Attached files
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| 8-K/A - Sovereign Lithium, Inc. | form8k-a.htm |
THIS MINERAL PROPERTY OPTION AGREEMENT (the "Agreement") is dated and made for reference effective as of the 28 day of Apr, 2012 (the "Effective Date").
Between.:
David A. Wallach
0911325 BC Ltd.
P.O. Box 29191
Kelowna, BC, VIM 4A7
Tel: 250-801-7744
Fax: 250-764-1431
dwallach@dwexploration.com
OF THE FIRST PART
The aforementioned is referred to herein as the "Optionor".
AND:
Great American Energy, Inc.
A Company having an office at
999 18th Street, Suite 3000
Denver, Colorado
80202
Tel: 919-649-3587
(the "Company")
OF THE SECOND PART
The aforementioned is referred to herin as the "Optionee".
The Optionor and the Optionee are each referred to herein as a "Party" or collectively as the "Parties."
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RECITALS
WHEREAS, the Company, having an interest in the mining claims owned by the Optionor consisting of 10 mining claims containing 2,958.69 hectares nearby the community of Trail, BC which claims are more particularly described in Exhibit A (the "Property"), attached hereto; and
WHEREAS, pursuant to the terms as outlined in that certain letter agreement between the Parties, dated Apr 28, 2012 (the "Letter Agreement"), the Optionor wishes to grant to the Company an option to purchase Sixty per cent (60.0%) interest in and to the Property, and the Company wishes to option on the same terms and subject to the conditions as more particularly set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and representations and subject to the conditions herein, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Each Party represents and warrants to the other party hereto that:
A. Authority. Each Party has full power and authority to enter into this Agreement and any agreement referred to or contemplated by this Agreement.
B. No Conflicts. Neither the execution and delivery of this Agreement nor any of the agreements contemplated hereby, or the consummation of the transactions hereby contemplated, conflict with, or result in the breach of, or accelerate the performance required by any agreement to which it is a party, or result in the creation of any encumbrance under the provisions of any other indenture, agreement or other instrument to which the Party is a party or by which it is bound or to which it may be subject.
C. Diligence. Each Party will diligently and in good faith perform the duties and obligations set forth in this Agreement. In the event a Party conducts or supervises mining exploration, development or other activities on or related to the Property, it shall conduct or supervise the same in a careful, diligent, efficient and professional manner, shall file all eligible expenditures for assessment work with the appropriate mining claim recorder, shall obtain any and all necessary permits and approvals from the appropriate governmental agencies, and shall keep the Property in good standing.
2. REPRESENTATIONS AND WARRANTIES OF THE OPTIONOR
The Optionor represents and warrants to the Company that:
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A. Ownership. It is the legal and beneficial owner of all of the mineral interests comprising its respective interest in the Property, free and clear of all liens, charges and claims of others and, except as disclosed herein, no taxes or rentals are due with respect to the property, the Optionor has free and unimpeded right of access to the Property subject to government approvals, and the Optionor has use of the Property surface for the purposes described herein.
B. Interests Recorded. The mineral interests comprising the 'Property have been duly and validly located and recorded pursuant to the laws of the jurisdiction in which the Property is located, and the Property is in good standing with the Ministry of Energy, Mines and Petroleum Resources, Province of British Columbia, Canada as of the Effective Date.
C. No Adverse Claims. To the best of the Optionor's knowledge, there is no adverse claim or challenge against or to the ownership of or title to any of the mineral interest comprising the Property or which may impede development, nor to the knowledge of the Optionor is there any basis for any potential claim or challenge and there are no outstanding agreements or options to acquire or purchase the Property or any portion thereof and no persons have any royalty, net profits or other interests whatsoever in production from any of the mineral interest comprising the Property.
D. No Restrictions. To the best of the Optionor's knowledge, there are no restrictions on the exploitation of minerals on the Property except as required by the Province of British Columbia, Ministry of Energy, Mines and Petroleum Resources.
E. No Violation. To the best of the Optionor's knowledge, the conditions existing on or with respect to the Property and Optionor's ownership and operation of the Property are not in violation of any applicable laws, rules or regulations (including without limitation any environmental laws) nor causing or permitting any damage (including Environmental Damage, as defined below) or impairment to the health, safety, or enjoyment of any person at or on the Property or in the general vicinity of the Property.
F. No Environmental Damage. To the best of the Optionor's knowledge, there have been no past violations by Optionor or to Optionor's knowledge, by any of its predecessors in title, of any environmental laws or other laws or regulations affecting or pertaining to the Property, nor any past creation of damage or threatened damage to the air, soil, surface waters, groundwater, flora, fauna, or other natural resources on, about or in the general vicinity of the Property ("Environmental Damage").
G. Bear Creek Rare Earths Project Report. The mineral interests as referred to in the Bear Creek Rare Earths Project dated February 12, 2011 and authored by Dr. Stewart Jackson, Ph D, P. Geol., are consistent with the mining claims owned by the Optionor, more specifically, the 10 mining claims containing 2,958.69 hectares nearby the community of Trail, BC and exhibited in Exhibit A of this agreement. It is also represented that the professional qualifications of Dr. Stewart Jackson have been duly and validly confirmed as in good standing, and that he holds a Professional Geologist (P. Geol.) Registration in the Provinces of Alberta and Ontario.
3. GRANT OF OPTION
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A. Grant of Option. The Optionor hereby grants to the Company the sole and exclusive right and option to acquire an undivided Sixty per cent (60%) legal and beneficial interest in and to the Property free and clear of all liens, charges, and claims of others (the "Option").
B. Option Deadline. The Option must be exercised on or before Apr 30, 2015 (the "Option Deadline").
C. Option Period. The period of time beginning with the Effective Date and ending with the Option Deadline is referred to herein as the "Option Period."
D. Exercise of Option. Upon the Company's satisfaction of the Conditions of Exercise, as defined and set forth in. Section 4 below, the Company may, at its sole and absolute discretion, exercise the Option by providing notice to the Optionor prior to the Option Deadline of its intent to exercise the Option (the "Exercise Notice"). Upon delivery of the Exercise Notice after satisfaction of the Conditions of Exercise, the Optionor shall be deemed to have transferred to the Company an undivided Sixty percent (60%) interest in the Property, such transfer to take effect in accordance with Section 5 below.
4. CONDITIONS OF EXERCISE
Exercise of Option. The Company may exercise the Option to acquire an undivided Sixty per cent (60%) legal and beneficial interest in and to the 'Property free and clear of all liens, charges, and claims of others by satisfying the conditions set forth in this section 4 (the "Conditions of Exercise").
A. Cash Payments. During the Option Period, the Company shall make cash payments to the Optionor totaling Three Hundred and Fifty Thousand Dollars ($350,000) according to the following schedule:
(1) $75,000 as upon execution and acceptance of the Letter Agreement;
(2) $75,000 within 90 days of the closing of the Letter Agreement;
(3) $75,000 within 180 days of the closing of the Letter Agreement;
(4) $50,000 within 240 days of the closing of the Letter Agreement;
(5) $50,000 within 1 year of the closing of the Letter Agreement; and
(6) $25,000 for staking additional claims within the Area of Mutual Interest as defined in Section 10(C) of this Letter Agreement to be paid within 30 days of proof of availability and staking.
B. Work Commitment.
(1) During the Option Period, the Company shall incur or fund a minimum of Three Hundred and Fifty Thousand Dollars ($350,000), according to the following schedule:
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(i) $100,000 within 12 months of the closing of the Letter Agreement;
(ii) An additional $250,000 within 24 months of the closing of the Letter Agreement
(iii) At the Company's sole and absolute discretion, it may increase the Work Commitment by an additional $250,000, at such time as it deems appropriate, but in no event later than Apr 30, 2015, thereby increasing its percentage interest in the Property by an additional 10%. For the avoidance of doubt, the Company need only meet the minimum Work Commitment of $350,000 in order to exercise the Option.
(2) Consultant. The Company will pay the Optionor $5,000/ month for a period of 1 year for services relating to the strategic oversight of the Bear Creek Property. At the discretion of the Company, the Optionor will be offered a 1 year extension at $5,000/ month and sit on the Company's Board of Advisors for this period. Any amounts paid to the Optionor will be deemed part of the work commitment.
(3) Work Commitment Definition. The term "Work Commitment" shall be defined herein as the sum of all monies spent in prospecting, exploring, conducting geological, geophysical and geochemical surveying, sampling, examining, diamond and other types of drilling, developing, dewatering, assaying, testing, constructing, maintaining and operating roads, trails and bridges upon or across the Property, buildings, equipment, plant and supplies, salaries and wages of employees and contractors directly engaged therein, insurance premiums, and all other expenses ordinarily incurred in prospecting, exploring and developing mining lands and also includes monies spent in acquiring additional claims or concessions within the Area of Mutual Interest (as defined in Section 10 below), which shall form part of the Property. Work Commitment shall also include all tax payments as well as legal costs and fees related to the registration of titles and agreements with the appropriate government agencies. The Company shall have the sole discretion to manage the Work Commitment.
(4) Work Commitment Shortfall. If the Company, by the Option Deadline, has not incurred or funded the total amount of the Work Commitment required under this Section, the Company may pay to the Optionor an amount equal to such shortfall in Work Commitment within thirty (30) days after the Option Deadline. Any payment so made shall be deemed to be Work Commitment duly and properly incurred within the Option Period for the purposes of the Conditions of Exercise.
(5) Work Commitment Excess. If the amount of Work Commitment incurred at any time exceeds the Work Commitment required under the Conditions of Exercise of the period next due to expire, then such excess shall be credited to the following period's commitment.
C. Issuance of Company Common Stock.
(1) Conditional Stock. If, during the Option Period, the work program provides evidence that there is the equivalent of $1 Billion gross value on the Property, the Company shall issue the Optionor one million (1,000,000) additional common shares of the Company. Such estimates are to be evidenced by an independent third party report as agreed upon by the Parties based on reputable industry standards (eg., 43-101).
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(2) Restricted Securities. The Optionor understands that the common stock issued pursuant to this section are characterized as "restricted securities" under the U.S. federal securities laws as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations, such securities may not be resold without registration under such federal and state securities laws as may be applicable, or pursuant to an available exemption therefrom. The Company hereby agrees to take whatever actions necessary to have these shares of common stock registered and become tradeable under the appropriate securities laws.
D. Conveyance of Interest Back to Optionor. In the event that the Company does not, in its sole and absolute discretion, achieve the exploration results it requires for the purpose of developing the Property, the Company shall provide notice and convey back to the Optionor the Company's interest in the Property with a minimum of one (1) outstanding year assessment on all claims on or before the Option Deadline.
E. Net Smelter Royalty. The Optionor shall retain a Net Smelter Royalty ("NSR") in the entire area of the claims including any additional claims obtained in the Area of Mutual Interest. The NSR is more specifically defined in Section 8 below.
5. TRANSFER OF PROPERTY
Upon the Company's satisfaction of the Conditions of Exercise, the Optionor shall be deemed to have transferred to the Company an undivided legal and beneficial interest of sixty percent (60%) in the Property free and clear of all liens, charges, and claims of others and the Optionor shall deliver to the Company such documentation as may be necessary to record the transfer with the Province of British Columbia, Department of Energy, Mines and Petroleum Resources, and any other appropriate government agency. The Optionor will provide any further assistance as may be reasonably required for the Company to perfect its interest in the Property. Further, upon the Company's exercise of the Option, the Parties shall enter into such further documentation, including, but not limited to, such joint venture agreement, as may be deemed reasonably necessary or convenient, to document the Company's and Optionor's ongoing means of owning and operating the Property as 60% and 40% owners, respectively.
6. PURCHASE OF THE OPTIONOR'S INTEREST
A. Right to Purchase Optionor's Interest. Not withstanding the additional percentage interest as outlined in Section 4(B)(iii), upon satisfying the Work Commitment, or at any time thereafter, the Company shall have the right to purchase the Optionor's 40% percent carried interest, in the Property from the Optionor as follows:
Following the completion of the Work Commitment, the Optionor and the Company shall mutually agree upon and hire an independent mining engineer or qualified geologist who shall prepare a "Valuation Report" for the Property which includes a fair market price for the Optionor's interest (the -Market Price"). Upon receipt of such report, the Optionor may:
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(1)
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Elect to continue as a forty per percent (40%) carried partner;
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(2)
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Offer its interest in the Property to the Company at the Market Price. The Company will have 30 days to make a decision whether to acquire said interest or not; or
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(3)
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If the Company chooses not to acquire the Optionor's interest in the Property, the Optionor may offer its interest in the Property to a third party on the basis that the 40% interest becomes a joint venture partner interest.
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If the Valuation Report is completed subsequent to the fulfillment of terms required for election of the 10% as outlined in Section 4(B)(iii), the percentage under consideration would then be 30% for purposes of this Section 6.
7. OBLIGATIONS OF THE PARTIES DURING THE OPTION PERIOD
A. Memorandum of Agreement. Within one (1) month of the Effective Date, the Company shall record a Memorandum of Agreement, which shall record the Parties' interests with respect to the Property with the appropriate mining recorder.
B. Additional Memoranda. Within one (1) month of the acquisition of any interest in the Area of Mutual Interest, as the term is defined below, by either Party, the acquiring Party shall record the Parties' interests with respect to the Property with the appropriate mining recorder. If an interest in the Area of Mutual Interest is acquired pursuant to a joint bid, the Company shall record. the Parties' interests with the appropriate mining recorder.
C. Third Party Memorandum. Within one (1) month of the execution of any joint venture agreement, option agreement, or assignment agreement with respect to the Property or this Agreement by either Party with a third party, the Party which executed such agreement shall record the Parties' interests with respect to the Property with the appropriate mining recorder.
8. NET SMELTER ROYALTY
The Company agrees to pay to the Optionor a net smelter returns royalty (the "NSR") as follows:
A. NSR. The Optionor shall retain a two percent (2%) NSR for any and all tonnage mined and delivered from the Property for any and all minerals. Such 2% NSR shall also apply with respect to any part or parts of any mining claims staked within the Area of Mutual Interest, which shall be included in the NSR subject to sale in accordance with paragraph (B) below.
B. Purchase of NSR. The Company shall have the right to purchase up to one percent (1%) of the total NSR from the Optionor for an aggregate purchase price of Ten Million Dollars ($10,000,000).
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C. Costs Related to NSR. If the mineral products are treated by an arm's length party at a smelter, refinery or mint, or at a smelter, refinery or mint owned, operated or controlled by the Company or an affiliate of it, all expenses relating thereto, including smelting, refining or minting of such products expenses, from the smelter, refinery or mint, as the case may be, the costs or charges at a smelter, refinery, roaster or mint, all expenses relating thereto, including all costs and charges for the treatment, tolling, smelting, refining or minting of such mineral products, from the smelter, refiner, roaster or mint, as the case may be, and the costs associated with mining, milling, concentrating and transportation are excluded from the NSR calculations. Only the freight costs on the concentrate shipped to a refinery or a smelter may be deducted from the NSR. Optionor has, at its sole discretion, the right to take their respective NSR share in the mineral product produced.
D. Calculation of NSR. Net smelter returns shall be calculated by the Company and audited statements shall be provided and sent out to the Optionor each quarter of the year in which the ores or concentrates from the Property and additional staked mining claims, if any, were sold or otherwise deemed disposed of and payment to the Optionor shall be made by certified checks issued quarterly.
9. RIGHT OF ENTRY
Right of Entry. During the Option Period, the Company and its agents, employees and independent contractors, shall have the right, with respect of the property, to:
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(1)
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Enter in, under and upon the Property;
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(2)
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Have quiet possession of the Property;
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(3)
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Do such prospecting, exploration, development and or other mining work thereon and there-under as it in its sole discretion may determine advisable;
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(4)
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Bring upon and erect upon the Property buildings, plant, machinery and equipment as the Company may deem advisable; and
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(5)
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Remove from the Property and dispose of the ores, minerals and metals for the purpose of obtaining assays or making other tests, or for their sale.
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10. AREA OF MUTUAL INTEREST
A. Area of Mutual Interest. The Parties agree that there will be an area of mutual interest encompassing all mining claims and real property within a 20 kilometer radius of the Property as more particularly described in Exhibit B attached hereto and incorporated herein by reference (the "Area of Mutual Interest").
B. Acquisition of Property in the Area of Mutual Interest. The Company and the Optionor agree that this 20 kilometer area of mutual interest from the current outer claim boundaries, if staked, will become part of and form part of this Agreement and subject to Optionor's 40% ownership interest and the 2% NSR. The work commitment as set forth in Section 4.B does not apply to any additional mining claims staked within the area of interest.
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C. Payment of Additional Property in the Area of Mutual Interest. For purposes of Section 4(A)(4) in this Letter Agreement, it is the Company's understanding that claims adjacent to the Property are available for staking, and that the Optionor will undertake best efforts to stake such claims totaling 5,000 hectares. The Company will commit $25,000 if the Optionor stakes at least 2,500 hectares in the Area of Mutual Interest.
11. TERMINATION
A. Termination. This Agreement shall terminate if the Company fails to satisfy the Conditions of Exercise set forth in Section 4.
B. Liability. In the event of the termination of this Agreement, the Company shall not be relieved of any liability related to the exploration and or mining activities conducted on the property and the Company shall comply with all laws and regulations of the Province of British Columbia relating to rehabilitation of the property.
C. Delivery of Reports. In the event of the termination of this Agreement, the Company shall deliver at no cost to the Optionor within thirty (30) days of termination, all copies of all reports, maps, assay results and all other relevant technical data compiled by, for or in the possession of the Company with respect to the Property.
D. Discharge of Liens. In the event of the termination of this Agreement, the Company shall remove or discharge any and liens placed on the Property by the Company, at no cost to the Optionor.
E. Removal of Buildings and Equipment. Notwithstanding termination, the Company shall have the right, within a period of thirty (30) days following termination, 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 Company, and any such property not removed within such 30 day period shall thereafter become the property of the Optionor.
12. ASSIGNMENT
This Agreement may not be assigned without the written consent of the other Party, such consent not to be unreasonably withheld.
13. CONFIDENTIAL INFORMATION
No information furnished by the Company to the Optionor hereunder with respect to the activities carried out on the Property by the Company, or related to the sale of product derived from the Property, shall be published by the Optionor without the prior written consent of the Company. The Optionor shall keep all terms of this agreement strictly confidential except as required by statute.
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14. GENERAL
A. Notice. Any notice or report required or permitted by this Agreement shall be deemed given if delivered personally or if sent by either party to the other by certified or registered first class mail, return receipt requested and postage prepaid, at such other party's address as set forth above or such other address as either party may specify in writing. if by mail, delivery shall be deemed effective three (3) business days after mailing in accordance with the above provisions.
The Optionor's address for notice shall be the address set forth on the first page of this Agreement.
The Company's address for notice shall be the address set forth on the first page of this Agreement.
B. Counterparts. This Agreement may be executed by the Parties in one or more counterparts by original or facsimile signature, each of which when so executed and delivered shall be an original and such counterparts shall together constitute the Agreement.
C. Severability. In the event that any term or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, void, or unenforceable shall not be affected thereby and shall remain in full force and effect.
D. Entire Agreement. The Parties hereto agree that the terms and conditions of this Agreement and all exhibits and attachments which are incorporated herein by reference shall supersede and replace any other agreements or arrangements, whether written or oral, heretofore existing among the Parties in respect of the subject matter of this Agreement, including, without limitation, the Letter Agreement, and constitutes the entire agreement between the Optionor and the Company.
E. Titles. The titles to the respective paragraphs hereof shall not be deemed as part of this Agreement but shall be regarded as having been used for convenience only.
F. Currency. In this Agreement, all dollar amounts are expressed in lawful currency of the United States of America, unless specifically provided to the contrary.
G. Governing Law. This Agreement shall be subject to the Laws of the Province of British Columbia, Canada. Any disputes arising under this agreement shall be adjudicated in the Province of British Columbia.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been executed by Optionor, and the Company as of the day and year first above written.
Optionor:
0911325 BC Ltd.
/s/ Dave Wallach
By: Dave Wallach
Its: CEO
Company:
Great American Energy, Inc.
/s/ Geoff Evett
By: Geoff Evett
Its: Director
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EXHIBIT A
The Bear Creek Property is located a few kilometers north-east of Trail, BC and contains 10 mineral claims totaling 2,958.69 hectares held 100% by David Wallach of 0911325 BC Ltd.
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Tenure#
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Type
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Claim Name
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Owner
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Map#
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Good to Date
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Status
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Hectares
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634483
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Mineral
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McMahon 1
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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507.31
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704603
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Mineral
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Bear Creek
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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63.4
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738062
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Mineral
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Bear Creek
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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528.35
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743442
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Mineral
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Bear Creek 3
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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528.24
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743482
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Mineral
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Bear Creek 4
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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380.42
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744422
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Mineral
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Bear Creek 5
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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63.42
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785343
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Mineral
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Bear Creek 6
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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84.57
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814483
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Mineral
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Bear Creek North
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D.A. Wallach 100%
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82 F
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2011/Sep/30
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Good
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190.14
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832600
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Mineral
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Bear Creek 7
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D.A. Wallach 100%
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82 F
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2011/Sep/01
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Good
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528.28
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832601
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Mineral
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Bear Creek 8
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D.A. Wallach 100%
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82 F
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2011/Sep/01
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Good
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84.56
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EXHIBIT B
Area of Mutual Interest
The Area of Mutual Interest shall encompass any and all mining claims and properties within an 8.5 kilometer perimeter of the Property.
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