to the existence of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares and such other
representations and warranties which in the opinion of legal counsel for the
Company, are necessary or appropriate to establish an exemption from the
registration requirements under applicable federal and state securities laws
with respect to the acquisition of such Shares.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of this Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's legal counsel to be necessary for the lawful issuance
and sale of any Share hereunder, shall relieve the Company of any liability
relating to the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. Stock Option Agreement. Each Option granted to an Employee or other
persons shall be evidenced by a written Stock Option Agreement in such form as
the Board shall approve.
17. Shareholder Approval. Continuance of this Plan shall be subject to
approval by the shareholders of the Company on or before August 31, 2000. Such
shareholder approval and any shareholder approval required under Section 13 of
this Plan, may be obtained at a duly held shareholders meeting if the votes cast
10
<PAGE>
in favor of the approval exceed the votes cast opposing the approval, or by
unanimous written consent of the shareholders in accordance with the provisions
of the Colorado Business Corporation Act.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under this Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
19. Gender. As used herein, the masculine, feminine and neuter genders
shall be deemed to include the others in all cases where they would so apply.
20. CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
COLORADO.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Plan effective as of August 31, 1999.
URANIUM POWER CORPORATION, INC.,
a Colorado corporation
By: /s/ Thornton J. Donaldson
--------------------------------
Thornton J. Donaldson, President
11
J. R. Billingsley
3157 West 33rd Avenue
Vancouver, B.C.
V6N 2G6
July 29, 1998
Mr. Thornton Donaldson
President
Urani9um Power Corporation
Suite 206 - 475 Howe Street
Vancouver, B.C. V6C 2B3
Dear Mr. Donaldson:
Re: Claim #S-106087, Northern Mining District, Saskatchewan
- --------------------------------------------------------------------------------
Further to our meeting of July 7, 1998, I have documented the terms discussed.
If these terms are agreeable they will form the basis of a FORMAL AGREEMENT that
may be drawn at a later date.
1. Billingsley is the registered 100% owner of claim #S-106087, Northern
Mining District, Saskatchewan.
2. Billingsley wished to enter into an agreement to have Uranium Power
Corporation proceed with exploration on the claim.
3. Uranium Power Corporation agrees to compete an airborne geophysical
survey of the claim, using the same type of surveys and equipment as
they plan to use on their Hocking Lake and Henday Lake claims located
in the Athabasca Basin, Northern Saskatchewan. Such survey will be
conducted immediately following completion of the survey of their
claims.
4. On or before Oct. 1, 1998, Uranium Power Corporation will notify
Billingsley in writing at his above address, whether or not they intend
to continue exploration and development of his claim.
(a) If they decide not to continue, Uranium Power Corporation will
file their exploration expenditures on the claim as assessment
work to maintain the claim in good standing and give Billingsley
a complete copy of the survey, its results, recommendations and
any other pertinent information they have obtained.
(b) If Uranium Power Corporation decides to continue with exploration
and development of the claim, Billingsley will transfer his 100%
ownership of the claim to them on the following terms:
i. Fifty thousand free trading shares of Uranium Power
Corporation common stock will be delivered to Mr. Murray
Swetz.
ii. Billingsley will be paid $13,375.
iii. Billingsley will receive $0.35 per pound of U3O8,
pitchblende or other uranium bearing minerals mined from the
claim when the price of U3O8 is $18.00 per pound or less and
$0.50 per pound when the price is $18.00 per pound or more.
In the event that minerals other than uranium are mined from
the claims, Billingsley will retain a 3% Net Smelter Return
Royalty.
iv. If exploration is successful and an economic feasibility
study indicates the claim should be brought to production,
Uranium Power Corporation will apply its best effort to
bring the property to production as quickly as possible.
<PAGE>
v. A Formal Agreement based on these terms will be drawn.
Note: All prices for U3O8 and other uranium minerals
expressed in $U.S. and based on price received from sale of
the U3O8.
TJD JRB
5. Area of Mutual Interest - 3 km from the claim perimeter.
6. The Agreement assignable by either party provided the Assignee agrees
to be bound by and observe the terms and conditions and fulfill the
obligations of Uranium Power Corporation.
7. Any dispute will be settled by ARBITRATION.
8. Normal default clause.
9. Billingsley receive quarterly progress reports.
I hope the above terms and conditions meet with your approval and if so, please
sign below.
I look forward to your participation and a successful program.
Yours sincerely,
J. R. BILLINGSLEY
/s/ J. R. Billingsley
- -------------------------------------
signed J. R. Billingsley
Noted and accepted by
Mr. Thornton Donaldson
on behalf of Uranium Power Corporation
/s/ Thornton Donaldson
- -------------------------------------
signed Thornton Donaldson
2
J.R. Billingsley
3157 West 33rd Avenue
Vancouver, B.C.
V6N 2G6
September 29, 1998
Via Hand Delivered
Mr. Thornton Donaldson
President
Uranium Power Corporation
#206, 475 Howe Street
Vancouver, B.C.
V6C 2B3
Dear Mr. Donaldson:
Regarding the Agreement dated July 29, 1998 between J.R. Billingsley and Uranium
Power Corporation concerning exploration of claim S-106087, northern mining
district, Saskatchewan.
For consideration of $2,000.00 (two thousand) dollars received from Uranium
Power Corporation, I hereby extend the expiry date of the Agreement from Oct. 1,
1998 to March 1, 1999.
Yours sincerely,
/s/ J. R. Billingsley
- --------------------------------
J.R. Billingsley
<PAGE>
J.R. BILLINGSLEY
3157 W. 33RD AVE. VANCOUVER, B.C.
V6N2G6
PHONE (604) 261-6455
FAX: (604) 261-6405
February 22, 1999
Mr. Thornton Donaldson
President,
Uranium Power Corporation
#206, 475 Howe street
Vancouver, B. C.
V6C2B3
Dear Mr. Donaldson:
Regarding the Agreement dated July 29, 1998 between J. R. Billingsley and
Uranium Power Corporation concerning claim S-106087, Northern Mining District,
Saskatchewan; For consideration of $1000.00 (one thousand dollars) to be paid on
completion of Uranium Power Corporation's initial public financing, I hereby
extend the expiry date of the Agreement from March 1, 1999 to July 1, 1999.
Your's sincerely
/s/ J. R. Billingsley
- --------------------------------
J. R. Billingsley
<PAGE>
J.R. BILLINGSLEY
3157 W. 33RD AVE. VANCOUVER, B.C.
V6N2G6
PHONE (604) 261-6455
FAX: (604) 261-6405
June 30, 1999
Mr. Thornton Donaldson
President,
Uranium Power Corporation
#206, 475 Howe street
Vancouver, B. C.
V6C2B3
Dear Mr. Donaldson.
Regarding the Agreement dated July 29, 1998 between J. R. Billingsley and
Uranium Power Corporation Concerning Claim S-106087, Northern Mining District,
Saskatchewan; For the consideration of $2000.00 (two thousand dollars) to be
paid when Uranium Power Corporation receives it's initial funding, I hereby
extend the expiry date of the Agreement to December 1, 1999.
Your's sincerely
/s/ J. R. Billingsley
- ---------------------------------
J. R. Billingsley
EXPLORATION OPTION
AND OPERATING JOINT VENTURE AGREEMENT
MADE AS OF THE 16th DAY OF DECEMBER, 1998
BETWEEN
PHELPS DODGE CORPORATION OF CANADA, LIMITED (Optionor)
and
URANIUM POWER CORPORATION (Optionee)
ATHABASCA BASIN, SASKATCHEWAN
PROPERTIES
<PAGE>
TABLE OF CONTENTS
PAGE NO.
ARTICLE I
DEFINITIONS.............................................................. 1
ARTICLE II
PRINCIPLES OF INTERPRETATION
2.1 Principles of Interpretation........................................ 5
2.2 Schedules .......................................................... 5
2.3 Operation of Parts.................................................. 5
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Capacity............................................................ 6
3.2 Liens and Encumbrances.............................................. 6
3.3 Representations, Warranties and Covenants of PDC.................... 6
3.4 Representations, Warranties and Covenants of UPC.................... 7
3.5 Materiality of Representations and Covenants ....................... 8
3.6 Disclosures ........................................................ 8
3.7 Survival ........................................................... 9
3.8 Indemnities/Limitation of Liability ................................ 9
PART I - THE OPTION PERIOD AND THE EARN BACK OPTION PERIOD
ARTICLE IV
SCOPE AND MAINTENANCE OF OPTION
4.1 Grant of Options and Rights ........................................ 9
4.2 Commitments of Optionee ............................................10
4.3 Requirements to Maintain and Exercise the Option ...................10
4.4 Exercise of the Option .............................................12
4.5 Abandonment of All Rights and Options ..............................12
4.6 Notice of Default ..................................................12
4.7 Conduct of Optionee ................................................13
4.8 Transfer of Title ..................................................13
4.9 Royalty ............................................................13
ARTICLE V
SCOPE AND MAINTENANCE OF EARN BACK OPTION
5.1 Grant of Options and Rights ........................................13
5.2 Commitments of PDC .................................................14
5.3 Requirements to Maintain and Exercise the Earn Back Option .........15
5.4 Exercise of the Earn Back Option ...................................16
5.5 Abandonment of All Rights and Options ..............................16
5.6 Notice of Default ..................................................16
5.7 Conduct of PDC .....................................................17
5.8 Transfer of Title ..................................................17
5.9 Royalty Suspended ..................................................17
PART II - THE JOINT VENTURE
ARTICLE VI
NATURE OF RELATIONSHIP
6.1 Formation of Joint Venture and Appointment of Operator .............17
6.2 Purposes ...........................................................17
6.3 Limitation .........................................................18
6.4 Effective Date and Term ............................................18
ARTICLE VII
CONTRIBUTIONS BY PARTIES
7.1 Deemed Initial Contributions .......................................18
7.2 Disregard of Other Expenses ........................................18
7.3 Additional Cash Contributions ......................................18
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ARTICLE VIII
INTERESTS OF PARTIES
8.1 Initial Participating Interests ....................................18
8.2 Changes in Participating Interests .................................18
8.3 Voluntary Non-Participation ........................................19
8.4 Default in Making Contributions ....................................20
8.5 Elimination of Minority Interest ...................................21
8.6 Continuing Liabilities Upon Adjustments of Participating Interests..22
8.7 Recording of Participating Interests and Changes ...................22
ARTICLE IX
MANAGEMENT COMMITTEE
9.1 Organization and Composition .......................................22
9.2 Decisions ..........................................................22
9.3 Meetings ...........................................................23
9.4 Action By Telephone Meeting ........................................24
ARTICLE X
OPERATOR
10.1 Appointment .......................................................24
10.2 Powers and Duties of Operator .....................................24
10.3 Standard of Care ..................................................26
10.4 Resignation and Deemed Offer to Resign ............................27
10.5 Payments to Operator ..............................................27
10.6 Transactions With Affiliates ......................................27
10.7 Activities During Deadlock ........................................27
ARTICLE XI
PROGRAMS AND BUDGETS
11.1 Operations Pursuant to Programs and Budgets .......................28
11.2 Types of Programs .................................................28
11.3 Preparation, Presentation and Content of Programs and Budgets .....28
11.4 Submittal and Approval of Proposed Programs and Budgets ...........29
11.5 Election to Participate ...........................................30
11.6 Participation in Subsequent Programs ..............................31
11.7 Budget Overruns and Program Changes ...............................31
11.8 Emergency or Unexpected Expenditures ..............................31
ARTICLE XII
ACCOUNTS AND SETTLEMENTS
12.1 Monthly Statements ................................................31
12.2 Cash Calls ........................................................31
12.3 Failure to Meet Cash Calls ........................................31
12.4 Audits ............................................................32
ARTICLE XIII
DISPOSITION OF PRODUCTION
13.1 Taking in Kind ....................................................32
13.2 Failure to Take in Kind ...........................................32
13.3 Hedging ...........................................................32
ARTICLE XIV
WITHDRAWAL AND TERMINATION
14.1 Termination by Expiration or Agreement ............................32
14.2 Withdrawal and Other Events of Termination ........................32
14.3 Continuing Obligations ............................................33
14.4 Disposition of Assets on Termination ..............................34
14.5 Right to Data After Termination ...................................34
14.6 Continuing Authority ..............................................34
ARTICLE XV
ABANDONMENT AND SURRENDER OF PROPERTIES
15.1 Surrender or Abandonment of Property ..............................34
15.2 Reacquisition .....................................................35
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PART III - PROVISIONS APPLICABLE TO PARTS I AND II
ARTICLE XVI
TRANSFER OF INTEREST
16.1 Transfers Generally ...............................................35
16.2 Limitations on Free Transferability ...............................35
16.3 Preemptive Right ..................................................36
16.4 Exceptions to Preemptive Right ....................................37
16.5 Compulsory Acquisition Option on Bankruptcy .......................37
16.6 Buy-Out Right on Royalty ..........................................38
16.7 Registration ......................................................38
ARTICLE XVII
CONFIDENTIALITY
17.1 General ...........................................................38
17.2 Exceptions ........................................................38
17.3 Duration of Confidentiality .......................................39
17.4 Internal Proprietary Information ..................................39
17.5 Public Announcements ..............................................39
17.6 Parties' Information ..............................................39
ARTICLE XVIII
TAX DEDUCTIONS AND CERTIFICATES
18.1 Deductions ........................................................40
18.2 Certificates ......................................................40
18.3 GST Election ......................................................40
ARTICLE XIX
GENERAL PROVISIONS
19.1 Notices ...........................................................40
19.2 Waiver ............................................................41
19.3 Modification ......................................................41
19.4 Force Majeure .....................................................41
19.5 Governing Law .....................................................42
19.6 Further Assurances ................................................42
19.7 Survival of Terms and Conditions ..................................42
19.8 Entire Agreement ..................................................42
19.9 Successors and Assigns ............................................42
19.10 Severability ......................................................42
19.11 No Partnership ....................................................42
19.12 Further Ground Within Area of Interest and Other Business
Opportunities .....................................................43
19.13 Waiver of Rights of Partition and Sale ............................44
19.14 Transfer or Termination of Rights to Properties ...................44
19.15 Implied Covenants .................................................44
19.16 Employees .........................................................44
19.17 Expense and Commissions ...........................................44
19.18 Counterparts ......................................................44
19.19 Rule Against Perpetuities .........................................44
19.20 Payment of Royalties ..............................................45
19.21 Arbitration of Disputes ...........................................45
SCHEDULES
Schedule A - Part 1 Property List - Saskatchewan Properties
Schedule A - Part 2 Location Map
Schedule B - Initial Program and Expenditures
Schedule C - Accounting Procedure
Schedule D - Definition, Calculation and Payment of Royalty
Schedule E - Definition of Feasibility Study
Schedule F - Insurance
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EXPLORATION OPTION AND OPERATING JOINT VENTURE
This Agreement is dated to be effective as of December 16, 1998, between
PHELPS DODGE CORPORATION OF CANADA, LIMITED, a corporation governed by the laws
of Delaware ("PDC" or "Optionor"), and URANIUM POWER CORPORATION, a corporation
governed by the laws of Colorado ("UPC" or "Optionee").
WHEREAS:
A. PDC owns a 100% beneficial interest in the rights to explore and mine
identified in Parts 1 and 2 of Schedule A and defined in Article I as the
"Properties";
B. Subject to the terms and provisions of Article IV of this Agreement, UPC
will fund an initial program of Expenditures (as herein defined) aggregating not
less than $500,000 on the Properties by December 31, 1999 and may thereafter
spend an additional $2,500,000 in exploration on the Properties on or before
December 31, 2002 to earn an undivided 100% participating and ownership interest
in the Properties, subject to a royalty interest;
C. PDC will have an option to earn back a 35% participating and ownership
interest in the Properties by incurring certain expenditures as set out herein
and, subject to the fulfilment of the other requirements of Article V of this
Agreement, PDC and UPC will form an operating joint venture as set forth in Part
II of this Agreement, all on the terms and conditions hereinafter set forth; and
D. PDC desires to dedicate its interest in the Properties to the purposes
of this Agreement.
IN CONSIDERATION OF the mutual promises set forth below, PDC and UPC agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions - As used in this Agreement and any schedules hereto,
unless there is something inconsistent in the subject matter or context, the
following words and terms shall have the meanings set out below:
"Accounting Procedure" means the procedures set forth in Schedule C.
"Additional Rights" means any right to explore or mine or both any part of which
is located within the Area of Interest and which has been offered to or acquired
by a Party and which has been offered by that Party and accepted by the other
Party to continue subject to the terms of this Agreement.
"Affiliate" means any person, partnership, joint venture, corporation or other
form of enterprise which directly or indirectly has a Control Interest, is under
common control with or is controlled by a Party or another Affiliate.
"Agreement" means this Exploration Option and Operating Joint Venture Agreement
and all attached Schedules and all instruments supplemental to or in amendment
or confirmation of this Agreement; and references to Parts, Articles, Sections
or subsections are to the specified Parts, Articles, Sections or subsections of
this Agreement.
"Area of Interest" means the area of land within the configuration on the ground
formed by extending outward the outer boundaries of each of the Properties two
kilometres in perpendicular distance and then extending lengthwise those
extended boundary lines until they first meet the extension of another extended
boundary line. For purposes of this definition "Properties" are the Properties
as they exist as at the Effective Date, and the boundaries of the Area of
Interest shall be unaffected by acquisition or surrenders of parts of the
Properties or Additional Rights during the term of this Agreement.
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"Assets" means the Properties, the Surface Rights, Products and all other real
and personal property, tangible and intangible, including, without limitation,
rights under agreements with federal, provincial or local governments relating
to the Properties and the Mine and Plant if Mining occurs, held for the benefit
of the Parties hereunder.
"Atomic Energy Control Act" means the Atomic Energy Control Act (Canada) and all
regulations thereunder, in force on the date this agreement is entered into,
together with all amendments enacted thereto from time to time.
"Budget" means a detailed estimate of all costs to be incurred by the Parties
with respect to a Program and a schedule of cash advances to be made by the
Parties.
"Business Day" means a day, other than a Saturday or Sunday, on which the
principal commercial banks located at Toronto, Ontario are open for business
during normal banking hours.
"Continuing Obligation" means an obligation or responsibility that is reasonably
expected to continue or arise after Operations on a particular area of the
Properties has ceased or is suspended, such as future monitoring, stabilization,
reclamation or restoration requirements under Laws, or under the terms of the
forms of tenure under which the Properties are held.
"Continuing Party" means a party that has a Participating Interest or has
acquired all or any part of the Participating Interest of a Party pursuant to
this Agreement.
"Control Interest" means an interest which allows the holder to direct or cause
the direction of the management and policies of a Party or Affiliate through the
legal or beneficial ownership of voting securities, the right to appoint
directors or management, contract, voting trust, or otherwise.
"Development" means preparation for the removal and recovery of Products,
including definition drilling, test mining, mine feasibility studies, and other
such work.
"Development Program" means that type of Program defined in Section 11.2(b).
"Earn Back Option" has the meaning given to it in Subsection 5.1(c).
"Effective Date" means the date set forth at the beginning of this Agreement.
"Effective Joint Venture Date" has the meaning set forth in Section 6.4.
"Expenditures" for all purposes of this Agreement means all moneys expended in
connection with the Properties by a Party authorized to do so by the terms of
this Agreement (an "Authorized Party") in prospecting, exploration, development,
preproduction, mining and processing work on or in connection with the
Properties or any part of them. Without limiting the generality of the
foregoing, Expenditures shall include all direct and indirect charges as
described in Sections II and III of the Accounting Procedure and shall include
moneys spent by an Authorized Party in acquiring and maintaining Surface Rights,
in constructing, maintaining and operating roads, trails and bridges upon or
across the Properties or other lands for the purpose of having convenient access
to the Properties; and in mining, prospecting, exploring, developing,
de-watering, sampling, examining, diamond drilling, testing and metallurgical
work of all types; for geophysical, geological and other surveys; reasonable
costs and expenses connected with feasibility studies (whether prepared by
persons who are associated with a Party or on an arm's length basis) and for
buildings, equipment, plant and supplies for the Properties including reasonable
supervision, office and travelling expenses, workers' compensation assessments,
unemployment insurance premiums, fire insurance premiums, taxes, rents, license
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fees and all other payments necessary to keep the Properties in good standing;
and all other expenses ordinarily incurred in exploring, developing and
operating a mining property, including an indirect charge for administration and
overhead in accordance with the Accounting Procedure. The certificate of an
officer of the Authorized Party which has incurred Expenditures in connection
with the Properties shall be accepted as prima facie evidence of the making of
Expenditures. Except as provided in this Agreement, the other Party shall be
given access to the documentation used by the Authorized Party to certify
Expenditures and shall be entitled at its own cost and expense to audit the
amount of Expenditures certified to by the Authorized Party.
"Exploration" means all activities directed toward ascertaining the existence,
location, quantity, quality or commercial value of deposits of Products
including such things as drilling, geophysics and geochemistry.
"Exploration Program" means a Program as defined in Subsection 11.2(a).
"Feasibility Study" means a written report which satisfies the criteria set
forth in Schedule E and a "Favourable Feasibility Study" shall be such a
Feasibility Study that recommends all or part of the Properties be brought into
production.
"Initial Contribution" means the contribution that each Party is deemed to have
made on the formation of the Joint Venture as described in Section 6.1(a).
"Initial Program" means the initial program of Exploration with Expenditures of
not less than $500,000 which is to be completed by not later than December 31,
1999, substantially as set out in Schedule B.
"Joint Account" means the account maintained in accordance with the Accounting
Procedure showing the charges and credits accruing to the Parties after Part II
comes into effect.
"Joint Venture" means the operating joint venture with respect to the Properties
established between Optionor and Optionee under Article VI.
"Law" or "Laws" means all applicable federal, provincial and local laws
(statutory or common), rules, ordinances, regulations, orders, directives,
standards, judgments, and decrees, and agreements with government departments or
agencies thereof, if any, whether legislative, administrative or judicial in
nature, including without limitation, the Mineral Act and the Atomic Energy
Control Act.
"Management Committee" means the committee established under Article IX after
Part II comes into effect.
"Mine and Plant" means the facilities constructed and equipment and supplies
purchased in accordance with the Mining Program and Budget and any approved
expansion or modification Mining Programs and Budgets.
"Mineral Act" means The Crown Minerals Act (Saskatchewan) and The Mineral
Disposition Regulations thereunder in force on the date this Agreement is
entered into, together with all amendments enacted thereto from time to time.
"Mining" means the mining, extracting, producing, handling, milling or other
processing of Products.
"Mining Program" means the type of Program defined in Section 11.2(c).
"Non-Operator" means the Party that is not the Operator.
"Operations" means the activities carried out under this Agreement after Part II
comes into effect.
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"Operator" means the person or entity appointed under Article X to manage
Operations, or any successor Operator after Part II comes into effect.
"Option" shall have the meaning given to it in Subsection 4.1(c).
"Party" and "Parties" means, initially, PDC and UPC, and thereafter the persons
or entities, that from time to time before Part II comes into effect have the
option rights under Part I, and after Part II comes into effect means only PDC
and UPC or the persons or entities as successors to PDC and UPC who have
Participating Interests acquired pursuant to the provisions of this Agreement.
"Participating Interest" means the percentage interest representing the
ownership interest, as a tenant in common with the other Party, of a Party who
is not a Royalty Holder in the Assets, and all other rights and obligations
arising under this Agreement, as such interest may from time to time be adjusted
hereunder. Participating Interests shall be calculated to three decimal places
and rounded to two (e.g., 1.519% rounded to 1.52%). Decimals of .005 or more
shall be rounded up to .01, decimals of less than .005 shall be rounded down.
The initial Participating Interests of the Parties upon the formation of the
Joint Venture are set forth in Section 8.1.
"Prime Rate" means, at any time, the rate of interest expressed as an annual
rate, established by The Toronto-Dominion Bank at its main office in Toronto,
Ontario as its reference rate of interest to determine the interest rates it
will charge for loans in Canadian dollars to Canadian customers, adjusted
automatically with each quoted or published change in such rate, all without the
necessity of any notice to its borrowers or any other person.
"Products" means all ores, minerals and mineral resources and by-products
thereof produced under this Agreement, including, without limitation,
Uranium-bearing Products, By-Products and Other Mineral Products, as such terms
are defined in Schedule D.
"Program" means a description in reasonable detail of Operations to be conducted
and objectives to be accomplished by the Operator for a year or any longer
period after Part II comes into effect.
"Properties" means the rights and obligations in respect of the rights to
explore and mine the properties identified in Schedule A, which are held subject
to this Agreement, as well as the Mineral Act, the Atomic Energy Control Act, or
other Laws, as applicable, together with any and all successor rights, titles
and interests issued pursuant to such rights.
"Representative" shall have the meaning given to it in Section 9.1.
"Rights and Options" means any or all of the rights and options granted to the
Optionee pursuant to this Agreement and more particularly described in Article
IV.
"Royalty" means the vested royalty on Products produced from the Properties,
which shall comprise an interest in, bind, run with and touch the Properties and
the Products and be defined and payable as provided in Schedule D attached
hereto.
"Royalty Holder" means a Party entitled to receive a Royalty.
"Separate Mining Program" means a Program as defined in Subsection 11.4(e).
"Surface Rights" means any ownership of or rights to enter, use and occupy the
surface area of the lands described by the Properties or other surface areas
useful in connection with activities under this Agreement and held from time to
time hereunder.
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"Tax Act" means the Income Tax Act (Canada), as amended.
"Transfer" means sell, grant, assign, arrange for substitute performance by an
Affiliate or third party, encumber, pledge or otherwise convey, commit or
dispose of and the word used as a noun shall have a corresponding meaning.
ARTICLE II
PRINCIPLES OF INTERPRETATION
2.1 Principles of Interpretation - In this Agreement and the Schedules:
(a) time is of the essence in the performance of the Parties' respective
obligations; provided, however, that should the Parties set new times for the
performance of any of their obligations time shall again be of the essence in
respect of such new times;
(b) unless otherwise specified, all references to money amounts are to
Canadian currency;
(c) the use of words in the singular or plural, or with a particular
gender, shall not limit the scope or exclude the application of any provision of
this Agreement or a Schedule to such person or persons or circumstances as the
context otherwise permits;
(d) the descriptive headings of Parts, Articles, Sections and subsections
are inserted solely for convenience of reference and are not intended as
complete or accurate descriptions of content and shall not be used to interpret
the provisions of this Agreement;
(e) unless otherwise specified, any time period within or following which
any payment is to be made or act is to be done shall be calculated by excluding
the day on which the period commences and including the day on which the period
ends and by extending the period to the next Business Day following if the last
day of the period is not a Business Day;
(f) whenever any payment is to be made or action to be taken under this
Agreement is required to be made or taken on a day other than a Business Day,
such payment shall be made or action taken on the next Business Day following;
and
(g) whenever the phrase "to the best of its knowledge" is used, such phrase
shall be interpreted to mean to the best of a Party's knowledge after reviewing
all relevant records and making diligent inquiries regarding the relevant
subject matter.
2.2 Schedules - the Schedules annexed to this Agreement, as listed below,
are an integral part of this Agreement:
Title Description
----- -----------
Schedule A - Part 1 Property List - Saskatchewan Properties
Schedule A - Part 2 Location Map
Schedule B - Initial Program and Expenditures
Schedule C - Accounting Procedure
Schedule D - Definition, Calculation and Payment of Royalty
Schedule E - Definition of Feasibility Study
Schedule F - Insurance
2.3 Operation of Parts - On execution and delivery of this Agreement, it is
agreed that Articles I, II, III and IV and Parts I and III shall be operative
and that Part II shall only be operative upon the occurrence of certain events
as stated therein.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Capacity - Each of the Parties represents and warrants to the other as
follows:
(a) that it is a corporation existing and in good standing under the laws
of its governing jurisdiction and that it is qualified to do business and is in
good standing in the Province of Saskatchewan and in all jurisdictions where it
carries on its business;
(b) that it has the capacity to enter into and perform its obligations
under this Agreement, no shareholder actions are required on its part to
authorize the transactions contemplated herein and that all corporate and other
actions required to authorize it to enter into and perform its obligations under
this Agreement have been properly taken;
(c) that it will not breach any other agreement or instrument by entering
into or performing under this Agreement; and
(d) that this Agreement has been duly executed and delivered by it and is
valid, binding and enforceable against it in accordance with its terms, subject
only to the qualifications that enforceability may be limited by: (i)
bankruptcy, insolvency, reorganization, receivership, moratorium, arrangement or
winding-up laws or other similar laws affecting the enforcement of creditors'
rights generally; and (ii) equitable principles, including the principle that
equitable remedies such as specific performance and injunction may only be
granted in the discretion of a court of competent jurisdiction.
3.2 Liens and Encumbrances - Except as specifically provided in Part II of
this Agreement, UPC and PDC each covenants that it will not knowingly cause or
permit any liens or encumbrances to be charged against the Properties.
3.3 Representations, Warranties and Covenants of PDC - PDC represents,
warrants, and covenants to Optionee that:
(a) to the best of its knowledge, the information in Part 1 of Schedule A
hereto relating to the Properties is true, complete and correct and accurately
describes the area covered by the rights subject to this Agreement;
(b) to the best of its knowledge, the Properties have been properly staked
and recorded under the Mineral Act and are currently registered in the name of
Nordland Exploration Ltd. as to a 100% undivided interest. For the portion of
the Properties where the Surface Rights are not held in fee simple by Optionor,
Optionee shall obtain from the appropriate Surface Rights holder or holders all
necessary consents and approvals as to entry, use and occupation of the Surface
Rights for the purpose of its activities hereunder and Optionor agrees to
co-operate with Optionee in obtaining all such consents and approvals;
(c) Optionor is the sole beneficial owner and has exclusive possession of
the Properties and has complete authority to deal with the Properties, and,
other than this Agreement and the letter agreement dated February 21, 1996
between PDC and Nordland Exploration Ltd., there are no other agreements
affecting title to the Properties. Subject to Section 4.8 hereof, Optionor may
at any time cause Nordland Exploration Ltd. to transfer registered title to the
Properties into Optionor's name;
(d) during the currency of this Agreement, without the prior written
consent of Optionee, Optionor will not enter into new agreements or instruments,
encumbering or affecting the Properties or amend or modify any that now exist;
(e) none of the shareholders of Optionor are required to approve the
execution and delivery of this Agreement and no stock exchange or other
regulatory body having jurisdiction over Optionor is required to consent to or
approve the execution and delivery of this Agreement or the performance of any
of its terms;
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(f) except as noted in Subsection 3.3(b) above, the Properties are free of
all liens, charges, encumbrances and instruments of any kind whatsoever,
registered and unregistered, and Optionee has had access to examine copies of
all title documents, plots and field notes of surveys and all data and
information which Optionor has in its possession or under its control relating
to the Properties, the mineral potential of, and access rights to, the
Properties and Optionor is not aware of any pending or threatened actions or
claims by third parties or government agencies for anything done or not done
with respect to the Properties;
(g) all municipal, provincial, territorial and federal taxes and levies of
any kind whatsoever in respect of the ownership and use of all of the Properties
which were due and payable as of the date of this Agreement or prior to such
date have been paid and satisfied as of such date;
(h) Optionor is a non-resident of Canada for purposes of Section 116 of the
Tax Act;
(i) there are no outstanding or pending, or to the best of the Optionor's
knowledge, threatened, actions, suits or claims against or affecting the
Properties that would have an adverse effect on the Properties;
(j) conditions on and relating to the Properties with respect to all past
and current operations thereon are in compliance with all Laws relating to
environmental matters including, but not limited to, waste disposal and storage,
and no part of the surface of the Properties has been used as a site for the
disposal of any waste or has been contaminated with any toxic or harmful
substance; and
(k) there are no outstanding work orders or actions required to be taken
relating to the rehabilitation, reclamation, abandonment, restoration or
environmental matters in respect of the Properties or any operations thereon,
nor has the Optionor received notice of any such work orders or actions and the
Properties do not have any mine features or hazards, including but not limited
to, openings, shafts, excavations, adits, buildings, structures, machinery,
tailings, waste rock or any disturbances of the ground which create a hazard to
the public safety or environment or any other mine hazards which have not been
rehabilitated or restored in accordance with the Laws.
Optionor agrees with Optionee that each of the foregoing representations,
warranties and covenants are conditions to this Agreement inserted for the sole
benefit of Optionee and that each such condition shall survive the execution and
delivery of this Agreement and all transactions contemplated hereby.
3.4 Representations, Warranties and Covenants of UPC - UPC represents,
warrants and covenants to Optionor that:
(a) during the currency of this Agreement, without the prior written
consent of Optionor, UPC will not enter into new agreements or instruments
encumbering or affecting the Properties or amend or modify any that now exist;
(b) none of the shareholders of UPC and no stock exchange or other
regulatory body having jurisdiction over UPC is required to consent to or
approve the execution and delivery of this Agreement or the performance of any
its terms;
(c) UPC is a non-resident of Canada for purposes of Section 116 of the Tax
Act;
(d) UPC is capable of financing the $500,000 of Expenditures which it has
committed to incur under the Initial Program and to assure PDC of that financial
capability, UPC agrees to deliver to PDC on or before February 28, 1999 an
irrevocable letter of credit from a Canadian chartered bank to the effect that,
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subject to extension by force majeure, UPC will complete $500,000 in
Expenditures on or before December 31, 1999 and if there is any shortfall in
such Expenditures, such chartered bank will pay PDC the difference in cash;
(e) If Optionor elects to exercise the Earn Back Option, Optionee shall be
deemed to represent, warrant and covenant to and for the benefit of Optionor
that:
(i) Optionee is the sole beneficial and registered owner and has
exclusive possession of the Properties and has complete authority
to deal with the Properties, and, other than this Agreement,
there are no other agreements affecting title to the Properties;
(ii) during the currency of this Agreement, without the prior written
consent of Optionor, Optionee will not enter into new agreements
or instruments, encumbering or affecting the Properties or amend
or modify any that now exist;
(iii)all municipal, provincial, territorial and federal taxes and
levies of any kind whatsoever in respect of the ownership and use
of all of the Properties which were due and payable as of the
date of this Agreement or prior to such date have been paid and
satisfied as of such date;
(iv) there are no outstanding or pending, or to the best of the
Optionor's knowledge, threatened, actions, suits or claims
against or affecting the Properties that would have an adverse
effect on the Properties;
(v) conditions on and relating to the Properties with respect to all
past and current operations thereon are in compliance with all
Laws relating to environmental matters including, but not limited
to, waste disposal and storage, and no part of the surface of the
Properties has been used as a site for the disposal of any waste
or has been contaminated with any toxic or harmful substance; and
(vi) there are no outstanding work orders or actions required to be
taken relating to the rehabilitation, reclamation, abandonment,
restoration or environmental matters in respect of the Properties
or any operations thereon, nor has the Optionor received notice
of same and the Properties do not have any mine features or
hazards, including but not limited to, openings, shafts,
excavations, adits, buildings, structures, machinery, tailings,
waste rock or any disturbances of the ground which create a
hazard to the public safety or environment or any other mine
hazards which have not been rehabilitated or restored in
accordance with the Laws.
Optionee agrees with Optionor that each of the foregoing representations,
warranties and covenants are conditions to this Agreement inserted for the sole
benefit of Optionor and that each such condition shall survive the execution and
delivery of this Agreement and all transactions contemplated hereby.
3.5 Materiality of Representations and Covenants - All representations,
warranties and covenants made in this Article III are material to this Agreement
and the Parties' intent in entering into it.
3.6 Disclosures - Each Party represents and warrants that it is unaware of
any material facts or circumstances that have not been disclosed to the other
Party and that should be disclosed to prevent the representations, warranties
and covenants contained in this Article III from being misleading.
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3.7 Survival - All representations and warranties shall survive for a
period of four (4) years from the date of this Agreement. Recovery for breach of
such other representations and warranties by any Party shall be limited to the
fair market value of the other Party's interest in the Assets or Royalty
hereunder.
3.8 Indemnities/Limitation of Liability.
(a) Each Party shall indemnify the other Party, its officers, directors,
agents, employees and its Affiliates (collectively, the "Indemnified Party")
from and against any Material Loss. A "Material Loss" shall mean all costs,
expenses, damages or liabilities, including attorneys' fees and other costs of
litigation (including threatened or pending) arising out of or based on a breach
by a Party ("Indemnifying Party") of any representation, warranty or covenant
contained in this Agreement. A Material Loss shall be deemed to have occurred
if, in the aggregate, an Indemnified Party incurs losses, costs, damages or
liabilities in excess of five hundred dollars ($500.00) relating to the
warranties, representations and covenants described in this Agreement.
(b) If any claim or demand is asserted against an Indemnified Party in
respect of which such Indemnified Party may be entitled to indemnification under
this Agreement, written notice of such claim or demand shall promptly be given
to the Indemnifying Party. The Indemnifying Party shall have the right, by
notifying the Indemnified Party within thirty (30) days after its receipt of the
notice of the claim or demand, to assume the entire control of (subject to the
right of the Indemnified Party to participate, at the Indemnified Party's
expense and with counsel of the Indemnified Party's choice) the defence,
compromise or settlement of the matter. Any damages to the assets or business of
the Indemnified Party caused by a failure by the Indemnifying Party to defend,
compromise, or settle a claim or demand in a reasonable and expeditious manner,
after the Indemnified Party has given notice of such claim, shall be included in
the damages for which the Indemnifying Party shall be obligated to indemnify the
Indemnified Party. Any settlement or compromise of a matter by the Indemnifying
Party shall include a full release of claims against the Indemnified Party which
have arisen out of the claim or demand for which indemnification is sought.
PART I - THE OPTION PERIOD AND THE EARN BACK OPTION PERIOD
ARTICLE IV
SCOPE AND MAINTENANCE OF OPTION
4.1 Grant of Options and Rights - On execution and delivery of this
Agreement, Optionor hereby gives and grants to Optionee:
(a) Right and Option to Explore - Subject to the Optionee obtaining from
the appropriate Surface Rights holders, if any, all necessary consents and
approvals as to entry, use and occupation of the Surface Rights and, where
applicable, consents to explore land under water, the immediate licence,
authority and option to enter upon and explore and develop all parts of the
Properties and during the currency of the Option to acquire interests hereunder
with the same power and authority granted to Optionee, its servants, agents,
workers or contractors and their subcontractors and agents as Optionor has, to
sample, examine, diamond drill, prospect, explore, develop and mine the same in
searching for minerals, in such manner as may be permitted by Laws, the Surface
Rights owners, if any, and as Optionee in its sole discretion may determine,
including the right to erect, bring and install thereon all such buildings,
machinery, equipment and supplies as Optionee shall deem necessary and the right
to remove reasonable quantities of ore for assay and testing purposes only;
(b) Right to Return, Release and Otherwise Deal with Properties - Optionee
may at any time give 35 days' written notice (a "Release Notice") to Optionor
that it wishes to release all interest which it holds in any portion of the
Properties; provided, always, that the assessment work credits against any such
Properties will keep them in good standing for not less than one year from the
date of any such notice. In the case where the Release Notice relates to a
portion of the Properties held under the Mineral Act, unless Optionor exercises
its right to maintain such Properties, Optionee shall be free to allow such
Properties to lapse by ceasing to file assessment work in respect thereof or may
cause them to be abandoned or surrendered under the Mineral Act.
From the giving of Optionee's Release Notice with respect to any portion of
the Properties, that portion of the Properties shall no longer be subject to
this Agreement and either Party shall be free to acquire rights to explore or
mine or both over the areas previously covered by such Properties at any time.
During the currency of the Option, the Optionee shall have the right with
prior notice to and the concurrence of Optionor to apply for renewals and
extensions of each of the rights constituting the Properties, to make any
deficiency payments required, and to apply for and on behalf of both Parties for
further and other mineral rights in respect of the areas covered by the
Properties, to distribute work credits and apply for a mining lease and to
negotiate with the owners and occupiers of any Surface Rights, if any, required
for access to, or the exploration and development of, the Properties; and
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(c) Right and Option to Earn a 100% Interest - The further sole and
exclusive right and option to earn on or before December 31, 2002, a 100%
undivided interest subject to the Royalty provided in Section 4.9 and the Earn
Back Option, in the Properties free of all other liens, charges, encumbrances
and conflicting claims (the "Option"), by (i) completing by December 31, 1999
the Initial Program and incurring Expenditures of $500,000; (ii) incurring an
aggregate of not less than $2,500,000 in Expenditures (in addition to the amount
set out in paragraph (i)) prior to December 31, 2002; and (iii) thereafter
giving the Optionor notice of exercise as provided in Section 4.4, all upon and
subject to the terms and conditions of this Agreement.
4.2 Commitments of Optionee
(a) Initial Program - Notwithstanding anything contained in this Agreement
and regardless of whether Optionee elects to maintain or exercise the Option,
Optionee agrees to complete the Initial Program by December 31, 1999, which
Expenditures shall include those necessary to ensure that PDC recovers in cash
the $126,678.65 of the payments made in lieu of work, and those necessary
Expenditures are set out in Schedule A Part 1.
(b) Maintenance of Properties Free of Tax Liens - Until such time as
Optionee may exercise the right to release portions of the Properties under
Subsection 4.1(b) or to abandon the Rights and Options pursuant to Section 4.5,
or until the formation of the Joint Venture, Optionee shall maintain the
Properties in good standing under the Mineral Act or other Laws, as applicable,
until such time as it may exercise the right to right to release portions of the
Properties under Subsection 4.1(b) or to abandon the Rights and Options pursuant
to Section 4.5.
(c) Reports - Prior to the formation of the Joint Venture, Optionee agrees
to file the results of all its Expenditures for assessment work credit under the
Mineral Act. Optionee agrees to give Optionor verbal reports of material
occurrences in the conduct of work prior to the exercise of the option as soon
as practicable and in all events not less frequently than monthly. Optionee
shall prepare an annual technical report giving details of the factual data
resulting from the Expenditures incurred in the last completed calendar year,
within ninety (90) days following the completion of the applicable calendar
year.
(d) Access - Until such time as the Optionor becomes the Operator, Optionor
and its authorized representatives shall be entitled to enter upon the
Properties in reasonable numbers and at reasonable times at their own risk and
expense to inspect the work being carried out by Optionee. Optionor will
indemnify Optionee against any expenses or damages that it may incur as a result
of any injury or property damage sustained or caused by Optionor or its
representatives.
(e) Removal of Liens - Until such time as the Optionor becomes the
Operator, Optionee will pay or cause to be paid all workers or wage earners
employed by it on the Properties and will pay for all material purchased by it
in connection with its work on the Properties which might give rise to a lien.
If a lien or notice of lien is recorded against the Properties as a result of
work done by or for Optionee, it will take reasonable steps to have the lien
removed; provided, however, that Optionee may dispute any claim for lien.
4.3 Requirements to Maintain and Exercise the Option
(a) Option - Subject to Subsection 4.3(b) below, in order to keep the
Option in good standing and exercise the same, Optionee shall be required to (i)
expend not later than the dates set forth in Column (2) below; and (ii) certify
in writing to Optionor not later than ninety (90) days following the dates set
forth in Column (2) below, not less than the cumulative aggregate Expenditures
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set forth on the same line in Column (1) below, which certification shall
include or be accompanied by a report in the nature of the report referred to in
Subsection 4.2(c) in respect of such work to the extent not previously reported:
Column (1) Column (2)
Cumulative Aggregate Expenditures Required Dates
--------------------------------- --------------
$500,000 December 31, 1999
$3,000,000 December 31, 2002
(b) Title Disputes - Notwithstanding the dates set forth in this Agreement
for the incurring of any Expenditures by Optionee or the giving of any notices,
if Optionor's ownership of any of the Properties is disputed by proceedings in
any court, then the period of time within which Optionee is required to make any
Expenditures or give any notification hereunder shall be automatically extended
by the period of time between the commencement of any such proceedings and ten
(10) days after the final termination of any such proceedings in a court of
final resort from which no appeal can be taken by any party involved therein.
Similarly, all time periods and dates subsequent to such extended period shall
be adjusted to take into account the extension and delay arising out of such
dispute. Optionor shall be responsible for resolving any such proceedings;
however, Optionee shall co-operate with the Optionor, at Optionor's expense, in
the defence and resolution of such proceedings.
(c) Failure to Make Required Expenditures in respect of the Option Subject
to the provisions of Subsection 4.3(b) and the provisions regarding notice of
default in Section 4.6 and force majeure in Section 19.4 of this Agreement, if
on any stipulated date, Optionee fails to certify in writing to Optionor the
cumulative aggregate Expenditures required in accordance with Subsection 4.3(a),
then all Rights and Options hereunder shall lapse and the Option shall
terminate. Notwithstanding the foregoing, if Optionee should fail to make the
Expenditures required by Subsection 4.3(a) on or before the dates set forth
herein, Optionee shall have the option to pay any shortfall in cash to Optionor
and any such payment shall be counted towards the cumulative aggregate
Expenditures required by Subsection 4.3(a), in which case all Rights and Options
under the Agreement shall continue under the terms hereof.
(d) Rights or Duties on Termination - In the event of termination of the
Rights and Options hereunder through failure of Optionee to comply with the
provisions of Subsection 4.3(a) or as otherwise provided herein:
(i) Optionee shall surrender the use of the Properties to Optionor
provided that for a period of 180 days after the effective date
of such termination, subject to the Optionee making its own
arrangements with the owners of the Surface Rights, if any,
Optionee shall have the right of free access to the Properties
for the purposes of removing and may remove all buildings, plant,
equipment, machinery, tools, appliances, supplies and other
materials which it may have erected, placed or installed therein,
or thereon, but excluding any such items belonging to Optionor
(collectively, "Optionee's Equipment") and no rental or occupancy
shall be charged to Optionee for such privilege or removal. If
Optionee does not remove Optionee's Equipment within 180 days
after termination, Optionor may notify Optionee in writing that
it requires Optionee to remove all unremoved Optionee's
Equipment, and if such removal has not occurred within 45 days
after such notice was delivered, Optionor shall be entitled to
remove and dispose of all unremoved Optionee's Equipment, and
Optionor shall be entitled to recover from Optionee and Optionee
shall forthwith reimburse Optionor for its reasonable cost and
expenses of such removal;
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(ii) If Optionee has acquired any Surface Rights which are assignable
and are requested by Optionor to be assigned to it, Optionee
shall assign such Surface Rights to Optionor, subject to Optionor
paying to Optionee the amount of the transfer fee and other costs
for the transfer of such Surface Rights;
(iii)Optionee will comply with all regulatory authorities, including
municipal and provincial, with respect to clean-up of its work on
the Properties and in doing so will comply with all government
directives and regulations whatsoever, including those of
environmental agencies, and will be responsible for all
disturbances or contamination arising from its work on the
Properties; provided, however, that Optionee shall not be
responsible for disturbances or contamination of the Properties
that occurred on the Properties prior to the Effective Date or
following the termination of this Agreement;
(iv) Optionee will, within ninety (90) days of any termination,
deliver to Optionor a copy of any maps, reports, assays and a
certificate of its Expenditures in respect of those portions of
the Properties in respect of which termination has occurred, to
the extent that they have not previously been supplied by
Optionee to Optionor; and
(v) Optionee shall, to the extent not already paid, pay all taxes,
fees and fines if any, relating to all the Properties, applicable
to the period of the occupancy thereof by Optionee.
4.4 Exercise of the Option - If Optionee elects to exercise the Option, it
shall do so by giving written notice of exercise to Optionor on or before March
31, 2003.
4.5 Abandonment of All Rights and Options - Except for the commitments of
Optionee under Section 4.2 and Subsection 4.3(d), and any other accrued
obligations of Optionee to Optionor hereunder (which accrued obligations shall
be performed by Optionee irrespective of termination), it is agreed that nothing
contained in Article IV of this Agreement nor the doing of any act or thing by
Optionee under the terms of Article IV of this Agreement shall obligate it to do
anything else hereunder, it being clearly understood that Optionee may abandon
all the Rights and Options granted to it under this Article IV by giving notice
of such abandonment to Optionor. If Optionee gives notice of abandonment of the
Rights and Options granted to Optionee in Article IV, and provided Optionee
complies with all its accrued obligations to Optionor hereunder, Optionee shall
be under no obligation to make any payment or do anything else hereunder from
and after the date such notice is effective and shall forthwith thereafter
deliver the documentation and take the action relating to the Properties
referred to in Subsection 4.3(d).
4.6 Notice of Default - If, prior to the coming into effect of Part II,
Optionee fails to perform or defaults in the performance of a material
obligation under this Agreement, Optionor may terminate this Agreement, but only
if:
(a) Optionor has first given to Optionee a notice of default containing
particulars of the failure or default; and
(b) Optionee has not:
(i) in the case of default on any payment, including any expenditure
or payment in lieu of work as provided in Subsection 4.3(a) or
(c), cured such default within fifteen (15) days following
delivery of notice of default; or
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(ii) in any other case, cured such default or commenced proceedings to
remedy such default by appropriate performance within ninety (90)
days following delivery of notice of default (Optionee hereby
agreeing that should it so commence to cure any default it will
prosecute the same to completion without undue delay).
If Optionee fails to comply with the provisions of Subsection 4.6(b),
Optionor may then terminate the Rights and Options granted to Optionee by
written notice to Optionee.
4.7 Conduct of Optionee - The Optionee agrees that it shall, during the
currency of the Rights and Options hereby granted, carry out its activities as
contemplated hereunder in a manner consistent with good and prudent mining,
mineral exploration and environmental practices and in accordance with all Laws.
4.8 Transfer of Title - If Optionee exercises the Option by notice given
pursuant to Section 4.4 and provides Optionor with evidence that Optionee is
legally eligible to transfer title, then Optionor shall forthwith obtain all
requisite consents and take all requisite actions under the instruments and the
Laws by which the Properties are held to transfer, register and record the 100%
interest in the title to each of the Properties in favour of Optionee to be held
by Optionee subject to the terms and conditions of this Agreement, including
without limitation, the Earn Back Option.
4.9 Royalty - Upon the exercise of the Option, the Royalty shall vest in
the Optionor. Notwithstanding anything in this Agreement to the contrary, such
Royalty on Products shall comprise an interest in, run with, bind and touch the
Properties and the Products if, as and whenever they constitute "real property"
or severed "personal property", as the case may be. Upon the vesting of the
Royalty as provided above and subject to Section 5.9, PDC shall thereafter be
called a Royalty Holder. Subject to Subsection 16.6, the Royalty provided under
this Section 4.9 shall be freely transferable by the Royalty Holder
notwithstanding any other provisions of this Agreement, and such transfer shall
be binding upon and shall enure to the benefit of the parties involved and their
respective successors and assigns.
ARTICLE V
SCOPE AND MAINTENANCE OF EARN BACK OPTION
5.1 Grant of Options and Rights - On execution and delivery of this
Agreement, UPC hereby gives and grants to PDC the following rights and options,
provided that in order for PDC to be entitled to such rights and options, PDC
shall elect, on or before 180 days after UPC exercises its Option pursuant to
Section 4.4, to work toward exercising the Earn Back Option by giving notice to
UPC. If PDC fails to give such notice, PDC shall be deemed to have elected not
to work toward the exercise of the Earn Back Option. If PDC elects or is deemed
to have elected not to work toward the exercise of the Earn Back Option, this
Article V shall have no further force or effect.
(a) Right and Option to Explore - Subject to PDC with the assistance of UPC
obtaining from the appropriate Surface Rights holders, if any, all necessary
consents and approvals as to entry, use and occupation of the Surface Rights
and, where applicable, consents to explore land under water, immediately upon
the exercise of the Option by UPC pursuant to Section 4.4, the licence,
authority and option to enter upon and explore and develop all parts of the
Properties and during the currency of the option to acquire interests hereunder
with the same power and authority granted to PDC, its servants, agents, workers
or contractors and their subcontractors and agents as UPC has, to sample,
examine, diamond drill, prospect, explore, develop and mine the same in
searching for minerals, in such manner as may be permitted by Laws, the Surface
Rights owners, if any, and as UPC in its sole discretion may determine,
including the right to erect, bring and install thereon all such buildings,
machinery, equipment and supplies as PDC shall deem necessary and the right to
remove reasonable quantities of ore for assay and testing purposes only.
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(b) Right to Return, Release and Otherwise Deal with Properties In the
event PDC has elected to work toward the Earn Back Option, PDC may at any time
give 35 days' written notice (a "Release Notice") to UPC that it wishes to
release all interest which it holds in any portion of the Properties; provided,
always, that the assessment work credits against any such Properties will keep
them in good standing for not less than one year from the date of any such
notice. In the case where the Release Notice relates to a portion of the
Properties held under the Mineral Act, unless UPC exercises its right to
maintain such Properties, PDC shall be free to allow such Properties to lapse by
ceasing to file assessment work in respect thereof or may cause them to be
abandoned or surrendered under the Mineral Act.
From the giving of PDC's Release Notice with respect to any portion of the
Properties, that portion of the Properties shall no longer be subject to this
Agreement and either Party shall be free to acquire rights to explore or mine or
both over the areas previously covered by such Properties at any time.
During the currency of the Earn Back Option, PDC shall have the right with
prior notice to and the concurrence of UPC to apply for renewals and extensions
of each of the rights constituting the Properties, to make any deficiency
payments required, and to apply for and on behalf of both Parties for further
and other mineral rights in respect of the areas covered by the Properties, to
distribute work credits and apply for a mining lease and to negotiate with the
owners and occupiers of any Surface Rights, if any, required for access to, or
the exploration and development of, the Properties; and
(c) Right and Option to Earn a 35% Interest - The further sole and
exclusive right and option to earn on or before December 31, 2006, a 35%
undivided interest in the Properties free of all other liens, charges,
encumbrances and conflicting claims (the "Earn Back Option"), by (i) incurring
an aggregate of not less than $3,000,000 in Expenditures and (ii) thereafter
giving UPC notice of exercise as provided in Section 5.4, all upon and subject
to the terms and conditions of this Agreement.
5.2 Commitments of PDC
(a) Maintenance of Properties Free of Tax Liens - Until such time as PDC
may exercise the right to release portions of the Properties under Subsection
5.1(b) or to abandon the Rights and Options pursuant to Section 5.5, or until
the formation of the Joint Venture, PDC shall maintain the Properties in good
standing under the Mineral Act or other Laws, as applicable, until such time as
it may exercise the right to right to release portions of the Properties under
Subsection 5.1(b) or to abandon the Rights and Options pursuant to Section 5.5.
(b) Reports - Prior to the formation of the Joint Venture, PDC agrees to
file the results of all its Expenditures for assessment work credit under the
Mineral Act. PDC agrees to give PDC verbal reports of material occurrences in
the conduct of work prior to the exercise of the Earn Back Option as soon as
practicable and in all events not less frequently than monthly. PDC shall
prepare an annual technical report giving details of the factual data resulting
from the Expenditures incurred in the last completed calendar year, within
ninety (90) days following the completion of the applicable calendar year.
(c) Access - Until such time as UPC resumes the role of Operator, UPC and
its authorized representatives shall be entitled to enter upon the Properties in
reasonable numbers and at reasonable times at their own risk and expense to
inspect the work being carried out by PDC. UPC will indemnify PDC against any
expenses or damages that it may incur as a result of any injury or property
damage sustained or caused by UPC or its representatives.
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(d) Removal of Liens - Until such time as UPC becomes the Operator, PDC
will pay or cause to be paid all workers or wage earners employed by it on the
Properties and will pay for all material purchased by it in connection with its
work on the Properties which might give rise to a lien. If a lien or notice of
lien is recorded against the Properties as a result of work done by or for PDC,
it will take reasonable steps to have the lien removed; provided, however, that
PDC may dispute any claim for lien.
5.3 Requirements to Maintain and Exercise the Earn Back Option
(a) Earn Back Option - Subject to Subsection 5.3(b) below, in order to keep
the Earn Back Option in good standing and exercise the same, PDC shall be
required to (i) expend not later than December 31, 2006; and (ii) certify in
writing to UPC not later than ninety (90) days following December 31, 2006, not
less than $3,000,000 in cumulative aggregate Expenditures, which certification
shall include or be accompanied by a report in the nature of the report referred
to in subsection 5.2(b) in respect of such work to the extent not previously
reported.
(b) Title Disputes - Notwithstanding the dates set forth in this Agreement
for the incurring of any Expenditures by PDC or the giving of any notices, if
UPC's ownership of any of the Properties is disputed by proceedings in any
court, then the period of time within which PDC is required to make any
Expenditures or give any notification hereunder shall be automatically extended
by the period of time between the commencement of any such proceedings and ten
(10) days after the final termination of any such proceedings in a court of
final resort from which no appeal can be taken by any party involved therein.
Similarly, all time periods and dates subsequent to such extended period shall
be adjusted to take into account the extension and delay arising out of such
dispute. UPC shall be responsible for resolving any such proceedings; however,
PDC shall co-operate with UPC, at UPC's expense, in the defence and resolution
of such proceedings.
(c) Failure to Make Required Expenditures in respect of the Earn Back
Option - Subject to the provisions of Subsection 5.3(b) and the provisions
regarding notice of default in Section 5.6 and force majeure in Section 19.4 of
this Agreement, if on any stipulated date, PDC fails to certify in writing to
UPC the cumulative aggregate Expenditures required in accordance with Subsection
5.3(a), then all Rights and Options under Article V shall lapse and the Earn
Back Option shall terminate.
(d) Rights or Duties on Termination - In the event of termination of the
Rights and Options under this Article V through failure of PDC to comply with
the provisions of Subsection 5.3(a) or as otherwise provided herein:
(i) PDC shall surrender the use of the Properties to UPC provided
that for a period of 180 days after the effective date of such
termination, subject to PDC making its own arrangements with the
owners of the Surface Rights, if any, PDC shall have the right of
free access to the Properties for the purposes of removing and
may remove all buildings, plant, equipment, machinery, tools,
appliances, supplies and other materials which it may have
erected, placed or installed therein, or thereon, but excluding
any such items belonging to UPC (collectively, "PDC's Equipment")
and no rental or occupancy shall be charged to PDC for such
privilege or removal. If PDC does not remove PDC's Equipment
within 180 days after termination, UPC may notify PDC in writing
that it requires PDC to remove all unremoved PDC's Equipment, and
if such removal has not occurred within 45 days after such notice
was delivered, UPC shall be entitled to remove and dispose of all
unremoved PDC's Equipment, and UPC shall be entitled to recover
from PDC and PDC shall forthwith reimburse UPC for its reasonable
costs and expenses of such removal.
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(ii) If PDC has acquired any Surface Rights which are assignable and
are requested by UPC to be assigned to it, PDC shall assign such
Surface Rights to UPC, subject to UPC paying to PDC the amount of
the transfer fee for recording the transfer of such Surface
Rights;
(iii)PDC will comply with all regulatory authorities, including
municipal and provincial, with respect to clean-up of its work on
the Properties and in doing so will comply with all government
directives and regulations whatsoever, including those of
environmental agencies, and will be responsible for all
disturbances or contamination arising from its work on the
Properties; provided, however, that PDC shall not be responsible
for disturbances or contamination of the Properties that occurred
on the Properties prior to the Effective Date while UPC was
operator or following the termination of this Agreement;
(iv) DC will, within ninety (90) days of any termination, deliver to
UPC a copy of any maps, reports, assays and a certificate of its
Expenditures in respect of those portions of the Properties in
respect of which termination has occurred, to the extent that
they have not previously been supplied by PDC to UPC; and
(v) PDC shall, to the extent not already paid, pay all taxes, fees
and fines if any, relating to all the Properties, applicable to
the period of the occupancy thereof by PDC.
5.4 Exercise of the Earn Back Option - If PDC elects to exercise the Earn
Back Option, it shall do so by giving written notice of exercise to UPC on or
before March 31, 2007.
5.5 Abandonment of All Rights and Options - Except for the commitments of
PDC under Section 5.2 and Subsection 5.3(d), and any other accrued obligations
of PDC to UPC hereunder (which accrued obligations shall be performed by PDC
irrespective of termination), it is agreed that nothing contained in Article V
of this Agreement nor the doing of any act or thing by PDC under the terms of
Article V of this Agreement shall obligate it to do anything else hereunder, it
being clearly understood that PDC may abandon all the Rights and Options granted
to it under this Article V by giving notice of such abandonment to UPC. If PDC
gives notice of abandonment of the Rights and Options granted to PDC in Article
V and provided PDC complies with all its accrued obligations to UPC hereunder,
PDC shall be under no obligation to make any payment or do anything else
hereunder from and after the date such notice is effective and shall forthwith
thereafter deliver the documentation and take the action relating to the
Properties referred to in Subsection 5.3(d).
5.6 Notice of Default - If, prior to the coming into effect of Part II, PDC
fails to perform or defaults in the performance of a material obligation under
this Agreement, UPC may terminate this Agreement, but only if:
(a) UPC has first given to PDC a notice of default containing particulars
of the failure or default; and
(b) PDC has not:
(i) in the case of default on any payment, including any expenditure
or payment in lieu of work as provided in Subsection 5.3(a) or
(c), cured such default within fifteen (15) days following
delivery of notice of default; or
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(ii)in any other case, cured such default or commenced proceedings to
remedy such default by appropriate performance within ninety (90)
days following delivery of notice of default (PDC hereby agreeing
that should it so commence to cure any default it will prosecute
the same to completion without undue delay).
If PDC fails to comply with the provisions of Subsection 5.6(b), UPC may
then terminate the Rights and Options granted to PDC by written notice to PDC.
5.7 Conduct of PDC - PDC agrees that it shall, during the currency of the
rights and options granted pursuant to Article V, carry out its activities as
contemplated hereunder in a manner consistent with good and prudent mining,
mineral exploration and environmental practices and in accordance with all Laws.
5.8 Transfer of Title - If PDC exercises the Earn Back Option by notice
given pursuant to Section 5.4, UPC shall forthwith obtain all requisite consents
and take all requisite actions under the instruments and the Laws by which the
Properties are held to transfer a 35% beneficial interest in the title to each
of the Properties to PDC to be held by UPC in the capacity of the trustee and
agent for the Parties as their Participating Interests are determined from time
to time under the provisions of Article VIII.
5.9 Royalty Suspended - Upon the exercise of the Earn Back Option by PDC
and the vesting of the 35% Participating Interest in PDC, the Royalty shall be
suspended and only become payable as provided in Section 8.5. For certainty, if
PDC elects to work toward exercising the Earn Back Option pursuant to Section
5.1, but does not ultimately exercise the Earn Back Option and the 35%
Participating Interest is not vested in PDC, the Royalty shall continue to be
payable to PDC.
PART II - THE JOINT VENTURE
ARTICLE VI
NATURE OF RELATIONSHIP
6.1 Formation of Joint Venture and Appointment of Operator.
(a) Upon the exercise of the Earn Back Option, a Joint Venture with respect
to the Properties shall automatically be formed between PDC and UPC, with UPC
having a 65% Participating Interest and PDC having a 35% Participating Interest,
and UPC shall become the Operator with the rights and duties provided under
Parts II and III of this Agreement.
(b) UPC shall be entitled to continue to act as Operator for so long as it
maintains a Participating Interest equal to or greater than that of the other
Party. Thereafter, the Party who has a Participating Interest greater than that
of the other Party at a particular time (as determined pursuant to Article VIII)
shall be the Operator for so long as it retains such Participating Interest. If,
at any time, the Participating Interest of the Operator should cease to be equal
to or greater than the Participating Interest of the other Party, the
Non-Operator, by notice in writing to the Operator ("Notice of Change of
Operator"), shall be entitled to become the Operator. If Notice of Change of
Operator is given, the Party to whom it is given shall turn over all documents
and records and assign the rights under all contracts and otherwise co-operate
and take all proper actions reasonably necessary to allow the successor Operator
to assume its duties and responsibilities under this Agreement.
6.2 Purposes - The Joint Venture is formed for the following purposes and
for no others, and shall serve as the exclusive means by which PDC and UPC, or
either of them, accomplish such purposes:
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(a) to conduct Exploration on the Properties;
(b) to evaluate the possibilities for the Development and Mining of the
Properties;
(c) to engage in Development and Mining on the Properties;
(d) to engage in the storage and/or removal of Products, to the extent
permitted by Article XIII;
(e) to complete and satisfy all environmental compliance and Continuing
Obligations affecting the Properties; and
(f) to perform any other activity necessary, appropriate or incidental to
any of the foregoing.
6.3 Limitation - Unless the Parties otherwise agree in writing, the
purposes of the Operations shall be limited to those described in Section 6.2,
and nothing in this Agreement shall be construed to enlarge such purposes or to
change their relationship as set forth in Sections 19.12, 19.13 and 19.16.
6.4 Effective Date and Term - The effective date of this Part II (the
"Effective Joint Venture Date") shall be the date of the formation of the Joint
Venture. The term of this Part II shall be twenty (20) years from the Effective
Joint Venture Date and for so long thereafter as Products are produced from the
Properties or, if there is a cessation of production, for so long as the Parties
intend to recommence production, unless the Agreement is earlier terminated as
herein provided.
ARTICLE VII
CONTRIBUTIONS BY PARTIES
7.1 Deemed Initial Contributions - As of the Effective Joint Venture Date,
PDC and UPC shall each be deemed to have contributed and incurred an aggregate
of 35% and 65%, respectively, of $6,000,000 in Expenditures hereunder, or
$2,100,000 and $3,990,000, respectively.
7.2 Disregard of Other Expenses - All other expenses incurred by either UPC
or PDC prior to the Effective Joint Venture Date shall be ignored for the
purposes of calculating the Parties' Initial Contributions under this Agreement.
7.3 Additional Cash Contributions - Subject to election permitted by
Section 8.3, the Parties shall be obligated to contribute funds from time to
time to adopted Programs and Budgets in proportion to their respective
Participating Interests and such contributed funds shall be used in any
recalculations of Participating Interests made under this Agreement.
ARTICLE VIII
INTERESTS OF PARTIES
8.1 Initial Participating Interests - Immediately upon the Effective Joint
Venture Date, UPC shall have an initial Participating Interest equal to 65% and
PDC shall have an initial Participating Interest of 35%. All costs and
liabilities incurred in Operations shall be borne and paid, and all Assets
acquired and Products mined through the Operations shall be owned by such
Parties in accordance with their respective Participating Interests, as such
Participating Interests may be changed, from time to time, in accordance with
the provisions of this Agreement.
8.2 Changes in Participating Interests - A Party's Participating Interest
shall be changed upon:
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(a) an election by a Party pursuant to Section 8.3 not to contribute to an
adopted Program and Budget;
(b) default by a Party in making its agreed-upon contribution to an adopted
Program and Budget, followed by an election by the other Party to invoke
Subsection 8.4(b);
(c) reduction of a Party's Participating Interest to less than 10% pursuant
to the provisions of Subsection 8.5(a);
(d) transfer by a Party of less than all of its Participating Interest
pursuant to Article XVI; or
(e) acquisition of less than all of the Participating Interest of the other
Party, however arising.
8.3 Voluntary Non-Participation -
(a) Pursuant to Section 11.5, a Party may elect to contribute to all
adopted Programs and Budgets as follows:
(i) in the percentage amount of its then respective Participating
Interest; or
(ii) no contribution.
(b) If a Party elects not to contribute to an adopted Program and Budget
(such Program shall be called a "Non-Consent Program"), the Participating
Interest of the non-contributing Party shall be recalculated at the time an
adopted Non-Consent Program and Budget has been expended as follows:
Y = [(A plus B) divided by (C plus D plus the amount contributed
to the Non-Consent Program by the contributing Party)] X 100
where: "A" is the agreed value of the non-contributing Party's
Initial Contribution under Section 7.1;
"B" is the total of the non-contributing Party's additional
actual contributions under Section 7.3 up to but not including
the adopted Non-Consent Program and Budget for the Non-Consent
Program;
"C" is the agreed value of the aggregate of the Initial
Contributions under Section 7.1 of all Parties;
"D" is the aggregate of the additional actual contributions of
all Parties under Section 7.3 up to but not including the adopted
Non-Consent Program and Budget for the Non-Consent Program; and
"Y" is the recalculated Participating Interest of the
non-contributing Party.
The recalculated Participating Interest of the contributing Party shall be
calculated by subtracting Y from 100%.
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(c) Reports on the results of Expenditures otherwise required hereunder
shall be suspended until at least 85% of a Non-Consent Program has been
completed; provided, however, that reports on the amount of Expenditures shall
continue to be made. If the contributing Party in a Non-Consent Program fails to
spend at least 85% of its share of the associated Budget, then the
non-contributing Party shall be entitled, within thirty (30) days of being
notified of completion of the reduced Program and the amount of Expenditures
incurred, but without being allowed to review any results from such
Expenditures, to pay its share of the Expenditures actually made by the
contributing Party and thereby maintain its Participating Interest. As soon as
such thirty (30) day period expires or the non-contributing Party has paid its
share of Expenditures actually incurred, whichever occurs first, the
non-contributing Party shall be entitled to receive the results of such
Expenditures and if the non-consenting Party fails to contribute within such 30
day period, its Participating Interest shall be reduced in accordance with the
foregoing provisions.
8.4 Default in Making Contributions -
(a) If a Party defaults in making a contribution or cash call required by
an adopted Program and Budget, the non-defaulting Party may advance the
defaulted contribution on behalf of the defaulting Party (a "Cover Payment").
Each and every Cover Payment will constitute a demand loan bearing interest from
the date of the advance at the rate provided in Section 12.3. If more than one
Cover Payment is made, the Cover Payments shall be aggregated and the rights and
remedies described herein pertaining to an individual Cover Payment shall apply
to the aggregated Cover Payments. The failure to repay said loan upon demand
shall be a default under this Agreement.
Each Party hereby grants to the other a mortgage of and lien upon its
right, title and interest in the Assets and a security interest in its rights
under this Agreement and in its Participating Interest whenever acquired or
arising, and the proceeds from and accessions to the foregoing, to secure any
loan made thereby, including interest thereon, reasonable attorneys' fees and
all other reasonable costs and expenses incurred in recovering the loan with
interest and in enforcing such lien or security interest, or both. Each Party
hereby covenants with the other that such mortgage and security interest will
rank at all times prior to any and all other mortgages and security interests
affecting its interests in the Assets, or its Participating Interest. Each Party
hereby agrees to take all necessary action to perfect such mortgage and security
interest and irrevocably appoints the non-defaulting Party as its
attorney-in-fact to execute, file, and record all financing statements and any
other documents necessary to perfect or maintain such mortgage and security
interest or otherwise give effect to the provisions hereof.
Upon default being made in the payment of the indebtedness referred to
herein when due, the non-defaulting Party may exercise any or all of the rights
and remedies available to it at common law, by statute or hereunder. Without
limiting the generality of the foregoing, to the extent permitted by applicable
law, each Party grants to the non-defaulting Party a power of sale as to its
undivided interest in all parts of the Assets or Participating Interest that is
subject to the mortgage and security interest granted hereunder, such power to
be exercised in the manner provided by applicable law or otherwise in a
commercially reasonable manner and upon reasonable notice. If the non-defaulting
Participant enforces the mortgage or security interest pursuant to the terms of
this section, the defaulting Party waives any available right of redemption from
and after the date of judgment, any required valuation or appraisement of the
mortgaged or secured property prior to sale, any available right to stay
execution or to require a marshalling of assets, and any required bond in the
event a receiver is appointed, and the defaulting Party agrees that it will be
liable for any continuing deficiency. All such remedies shall be cumulative. The
election of one or more remedies shall not waive the election of any other
remedies.
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A non-defaulting Party may elect the applicable remedy under this
Subsection 8.4(a) or under Subsection 8.4(b), or, to the extent a Party has a
lien or security interest under applicable law, it shall be entitled to its
rights and remedies at law and in equity. All such remedies shall be cumulative.
The election of one or more remedies shall not be considered a waiver of the
election of any other remedies. Each Party hereby covenants with the other Party
to deliver all such documentation as may be required to perfect or effectuate
the applicable provisions of Section 8.4;
(b) The Parties acknowledge that if a Party defaults in making a
contribution, or a cash call, or in repaying a loan, as required hereunder, or a
Cover Payment made pursuant to Section 8.4(a) above, it will be difficult to
measure the damages resulting from such default (it being hereby understood and
agreed that the Parties have attempted to determine such damages in advance and
determined that the calculation of such damages cannot be ascertained with
reasonable certainty). Notwithstanding this, each Party acknowledges and
recognizes that the damage to the non-defaulting Party could be significant. In
the event of such default, or the making of a Cover Payment, as reasonable
liquidated damages and not as a penalty, the non-defaulting Party may, with
respect to any such default not cured within sixty (60) days after notice to the
defaulting Party of such default, elect one of the following remedies by giving
notice to the defaulting Party:
(i) For a default relating exclusively to an Exploration Program and
corresponding Budget, the non-defaulting Party may elect to have
the defaulting Party's Participating Interest reduced as provided
in Subsection 8.3(b), and further reduced by multiplying the
result by 90%. Amounts previously treated as a loan pursuant to
Subsection 8.4(a) and interest thereon shall be treated as actual
contributions to Programs and Budgets by the non-defaulting Party
in the calculation of the defaulting Party's reduced
Participating Interest. The non-defaulting Party's Participating
Interest shall, at such time, become the difference between 100%
and the further reduced Participating Interest. Such reductions
shall be effective as of the date of the default; and
(ii)For a default relating to a Development Program or Mining Program
and corresponding Budget, at the non-defaulting Party's election,
the defaulting Party shall be deemed to have withdrawn from the
Joint Venture in accordance with Section 14.2.
8.5 Elimination of Minority Interest -
(a) Upon the reduction of a Party's Participating Interest to 10% or less,
that Party shall be vested with a Royalty. Notwithstanding anything in this
Agreement to the contrary, such Royalty on Products shall comprise an interest
in, run with, bind and touch the Properties and the Products if, as and whenever
they constitute "real property" or severed personal property, as the case may be
and be an interest having priority to any interest created under Section 8.4.
Upon the vesting of the Royalty as provided above, such Party shall be
deemed to have transferred to the Continuing Party its Participating Interest
and such Party shall thereafter be called a Royalty Holder. Such transfer will
be without cost and free and clear of royalties, liens, or other encumbrances
arising by, through or under the Royalty Holder, except for the royalty referred
to in this Subsection 8.5(a), and those other interests and exceptions to which
both Parties have given their written consent after the date of this Agreement.
The Royalty Holder shall execute and deliver all instruments as may be necessary
to effect the transfer of its Participating Interest.
The transfer under this Subsection 8.5(a) shall not relieve the Royalty
Holder of its share of liabilities to third persons (whether accrued before or
after such transfer) arising out of Operations prior to the transfer. The
Royalty Holder's share of such liability shall be equal to its Participating
Interest at the time such liability was incurred.
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(b) Subject to Subsection 16.6 and Schedule D, the Royalty provided under
Subsection 8.5(a) shall be freely transferable by the Royalty Holder
notwithstanding any other provisions of this Agreement, and such transfer shall
be binding upon and shall enure to the benefit of the parties involved and their
respective successors and assigns.
8.6 Continuing Liabilities Upon Adjustments of Participating Interests Any
reduction of a Party's Participating Interest under this Article VIII shall not
relieve such Party of its share of any liability, whether it accrues before or
after such reduction, arising out of Operations conducted prior to such
reduction. For purposes of this Article VIII, such Party's share of such
liability shall be equal to its Participating Interest at the time such
liability was incurred. The increased Participating Interest accruing to a Party
as a result of the reduction of the other Party's Participating Interest shall
be free of royalties, liens or other encumbrances arising by, through or under
such other Party, other than those existing at the time the Properties were
acquired by, or contributed to, the Joint Venture or those to which both Parties
have given their written consent. An adjustment to a Participating Interest need
not be evidenced during the term of this Agreement by the execution and
recording of appropriate instruments, but each Party's Participating Interest
shall be shown in the books of the Operator. However, either Party, at any time
upon the request of the other Party, shall execute and acknowledge instruments
necessary to evidence such adjustment in form sufficient for recording in the
jurisdiction where the Properties are located.
8.7 Recording of Participating Interests and Changes - Subject to the
provisions of Sections 4.8 and 5.8, on exercise of the Option, a 100% interest
in the title to the Properties will be recorded in the name of the Operator.
Thereafter, the Participating Interest of each Party in the Properties shall not
be evidenced by the recording of appropriate instruments, unless a Party
requests such recording. Rather, the initial Participating Interests of each
Party and changes thereto shall be shown and maintained in the records of the
Operator. However, each Party at any time may request that the other Party
execute and deliver appropriate instruments in recordable or registrable form,
as the case may be, to evidence or transfer to it, its Participating Interest,
provided that it first provides to the other Party evidence of the requesting
Party's legal ability to subsequently transfer such interest in accordance with
the terms and conditions of this Agreement, in which case, the other Party will
comply with such request.
ARTICLE IX
MANAGEMENT COMMITTEE
9.1 Organization and Composition - The Parties hereby establish a
Management Committee to determine overall policies, objectives, procedures,
methods and actions under Part II of this Agreement. The Management Committee
shall consist of two members. Each Party shall appoint one member as the
representative (the "Representative") of each Party, and may appoint one or more
alternates to act in the absence of a regular member. Any alternate so acting
shall be deemed to be a member. Initial appointments shall be made in writing
and shall contain telephone and fax numbers of the appointed members at the time
that Part II comes into force. Subsequent appointments shall be made or changed
by notice to the other Party prior to the meeting at which the member is to act.
The actions of a Party's Representative shall bind the Party who made the
appointment.
9.2 Decisions - The Management Committee shall have exclusive authority to
determine all management matters related to this Agreement, except:
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(a) for the following matters, which shall require approval of a Party or
Parties holding more than 75% of the Participating Interests:
(i) the disposition of any single item of the Assets which had an
original capital cost of more than $250,000 unless that item is
to be replaced in a timely manner and the funds necessary to make
the replacement have been provided for in an approved Program and
Budget;
(ii)the commencement of litigation or any similar process involving a
claim for more than $250,000 or the settlement of any claim by or
against the Joint Venture where the settlement involves more than
$250,000;
(iii)any material amendment initiated by the Operator of: (i) the
title to any Properties forming part of a Production Area; and
(ii) any governmental permit or license or similar authorization
related to any Mine and Plant; and
(iv)the entry into any contract or agreement which has a term
exceeding 12 months, which is essential to the orderly conduct of
the business of the Joint Venture and which involves the Joint
Venture becoming indebted or obligated for an amount exceeding
$250,000 in any 12 month period, except any contract or agreement
relating to the employees of the Operator engaged at any Mine and
Plant; and
(b) for the matters delegated to the Operator pursuant to Section 10.2.
If any matter for decision, other than a matter referred to in paragraphs (a) or
(b) above, and other than in respect of Budgets and Programs (which are
addressed in Article XI), is not mutually agreed to by the Parties and the
Parties are deadlocked, the deadlock shall be resolved by a decision of the
Operator.
9.3 Meetings -
(a) The Management Committee shall hold regular meetings at least
semi-annually at a mutually agreed place. The Operator shall give thirty (30)
days advance notice to the Parties of such regular meetings. Additionally,
either Party may call a special meeting upon fifteen (15) days notice to the
Operator and the other Party. There shall be a quorum if at least one member
representing each Party is present; provided, however that if a quorum is not
present within fifteen (15) minutes of the appointed time, then one member may
adjourn the meeting to the same place and time on any date not more than thirty
(30) days from the originally appointed date. The member adjourning the meeting
shall provide five (5) days advance notice to the Parties of the date of any
such adjourned meeting. At any such adjourned meeting a quorum shall consist of
one member without the requirement that a member or alternate representing each
Party be present. Each notice of a regular meeting shall include an itemized
agenda prepared by the Operator, in the case of a regular meeting, or by the
Party calling the meeting, in the case of a special meeting, but any matters may
be considered in any meeting with the consent of all Parties. The Operator shall
prepare minutes of all meetings and shall distribute copies of such minutes to
the Parties within ten (10) days after the meeting. The minutes, when signed by
all Parties, shall be the official record of the decisions made by the
Management Committee and shall be binding on the Operator and the Parties. If
personnel employed by the Operator are required to attend a Management Committee
meeting, reasonable costs incurred in connection with such attendance shall be a
charge to the Joint Account. All other costs shall be paid by the respective
Parties.
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(b) In the case of an emergency, the Operator shall give such notice to the
other Party as it deems reasonable in the circumstances, having regard to the
seriousness of the matter and the urgency of having a meeting to address the
emergency. Other than in respect of the notice provisions set out in this
paragraph (b), which shall prevail in the case of emergency meetings, the
provisions of paragraph (a) above shall apply mutatis mutandis to emergency
meetings.
9.4 Action By Telephone Meeting - In addition to, or in lieu of, regular
meetings the Management Committee may hold conference telephone meetings (where
the members representing each Party can hear each other). Actions taken or
authorized at any such meeting are as effective as actions taken or authorized
at regular meetings so long as all decisions are immediately confirmed in
writing (which includes confirmation by facsimile) by the Party holding the
requisite Participating Interests pursuant to Section 9.2 to determine the
decision of the Management Committee.
ARTICLE X
OPERATOR
10.1 Appointment - The Parties hereby appoint UPC as the Operator with
overall management responsibility for Operations. UPC hereby agrees to serve
until it resigns as provided in Section 10.4 or is replaced as Operator pursuant
to Subsection 6.1(b).
10.2 Powers and Duties of Operator - Subject to the terms and provisions of
this Agreement, the Operator shall have the following powers and duties which
shall be discharged in accordance with adopted Programs and Budgets:
(a) The Operator shall manage, direct and control Operations and shall
prepare and present to the Management Committee proposed Programs and Budgets as
provided in Article XI;
(b) The Operator shall implement the decisions of the Management Committee,
shall make all expenditures necessary to carry out adopted Programs and shall
promptly advise the Management Committee if it has not received sufficient funds
to carry out its responsibilities under this Agreement;
(c) The Operator shall: (i) purchase or otherwise acquire all material,
supplies, equipment, water, utility and transportation services required for
Operations, such purchases and acquisitions to be made on the best terms
available, taking into account all of the circumstances; (ii) obtain such
customary warranties and guarantees as are available in connection with such
purchases and acquisitions; and (iii) keep the Assets free and clear of all
liens and encumbrances, except for those existing at the time of, or created
concurrent with, the acquisition of such Assets, or worker's, mechanic's or
materialmen's or construction liens which shall be released or discharged in a
diligent manner, or liens and encumbrances specifically approved by the
Management Committee;
(d) The Operator shall: (i) make or arrange for all payments required by
leases, licenses, permits, contracts and other agreements related to the Assets;
(ii) make royalty and/or reimbursement of contributions payments to the Parties
and third parties required hereunder; (iii) pay all taxes, assessments and like
charges on Operations and Assets except taxes determined or measured by a
Party's sales revenue or net income; and (iv) do all other acts reasonably
necessary to maintain the Assets. If authorized by the Management Committee, the
Operator shall have the right to contest in the courts or otherwise, the
validity or amount of any taxes, assessments or charges if the Operator deems
them to be unlawful, unjust, unequal or excessive, or to undertake such other
steps or proceedings as the Operator may deem reasonably necessary to secure a
cancellation, reduction, readjustment or equalization thereof before the
Operator shall be required to pay them, but in no event shall the Operator
permit or allow title to the Assets to be lost as the result of the nonpayment
of any taxes, assessments or like charges;
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(e) The Operator shall: (i) apply for all necessary permits, licenses and
approvals; (ii) comply with Laws; (iii) notify promptly the Management Committee
of any allegations of substantial violation thereof; and (iv) prepare and file
all reports or notices required for or as a result of Operations. The Operator
shall not be in breach of this provision if a violation has occurred in spite of
the Operator's good faith efforts to comply and the Operator has timely cured or
disposed of such violation through performance or payment of fines and
penalties;
(f) The Operator shall prosecute and defend, but shall not initiate without
consent of the Management Committee, all litigation or administrative
proceedings arising out of Operations. The Non-Operator shall have the right to
participate, at its own expense, in such litigation or administrative
proceedings;
(g) The Operator shall provide insurance for the benefit of the Parties as
set out in Schedule F or as may otherwise be prudent in the view of the
Management Committee having regard to the Operations authorized, the risks
involved and usual industry practices with respect thereto;
(h) The Operator may dispose of Assets, whether by abandonment, surrender
or Transfer in the ordinary course of business, except that Properties may be
abandoned or surrendered only as provided in Article XV. Without prior
authorization from the Management Committee, the Operator shall not: (i) dispose
of Assets in any one transaction having a value in excess of $50,000; (ii) enter
into any sales contracts or commitments for Products; (iii) begin a liquidation
of the Assets; or (iv) dispose of all or a substantial part of the Assets
necessary to achieve the purposes set forth in this Agreement;
(i) The Operator shall have the right to carry out its responsibilities
hereunder through agents, Affiliates or independent contractors;
(j) The Operator shall perform or cause to be performed during the term of
this Agreement all assessment and other work required by law in order to
maintain any unpatented mining claims that are or may become a part of the
Properties. The Operator shall have the right to perform the assessment work
required hereunder pursuant to a common plan of exploration and continued actual
occupancy of such claims and sites shall not be required. The Operator shall not
be liable on account of any determination by any court or governmental agency
that the work performed by the Operator does not constitute the required annual
assessment work or occupancy for the purposes of preserving or maintaining
ownership of the claims, provided that the work done is in accordance with the
adopted Program and Budget. The Operator shall timely record with the
appropriate governmental agency, evidence in proper form attesting to the
performance of assessment work or notices of intent to hold in proper form, and
allocating therein, to or for the benefit of each claim, at least the minimum
amount required by law to maintain such claim or site;
(k) If authorized by the Management Committee, the Operator may: (i)
locate, amend or relocate any mineral rights; (ii) locate any fractions
resulting from such amendment or relocation; (iii) apply for further mineral
rights, permits to mine and/or mining leases or other forms of mineral tenure
for any such mineral rights; (iv) abandon any mineral rights for the purpose of
relocating such mineral rights or otherwise acquiring from a government agency
rights to the ground covered thereby; (v) exchange with or convey to a
government agency any of the Properties for the purpose of acquiring rights to
the ground covered thereby or other adjacent ground; (vi) convert any mineral
rights into one or more leases or other forms of mineral tenure pursuant to any
applicable law; and (vii) contract with and pay compensation to any person
including any government or agency thereof for surface rights, rights of access,
easements, rights of way or any other form of other tenement whether located at
or near the Properties or elsewhere useful in connection with the activities of
the Joint Venture;
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(l) The Operator shall keep and maintain all required accounting and
financial records pursuant to the Accounting Procedure and in accordance with
customary cost accounting practices in the mining industry;
(m) The Operator shall keep the Management Committee advised of all
Operations by submitting to the Representative of each Party in writing the
following information as soon as it is available to the Operator: (i) quarterly
within one month after the end of each calendar quarter a quarterly report and
annually within three months after the end of each calendar year an annual
summary report, which reports include statements of Expenditures and comparisons
of such Expenditures to the adopted Budget; (ii) periodic summaries of data
acquired; (iii) a copy of any reports concerning Operations; (iv) a detailed
final report within 60 days after completion of each Program and Budget, which
shall include comparisons between actual and budgeted Expenditures and
comparisons between the objectives and results of Programs; and (v) a copy of
such other reports as either Party may reasonably request. Items (i) through
(iii) of this Subsection 10.2(m) shall be submitted by the Operator as it
prepares them in the normal course of business. Copying of items (i) through (v)
will be charged to the Joint Account. At all reasonable times the Operator shall
provide the Management Committee or the Representative of any Party, upon the
request of any member of the Management Committee, access to, and the right to
inspect and copy all maps, drill logs, core tests, reports, surveys, assays,
analyses, production reports, operations, technical, accounting and financial
records and other information acquired in Operations that has not been provided
pursuant to items (i) through (v) of this Subsection 10.2(m); such information
will be provided to the Management Committee as a charge to the Joint Account
and if additional copies are required by a Party, they will be paid for by that
Party. In addition, the Operator shall allow upon written request (which request
shall not be unreasonably denied) the Non-Operator, at the latter's sole risk
and expense, and subject to reasonable safety regulations, to inspect the Assets
and Operations at all reasonable times, so long as the inspecting Party does not
unreasonably interfere with Operations;
(n) The Operator shall undertake to perform Continuing Obligations when and
as economic and appropriate, whether before or after termination of this
Agreement. The Operator shall have the right to delegate performance of
Continuing Obligations to persons having demonstrated skill and experience in
relevant disciplines. As part of each Program and Budget submittal, the Operator
shall prepare and distribute to the Parties a Program and Budget for performance
of Continuing Obligations and shall keep the Parties reasonably informed about
the Operator's efforts to discharge Continuing Obligations. Each Party shall
have the right from time to time to enter the Properties to inspect work
directed toward satisfaction of Continuing Obligations and audit books, records,
and accounts related thereto; and
(o) The Operator shall undertake all other activities reasonably necessary
to fulfil the foregoing.
The Operator shall not be in default of any duty under this Section 10.2 if
its failure to perform results from the failure of the Non-Operator to perform
acts or to contribute amounts required of it by this Agreement.
10.3 Standard of Care - The Operator shall conduct all Operations in a
good, workmanlike and efficient manner, in accordance with: (a) sound mining and
other applicable industry standards and practices; (b) all Laws; and (c) the
terms and provisions of leases, licenses, permits, contracts and other
agreements pertaining to the Assets.
The Operator shall not be liable to the Non-Operator for any act or
omission resulting in damage or loss except to the extent caused by or
attributable to the Operator's willful misconduct or gross negligence.
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10.4 Resignation and Deemed Offer to Resign - The Operator may resign upon
giving ninety (90) days prior written notice to the other Party, in which case
the other Party may elect to become the new Operator by notice to the resigning
Party given within sixty (60) days after the notice of resignation is delivered.
If the other Party does not so elect to become the new Operator, this Agreement
shall terminate and the resigning Operator shall comply with the provisions of
Section 14.4.
If any of the following shall occur, the Operator shall be deemed to have
offered to resign, which offer shall be accepted by the other Party, if at all,
within ninety (90) days following such deemed offer by notice in writing to the
resigning Party and the Operator (if not the resigning Party):
(a) the Participating Interest of the Operator becomes less than 50%;
(b) the Operator fails to perform or in good faith commence a material
obligation imposed upon it under this Agreement and such failure continues for a
period of sixty (60) days after notice from the other Party demanding
performance;
(c) the Operator fails to pay or contest in good faith its bills, whether
in connection with the Joint Venture or otherwise, within sixty (60) days after
they are due;
(d) a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for a substantial part of the Operator's assets is appointed
and such appointment is neither made ineffective nor discharged within sixty
(60) days after the making thereof, or such appointment is consented to,
requested by, or acquiesced in by the Operator;
(e) the Operator commences a voluntary assignment under any applicable
bankruptcy, insolvency or similar laws now or hereafter in effect, consents to
the entry of an order for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of any substantial
part of its assets, makes a general assignment for the benefit of creditors,
fails generally to pay its debts charged to the Joint Account as such debts
become due or takes corporate or other action in furtherance of any of the
foregoing; or
(f) entry is made against the Operator of a judgment, decree or order for
relief affecting a substantial part of its assets by a court of competent
jurisdiction in an involuntary case commenced under any applicable bankruptcy,
insolvency or other similar laws of any jurisdiction now or hereafter in effect.
If the other Party shall accept the Operator's deemed resignation then the other
Party shall be the successor Operator.
10.5 Payments to Operator - The Operator shall be compensated for its
services and reimbursed for its costs hereunder in accordance with the
Accounting Procedure.
10.6 Transactions With Affiliates - If the Operator engages Affiliates or
any person or entity with which it does not deal "at arm's length" as such
relationship would be defined under the Tax Act to provide services hereunder,
it shall do so on terms no less favourable to the Non-Operator than would be the
case in arm's-length transactions.
10.7 Activities During Deadlock : If the Management Committee for any
reason fails to adopt a Program and Budget for the maintenance of the Properties
or a Mining Program and Budget for the maintenance of the Assets for any
calendar year or part thereof, in the absence of contrary direction and subject
to the receipt of necessary funds, the Operator shall continue Operations at
levels sufficient to maintain the Properties and the Assets. In such event, for
purposes of determining required contributions of the Participants and their
respective Participating Interests, the last adopted Program and Budget or
Mining Program and Budget, as the case may be, shall be deemed extended.
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ARTICLE XI
PROGRAMS AND BUDGETS
11.1 Operations Pursuant to Programs and Budgets - Unless otherwise
provided herein, Operations shall be conducted, expenses shall be incurred, and
Assets shall be acquired only pursuant to approved Programs and Budgets.
11.2 Types of Programs - Three general types of Programs may be proposed:
Exploration Programs, Development Programs and Mining Programs.
(a) An "Exploration Program" shall be a Program that may entail geological
mapping, geochemical sampling, geophysical surveys, drilling, underground or
surface drilling, bulk sampling, and other work carried out to ascertain the
existence, location, quantity, and quality and preliminary economic assessment
of commercial value of deposits of Products on the Properties, including but not
limited to additional drilling required after discovery of potentially
commercial mineralization, and including related compliance with environmental
Laws.
(b) A "Development Program" shall be a Program that may entail Development
work, in-depth drilling, test mining, a Feasibility Study, and other such work
expended toward developing deposits of Products on the Properties, but does not
encompass, by itself, construction, operation, maintenance, and attendant
activities designed to bring a Mine on any of the Properties into production in
reasonable commercial quantities.
(c) A "Mining Program" shall be a Program, after a Favourable Feasibility
Study has been adopted, that is designed to bring a Mine into production and
that provides for its subsequent operation, modification or expansion. It may
entail Development and Mining work, including in-depth drilling, test mining,
engineering and design work, and work expended towards development of deposits
of Products, as well as construction, operation, maintenance modification,
expansion and attendant activities.
11.3 Preparation, Presentation and Content of Programs and Budgets -
(a) Content and Submission of Programs - Proposed Programs and Budgets
shall be prepared and submitted by the Operator; provided, however, that if the
Operator fails to prepare and submit to Non-Operator a proposed Program and
Budget or carry out a Program and Budget in any calendar year, then, after
thirty (30) days advance notice that, unless the Operator proposed a Program and
Budget within such thirty (30) days, the Non-Operator may propose to the
Operator a Program and Budget. If the Operator is not prepared to convene the
Management Committee and is not prepared to agree to fund its Participating
Interest share of the Non-Operator's proposed Program and Budget within thirty
(30) days of receipt of the Non-Operator's proposed Program and Budget then,
provided that Non-Operator is willing to fund 100% of the Budget for its
proposed Program, Non-Operator shall assume the duties of the Operator for the
period required to carry out its proposed Program and Budget and all the
provisions of this Agreement relating to the Operator shall apply mutatis
mutandis to Non-Operator for the period it is conducting such Program. Each
Program shall be accompanied by and shall include a corresponding Budget and
shall designate precisely the area on which Operations are to be performed,
describe work to be performed and state the estimated period of time required to
perform the work. Each Program shall state whether it is an Exploration,
Development or Mining Program;
(b) Content of Budgets - Each Budget shall be prepared in reasonable detail
and shall set forth each Expenditure of $5,000 or more for a budgeted item
which, under generally accepted accounting principles, would be capitalized.
Each Budget for an Exploration Program, as near as is practicable, shall show
the estimated expenditures for each calendar quarter covered by the Budget
period. Each Budget for any Development or Mining Program, as near as is
practicable, shall show the estimated Expenditures for each month covered by the
Budget period;
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(c) Initial Exploration Program and Budget - The first Exploration Program
and Budget shall commence as of the Effective Joint Venture Date and be in
effect through to the end of the calendar year in which the Effective Joint
Venture Date falls;
(d) Duration - After the period of the initial Exploration Program and
Budget, any Program and Budget shall be for a period of one calendar year unless
otherwise determined by the Management Committee but may extend for such longer
period as is reasonably necessary to complete the Program. Unless otherwise
determined by the Management Committee, only one Exploration Program and one
Development Program may be carried out at a time; provided, however, that
Exploration Programs may be conducted after or during Development Programs and
Mining Programs; and
(e) Review - Each adopted Program and Budget, regardless of length, shall
be reviewed at least once a year at a regular meeting of the Management
Committee. During the period encompassed by any Program and Budget and at least
two (2) months prior to its expiration, a proposed Program and Budget for the
succeeding period shall be prepared by the Operator and submitted to the
Parties.
11.4 Submittal and Approval of Proposed Programs and Budgets -
(a) Submittal of Operator's Program and Budget - Within thirty (30) days
after the Operator submits a proposed Program and Budget to the Management
Committee, Non-Operator shall submit to the Management Committee:
(i) notice that the Non-Operator approves of the Program and Budget;
or
(ii)proposed modifications of the proposed Program and Budget, which
shall include detailed specific objections regarding the proposed
Program and Budget.
If a Non-Operator fails to give either of the foregoing responses within
the allotted time, the failure shall be deemed an approval by that Party of the
proposed Program and Budget. If a Non-Operator makes a timely submission to the
Management Committee pursuant to Clause 11.4(a)(ii), then the Management
Committee shall within the following thirty (30) days meet to consider the
proposed Program and Budget and proposed modifications;
(b) Submittal of Non-Operator's Program and Budget - If Management
Committee agreement with the proposed Program and Budget submitted by the
Operator is not reached at the meeting described in Subsection 11.4(a), then the
Non-Operator may within thirty (30) days of that meeting submit a proposed
Program and Budget for consideration and approval according to the procedure
provided for the Operator's Program and Budget in Subsection 11.4(a), mutatis
mutandis;
(c) Deemed Approval of Operator's Program and Budget - If Management
Committee agreement with a proposed Program and Budget submitted under
Subsection 11.4(a) or (b) is not reached, then the proposed Program and Budget
submitted by the Operator, incorporating any modifications agreed upon by the
Management Committee, shall be deemed adopted upon the Operator's giving notice
of its intent to conduct such Program and Budget; provided, however, that the
Operator and Management Committee shall use all reasonable efforts to
accommodate the Non- Operator's position in preparation and approval of the
Program and Budget;
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(d) Feasibility Study - Any Party may propose to the Management Committee
at any time that a Feasibility Study evaluating the feasibility of opening or
expanding a mine on the Properties be conducted on behalf of the Parties. If the
Management Committee does not approve of the preparation of such Feasibility
Study, then the Party proposing it may cause such Feasibility Study to be
prepared at its own expense. Promptly upon completion of a Favourable
Feasibility Study, the Party preparing it shall present it to the Management
Committee for evaluation. If a Separate Mining Program or Mining Program is then
proposed, based primarily on the Favourable Feasibility Study, any Party that
(i) did not contribute to the costs of preparing the Favourable Feasibility
Study; and (ii) participates in the Program, will reimburse the Party who
prepared the Favourable Feasibility Study at the commencement of the Program in
proportion to the Participating Interest in the Program of the non-preparing
Party plus a penalty of fifteen percent in the amount of its reimbursement; and
(e) Separate Mining Program - After completion of a Favourable Feasibility
Study and within one hundred and eighty (180) days prior to the expiration of a
Development Program, any Non-Operator may request that the Operator propose in
the next Program and Budget the opening of a mine. If the Operator does then
propose the opening of the mine, the proposal will be considered according to
Subsections 11.4(a), (b), and (c). If the Operator does not then propose the
opening of a mine, the Non-Operator may propose, under Subsection 11.4(b), a
Mining Program that includes the opening of a mine. If that proposed Mining
Program is not adopted by the Management Committee within thirty (30) days of a
submittal, the Non-Operator may conduct that Program as Operator. To do so, such
Non-Operator shall, within ten (10) days after expiration of the thirty (30)
days, give written notice to the Operator of its intent to conduct its proposed
Mining Program as a Separate Mining Program under this Subsection 11.4(e) as
Operator for the Program. The other Party shall then elect, according to Section
11.5, whether to participate in the Separate Mining Program.
(f) Non-Operator's Program - For so long as both Parties maintain more than
a 20% Participating Interest in the Properties, should Operator fail to propose
a Program and Budget in any calendar year, then at any time within 60 days after
the beginning of the next calendar year, but before the Operator proposes a new
Program and Budget, Non-Operator may propose a Program and Budget to Operator
provided that such proposed Program shall require contributions by the Parties
in proportion to their respective Participating Interests. The Operator shall be
entitled to carry out each such Program and Budget proposed by Non-Operator and
to contribute to Expenditures incurred thereunder. If, however, the Operator
fails to agree in writing to carry out and pay its Participating Interest of any
Program and Budget proposed by Non-Operator within 30 days of receipt thereof by
the Operator, Non-Operator shall thereupon assume the duties of the Operator for
that calendar year, shall carry out its proposed Program and Budget and shall
pay 100% of the Expenditures in connection with such Program and Budget.
11.5 Election to Participate -
(a) Deadline for Election - Any Party whose proposed Program and Budget is
adopted as provided in Subsection 11.4(a) or (b) is deemed to have elected to
contribute to that Program and Budget to the extent of its then Percentage
Interest. By notice in writing to the Management Committee within twenty (20)
days after either the final vote adopting a Program and Budget pursuant to
Subsection 11.4(a) or (b) or receipt of notice pursuant to Subsection 11.4(c) or
11.4(e), whichever is applicable, the other Party may elect to contribute to
such Program and Budget (i) in proportion to its then respective Participating
Interest; or (ii) not at all. If the other Party fails to notify the Management
Committee or the Party electing to conduct the Program within the twenty (20)
days, the Party so failing shall be deemed to have elected to contribute to such
Program and Budget in proportion to its then respective Participating Interest.
If a Party elects to contribute nothing, the Party who elected to contribute in
proportion to its then Participating Interest may within an additional twenty
(20) days revise or revoke its election to contribute, provided that any such
revision does not result in the proposed Program and Budget being for an amount
which is less than the amount that the contributing Party's Participating
Interest contribution would have been of the originally proposed Program and
Budget.
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(b) Participation in Program and Budget - If the other Party elects not to
participate in a Program and Budget at all, that Party's Participating Interest
shall be reduced as provided in Article VIII; and
(c) Contributions Schedule - Contributions for an Exploration Program
should be made at the beginning of each calendar quarter of the Budget period.
Contributions for a Development or Mining Program should be made at the
beginning of each month of the Budget period. An election to contribute to a
Program may not be changed or modified in percentage contribution over the
course of the Program.
11.6 Participation in Subsequent Programs - A Party may participate in any
subsequent Program at the level of the Party's then Participating Interest
unless the Party's Participating Interest has been converted to a Royalty
interest pursuant to Section 8.5.
11.7 Budget Overruns and Program Changes - The Operator shall immediately
notify the Management Committee of any material departure from an adopted
Program and Budget. If the Operator exceeds an adopted Budget by more than 10%,
then the excess over 10%, unless directly caused by an emergency or unexpected
expenditure made pursuant to Section 11.8 or unless otherwise authorized by the
Management Committee, shall be for the sole account of the Operator and such
excess shall not be included in the calculations of the Participating Interests.
Budget overruns of 10% or less shall be borne by the Parties in proportion to
their respective Participating Interests as of the time the overrun occurs.
11.8 Emergency or Unexpected Expenditures - In case of emergency, the
Operator may take any reasonable action it deems necessary to protect life, limb
or property, to maintain and protect the Assets and to comply with Laws. The
Operator may also make reasonable Expenditures for events which are beyond its
reasonable control and which do not result from a breach by it of its standard
of care. The Operator shall promptly notify the Parties of the emergency or
unexpected Expenditure, and the Operator shall be reimbursed for all resulting
costs by the Parties in proportion to their respective Participating Interests
at the time the emergency or unexpected Expenditures are incurred.
ARTICLE XII
ACCOUNTS AND SETTLEMENTS
12.1 Monthly Statements - The Operator shall promptly submit to the
Management Committee monthly statements of account reflecting in reasonable
detail the charges and credits to the Joint Account during the preceding month.
12.2 Cash Calls - Except where a Party has voluntarily elected not to
participate in an adopted Program and Budget pursuant to Sections 8.3 and 11.5,
on the basis of the adopted Program and Budget, the Operator may submit to each
Party prior to the last day of each month, a billing for estimated cash
requirements for the next month. Within ten (10) days after receipt of each
billing, each Party shall advance to the Operator its proportionate share of the
estimated amount. Time is of the essence with respect to payment of such
billings. The Operator shall either (a) maintain at all times a cash balance
approximately equal to the rate of disbursement for up to thirty (30) days; or
(b) bill the Non-Operator on a monthly basis in the month following the month in
which Expenditures were incurred. All funds in excess of immediate cash
requirements shall be invested in interest-bearing accounts in a bank to be
selected by the Management Committee, for the benefit of the Joint Account.
12.3 Failure to Meet Cash Calls - A Party that fails to meet cash calls in
the amount and at the times specified in Section 12.2 shall be in default, and
the amounts of the defaulted cash call shall bear interest from the date due at
an annual rate equal to three (3) percentage points over the Prime Rate, but in
no event shall said rate of interest exceed the maximum permitted by law. The
non-defaulting Party shall have those rights, remedies and elections specified
in Section 8.4.
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12.4 Audits - Upon request made by any Party within twenty-four (24) months
following the end of any calendar year (or, if the Management Committee has
adopted an accounting period other than the calendar year, within twenty-four
(24) months after the end of such period), the Operator shall order an
independent audit of the accounting and financial records for such calendar year
(or other accounting period). All written exceptions to and claims upon the
Operator for discrepancies disclosed by such audit shall be made not more than
three (3) months after receipt of the audit report. Failure to make any such
exception or claim within the three (3) month period shall mean the audit is
correct and binding upon the Parties. The audits shall be conducted by a
national firm of chartered accountants selected by the Operator, unless
otherwise agreed by the Management Committee and the costs thereof shall be
chargeable to the Joint Account.
ARTICLE XIII
DISPOSITION OF PRODUCTION
13.1 Taking in Kind - At the time and place specified from time to time by
the Operator, each Party hereto owning a Participating Interest shall take in
kind or separately dispose of its Participating Interest share of the Products
produced from any Production Area. Risk of loss of any Products held for each
Party's respective account shall be borne by such Party, provided that such loss
is not caused by the Operator's gross negligence, intentional misconduct, or bad
faith. Each Party shall take possession of such Products at the time and place
specified by the Operator and will thereafter bear the responsibilities and
costs of transportation, security and related expenses and shall, at its own
expense, construct, operate and maintain any facilities necessary to receive,
store and dispose of its share of production.
13.2 Failure to Take in Kind - If a Party fails to take in kind or
separately dispose of its share of Products as required by Section 13.1 after
ten (10) days' notice by the Operator, the Operator may either charge the
delinquent Party 150% of the cost and expense of storing such Products or the
Operator may act as the delinquent Party's agent to have an independent
contractor remove the Products and store them for the delinquent Party's
account.
13.3 Hedging - The Parties agree that no Party shall have any obligation to
account to any other Party nor have any interest or right of participation in
any profits or proceeds from future contracts, forward sales, trading in puts or
calls, or any similar hedging or marketing mechanism it may employ with respect
to any Products produced or to be produced from the Properties.
ARTICLE XIV
WITHDRAWAL AND TERMINATION
14.1 Termination by Expiration or Agreement - This Agreement shall
terminate as expressly provided in this Agreement, unless earlier terminated by
written agreement.
14.2 Withdrawal and Other Events of Termination -
(a) A Party may withdraw as a Party from this Agreement in any of three
ways:
(i) a Party, at any time, may withdraw voluntarily by giving notice
to the other Party of the effective date of withdrawal, which
shall be the later of the end of the then current Program and
Budget or at least thirty (30) days after the date of the notice;
(ii)aParty which is obligated to contribute to a Development or
Production Program and corresponding Budget and fails to make
such a contribution, upon election by the non-defaulting Party
pursuant to Clause 8.4(b)(ii) will be deemed to have withdrawn;
and
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(iii)a Party, which allows its Participating Interest in the
Properties to be reduced to 10% or less will be deemed to have
withdrawn;
(b) Upon withdrawal, the Joint Venture shall terminate, either as a whole
or as to certain lands (in which latter case the Joint Venture continues with
respect to such other lands), and the withdrawing Party shall be deemed to have
transferred to the remaining Party its Participating Interest, without cost and
free and clear of royalties, liens or other encumbrances arising by, through or
under such withdrawing Party, except the Royalty described in Section 8.5 and
those other interests and exceptions to which both Parties have given their
written consent after the date of this Agreement. The withdrawing Party shall
execute and deliver all instruments as may be necessary to effect the transfer
of its Participating Interest in the Assets and in this Agreement to the
remaining Party. Any withdrawal under this Section 14.2 shall not relieve the
withdrawing Party of its share of liabilities to third persons (whether such
liabilities accrue before or after such withdrawal) arising out of Operations
conducted prior to such withdrawal. For purposes of this Section 14.2, the
withdrawing Party's share of such liabilities shall be equal to its
Participating Interest at the time such liability was incurred;
(c) In addition to withdrawal under Subsections 14.2(a) and (b) resulting
in termination, this Agreement shall also terminate under this Subsection
14.2(c) if any of the following occur:
(i) if at any time there are no Assets which are subject to the
provisions of this Agreement;
(ii) if the rights of the Parties to explore and mine the Properties
have been terminated;
(iii)if the Properties have been mined to Economic Exhaustion.
"Economic Exhaustion" shall occur whenever a skilled and prudent
miner who is knowledgeable concerning costs and economics of the
mining industry would abandon permanently mineral extraction
operations as uneconomic, rather than continue the upkeep and
maintenance of the Assets on a standby basis. If a difference
should arise between the Parties concerning such occurrence it
shall be determined by arbitration in accordance with the
provisions of Section 19.21, but if one party is willing to
advance funds for standby Expenditures (which shall be subject to
recoupment), together with a sum equal to 100% of the standby
Expenditures (only from Products subsequently produced) then it
shall be conclusively presumed that Economic Exhaustion has not
occurred so long as standby Expenditures are so advanced;
(iv)if the entire Participating Interest of one Party is acquired by
the other Party pursuant to any provision hereof; or
(v) the Operator resigns and the other Party does not elect to become
the new Operator as provided for under Section 10.4.
14.3 Continuing Obligations - On termination of this Agreement under this
Article XIV, the Parties shall remain liable for Continuing Obligations
hereunder in proportion to their Participating Interests until final settlement
of all accounts. Such continuing obligations include liability for all amounts
chargeable with respect to any Budget to which the withdrawing Party is
committed, including costs incurred pursuant to such Budget after the effective
date of withdrawal but not in excess of the most recent cost estimates committed
to, or approved by, such withdrawing Party. The withdrawing Party shall also
remain liable in proportion to its Participating Interest for any liability,
whether it accrues before or after termination, if it arises out of Operations
during the term of the Agreement. Should the cumulative cost of satisfying
Continuing Obligations be in excess of cumulative amounts accrued or otherwise
charged to reclamation account, if any, each Party shall be liable for its
allocable share of the cost of satisfying such Continuing Obligations, whether
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or not one or more Parties has previously withdrawn or reduced its Participating
Interest or had it converted to a Royalty. If the Participating Interests of the
Parties change, the Operator should propose to the Management Committee a method
for fairly allocating such costs. Upon withdrawal, the withdrawing Party will
assign its interest in any mining claims, leases or subleases to the remaining
Party.
14.4 Disposition of Assets on Termination - Promptly after termination of
this Agreement under this Article XIV, the Operator shall take all action
necessary to wind up the joint activities of the Parties, and all costs and
expenses incurred in connection with the termination of the Agreement shall be
expenses chargeable to the Parties. The Assets shall first be paid, applied, or
distributed in satisfaction of all liabilities of the Parties to third parties
and then to satisfy any debts, obligations or liabilities owed to the Parties.
Before distributing any funds or Assets to Parties, the Operator shall have the
right to segregate amounts which, in the Operator's reasonable judgment, are
necessary to discharge continuing obligations or to purchase for the account of
Parties, bonds or other security for the performance of such obligations.
Thereafter, any remaining cash and all other Assets shall be distributed (in
undivided interests unless otherwise agreed) to the Parties according to their
Participating Interests. No Party shall receive a distribution of any interest
in Products or proceeds from the sale thereof if such Party's Participating
Interest therein has been terminated pursuant to this Agreement.
14.5 Right to Data After Termination - After termination of this Agreement
pursuant to this Article XIV, each Party shall be entitled to a copy of all
information acquired hereunder before the effective date of termination not
previously furnished to it, but a terminating or withdrawing Party shall not be
entitled to copies of any such information relating to the period after its
withdrawal.
14.6 Continuing Authority - On termination of this Agreement or the
withdrawal of a Party pursuant this Article XIV, the Operator shall have the
power and authority, subject to control of the Management Committee, if any, to
do all things on behalf of the Parties which are reasonably necessary or
convenient to: (a) wind up Operations; and (b) complete any transaction and
satisfy any obligation, unfinished or unsatisfied, at the time of such
termination or withdrawal, if the transaction or obligation arises out of
Operations prior to such termination or withdrawal. The Operator shall have the
power and authority to grant or receive extensions of time or change the method
of payment of an already existing liability or obligation, prosecute and defend
actions on behalf of the Parties, mortgage Assets and take any other reasonable
action in any matter with respect to which the former Parties continue to have,
or appear or are alleged to have, a common interest or a common liability.
ARTICLE XV
ABANDONMENT AND SURRENDER OF PROPERTIES
15.1 Surrender or Abandonment of Property - If the Management Committee
authorizes any surrender or abandonment over the objection of a Party, the Party
who desires to abandon or surrender shall assign to the objecting Party, by quit
claim deed and without cost to the surrendering Party, all of the surrendering
Party's interest in the property to be abandoned or surrendered, and the
abandoned or surrendered property shall cease to be part of the Properties. If
Properties to be abandoned or surrendered are located upon a mining lease or
sublease, abandonment shall be conducted in accordance with and only to the
extent permitted by any appurtenant mining lease or sublease. Any Transfer under
this Section 15.1 shall not relieve the transferring Party of its share of
liabilities to third persons arising out of Operations conducted prior to such
Transfer. Any assignment of an interest pursuant to this Section 15.1 shall not
reduce or change the transferor's Participating Interest.
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15.2 Reacquisition - If any Properties are abandoned or surrendered under
the provisions of this Article XV, then, unless this Agreement is earlier
terminated, neither Party nor any Affiliate thereof shall acquire any interest
in such Properties or a right to acquire such Properties for a period of two (2)
years following the date of such abandonment or surrender. If a Party reacquires
any Properties in violation of this Section 15.2, such Properties shall
automatically become subject to the terms of this Agreement and the other Party
may elect by notice to the reacquiring Party within forty-five (45) days after
it has actual notice of such reacquisition, to have such properties continued
subject to the terms of this Agreement. If such election is made, such
reacquisitions shall be held in the proportion that each Party owned the
reacquired Properties at the time they were abandoned and the costs of
reacquisition shall be paid in those proportions. If such an election is not
made, the reacquired properties shall thereafter cease to be treated as
Properties, and the costs of reacquisition shall be borne solely by the
reacquiring Party and shall not be included for purposes of calculating the
Parties' respective Participating Interests.
PART III - PROVISIONS APPLICABLE TO PARTS I AND II
ARTICLE XVI
TRANSFER OF INTEREST
16.1 Transfers Generally - Until such time as UPC has exercised the Option
pursuant to Section 4.4, UPC will be permitted to Transfer any part of its
Rights and Options hereunder provided it has first obtained the written consent
of PDC. After UPC has exercised the Option pursuant to Section 4.4, UPC will be
permitted to Transfer any part of its Rights and Options hereunder subject to
compliance with Section 16.2, 16.3 and 16.4. At all times after the Effective
Joint Venture Date, a Party shall have the right to Transfer all or any part of
its Participating Interest solely as provided in the provisions of Sections
16.2, 16.3 and 16.4.
16.2 Limitations on Free Transferability - At all times under this
Agreement after the coming into force of Part II and on complying only with the
provisions of Subsection 16.2(a) and Section 16.3, either Party shall be free to
Transfer all or any part of its Participating Interest under this Agreement.
However, the Transfer right of both Parties under this Article XVI shall be
subject to the following terms and conditions:
(a) No transferee of all or any part of any Participating Interest shall
have the rights of a Party, unless and until the transferring Party has provided
to all Continuing Parties notice of the Transfer and, except as provided in
Subsections 16.2(f) and 16.2(g), the transferee has:
(i) received a true copy of this Agreement;
(ii) as of the effective date of the Transfer, committed in writing to
the Continuing Parties to be bound by this Agreement in the place
and stead of the transferring Party; and
(iii)assured the Continuing Parties that in any subsequent Transfer
permitted under this Agreement any transferee from it and its
successors and assigns the transferee will covenant to the same
effect as is required by this Subsection 16.2(a);
(b) No Transfer permitted by this Article XVI shall relieve the
transferring Party of its share of any liability, whether accruing before or
after such Transfer, which arises out of Operations conducted prior to such
Transfer;
(c) The transferring Party and the transferee shall bear all tax
consequences of the Transfer;
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(d) In the event of a Transfer of less than all of a Participating
Interest, the transferring Party and its transferee shall thereafter act and be
treated as one Party hereunder and shall operate the transferred Participating
Interest with the transferring Party's untransferred Participating Interest as a
single interest except for the provisions of Section 6.1 regarding entitlement
to be the Operator;
(e) No Party shall Transfer any interest in the Assets except by Transfer
of part or all of its Participating Interest;
(f) No Party shall grant a security interest by mortgage, deed of trust,
pledge, lien or other encumbrance of any interest in this Agreement or any
Participating Interest to secure a loan or other indebtedness of a Party unless
it is in respect of a bona fide transaction for the purpose of developing or
mining the Assets. Any security interest granted by a Party shall be subordinate
to the terms of this Agreement and the rights and interests of the other Party
hereunder and shall be subject to the condition that the holder of any such
encumbrance (the "Chargee"), first enters into a written agreement with the
other Party in form satisfactory to the other Party, acting reasonably, binding
upon the Chargee, to the effect that: (i) the Chargee will not enter into
possession or institute any proceedings for foreclosure or partition of the
encumbering Party's Participating Interest and that such encumbrance shall be
subject to the provisions of this Agreement; (ii) the Chargee's remedies under
the encumbrance shall be limited to the sale of the whole (but only of the
whole) of the encumbering Party's Participating Interest to the other Party, or,
failing such a sale, at a public auction to be held thirty (30) days after prior
notice to the other Party, such sale to be subject to the purchaser entering
into a written agreement with the other Party whereby such purchaser assumes all
obligations of the encumbering Party under the terms of this Agreement; provided
that the price of any preemptive sale to the other Party shall be the remaining
principal amount of the loan plus accrued interest and related expenses; and
(iii) the charge shall be subordinate to any debt encumbering the Mine and Plant
and other Assets;
(g) If a sale or other commitment or disposition of Products or proceeds
from the sale of Products by a Party upon distribution to it pursuant to Article
XIII creates in a third party a security interest in Products or proceeds
therefrom prior to such distribution, such sales, commitment or disposition
shall be subject to the terms and conditions of this Agreement;
(h) Only Canadian currency shall be used for Transfers for consideration;
and
(i) Regardless of the number of Transfers, the total Royalty amount
available to be divided among all transferring and withdrawing Parties pursuant
to Section 8.5 hereof shall not exceed the amount provided therein.
16.3 Preemptive Right -
(a) Except as otherwise provided in this Article XVI, if either Party
desires to Transfer, directly or indirectly, all or any part of its
Participating Interest, the other Party shall have a preemptive right to acquire
such interests as provided in this Section 16.3.
(b) If a Party (the "Transferring Party") is intending to Transfer all or
any part of its Participating Interest, a Control Interest in itself or an
Affiliate or the Assets, it shall promptly notify the other Party of its
intentions. The notice shall state the price and all other pertinent terms and
conditions of the intended Transfer including the name of the proposed
transferee and shall be accompanied by a copy of an offer or contract for sale
to the other Party. If the consideration for the intended Transfer is, in whole
or in part, other than cash, the notice shall describe such consideration and
its cash equivalent (based upon the fair market value of the non cash
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consideration and stated in cash). The other Party shall have sixty (60) days
from the date such notice is delivered to notify the Transferring Party whether
it elects to acquire the offered interest at the same price (or its cash
equivalent) and on the same terms and conditions as set forth in the notice. If
it does so elect, the Transfer shall be consummated promptly after notice of
such election is delivered to the Transferring Party;
(c) If the other Party fails to so elect within the period provided in
Subsection 16.3(b), the Transferring Party shall have ninety (90) days following
the expiration of such period to consummate the Transfer to a third party at a
price and on terms no less favourable than those offered by the Transferring
Party to the other Party in the notice required in Subsection 16.3(b);
(d) If the Transferring Party fails to consummate the Transfer to a third
party within the period set forth in Subsection 16.3(c), the preemptive right of
the other Party in such offered interest shall be deemed to be revived. Any
subsequent proposal to Transfer such interest shall also be conducted in
accordance with all of the procedures set forth in this Section 16.3.
16.4 Exceptions to Preemptive Right - Section 16.3 shall not apply to the
following:
(a) A transfer by either Party to an Affiliate of all or any of its
Participating Interest; provided that the transferee remains an Affiliate for
the period that this Agreement is in effect or the written consent of the other
Party is obtained prior to the transferee ceasing to be an Affiliate;
(b) The incorporation of a Party, or corporate merger, consolidation,
amalgamation or reorganization of a Party by which the surviving entity shall
possess substantially all of the issued shares, or all of the property rights
and interests, and be subject to substantially all of the liabilities and
obligations of the Party;
(c) Subject to the provisions of Subsection 16.2(f), the grant by either
Party of a security interest in any interest in this Agreement, any
Participating Interest, or royalty rights under this Agreement by mortgage, deed
of trust, pledge, lien or other encumbrance;
(d) The transfer of a Control Interest by an Affiliate to a Party or to
another Affiliate;
(e) The grant by any Affiliate of either Party of a security interest in
the ownership interest the Affiliate holds in the Party by mortgage, deed of
trust, pledge, lien or other encumbrances; or
(f) A sale or other commitment or disposition of Products or proceeds from
sale of Products by a Party upon distribution to it pursuant to Article XIII.
16.5 Compulsory Acquisition Option on Bankruptcy - If any of the events
referred to in Subsections 10.4(c) through 10.4(f), inclusive, occurs in
relation to any Party (an "Insolvent Party"), the other Party shall have an
option to acquire the entire Participating Interest of the Insolvent Party for a
cash purchase price determined by agreement with the Insolvent Party or its
legal representatives to be fair market value. The other Party may exercise such
option to purchase by written notice to the Insolvent Party and/or its legal
representatives given within thirty days of first becoming aware of the event
referred to in Subsections 10.4(c) to 10.4(f), inclusive. If no agreement is
reached on the fair market value of the entire Participating Interest of the
Insolvent Party within thirty (30) days of the giving of such notice, either
Party may submit the matter to arbitration in accordance with the provisions of
Section 19.21.
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16.6 Buy-Out Right on Royalty - At any time during the period commencing on
the completion of a Favourable Feasibility Study covering a specific portion of
the Properties and for a period of twenty (20) years thereafter, the Party who
is not a Royalty Holder (the "Non Royalty Holder") shall be entitled to purchase
one half of the interest in the Royalty then held, directly or indirectly, by
the Royalty Holder in respect of specified reserves or locations (the "Buy-Out
Right"). The Buy-Out Right shall be at net present value for that Royalty based
on the reserves and contemplated or existing mine plan with such net present
value discounted on an 8% discounted cash flow basis. The Non Royalty Holder
wishing to exercise its Buy-Out Right shall deliver to the Royalty Holder
detailed information on the reserves as set forth in the contemplated or
existing mine plan together with a configuration of those portions of the
Property in which such reserves are located and its calculation of the net
present value for the Royalty (the "Buy-Out Purchase Price"). The Royalty Holder
shall respond by notice in writing to the Non-Royalty Holder within thirty (30)
days of receiving such documentation and information as to whether it agrees
with the Buy-Out Purchase Price proposed by the Non-Royalty Holder and if the
Royalty Holder fails to notify the Non Royalty Holder within such thirty (30)
day period whether it agrees or disagrees with the Buy-Out Purchase Price, the
Royalty Holder shall be deemed to have agreed with the Buy-Out Purchase Price.
If there is agreement on the Buy-Out Purchase Price, the Royalty Holder will
execute and deliver to the Non-Royalty Holder all such documents as may be
reasonably required (in the opinion of counsel for such Party) to give effect to
the purchase of one half of its Royalty. Each party to such transaction shall
bear its own expenses in connection with the preparation, execution and delivery
of all such documents.
If, on the other hand, the Royalty Holder disagrees with the Buy-Out
Purchase Price for one half of its Royalty, either Party may refer the
determination of the Buy-Out Purchase Price to arbitration pursuant to Section
19.21.
16.7 Registration - This Agreement will not be registered by either Party
by filing and registering the entire Agreement unless required under Applicable
Law to protect such party's interest herein, but, at the request of either
Party, a memorandum sufficient to protect the interest of each Party will be
registered wherever necessary to protect such Party's interest from time to
time.
ARTICLE XVII
CONFIDENTIALITY
17.1 General - The terms of this Agreement and all information obtained in
connection with the performance of this Agreement and the confidentiality
agreement entered into prior to entering into this Agreement shall be the
exclusive property of the Parties and, except as provided in Section 17.2, shall
not be disclosed to any third party or the public without the prior written
consent of the other Party, which consent shall not be unreasonably withheld. No
Party need seek the consent of a Royalty Holder under this Article XVII;
however, as set forth in Section 17.3, a Royalty Holder shall continue to be
bound by the confidentiality provisions of this Article XVII.
17.2 Exceptions - The consent required by Section 17.1 shall not apply to a
disclosure:
(a) To an Affiliate of a Party, or to a Party's consultant, contractor or
subcontractor that has a bona fide need to be informed;
(b) To any third party to whom the disclosing Party contemplates a Transfer
of all or any part of its interest in or to this Agreement, or all or any part
of its Participating Interest;
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(c) To a governmental agency or to the public which the disclosing Party
believes in good faith is required by Laws or the applicable rules of any stock
exchange; or
(d) To any actual or potential lender or underwriter who has a bona fide
need to be informed.
In any case to which Subsections 17.2(b), (c) or (d) is applicable, the
disclosing Party shall give notice to the other Party concurrently with the
making of such disclosure specifying the entity receiving the information and
the reason for the disclosure. This notice shall include a summary of the
information disclosed and, if requested by the other Party, copies of all
confidential information delivered by the disclosing Party, and, in the case of
information delivered under Subsections 17.2(b) or (d), a copy of the agreement
protecting the confidential information from further disclosure. As to any
disclosure pursuant to Subsection 17.2(b), only such confidential information as
such third party shall have a legitimate business need to know shall be
disclosed and such third party shall first agree in writing to protect the
confidential information from further disclosure to the same extent as the
Parties are obligated under this Article XVII.
17.3 Duration of Confidentiality - The provisions of this Article XVII
shall apply during the term of this Agreement and for two (2) years following
termination of this Agreement pursuant to Section 14.1, and shall continue to
apply to any Party who withdraws, who is deemed to have withdrawn, or who
Transfers its Participating Interest, for two (2) years following the date of
such occurrence. Any Party whose Participating Interest is converted to a
Royalty and any person who becomes a Royalty Holder by means of a permitted
transfer of all or part of the Royalty hereunder shall be bound by the
confidentiality provisions of this Article XVII for so long as this Agreement
remains in force.
17.4 Internal Proprietary Information - The Parties agree not to use, sell,
give, disclose, or otherwise make available to third parties or the public at
any time any knowledge or information they may obtain relating to internal
proprietary techniques and methods used by the other Party for purposes of
geological interpretation, extraction, mining, processing of minerals, or any
other proprietary information that may be acquired.
17.5 Public Announcements - Subject to the exception in Subsection 17.2(c),
each Party shall consult with and obtain the consent of the other Party (which
consent is not to be unreasonably withheld) prior to making or issuing any
public announcement, press release, or similar publicity or disclosure with
respect to this Agreement or any agreement entered into contemporaneously
herewith or with respect to any activities under this Agreement or any such
other agreements. As early as practicable, and not less than forty-eight (48)
hours, before a Party makes any public announcement concerning this Agreement or
activities undertaken pursuant hereto (unless the disclosing Party demonstrates
that sooner disclosure is required by law), such Party shall first give the
other Parties notice of the intended announcement, including a copy of such
proposed announcement.
17.6 Parties' Information - Any analysis, data, documentation, or other
information developed by any Party on its own behalf, and at no cost to the
other Party, shall nevertheless be made available to any other Party if such
analysis, data, documentation, or information utilizes information relevant to
the Assets.
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ARTICLE XVIII
TAX DEDUCTIONS AND CERTIFICATES
18.1 Deductions - Each Party shall be entitled for tax purposes to take
advantage of any deductions or incentives or any elections which may be
available under the provisions of applicable federal, provincial, territorial or
municipal tax laws, regulations and incentive programs in relation to costs and
expenses incurred by it hereunder. Whenever deductions, incentives or elections
are granted to the Parties individually but a joint election is required, each
Party agrees that it will join with the other Party and execute and deliver any
documentation required in connection therewith and otherwise furnish such
information and take such action as may be reasonably requested by the other
Party in connection therewith; provided that nothing herein contained shall
require either Party to take any action which in the written opinion of counsel
for that Party is likely to be detrimental to that Party's tax position.
18.2 Certificates - Should either Party change its status as a non-resident
person to become a resident person, or if a resident person, become a
non-resident person for purposes of the Tax Act, it shall forthwith notify the
other Party in the manner provided in Section 19.1. Should any Party who is or
becomes a non-resident for purposes of the Tax Act, in the opinion of counsel
for the Operator, make a disposition of a Canadian resource property or taxable
Canadian Property within the meaning of the Tax Act, then, in such event, the
disposing person shall take all steps as are necessary including the payment of
money to obtain a certificate or certificates pursuant to section 116 of the Tax
Act designating one or more certificate limits equal to the estimated amount of
the proposed proceeds of disposition. If the disposing person does not obtain
such certificate with a certificate limit not less than the proceeds of
disposition, then the Operator may withhold from any payment due to such person
in respect of such disposition or from any subsequent payment due or otherwise
recover (until such time as the disposing person delivers a certificate with a
certificate limit equal to the proceeds of the disposition) an amount necessary
to permit the Operator to remit to the Receiver General of Canada the tax for
which any Party is liable under section 116 of the Tax Act. Any such
non-resident person shall indemnify and save harmless the other Party or Parties
to this Agreement for any increased taxes that such party or parties may incur
in connection with this Agreement as a consequence of such person's
non-residency.
18.3 GST Election - The Operator and each other Party shall jointly elect
in the prescribed form to authorize the Operator to perform all necessary
functions relating to the goods and services tax payable under the provisions of
section 273 of the Excise Tax Act (Canada), and any applicable provincial
legislation relating to goods and services, including any harmonized sales tax
(such as that presently provided for in certain Canadian Atlantic provinces)
(collectively, "GST"), as amended from time to time, which is payable by the
Operator and which arise out of the ownership and operation of the Properties or
the delivery of each Party's share of Product, if any. Should the Operator
receive any rebate of GST in respect of the Operations, such rebate shall be
credited to the Joint Account.
ARTICLE XIX
GENERAL PROVISIONS
19.1 Notices - All notices, payments and other required communications
("Notices") to the Parties shall be in writing, and shall be addressed
respectively as follows:
To: Phelps Dodge Corporation of Canada, Limited
Suite 912
120 Adelaide Street West
Toronto, Ontario M5H 1T1 Facsimile: (416) 594-0355
Attention: Vice-President and Managing Director, Exploration
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With a copy to:
Phelps Dodge Exploration Corporation
2600 North Central Avenue
Phoenix, Arizona
U.S.A. 85004-3014 Facsimile: (602) 234-8337
Attention: President
To: Uranium Power Corporation
475 Howe Street
Suite 206
Vancouver, British Columbia
V6C 2B3 Facsimile: (604) 687-8789
Attention: President
And in the case of Notice to the Management Committee:
To the appointed member thereon of the other Party c/o the other Party as
specified above.
And in the case of Notice to the Operator if it is not a Party:
To the address, person's attention, telephone and facsimile specified
in the communication appointing such Operator.
All Notices shall be given (a) by personal delivery to the Party if
delivered during normal business hours; (b) by electronic communication, with a
confirmation sent by registered or certified mail return receipt requested; or
(c) by registered or certified mail return receipt requested.
All Notices shall be effective and shall be deemed delivered (a) if by
personal delivery, on the date of delivery if delivered during normal business
hours, and, if not delivered during normal business hours, on the next Business
Day following delivery; (b) if by electronic communication, on the next Business
Day following receipt of the electronic communication; or (c) if solely by mail,
on the next Business Day after actual receipt. A Party may change its address by
Notice to the other Party.
19.2 Waiver - The failure of a Party to insist on the strict performance of
any provision of this Agreement or to exercise any right, power or remedy upon a
breach hereof shall not constitute a waiver of any provision of this Agreement
or limit the Party's right thereafter to enforce any provision or exercise any
right.
19.3 Modification - No modification of this Agreement shall be valid unless
made in writing and duly executed by the Parties.
19.4 Force Majeure - Except for any obligation to make payments when due
hereunder, the obligations of a Party shall be suspended to the extent and for
the period that performance is prevented by any cause, whether foreseeable or
unforeseeable, beyond its reasonable control, including, without limitation,
labour disputes (however arising and whether or not employee demands are
reasonable or within the power of the party to grant); acts of God; laws,
regulations, orders, proclamations, instructions or requests of any government
or governmental entity; judgments or orders of any court; inability to obtain on
reasonably acceptable terms any public or private license, permit or other
authorization; curtailment or suspension of activities to remedy or avoid an
actual or alleged, present or prospective violation of federal, provincial or
territorial or local environmental standards; acts of war or conditions arising
out of or attributable to war, whether declared or undeclared; riot, civil
strife, insurrection or rebellion; fire, explosion, earthquake, storm, flood,
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sink holes, drought or other adverse weather conditions; delay or failure by
suppliers or transporters of materials, parts, supplies, services or equipment
or by contractors' or subcontractors' shortage of, or inability to obtain,
labour, transportation, materials, machinery, equipment, supplies, utilities or
services; accidents; breakdown of equipment, machinery or facilities; actions by
native rights or environmental pressure groups; or any other cause whether
similar or dissimilar to the foregoing. The affected Party shall promptly give
notice to the other Party of the suspension of performance, stating therein the
nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected Party shall resume performance as soon as reasonably
possible. Commercial frustration, commercial impracticability or the occurrence
of unforeseen events rendering performance hereunder uneconomical shall not
constitute an excuse of performance of any obligation imposed hereunder.
19.5 Governing Law - Except for conveyancing and title matters which shall
be governed by the laws of the Province of Saskatchewan, this Agreement shall be
governed by and interpreted in accordance with the laws of the Province of
Ontario and the laws of Canada applicable therein.
19.6 Further Assurances - Each of the Parties agrees to take from time to
time such actions and execute such additional instruments as may be reasonably
necessary or convenient to implement and carry out the intent and purpose of
this Agreement.
19.7 Survival of Terms and Conditions - The following Sections shall
survive the termination of this Agreement to the full extent necessary for their
enforcement and the protection of the Party in whose favour they run: Sections
8.4, 8.6, 12.3, 14.2, 14.3, 14.4, 14.5, 14.6, 17.3, and 19.11.
19.8 Entire Agreement - This Agreement contains the entire understanding of
the Parties and supersedes all prior agreements and understandings between the
Parties relating to the subject matter hereof including without limitation, the
confidentiality agreement dated July 6, 1998.
19.9 Successors and Assigns - This Agreement shall be binding upon and
enure to the benefit of the respective successors and permitted assigns of the
Parties. In the event of any conflict between this Agreement and any Schedule
attached hereto, the terms of this Agreement shall be controlling.
19.10 Severability - If a court of competent jurisdiction determines that
any term, part or provision of this Agreement is unenforceable, illegal, or in
conflict with any federal, provincial, territorial, or local laws, the Parties
intend that the court reform that term, part or provision within the limits
permissible under law in a way as to approximate most closely the intent of the
Parties to this Agreement; provided that, if the court cannot make a
reformation, then that term, part or provision shall be considered severed from
this Agreement. The remaining portions of this Agreement shall not be affected
and it shall be construed and enforced as if it did not contain that term, part
or provision.
19.11 No Partnership - Nothing contained in this Agreement shall be deemed
to constitute either Party the partner of the other, nor, except as otherwise
herein expressly provided, to constitute either Party the agent or legal
representative of the other, nor to create any fiduciary relationship between
them. It is not the intention of the Parties to create, nor shall this agreement
be construed to create, any mining, commercial or other partnership. Neither
Party shall have any authority to act for or to assume any obligation or
responsibility on behalf of the other Party, except as otherwise expressly
provided herein. The rights, duties, obligations and liabilities of the Parties
shall be several and not joint or collective. Each Party shall be responsible
only for its obligations as herein set out and shall be liable only for its
share of the costs and expenses as provided herein, it being the express purpose
and intention of the Parties that their ownership of Assets and the rights
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acquired hereunder shall be as tenants in common. Each Party shall indemnify,
defend and hold harmless the other Party, its directors, officers, employees,
agents and attorneys from and against any and all losses, claims, damages and
liabilities arising out of any act or any assumption of liability by the
indemnifying Party, or any of its directors, officers, employees, agents and
attorneys done or undertaken, or apparently done or undertaken, on behalf of the
other Party, except pursuant to the authority expressly granted herein or as
otherwise agreed in writing between the Parties.
19.12 Further Ground Within Area of Interest and Other Business
Opportunities -
(a) If, during the currency of this Agreement, any Party or any Affiliate
of a Party (herein called an "Acquiring Party") shall stake or otherwise acquire
or propose to acquire any right to explore or mine or both or an interest in any
such rights, direct or indirect, whether by contract, staking or otherwise any
part of which is within the Area of Interest (as defined in Section 1.1) which
acquisition or proposed acquisition was not part of a Program (herein called an
"Additional Right"), such Additional Right shall be subject to the terms of this
Agreement. It is also agreed that any mining claim, part of which includes a
restaking of any ground that was originally part of the Properties, shall
nonetheless constitute an Additional Right to be dealt with under this Section
19.12;
(b) The Acquiring Party shall give notice (the "Notice") to the other Party
who shall be the "Notified Party", such Notice shall specify the nature and
location of the Additional Right, the acquisition costs and other terms upon
which such acquisition is proposed to be made or was made and any other
information which the Acquiring Party has which may be reasonably expected to be
pertinent to the Notified Party in determining whether it wishes to acquire a
Participating Interest in such Additional Right;
(c) If the Notified Party elects by written notice to the Acquiring Party
(notice to an Affiliate of a Party may be given to the Party affiliated) given
within thirty (30) days of the receipt of the Acquiring Party's Notice, to
continue such Additional Right subject to this Agreement, each Party shall pay
to the Acquiring Party if the acquisition has been completed or to the third
party seller if it is only a proposed acquisition an amount of such acquisition
cost equal to their then respective Participating Interest in the Properties and
such Additional Right shall thereafter form part of the Properties. The
Acquiring Party shall execute whatever instrument(s) are necessary to convey
title to the Additional Right to the proper Parties in accordance with the terms
of this Agreement. If the Notified Party does not elect to continue an
Additional Right subject to this Agreement as herein provided, then all costs
incurred by the Acquiring Party shall be for its own account and such Additional
Right shall be held by the Acquiring Party free and clear of any further
obligations to the Notified Party under the provisions of this Agreement;
(d) For purposes of this Section 19.12 "acquisition costs" mean the
consideration paid or to be paid by the Acquiring Party including, without
restriction, purchase price, registration fees, legal costs and other
out-of-pocket costs, but does not include an allocation of the overhead of the
Acquiring Party. If any acquisition costs are not expressed in money, such
acquisition costs shall be for purposes of this definition, the value of such
costs in money calculated on the basis that the Acquiring Party shall make no
profit or loss therefrom; and
(e) Without limiting the operation of Section 15.2, the provisions of this
Section 19.12 shall apply to any acquisition of an Additional Right by a former
party to this Agreement which ceases to be a Party through the disposition or
forfeiture of the Participating Interest of such former party in the Properties
or through the withdrawal of such Party from this Agreement in accordance with
its terms, during a period of one (1) year from such disposition, forfeiture or
withdrawal.
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(f) Each Party shall have the unrestricted right to stake or otherwise
acquire any rights to explore or mine or both or any other rights in any
property outside the Area of Interest, and to use information obtained under
this Agreement to do so without advising the other Party or without allowing the
other Party to acquire any interest in any such rights or properties, both
before and after the Effective Joint Venture Date. Except as expressly provided
in this Agreement, each Party shall have the unrestricted right to explore,
develop and mine any lands now owned or hereafter acquired by it without
allowing the other Party any participation in such activities; provided,
however, that if any orebody should be developed which straddles the boundary of
the Area of Interest and any such lands the Parties will use their reasonable
best efforts to enter into party wall or unitization agreements with regard to
the mining of any such orebody.
(g) Except as expressly provided in this Agreement, each Party shall also
have the right independently to engage in and receive full benefits from
business activities, whether or not competitive with the Operations, without
consulting the other. The doctrines of "corporate opportunity" or "business
opportunity" shall not be applied to any other activity, association, or
operation of either Party outside the Area of Interest. Unless otherwise agreed
in writing, no Party shall have any obligation to mill, beneficiate or otherwise
treat any Products or any other Party's share of Products in any facility owned
or controlled by such Party.
19.13 Waiver of Rights of Partition and Sale - The Parties hereby waive and
release all rights of partition or of sale in lieu thereof, or other division of
Assets, including any such rights provided by statute and all similar rights
applicable in the Province of Saskatchewan.
19.14 Transfer or Termination of Rights to Properties - Except as otherwise
provided in this Agreement, neither Party shall Transfer all or any part of its
interest in the Assets or this Agreement or otherwise permit or cause such
interests to terminate.
19.15 Implied Covenants - There are no implied covenants contained in this
Agreement except those of good faith, fair dealing and development.
19.16 Employees - Employees of the Operator are not and shall not be
employees of the Party which is not the Operator.
19.17 Expense and Commissions - Each Party shall pay its own legal and
other costs and expenses incurred in connection with this Agreement and agrees
to save harmless each other Party from and against any and all claims whatsoever
for any commissions or other remuneration payable or alleged to be payable to
anyone acting on its behalf.
19.18 Counterparts - Each Party agrees that this Agreement and all
documents and instruments contemplated hereby may be executed in one or more
counterparts which together shall be deemed to constitute one valid and binding
agreement or instrument, as the case may be. Delivery of the counterparts may be
effected by means of facsimile transmission.
19.19 Rule Against Perpetuities - Notwithstanding any provision of this
Agreement, the Parties do not intend that there shall be any violation of the
rule against perpetuities, the rule against unreasonable restraints on the
alienation of property or any related rule against interests that last too long.
Accordingly, if any right, or option to acquire any interest in the Properties,
in a Participating Interest, in the Assets, or in any real property exists under
this Agreement, such right or option must be exercised if at all, so as to vest
such interest in the acquiring Party within time periods permitted by applicable
rules. If, however, any such violation should inadvertently occur, the Parties
hereby agree that a court shall reform that provision in such a way as to
approximate most closely the intent of the Parties within the limits permissible
under such rules.
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19.20 Payment of Royalties - All required payments of royalties to third
parties shall be made by each Party proportionately (based on each Party's
Participating Interest) following the disposition of Products in accordance with
Article XIII, and each Party undertakes to make such payments timely in
accordance with the terms of applicable agreements.
19.21 Arbitration of Disputes -
(a) The parties contemplate all matters in dispute under this Agreement may
be settled by final and binding arbitration with no appeal from the decision of
the arbitrators; provided, however, no party may refer any matter to arbitration
without first having given ten (10) Business Days advance written notice to each
other party specifying in detail the matter to be arbitrated, its proposed
resolution of such matter and the intention to refer the matter to arbitration
(collectively, a "Notice of Intended Arbitration"). After ten (10) Business Days
have elapsed from the delivery to each party of a Notice of Intended Arbitration
without resolution of the matter, the party who gave such notice may refer the
dispute to arbitration pursuant to all the provisions of the Arbitration Act,
1991 (Ontario) and regulations thereunder (collectively, the "Arbitration
Provisions") by naming an arbitrator and notifying each other party of the
arbitrator appointed by it accompanied by that arbitrator's acceptance of his or
her appointment;
(b) If the Parties agree in writing on a single arbitrator, any matter
covered by a Notice of Intended Arbitration under this Agreement may be referred
by the Parties to arbitration by a single arbitrator in lieu of the arbitration
panel otherwise contemplated herein. The Parties contemplate the arbitrator(s)
appointed will be persons qualified by experience and skill in the area(s)
referred to in the Notice of Intended Arbitration. The Parties further
contemplate the arbitrator(s) will determine the matter specified in the Notice
of Intended Arbitration, reduce their decision to writing and deliver a copy to
each party, all within forty-five (45) days of the appointment of the last
arbitrator, subject to any reasonable delay due to unforeseen circumstances.
Notwithstanding the foregoing, if the single arbitrator fails to make a decision
within sixty (60) days after appointment or if the arbitrators, or a majority of
them, fail to make a decision within sixty (60) days after the appointment of
the third arbitrator, then either of the Parties may by notice to the other
elect to have a new single arbitrator or arbitrators chosen in like manner as if
none had previously been selected;
(c) If the Parties do not agree on a single arbitrator, the other Party
shall, within ten days of the delivery of the notice of appointment and
acceptance of the first appointed arbitrator, appoint an arbitrator and deliver
to each other party notice of such appointment and the acceptance of the
appointed arbitrator. If two arbitrators are appointed, those arbitrators shall
within fifteen (15) days of the appointment of the second of them choose a third
member of the arbitration panel. If either Party fails to choose an arbitrator
or the two arbitrators appointed by the Parties, fail to choose a third member
of the arbitration panel, a judge of the Ontario Court (General Division) shall,
upon the request of either Party appoint the arbitrator or arbitrators to
complete the three person arbitration panel;
(d) The Parties agree that proceedings before the arbitrator(s) shall take
place in Toronto, Ontario, or such other place as the arbitrator(s) may
determine;
(e) Each Party to this Agreement expressly agrees with each other Party
that the arbitrators appointed hereunder shall have all the rights and
obligations provided for in the Arbitration Provisions and additionally that the
arbitrators shall be entitled to finally determine all questions of law, fact
and mixed fact and law without reference or appeal to any court;
45
<PAGE>
(f) The fees and expenses of the arbitrator(s) (unless otherwise determined
by the arbitrator(s)) shall be paid by the Parties equally; and
(g) None of the Parties concerned shall be deemed to be in default of any
matter being arbitrated until ten (10) days after the decision of the
arbitrator(s) is delivered to all of them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PHELPS DODGE CORPORATION OF CANADA, LIMITED
Per: /s/ R. Michael Gray
--------------------------------------
R. Michael Gray,
Vice-President and Managing Director,
Exploration
URANIUM POWER CORPORATION
Per: /s/ Thornton Donaldson
--------------------------------------
Thornton J. Donaldson,
President
Per:
--------------------------------------
46
<PAGE>
<TABLE>
<CAPTION>
Schedule A - Part 1
Property list - Saskatchewan Uranium Properties
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
<S> <C> <C> <C> <C> <C>
Property Name NTS Claim No. Size (ha) Payment made Due date
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Brown 74H-5 CBS 7756 2,445 16,748.33 May 9, 1999
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
74H-5 CBS 7757 3,509 25,611.94 May 9, 1999
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Total 2 Claims 5,954
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Crawford 74H-5 S-104749 2,945
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
74H-5 S-104750 2,235
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
74H-5 S-104764 3,210
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
74H-5 CBS 7741 2,980
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Total 4 Claims 11,370
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Jasper 74I-1, S-105750 1,415
(off map to Northeast) 74H-16
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Marean 74H-11 CBS 7752 3,125 16,318.66 May 9, 1999
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Perpete 74G-8 S-104755 1,370 9,268.75 May 11, 1999
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
74G-8 S-104756 3,265 22,089.40 May 2, 1999
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Total 2 Claims 4,635
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Morin 74G-8 CBS 7758 3,753 36,641.57 May 9, 1999
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
Grand Total 11 Claims 30,252 ha. $126,678.65 (Note 1)
- ---------------------------- ------------ -------------- --------------- ------------------ ------------------------
</TABLE>
Note 1: To be repaid to PDC upon completion and filing of two years of
assessment work for each claim where payments have been made by the
applicable due date noted.
<PAGE>
Schedule A - Part 2
Location Map
<PAGE>
<TABLE>
<CAPTION>
Schedule B
Initial Program and Expenditures
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Minimum
Initial Program - Estimated Required
Property Prior PD Expenditure Proposed Work Cost Expenditures*
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
<S> <C> <C> <C> <C>
$1,618,263 Lithogeochem boulder $ 3,000 --
sampling
Crawford
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Perpete 118,601 Drill 155,000 $ 86,978.14
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Jasper 59,472 Gridding, Detail 26,000 --
Lithogeochem
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Brown 28,989 Gridding, TDEM, Mag/VLF,
Lithogeochem, Drill 180,000 113,808.29
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Morin 8,395 Lithogeochem, Gridding, 81,677.57
TDEM
82,000
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Marean 20,205 Gridding, TDEM, 53,818.66
Lithogeochem
54,000
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
54,652 Expenditures on previously held -- --
properties in area
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
Total $1,908,577 $500,000 $336,282.66
- ----------------- --------------------------- ------------------------------------- ------------- ------------------
</TABLE>
* Minimum required expenditures for recovery of PDC Payments in lieu of work.
(c) The cost of any required insurance, deductibles, or retention amounts
shall be charged to the Joint Account.
PROPERTY OPTION AGREEMENT
Dated March 24, 1999
Between:
URANIUM POWER CORPORATION
and:
PACIFIC AMBER RESOURCES LTD.
<PAGE>
INDEX
1. GRANT OF OPTION............................................................2
2. ISSUANCE OF OPTIONOR SHARES................................................3
3. EXERCISE OF OPTION.........................................................3
4. REPRESENTATIONS AND WARRANTIES OF THE OPTIONOR.............................4
5. REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE.............................6
6. COVENANTS OF THE OPTIONOR..................................................7
7. TERMINATION................................................................7
8. INDEPENDENT ACTIVITIES.....................................................8
9. CONFIDENTIALITY OF INFORMATION.............................................9
10. ARBITRATION...............................................................9
11. DELAYS...................................................................10
12. ASSIGNMENT...............................................................10
13. NOTICES..................................................................11
14. REGULATORY APPROVALS.....................................................12
15. GENERAL TERMS AND CONDITIONS.............................................12
SCHEDULE "A": Initial Program and Expenditures
1
<PAGE>
PROPERTY OPTION AGREEMENT
THIS AGREEMENT is made as of the 24th day of March, 1999,
BETWEEN:
URANIUM POWER CORPORATION, a company duly
incorporated under the laws of the State of Colorado and
having its head office at Suite 206, 475 Howe Street,
Vancouver, British
Columbia, V6C 2B3
(hereinafter referred to as the "Optionor")
OF THE FIRST PART,
AND:
PACIFIC AMBER RESOURCES LTD., a company
incorporated under the laws of British Columbia and having a
head office at Suite 1818, 701 West Georgia Street, Vancouver,
British Columbia, V7Y 1C6
(hereinafter referred to as the "Optionee")
OF THE SECOND PART.
RECITALS
WHEREAS the Optionor has entered into an exploration option and operations
joint venture agreement with Phelps Dodge Corporation of Canada, Limited
("PDC"), dated December 16, 1998 (the "Underlying Agreement");
AND WHEREAS any terms defined in the Underlying Agreement and used herein
shall have the meaning assigned to them in the Underlying Agreement;
AND WHEREAS the Underlying Agreement grants to the Optionor the sole and
exclusive right and option to earn on or before December 31, 2002, a 100%
undivided interest subject to the Royalty and the Earn Back Option, in the
Properties free of all liens, charges, encumbrances and conflicting claims by
(i) completing by December 31, 1999, the Initial Program and incurring
Expenditures of $500,000; and (ii) incurring an aggregate of not less than
$2,500,000 in Expenditures (cumulative aggregate Expenditures of $3,000,000)
prior to December 31, 2002;
AND WHEREAS the Optionor has agreed to grant to the Optionee an option to
acquire 50% of the Optionor's right, title and interest in the Property and the
Underlying Agreement (hereinafter collectively called the "Property");
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants and agreements herein contained and subject to the terms and
conditions hereafter set out, the parties hereto agree as follows:
1. GRANT OF OPTION
1.01 The Optionor, in consideration of the sum of $10, the receipt and
sufficiency of which is hereby acknowledged, hereby grants to the Optionee the
exclusive right and option (the "Option") to acquire a 50% interest in and to
the Property and all of the Optionor's rights, licences and permits appurtenant
thereto or held for the specific use and enjoyment thereof by completing the
Initial Program and incurring $500,000 in Expenditures on or before December 31,
1999, as set out in Schedule "A" attached hereto.
2
<PAGE>
1.02 The Optionor and the Optionee shall immediately establish a management
committee (the "Management Committee") to determine all actions to be taken in
respect to the carrying out of the Initial Program on the Properties pursuant to
the provisions of the Underlying Agreement. The Management Committee shall
consist of four members and each of the Optionor and Optionee shall appoint two
members as their representatives and each member may appoint one or more
alternatives to act in the absence of a regular member. The Management Committee
shall determine all matters coming before it by the affirmative vote of members
having voting interests in the aggregate of more than 50%. In the event the
members of the Management Committee cannot agree on any matter coming before
them and in the further event the interest of each party is 50%, then the
Optionee shall have an additional casting or deciding vote.
1.03 If the Optionee fails to incur any of the Expenditures listed in paragraph
1.01 by the end of the last day on which the same was due to be incurred by
reason of paragraph 1.01 or as deferred by reason of paragraph 11.01, the
Optionee may, at any time within 15 days of such date, make a cash payment to
PDC in an amount equal to the deficiency in the Expenditures. Any cash payment
so made shall be deemed to have been Expenditures duly and properly incurred in
an amount equal to the cash payments.
1.04 If the Optionor receives a notice of default from the PDC under the
Underlying Agreement, and if in the opinion of the Optionee the Optionor is not
taking curative or corrective action adequate to rectify such default, the
Optionee may, at its sole election, and after having given prior notice to the
Optionor, take such curative or corrective action as may be necessary in order
to preserve the Option. In such circumstance, the Optionee shall be entitled to
recover from the Optionor the full cost of such curative or corrective action,
whether or not such action is successful in curing the default under the
Underlying Agreement.
2. ISSUANCE OF OPTIONOR SHARES
2.01 The Optionor shall immediately issue to the Optionee 200,000 common shares
in the Optionor's capital stock as fully paid and non-assessable shares, subject
only to applicable securities laws' resale restrictions.
3. EXERCISE OF OPTION
3.01 The Optionee shall have exercised the Option, and shall have acquired a 50%
interest in and to the Property, by having incurred Expenditures of $500,000 in
accordance with paragraph 1.01.
3.02 Upon the Optionee having exercised the Option, all further work on and with
respect to the Property, and the subsequent relationship between the Optionor
and the Optionee, shall be governed by a joint venture agreement (the "Joint
Venture Agreement") between the parties in a form to be agreed upon by the
parties as soon as practicable but in any event not later than 60 days of the
date hereof. The Joint Venture Agreement shall contain a dilution clause and
each of the party's contributions shall be deemed to be $500,000 and the
interest of each party will be determined by the contribution made or deemed to
be made by a party divided by the aggregate contributions made or deemed to be
made by all parties multiplied by 100% and if the interest of any party is
reduced to less than 15%, such interest shall be deemed to have been converted
to a 5% net profit interest. If such party has not contributed in the aggregate
$1,500,000, it shall have no further interest in the Underlying Agreement and
the Property. All interests will be subject to the Royalty and Earn Back Option.
The Management Committee decisions will be determined by votes represented by
each party's interest provided that if there is a tied vote, the Optionee shall
have the casting vote.
3
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE OPTIONOR
4.01 The Optionor hereby represents and warrants to the Optionee that:
(a) it is not in breach or violation of or default under (and no
event has occurred and is continuing which with the giving of
notice or lapse of time or both would constitute an event of
default under) the Underlying Agreement;
(b) it is not aware of any adverse claim asserted or threatened as to
the validity or rights of the Optionor in and to the Property,
and except as set out in the Underlying Agreement, the Optionor
is not aware of any liens, charges, encumbrances, or conflicting
claims or rights of whatsoever nature or kind, recorded or
unrecorded, against the Properties, and the Optionor is not aware
of any factual basis for any such liens, charges, encumbrances,
conflicting claims or rights against the Properties;
(c) to the best of its knowledge, the Properties have been validly
located and are now duly recorded and in good standing in
accordance with the laws of the jurisdiction in which the mining
claims are situated;
(d) it has full corporate power and authority to enter into this
agreement;
(e) it is a company validly existing and in good standing under the
laws of the State of Colorado and is up to date with respect to
its filings with the applicable governmental corporate agency;
(f) the entering into this agreement does not conflict with any
applicable laws or with its charter documents nor does it
conflict with, or result in a breach of or accelerate the
performance required by any contract or other commitment to which
it is party or by which it is bound;
(g) it has the exclusive right to enter into this agreement and all
necessary authority to assign to the Optionee a 50% right, title
and interest in and to the Property in accordance with the terms
and conditions of this agreement, and the Optionee shall be
treated as an Authorised Party for the purpose of carrying out
the Initial Program and incurring Expenditures;
(h) reclamation and rehabilitation of those parts of the Properties
which have been previously worked by the Optionor have been
properly completed in compliance with all applicable laws and the
Optionor hereby covenants and agrees to save the Optionee
harmless from and against any loss, liability, claim, demand,
damage, expense, injury or death arising out of or in connection
with the operations or activities which were carried out on the
Properties by the Optionor prior to the date of this agreement;
(i) to the best of its knowledge and belief after having made
reasonable enquiry, reclamation and rehabilitation of those parts
of the Properties which have been previously worked by persons
other than the Optionor have been properly completed in
compliance with all applicable laws by such other persons, or if
not so completed, the Optionor has used its best efforts to
mitigate the damage to the environment resulting from such
previous work;
4
<PAGE>
(j) without limiting the generality of sub-paragraphs 4.01(h) and
(i), to the best of the Optionor's knowledge, its contractors
(i) have operated the Properties and have at all times received,
handled, used, stored, treated, shipped and disposed of all
environmental or similar contaminants in strict compliance
with all applicable environmental, health or safety laws,
regulations, orders or approvals, and
(ii) have removed from and off the Properties all environmental
or similar contaminants;
(k) to the best of the Optionor's knowledge there are no orders or
directions relating to environmental or similar matters requiring
any work, repairs, construction or capital expenditures with
respect to the Properties and the conduct of the business related
thereto, nor has the Optionor received any notice of such;
(l) to the best of the Optionor's knowledge no hazardous or toxic
materials, substances, pollutants, contaminants or wastes have
been released by the Optionor's contractors into the environment,
or deposited, discharged, placed or disposed of at, on or near
the Properties as a result of the contractor's operations carried
out on the Properties;
(m) to the best of the Optionor's knowledge
(i) no notices of any violation or apparent violation of any of
the matters referred to in subparagraphs 4.01(i) through
6.01(l) relating to the Properties or its use have been
received by the Optionor or PDC and
(ii) there are no writs, injunctions, orders or judgements
outstanding, no law suits, claims, proceedings or
investigations pending or threatened, relating to the use,
maintenance or operation of the Properties, whether related
to environmental or similar matters, or otherwise, nor, to
the knowledge of the Optionor, is there any basis for such
law suits, claims, proceedings or investigations being
instituted or filed; and
(n) it has advised the Optionee of all of the material information
relating to the mineral potential of the Properties of which the
Optionor has knowledge.
4.02 The representations and warranties hereinbefore set out are conditions upon
which the Optionee has relied on entering into this agreement and shall survive
the exercise of the Option, and the Optionor hereby forever indemnifies and
saves the Optionee harmless from all loss, damage, costs, actions and suits
arising out of or in connection with any breach of any representation or
warranty made by it and contained in this agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
5.01 The Optionee represents and warrants to the Optionor that:
(a) it has full corporate power and authority to enter into this
agreement;
5
<PAGE>
(b) the entering into of this agreement does not conflict with any
applicable laws or with its charter documents nor does it
conflict with, or result in a breach of, or accelerate the
performance required by any contract or other commitment to which
it is party or by which it is bound.
5.02 The representations and warranties hereinbefore set out are conditions upon
which the Optionor has relied on entering into this agreement and shall survive
the exercise of the Option, and the Optionee hereby indemnifies and saves the
Optionor harmless from all loss, damage, costs, actions and suits arising out of
or in connection with any breach of any representation or warranty made by it
and contained in this agreement.
6. COVENANTS OF THE OPTIONOR
6.01 The Optionor hereby covenants with and to the Optionee that it shall:
(a) within 10 days of the execution and delivery of this agreement,
provide the Optionee with all of the data and information in its
possession or under its control relating to the Optionor's
exploration activities on and in the vicinity of the Properties;
(b) until such time as the Option is exercised or otherwise
terminates, not deal, or attempt to deal with its right, title
and interest in and to the Property in any way that would
adversely affect the right of the Optionee to become absolutely
vested in a 50% interest in and to the Property, free and clear
of any liens, charges and encumbrances other than the Underlying
Agreement;
(c) maintain the Underlying Agreement in good standing at all times;
(d) forward to the Optionee, within 24 hours of receipt, any notice
or demand which it may receive from PDC relating to the
Underlying Agreement; and
(e) promptly forward to the Optionee copies of all correspondence in
connection with the Underlying Agreement.
7. TERMINATION
7.01 If the Optionee fails to do any thing on or before the last day provided
for such performance under this agreement, the Optionor may terminate this
agreement but only if:
(a) it shall have first given to the Optionee written notice of the
failure containing particulars of the payment which the Optionee
has not made or the act which the Optionee has not performed; and
(b) the Optionee has not within 30 days following delivery of the
Optionor's notice given notice to the Optionor that it has cured
such failure or commenced proceedings to cure such failure by
appropriate payment or performance (the Optionee hereby agreeing
that should it so commence to cure any failure it will prosecute
the same to completion without undue delay).
Should the Optionee fail to deliver the notice provided for in sub-paragraph
7.01(c) within the said 30 days, this agreement shall be deemed to have
terminated on the day following the last day provided for the performance the
failure of which by the Optionee caused the Optionor to issue the notice
referred to in subparagraph 7.01(a) hereof.
6
<PAGE>
7.02 Upon termination of this agreement the Optionee:
(a) shall deliver to the Optionor, within 60 days of the effective
date of termination, copies of all factual maps, reports, assay
results and other factual data and documentation relating to its
operations on the Properties;
(b) forfeits any and all interest in the Property hereunder and shall
cease to be liable to the Optionor in debt, damages or otherwise
save for the performance of those of its obligations which were
not satisfied on the effective date of termination; and
(c) shall vacate the Properties within a reasonable time after such
termination, but shall have the right of access to the Properties
for a period of six months thereafter for the purpose of removing
its chattels, machinery, equipment and fixtures therefrom.
8. INDEPENDENT ACTIVITIES
8.01 Except as expressly provided herein, each party shall have the free and
unrestricted right to independently engage in and receive the full benefit of
any and all business endeavours of any sort whatsoever, whether or not
competitive with the endeavours contemplated herein without consulting the other
or inviting or allowing the other to participate therein. No party shall be
under any fiduciary or other duty to the other which will prevent it from
engaging in or enjoying the benefits of competing endeavours within the general
scope of the endeavours contemplated herein. The legal doctrines of "corporate
opportunity" sometimes applied to persons engaged in a joint venture or having
fiduciary status shall not apply in the case of any party. In particular,
without limiting the foregoing, no party shall have an obligation to any other
party as to:
(a) any opportunity to acquire, explore and develop any mining
property, interest or right presently owned by it or offered to
it outside the Properties at any time; and
(b) the erection of any mining plant, mill, smelter or refinery,
whether or not such mining plant, mill, smelter or refinery
treats ores or concentrates from the Properties.
9. CONFIDENTIALITY OF INFORMATION
9.01 Except as otherwise provided in this paragraph, both parties shall treat
all data, reports, records and other information relating to this agreement and
the Property as confidential. The text of any news release or any other public
statements, other than those required by law or regulatory bodies or stock
exchanges, which a party desires to make shall be sent to the other party for
its comments not less than 48 hours prior to publication and shall not include
references to the other party unless such party has given its prior consent in
writing. The text of any disclosure which a party is required to make by law, by
regulatory bodies or stock exchanges shall be sent to the other party prior to
filing. For all public disclosure, whether required to be made or not, any
reasonable changes requested by the non-disclosing party shall be incorporated
into the disclosure document.
10. ARBITRATION
10.01 If there is any disagreement, dispute or controversy (hereinafter
collectively called a "dispute") between the parties with respect to any matter
arising under this agreement or the construction hereof, then the dispute shall
be determined by arbitration in accordance with the following procedures:
7
<PAGE>
(a) the parties to the dispute shall appoint a single mutually
acceptable arbitrator. If the parties cannot agree upon a
single arbitrator, then the party on one side of the dispute
shall name an arbitrator, and give notice thereof to the party
on the other side of the dispute;
(b) the party on the other side of the dispute shall within 14 days
of the receipt of notice, name an arbitrator; and
(c) the two arbitrators so named shall, within seven days of the
naming of the later of them, name a third arbitrator.
If the party on either side of the dispute fails to name its arbitrator within
the allotted time, then the arbitrator named may make a determination of the
dispute. The arbitration shall be conducted in Vancouver, B.C. and in accordance
with the Commercial Arbitration Act (British Columbia). The decision shall be
made within 30 days following the naming of the latest of them, and shall be
conclusive and binding upon the parties. The costs of arbitration shall be borne
equally by the parties to the dispute unless otherwise determined by the
arbitrator(s) in the award.
11. DELAYS
11.01 If any party should be delayed in or prevented from performing any of the
terms, covenants or conditions of this agreement by reason of a cause beyond the
control of such party, whether or not foreseeable, including fires, floods,
earthquakes, subsidence, ground collapse or landslides, interruptions or delays
in transportation or power supplies, First Nations land claims and blockades,
strikes, lockouts, wars, acts of God, government regulation (including currency
control) or interference or the inability to secure on reasonable terms any
private or public permits or authorizations, then any such failure on the part
of such party to so perform shall not be deemed to be a breach of this agreement
and the time within which such party is obliged to comply with any such term,
covenant or condition of this agreement shall be extended by the total period of
all such delays. In order that the provisions of this article may become
operative, such party shall give notice in writing to the other party, forthwith
and for each new cause of delay or prevention and shall set out in such notice
particulars of the cause thereof, and the day upon which the same arose, and
shall take all reasonable steps to remove the cause of such delay or prevention,
and shall give like notice forthwith following the date that such cause ceased
to subsist.
12. ASSIGNMENT
12.01 Neither party may dispose of all or any part of its interest in and to the
Property and this agreement to any third party without the prior written consent
of the other party and PDC.
13. NOTICES
13.01 Any notice, election, consent or other writing required or permitted to be
given hereunder shall be deemed to be sufficiently given if delivered or if
mailed by registered air mail or by fax, addressed as follows:
In the case of the Optionor:
URANIUM POWER CORPORATION
206 - 475 Howe Street
Vancouver, British Columbia
Canada, V6C 2B3
Attention: President
Fax No.: (604) 687-8789
8
<PAGE>
In the case of the Optionee:
PACIFIC AMBER RESOURCES LTD.
P.O. Box 10133 Pacific Centre
1818 - 701 West Georgia Street
Vancouver, British Columbia
Canada V7Y 1C6
Attention: President
Fax No: (604) 688-2641
With a copy to:
SCOTT, BISSETT
Barristers and Solicitors
Suite 1040, 999 West Hastings Street
Vancouver, British Columbia
Canada V6C 2W2
Attention: David R. Bissett
Fax No: (604) 683-2643
and any such notice given as aforesaid shall be deemed to have been given to the
parties hereto if delivered, when delivered, or if mailed, on the third business
day following the date of mailing, or, if faxed, on the next succeeding business
day following the faxing thereof PROVIDED HOWEVER that during the period of any
postal interruption in either the country of mailing or the country of delivery,
any notice given hereunder by mail shall be deemed to have been given only as of
the date of actual delivery of the same. Any party may from time to time by
notice in writing change its address for the purpose of this paragraph.
14. REGULATORY APPROVALS
14.01 This agreement shall be subject to the Optionee receiving any required
approvals from the Vancouver Stock Exchange.
15. GENERAL TERMS AND CONDITIONS
15.01 The parties hereto hereby covenant and agree that they will execute such
further agreements, conveyances and assurances as may be requisite, or which
counsel for the parties may deem necessary to effectually carry out the intent
of this agreement.
15.02 This agreement shall represent the entire understanding between the
parties with respect to the subject matter hereof. No representations or
inducements have been made save as herein set forth. No changes, alterations, or
modifications of this agreement shall be binding upon either party until and
unless a memorandum in writing to such effect shall have been signed by both
parties hereto.
15.03 The titles to the articles to this agreement shall not be deemed to form
part of this agreement but shall be regarded as having been used for convenience
of reference only.
15.04 The schedules to this agreement shall be construed with and as an integral
part of this agreement to the same extent as if they were set forth verbatim
herein.
15.05 All references to dollar amounts contained in this agreement are
references to Canadian funds.
15.06 This agreement shall be governed by and interpreted in accordance with the
laws in effect in British Columbia, and is subject to the exclusive jurisdiction
of the Courts of British Columbia.
9
<PAGE>
15.07 This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF this agreement has been executed by the parties hereto
as of the day and year first above written.
The COMMON SEAL of URANIUM POWER )
CORPORATION was hereunto affixed in the )
presence of: )
)
) c/s
//s// Thornton J. Donaldson )
- -----------------------------------------------------
)
)
//s// William G. Timmins
The COMMON SEAL of PACIFIC AMBER )
RESOURCES LTD. was hereunto affixed in )
the presence of: )
)
)
//s// Hiro Ogata ) c/s
)
)
//s// Harold M. Jones )
This is page 13 of that certain agreement dated March 24, 1999, between Uranium
Power Corporation of the first part and Pacific Amber Resources Ltd. of the
second part.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE "A"
TO THAT PROPERTY OPTION AGREEMENT MADE AS OF
MARCH 24, 1999 BETWEEN URANIUM POWER
CORPORATION OF THE FIRST PART AND PACIFIC AMBER
RESOURCES LTD. OF THE SECOND PART
INITIAL PROGRAM AND EXPENDITURES
Property Prior PD Initial Program - Proposed Estimated Minimum
Expenditure Work Cost Required
Expenditures*
- -------- ----------- ----------------------------- --------- ------------
<S> <C> <C> <C> <C>
Crawford $1,618,263 Lithogeochem boulder sampling $3,000 -
Perpete 118,601 Drill 155,000 $86,978.14
Jasper 59,472 Gridding, Detail Lithogeochem 26,000 -
Brown 28,989 Gridding, TDEM, Mag/VLF, 180,000 113,808.29
Lithogeochem, Drill
Morin 8,395 Lithogeochem, Gridding, TDEM 82,000 81,677.57
Marean 20,205 Gridding, TDEM, Lithogeochem 54,000 53,818.66
54,652 Expenditures on previously held - -
properties in area
Total $1,908,577 $500,000 $336,282.66
- ----------------- ------------------- ------------------------------------------ ------------------- --------------------
</TABLE>
* Minimum required expenditures for recovery of PDC Payments in lieu of work.
AMENDMENT
TO
PROPERTY OPTION AGREEMENT
This amendment ("Amendment") is made and entered into this 7th day of
October, 1999, and shall amend and become a part of that certain Property Option
Agreement dated March 24, 1999 ("Option Agreement") between Uranium Power
Corporation and Pacific Amber Resources Ltd. All capitalized terms not defined
herein shall be as defined in the Option Agreement.
1. The undersigned parties hereby agree to waive the requirement contained
in Section 3.02 of the Option Agreement that a Joint Venture Agreement be
entered into within 60 days of the Option Agreement.
2. The undersigned parties hereby agree that the following sentence that is
contained in Section 3.02 of the Option Agreement is hereby deleted from Section
3.02 and shall no longer be contained therein:
"If such party has not contributed in the aggregate
$1,500,000, it shall have no further interest in the
Underlying Agreement and the Property."
In witness whereof, the parties have executed this Amendment as of the date
first above set forth.
URANIUM POWER CORPORATION
By: /s/ Thornton Donaldson
---------------------------------
Its: President
PACIFIC AMBER RESOURCES LTD.
By: /s/ Hiro Ogata
---------------------------------
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR OTHER
<FISCAL-YEAR-END> APR-30-1999 APR-30-1998 APR-30-1998
<PERIOD-START> MAY-01-1999 MAY-01-1998 APR-30-1998
<PERIOD-END> JUL-31-1999 APR-30-1999 APR-30-1998
<CASH> 8,389 3,149 37,675
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 8,389 3,149 37,675
<PP&E> 0 0 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 8,389 3,149 37,675
<CURRENT-LIABILITIES> 2,565 3,082 0
<BONDS> 19,916 0 0
0 0 0
0 0 0
<COMMON> 6,278 6,278 6,000
<OTHER-SE> (20,461) (6,211) 31,675
<TOTAL-LIABILITY-AND-EQUITY> 8,389 3,149 37,675
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 6,944 226,322 60,159
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (6,944) (226,322) (60,159)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (6,944) (226,322) (60,159)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (6,944) (226,322) (60,159)
<EPS-BASIC> (0.00) (0.04) (0.21)
<EPS-DILUTED> 0 0 0
</TABLE>
