Exhibit 10.1


 


AGENCY AGREEMENT


 


February 22,
2006


 


U.S. Gold
Corporation


99 George Street


3rd Floor


Toronto, Ontario M5A 2N4


 


Attention:                                         Robert R. McEwen, Chairman
and Chief Executive Officer


 


Dear Sirs:


 


The
undersigned, GMP Securities L.P. and Griffiths McBurney Corp. (collectively,
the “Agent”), understands that
U.S. Gold Corporation (the “Company”)
proposes to issue and sell up to 11,200,000 subscription receipts
(individually, a “Subscription Receipt” and,
collectively, the “Subscription Receipts”)
having the terms described herein, at a price of US$4.50 per Subscription
Receipt (the “Issue Price”) for aggregate gross
proceeds to the Company of up to US$50,400,000.
Each Subscription Receipt shall be automatically converted, upon the occurrence
of the Release Conditions (as defined below), subject to adjustment and
dilution penalties in certain instances, and without payment of any further
consideration, into one unit of the Company (a “Unit”).
 Each Unit shall be comprised of one
share of common stock, no par value, of the Company (a “Unit Share”)
and one-half of one share purchase warrant of the Company (each whole share
purchase warrant being a “Warrant”). Each
Warrant will entitle the holder thereof to purchase one share (a “Warrant Share”) for a period of five years following the
Closing Date (as defined below) at a price of US$10.00.


 


The
Agent shall have an option (the “Agent’s Option”)
to sell up to 5,500,000 additional Subscription Receipts at the
Issue Price. The Agent’s Option shall be exercisable, in whole or in part at
the sole discretion of the Agent at any time until the Closing Time (as
hereinafter defined). The offering of
Subscription Receipts is hereinafter referred to as the “Offering”.
Unless the context otherwise requires, all references to the “Subscription Receipts” shall assume the exercise of the
Agent’s Option.


 


Upon and subject to the terms and conditions set forth
herein, the Agent hereby agrees to act, and upon acceptance hereof the Company
hereby appoints the Agent, as the Company’s exclusive agent to offer for sale
the Subscription Receipts on a “best efforts” agency basis, without underwriter
liability, at the Issue Price, and agrees to arrange for purchasers for the
Subscription Receipts resident in the Selling Jurisdictions (as hereinafter
defined).


 


The Subscription
Receipts will be issued pursuant to the provisions of a subscription receipt
agreement (the “Subscription Receipt
Agreement”) to be dated the date hereof among the Company, the Agent
and Equity Transfer Services Inc. (the “Transfer Agent”).
The specific attributes of the Subscription Receipts will be set forth in the
Subscription Receipt Agreement.   The
Subscription Receipt Agreement will otherwise be in such form and contain
such terms as approved by the Agent, the Company and their respective counsel. The
Purchasers (as


 

















 


hereinafter defined),
Agent and other holders (including subsequent transferees) of the Subscription
Receipts (and any holders of Registrable Securities (as hereinafter defined)
will be entitled to the benefits of the registration rights agreement, to be
dated as of the Closing Date (the “Registration Rights Agreement”), among the
Company and the Agent, in the Form attached hereto as Exhibit A


 


In consideration of the services to be rendered by the
Agent in connection with the Offering, the Company shall pay to the Agent the
Commission (as hereinafter defined) and issue to the Agent the Compensation
Option as set out in section 15 hereof.


 


DEFINITIONS


 


In
this Agreement, in addition to the terms defined above, the following terms
shall have the following meanings:


 


“Act” means the Securities Act (Ontario);


 


“Affiliates” means the affiliates of
the Agent, as such term is defined in the Act;


 


“Agent” shall have the meaning
ascribed to such term on the face page of the Agreement;


 


“Agent’s
Option” shall have the meaning ascribed to such term on the face page of
the Agreement;


 


“Agreement” means the agreement
resulting from the acceptance by the Company of the offer made by the Agent
hereby;


 


“Broker Shares” means the Common Shares
issuable upon the due exercise of the Broker Warrants;


 


“Broker
Unit Warrants” means the
Warrants issuable upon the due exercise of the Broker Warrants;


 


“Broker
Unit Warrant Shares” means the
Common Shares issuable upon the due exercise of the Broker Unit Warrants;


 


“Broker Warrant” shall have the meaning
ascribed to such term in section 15
hereto;


 


“Broker Warrant Certificate” means the certificate
representing the Broker Warrants and containing the terms thereof;


 


“Business
Day” means a day which is not a Saturday, Sunday or statutory or civic
holiday in the City of Toronto, Ontario or the City of Denver, Colorado;


 


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“Closing” means the closing on the Closing
Date of the transaction of purchase and sale in respect of the Subscription
Receipts as contemplated by this Agreement and the Subscription Agreements;


 


“Closing Date” means February 22,
2006 or such other date as the Agent and the Company may agree;


 


“Closing
Time” means 9:00 a.m. (Toronto time) on the Closing Date or such other
time on the Closing Date as the Company and the Agent may agree;


 


“Commission” shall have the meaning
ascribed to such term in section 15 hereof;


 


“Common Shares” means the shares of
common stock in the capital of the Company;


 


“Company”
means US Gold Corporation and includes any successor corporation to or of the
Company;


 


“Company’s Auditors” means Stark Winter
Schenkein & Co., LLP, or such other firm of chartered accountants as
the Company may have appointed or may from time to time appoint as
auditors of the Company;


 


“Compensation Option” shall have the meaning
ascribed to such term in section 15 hereto;


 


“Compensation Option Certificate” means the certificate
evidencing the Compensation Option and containing the terms thereof;


 


“Debt
Instrument” means any loan, bond, debenture, promissory note or other instrument
evidencing indebtedness (demand or otherwise) for borrowed money or other
liability;


 


“Disclosure Documents” means collectively, the
Corporation’s annual report on Form 10-KSB for the year ended December 31,
2004, and all subsequent documents filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14(a) or 15(d) of the Exchange Act
prior to the Closing Date, including the quarterly reports filed on Form 10-QSB
for the quarters ended March 31, 2005, June 30, 2005 and September 30,
2005, the current reports filed on Form 8-K since January 1, 2005 and
the proxy statement dated October 28, 2005;


 


“Environmental Laws” has the meaning ascribed in section 5 (a)(xxxi) hereof;


 


“Escrowed Funds” has the meaning attributed thereto in section 2(b) hereof;


 


“Exchange Act” means the United States Securities Exchange Act of 1934, as
amended;


 


“Financial Statements” has the meaning
ascribed in section 5 (a)(vi) hereof;


 


“Final
Prospectus” means the Canadian (final) prospectus of the Company, qualifying the
distribution of the Unit Shares, the Warrants and the Broker Warrants in the
Qualifying Provinces;


 


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“Final Qualification Deadline” has the meaning attributed thereto in section 2(d) hereof;


 


“Final Receipt” means the receipt for the Final Prospectus issued by the securities
regulatory authorities in all Qualifying Provinces;


 


“including” means including without
limitation;


 


“Initial Qualification Deadline” has the meaning attributed
thereto in section 2(d) hereof;


 


“Institutional
Accredited Investor” means an institution that
is an “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) and
(7) of the U.S. Securities Act;


 


“Investment Company Act” means the United States Investment Company
Act of 1940, as amended;


 


“Issue Price”
shall have the meaning ascribed to such term on the face page of the
Agreement;


 


“Leased
Premises” means all premises which are material to the Company and
which the Company or a Material Subsidiary occupies as tenant;


 


“Material
Agreement” means any material note, indenture, mortgage or other form of
indebtedness and any contract, commitment, agreement (written or oral),
instrument, lease or other document, including licence agreements and
agreements relating to intellectual property, to which the Company is a party
and which is material to the Company;


 


“Material Subsidiaries” shall have the meaning ascribed
thereto in section 5(a)(ii) hereof;


 


“MRRS”
means the mutual reliance review system procedures provided for under National
Policy 43-201 – Mutual Reliance Review System for Prospectuses and Annual
Information Forms;


 


“misrepresentation”,
“material fact”, “material change”, “subsidiary”, “affiliate”, “associate”, and “distribution” have the respective meanings ascribed thereto
in the Act or the U.S. Securities Act, as applicable;


 


“Offering” shall have the meaning
ascribed to such term on the face page of the Agreement;


 


“person” means any individual (whether acting as an executor,
trustee, administrator, legal representative or otherwise), corporation, firm,
partnership, sole proprietorship, syndicate, joint venture, trustee, trust,
unincorporated organization or association, and pronouns have a similar
extended meaning;


 


“Personnel” has the meaning ascribed in section 13 hereof;


 


“Preliminary
Prospectus” means the Canadian preliminary prospectus of the Company filed in
accordance with the MRRS;


 


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“Prospectus” shall mean,
collectively, the Preliminary Prospectus and the Final Prospectus;


 


“Purchasers” means the persons who,
as purchasers, acquire Subscription Receipts by duly completing, executing and
delivering Subscription Agreements and any other required documentation and
permitted assignees or transferees of such persons from time to time;


 


“Qualifying
Provinces” means the Provinces of Ontario and Quebec;


 


“Registration Rights Agreement”
shall have the meaning ascribed to such term on the face page of this
Agreement;


 


“Registration Statement”
means the registration statement of the Corporation to be filed with the SEC in
order to register, or register the resale of, the Registrable Securities, as
applicable, as such Registration Statement is amended from time to time;


 


“Registrable Securities”
means the Unit Shares, the Warrants, the Warrant Shares, the Broker Warrants,
the Broker Shares, the Broker Unit Warrants and the Broker Unit Warrant Shares;


 


“Regulation
D” means Regulation D under the U.S. Securities Act;


 


“Regulation
S” means Regulation S under the U.S. Securities Act;


 


“Release
Conditions” means the conditions to be satisfied prior to automatic
conversion of the Subscription Receipts, which shall be satisfied upon the
latest to occur of the following: (i) the third business day after the
date on which a Final Receipt has been issued; (ii) the completion and
filing via SEDAR of a current technical report regarding the Tonkin Springs
gold project that complies with National Instrument 43-101 – Standards of Disclosure for Mineral Projects
of the Canadian Securities Administrators; (iii) the Common Shares being
listed for trading on the Toronto Stock Exchange; (iv) the declaration by
the SEC of the effectiveness of the Registration Statement; and (v) the
delivery of a “10b-5” opinion, in customary form, addressed to the Agent,
satisfactory to the Agent, acting reasonably, provided by United States counsel
to the Corporation in respect of the Registration Statement;


 


“Remaining Subscription Receipts” has the meaning ascribed to such term in section 2(d) hereof;


 


“Rule 144”
means Rule 144 under the U.S. Securities Act;


 


“Rule 144A” means Rule 144A under the U.S. Securities Act;


 


“SEC”
means the United States Securities and Exchange Commission;


 


“Securities
Laws” means, as applicable, the securities laws, regulations, rules,
rulings and orders in the Selling Jurisdictions, the applicable policy
statements issued by the securities regulators in the Selling Jurisdictions,
the securities laws of the United States, any applicable States and any
jurisdictions outside of Canada and the United States, the regulations and rules thereunder
and the forms prescribed thereby and the rules of any applicable stock
exchange;


 


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“Securities Regulators” means the securities commissions or
other securities regulatory authorities of the Selling Jurisdictions, including
the SEC, or, as the context may require, any one or more of Selling
Jurisdictions;


 


“Selling
Jurisdictions” means the Provinces of Ontario and Quebec and such other jurisdictions
outside of Canada (including the United States) as may be agreed to by the
Agent and the Company as evidenced by the Company’s acceptance of a
Subscription Agreements with respect thereto;


 


“State”
means any one of the 50 states of the United States of America or the District
of Columbia;


 


“Subscription
Receipt Agreement” shall have the meaning ascribed to such term on the
face page of the Agreement;


 


“Subscription Receipt Certificates”
means the certificates to be issued to Purchasers evidencing the Subscription
Receipts purchased;


 


“Subscription
Receipts” shall have the meaning ascribed to such term on the face page of
the Agreement;


 


 “Subscription Agreements” means the subscription
agreements in the form agreed upon by the Agent and the Company pursuant
to which Purchasers agree to subscribe for and purchase the Subscription
Receipts herein contemplated and shall include, for greater certainty, all
schedules thereto;


 


“Supplementary
Material” means, collectively, any amendment to the Preliminary Prospectus, the
Final Prospectus, the Registration Statement, or any amended or supplemental
prospectus or ancillary material required to be filed with any of the
Securities Regulators pursuant to the Canadian Securities Laws;


 


“Taxes” shall have the meaning
ascribed thereto in section 5 (a)(viii);


 


“Transaction Documents”
means, collectively, this Agreement, the Subscription Agreements, the Registration
Rights Agreement, Subscription Receipt Agreement, the Warrant Indenture, the
Compensation Option Certificate and, if and when issued upon due exercise of
the Compensation Option, the Broker Warrant Certificates;


 


“Transfer
Agent” shall have the meaning ascribed to such term on the face page of
this Agreement;


 


“Unit”
shall have the meaning ascribed to such term on the face page of this
Agreement;


 


“Unit
Shares” shall have the meaning ascribed to such term on the face page of
this Agreement;


 


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“United States” means the United States of America, its
territories and possessions, any state of the United States, and the District
of Columbia;


 


“U.S.
Securities Act” means the United States Securities Act of 1933, as amended;


 


“Warrant
Indenture”
means the warrant indenture dated as of the Closing Date between the Company
and the Transfer Agent, providing for the creation and issuance of the
Warrants;


 


“Warrant Shares” shall have the
meaning ascribed to such term on the face page of the Agreement; and


 


“Warrants” shall have the
meaning ascribed to such term on the face page of the Agreement;


 


“$” as used herein means dollars of the United States.


 


TERMS AND CONDITIONS


 


1.                                      (a)                                  Sale on
Exempt Basis. The Agent will offer
for sale and sell the Subscription Receipts in the Selling Jurisdictions on a “private
placement” basis in those jurisdictions where they may lawfully be offered
for sale or sold and only at the Issue Price. The Agent will offer the
Subscription Receipts to persons who it reasonably believes are Institutional
Accredited Investors, or “accredited investors” as defined in the Act, in
transactions which comply with the exemptions from registration or do not
require the filing of a prospectus or offering memorandum with respect to those
Subscription Receipts under the laws of any Selling Jurisdiction.


 


(b)                                  Filings. The Company undertakes to file or cause to be filed all forms or
undertakings required to be filed by the Company in the Selling
Jurisdictions in connection with the purchase and sale of the Subscription Receipts so
that the distribution of the Subscription Receipts and the issuance of the
Units may lawfully occur without the necessity of filing a prospectus, a
registration statement or an offering memorandum in Canada or the United States
(but on terms that will permit the Subscription Receipts and the Units acquired
by the Purchasers in the Selling Jurisdictions to be sold by such Purchasers at
any time in the Selling Jurisdictions subject to the terms of the Subscription
Receipt Agreement, this Agreement and applicable securities laws, including,
but not limited to, compliance with applicable hold periods), and the Agent
undertakes to cause Purchasers of Subscription Receipts to complete any forms
required by the Securities Laws. All fees payable in connection with such
filings shall be at the expense of the Company.


 


(c)                                  No
Offering Memorandum. Neither the Company nor the Agent shall: (i) provide
to prospective purchasers of the Subscription Receipts any document or other
material that would constitute an offering memorandum or future oriented
financial information within the meaning of Securities Laws in Canada or in the
United States or any State or territory thereof; or (ii) engage in any form of
general solicitation or general advertising in connection with the offer and
sale of the


 


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Subscription
Receipts, including, but not limited to, causing the sale of the Subscription
Receipts to be advertised in any newspaper, magazine, printed public media,
printed media or similar medium of general and regular paid circulation,
broadcast over radio, television or telecommunications, including electronic
display, or conduct any seminar or meeting relating to the offer and sale of
the Subscription Receipts whose attendees have been invited by general
solicitation or advertising.


 


2.                                    Description
of the Subscription Receipts.


 


(a)                                  The Subscription Receipts shall be
created and issued pursuant to the Subscription Receipt Agreement to be entered
into between the Transfer Agent, the Corporation and the Agent to be dated as
of the Closing Date. The specific attributes of the Subscription Receipts,
including the adjustment provisions, shall be set forth in the Subscription
Receipt Agreement.


 


(b)                                  On Closing, 50% of the gross
proceeds from the Offering will be delivered to and held by the Transfer Agent
and invested in short term investment grade debt obligations as agreed to by
the Corporation and the Agent. The funds held in escrow by the Transfer Agent,
together with all interest and other income earned thereon, are referred to
herein as the “Escrowed Funds”.


 


(c)                                  The Subscription Receipts will
convert into Units upon satisfaction of the Release Conditions, without any
action, including additional payment, required on the part of the holders
thereof. Upon the satisfaction of all of the Release Conditions, the Escrowed
Funds shall be released by the Transfer Agent to the Company.


 


(d)                                  If any of the Release Conditions
have not been satisfied on or prior to 5:00 p.m. (Mountain time) on that
date which is 183 days following the Closing Date, each Subscription Receipt
shall thereafter be convertible into 1.1 Unit Shares (in lieu of one Unit
Share) and 0.55 Warrants (in lieu of 0.5 Warrants). If any of the Release
Conditions have not been satisfied prior to 5:00 p.m. (Mountain time) on
that date that is twelve months following the Closing Date (the “Initial Qualification Deadline”), the Escrowed Funds shall
be returned by the Transfer Agent, on behalf of the Corporation, to the holders
of the Subscription Receipts in exchange for the delivery to the Corporation of
50% of the outstanding Subscription Receipts held by each holder. The remaining
50% of the Subscription Receipts not returned to the Company on the Initial
Qualification Deadline (the “Remaining Subscription
Receipts”) shall remain outstanding until the earlier of: (i) 18
months following the Closing Date (the “Final Qualification
Deadline”); and (ii) the satisfaction by the Company, or the
waiver by the Agent, of each of the Release Conditions. If any of the Release
Conditions have not been satisfied prior to 5:00 p.m. (Mountain time) on
the Final Qualification Deadline, the Remaining Subscription Receipts shall be
deemed to be exchanged into Units in accordance with the provisions of the
Subscription Receipt Agreement.


 


(e)                                  Upon the valid conversion of a
holder’s Subscription Receipts, the Transfer Agent will mail certificates
representing the Unit Shares and Warrants to the holder’s last address on
record with the Transfer Agent.


 


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3.                                      (a)                                  Covenants.
The Company hereby covenants to the Agent and to the Purchasers and
their permitted assigns, and acknowledges that each of them is relying on such
covenants, that the Company shall:


 


(i)                                     promptly from time to
time take such action requested by the Agents to qualify the Subscription
Receipts, the Unit Shares and the Warrants for offering and sale under the
securities laws of such jurisdictions, by way of exceptions or exemptions from
the prospectus and registration requirements, as the Agent and the Company may agree
and to comply with such laws as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Subscription Receipts, provided that in connection
therewith the Company shall not be required, except as otherwise provided
herein, to file a prospectus or registration statement, to qualify as a foreign
corporation or to file a general consent to service in jurisdiction;


 


(ii)                                  allow the Agent and
their representatives the opportunity to conduct all due diligence which the
Agent may require to be conducted prior to (i) the Closing Time, and (ii) the
date of the Prospectus and the Registration Statement in order to fulfil their
obligations as Agent under Securities Laws and in order to enable the Agent to
execute any certificate required to be executed by the Agent in connection with
the Prospectus, and it shall be a condition precedent to the Agent’s execution
of any certificate in any Prospectus that they be satisfied, acting reasonably,
as to the form and content of such Prospectus;


 


(iii)                               duly execute and deliver
the Transaction Documents at the Closing Time, and comply with and satisfy all
terms, conditions and covenants therein contained to be complied with or
satisfied by the Company;


 


(iv)                              use its best efforts to
fulfil or cause to be fulfilled, at or prior to the Closing Date, each of the
conditions set out in section 9 hereof;


 


(v)                                 ensure that the
Subscription Receipts shall be duly and validly created, authorized and issued
and shall have the attributes corresponding in all material respects to the
description thereof set forth in this Agreement, the Subscription Receipt
Agreement and the Subscription Agreements;


 


(vi)                              ensure that, at all
times prior to the expiry of the Subscription Receipts, a sufficient number of
Unit Shares and Warrants are allotted, created and reserved for issuance, as
the case may be, upon the conversion of the Subscription Receipts;


 


(vii)                           ensure that the Unit
Shares, upon exercise or deemed exercise of the Subscription Receipts, shall be
duly issued as fully paid and non-assessable securities in the capital of the
Company, free of pre-emptive rights;


 


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(viii)                        ensure that the Warrants
shall be duly and validly created, authorized and issued upon the exercise or
deemed exercise of the Subscription Receipts and shall have the attributes
corresponding in all material respects to the description thereof in this
Agreement and the Warrant Indenture;


 


(ix)                                ensure that, at all
times prior to the expiry of the Warrants, a sufficient number of Warrant
Shares, are allotted and reserved for issuance, and, upon exercise of the
Warrants, shall be duly issued as fully paid and non-assessable securities in
the capital of the Company;


 


(x)                                   ensure
that the Compensation Option shall be duly and validly created, authorized and
issued;


 


(xi)                                ensure that the Broker
Warrants shall be duly and validly created, authorized and issued upon the
exercise or deemed exercise of the Compensation Option and shall have the
attributes corresponding in all material respects to the description thereof in
this Agreement and the Compensation Option Certificate;


 


(xii)                             ensure
that, at all times prior to the expiry of the Broker Warrants, a sufficient
number of Broker Shares and Broker Unit Warrants are allotted, created and
reserved for issuance upon the due exercise of the Broker Warrants, as the case
may be and upon such due exercise, such Broker Shares and Broker Unit
Warrants shall be duly issued as fully paid and non-assessable securities in
the capital of the Company;


 


(xiii)                          ensure that, at all times
prior to the expiry of the Broker Unit Warrants, a sufficient number of Broker
Unit Warrant Shares are allotted and reserved for issuance, and,
upon exercise of the Broker Unit Warrants, shall be duly issued as fully paid
and non-assessable securities in the capital of the Company;


 


(xiv)                         use its commercially
reasonable efforts to satisfy the Release Conditions promptly following
Closing;


 


(xv)                            not
to issue, offer, sell, contract to sell or otherwise dispose of any additional
securities until the earlier to occur of: (I) the Final Qualification Deadline;
and (II) satisfaction of the Release Conditions, without the prior written
consent of the Agent, such consent not to be unreasonably withheld, except in
conjunction with: (A) the Offering and the conversion of the Subscription
Receipts or Broker Warrants for Unit Shares and Warrants, and the exercise of
the Warrants or Broker Unit Warrants; (B) the grant or exercise of stock
options and other similar issuances pursuant to the existing share incentive
plan of the Company and other existing share compensation arrangements; (C) outstanding
convertible securities as set forth in Schedule “B” hereto; (D) the
acquisition by the Company of any mineral properties, royalty interests or
other assets; (E) a business combination by the Company with another
company or entity; and (F) any obligations to issue securities existing at
the date of this Agreement;


 


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(xvi)                         execute
and file with the Securities Regulators all forms, notices and certificates
required to be filed pursuant to the Securities Laws in the time required by
the applicable Securities Laws, including, not later
than 15 days after the Closing Date, file five copies of a notice on Form D
under the U.S. Securities Act (one of which will be manually signed by a person
duly authorized by the Company); to otherwise comply with the requirements of Rule 503
under the U.S. Securities Act; and to furnish promptly to the Agent evidence of
each such required timely filing (including a copy thereof);


 


(xvii)                      not to be or
become, at any time prior to the expiration of five years after the Closing
Time, an open-end investment company, unit investment trust, closed-end
investment company or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act;


 


(xviii)                   the Company
will comply with the U.S. Securities Act so as to permit the completion of the
distribution of the Subscription Receipts and the Unit Shares and Warrants
contemplated hereby and in the Transaction Documents. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act,
for the benefit of holders from time to time of Unit Shares, Warrants and
Warrant Shares, to furnish at its expense, upon request, to holders of such
securities and prospective purchasers of any such securities information
satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the U.S. Securities Act;


 


(xix)                           to furnish
to the holders of the Subscription Receipts, Unit Shares and Warrants, as soon
as practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders’ equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants), which requirement will be satisfied by the furnishing of the
Company’s Annual Report on Form 10-KSB (or any applicable successor
thereto under the Exchange Act), and, as soon as practicable after the end of
each of the first three quarters of each fiscal year (beginning with the fiscal
quarter ending March 31, 2006), consolidated summary financial information
of the Company and its subsidiaries for such quarter in reasonable detail,
which requirement will be satisfied by the furnishing of the Company’s
Quarterly Report on Form 10-QSB (or any applicable successor thereto under
the Exchange Act);


 


(xx)                              the
Registration Statement and the Prospectus and any amendments or supplements
thereto, and the Disclosure Documents did not and will not, as of their
respective dates, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Agent;


 


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(xxi)                           the Company
will timely file such reports pursuant to the Exchange Act as are necessary in
order to make generally available to its securityholders as soon as practicable
an earnings statement for the purposes of, and to provide the Agent the
benefits contemplated by, the last paragraph of Section 11(a) of the
U.S. Securities Act; and


 


(xxii)                        the Company
will use its commercially reasonable efforts to effect the listing of the
Common Shares on the Toronto Stock Exchange, promptly after Closing.


 


(b)                                  The
Agent hereby covenants and agrees to conduct their activities in connection
with the sale of the Subscription Receipts in compliance with all applicable
laws and to obtain from each Purchaser a completed and executed Subscription
Agreement (including all certifications, forms and other documentation
contemplated thereby or as may be required by applicable Securities
Regulators) in a form acceptable to the Company and the Agent relating to
the Offering.


 


4.                                  Material Changes During
Offering. The Company will promptly notify the Agent in writing until the
earlier of (i) the Final Qualification Deadline; and (ii) satisfaction
of the Release Conditions:


 


(a)                                  if the Company becomes aware of any material fact not previously
disclosed, any material change or change in a material fact (in either case,
whether actual, anticipated, contemplated or threatened and other than a change
of fact relating solely to the Agent) or any event or development involving a
prospective material change or change in a material fact in any or all of the
business of the Company and its subsidiaries, taken as a whole, or any other
change which is of such a nature as to result in, or could result in, the
Disclosure Documents, Preliminary Prospectus, the Final Prospectus, any
Supplementary Material or the Registration Statement (and any amendment or
supplement thereto) containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or which could render any of the foregoing not
in compliance with any Securities Laws;


 


(b)                                with full particulars of any such actual, anticipated, contemplated,
threatened or prospective change of which it becomes aware referred to in the
first preceding paragraph and the Company will, to the reasonable satisfaction
of the Agent, issue or file, as applicable, promptly and, in any event, within
all applicable time limitation periods with the Securities Regulators, in the
case of a material adverse change, a new or amended Preliminary Prospectus,
and, in the case of a material change, a new or amended Final Prospectus or
Supplementary Material or Registration Statement, as the case may be, or
press release, material change report or Current Report on Form 8-K as may be
required under Securities Laws and shall comply with all other applicable
filing and other requirements under the Securities Laws including, without
limitation, any requirements necessary to register with the SEC or qualify the
issuance and distribution of the Unit Shares and Warrants comprising the Units,
as the case may be. The Company shall not file any such new or amended
disclosure documentation without first notifying the Agent, and shall not issue
or file, as applicable any press release, material change


 


12

















 


report or
Current Report on Form 8-K without giving the Agent and its counsel an
opportunity for review of the proposed forms;


 


(c)                                will in good faith discuss with the Agent as promptly as possible
any circumstance or event which is of such a nature that there is or ought to
be consideration given as to whether there may be a material change or
change in a material fact described in paragraphs (a) and (b) above;


 


(d)                                  subject to applicable
law, the Company shall consult with the Agent as to the content and form of
any press release.


 


(e)                                  Change in Securities Laws. If during the period of distribution of the Unit
Shares and Warrants comprising the Units or during the time that the
Registration Statement is outstanding, there shall be any change in Securities
Laws or other applicable securities laws which in the opinion of counsel to the
Company or counsel to the Agent requires the filing of Supplementary Material,
the Company shall, to the satisfaction of its counsel and the Agent’s counsel,
promptly prepare and file such Supplementary Material with the appropriate
securities regulatory authority in each of the Qualifying Provinces where such
filing is required, or file an amendment to the Registration Statement, as the
case may be


 


5.                                  (a)                            Representations
and Warranties of the Company. The Company represents and warrants to the Agent and
to the Purchasers, and acknowledges that each of them is relying upon such
representations and warranties, that, subject to the exceptions noted in Schedule “B”:


 


(i)                                                             the Company and the
Material Subsidiaries (as hereinafter defined) have been duly incorporated and
are in good standing under the laws of their respective jurisdictions, and are
current and up-to-date with all filings required to be made by them in such
jurisdiction, have all requisite corporate power and authority and are duly
qualified and possess all certificates, authorizations, permits and licences
issued by the appropriate provincial, municipal, federal regulatory agencies or
bodies necessary (and has not received or is aware of any modification or
revocation to such licences, authorizations, certificates or permits) to carry
on its business as now conducted and to own its properties and assets and the
Company and the Material Subsidiaries have all requisite corporate power and
authority to carry out their obligations under the Transaction Documents;


 


(ii)                                                          the Company
has no material subsidiaries other than as listed below (the “Material Subsidiaries”) and the Company beneficially owns,
directly or indirectly, the percentage indicated below of the issued and
outstanding shares in the capital of the Material Subsidiaries free and clear
of all mortgages, liens, charges, pledges, security interests, encumbrances,
claims or demands of any kind whatsoever, all of such shares have been duly
authorized and validly issued and are outstanding as fully paid and non-assessable
shares and no person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming a right, agreement or
option, for the purchase from the Company of any interest in any of such shares
or for the issue or allotment of any


 


13

















 


unissued
shares in the capital of the Material Subsidiaries or any other security
convertible into or exchangeable for any such shares:


 


	
  Name

  	
   

  	
  Jurisdiction of

  Incorporation or

  Continuance

  	
   

  	
  Beneficial

  Equity/Voting

  Ownership

  	
   

  
	
  U.S.
  Environmental Corporation

  	
   

  	
  Colorado

  	
   

  	
  100

  	
  %

  
	
  Tonkin
  Springs Gold Mining Corporation

  	
   

  	
  Colorado

  	
   

  	
  100

  	
  %

  



 


(iii)                                                       all consents, approvals,
permits, authorizations or filings as may be required for the execution
and delivery of the Transaction Documents, the issuance and sale of the
Subscription Receipts, the issuance of the Unit Shares and Warrants upon the
conversion of the Subscription Receipts, the issue and sale of the Warrant
Shares upon the exercise of the Warrants, the issuance of the Compensation
Option, the issuance of the Broker Warrants upon exercise or deemed exercise of
the Compensation Option, the issue and sale of the Broker Shares and Broker
Unit Warrants upon the exercise of the Broker Unit Warrants, the issue and sale
of the Broker Unit Warrant Shares upon the exercise of the Broker Warrants, all
in conformance with this Agreement, and the consummation of the transactions
contemplated in this Agreement, have been made or obtained, as applicable,
except for the filing of the notification on Form D with the SEC required
to be made within 15 days of closing;


 


(iv)                                                      each of the execution
and delivery of the Transaction Documents, the performance by the Company of
its obligations hereunder or thereunder, the issuance and sale of the
Subscription Receipts, the issuance of the Unit Shares and Warrants upon
exercise or deemed exercise of the Subscription Receipts, the issue and sale of
the Warrant Shares upon the exercise of the Warrants, the issuance of the
Compensation Option, the issuance of the Broker Warrants upon exercise or
deemed exercise of the Compensation Option, the issue and sale of the Broker
Shares and Broker Unit Warrants upon the exercise of the Broker Warrants, the
issue and sale of the Broker Unit Warrant Shares upon the exercise of the
Broker Unit Warrants, and the consummation of the transactions contemplated in
this Agreement, do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
(whether after notice or lapse of time or both), (A) any statute, rule or
regulation applicable to the Company including, without limitation, Securities
Laws or other applicable securities laws; (B) the constating documents, articles
or resolutions of the Company which are in effect at the date hereof; (C) any
Debt Instruments, Material Agreement, mortgage, note, indenture, contract,
agreement, instrument, lease or other document to which the Company is a party
or by which it is bound; or (D) any judgment, decree order, statute, rule,
law or regulation binding the Company or the property or assets of the Company;


 


14

















 


(v)                                                         The Disclosure Documents, when they
were or are filed with the SEC, conformed or will conform in all material
respects to the applicable requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder and when read together did not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;


 


(vi)                                                      the audited financial
statements of the Company as at and for the year ended December 31, 2004
and unaudited interim financial statements as at and for the nine month period
ended September 30, 2005 (collectively, the “Financial Statements”) have been prepared in accordance with
generally accepted accounting principles in the United States, as applicable,
consistently applied with prior periods, except as otherwise noted therein and
present fairly, in all material respects, the financial position (including the
assets and liabilities, whether absolute, contingent or otherwise) of the
Company as at such dates and results of operations of the Company for the
periods then ended and there has been no material change in accounting policies
or practices of the Company or the Material Subsidiaries since December 31,
2004. All disclosures in the Disclosure Documents regarding “non-GAAP financial
measures” (as such term is defined by the rules and regulations of the
SEC) comply with Regulation G, to the extent applicable;


 


(vii)                                                   there has been no
adverse material change to the Company or the Material Subsidiaries (actual,
proposed or prospective, whether financial or otherwise) in the business,
affairs, operations, assets, liabilities (contingent or otherwise) or
shareholders’ equity of the Company or the Material Subsidiaries since December 31,
2004, which has not been generally disclosed to the public and, in all material
respects, the business of the Company and the Material Subsidiaries have been
carried on in the usual and ordinary course consistent with past practice since
December 31, 2004 to the extent that such past practice is consistent with
the current business direction of the Company and the Material Subsidiaries;


 


(viii)                                                all taxes (including
income tax, capital tax, payroll taxes, employer health tax, workers’
compensation payments, property taxes, custom and land transfer taxes), duties,
royalties, levies, imposts, assessments, deductions, charges or withholdings
and all liabilities with respect thereto including any penalty and interest
payable with respect thereto (collectively, “Taxes”)
due and payable or required to be collected or withheld and remitted, by the
Company and the Material Subsidiaries have been paid, collected or withheld and
remitted, as applicable. All tax returns, declarations, remittances and filings
required to be filed by the Company and the Material Subsidiaries have been
filed with all appropriate governmental authorities and all such returns,
declarations, remittances and filings are complete and accurate and no material
fact or facts have been omitted therefrom which would make any of them misleading.
No examination of any tax return of the Company or the Material Subsidiaries is
currently in progress and there are no issues or disputes outstanding with any


 


15

















 


governmental
authority respecting any taxes that have been paid, or may be payable, by
the Company and the Material Subsidiaries. There are no agreements, waivers or
other arrangements with any taxation authority providing for an extension of
time for any assessment or reassessment of taxes with respect to the Company
and the Material Subsidiaries;


 


(ix)                                                        the auditors who audited
the Financial Statements of the Company and the Material Subsidiaries for the
year ended December 31, 2004 and the year ended December 31, 2003 and
who provided their audit report thereon are independent public accountants as
required under the U.S. Securities Act and the Exchange Act;


 


(x)                                                           the Company’s auditors
have not provided any material comments or recommendations to the Company
regarding its accounting policies, internal control systems or other accounting
or financial practices;


 


(xi)                                                        there has never been a “reportable
event” (within the meaning of National Instrument 51-102) with the present or
former auditors of the Company;


 


(xii)                                                     except as set forth in Schedule “A”
to this Agreement, no holder of outstanding securities of the Company will be
entitled to any pre-emptive or any similar rights to subscribe for any of the
Common Shares or other securities of the Company and no rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, any
shares in the capital of the Company are outstanding. Other than the holders of
the Subscription Receipts there are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the U.S.
Securities Act;


 


(xiii)                                                  there
is not, in its articles or incorporation, by-laws or in any Debt Instrument,
Material Agreement, agreement, mortgage, note, debenture, indenture or other
instrument or document to which the Company or the Material Subsidiaries is a
party, any restriction upon or impediment to, the declaration or payment of
dividends by the directors of the Company or the payment of dividends by the
Company to the holders of its Common Shares;


 


(xiv)                                                 neither
the Company nor any of its subsidiaries are a party to or bound or affected by
any commitment, agreement or document containing any covenant which expressly
limits the freedom of the Company or the Company’s subsidiaries to compete in
any line of business, transfer or move any of its assets or operations or which
materially or adversely affects the business practices, operations or condition
of the Company and the Company’s subsidiaries taken as a whole;


 


(xv)                                                    the
Company and the Material Subsidiaries have conducted and are conducting their
business in compliance in all material respects with all applicable laws and
regulations of each jurisdiction in which it holds assets or carries on business


 


16

















 


(including, without limitation, all applicable
federal, provincial, municipal, local environmental anti-pollution and
licensing laws, regulations and other lawful requirements of any Canadian, United
States or foreign governmental or regulatory body including exploration and
exploitation permits and concessions) and has not received a notice of
non-compliance, nor knows of, nor has reasonable grounds to know of, any facts
that could give rise to a notice of non-compliance with any such laws,
regulations or permits;


 


(xvi)                                                 the
Company and the Material Subsidiaries are not aware of any pending change or
contemplated change to any applicable law or regulation or governmental
position that would materially effect the business of the Company or the
Material Subsidiaries or the business or legal environment under which the
Company or the Material Subsidiaries operate;


 


(xvii)                                              this Agreement has been
duly authorized, executed and delivered by the Company and constitutes a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms;


 


(xviii)                                           upon the execution and
delivery thereof, each of the Transaction Documents shall constitute a valid
and binding obligation of the Company and each shall be enforceable against the
Company in accordance with its terms;


 


(xix)                                                   at the Closing Time, all
necessary corporate action will have been taken by the Company to: (a) validly
create, authorize and issue the Subscription Receipts; (b) allot, reserve
and authorize the issuance of the Unit Shares as fully paid and non-assessable
securities in the capital of the Company upon the exercise or deemed exercise
of the Subscription Receipts; (c) validly create, allot and authorize the
issuance of the Warrants upon the exercise or deemed exercise of the
Subscription Receipts; (d) validly allot, reserve and authorize the
issuance of the Warrant Shares upon the payment therefor as fully paid
non-assessable securities in the capital of the Company upon the exercise of
the Warrants; (e) validly create, allot and authorize the issuance of the
Compensation Option; (f) validly create, allot and authorize the issuance
of the Broker Warrants upon the exercise or deemed exercise of the Compensation
Option; (g) validly allot, reserve and authorize the issuance of the
Broker Shares upon the payment therefor as fully paid non-assessable securities
in the capital of the Company upon the exercise of the Broker Warrants; (h) validly
create, allot and authorize the issuance of the Broker Unit Warrants upon the
exercise of the Broker Warrants; and (i) validly allot, reserve and
authorize the issuance of the Broker Unit Warrant Shares upon the payment
therefor as fully paid non-assessable securities in the capital of the Company
upon the exercise of the Broker Unit Warrants;


 


(xx)                                                      as of the close of
business on February 21,
2006, the authorized capital of the Company consists of 250,000,000 Common
Shares of which 33,296,755 Common Shares are issued
and outstanding as fully paid and non-assessable;


 


17

















 


(xxi)                                                   the
currently issued and outstanding Common Shares currently trade on the
Over-the-Counter market and are quoted in the Bulletin Board system maintained
by the National Association of Securities Dealers, Inc. and no order
ceasing or suspending trading in any securities of the Company or the trading
of any of the Company’s issued securities is currently outstanding and no
proceedings for such purpose are, to the knowledge of the Company, pending or
threatened;


 


(xxii)                                                other than in connection with transferring the listing
of the Common Shares to the American Stock Exchange or the NASDAQ Market, Inc.
the Company shall not take any action which would be reasonably expected to
result in the delisting or suspension of its Common Shares on the Over-the-Counter
Bulletin Board system or
from any other securities exchange, market or trading or quotation facility on
which its Common Shares become listed or quoted (including the Toronto Stock
Exchange) and the Company shall comply, in all material respects, with the rules and
regulations thereof;


 


(xxiii)                                             all information which
has been prepared by the Company relating to the Company and the Material
Subsidiaries and their respective business, property and liabilities and either
publicly disclosed or provided to the Agent, including all financial,
marketing, sales and operational information provided to the Agent and all
Disclosure Documents did not and will not contain a misrepresentation
or an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;


 


(xxiv)                                            the Company and the
Material Subsidiaries are not party to any agreement, nor is the Company or the
Material Subsidiaries aware of any agreement, which in any manner affects the
voting control of any of the securities of the Company or the Material
Subsidiaries;


 


(xxv)                                               other than the
notification filing on Form D required to be filed with the SEC 15 days
after the Closing Date, all filings required to be made by the Company and the
Material Subsidiaries pursuant to the Securities Laws and general corporate law
applicable to them have been made and such filings were true and accurate as at
the respective dates thereof and the Company has not filed any confidential
material change reports;


 


(xxvi)                                            the Company and the
Material Subsidiaries are in compliance with all laws respecting employment and
employment practices, terms and conditions of employment, occupational health
and safety, pay equity and wages; and there is not currently any labour
disruption or conflict involving the Company or the Material Subsidiaries;


 


(xxvii)                                         the Company and the
Material Subsidiaries do not have any loans or other indebtedness outstanding
which has been made to any of its shareholders, officers, directors or
employees, past or present, or any person not dealing at “arm’s length” (as
such term is defined in the Income Tax Act
(Canada)) with it;


 


18

















 


(xxviii)                                      the assets of the
Company and the Material Subsidiaries and their respective business and
operations are insured against loss or damage with responsible insurers on a
basis consistent with insurance obtained by reasonably prudent participants in
comparable businesses, and such coverage is in full force and effect, and the
Company and the Material Subsidiaries have not breached the terms of any
policies in respect thereof or failed to promptly give any notice or present
any material claim thereunder;


 


(xxix)                                              other
than the Agent and its representatives, there are no persons acting or
purporting to act at the request or on behalf of the Company, that are entitled
to any brokerage or finder’s fee in connection with the transactions
contemplated by this Agreement;


 


(xxx)                                                 the
Company and the Material Subsidiaries are in compliance in all respects with
each license and permit held by it and is not in violation of, or in default
under, the applicable statutes, ordinances, rules, regulations, orders or
decrees (including, without limitation, “Environmental
Laws” as defined below) of any Canadian governmental entities,
regulatory agencies or bodies having asserting or claiming jurisdiction over it
or over any part of its operations or assets;


 


(xxxi)                                              the
Company and the Material Subsidiaries (i) are in compliance with any and
all applicable federal, provincial, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) in each jurisdiction
in which they hold assets or conduct business; (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct its business; and (iii) are in compliance
with all terms and conditions of any such permit, license or approval;


 


(xxxii)                                           there
are no known environmental audits, evaluations, assessments, studies or tests
relating to the Company or any of the Material Subsidiaries except for ongoing
assessments conducted by or on behalf of the Company in the ordinary course;


 


(xxxiii)                                        there
have been no past unresolved, and there are no pending or threatened claims,
complaints, notices or requests for information received by the Company or the
Material Subsidiaries with respect to any alleged violation of any
Environmental Law; and no conditions exist at, on or under any property now or
previously owned, operated or leased by the Company or the Material
Subsidiaries which, with the passage of time, or the giving of notice or both,
would give rise to liability under any Environmental Law that, individually or
in the aggregate, has or may reasonably be expected to have, an adverse
effect with respect to the Company or the Material Subsidiaries;


 


19

















 


(xxxiv)                                       the
Company and/or the Material Subsidiaries are not party to any Debt Instrument
or any agreement, contract or commitment to create, assume or issue any Debt
Instrument or other indebtedness;


 


(xxxv)                                          other
than the Company, there is no person that is or will be entitled to demand the
proceeds of this Offering under the terms of any Debt Instrument, Material
Agreement, mortgage, note, indenture, contract, instrument, lease agreement
(written or unwritten) or otherwise;


 


(xxxvi)                                       the
Company and the Material Subsidiaries are not, nor to the knowledge of the
Company, any other person is not in default in the observance or performance of
any term, covenant or obligation to be performed by it under any Debt
Instrument, Material Agreement, contract, agreement or arrangement to which the
Company is a party and no event has occurred which with notice or lapse of time
or both would constitute such a default and all such contracts, agreements and
arrangements are in good standing;


 


(xxxvii)                                    the
minute books and records of the Company and the Material Subsidiaries which
have made available to the Agent and its counsel in connection with its due
diligence investigation of the Company and the Material Subsidiaries for the
periods from its inception date to the date of examination thereof, are all of
the minute books and material records of the Company and the Material
Subsidiaries and contain copies of all material proceedings (or certified
copies thereof) of the shareholders, the boards of directors and all committees
of the boards of directors of the Company and the Material Subsidiaries to the
date of review of such corporate records and minute books. There have been no
other material meetings, resolutions or proceedings of the shareholders, boards
of directors or any committees of the boards of directors of the Company and
the Material Subsidiaries to the date of review of such corporate records and
minute books not reflected in such minute books and other records or provided
to the Agent and its counsel;


 


(xxxviii)                                 with
respect to each of the Leased Premises, the Company and/or the Material
Subsidiaries occupy the Leased Premises, have the exclusive right to occupy and
use the Leased Premises and each of the leases pursuant to which the Company
and the Material Subsidiaries occupy the Leased Premises is in good standing
and in full force and effect. The performance of obligations pursuant to and in
compliance with the terms of this Agreement and the completion of the
transactions described herein by the Company and the Material Subsidiaries,
will not afford any of the parties to such leases or any other person the right
to terminate such lease or the Company’s or the Material Subsidiary’s right to
occupy and use the Leased Premises or, result in any additional or more onerous
obligations under such leases;


 


(xxxix)                                         the Company or the
Material Subsidiaries are the absolute legal and beneficial owner of, and have
good and marketable title to, all of the material property or


 


20

















 


assets thereof to
the extent described in the Disclosure Documents, free of all mortgages, liens,
charges, pledges, security interests, encumbrances, claims or demands
whatsoever, other than those described in the Disclosure Documents, and no
other property rights are necessary for the conduct of the business of the
Company or the Material Subsidiaries as currently conducted or contemplated to be
conducted, the Company and the Material Subsidiaries know of no claim or basis
for any claim that might or could adversely affect the right thereof to use,
transfer or otherwise exploit such property rights and except as disclosed in
the Disclosure Documents, the Company and the Material Subsidiaries have no
responsibility or obligation to pay any commission, royalty, licence fee or
similar payment to any person with respect to the property rights thereof;


 


(xl)                                                        the Company and the
Material Subsidiaries hold either freehold title, mining leases, mining claims
or other conventional property, proprietary or contractual interests or rights,
recognized in the jurisdiction in which a particular property is located in
respect of the ore bodies and minerals located in properties in which the
Company and the Material Subsidiaries have an interest as described in the
Disclosure Documents under valid, subsisting and enforceable title documents or
other recognized and enforceable agreements or instruments, which are currently
sufficient to permit the Company and the Material Subsidiaries to explore the
minerals relating thereto, all such property, leases or claims and all
property, leases or claims in which the Company or the Material Subsidiaries
have any interest or right have been validly located and recorded in accordance
with all applicable laws and are valid and subsisting, the Company or the
Material Subsidiaries currently have all necessary surface rights, access
rights and other necessary rights and interest relating to the properties in
which the Company or the Material Subsidiaries have an interest as described in
the Disclosure Documents granting the Company or the Material Subsidiaries the
right and ability to explore for minerals, ore and metals for development
purposes as are appropriate in view of the rights and interests therein of the
Company or the Material Subsidiaries, with only such exceptions as do not
materially interfere with the use made by the Company or the Material
Subsidiaries of the rights or interests so held and each of the proprietary
interests or rights and each of the documents, agreements and instruments and
obligations relating thereto referred to above are currently in good standing
in the name of the Company or the Material
Subsidiaries;


 


(xli)                                                     any and all of the
agreements and other documents and instruments pursuant to which the Company
and the Material Subsidiaries hold their property and assets (including any
interest in, or right to earn an interest in, any property) are valid and
subsisting agreements, documents or instruments in full force and effect,
enforceable in accordance with the terms thereof, the Company and the Material
Subsidiaries are not in default of any of the material provisions of any such
agreements, documents or instruments nor has any such default been alleged, and
such properties and assets are in good standing under the applicable statutes
and regulations of the jurisdictions in which they are situated, and there has
been no


 


21

















 


	
   

  	
   

  	
  default under
  any lease, licence or claim pursuant to which the Company or the Material
  Subsidiaries derives an interest in such property or assets and all taxes
  required to be paid with respect to such properties and assets to the date
  hereof have been paid. The interests of the Company or the Material
  Subsidiaries in, or rights of the Company or the Material Subsidiaries to
  earn an interest in, any property of the Company or the Material Subsidiaries
  are not subject to any right of first refusal or purchase or acquisition
  rights other than as described in the Disclosure Documents;

  
	
   

  	
   

  	
   

  
	
  (xlii)

  	
   

  	
  the Company has
  disclosed all material information relating to the Tonkin Springs gold
  project in the Disclosure Documents in compliance with Securities Laws and
  such disclosure is true and complete and accurate in all material respects;

  
	
   

  	
   

  	
   

  
	
  (xliii)

  	
   

  	
  the Company’s
  only material mineral property are the mining claims comprising the Tonkin
  Springs gold project as set forth in the title opinion dated the date hereof
  of Erwin & Thompson LLP;

  
	
   

  	
   

  	
   

  
	
  (xliv)

  	
   

  	
  all mineral
  exploration activities conducted by the Company and the Material Subsidiaries
  since the acquisition of their mineral properties has been conducted in
  accordance with good mining and engineering practices and all applicable
  workers’ compensation, health and safety and workplace laws, regulations and
  policies have been complied with in all material respects;

  
	
   

  	
   

  	
   

  
	
  (xlv)

  	
   

  	
  other than as described in the Disclosure
  Documents, there are no actions, suits, proceedings or inquiries pending or,
  to the knowledge of the Company or the Material Subsidiaries, threatened
  against or affecting the Company or the Material Subsidiaries or their
  property or assets at law or in equity or before or by any federal,
  provincial, municipal or other governmental department, commission, board,
  bureau, agency or instrumentality;

  
	
   

  	
   

  	
   

  
	
  (xlvi)

  	
   

  	
  there
  are no judgments against the Company or the Material Subsidiaries which are
  unsatisfied, nor are there any consent decrees or injunctions to which the
  Company or the Material Subsidiaries are subject;

  
	
   

  	
   

  	
   

  
	
  (xlvii)

  	
   

  	
  the Transfer
  Agent, at its principal offices in the City of Toronto, Ontario has
  been duly appointed as transfer agent and registrar in respect of the Common
  Shares and as agent and escrow agent in respect of the Subscription Receipts;

  
	
   

  	
   

  	
   

  
	
  (xlviii)

  	
   

  	
  no proceedings
  have been taken, instituted or, to the knowledge of the Company, are pending
  for the dissolution or liquidation of the Company or the Material
  Subsidiaries;

  
	
   

  	
   

  	
   

  
	
  (xlix)

  	
   

  	
  None
  of the transactions contemplated by this Agreement including, without
  limitation, the use of the proceeds from the sale of the Securities will
  violate or result in a violation of Section 7 of the Exchange Act, or
  any regulation

  



 


22

















 


	
   

  	
   

  	
  promulgated
  thereunder, including, without limitation, Regulations G, T, U, and X of the
  Board of Governors of the Federal Reserve System;

  
	
   

  	
   

  	
   

  
	
  (l)

  	
   

  	
  There
  is and has been no failure on the part of the Company or any of the
  Company’s directors or officers, in their capacities as such, to comply in
  all material respects with any applicable provision of the Sarbanes-Oxley Act
  of 2002 and the rules and regulations promulgated in connection
  therewith, including Section 402 related to loans and Sections 302 and
  906 related to certifications;

  
	
   

  	
   

  	
   

  
	
  (li)

  	
   

  	
  Prior
  to the date hereof, neither the Company nor any of its affiliates has taken
  any action which is designed to or which has constituted or which might have
  been expected to cause or result in stabilization or manipulation of the
  price of any security of the Company in connection with the offering of the
  Subscription Receipts;

  
	
   

  	
   

  	
   

  
	
  (lii)

  	
   

  	
  The
  Company is subject to Section 13 or 15(d) of the Exchange Act;

  
	
   

  	
   

  	
   

  
	
  (liii)

  	
   

  	
  The
  Company is not, and after giving effect to the offering and sale of the
  Subscription Receipts, will not be an “investment company”, or an entity
  “controlled” by an “investment company”, as such terms are defined in the
  Investment Company Act;

  
	
   

  	
   

  	
   

  
	
  (liv)

  	
   

  	
  Assuming
  compliance with the terms of the Subscription Agreement, and this Agreement,
  neither the Company nor any person acting on its behalf has offered or sold
  the Subscription Receipts (or any securities issuable on conversion thereof)
  by means of any general solicitation or general advertising within the
  meaning of Rule 502(c) under the U.S. Securities Act or, with
  respect to Subscription Receipts (or any such securities) sold outside the
  United States to non-U.S. persons (as defined in Rule 902 under the U.S.
  Securities Act), by means of any directed selling efforts within the meaning
  of Rule 902 under the U.S. Securities Act and the Company, any affiliate
  of the Company and any person acting on its or their behalf has complied with
  and will implement the offering restriction requirements of Rule 902
  under the U.S. Securities Act;

  
	
   

  	
   

  	
   

  
	
  (lv)

  	
   

  	
  The Company and
  each of the Material Subsidiaries maintains a system of internal accounting
  controls sufficient to provide reasonable assurances that (A) transactions
  are executed in accordance with management’s general or specific
  authorization; (B) transactions are recorded as necessary to permit
  preparation of financial statements in conformity with U.S. GAAP and to
  maintain accountability for assets; (C) access to assets is permitted
  only in accordance with management’s general or specific authorization; and
  (D) the recorded accountability for assets is compared with the existing
  assets at reasonable intervals and appropriate action is taken with respect
  to any differences. Since December 31, 2004, there has been (1) no
  material weakness in the Company’s internal control over financial reporting
  (whether or not remediated) and (2) no

  



 


23

















 


change in the
Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
controls over financial reporting.


 


(b)                                  Representations,
Warranties and Covenants of the Agent. The Agent hereby represents,
warrants and covenants to the Company, and acknowledge that the Company is
relying upon such representations and warranties, that:


 


(i)                                     in respect of the offer
and sale of the Subscription Receipts, the Agent will comply with all
Securities Laws of the jurisdictions in which it offers Subscription Receipts;


 


(ii)                                  the Agent and its
representatives have not engaged in or authorized, and will not engage in or
authorize, any form of general solicitation or general advertising in
connection with or in respect of the Subscription Receipts in any newspaper,
magazine, printed media of general and regular paid circulation or any similar
medium, or broadcast over radio or television or otherwise or conducted any
seminar or meeting concerning the offer or sale of the Subscription Receipts
whose attendees have been invited by any general solicitation or general
advertising;


 


(iii)                               the
Agent is an “accredited investor” as such term is defined in National
Instrument 45-106 -  Prospectus
and Registration Exemptions.


 


6.                                    Prospectus and Registration Statement Matters


 


	
  (a)

  	
   

  	
  The
  Company will use its commercially reasonable efforts to cause the Preliminary
  Prospectus and any other related documents required to be filed in connection
  with the Preliminary Prospectus to be prepared and filed in accordance with
  the Securities Laws of the Qualifying Provinces, as soon as practicable after
  the Closing Date, in each case in form and substance satisfactory to the
  Agent acting reasonably. The Company will use its commercially reasonable
  efforts to satisfy as expeditiously as possible any comments made by any of
  the Securities Regulators in respect of the Preliminary Prospectus;

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  The
  Company will use its commercially reasonable efforts to obtain, as soon as
  possible, a Final Receipt from each of the Securities Regulators in the
  Qualifying Provinces for the Final Prospectus and will take all other steps
  and proceedings that may be necessary in order to qualify the Unit
  Shares, Warrants and Broker Warrants for distribution in each of the
  Qualifying Provinces as practicable and, in any event, no later than 5:00 p.m.
  (Toronto time) on the Final Qualification Deadline;

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  The Company will use its commercially
  reasonable efforts, promptly following the Closing but no later than March 31,
  2006, to prepare and file with the SEC the Registration Statement on
  Form S-1 or SB-2 (or, if Form S-1 or SB-2 is not then

  



 


24

















 


	
   

  	
   

  	
  available to the Company, on such form of
  registration statement as is then available) to effect a registration
  covering the resale of the Registrable Securities in an amount at least equal
  to the aggregate of the Registrable Securities. The Registration Statement
  also shall cover, to the extent allowable under the U.S. Securities Act and
  the rules promulgated thereunder (including Rule 416), such
  indeterminate number of additional shares of common stock of the Company
  resulting from stock splits, stock dividends or similar transactions with
  respect to the Registrable Securities. The Company shall use its commercially reasonable efforts to have the Registration Statement declared
  effective by the SEC as soon as practicable and, in any event, no later than
  5:00 p.m. (Toronto time) on the Final Qualification Deadline

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Prior
  to the filing of the Preliminary Prospectus, the Final Prospectus, any
  Supplementary Material and the Registration Statement (and each amendment or
  supplement thereto) the Company will allow the Agent
  to participate fully in the preparation of, and approve the form of the
  Preliminary Prospectus, the Final Prospectus, any Supplementary Material, and
  the Registration Statement (and each amendment or supplement thereto), and
  will allow the Agent to conduct all due diligence which they may require
  to conduct in order to fulfil their obligations and in order to enable them
  responsibly to execute the certificate required to be executed by them at the
  end of each of the Preliminary Prospectus, the Final Prospectus and any
  Supplementary Material;

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  All
  the information and statements to be contained in the Preliminary Prospectus,
  the Final Prospectus, any Supplementary Material and the Registration
  Statement (and
  each amendment or supplement thereto), will, at the
  respective dates of delivery thereof, constitute full, true and plain
  disclosure of all material facts relating to the Company and the Registrable Securities and will not contain an untrue statement of a material fact or
  omit to state a material fact required to be stated therein or necessary to
  make the statements therein not misleading (provided that this representation
  is not intended to extend to information and statements included in reliance
  upon and in conformity with information furnished to the Corporation by or on
  behalf of the Agent specifically for use therein);

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  None
  of the Preliminary Prospectus, the Final Prospectus, any Supplementary
  Material nor the Registration Statement (and each amendment or supplement thereto),
  will contain a misrepresentation (provided that this representation
  is not intended to extend to information and statements included in reliance
  upon and in conformity with information furnished to the Company by or on
  behalf of the Agent specifically for use therein);

  
	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  The
  Preliminary Prospectus, the Final Prospectus, and any Supplementary Material
  will contain the disclosure required by all requirements of the Securities
  Laws of the Qualifying Jurisdictions;

  
	
   

  	
   

  	
   

  



 


 


25

















 


	
  (h)

  	
   

  	
  The
  Registration Statement (and each amendment or supplement thereto), will
  contain the disclosure required by all requirements of the Securities Laws of
  the United States;

  
	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  The
  Company recognizes that it is fundamental to the Purchasers that the
  distribution of the Unit Shares and Warrants be qualified under the Final
  Prospectus and their resale be registered in the United States under the
  Registration Statement so that the Unit Shares, Warrants and Warrant Shares
  will be tradable in such Qualifying Provinces and in the United States
  without the necessity of the holder thereof filing a prospectus or effecting
  the trade in a manner which falls within one of the various private placement
  exemptions or exemptions from registration under applicable securities
  legislation or subject to any statutory or regulatory hold periods or trade
  restrictions in such Qualifying Provinces and in the United States (provided
  such trade is not a “control distribution” as defined by the applicable
  Securities Laws, or an “affiliate” as defined in Rule 144). The Company
  acknowledges that it is for this reason that the Company has agreed to use
  its commercially reasonable efforts to ensure that the Preliminary Prospectus
  and the Final Prospectus are to be filed with the Securities Regulators in
  the Qualifying Provinces and receipts are to be obtained therefore and the
  Registration Statement is to be filed with the SEC in the United States
  within the time periods contemplated by this Agreement.

  



 


7.                                      Delivery of Prospectuses


 


(a)                                  The
Company shall deliver or cause to be delivered to the Agent and the Agent’s
counsel the documents set out below at the respective times indicated:


 


	
  (i)

  	
   

  	
  prior to or contemporaneously, as nearly
  as practicable, with the filing with the Securities Regulators (i) in
  the Qualifying Provinces of the Preliminary Prospectus or of the Final
  Prospectus copies of the Preliminary Prospectus or of the Final Prospectus
  signed as required by applicable Securities Laws, and (ii) with the SEC
  of the Registration statement and all amendments thereto;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  as soon as they are available, copies of
  any Supplementary Material required to be filed under any of the Securities
  Laws in Canada and the United States, signed as required by applicable
  Securities Laws and including copies of any documents or information
  incorporated by reference therein which have not been previously delivered to
  the Agent;

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  prior to filing the Final Prospectus upon
  the effectiveness of the Registration Statement, comfort letters from the
  auditors of the Company dated the date of the Final Prospectus and the
  Registration Statement and satisfactory in form and substance to the
  Agent, with respect to the financial and accounting information contained in
  or incorporated by reference into the Final Prospectus and the Registration
  Statement which

  



 


26

















 


	
   

  	
   

  	
  comfort
  letter shall be based on a review by the auditors having a cut-off date of
  not more than two business days prior to the date of the comfort letter and
  shall be in addition to any comfort letter which must be filed with
  securities regulatory authorities pursuant to Securities Laws in Canada or
  the United States, as the case may be; and

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  as
  soon as possible and, in any event, a date two Business Days following
  receipt of a decision document in respect of the Preliminary Prospectus and
  the Final Prospectus, without charge, shall print and deliver such number of
  commercial copies of the Preliminary Prospectus and the Final Prospectus as
  the Agent shall reasonably require.

  



 


(b)                               The
delivery to the Agent of the Prospectus, or any Supplementary Material and the
filing of the Registration Statement (or any amendment or supplement thereto)
with the SEC shall constitute the representation and warranty of the Company to
the Agent that, at the time of such delivery or filing, as the case may be:


 


	
  (i)

  	
   

  	
  such
  documents contain full, true and plain disclosure of all material facts
  relating to the Company and the Common Shares, and no material facts have
  been omitted therefrom which are necessary to make the statements therein not
  misleading in light of the circumstances in which they are made;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  such
  documents contain no misrepresentations; and

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  such
  documents comply in all material respects with the Securities Laws in Canada
  and the United States;

  



 


provided,
however, that the foregoing representations and warranties will not apply with
respect to information and statements contained in the Prospectus or the
Registration Statement or misrepresentations with respect thereto or omissions
therefrom which relate solely to the Agent or information provided by the
Agent.


 


8.                                  Closing
Deliveries. The purchase and sale of the Subscription Receipts shall be completed
at the Closing Time at the offices
of the Company’s counsel, Fraser Milner Casgrain LLP, Toronto, Ontario at 9:00 a.m. (Toronto time), or at such other place
as the Agent and the Company may agree upon in writing. At or prior to the
Closing Time, the Company shall duly and validly deliver to the Agent
certificates in definitive form representing the Subscription Receipts in
the names of such Purchasers or as indicated on their respective Subscription
Agreements, against payment to the Company of the Issue Price therefor, in
lawful money of the United States. The Agent may discharge its payment
obligations under this paragraph 8 by wire transfer from the Agent to the
Company equal to 50% of the aggregate Issue Price for the Subscription Receipts
less the Agent’s expenses, as set out in paragraph 11 hereto and less 50% of the Commission. At the direction of the
Company, the Agent shall, by way of wire transfer, deposit the remaining 50% of
the aggregate Issue Price in a trust account of the Transfer Agent as
contemplated in the Subscription Receipt Agreement.


 


27

















 


9.                                    Closing
Conditions. Each Purchaser’s obligation to purchase the Subscription Receipts at
the Closing Time shall be conditional upon the fulfilment at or before the
Closing Time of the following conditions:


 


(a)                                   the Agent shall have
received a certificate, dated as of the Closing Date, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, or such other
officers of the Company as the Agent may agree, certifying for and on
behalf of the Company, to the best of their knowledge, information and belief,
that:


 


(i)                                      no order, ruling or
determination having the effect of suspending the sale or ceasing the trading
in any securities of the Company (including the Common Shares) has been issued
by any regulatory authority and is continuing in effect and no proceedings for
that purpose have been instituted or are pending or, to the knowledge of such
officers, contemplated or threatened by any regulatory authority;


 


(ii)                                   the Company has duly
complied with all the terms, covenants and conditions of this Agreement on its part to
be complied with up to the Closing Time; and


 


(iii)                                there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and the
Material Subsidiaries considered as a whole, whether or not arising in the
ordinary course of business and the representations, warranties and covenants
of the Company contained in this Agreement are true and correct as of the
Closing Time with the same force and effect as if made at and as of the Closing
Time after giving effect to the transactions contemplated by this Agreement;


 


(b)                                   the Agent shall have
received at the Closing Time certificates dated the Closing Date, signed by
appropriate officers of the Company addressed to the Agent and their counsel,
with respect to the articles and by-laws of the Company, all resolutions of the
Company’s board of directors relating to this Agreement and the transactions
contemplated hereby and thereby, the incumbency and specimen signatures of
signing officers, the articles and by-laws of the Company and such other
matters as the Agent may reasonably request;


 


(c)                                   the Agent shall have
received at the Closing Time, evidence of all requisite approvals, consents and
acceptances of the appropriate regulatory authorities required to be made or
obtained by the Company in order to complete the Offering;


 


(d)                                   the Subscription Receipt
Agreement, the Registration Rights Agreement, Warrant Indenture, the
Subscription Agreements, the Subscription Receipt Certificates and the
certificate representing the Compensation Option shall have been executed and
delivered by the parties thereto in form and substance satisfactory to the
Agent and their counsel, acting reasonably;


 


28

















 


(e)                                  the Agent shall have
received favourable legal opinions addressed to the Agent, and the Purchasers,
in form and substance satisfactory to the Agent’s counsel acting
reasonably, dated each applicable Closing Date, from Fraser Milner Casgrain LLP
and Dufford & Brown, P.C., counsel for the Company and where
appropriate, counsel in the other Selling Jurisdictions, which counsel in turn may rely,
as to matters of fact, on certificates of auditors, public officials and
officers of the Company in the Form of Exhibit B hereto;


 


(f)                                    the Agent shall have
received good standing certificates or similar certificates with respect to the
jurisdictions in which the Company and the Material Subsidiaries are
incorporated;


 


(g)                                 the Agent shall, in its
sole discretion, be satisfied with their due diligence review with respect to
the business, assets, financial condition, affairs and prospects of the
Company;


 


(h)                                  the Agent shall have received favourable legal opinions addressed to the
Agent, the Purchasers and the Agent’s counsel in form and substance
satisfactory to the Agent’s counsel, acting reasonably, dated the Closing Date
from local counsel to the Company in the United States as to the title and
ownership interest in the Tonkin Springs gold property;


 


(i)                                     the Company will cause
its Transfer Agent to deliver a certificate as to the issued and outstanding
Common Shares; and


 


(j)                                   the Agent shall have received a favourable legal
opinion addressed to the Agent, the Purchasers and the Agent’ counsel, as to (i) the
incorporation and subsistence of the Material Subsidiaries; (ii) the
corporate power and authority of the Material Subsidiaries to carry on its
business as presently carried on and to own its assets and property; and (iii) as
to the registered ownership of the issued and outstanding shares of the
Material Subsidiaries.


 


10.                                Rights of
Termination


 


(a)                                  Due
Diligence Out. In the event that the due diligence investigations performed by the
Agent and/or their representatives reveals any material information or fact not
generally known to the public which might, in the Agent’s sole opinion, acting
reasonably, adversely affect the market price of the securities of the Company,
quality of the investment or marketability of the Offering, the Agent shall be
entitled, at its sole option and in accordance with subparagraph 10(h) of
this Agreement, to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by it to purchase Subscription Receipts)
by notice to that effect given to the Company any time prior to the Closing
Time.


 


(b)                                  Litigation.
If any inquiry, action, suit, investigation or proceeding, whether
formal or informal, (including matters of regulatory transgression or unlawful
conduct and including any inquiry or investigation by any Securities Regulator)
is commenced, announced or threatened in relation to the Company or any of the
officers or directors of the Company or any of its principal security holders,
the Agent shall be entitled, at its sole option and in accordance with


 


29

















 


subparagraph 10(h) of this Agreement, to
terminate its obligations under this Agreement (and the obligations of the
Purchasers arranged by them to purchase Subscription Receipts) by notice to
that effect given to the Company any time prior to the Closing Time.


 


(c)                                  Disaster
Out. In the event that prior to the Closing Time, there should develop, occur
or come into effect any action, state, or condition, including, without
limitation, terrorism, accident, a new or change in any governmental law or
regulation, or other condition or major financial occurrence of national or
international consequence, which, in the sole opinion of the Agent materially
adversely affects, or may adversely affect, the financial markets
generally or the business, operations, affairs or profitability of the Company,
or the trading, market price or value of the securities of the Company, the Agent
shall be entitled at their sole option, in accordance with subparagraph 10(h) of
this Agreement, to terminate its obligations under this Agreement (and the
obligations of the Purchasers arranged by them to purchase Subscription
Receipts) by written notice to that effect given to the Company prior to the
Closing Time.


 


(d)                                  Change in
Material Fact. In the event that prior to the Closing Time, the Agent or the Agent’
representatives, through their due diligence investigations, or otherwise
discover or there should occur a material change or a change in any material
fact or new material fact shall arise, which, in the sole opinion of the Agent
has or could be expected to have a significant adverse effect on the market
price or value of the securities of the Company, the Agent shall be entitled,
at its sole option, in accordance with subparagraph 10(h), to terminate its
obligations under this Agreement (and the obligations of the Purchasers
arranged by it to purchase Subscription Receipts) by written notice to that
effect given to the Company prior to the Closing Time.


 


(e)                                  Non-Compliance
With Conditions. The Company agrees that all terms, conditions and
covenants in this Agreement shall be construed as conditions and complied with
so far as the same relate to acts to be performed or caused to be performed by
the Company and that it will use its best efforts to cause such conditions to
be complied with, and any breach or failure by the Company to comply with any
of such conditions or in the event that any representation or warranty given by
the Company becomes false and is not rectified as at the Closing Time, shall
entitle the Agent, at its sole option in accordance with subparagraph 10(h), to
terminate its obligations under this Agreement (and the obligations of the
Purchasers arranged by it to purchase the Subscription Receipts) by notice to
that effect given to the Company at or prior to the Closing Time. The Agent may waive,
in whole or in part, or extend the time for compliance with, any terms and
conditions without prejudice to its rights in respect of any other of such
terms and conditions or any other or subsequent breach or non-compliance,
provided that any such waiver or extension shall be binding upon the Agent only
if the same is in writing and signed by it.


 


(f)                                    Cease
Trade Order. In the event that a stop order exists with respect to the securities of
the Company, the Agent shall be entitled, at its sole option, in accordance
with subparagraph 10(h) of this Agreement, to terminate its obligations
under this Agreement (and the obligations of the Purchasers arranged by it to
purchase Subscription Receipts) by written notice to that effect given to the
Company prior to the Closing Time.


 


30

















 


(g)                                 Profitably Marketed. In the event that prior to the Closing Time, the state
of the Canadian, U.S. or international financial markets is such that, in the
sole opinion of the Agent, the Subscription Receipts cannot be profitably
marketed, the Agent shall be entitled at its sole option, in accordance with
subparagraph 10(h) of this Agreement, to terminate its obligations under
this Agreement (and the obligations of the Purchasers arranged by them to
purchase Special Warrants) by written notice to that effect given to the
Company prior to the Closing Time.


 


(h)                                 Exercise
of Termination Rights. The rights of termination contained in subparagraphs
10(a), (b), (c), (d), (e) (f) and (g) may be exercised by
the Agent and are in addition to any other rights or remedies the Agent may have
in respect of any default, act or failure to act or non-compliance by the
Company in respect of any of the matters contemplated by this Agreement or
otherwise. In the event of any such termination by the Agent, there shall be no
further liability on the part of the Agent to the Company or on the part of
the Company to the Agent except in respect of any liability which may have
arisen or may arise after such termination in respect of acts or omissions
prior to such termination under sections 11 and 13.


 


11.                               Expenses.
Whether or not the sale of the Subscription Receipts shall be completed,
the Company will pay all reasonable
expenses and fees in connection with the Offering, including, all reasonable
expenses of or incidental to the issue, sale or distribution of the
Subscription Receipts; the reasonable fees and expenses of the Company’s
counsel, accountants and technical experts; all reasonable costs incurred in
connection with the preparation of documents relating to the Offering and the
Prospectus and Registration Statement (including printing and delivery costs
associated therewith); all costs associated with listing the securities of the
Company on the Toronto Stock Exchange; and all reasonable expenses and fees
incurred by the Agent, which shall include the reasonable fees and
disbursements of the Agent’s counsel. All reasonable fees and expenses incurred
by the Agent or on their behalf including the fees of the Agent’s counsel shall
be payable by the Company immediately upon receiving an invoice therefor.


 


12.                             Survival
of Representations and Warranties. All terms, warranties, representations, covenants and
agreements herein contained or contained in any documents submitted pursuant to
this Agreement and in connection with the transactions herein contemplated
shall survive the purchase and sale of the Subscription Receipts and continue
in full force and effect for the benefit of the Agent and Purchasers and shall
not be limited or prejudiced by any investigation made by or on behalf of the
Agent in connection with the purchase and sale of the Subscription Receipts.


 


13.                             (a)                              Indemnity. The Company hereby agrees to
indemnify and hold the Agent and/or any of its affiliates and the directors,
officers, employees, shareholders and unitholders of the Agent (hereinafter
referred to as the “Personnel”)
harmless from and against any and all expenses, losses, claims, actions,
damages or liabilities, whether joint or several (including the aggregate
amount paid in reasonable settlement of any actions, suits, proceedings or
claims), and the reasonable fees and expenses of its counsel that may be
incurred in advising with respect to and/or defending any claim that may be
made against the Agent, to which the Agent and/or their Personnel may become
subject or otherwise involved in any capacity under any statute or common law
or otherwise insofar as such expenses, losses, claims, damages, liabilities or
actions


 


31

















 


arise out of or are based, directly or indirectly, upon the performance
of professional services rendered to the Company by the Agent and their
Personnel hereunder or otherwise in connection with the matters referred to in
this Agreement, including any loss, claim, damage and expense arising out of
any untrue statement of a material fact contained in the Registration Statement
or the Prospectus or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided, however, that this indemnity shall not apply to the
extent that a court of competent jurisdiction in a final judgment that has
become non-appealable shall determine that:


 


(i)                                     the Agent or their Personnel have
been grossly negligent or dishonest or have committed any fraudulent act in the
course of such performance;


 


(ii)                                  the expenses, losses, claims,
damages or liabilities, as to which indemnification is claimed, were directly
caused by the gross negligence, dishonesty or fraud referred to in (i); and


 


(iii)                               the loss or expense was caused by
failure of the Agent to comply with this Agreement or by a statement provided
to the Company by the Agent in writing.


 


If for any reason
(other than the occurrence of any of the events itemized in (i) and (ii) above),
the foregoing indemnification is unavailable to the Agent or insufficient to
hold it harmless, then the Company shall contribute to the amount paid or
payable by the Agent as a result of such expense, loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and the Agent on the other
hand but also the relative fault of the Company and the Agent, as well as any
relevant equitable considerations; provided that the Company shall, in any
event, contribute to the amount paid or payable by the Agent as a result of
such expense, loss, claim, damage or liability, any excess of such amount over
the amount of the fees received by the Agent hereunder pursuant to this Agreement.


 


The Company agrees that in case any legal proceeding shall be brought
against the Company and/or the Agent by any governmental commission or
regulatory authority or any stock exchange or other entity having regulatory
authority, either domestic or foreign, shall investigate the Company and/or the
Agent and any Personnel of the Agent shall be required to testify in connection
therewith or shall be required to respond to procedures designed to discover
information regarding, in connection with, or by reason of the performance of
professional services rendered to the Company by the Agent, the Agent shall
have the right to employ their own counsel in connection therewith, and the
reasonable fees and expenses of such counsel as well as the reasonable costs (including
an amount to reimburse the Agent for time spent by its Personnel in connection
therewith) and out-of-pocket expenses incurred by its Personnel in connection
therewith shall be paid by the Company as they occur.


 


Promptly after receipt of notice of the commencement of any legal
proceeding against the Agent or any of its Personnel or after receipt of notice
of the commencement of any investigation, which is based, directly or
indirectly, upon any matter in respect of which indemnification may be
sought from the Company, the Agent will notify the Company in writing of the


 


32

















 


commencement thereof and, throughout the course thereof, will provide
copies of all relevant documentation to the Company, will keep the Company
advised of the progress thereof and will discuss with the Company all
significant actions proposed. The omission to so notify the Company shall not
relieve the Company of any liability which the Company may have to the
Agent except only to the extent that any such delay in giving or failure to
give notice as herein required materially prejudices the defence of such
action, suit, proceeding, claim or investigation or results in any material
increase in the liability which the Company would otherwise have under this
indemnity had the Agent not so delayed in giving or failed to give the notice
required hereunder.


 


The Company shall be entitled, at its own
expense, to participate in and, to the extent it may wish to do so, assume
the defence thereof, provided such defence is conducted by experienced and
competent counsel. Upon the Company notifying the Agent in writing of its
election to assume the defence and retaining counsel, the Company shall not be
liable to the Agent for any legal expenses subsequently incurred by them in
connection with such defence. If such defence is assumed by the Company, the
Company throughout the course thereof will provide copies of all relevant
documentation to the Agent, will keep the Agent advised of the progress thereof
and will discuss with the Agent all significant actions proposed.


 


Notwithstanding the foregoing paragraph, the
Agent shall have the right, at the Company’s expense, to employ counsel of the
Agent’ choice, in respect of the defence of any action, suit, proceeding, claim
or investigation if: (i) the employment of such counsel has been
authorized by the Company; or (ii) the Company has not assumed the defence
and employed counsel therefor within a reasonable time after receiving notice
of such action, suit, proceeding, claim or investigation; or (iii) counsel
retained by the Company or the Agent have advised the Indemnified Party that
representation of both parties by the same counsel would be inappropriate for
any reason, including without limitation because there may be legal
defences available to the Agent which are different from or in addition to
those available to the Agent (in which event and to that extent, the Company
shall not have the right to assume or direct the defence on the Agent’ behalf)
or that there is a conflict of interest between the Company and the Agent or
the subject matter of the action, suit, proceeding, claim or investigation may not
fall within the indemnity set forth herein.


 


No admission of liability and no settlement of
any action, suit, proceeding, claim or investigation shall be made without the
consent of the Agent affected. No admission of liability shall be made and the
Company shall not be liable for any settlement of any action, suit, proceeding,
claim or investigation made without its consent.


 


The indemnity and contribution obligations of the Company shall be in
addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to the Personnel of the Agent and
shall be binding upon and enure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Agent and any of the
Personnel of the Agent. The foregoing provisions shall survive the completion
of professional services rendered under this Agreement or any termination of
the authorization given.


 


33

















 


(b)                                  Right of
Indemnity in Favour of Others. With respect to any party who may be
indemnified by section 13(a) above and is not a party to this
Agreement, the Agent shall obtain and hold the rights and benefits of this section 13
in trust for and on behalf of such indemnified party.


 


14.                               Advertisements.
The Company acknowledges that the Agent shall have the right, subject to
clauses 1(a) and (c) of this Agreement, at its own expense, to place
such advertisement or advertisements relating to the sale of the Subscription
Receipts contemplated herein as the Agent may consider desirable or
appropriate and as may be permitted by applicable law. The Company and the
Agent each agree not to make or publish any advertisement in any media
whatsoever relating to, or otherwise publicise, the transaction provided for
herein so as to result in any exemption from the prospectus and registration
requirements of Securities Laws in any of the Selling Jurisdictions or any
other jurisdiction in which the Subscription Receipts shall be offered or sold
being unavailable in respect of the sale of the Subscription Receipts to
prospective purchasers.


 


15.                               Commission. In consideration of
the services to be rendered by the Agent in connection with the Offering, the
Company shall pay to the Agent a cash commission equal to 7.0% of the aggregate
Issue Price (the “Commission”) and the Agent’s
expenses and as set forth in section 11. The Company will also issue to the Agent a compensation option
(the “Compensation Option”) exercisable,
without payment of additional consideration, to acquire non-transferable broker
warrants (the “Broker Warrants”) equal to 6.0%
of the aggregate number of Subscription Receipts sold pursuant to the Offering.
Each Broker Warrant will be exercisable to purchase one Unit at the Issue Price
until 5:00 p.m. (Toronto time) on the date that is 18 months following the
Closing Date. The Commission
will be paid, and the Compensation Options will be issued, to the Agent as
follows: (i) 50% of such amounts on the Closing Date; and (ii) the
remaining 50% of such amounts upon the release of the Escrowed Funds to the
Company.


 


16. Notices. Unless
otherwise expressly provided in this Agreement, any notice or other
communication to be given under this Agreement (a “notice”) shall be in writing
addressed as follows:


 


(a)                                  in the case of the Company, to:


 


U.S. Gold Corporation


99 George Street


3rd Floor


Toronto, Ontario M5A 2N4


 


Attention:  Robert R. McEwen


Fax:  (647) 258-0408


 


with a copy to:


 


Fraser Milner Casgrain LLP


1 First Canadian Place


 


34

















 


39th Floor


100 King Street West


Toronto, Ontario M5X 1B2


 


Attention:  Michael Melanson


 


Fax: (416) 863-4592


 


and to:


 


Dufford & Brown
P.C.


1700 Broadway, Suite 2100


Denver, CO 80290-2101


Attention:  David Babiarz


Fax:  (303) 832-3804


 


(b)                             in
the case of the Agent at:


 


GMP Securities L.P.


145 King Street
West


Suite 1100


Toronto, Ontario
M5H 1J8


 


Attention:  Mark Wellings


Fax:                         (416) 943-6160


 


with a copy
to:


 


Cassels
Brock & Blackwell LLP

2100 Scotia Plaza

40 King Street West

Toronto, Ontario M5H 3C2


 


Attention:  Chad Accursi

Fax:  (416) 642-7131


 


and to:


 


Dorsey &
Whitney LLP

161 Bay Street, Suite 4310

Toronto, Ontario M5J 2S1


 


Attention:  Gil Cornblum

Fax:  (416) 367-7371


 


or to such other address as any of the parties may designate
by notice given to the others.


 


35

















 


Each notice shall be personally delivered to the
addressee or sent by facsimile transmission to the addressee and (i) a
notice which is personally delivered shall, if delivered on a Business Day, be
deemed to be given and received on that day and, in any other case, be deemed
to be given and received on the first Business Day following the day on which
it is delivered; and (ii) a notice which is sent by facsimile transmission
shall be deemed to be given and received on the first Business Day following
the day on which it is sent.


 


17.                               Time of
the Essence. Time shall, in all respects, be of the essence hereof.


 


18.                               Headings. The headings contained
herein are for convenience only and shall not affect the meaning or
interpretation hereof.


 


19.                               Singular
and Plural, etc. Where the context so requires, words importing the
singular number include the plural and vice versa, and words importing gender
shall include the masculine, feminine and neuter genders.


 


20.                               Entire
Agreement; No Advisory or Fiduciary Relationship.


 


(a)                                   This Agreement
constitutes the only agreement between the parties with respect to the subject
matter hereof and shall supersede any and all prior negotiations and
understandings. This Agreement may be amended or modified in any respect
by written instrument only. All schedules attached to this Agreement are deemed
to be part hereof and are hereby incorporated by reference.


 


(b)                                 The Company acknowledges
and agrees that (a) the offer of Subscription Receipts pursuant to this
Agreement, including the determination of the offering price of the
Subscription Receipts and any related commissions, is an “arm’s length”
commercial transaction between the Company and the Agent, (ii) in
connection with the Offering contemplated hereby and the process leading to
such transaction the Agent is and has been acting solely as a principal and is
not the agent or fiduciary of the Company, or its shareholders, creditors,
employees or any other party, (c) the Agent has not assumed or will assume
an advisory or fiduciary responsibility in favour of the Company with respect
to the Offering contemplated hereby and the process leading thereto
(irrespective of whether the Agent has advised or is currently advising the
Company on other matters) and the Agent has no obligation to the Company with
respect to the Offering contemplated hereby except the obligations expressly
set forth herein, (iv) the Agent and its affiliates may be engaged in
a broad range of transactions that involve interests that differ from those of
the Company, and (v) the Agent has not provided any legal, accounting,
regulatory or tax advice with respect to the Offering contemplated hereby and
the Company has consulted its own legal, accounting, regulatory and tax
advisors to the extent it deemed appropriate.


 


21.                               Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
or limit the validity or enforceability of the remaining provisions of this
Agreement.


 


22.                               Governing
Law; Attornment to Ontario. This Agreement shall be governed by and construed in
accordance with the laws of Ontario and the laws of Canada applicable therein.


 


36

















 


Any and all disputes
arising under this Agency Agreement, whether as to interpretation, performance
or otherwise, shall be subject to the exclusive jurisdiction of the courts of
the Province of Ontario and each of the parties hereto hereby irrevocably
attorns to the jurisdiction of the courts of such province.


 


23.                               Successors
and Assigns. The terms and provisions of this Agreement shall be binding upon and
enure to the benefit of the Company, the Agent and the Purchasers and their
respective executors, heirs, successors and permitted assigns; provided that,
except as provided herein, or in the Subscription Receipt Agreement or in the
Subscription Agreements, this Agreement shall not be assignable by any party
without the written consent of the others.


 


24.                               Further
Assurances. Each of the parties hereto shall do or cause to be done all such acts
and things and shall execute or cause to be executed all such documents,
agreements and other instruments as may reasonably be necessary or
desirable for the purpose of carrying out the provisions and intent of this
Agreement.


 


25.                               Effective
Date. This Agreement is intended to and shall take effect as of the date
first set forth above, notwithstanding its actual date of execution or
delivery.


 


26.                               Language.
The parties hereby acknowledge that they have expressly required this
Agreement and all notices, statements of account and other documents required
or permitted to be given or entered into pursuant hereto to be drawn up in the
English language only. Les parties reconnaissent avoir expressément demandé que
la présente Convention ainsi que tout avis, tout état de compte et tout autre
document à être ou pouvant être donné ou conclu en vertu des dispositions des
présentes, soient rédigés en langue anglaise seulement.


 


27.                               Counterparts
and Facsimile. This Agreement may be executed in any number of counterparts and
by facsimile, each of which so executed shall constitute an original and all of
which taken together shall form one and the same agreement.


 


[intentionally blank]


 


37

















 


If the Company is in agreement with the foregoing
terms and conditions, please so indicate by executing a copy of this letter
where indicated below and delivering the same to the Agent.


 


Yours
very truly,


 


GMP SECURITIES L.P.


 


	
  Per:

  	
   

  	
   

  
	
  Authorized Signing Officer

  



 


GRIFFITHS McBURNEY CORP.


 


 


	
  Per:

  	
   

  	
   

  
	
  Authorized Signing Officer

  



 


 


The foregoing is hereby accepted on the terms and
conditions therein set forth.


 


DATED as of February 22,
2006.


 


U.S. GOLD CORPORATION


 


	
  Per:

  	
   

  	
   

  
	
  Authorized Signing Officer

  



 


38

















 


SCHEDULE “A”


Details of outstanding Convertible Securities


 


1

















 


SCHEDULE “B”


Exceptions


 


(ii)                                                          The Company also owns an interest in:


 


(1)                                  Tonkin
Springs Venture Limited Partnership, organized under the laws of Nevada; and


 


(2)                                  Tonkin
Springs LLC, a limited liability company organized under the laws of the State
of Delaware.


 


(vii)                                                   The Company anticipates an increase in the liability for reclamation
obligation in accordance with SFAS 143 for internal estimates of costs and
timing related to reclamation.


 


(xii)                                                     The Company has granted Robert McEwen registration rights.


 


(xiv)                                                 The Company entered into an agreement to pay certain distributions
with French American Banking Corporation.


 


(xv)                                                    (i)                                     The Company received a Notice of Non-compliance from United States
Bureau of Land Management dated December 27, 2005 regarding alleged
deficiencies in closure plans, among other things.


 


(ii)                                  The
Company received a Notice of Non-compliance from the Nevada Division of Environmental
Protection dated April 18, 2005 regarding alleged deficiencies in closure
plans, among other things.


 


(xxxiii)                                        The Company has received a Notice of Non-compliance from United
States Bureau of Land Management dated December 27, 2005 regarding alleged
deficiencies in closure plans, among other things.


 


2

















 


EXHIBIT “A”


Registration Rights
Agreement


 


3

















 


EXHIBIT “B”


Form of legal opinions


 


4