Unassociated Document


    
      

      

    

    

      CLEAR
        LAKE PROPERTY OPTION AGREEMENT

      


      


      THIS
        AGREEMENT
        dated
        for reference May 31, 2005.

      


      


      BETWEEN:

      


      THOMAS
        VON CARDINAL, P.O.
        Box.
        58, Latchford, Ontario, P0J 1N0;

      


      ("Cardinal")

      


      OF
        THE
        FIRST PART

      


      AND:

      


      NEW
        INVERNESS EXPLORATIONS, INC,
        a body
        corporate, duly incorporated under the laws of the State of Nevada and having
        its head office at 18 Patricia St., Pickle Lake, Ontario, P0V 3A0;

      


      ("New
        Inverness")

      


      OF
        THE
        SECOND PART

      


      W
        H E R E
        A S :

      


      A.         
Cardinal
        is the registered and beneficial owner of the one mineral property claim
        located
        in Coleman Township, Larder Lake Mining Division, Ontario, which claim is
        more
        particularly described in Schedule "A" attached hereto which forms a material
        part hereof (collectively, the "Claim");

      


      B.          
        Cardinal
        has agreed to grant to New Inverness the sole and exclusive right, privilege
        and
        option to explore the Claim together with the sole and exclusive right,
        privilege and option to purchase the Claim upon the terms and conditions
        hereinafter set forth;

      


      NOW
        THEREFORE THIS AGREEMENT WITNESSETH
        that in
        consideration of the mutual covenants and provisos herein contained,
THE
        PARTIES HERETO AGREE AS FOLLOWS:

      


      1.           
        OPTIONOR’S
        REPRESENTATIONS

      


      1.1         
Cardinal
        represents and warrants to New Inverness that:

      


      
        	 	
                (a)

              	
                Cardinal
                  is the registered and beneficial owner of the Claim and holds the
                  right to
                  explore and develop the Claim;

              


      

      


      
        	 	
                (b)

              	
                Cardinal
                  holds the Claim free and clear of all liens, charges and claims
                  of others,
                  and Cardinal has a free and unimpeded right of access to the Claim
                  and has
                  use of the Claim surface for the herein
                  purposes;

              


      


      
        
           

        

        
          
          

          
            

          

        

        
           

        

      


      


      
        	 	
                (c)

              	
                The
                  Claim has been duly and validly located and recorded in a good
                  and
                  miner-like manner pursuant to the laws of the Province of Ontario
                  and are
                  in good standing in Ontario as of the date of this
                  Agreement;

              


      

      


      
        	 	
                (d)

              	
                There
                  are no adverse claims or challenges against or to the Cardinal's
                  ownership
                  of or title to the Claim nor to the knowledge of Cardinal is there
                  any
                  basis therefor, and there are no outstanding agreements or options
                  to
                  acquire or purchase the Claim or any portion
                  thereof;

              


      

      


      
        	 	
                (e)

              	
                Cardinal
                  has the full right, authority and capacity to enter into this Agreement
                  without first obtaining the consent of any other person or body
                  corporate
                  and the consummation of the transaction herein contemplated will
                  not
                  conflict with or result in any breach of any covenants or agreements
                  contained in, or constitute a default under, or result in the creation
                  of
                  any encumbrance under the provisions of any indenture, agreement
                  or other
                  instrument whatsoever to which Cardinal is a party or by which
                  he is bound
                  or to which he is subject; and

              


      

      


      
        	 	
                (f)

              	
                No
                  proceedings are pending for, and Cardinal is unaware of any basis
                  for, the
                  institution of any proceedings which could lead to the placing
                  of Cardinal
                  in bankruptcy, or in any position similar to
                  bankruptcy.

              


      

      


      1.2       The
        representations and warranties of Cardinal set out in paragraph 1.1 above
        form a
        part of this Agreement and are conditions upon which New Inverness has relied
        in
        entering into this Agreement and shall survive the acquisition of any interest
        in the Claim by New Inverness .

      


      1.3       Cardinal
        will indemnify New Inverness from all loss, damage, costs, actions and suits
        arising out of or in connection with any breach of any representation, warranty,
        covenant, agreement or condition made by Cardinal and contained in this
        Agreement.

       

      1.4       Cardinal
        acknowledges and agrees that New Inverness has entered into this Agreement
        relying on the warranties and representations and other terms and conditions
        of
        this Agreement and that no information which is now known or which may hereafter
        become known to New Inverness shall limit or extinguish the right to indemnity
        hereunder, and, in addition to any other remedies it may pursue, New Inverness
        may deduct the amount of any such loss or damage from any amounts payable
        by it
        to Cardinal hereunder.

      


      2.        
        NEW
        INVERNESS' REPRESENTATIONS

      


      New
        Inverness warrants and represents to Cardinal that it is a body corporate,
        duly
        incorporated under the laws of the State of Nevada with full power and absolute
        capacity to enter into this Agreement and that the terms of this Agreement
        have
        been authorized by all necessary corporate acts and deeds in order to give
        effect to the terms hereof.


      
        
           

        

        
          2

          
            

          

        

        
           

        

      


      


      3.        
        GRANT
        OF OPTION

      


      Cardinal
        hereby gives and grants to New Inverness the sole and exclusive right and
        option
        to acquire a l00% undivided right, title and interest in and to the Claim
        (the
        "Option"), subject to a 3% net smelter returns royalty and a 2% gross overriding
        royalty on diamond production on the Claims, as described respectively in
        Schedules B and C attached to this Agreement, by performing the acts and
        deeds
        and paying the sums provided for in paragraph 4.

      


      4.        
        CONSIDERATION
        FOR THE GRANT OF OPTION

      


      4.1       In
        order
        to keep the Option in respect of the Claim in good standing and in force
        and
        effect, New Inverness shall be obligated to:

      


      Cash
        Payment

      
         

      

      
        	
              	
                (a)

              	
                Pay
                  to Cardinal a total of $33,000
                  as follows:

              


      

      


      
        	
              	(i)	
                $3,000
                  immediately upon execution of this agreement by all parties;
                  

              


      

      


      
        	
              	(ii)	
                an
                  additional $5,000 by May 25, 2006; 

              


      

      


      
        	
              	(iii)	
                an
                  additional $10,000 by May 25, 2007;
                  and

              


      

      


      
        	
              	(iv)	
                an
                  additional $15,000 by May 25, 2008.

              


      

      


      Expenditure
        Commitments

      


      
        	 	
                (b)

              	
                Incur,
                  or cause to be incurred, exploration work on the Claims totalling
                  at least
                  $200,000 by May 25, 2008, which work shall be conducted by New
                  Inverness
                  under the direction of a qualified geologist or project engineer,
                  as
                  follows:

              


      

      


      
        	
              	(i)	
                $5,000
                  in
                  expenditures on the Claim by Dec 31, 2005. New Inverness’ completion of
                  these expenditures is mandatory;

              


      

      


      
        	
              	(ii)	
                No
                  less than a further $15,000
                  of
                  expenditures to be incurred on the Claim by May 25, 2006;

              


      

      


      
        	
              	(iii)	
                No
                  less than a further $30,000 of expenditures to be incurred on the
                  Claim by
                  May 25, 2007; 

              


      

      


      
        	
              	(iv)	
                No
                  less than a further $50,000 of expenditures to be incurred on the
                  Claim by
                  May 25, 2008; and

              


      

      


      
        	
              	(v)	
                No
                  less than a further $100,000 of expenditures to be incurred on
                  the Claim
                  by May 25, 2009. 

              


      


      
        
           

        

        
          3

          
            

          

        

        
           

        

      


      


      Advance
        Royalty Payments

       

      
        	 	
                (c)

              	
                Stonechurch
                  agrees to pay to Cardinal advance net smelter returns royalty payments
                  on
                  the Claim of $10,000 per year. Advance net smelter return royalty
                  payments
                  shall be due on the May 25 each year commencing May 31, 2010, and
                  continuing on May 25 of each calendar year thereafter until this
                  Agreement
                  is terminated. All such advance net smelter returns royalty payments
                  that
                  New Inverness makes to Cardinal shall be fully credited toward
                  any monies
                  due under the provisions of paragraph
                  10.

              


      

      


      Assessment
        Work

      


      
        	 	
                (d)

              	
                Pay,
                  or cause to be paid, to Cardinal, or on Cardinal's behalf, as New
                  Inverness may determine, all Claims payments and assessment work
                  required
                  to keep the Claim and this Option in good standing during the term
                  of this
                  Agreement.

              


      

      


      4.3       New
        Inverness shall deliver all consideration due to the Cardinal under paragraph
        4.1
        directly in his name.

      


      5.        
        PERIPHERAL
        INTEREST

      


      New
        Inverness agrees that any other right or interest acquired in any mineral
        property claim group within a two kilometer distance of the boundaries of
        the
        Claim will form part of the Claim for the purpose of this agreement. Any
        additional mineral property right or interest that New Inverness may acquire
        shall be included under the provisions of paragraph 6.1.

      


      6.        
        RIGHT
        TO ABANDON PROPERTY INTERESTS

      


      6.1       Should
        New Inverness, in its sole discretion, determine that any part of the Claim
        no
        longer warrants further exploration and development, then New Inverness may
        abandon such interest or interests without affecting its rights or obligations
        under this Agreement, so long as New Inverness provides Cardinal with 30
        days
        notice of its intention to do so. Upon receipt of such notice, Cardinal may
        request New Inverness to retransfer the title to such interest or interests
        to
        him, and New Inverness hereby agrees to do so, and upon expiry of the 30
        days,
        or upon the earlier transfer thereof, such interests shall cease to be part
        of
        the Claim for the purposes of this Agreement.

      


      6.2       Any
        Claim
        that New Inverness returns to Cardinal in accordance with paragraph 6.1 shall
        have a minimum of one year of assessment work credited against it at the
        time of
        return.

      


      7.        
        TERMINATION
        OF OPTION

      


      7.1       Subject
        to paragraph 7.2, the Option shall terminate if New Inverness fails to make
        the
        required cash payments, advance royalty payments or, fails to complete the
        required assessment work in accordance with paragraph 4.1 herein within the
        time
        periods specified therein.

      


      7.2       If
        New
        Inverness shall be in default of any requirement set forth in paragraph 4.1
        herein, Cardinal shall give written notice to New Inverness specifying the
        default and New Inverness shall not lose any rights granted under this
        Agreement, unless within 30 days after the giving of notice of default by
        Cardinal, New Inverness has failed to take reasonable steps to cure the default
        by the appropriate performance.


      
        
           

        

        
          4

          
            

          

        

        
           

        

      


      


      7.3       If
        the
        Option is terminated in accordance with paragraphs 7.1 and 7.2 herein, New
        Inverness shall have no interest in or to the Claim, and all share issuances,
        expenditures and payments made by New Inverness to or on behalf of Cardinal
        under this Agreement shall be non-refundable by Cardinal to New Inverness
        for
        which New Inverness shall have no recourse. Within 60 days of such termination,
        New Inverness shall transfer the Claim back to Cardinal, failing which, Cardinal
        shall have the right to act as attorney for New Inverness for the purpose
        of
        such transfer.

      


      8.        
        ACQUISITION
        OF INTERESTS IN THE PROPERTY

      


      At
        such
        time as New Inverness has made the required cash payments and exploration
        expenditures in accordance with paragraph 4.1 herein, within the time periods
        specified therein, then the Option shall be deemed to have been exercised
        by New
        Inverness, and New Inverness shall have thereby, without any further act,
        acquired an undivided 100% interest in and to the Claim.

      


      9.        
        RIGHT
        OF ENTRY

      


      For
        so
        long as the Option continues in full force and effect, New Inverness, its
        employees, agents, permitted assigns and independent contractors shall have
        the
        sole and exclusive right and option to:

      


      
        	 	
                (a)

              	
                enter
                  upon the Claim;

              


      

      


      
        	 	
                (b)

              	
                have
                  exclusive and quiet possession of the
                  Claim;

              


      

      


      
        	 	
                (c)

              	
                incur
                  expenditure;

              


      

      


      
        	 	
                (d)

              	
                bring
                  upon and erect upon the Claim such mining facilities as New Inverness
                  may
                  consider advisable; and

              


      

      


      
        	 	
                (e)

              	
                remove
                  from the Claim and sell or otherwise dispose of mineral
                  products.

              


      

      


      10.       NET
        SMELTER RETURNS ROYALTY

      


      10.1
              On
        the
        date New Inverness commences commercial production on the Claim, Cardinal
        shall
        be entitled to receive and New Inverness shall pay to Cardinal 3% of net
        smelter
        returns. "Commercial production" shall not include milling of ores for the
        purpose of testing or milling by a pilot plant or milling during an initial
        tune-up period of a plant.

      


      10.2
               New
        Inverness shall be under no obligation whatsoever to place the Claim into
        commercial production and in the event they are placed into commercial
        production, New Inverness shall have the right, at any time, to curtail or
        suspend such production as it, in its absolute discretion, may determine.
        

      


      10.2 
              New
        Inverness shall be entitled to, but under no obligation whatsoever, purchase
        up
        to 2% of the 3% of net smelter returns held by Cardinal at a rate of $500,000
        per 0.5% of net smelter return.


      
        
           

        

        
          5

          
            

          

        

        
           

        

      


      


      11.       OPERATOR

      


      11.1 
              After
        the
        execution of this Agreement, New Inverness, or at New Inverness' option,
        its
        respective associate or nominee or such other unrelated entity as it may
        determine, will act as the operator of the Claim under this Agreement. New
        Inverness, if operator, may resign as the operator at any time by giving
        30
        calendar days prior written notice to Cardinal, and within such 30 day period,
        New Inverness may appoint another party who covenants to act as the operator
        of
        the Claim upon such terms as New Inverness sees fit.

      


      11.2 
              Notwithstanding
        paragraph 11.1, Cardinal shall have the right to conduct and supervise all
        of
        New Inverness’ exploration and development work on the Claim and to be
        compensated at competitive industry rates.

      


      12.       POWER
        AND AUTHORITY OF THE OPERATOR

      


      12.1 
              After
        the
        execution of this Agreement, the Operator shall have full right, power and
        authority to do everything necessary or desirable in connection with the
        exploration and development of the Claims and to determine the manner of
        operation of the Claim as a mine. 

      


      12.2 
              Where
        possible, the Operator shall insure that all field work is conducted, and
        that
        all assay and work program results are verified, by a third party independent
        from New Inverness.

      


      13.       REGISTRATION
        OF PROPERTY INTERESTS

      


      Upon
        the
        request of New Inverness, Cardinal shall assist New Inverness to record this
        Agreement with the appropriate mining recorder and, when required, Cardinal
        shall further provide New Inverness with such recordable documents as New
        Inverness and its counsel shall require to record its due interest in respect
        of
        the Claim.

      


      14.       FURTHER
        ASSURANCES

      


      The
        parties hereto agree to do or cause to be done all acts or things necessary
        to
        implement and carry into effect the provisions and intent of this
        Agreement.

      


      15.       FORCE
        MAJEURE

      


      If
        New
        Inverness is prevented from or delayed in complying with any provisions of
        this
        Agreement by reasons of strikes, labour disputes, lockouts, labour shortages,
        power shortages, fires, wars, acts of God, governmental regulations restricting
        normal operations or any other reason or reasons beyond the control of New
        Inverness, the time limited for the performance of the various provisions
        of
        this Agreement as set out above shall be extended by a period of time equal
        in
        length to the period of such prevention and delay, and New Inverness, insofar
        as
        is possible, shall promptly give written notice to Cardinal of the particulars
        of the reasons for any prevention or delay under this section, and shall
        take
        all reasonable steps to remove the cause of such prevention or delay and
        shall
        give written notice to Cardinal as soon as such cause ceases to
        exist.


      
        
           

        

        
          6

          
            

          

        

        
           

        

      


      


      16.       CONFIDENTIAL
        INFORMATION

      


      No
        information furnished by New Inverness to Cardinal hereunder in respect of
        the
        activities carried out on the Claim by Cardinal, or related to the sale of
        mineral products derived from the Claim, shall be published by Cardinal without
        the prior written consent of New Inverness, but such consent in respect of
        the
        reporting of factual data shall not be unreasonably withheld. Cardinal, shall
        be
        entitled to copies of all exploration work and development data that New
        Inverness may acquire in conducting work on the Claim, in written and electronic
        format, to be provided as the data is generated

      


      17.       ENTIRE
        AGREEMENT

      


      This
        Agreement constitutes the entire agreement to date between the parties hereto
        and supersedes every previous agreement, communication, expectation,
        negotiation, representation or understanding, whether oral or written, express
        or implied, statutory or otherwise, between the parties hereto with respect
        to
        the subject matter of this Agreement.

      


      18.       NOTICE

      


      18.1
              Any
        notice required to be given under this Agreement shall be deemed to be well
        and
        sufficiently given if delivered, or if mailed by registered mail, in the
        case of
        Cardinal addressed to him as follows:

      


      Thomas
        von Cardinal

      P.O.
        Box
        58

      Latchford,
        Ontario

      P0J
        1N0

      


      and
        in
        the case of New Inverness addressed as follows:

      


      NEW
        INVERNESS EXPLORATIONS, INC.

      18
        Patricia Street,

      Pickle
        Lake, Ontario

      P0V
        3A0

      


      Attention:
        Amanda Lamothe, President

      


      and
        any
        notice given as aforesaid shall be deemed to have been given, if delivered,
        when
        delivered, or if mailed by registered mail, on the fourth business day after
        the
        date of mailing thereof.

      


      18.2
              Either
        party hereto may from time to time by notice in writing change its address
        for
        the purpose of this section.


      
        
           

        

        
          7

          
            

          

        

        
           

        

      


      


      19.       OPTION
        ONLY

      


      Until
        the
        Option is exercised, this is an option only and except as specifically provided
        otherwise, nothing herein contained shall be construed as obligating New
        Inverness to do any acts or make any payments hereunder and any acts or payments
        made hereunder shall not be construed as obligating New Inverness to do any
        further acts or make any further payments.

      


      20.       RELATIONSHIP
        OF PARTIES

      


      Nothing
        contained in this Agreement shall, except to the extent specifically authorized
        hereunder, be deemed to constitute either party hereto a partner, agent or
        legal
        representative of the other party.

      


      21.       TIME
        OF ESSENCE

      


      Time
        shall be of the essence of this Agreement.

      


      22.       TITLES

      


      The
        titles to the respective sections hereof shall not be deemed a part of this
        Agreement but shall be regarded as having been used for convenience
        only.

      


      23.       CURRENCY

      


      All
        funds
        referred to under the terms of this Agreement shall be funds designated in
        the
        lawful currency of the United Stares of America.

      


      24.       SEVERABILITY

      


      In
        the
        event that any of the paragraphs contained in this Agreement, or any portion
        of
        thereof, is unenforceable or is declared invalid for any reason whatsoever,
        such
        unenforceability or invalidity shall not affect the enforceability or validity
        of the remaining terms or portions thereof contained in this Agreement and
        such
        unenforceable or invalid paragraph, or portion thereof, shall be severable
        from
        the remainder of the Agreement.

      


      25.       APPLICABLE
        LAW

      


      The
        situs
        of the Agreement is Cobalt, Ontario, and for all purposes this Agreement
        will be
        governed exclusively by and construed and enforced in accordance with the
        laws
        prevailing in the Province of Ontario. 

      


      26.       ENUREMENT

      


      This
        Agreement shall enure to the benefit of and be binding upon the parties hereto
        and their respective successors and assigns.


      
        
           

        

        
          8

          
            

          

        

        
           

        

      


      


      


      IN
        WITNESS WHEREOF
        this
        Agreement has been executed as of the day and year first above
        written.

      


      
        	 	 	
                STONECHURCH,
                  INC.

              
	 	 	 
	 	 	
                per:

              
	 	 	 
	
                ________________________________

              	 	
                ___________________________

              
	
                Thomas
                  von Cardinal

              	 	
                Luke
                  Willis, Director

              


      

      


      


      


      


      



      
        
           

        

        
          9

          
            

          

        

        
           

        

      


      SCHEDULE
        "A"

      


      TO
        THAT CERTAIN AGREEMENT MADE AS OF MAY 31, 2005 BETWEEN 

      THOMAS
        VON CARDINAL AND NEW INVERNESS EXPLORATIONS, INC.

      


      


      The
        Clear
        Lake Lake claim block consists of a total of 9 claim units located in the
        Larder
        Lake Mining Division, Canada with the following record number and
        area:

      


      
        	
                Township.

              	
                Recording
                  Date

              	
                Record
                  No.

              	
                Acreage

              
	 	 	 	 
	
                Coleman

              	
                April
                  25, 2005

              	
                4203309

              	
                360

              


      

      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


       

      


      


      



      
        
           

        

        
          10

          
            

          

        

        
           

        

      


      


      SCHEDULE
        “B”

      


      TO
        THAT CERTAIN AGREEMENT MADE AS OF MAY 25, 2004 BETWEEN

      THOMAS
        VON CARDINAL AND NEW INVERNESS EXPLORATIONS, INC.

      


      DEFINITION
        OF GROSS OVERRIDING ROYALTY (“GORR”)

      


      (All
        capitalized terms used herein shall have the definitions contained in the
        Agreement, unless otherwise specified.)

      


      Pursuant
        to the Agreement to which this Appendix is attached, Cardinal is entitled
        to a
        royalty (the “GORR”) equal to 2% of the Average Appraised Value (as hereinafter
        defined) of all gem and industrial diamonds recovered, sorted and graded
        from
        the Claims (the “Diamonds”), free and clear of all costs of development and
        operations.

      


      “Average
        Appraised Value”
        means
        the average of the valuations in Canadian dollars of the Diamonds determined
        by
        two independent graders, one appointed by New Inverness and one appointed
        by
        Cardinal. Such independent graders shall be duly qualified and accredited,
        and
        shall sort, grade and value the Diamonds in accordance with industry standards,
        having regard to, but without limiting the generality of the foregoing, the
        commercial demand for the Diamonds. Each independent valuator shall value
        each
        particular classification of the Diamonds in accordance with the industry
        pricebooks, standards and formulas. The parties acknowledge that the intention
        is that the GORR is to be paid to Cardinal on this basis, regardless of the
        price or proceeds actually received by New Inverness for or in connection
        with
        the Diamonds or the manner in which a sale of the Diamonds to a third party
        is
        made, and without deduction.

      


      New
        Inverness will calculate and pay the GORR to Cardinal within 30 days of the
        end
        of each calendar quarter, based on all Diamonds from the Property which were
        graded in such calendar quarter.

      


      Cardinal
        shall not be entitled to participate in the profits or be obligated to share
        in
        any losses generated by the Purchaser’s actual marketing or sales
        practices.

      


      Cardinal
        shall also at his election have the right to take their GORR in
        kind.

      


      


       

      



      
        
           

        

        
          11

          
            

          

        

        
           

        

      


       

      SCHEDULE
        “C”

      


      TO
        THAT CERTAIN AGREEMENT MADE AS OF MAY 25, 2005 BETWEEN

      THOMAS
        VON CARDINAL AND NEW INVERNESS EXPLORATIONS, INC.

      


      NET
        SMELTER RETURNS

      


      1.  In
        the
        Agreement, “Net
        Smelter Returns”
        means
        the net amount of money received by New Inverness for its own account from
        the
        sale of ore, or ore concentrates or any other products from the Claim to
        a
        smelter or other ore buyer after deduction of smelter and /or refining charges,
        ore treatment charges, penalties and any and all charges made by the purchaser
        of ore or concentrates, less any and all transportation costs which may be
        incurred in connection with the transportation of ore or
        concentrates.

      


      2.  Payment
        of Net Smelter Returns by New Inverness to Cardinal shall be made quarterly
        within 45 days after the end of each fiscal quarter of New Inverness and
        shall
        be accompanied by unaudited financial statements pertaining to the operations
        carried out by New Inverness on the Claim. Within 120 days after the end
        of each
        fiscal year of New Inverness in which Net Smelter Returns are payable to
        Cardinal, the records relating to the calculation of Net Smelter Returns
        for
        such year shall be audited and any resulting adjustments in the payment of
        Net
        Smelter Returns payable to Cardinal shall be made forthwith. A copy of the
        said
        audit shall be delivered to Cardinal within 30 days of the end of such 120-day
        period.

      


      3.  Each
        annual audit shall be final and not subject to adjustment unless the Cardinal
        delivers to New Inverness written exceptions in reasonable detail within
        one
        month after Cardinal receives the report. Cardinal, or his representative
        duly
        authorized in writing, at his expense, shall have the right to audit the
        books
        and records of New Inverness related to Net Smelter Returns to determine
        the
        accuracy of the report, but shall not have access to any other books and
        records
        of New Inverness. The audit shall be conducted by a chartered or certified
        public accountant of recognized standing. New Inverness shall have the right
        to
        condition access to its books and records on execution of a written agreement
        by
        the auditor that all information will be held in confidence and used solely
        for
        purposes of audit and resolution of any disputes related to the report. A
        copy
        of Cardinal’s report shall be delivered to New Inverness and the amount which
        should have been paid according to Cadinal’s report shall be paid forthwith. In
        the event that the said discrepancy is to the detriment of Cardinal and exceeds
        5% of the amount actually paid by New Inverness, then New Inverness shall
        pay
        the entire cost of the audit.

      


      4.  In
        the
        event smelting or refining are carried out in facilities owned or controlled,
        in
        whole or in part, by New Inverness, charges, costs and penalties with respect
        to
        such operations, excluding transportation, shall mean reasonable charges,
        costs
        and penalties for such operations but not in excess of the amounts that New
        Inverness would have incurred if such operations were carried out at facilities
        not owned or controlled by New Inverness then offering comparable custom
        services.

      


      5.  Cardinal
        shall at his election have the right to take their Net Smelter Return as
        it may
        pertain to precious metals defined as gold and platinum group elements in
        kind.

       

       

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