<PAGE>
OPTION AGREEMENT
----------------
THIS AGREEMENT made as of the 15th day of July, 2000
BETWEEN:
JOHN D. MACPHERSON, of RR1, S35, C7
Castlegar, BC V1N 3H7
(the "Optionor")
OF THE FIRST PART
AND:
COYOTE VENTURES CORP., of 202 - 1201 West
Pender Street, Vancouver, BC V6E 2V2
(the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Optionor is the owner of certain mineral claims
located in the Slocan Mining Division of British Columbia;
B. The Optionor has agreed to grant an exclusive option to
the Optionee to acquire an interest in and to the Property, on the
terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
sum of $1.00 now paid by the Optionee to the Optionor (the receipt
of which is hereby acknowledged), the parties agree as follows:
DEFINITIONS
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1. For the purposes of this Agreement the following words
and phrases shall have the following meanings, namely:
(a) "Exploration Expenditures" means the sum of:
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(i) all costs of acquisition and maintenance of the
Property, all expenditures on the exploration and
development of the Property, and all other costs
and expenses of whatsoever kind or nature,
including those of a capital nature, incurred or
chargeable by the Optionee with respect to the
exploration of the Property, and
(ii) as compensation for general overhead expenses
which the Optionee may incur, an amount equal to
10% of all amounts included in subparagraph (i)
in each year but only 5% of such amounts when
paid by the Optionee under any contract involving
payments by it in excess of $100,000 in one year;
(b) "Option" means the option to acquire a 100% undivided
interest in and to the Property as provided in this
Agreement;
(c) "Option Period" means the period from the date of this
Agreement to and including the date of exercise or
termination of the Option;
(d) "Property" means the mineral claims described in Schedule
"A" hereto including any replacement or successor claims,
and all mining leases and other mining interests derived
from any such claims. Any reference herein to any
mineral claim comprising the Property includes any
mineral leases or other interests into which such mineral
claim may have been converted;
(e) "Property Rights" means all licenses, permits, easements,
rights-of-way, certificates and other approvals obtained
by either of the parties either before or after the date
of this Agreement and necessary for the exploration of
the Property;
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONOR
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2. (a) The Optionor represents and warrants to and covenants
with the Optionee that:
(i) it is legally entitled to hold the Property and
the Property Rights and will remain so entitled
until the interest of the Optionor in the
Property which is subject to the Option has been
duly transferred to the Optionee as contemplated
hereby;
(ii) it is, and at the time of each transfer to the
Optionee of an interest in the mineral claims
comprising the Property pursuant to the exercise
of the Option it will be, the recorded holder and
beneficial owner of all of the mineral claims
comprising the Property free and clear of all
liens, charges and claims of others, except as
noted on Schedule "A", and no taxes or rentals
are or will be due in respect of any of the
mineral claims;
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3
(iii) the mineral claims comprising the Property have
been duly and validly located and recorded
pursuant to the laws of the jurisdiction in which
the Property is situate and are in good standing
with respect to all filings, fees, taxes,
assessments, work commitments or other conditions
on the date hereof and until the dates set
opposite the respective names thereof in Schedule
"A";
(iv) there are not any adverse claims or challenges
against or to the ownership of or title to any of
the mineral claims comprising the Property, nor
to the knowledge of the Optionor is there any
basis therefor, and there are no outstanding
agreements or options to acquire or purchase the
Property or any portion thereof, and no person
other than the Optionor, pursuant to the
provisions hereof,] has any royalty or other
interest whatsoever in production from any of the
mineral claims comprising the Property other than
as set out in Schedule "A";
(v) no proceedings are pending for, and the Optionor
is unaware of any basis for the institution of
any proceedings leading to the placing of the
Optionor in bankruptcy or subject to any other
laws governing the affairs of insolvent persons;
(b) The representations and warranties contained in this
section are provided for the exclusive benefit of the
Optionee, and a breach of any one or more thereof may be
waived by the Optionee in whole or in part at any time
without prejudice to its rights in respect of any other
breach of the same or any other representation or
warranty, and the representations and warranties
contained in this section shall survive the execution of
this Agreement and of any transfers, assignments, deeds
or further documents respecting the Property.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONEE
---------------------------------------------------------
3. (a) The Optionee represents and warrants to and covenants
with the Optionor that:
(i) it has been duly incorporated, amalgamated or
continued and validly exists as a corporation in
good standing under the laws of its jurisdiction
of incorporation, amalgamation or continuation;
(ii) it will on exercise of the Option be lawfully
authorized to hold mineral claims and real
property under the laws of the jurisdiction in
which the Property is situate;
(iii) it has duly obtained all corporate authorizations
for the execution of this Agreement and for the
performance of this Agreement by it, and the
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4
consummation of the transactions herein
contemplated will not conflict with or result in
any breach of any covenants or agreements
contained in, or constitute a default under, or
result in the creation of any encumbrance under
the provisions of the Articles or the constating
documents of the Optionee or any shareholders' or
directors' resolution, indenture, agreement or
other instrument whatsoever to which the Optionee
is a party or by which it is bound or to which it
or the Property may be subject;
(iv) no proceedings are pending for, and the Optionee
is unaware of any basis for the institution of
any proceedings leading to, the dissolution or
winding up of the Optionee or the placing of the
Optionee in bankruptcy or subject to any other
laws governing the affairs of insolvent
corporations;
(b) The representations and warranties contained in this
section are provided for the exclusive benefit of the
Optionor and a breach of any one or more thereof may be
waived by the Optionor in whole or in part at any time
without prejudice to its rights in respect of any other
breach of the same or any other representation or
warranty, and the representations and warranties
contained in this section shall survive the execution
hereof.
GRANT AND EXERCISE OF OPTION
----------------------------
4. (a) The Optionor hereby grants to the Optionee the sole and
exclusive right and option to acquire a 100% undivided
interest in and to the Property free and clear of all
charges, encumbrances and claims.
(b) The Option shall be exercised by the Optionee:
(i) paying the Optionor $5,000 US on the execution of
this Agreement, the receipt of which is hereby
acknowledged by the Optionor;
(ii) paying the Optionor up to $560,000 US as follows:
(A) $10,000 US on or before June 30, 2001, the
first anniversary of the date of this
Agreement;
(B) an additional $50,000 US on or before
December 31, 2001; and
(C) an additional $500,000 US on or before
December 31, 2002.
(iii) incurring Exploration Expenditures of up to
$112,000 US on the Property as follows:
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5
(A) $2,000 US on or before December 31, 2000;
(B) a further $10,000 US on or before June 30,
2001; and
(C) a further $100,000 US on or before December
31, 2001.
In the event that the Optionee spends, in any of the
above periods, less than the specified sum, it may pay to
the Optionor the difference between the amount it
actually spent and the specified sum before the expiry of
that period in full satisfaction of the Exploration
Expenditures to be incurred. In the event that the
Optionee spends, in any period, more than the specified
sum, the excess shall be carried forward and applied to
the Exploration Expenditures to be incurred in succeeding
periods.
(c) If and when the Option has been exercised, a 100%
undivided right, title and interest in and to the
Property shall vest in the Optionee free and clear of all
charges, encumbrances and claims.
TRANSFER OF PROPERTY
--------------------
5. The Optionor shall, forthwith after the exercise of the
Option by the Optionee, deliver to the Optionee duly executed
transfers of the appropriate interest in the Property which shall
have been acquired by the Optionee upon exercise of the Option.
RIGHT OF ENTRY
--------------
6. Throughout the Option Period the directors and officers
of the Optionee and its servants, agents and independent
contractors, shall have the sole and exclusive right in respect of
the Property to:
(a) enter thereon;
(b) have exclusive and quiet possession thereof;
(c) do such prospecting, exploration, development and other
mining work thereon and thereunder as the Optionee in its
sole discretion may determine advisable;
(d) bring upon and erect upon the Property such buildings,
plant, machinery and equipment as the Optionee may deem
advisable; and
(e) remove therefrom and dispose of reasonable quantities of
ores, minerals and metals for the purposes of obtaining
assays or making other tests.
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6
OBLIGATIONS OF THE OPTIONEE DURING OPTION PERIOD
------------------------------------------------
7. During the Option Period the Optionee shall:
(a) maintain in good standing those mineral claims comprising
the Property by the doing and filing of assessment work
or the making of payments in lieu thereof, by the payment
of taxes and rentals, and the performance of all other
actions which may be necessary in that regard and in
order to keep such mineral claims free and clear of all
liens and other charges arising from the Optionee's
activities thereon except those at the time contested in
good faith by the Optionee;
(b) permit the directors, officers, employees and designated
consultants of the Optionor, at their own risk and
expense, access to the Property at all reasonable times,
and the Optionor agrees to indemnify the Optionee against
and to save it harmless from all costs, claims,
liabilities and expenses that the Optionee may incur or
suffer as a result of any injury (including injury
causing death) to any director, officer, employee or
designated consultant of the Optionor while on the
Property;
(c) do all work on the Property in a good and workmanlike
fashion and in accordance with all applicable laws,
regulations, orders and ordinances of any governmental
authority;
(d) indemnify and save the Optionor harmless in respect of
any and all costs, claims, liabilities and expenses
arising out of the Optionee's activities on the Property,
but the Optionee shall incur no obligation hereunder in
respect of claims arising or damages suffered after
termination of the Option if upon termination of the
Option any workings on or improvements to the Property
made by the Optionee are left in a safe condition;
(e) permit the Optionor, at its own expense, reasonable
access to the results of the work done on the Property
during the last completed calendar year;
(f) deliver to the Optionor, forthwith upon receipt thereof,
copies of all reports, maps, assay results and other
technical data compiled by or prepared at the direction
of the Optionee with respect to the Property.
TERMINATION OF OPTION BY OPTIONEE
---------------------------------
8. (a) The Option shall terminate:
(i) upon the Optionee failing to incur or make any
expenditure or payment which must be incurred or
made in exercise of the Option; or
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7
(ii) at any other time, by the Optionee giving notice
of such termination to the Optionor.
(b) If the Option is terminated the Optionee shall:
(i) leave in good standing for a period of at least
12 months from the termination of the Option
Period those mineral claims comprising the
Property;
(ii) deliver or make available at no cost to the
Optionor within 90 days of such termination, all
drill core, copies of all reports, maps, assay
results and other relevant technical data
compiled by, prepared at the direction of, or in
the possession of the Optionee with respect to
the Property and not theretofore furnished to the
Optionor.
(c) Notwithstanding the termination of the Option, the
Optionee shall have the right, within a period of 180
days following the end of the Option Period, to remove
from the Property all buildings, plant, equipment,
machinery, tools, appliances and supplies which have been
brought upon the Property by or on behalf of the
Optionee, and any such property not removed within such
180 day period shall thereafter become the property of
the Optionor.
TRANSFERS
---------
9. (a) The Optionee may at any time either during the Option
Period or thereafter, sell, transfer or otherwise dispose
of all or any portion of its interest in and to the
Property and this Agreement provided that any purchaser,
grantee or transferee of any such interest shall have
first delivered to the Optionor its agreement relating to
this Agreement and to the Property, containing:
(i) a covenant to perform all the obligations of the
Optionee to be performed under this Agreement in
respect of the interest to be acquired by it from
the Optionee to the same extent as if this
Agreement had been originally executed by such
purchaser, grantee or transferee; and
(ii) a provision subjecting any further sale, transfer
or other disposition of such interest in the
Property and this Agreement or any portion
thereof to the restrictions contained in this
paragraph (a).
(b) No assignment by the Optionee of any interest less than
its entire interest in this Agreement and in the Property
shall, as between the Optionee and the Optionor,
discharge it from any of its obligations hereunder, but
upon the transfer by the Optionee of the entire interest
at the time held by it in this Agreement, whether to one
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8
or more transferees and whether in one or in a number of
successive transfers, the Optionee shall be deemed to be
discharged from all obligations hereunder save and except
for the fulfilment of contractual commitments accrued due
prior to the date on which the Optionee shall have no
further interest in this Agreement.
(c) If the Optionor should receive a bona fide offer from an
independent third party (the "Proposed Purchaser")
dealing at arm's length with the Optionor to purchase all
or a part of its interest in the Property, which offer
the Optionor desires to accept, or if the Optionor
intends to sell all or a part of its interest in the
Property:
(i) The Optionor shall first offer (the "Offer") such
interest in writing to the Optionee upon terms no
less favourable than those offered by the
Proposed Purchaser or intended to be offered by
the Optionor, as the case may be.
(ii) The Offer shall specify the price, terms and
conditions of such sale, the name of the Proposed
Purchaser and shall, in the case of an intended
offer by the Optionor, disclose the person or
persons to whom the Optionor intends to offer its
interest and, if the offer received by the
Optionor from the Proposed Purchaser provides for
any consideration payable to the Optionor
otherwise than in cash, the Offer shall include
the Optionor's good faith estimate of the cash
equivalent of the non-cash consideration.
(iii) If within a period of 60 days of the receipt of
the Offer the Optionee notifies the Optionor in
writing that it will accept the Offer, the
Optionor shall be bound to sell such interest to
the Optionee on the terms and conditions of the
Offer. If the Offer so accepted by the Optionee
contains the Optionor's good faith estimate of
the cash equivalent of the non cash consideration
as aforesaid, and if the Optionee disagrees with
the Optionor's best estimate, the Optionee shall
so notify the Optionor at the time of acceptance
and the Optionee shall, in such notice, specify
what it considers, in good faith, the fair cash
equivalent to be and the resulting total purchase
price. If the Optionee so notifies the Optionor,
the acceptance by the Optionee shall be effective
and binding upon the Optionor and the Optionee,
and the cash equivalent of any such non-cash
consideration shall be determined by binding
arbitration and shall be payable by the Optionee,
subject to prepayment as hereinafter provided,
within 60 days following its determination by
arbitration. The Optionee shall in such case pay
to the Optionor, against receipt of an absolute
transfer of clear and unencumbered title to the
interest of the Optionor being sold, the total
purchase price which is specified in its notice
to the Optionor and such amount shall be credited
to the amount determined following arbitration of
the cash equivalent of any non-cash
consideration.
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9
(iv) If the Optionee fails to notify the Optionor
before the expiration of the time limited
therefor that it will purchase the interest
offered, the Optionor may sell and transfer such
interest to the Proposed Purchaser at the price
and on the terms and conditions specified in the
Offer for a period of 60 days, but the terms of
this paragraph shall again apply to such interest
if the sale to the Proposed Purchaser is not
completed within such 60 days.
(v) Any sale hereunder shall be conditional upon the
Proposed Purchaser delivering a written
undertaking to the Optionee, in form and
substance satisfactory to its counsel, to be
bound by the terms and conditions of this
Agreement.
SURRENDER OF PROPERTY INTERESTS
PRIOR TO TERMINATION OF AGREEMENT
---------------------------------
10. The Optionee may at any time during the Option Period elect
to abandon any one or more of the mineral claims comprised in
the Property by giving notice to the Optionor of such intention.
Any claims so abandoned shall be in good standing under the laws of
the jurisdiction in which they are situate for at least 12 months
from the date of abandonment. Upon any such abandonment, the
mineral claims so abandoned shall for all purposes of this
Agreement cease to form part of the Property and, if title to such
claims has been transferred to the Optionee the Optionee shall
retransfer such title to the Optionor at the Optionee's expense.
FORCE MAJEURE
-------------
11. (a) If the Optionee is at any time either during the Option
Period or thereafter prevented or delayed in complying
with any provisions of this Agreement by reason of
strikes, lock-outs, labour shortages, power shortages,
fuel shortages, fires, wars, acts of God, governmental
regulations restricting normal operations, shipping
delays or any other reason or reasons, other than lack of
funds, beyond the control of the Optionee, the time
limited for the performance by the Optionee of its
obligations hereunder shall be extended by a period of
time equal in length to the period of each such
prevention or delay, but nothing herein shall discharge
the Optionee from its obligations hereunder to maintain
the Property in good standing;
(b) The Optionee shall give prompt notice to the Optionor of
each event of force majeure and upon cessation of such
event shall furnish to the Optionor with notice to that
effect together with particulars of the number of days by
which the obligations of the Optionee hereunder have been
extended by virtue of such event of force majeure and all
preceding events of force majeure.
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10
CONFIDENTIAL INFORMATION
------------------------
12. No information furnished by the Optionee to the Optionor
hereunder in respect of the activities carried out on the Property
by the Optionee shall be published or disclosed by the Optionor
without the prior written consent of the Optionee, but such consent
in respect of the reporting of factual data shall not be
unreasonably withheld, and shall not be withheld in respect of
information required to be publicly disclosed pursuant to
applicable securities or corporation laws, regulations or policies.
ARBITRATION
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13. (a) All questions or matters in dispute under this Agreement
shall be submitted to arbitration pursuant to the terms
hereof.
(b) It shall be a condition precedent to the right of any
party to submit any matter to arbitration pursuant to the
provisions hereof, that any party intending to refer any
matter to arbitration shall have given not less than 10
days' prior notice of its intention to do so to the other
party, together with particulars of the matter in
dispute. On the expiration of such 10 days, the party
who gave such notice may proceed to refer the dispute to
arbitration as provided in paragraph (c).
(c) The party desiring arbitration shall appoint one
arbitrator, and shall notify the other party of such
appointment, and the other party shall, within 15 days
after receiving such notice, either consent to the
appointment of such arbitrator which shall then carry out
the arbitration or appoint an arbitrator, and the two
arbitrators so named, before proceeding to act, shall,
within 30 days of the appointment of the last appointed
arbitrator, unanimously agree on the appointment of a
third arbitrator to act with them and be chairman of the
arbitration herein provided for. If the other party
shall fail to appoint an arbitrator within 15 days after
receiving notice of the appointment of the first
arbitrator, the first arbitrator shall be the only
arbitrator. If the two arbitrators appointed by the
parties shall be unable to agree on the appointment of
the chairman, the chairman shall be appointed under the
provisions of the Commercial Arbitration Act of British
Columbia. Except as specifically otherwise provided in
this section, the arbitration herein provided for shall
be conducted in accordance with such Act. The chairman,
or in the case where only one arbitrator is appointed,
the single arbitrator, shall fix a time and place in
Vancouver, British Columbia, for the purpose of hearing
the evidence and representations of the parties, and he
shall preside over the arbitration and determine all
questions of procedure not provided for under such Act or
this section. After hearing any evidence and
representations that the parties may submit, the single
arbitrator, or the arbitrators, as the case may be, shall
make an award and reduce the same to writing, and deliver
one copy thereof to each of the parties. The expense of
the arbitration shall be paid as specified in the award.
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11
(d) The parties agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of
such arbitrator, shall be final and binding upon each of
them.
DEFAULT
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14. If at any time during the Option Period the Optionee is
in default of any provision in this Agreement (other than the
provisions of subparagraph 4(b) for which no notice of default need
be given), the Optionor may terminate this Agreement, but only if:
(a) it shall have first given to the Optionee a notice of
default containing particulars of the obligation which
the Optionee has not performed, or the warranty breached;
and
(b) the Optionee has not, within 45 days following delivery
of such notice of default, cured such default or
commenced proceedings to cure such default by appropriate
payment or performance, the Optionee hereby agreeing that
should it so commence to cure any default it will
prosecute the same to completion without undue delay.
Should the Optionee fail to comply with the provision of
subparagraph (b), the Optionor may thereafter terminate this
Agreement by giving notice thereof to the Optionee.
NOTICES
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15. Each notice, demand or other communication required or
permitted to be given under this Agreement shall be in writing and
shall be delivered, telegraphed or telecopied to such party at the
address for such party specified above. The date of receipt of
such notice, demand or other communication shall be the date of
delivery thereof if delivered or telegraphed or, if given by
telecopier, shall be deemed conclusively to be the next business
day. Either party may at any time and from time to time notify the
other party in writing of a change of address and the new address
to which notice shall be given to it thereafter until further
change.
GENERAL
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16. (a) This Agreement shall supersede and replace any other
agreement or arrangement, whether oral or written,
heretofore existing between the parties in respect of the
subject matter of this Agreement.
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12
(b) No consent or waiver expressed or implied by either party
in respect of any breach or default by the other in the
performance by such other of its obligations hereunder
shall be deemed or construed to be a consent to or a
waiver of any other breach or default.
(c) The parties shall promptly execute or cause to be
executed all documents, deeds, conveyances and other
instruments of further assurance and do such further and
other acts which may be reasonably necessary or advisable
to carry out fully the intent of this Agreement or to
record wherever appropriate the respective interest from
time to time of the parties in the Property.
(d) This Agreement shall enure to the benefit of and be
binding upon the parties and their respective successors
and permitted assigns.
(e) This Agreement shall be governed by and construed in
accordance with the laws of British Columbia and shall be
subject to the approval of all securities regulatory
authorities having jurisdiction.
(f) Time shall be of the essence in this Agreement.
(g) Wherever the neuter and singular is used in this
Agreement it shall be deemed to include the plural,
masculine and feminine, as the case may be.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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14
(h) Any reference in this Agreement to currency shall be
deemed to be United States currency.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the day and year first above written.
THE COMMON SEAL OF )
COYOTE VENTURES CORP. )
was hereunto affixed in the )
presence of: )
)
) c/s
)
Authorized Signatory )
)
)
/s/ S. Houghton )
)
Authorized Signatory )
SIGNED, SEALED AND DELIVERED )
BY JOHN D. MACPHERSON )
in the presence of: )
)
)
)
)
)
Signature ) Signature /s/ John D. MacPherson
)
)
Name Dominique Boulanger ) Witness /s/ Dominique Boulanger
)
Address 2429 10th Ave )
Castlegar, B.C. )
V1N 3A1 )
<PAGE>
SCHEDULE "A"
------------
A. Located Mineral Claims
Record
Claim Name Number Year of Expiry
---------- ------ --------------
Flint Claim 257117 September 29, 2001
all located in the Slocan Mining Division, British Columbia
