Document:

Confidential Treatment

  	
   

  
	
  Requested

  	
   

  

 

Exhibit
10.23

 

PATENT
LICENSE AGREEMENT

 

This Agreement is made as
of June 26, 2003 by and between:

 

AVON
PRODUCTS, INC., a corporation in good standing, organized and
existing under the laws of the State of New York, having a principal office at
1345 Avenue of the Americas, New York, New York 10105, and its Affiliates
(hereinafter collectively called “AVON”);
and

 

OBAGI
MEDICAL PRODUCTS, INC., a corporation in good standing,
organized and existing under the laws of the State of Delaware, having a
principal office at 310 Golden Shore, Ste 100, Long Beach, California, and its
Affiliates (hereinafter collectively called “OMP”).

 

WITNESSETH

 

WHEREAS,
AVON represents that it owns and has the right to license
certain patents which claim products and methods utilizing ascorbic acid; and

 

WHEREAS,
OMP has developed and continues to develop skin care products, particularly
facial peels; and

 

WHEREAS,
OMP wishes to acquire a license from AVON for use in or associated with OMP’s current
and future commercial activities relating to the sale of products containing
ascorbic acid on the terms set forth herein;

 

NOW,
THEREFORE, the parties hereby mutually agree as follows:

 

ARTICLE I - DEFINITIONS

 

Wherever used in this
Agreement, unless otherwise clearly indicated in the context, the following
terms shall have the meaning indicated below:

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

 

1.                          “Affiliate”
means any corporation or other legal business entity now or hereafter
controlling, controlled by or under common control with a party to this
Agreement. The term “control” (including the terms “controlling,” “controlled
by” and “under common control with”) means the possession, direct or indirect,
of the power to direct or cause the direction of the managing policies of an
entity due to the ownership of voting securities or voting rights, by contract
or otherwise.

 

2.                          “Effective
Date” means the date written on the first line of this Agreement.

 

3.                          “Medical
Spa” means a spa affiliated with a licensed physician, at which Rx products are
sold.

 

4.                          “Net
Sales” means the gross amount at which Products (as defined hereafter) are sold
or invoiced by OMP, less trade, quantity or cash discounts, return credits and
allowances actually given.

 

5.                          “Licensed
Patents” means U.S. Patent Nos. 6,299,889; 5,703,122; 5,516,793 and 4,983,382
and all continuations, continuations-in-part, extensions, divisionals,
substitutes, replacements, reexaminations and reissues and counterparts thereof
in any and every country of the world, any claim of which would be infringed by
Products manufactured, used, sold, offered for sale or distributed by OMP after
the Effective Date, absent this Agreement.

 

6.                          “Products”
means skin care products containing an ascorbic acid component limited to
Vitamin C and which fall within the scope of any claim of the Licensed Patents.
Foot care products are excluded from the scope of skin care products.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

2

 

ARTICLE II - LICENSE GRANT

 

1.                          For the
Term of this Agreement, as defined in Article V herein, AVON hereby grants to
OMP upon the terms and conditions set forth in this Agreement: (a) an
exclusive, worldwide, payment-bearing license under the Licensed Patents,
without the right to sublicense, to allow OMP to make, have made, use, sell,
offer for sale and distribute Products directly to physicians and Medical Spas
for sale to and/or use by consumers; and (b) a non-exclusive, payment-bearing
license under the Licensed Patents, without the right to sublicense, to allow
OMP, or its authorized distributors acting on OMP’s behalf, to make, have made,
use, sell, offer for sale and distribute Products directly to drug stores
outside the United States only for sale to and/or use by consumers, Without
limiting the scope of the exclusive grant set forth in subparagraph (a) of this
Article II, Paragraph 1, it is understood and agreed that all Products sold to
and/or used by consumers, as set forth in this Article II, Paragraph 1, shall
at all times be marketed to such consumers under the “Obagi” or other trademark
owned by OMP.

 

2.                          In the
event OMP shall make or contribute to any invention or improvement which is (a)
within the scope of any Licensed Patent, or (b) conceived and/or made based
upon and as a result of (i) the disclosure by Avon of its Confidential
Information (as hereinafter defined) or (ii) the use of the patented technology
of the Licensed Patents ((a) and (b) collectively referred to as
“Improvements”), OMP shall promptly disclose such Improvements to AVON in
writing, and assign to AVON its full worldwide right, title and interest in and
to such Improvements, including without limitation the right for AVON to apply
for patents on such Improvements in its own

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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name, and AVON shall grant and hereby does grant OMP (c) a
non-transferable, non-sublicenseable, payment-free license commensurate in
scope with the exclusivities, business channels and territories set forth in
Article II, paragraph 1 above to practice, during the Term of this Agreement,
Improvements within the scope of the Licensed Patents solely to make, have
made, use, sell, offer for sale and distribute Products, and (d) a perpetual,
non-exclusive, non-transferable, non-sublicensable, payment-free license in the
business channels and territories set forth in Article II, paragraph 1 above to
practice Improvements outside the scope of the Licensed Patents. OMP agrees to
take such further actions as may be reasonably requested by AVON, at AVON’S
expense, including without limitation signing patent application and assignment
documents prepared by AVON, in order to vest in AVON ownership of such
Improvements.

 

3.                          No
license is granted to OMP for the manufacture, use, sale, offer for sale or
distribution of any product or service covered by the Licensed Patents other
than the Products expressly defined herein and expressly in the business
channels and territories described in Article II, paragraph 1 above.

 

4.                          OMP
shall use its best commercial efforts to manufacture, distribute and sell the
Products no later than March 1, 2004. OMP shall mark all Products it sells
and/or distributes with the patent numbers of the Licensed Patents.

 

5.                          Notwithstanding
anything contained in this Agreement to the contrary, AVON and OMP understand
and agree that this Agreement shall not in any way restrict or exclude AVON
from making, using, selling, offering for sale or distributing any products in
any business channel anywhere in the world. AVON agrees to provide three

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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(3) months notice to OMP in advance of the introduction for sale of any
Product within the business channels and territories set forth in Article II,
paragraph 1 above.

 

ARTICLE III - PAYMENTS

 

1.                          In
consideration of the licenses herein granted, OMP shall pay to AVON the
following sums:

 

(a)                     a
non-refundable license issue fee of Four Hundred Thousand Dollars ($400,000) payable
in three (3) installments as follows:

 

(i) [***] Dollars [***]
within ten (10) days of the Effective Date of this Agreement;

 

(ii) [***] Dollars [***]
within one year from the Effective Date of this Agreement; and

 

(iii) [***] Dollars [***]
within two years from the Effective Date of this Agreement; and

 

(b)                    Throughout the
Term of this Agreement, (i) a royalty of [***] percent of Net Sales of Products
sold in a territory covered by one or more of the Licensed Patents; and (ii) a
royalty of [***] percent [***] of Net Sales of Products manufactured in a
territory covered by one or more of the Licensed Patents but sold in a
territory not covered by one or more of the Licensed Patents. Royalties paid by
OMP shall be non-refundable.

 

2.                          Royalties
provided for in this Agreement, when overdue, shall bear interest at a rate per
annum equal to          percent [***]
in excess of the “prime rate”

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

5

 

published by “The Wall Street Journal” at the time such payment is due,
and for the time period until payment is received by AVON.

 

3.                          In the
event of a renewal of the Term of this Agreement, as set forth in Article V,
paragraph I herein, a non-refundable annual renewal fee of one hundred thousand Dollars
$100,000 shall be due and payable on the date of each such annual renewal.

 

ARTICLE IV - ACCOUNTING PROVISIONS

 

1.                          OMP
shall keep or cause to be kept, in accordance with generally accepted
accounting principles, books, records and accounts covering its operations
applicable to this Agreement and containing all information necessary for the
accurate determination of amounts payable hereunder. OMP also agrees to permit,
at AVON’s expense, a certified public accountant to examine, no more than twice
per year, and during regular business hours, such books, records and accounts
as may be necessary to determine the completeness and accuracy of accounting
reports required to be made hereunder. If a discrepancy of more than [***]
percent [***] is found, such examination shall be at the expense of OMP.

 

2.                          Within
thirty (30) days after the end of each calendar quarter, any part of which is within
the Term of this Agreement. OMP shall deliver to AVON a report in writing,
certified by an officer of OMP, setting forth in reasonable detail the number
of Products sold by OMP and the gross sales and Net Sales of Products during
such calendar quarter. Such report shall be made whether or not OMP has sold
Products during such quarter. Each such quarterly report shall be accompanied
with payment of royalty due, if

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

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any, to AVON in respect of OMP’s activities during the period for which
such report is made. OMP, at AVON’s request, shall also provide to AVON an
annual summary within forty-five (45) days after the completion of each of
OMP’s fiscal years, prepared by such accounting firm which at the time shall be
used by OMP as its auditors, attesting to the number of Products sold by OMP
and the gross sales and Net Sales of Products in that fiscal year.

 

3.                          Whenever
for the purpose of calculating royalties, conversion from any foreign currency
shall be required (due to sales of Products outside the U.S.), such conversion
shall be made based upon the daily average rate applicable to the period that
such sales of Products were made, based upon exchange rates published in the
Wall Street Journal on the date the conversion occurs. All payments shall be based
on Net Sales of Products by OMP and may be made directly from OMP to an account
designated by AVON in the U.S.

 

ARTICLE V - TERM AND TERMINATION

 

1.                          As used
in this Agreement, the “Term of this Agreement” shall initially mean a period
of three (3) years from the Effective Date. OMP shall have the option, until
the last to expire of the Licensed Patents, and provided that the Agreement is
in full force and effect, to renew the Agreement on an annual basis, upon
payment to AVON of the annual renewal fee set forth in Article III, paragraph 3 not less than ninety (90)
days before the end of such three (3) year period and each annual renewal
period. Any such renewal period shall be included in the definition of the
“Term of this Agreement.”

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

7

 

2.                          If OMP
shall become bankrupt or become insolvent, or files a petition for bankruptcy,
and/or if the business of OMP shall be placed in the hands of a receiver,
assignee or trustee from which OMP cannot extract itself within 120 days,
and/or OMP shall be liquidated or dissolved, and/or all or substantially all of
the assets or shares of OMP shall be sold, exchanged or transferred, and/or in
the event of a merger or consolidation to which OMP is a party and to which
Avon reasonably objects, whether by the voluntary act of OMP or otherwise, this
Agreement shall immediately terminate without notice.

 

3.                          Either
party, at its option, may terminate this Agreement if the other party defaults
in the performance of any obligation hereunder and such default has not been
remedied within forty-five (45) days after written notice to the defaulting
party describing the default.

 

4.                          In the
event of any termination of this Agreement, OMP shall have no further rights
in, and shall cease practicing, the Licensed Patents and Improvements within
the scope of the Licensed Patents, and all non-refundable fees owed and
royalties accrued shall become immediately due and payable.

 

ARTICLE VI - INFRINGEMENT

 

In the event that either
party becomes aware of any actual or suspected infringement of any Licensed
Patent by a third party as a result of the manufacture, sale, distribution,
offer for sale or use of any Product in any business channel and territory
covered by Article II, paragraph 1 of this Agreement, it shall promptly notify
the other party in writing. AVON shall have the sole initial right, in its sole
discretion, to bring

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

8

 

and prosecute suit against such third party, and OMP shall cooperate,
at AVON’s sole expense, in any such suit. Except to the extent provided for
herein, all expenses of such suit shall be borne by, and any recovery obtained
or awarded shall belong to, AVON. After AVON has recovered all of its
attorneys’ fees, court costs and damages for infringing sales made by such
third party (calculated using the royalty rate set forth in Article III
herein), AVON shall pay to OMP out of such remaining, if any, recovery or
award, all of OMP’s damages as a result of the infringement by such third
party. Notwithstanding the foregoing, AVON shall not be required to pay to OMP
any amount above such remaining, if any, recovery or award. In the event that
AVON elects not to bring suit against such third party within three (3) months
after learning of the actual or suspected infringement, and diligently
prosecute such suit thereafter, OMP may, at OMP’s sole expense, and with AVON’s
reasonable approval, bring suit against such third party and join AVON as a
co-plaintiff. AVON agrees to cooperate with OMP in the prosecution of such suit
at no cost or expense to AVON. OMP shall bear the full cost and expense of such
suit, including enforcing and defending the Licensed Patents, and shall be
entitled to retain recovery from such suit, provided that, after OMP has
recovered all of its attorney’s fees and court costs, OMP shall first pay to
AVON all the royalties due for sales of the infringing products at the royalty
rate set forth in Article III herein. OMP shall not settle such suit in any way
that shall affect the rights of AVON or the scope, validity or any other aspect
of the Licensed Patents.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

9

 

ARTICLE VII - INDEMNIFICATION

 

1.                          AVON
assumes no liabilities or responsibilities to OMP with respect to any
attorneys’ fees or other defense costs incurred by OMP or any actual or
consequential damages incurred by OMP as a result of any claims, demands,
actions, suits or prosecutions made or alleged against OMP by any person, firm
or corporation claiming infringement of the intellectual property rights of any
third party.

 

2.                          AVON
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE WITH REGARD TO
THE PRODUCTS OR THE LICENSED PATENTS OR ANY IMPROVEMENTS THERETO. AVON does not
assume any liabilities or responsibilities to OMP, its employees, officers,
directors, agents, customers, successors or assigns with respect to any
attorneys’ fees or other defense costs incurred by OMP, its employees,
officers, directors, agents, customers, successors or assigns or any damages or
losses incurred by OMP, its employees, officers, directors, agents, customers,
successors or assigns as a result of any claims, demands, actions, suits or
prosecutions made or alleged against OMP, its employees, officers, directors,
agents, customers, successors or assigns by any person, firm or corporation
claiming in particular, but not limited to, personal injury or property damage
caused by the Products or the manufacture, sale, use or distribution thereof.

 

3.                          OMP
agrees to indemnify and hold harmless AVON, its employees, officers, directors,
agents, successors and assigns from all reasonable attorneys’ fees and

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

10

 

other defense costs and all actual and consequential damages that may
be incurred as a result of all claims, demands, actions, suits or prosecutions
arising out of or in connection with (i) any breach or alleged breach of any of
OMP’s obligations or representations contained in this Agreement; (ii) any
Products manufactured, sold, offered for sale or distributed by or on behalf of
OMP commencing as of the Effective Date, and (iii) any use of the subject
matter embodied in Licensed Patents or Improvements by or on behalf of OMP
commencing as of the Effective Date. In any action or suit arising out of or in
connection with any breach or alleged breach of either party’s obligations,
representations or warranties under this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys’ fees and court costs.

 

ARTICLE VIII - CONFIDENTIALITY

 

OMP and AVON acknowledge
that in connection with the matters governed by this Agreement, they may
receive or may obtain, or have received, or have obtained, access to
confidential and/or proprietary information of each other, including without
limitation confidential and/or proprietary information concerning inventions,
trade secrets, know-how, methods, processes, techniques, technologies, other
technical, business and operational information related to the their
businesses, and information embodied in or relating to the Licensed Patents
(collectively, the “Confidential Information”). Except as otherwise provided
herein, Confidential Information shall remain the exclusive property of the
disclosing party, and neither party may use or disclose any Confidential
Information of the other party to any third party. OMP and AVON agree to instruct
their employees to keep confidential all received Confidential

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

11

 

Information and to implement and enforce such security measures for the
protection of all received Confidential Information as are reasonably requested
by the disclosing party. The parties agree that the following information is
not Confidential Information within the meaning of this Agreement: 1)
information that was in the public domain at the time of disclosure; 2)
information that later became part of the public domain through no act or
omission of the receiving party, its employees, agents successors or assigns;
3) information that was lawfully disclosed to the receiving party by a third
party having the right to disclose it; 4) information that was already known by
the receiving party, from other than the disclosing party, at the time such
information was disclosed in writing by the disclosing party, as evidenced by
adequate documentation provided to the disclosing party within thirty (30) days
of such disclosure; or 5) information
that was independently developed by the receiving party, as evidenced by
adequate documentation provided to the disclosing party. If the receiving party
becomes aware that any Confidential Information may be required to be disclosed
by law or by a court order, the receiving party shall promptly notify the
disclosing party and cooperate with the disclosing party in the event that the
disclosing party attempts to seek a protective order.

 

ARTICLE IX - GENERAL PROVISIONS

 

1.                          This
Agreement will be governed by and interpreted in accordance with the laws of
the State of New York, USA, without giving effect to any conflict of laws
provisions. Each of the parties hereto irrevocably and unconditionally consents
to submit to the exclusive jurisdiction of the courts of the State of New York
and the United States

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

12

 

of America in each case located in New York County, New York for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby.

 

2.                          Neither
this Agreement nor any of the rights or obligations hereunder shall be assigned by OMP without the prior written
consent of AVON (which consent shall not be unreasonably withheld), provided
that assignment shall not relieve OMP of any liabilities accrued hereunder
prior to such assignment. This Agreement shall be binding upon and inure to the
benefit of AVON and OMP and their respective successors, assigns, and
transferees of assets as permitted in accordance with this Article IX,
paragraph 2.

 

3.                          If any
provision of this Agreement shall be deemed ineffective or invalid, the
remaining provisions hereof shall not be affected thereby and shall continue to
be in full force and effect.

 

4.                          Any
notices required or permitted to be given hereunder shall be in writing and
shall be sent by prepaid registered mail, return receipt requested, or by
facsimile transmission with a confirmation copy simultaneously sent by first
class mail, to the following addresses or to such addresses as the parties may
communicate to each other according to the provisions herein. All notices shall
be deemed to have been served one (1) day after confirmed facsimile
transmission, or upon actual receipt of registered mail.

 

	
  TO AVON:

  	
   

  	
  AVON PRODUCTS, INC.

  1345 Avenue of the Americas

  New York, NY 10105

  
	
   

  	
   

  	
  Attention: Gilbert L. Klemann
  II, Esq.

  
	
   

  	
   

  	
  Senior Vice President
  and General Counsel

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  AVON PRODUCTS, INC.

  Avon Place

  

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

13

 

	
   

  	
   

  	
  Suffern, NY 10901

  
	
   

  	
   

  	
  Attention: Janice J. Teal, Ph.D.

  
	
   

  	
   

  	
  Group Vice President
  and Chief Scientific Officer

  
	
   

  	
   

  	
   

  
	
  TO OMP:

  	
   

  	
  OMP, INC.

  
	
   

  	
   

  	
  310 Golden Shore Dr., Ste 120

  Long Beach, CA 90802

  Attn: Curtis Cluff

  
	
   

  	
   

  	
  SVP and Chief
  Financial Officer

  

 

5.                          Except
as may be required by law, the terms and conditions of this Agreement shall not
be disclosed, publicized or otherwise communicated by AVON or OMP to third
parties, except to any purchaser to whom assignment is permitted; provided,
however, that such disclosure be made pursuant to a non-disclosure agreement.

 

6.                          This
Agreement embodies and constitutes the entire agreement, and supersedes any and
all prior agreements, understandings and arrangements, oral or written, between
the parties hereto relating to the subject matter hereof.

 

7.                          Each
party warrants to the other that they have the authority to enter into this
Agreement and that the individual signing this Agreement has full authority to
execute this Agreement on behalf of the party for which they sign, and that,
when executed, this Agreement shall be valid, binding and legally enforceable
against each of the parties. However, no portion of this Agreement shall become
effective until all parties have executed this Agreement.

 

8.                          This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original.

 

9.                          This
Agreement may not be amended or modified, except by a written amendment, signed
by the parties hereto, which expressly states that it is intended to be

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

14

 

an amendment to this Agreement. No other writing, irrespective of its
content, and no course of conduct shall act as an amendment or modification of
this Agreement.

 

10.                    No failure or
delay of either party to this Agreement to enforce or exercise a right under
any one or more of the provisions of this Agreement shall be construed to be a
waiver of such provision. Nor shall any single or partial exercise of any right
or power under this Agreement preclude any further exercise of any other right
or power. The waiver of any one provision herein shall not be deemed to be a
waiver of any other provision herein.

 

11.                    Except as
specifically provided herein, nothing herein shall be construed as granting to
either party hereto, by implication, estoppel or otherwise, any right, title or
interest in or to, or any license under, any patent or patent application, now
or subsequently owned by the other party or its designee.

 

12.                    Except as set
forth in Article II, paragraph 4 herein, OMP shall not publicize, commercially
or otherwise, positively or negatively, any association, relation or comparison
between its Products and AVON or the products of AVON.

 

13.                    The terms and
conditions of Article II, paragraph 2; Article III, Paragraph 2; Article IV,
paragraph 2; Article V, paragraph 4; Article VII, paragraph 3; Article VIII;
and Article IX shall survive the expiration or termination of this Agreement
for any reason.

 

IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed in duplicate originals by
their respective duly authorized representatives.

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

15

 

	
  AVON PRODUCTS,
  INC.

  	
   

  	
  OBAGI MEDICAL PRODUCTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Janice
  J. Teal

  	
   

  	
   

  	
  By:

  	
  /s/ Austin McNamara

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name:

  	
   Janice J.
  Teal

  	
   

  	
   

  	
  Printed Name:

  	
   Austin McNamara

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: 

  	
  GVP Research
  & Dev—Avon

  	
   

  	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
  6/26/03

  	
   

  	
   

  	
   

  	
  6/24/03

  
											

 

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION, CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

 

16Filed by Automated Filing Services Inc. (604) 609-0244 - Garuda Capital Corp. - Exhibit 10.5

OPTION AGREEMENT

THIS AGREEMENT is dated for reference this 7th day of
July, 2006. 

BETWEEN:

Xemplar Energy Corp.
having a business office located at 3465 Commercial Street, Vancouver,
British Columbia, V5N 4E8, 

(the "Optionor") 

OF THE FIRST PART 

AND:

Garuda Ventures Canada
Inc. having a business office located at #502 – 1978 Vine Street,
Vancouver, BC., V6K 4S1, 

(“Garuda”) 

OF THE SECOND PART

WHEREAS: 

A. The Optionor wishes to grant Garuda an option to earn and
acquire from the Optionor an undivided 70% interest in the Optionor’s interest
in certain mining claims known collectively as the Corhill Property located on
NTS 86-K-14 and 86-K-15 and straddling the Northwest Territories / Nunavut
Territory border. The property is approximately 312 miles NNW of Yellowknife and
90 miles SW of Kugluktuk (Coppermine) more particularly described in Schedule
"B" attached hereto (including, without limitation, all prospecting, research,
exploration, exploitation, operating and mining permits, licenses and leases
associated therewith), and subject to a 2% net smelter return described in
Schedule “A” hereto (the “Net Smelter Return), (collectively and hereinafter
referred to as the "Property"). 

NOW THEREFORE THIS AGREEMENT WITNESSETH that in
consideration of the sum of one dollar ($1.00) paid by Garuda to the Optionor
(the receipt and sufficiency of which is acknowledged by the Optionor) and the
mutual agreements and covenants hereinafter set forth, the parties hereto agree
as follows: 

INTERPRETATION

	1. 	
      This Agreement supersedes all prior understandings and
      agreements between the parties hereto, whether verbal or
written.

	 	 	 
	1.1 	
      In this Agreement, the following words, phrases and
      expressions shall have the following meaning, except that if an identical
      word, phrase or expression is defined in this Agreement, the definition of
      that word, phrase or expression shall be restricted to this Agreement, as
      the case may be, in which it appears:

	 	 	 
		(a) 	
      "Affiliate" shall mean a corporation, which is
      affiliated with another corporation, and for the purposes hereof,
      corporations are affiliated if one of them is the subsidiary of the other,
      or both are subsidiaries of the same corporation, or each of them is
      controlled by the same person. A corporation is a subsidiary of another
      corporation if it is controlled by (i) that other corporation, (ii) that
      other corporation and one or more corporations, each of which is
      controlled by that other

	 		
      corporation, or (iii) 2 or more corporations, each of
      which is controlled by that other corporation, or (iv) it is a subsidiary
      of a subsidiary of that other corporation. A corporation is controlled by
      a person if shares of the corporation carrying more than 50% of the votes
      for the election of directors are held, other than by way of security
      only, by or for the benefit of that person, and the votes carried by the
      shares are sufficient, if exercised, to elect a majority of the directors
      of the corporation

	 	 	 
	 	(b) 	
      "Execution Date" shall mean the date that this
      Agreement is executed by all parties hereto;

	 	 	 
	 	(c) 	
      "Expenditures" shall mean all expenses and
      obligations of whatever kind spent or incurred directly or indirectly by
      Garuda from the date hereof, in connection with the exploration and
      development of the Property, including, without limiting the generality of
      the foregoing, moneys expended in maintaining the Property in good
      standing; in applying for and securing all permits and rights with respect
      thereto and with respect to undertaking work thereon; moneys expended
      toward all taxes, fees and rentals; moneys expended in doing and filing
      assessment work; expenses paid for or incurred in connection with any
      program of surface or underground prospecting, exploring, geophysical,
      geochemical and geological surveying, diamond drilling and drifting,
      raising and other underground work, assaying and metallurgical testing and
      engineering, environmental studies, data preparation and analysis,
      submissions to government agencies; in acquiring facilities; in paying the
      fees, wages, salaries, travelling expenses, and fringe benefits (whether
      or not required by law) of all persons engaged in work with respect to the
      Property; in paying for the food, lodging and other reasonable needs of
      such persons; and including a charge in lieu of overhead, management and
      other unallocatable costs equal to fifteen (15%) percent of all such
      expenditures;

	 	 	 
	 	(d) 	
      "Interest" shall mean an undivided seventy percent
      (70%) earned interest in the Property;

	 	 	 
	 	(e) 	
      “Joint Operating Agreement” shall mean the Form 5
      of the Rocky Mountain Mineral Law Foundation as amended from time to time,
      except for those provisions set out under the heading 'Formation of Joint
      Venture’;

	 	 	 
	 	(f) 	
      “Joint Venture" shall mean the joint venture to be
      formed upon the Participation Date between Garuda and the Optionor with
      regard to the Property;

	 	 	 
	 	(g) 	
      "Net Smelter Return" shall mean a 2% royalty in
      favour of Kalac Holdings Ltd., Trevor Teed and Lane Dewar as
      calculated and paid in accordance with Schedule "A";

	 	 	 
	 	(h) 	
      "Option" shall mean the sole and exclusive right
      and option of Garuda to earn the Interest;

	 	 	 
	 	(i) 	
      "Option Price" shall mean the completion of those
      obligations in accordance with the terms hereof in order to exercise the
      Option in respect of the Property.

	 	 	 
	 	(j) 	
      "Option Period" shall mean the period during which
      the Option may be exercised, and will commence on upon the Execution
      Date;

	 	 	 
	 	(k) 	
      "Participant" shall mean each of Garuda and the
      Optionor;

	 	 	 
	 	(l) 	
      "Participation Date" shall mean the date of
      exercise of the Option by Garuda in respect of the
  Property;

	 	(m) 	
      "Property" shall mean certain mining claims known
      collectively as the Corhill Property located on NTS 86-K-14 and 86-K-15
      and straddling the Northwest Territories / Nunavut Territory border,
      approximately 312 miles NNW of Yellowknife and 90 miles SW of Kugluktuk
      (Coppermine) more particularly described in Schedule "B" attached
      hereto;

	 	 	 
	 	(n) 	
      "Shares" shall mean 2,000,000 common shares of
      Garuda Capital Corp., the wholly owning parent corporation of
    Garuda;

	 	 	 
	 	(o) 	
      "this Agreement" refers to and collectively
      includes this Agreement, the recitals hereto and every Schedule attached
      to this Agreement;

OPTION

	2. 	
      Subject to the 2% Net Smelter Return the Optionor grants
      to Garuda the sole and exclusive option (the "Option") free and clear of
      all liens, charges, encumbrances, claims, rights or interest of any person
      to earn an undivided seventy percent (70%) earned interest in the Property
      by making the following payments and incurring exploration expenditures
      (collectively, the “Option Price”) set out at sub-paragraphs 2(a), 2(b)
      and 2(c) below.

	 	 	 	 
		
      The Option is an option only and nothing in this
      Agreement shall obligate Garuda to pay any amount or incur any
      expenditures except for the payments under sub-paragraphs 2(b) and
      2(c).

	 	 	 	 
		(a) 	
      Garuda will arrange for the issuance to the Optionor of
      the Shares within 5 business days of the Execution Date;

	 	 	 	 
		(b) 	
      Garuda will make a payment of $50,000 to the Optionor
      within 5 business days of the Execution Date; and,

	 	 	 	 
		(c) 	
      Garuda will incur no less than $1,500,000 of exploration
      expenditures on the Property, as follows:

	 	 	 	 
			(i) 	
      $300,000 on or before 180 days from the Execution
      Date;

	 	 	 	 
			(ii) 	
      an additional $500,000 on or before the second
      anniversary of the Execution Date; and

	 	 	 	 
			(iii) 	
      $700,000 on or before the third anniversary of the
      Execution Date.

	 	 	 	 
	3 	
      The Shares will be “restricted shares” pursuant to Rule
      144 of the US Securities Act of 1933 (the "US Securities Act"). Garuda
      will make its best efforts to register the shares pursuant to a
      registration statement on or before the first anniversary of the Execution
      Date. If Garuda has failed to register the Shares on or before the first
      anniversary of the Execution Date, the Optionor shall have the option of
      returning the Shares to Garuda for cancellation, in which case Garuda
      shall make a payment of US$200,000.00 to the Optionor within two weeks of
      the delivery of written notice by the Optionor to return the Shares to the
      Optionee for cancellation, failing which this Agreement and the Option
      shall each terminate automatically without further formality and have no
      force or effect.

	 	 	 	 
	4. 	
      Garuda:

	 	 	 	 
		(a) 	
      may exercise the Option in respect of the Property by
      making the payments and incurring

	 		
      the exploration expenditures that are the Option Price as
      set out and defined in section 2 hereof and incurring the minimum
      amount of Expenditures to maintain the Property in good standing with
      applicable mining authorities;

	 	 	 	 
	 	(b) 	
      may accelerate the Expenditures, and any Expenditures
      made towards the Option Price that are over and above that required to be
      made during the relevant time period shall be carried forward and applied
      against the Option Price payable in the subsequent period(s);

	 	 	 	 
	 	(c) 	
      at all times during the term of this Agreement, shall
      have the right to abandon the Property. Further:

	 	 	 	 
	 		(i) 	
      to abandon the Property it shall give written notice to
      the Optionor and give back to the Optionor or whomever it appoints access
      to the Property;

	 	 	 	 
	 		(ii) 	
      a notice of abandonment of the Option to acquire an
      interest in the Property must be given with at least 60 days prior notice
      to any of the anniversaries of the Execution Date, in which case, the
      Expenditures obligation for said year will not be enforceable. However, if
      the notice of abandonment of the Option to acquire the Property is not
      given within the abovementioned 60-day period, the Expenditures obligation
      for that year shall be enforceable against Garuda;

	 	 	 	 
	 		(iii) 	
      in case that the amount of Expenditures is not sufficient
      to cover the Expenditures for a specific year and the notice of
      abandonment is not given within the aforementioned 60 day period, the
      balance shall be paid in cash to the Optionor; and

	 	 	 	 
	 		(iv) 	
      all payments made to the Optionor shall be non-refundable
      to Garuda.

Obligations of Garuda During the Option Period 

	5. 	
      During the currency of the Option:

	 	 	 
		(a) 	
      Garuda shall be the operator of the Property and will
      have the full right to enter on and to do all work on the Property as
      Garuda determines to be appropriate, subject to compliance with applicable
      law. "Operator" is defined as the party responsible for managing and
      carrying out mineral exploration and development operations. Exploration
      means all activities directed toward ascertaining the existence, location,
      quantity, quality or commercial value of deposits of all ores, minerals
      and mineral resources produced under this Agreement, including but not
      limited to additional drilling required after discovery of potentially
      commercial mineralization, and including related environmental compliance.
      Development means all preparation (other than exploration) for the removal
      and recovery of all ores, minerals and mineral resources produced under
      this Agreement, including construction and installation of a mill or any
      other improvements to be used for the mining, handling, milling,
      processing, or other beneficiation of all ores, minerals and mineral
      resources, and all related environmental compliance;

	 	 	 
		(b) 	
      The Optionor and its representatives authorized in
      writing will have the right, at their own expense and risk, of access to
      and the right to inspect the Property and the data obtained therefrom, and
      to copy all data derived from work thereon, provided that such rights may
      only be exercised in a manner which does not unduly interfere with the
      activities of Garuda on the Property and that the Optionor will indemnify
      Garuda from and against all liabilities which may be incurred in
      connection with the exercise of such right of
access;

	 	(c) 	
      In order for Garuda to maintain the Option in good
      standing and be able to exercise it, Garuda shall keep the Property in
      good standing, in compliance with all applicable laws and rules thereto,
      including without limitation, incurring the cost of converting such of the
      Property into full exploration licence, payment of surface rights and
      filing the work commitments as provided in the Northwest Territories and
      Nunavut Territory mining laws and rules thereto, comply with environmental
      and use and disposal of water laws and rules thereto, and perform all
      works in such a manner to keep the Property in good standing and to
      maintain their value. Garuda shall conduct exploration and development
      programs on the Property described below;

	 	 	 
	 	(d) 	
      Garuda will prepare and deliver to the Optionor written
      quarterly progress reports of the work completed in the last calendar
      quarter and presently in progress and results obtained, comprehensive
      annual reports on or before January 31 of each year covering the
      activities hereunder and results obtained during the calendar year ending
      on December 31st immediately preceding, accompanied by copies of all data,
      reports and other information on or with respect to the Property not
      already provided to the Optionor and, during periods of active field work,
      timely current reports and information on any material results obtained,
      accompanied by copies of all relevant data, reports and other information
      concerning such results, including those necessary to permit each of the
      Optionor and Garuda to meet its continuous disclosure obligations under
      applicable securities laws;

	 	 	 
	 	(e) 	
      Garuda will pay, when due and payable, all wages or
      salaries for services rendered in connection with the Property and all
      accounts for materials supplied on or in respect of any work or operations
      performed in connection therewith;

	 	 	 
	 	(f) 	
      Garuda will conduct all work on or with respect to the
      Property in a careful and workman- like manner, following reasonable and
      prudent geological exploration methods and approaches, and in compliance
      with all applicable laws; and

	 	 	 
	 	(h) 	
      Except with regard to services provided by the Optionor
      or their affiliates, Garuda will obtain and maintain, and cause any
      contractor or subcontractor engaged hereunder by Garuda to obtain and
      maintain, adequate insurance and will procure that the Optionor is named
      as an additional insured in respect of all such
policies.

TERMINATION OF OPTION 

	6. 	
      The Option shall automatically terminate, and no longer
      be capable of exercise, and Garuda shall have lost all right to acquire
      the Interest, upon the occurrence of any of the following
events:

	 	 	 
		(a) 	
      Garuda failing to incur the amount of Expenditures
      required by section 2 on or before the required dates (subject to the
      delivery of the required Expenditure certificate(s) and the outcome of any
      arbitration proceedings in connection therewith), provided that in the
      event that a determination is made pursuant to arbitration proceedings
      that Garuda has failed to comply with subsection 2, Garuda shall be
      allowed 30 days from the date of the determination to pay the amount of
      any shortfall directly to the Optionor;

	 	 	 
		(b) 	
      Garuda failing to allot and issue any of the Shares as
      and when required under section 2; or

	 	 	 
		(c) 	
      Garuda making default in the performance of any other
      obligation of Garuda hereunder as and when required, which default is not
      cured:

		 	(i) 	
      in the case of a default involving the payment of monies,
      within (5) business days,

	 	 	 	 
		 	(ii) 	
      in the case of any other default, within thirty (30) days
      after receipt of notice of such default from the Optionor, provided that
      if any such default (other than with respect to the payment of monies) is,
      by its nature, not able to be cured within a thirty (30) day period, and
      Garuda commences reasonable steps to begin to cure such default within the
      thirty (30) day period specified herein, Garuda shall be allowed such
      additional time (not exceeding sixty (60) days) as may be reasonably
      required to cure such default so long as it assiduously proceeds with the
      curing of such default during such period.

	 	 	 	 
	7. 	
      In the event that Garuda makes an assignment for the
      benefit of its creditors or is declared bankrupt or makes an authorized
      assignment or a receiver is appointed under the Bankruptcy and Insolvency
      Act (Canada) or a receiver or receiver-manager of all or any part of the
      property of Garuda is appointed, the Option shall automatically terminate
      unless Garuda provides 30 days written notice of the occurrence of such
      event and unless Garuda has assigned its obligations under this Agreement
      within 120 days of the occurrence of such event to a party on terms and
      conditions no less favourable than those described hereunder acceptable to
      the Optionor, which acceptance shall not be unreasonably
  withheld.

OBLIGATIONS OF GARUDA UPON TERMINATION OF THE OPTION 

	8. 	
      Upon the termination of the Option for any reason
      whatsoever other than the exercise thereof by Garuda in accordance with
      the provisions of this Agreement, Garuda will:

	 	 	 
		(a) 	
      leave the Property in good standing for a period of not
      less than 6 months under the Northwest Territories and Nunavut Territory
      mining laws and rules as at the effective date of termination, free and
      clear of all liens, charges, and encumbrances arising from operations by
      or on behalf of Garuda, and in a safe and orderly condition and in a
      condition which is in compliance with all applicable laws including,
      without limitation, with respect to reclamation and rehabilitation and
      including the clean-up and removal of any hazardous waste from the
      Property;

	 	 	 
		(b) 	
      deliver to the Optionor, within sixty (60) days of
      termination a full report on all work carried out by or on behalf of
      Garuda on the Property and all results relating thereto and any
      interpretations, models, or assessments in respect thereof, copies of all
      reports, studies, and assessments prepared by or on behalf of Garuda with
      respect to work on or for the benefit of the Property not already provided
      to the Optionor, copies of all drill logs, assay results, maps, field
      notes, sections, and other technical or interpretive data generated or
      compiled by or on behalf of Garuda with respect to the Property and work
      thereon hereunder, and will make available for delivery to the Optionor,
      at the place of storage, all available samples, drill chips, core and
      cuttings, sample rejects and pulps, and any other physical material
      removed by or for Garuda from the Property;

	 	 	 
		(c) 	
      comply with all obligations and make all payments accrued
      (including any taxes or similar payments) as of the date of termination
      with respect to the Property;

	 	 	 
		(d) 	
      unless otherwise specified by the Optionor, remove from
      the Property, within three (3) months of the effective date of
      termination, all machinery, equipment, supplies and facilities erected,
      installed, or brought upon the Property by or at the instance of
      Garuda.

REGISTRATION OF INTEREST 

	9. 	
      Immediately upon the exercise of the Option of any or all
      of the Property by Garuda, Garuda shall forthwith receive registration
      documentation duly executed for the registration of its interest in the
      Property.

FORMATION OF JOINT VENTURE 

	10. 	
      Upon exercise of the Option, the parties hereto (the
      “Participants”) shall form a joint venture (the “Joint Venture”), with
      Garuda as the initial designated operator of the Property

	 	 
	11. 	
      The Joint Operating Agreement will incorporate the terms
      and principles set forth under the heading ‘Formation of Joint Venture’.
      In addition, when determining the terms and conditions of the Shareholders
      Agreement, the Participants shall, to the extent reasonably practicable
      and consistent with the terms of this Agreement, take into due
      consideration the Canadian tax, corporate and accounting effects upon the
      Participants with a view to securing the most beneficial structure to the
      Participants as a whole. Each of Garuda and the Optionor will, following
      the second anniversary of the date of execution of this Agreement,
      negotiate in good faith to settle the form of the Joint Operating
      Agreement and, upon agreement being reached on the form thereof, such
      Joint Operating Agreement will be added as a schedule to this Agreement.
      If the parties are unable to agree on the form of the Joint Operating
      Agreement within such time, any outstanding issues will be referred to
      arbitration in accordance with the provisions of this Agreement.

	 	 
	12. 	
      The Joint Operating Agreement shall provide
  that:

	 	(a) 	
      the affairs of the Participants shall be structured and
      governed in a manner consistent with the Joint Operating Agreement, and,
      to the extent practicable under the laws of the Northwest Territories and
      Nunavut Territory, operations will be carried out substantially as set
      forth in the Joint Operating Agreement, as modified by the provisions
      herein and as may be agreed by the
Participants;

	 	b) 	
      After the formation of the Joint Venture, each
      Participant shall be responsible for its pro rata share (based on its
      percentage interest at the exercise of the Option pursuant to which such
      expenditures are incurred) of all Joint Venture Expenditures (which
      Expenditures shall only be incurred pursuant to budgets and work programs
      proposed by the operator and approved by the Participants) incurred under
      programs in which it has elected to
participate;

	 	c) 	
      If a Participant elects to not to contribute to an
      approved work program and budget, its interest in the Joint Venture will
      be diluted in accordance with this Section 5.1 herein;

	 	 	 	 
	 	d) 	
      If a Participant elects to contribute, but fails to do as
      and when required and does not remedy such failure within thirty (30) days
      of such failure, not only will its interest in the Joint Venture be
      diluted, but it shall have lost the right to contribute to any further
      work programs and budgets;

	 	 	 	 
	 	e) 	
      Notwithstanding the adoption of a program and budget, a
      Participant may elect to participate in the approved program and budget:
      

	 	 	 	 
	 	 	i)	in proportion to its respective interest;

	 		ii) 	
      in some lesser amount than its respective interest;
    or

	 	 	 	 
	 		iii) 	
      not at all;

	 	 	 	 
	 	f) 	
      In the event that a Participant elects to participate in
      some lesser amount than its respective interest or not at all in a program
      and budget, such Participant’s beneficial interest in the Property shall
      be recalculated as provided in this Section 5.1, with dilution effective
      as of the first day of the subject program and budget;

	 	 	 	 
	 	g) 	
      If a Participant fails to so notify the other Participant
      of the extent to which it elects to participate, such Participant shall be
      deemed to have elected to contribute to such program and budget in
      proportion to its respective interest as of the beginning of the program
      period;

	 	 	 	 
	 	h) 	
      If a Participant elects to contribute, but fails to do so
      as and when required and does not remedy such failure within ninety (90)
      days of such failure, its interest in the Joint Venture shall be
      recalculated as provided in this Section 5.1 and it shall have lost the
      right to contribute to any further work programs and budgets;

	 	 	 	 
	 	i) 	
      If a Participant elects to contribute to a program and
      budget some lesser amount than in proportion to its respective interest,
      or not at all, and the other Participant elects to fund all or any portion
      of the deficiency, the decreased or non-participating Participant’s
      interest in the Joint Venture shall be diluted, and the interest of the
      other Participant in the Joint Venture will be correspondingly increased,
      so that at any time the interest of a party in the Joint Venture will be
      equal to:

(Actual Contributions of
Participant since Participation Date + Deemed 
Contributions of such
participant) x 100% 

(Sum of Total Actual Contributions
of all Participants since Participation Date + 
Total Deemed
Contributions of all Participants)

with the percentage rounded to the
nearest 2 decimal places;

	 	j) 	
      The Deemed Contributions of the Participants will
    be:

	 	 	 	 
	 		(a) 	
      for the Optionor it will be equal to 30% of $1,500,000
      being $450,000

	 	 	 	 
	 		(b) 	
      for Garuda it shall be $1,050,000;

	 	 	 	 
	 	k) 	
      If a Participant defaults in making a contribution or
      cash call required by an adopted program and budget, the non-defaulting
      Participant may, but shall not be obligated to, advance some portion or
      all of the amount in default on behalf of the defaulting Participant (a
      "Cover Payment");

	 	 	 	 
	 	l) 	
      Each and every Cover Payment shall constitute a demand
      loan bearing interest from the date of the advance at the rate to be
      determined between the parties. If more than one Cover Payment is made,
      the Cover Payments shall be aggregated and the rights and remedies
      described herein pertaining to an individual Cover Payment shall apply to
      the aggregated Cover Payments. The failure to repay such loan upon demand
      shall be a default;

	 	m) 	
      If the interest of a Participant in the Joint Venture is
      reduced to 10% percent or less, the interest of such Participant in the
      Joint Venture will be transferred to the Joint Venture in exchange for a
      net smelter return of 3% calculated in accordance with Schedule
  "A";

	 	n) 	
      Nothing contained in this Agreement shall be deemed to
      constitute either party the partner of the other, or, except as otherwise
      herein expressly provided, to constitute either party the agent of the
      other, or to create any fiduciary relationship between them. The parties
      hereto do not intend to create, and this Agreement shall not be construed
      to create, any mining, commercial or other partnership. Neither party, nor
      any of its agents, shall act for or assume any obligation or
      responsibility on behalf of the other party, except as otherwise expressly
      provided herein. The rights, duties, obligations and liabilities of the
      parties hereto shall be several and not joint or
  collective;

	 	(m) 	
      a Participant's interest is assignable under the terms
      and conditions described below.

	13. 	
      Further, so long as Garuda holds an interest in the
      Property, Garuda shall have a first right of refusal with regard to the
      purchase of the 30% interest held by the Optionor (the "Interest") as
      follows:

	 	 	 
		(a) 	
      the Optionor shall provide notice in writing (the
      "Transfer Notice") to Garuda of its desire to transfer such
    Interest;

	 	 	 
		(b) 	
      the Transfer Notice shall specify the consideration, the
      terms of payment, the third party to whom the Optionor is proposing to
      transfer such Interest, if determined, and any other material information
      with respect to the proposed transfer;

	 	 	 
		(c) 	
      if the consideration to be paid for the transfer of the
      Interest is consideration other than cash the Transfer Notice shall
      contain the Optionor good faith estimate of the cash equivalent of the
      non-cash consideration (the "Non-Cash Price");

	 	 	 
		(d) 	
      Garuda shall notify the Optionor within 30 days from the
      date of its receipt of the Transfer Notice whether it is willing to
      purchase such Interest on the terms and conditions contained in the
      Transfer Notice and, if applicable, its agreement with the Non-Cash Price;
      and

	 	 	 
		(e) 	
      if Garuda fails to notify the Optionor of its intention
      to purchase the Interest within the 30- day period or fails to pay the
      consideration to the Optionor, the Optionor shall be at liberty for a
      period of 60 days from the end of the applicable period to complete the
      transfer of the Interest as provided for in the Transfer Notice. If the
      transfer of the Interest is not completed within the aforesaid 60 day
      period, any further transfer of the Interest shall be subject to the terms
      of this paragraph.

NO PARTNERSHIP 

	14. 	
      Nothing contained in this Agreement shall be deemed to
      constitute either party the partner of the other, or, except as otherwise
      herein expressly provided, to constitute either party the agent of the
      other, or to create any fiduciary relationship between them. The parties
      hereto do not intend to create, and this Agreement shall not be construed
      to create, any mining, commercial or other partnership. Neither party, nor
      any of its agents, shall act for or assume any obligation or
      responsibility on behalf of the other party, except as otherwise expressly
      provided herein. The rights, duties, obligations and liabilities of the
      parties hereto shall be several and not joint or
  collective.

REPRESENTATIONS, WARRANTIES AND COVENANTS 

	15. 	
      The Optionor represents and warrants to Garuda that, as
      of the date of this Agreement:

	 	(a) 	
      the Optionor is the legal and beneficial owner of the
      Property;

	 	 	 
	 	(b) 	
      all of the concessions comprising the Property have been
      acquired in accordance with and are in good standing pursuant to the laws
      of Northwest Territories and the laws of Nunavut Territory;

	 	 	 
	 	(c) 	
      the Optionor has the sole and exclusive right to deal
      with the Property in the manner provided in this Agreement;

	 	 	 
	 	(d) 	
      the Optionor has the full power and authority to execute
      and deliver this Agreement and to fulfil its obligations provided for by
      this Agreement;

	 	 	 
	 	(e) 	
      there are no outstanding agreements or options to acquire
      or purchase any interest in any of the Property, or to explore, develop or
      exploit any part thereof other than the terms of the Property Acquisition
      Agreement between the Optionor (formerly Consolidated Petroquin Resources
      Limited) and Kalac Holdings Ltd, Trevor Teed and Lane Dewar (the “ Kalac
      Agreement”), granting a 2% net smelter returns and no person has other
      interest whatsoever in the Property or any production therefrom;

	 	 	 
	 	(f) 	
      the Optionor has delivered to or made available for
      inspection by Garuda all existing data in its possession or control, and
      true and correct copies of all leases or other contracts, relating to the
      Property;

	 	 	 
	 	(g) 	
      with respect to the Property, to the best of the
      Optionor's information and knowledge, there are no pending or threatened
      actions, suits, claims or proceedings,; and

	 	 	 
	 	(h) 	
      except as to matters otherwise disclosed herein, to the
      best of the Optionor's information and
knowledge,

	 	(i) 	
      the conditions existing on or with respect to the
      Property and its ownership and operation of the Property are not in
      violation of any laws (including without limitation any environmental
      laws), nor causing or permitting any damage or impairment to the health,
      safety, or enjoyment of any person at or on the Property or in the general
      vicinity of the Property;

	 	 	 
	 	(ii) 	
      there have been no past violations by it or by any of its
      predecessors in title of any environmental laws or other laws affecting or
      pertaining to the Property, nor any past creation of damage or threatened
      damage to the air, soil, surface waters, groundwater, flora, fauna, or
      other natural resources on, about or in the general vicinity of the
      Property ("Environmental Damage"); and

	 	 	 
	 	(iii) 	
      the Optionor has not received inquiry from or notice of a
      pending investigation from any governmental agency or of any
      administrative or judicial proceeding concerning the violation of any
      laws.

	16. 	
      Garuda represents and warrants to the Optionor that, as
      of the date of this Agreement:

		
(a) 		
the common shares of its parent company, Garuda Capital Corp. are listed and posted for trading on the OTC.BB Exchange and it is in good standing with the Securities Exchange Commission and the laws of the United States and
British Columbia;

	
	 	 	 	 
	
17. 		
Garuda and the Optionor each warrant and represent to the other that, as of the date of this Agreement:

	
	 	 	 	 
		
(a) 		
it is a corporation duly organized and in good standing in its jurisdiction of incorporation and is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this
Agreement;

	
	 	 	 	 
		
(b) 		
it has the capacity to enter into and perform this Agreement and all transactions contemplated herein, including the Option, and it has obtained all required consents, approvals and authorizations required from its directors and
from any surface and mineral rights owner, and all other actions required to authorize it to enter into and perform this Agreement have been properly taken;

	
	 	 	 	 
		
(c) 		
it will not breach any other agreement or arrangement by entering into or performing this Agreement or by the exercise of the Option;

	
	 	 	 	 
		
(d) 		
it is not subject to any governmental order, judgment, decree, debarment, sanction or laws that would preclude the permitting or implementation of mining operations under this Agreement; and

	
	 	 	 	 
		
(e) 		
this Agreement has been duly executed and delivered by it and is valid and binding upon it in accordance with its terms, subject to laws of general application with respect to creditor rights and the discretionary nature of
equitable remedies.

	
	 	 	 	 
	
18. 		
Each of the parties hereto represents and warrants that it is unaware of any material facts or circumstances that have not been disclosed in this Agreement, which should be disclosed to the other party in order to prevent the
representations and warranties in this Agreement from being materially misleading.

	
	 	 	 	 
	
19. 		
Each of the parties acknowledges that the other has relied and will rely upon the accuracy of its respective representations and warranties contained in sections 16, 17 and 18, which representations and warranties shall constitute
fundamental terms of this Agreement.

	
	 	 	 	 
	
20. 		
The Optionor covenants with Garuda that, during the Option Period: it shall:

	
	 	 	 	 
		
(a) 		
not take any action whereby the Property will become subject to:

	
	 	 	 	 
			
(i) 		
any lien, charge or encumbrance (other than pursuant to this Agreement),

	
	 	 	 	 
			
(ii) 		
any action, suit, proceeding or claim by any person or party (other than Garuda), or

	
	 	 	 	 
			
(iii) 		
any environmental damage;

	
	 	 	 	 
		
(b) 		
deliver to Garuda, upon receipt by the Optionor thereof, all notices, documentation and other materials with respect to the Property received from any governmental agencies or third parties;

	

		(c) 	
      maintain its corporate existence and good standing under
      applicable corporate laws;

	 	 	 	 
		(d) 	
      so long as Garuda is not in default hereunder, not take
      any action which would adversely affect the rights of Garuda
    hereunder;

	 	 	 	 
	20. 	
      Garuda covenants with the Optionor that, during the
      Option Period, it shall:

	 	 	 	 
		(a) 	
      not take any action whereby the Property will become
      subject to:

	 	 	 	 
			(i) 	
      any lien, charge or encumbrance (other than pursuant to
      this Agreement);

	 	 	 	 
			(ii) 	
      any action, suit, proceeding or claim by any person or
      party (other than the Optionor); or

	 	 	 	 
			(iii) 	
      any environmental damage.

	 	 	 	 
			(iv) 	
      operate in compliance with all regulations and laws of
      the Northwest Territories and Nunavut Territory.

	 	 	 	 
		(b) 	
      deliver to the Optionor, upon receipt by Garuda thereof,
      all notices, documentation and other materials with respect to the
      Property received from any governmental agencies or third
  parties;

	 	 	 	 
		(c) 	
      maintain its corporate existence and good standing under
      applicable corporate laws;

	 	 	 	 
		(d) 	
      so long as the Optionor is not in default hereunder, not
      take any action which would adversely affect the rights of the Optionor
      hereunder; and

	 	 	 	 
		(e) 	
      use its commercially reasonable efforts to ensure that
      its regulatory filings with the Securities and Exchange Commission are
      kept current and to ensure that all shares issued to the Optionor shall be
      issued as fully paid and non-assessable shares in the capital of Garuda,
      free and clear of all encumbrances except with regard to any applicable
      resale restrictions under the Securities Act (British
  Columbia).

SURVIVAL OF REPRESENTATIONS AND WARRANTIES 

	21. 	
      All representations, warranties and covenants granted or
      assented to in this Agreement, shall survive the completion of the
      transactions contemplated herein and each such representation, warranty,
      and covenant is a condition of this Agreement, any or all of which
      conditions may be waived in whole or in part by the party for whose
      benefit the representation is made. The representations and warranties of
      the parties contained in this Agreement shall not be discharged, dissolved
      or terminated by the exercise of the Option.

INDEMNITIES 

	22. 	(a) 	
      Neither the Optionor nor its affiliated companies and
      their shareholders, principals, Board members, representatives, agents,
      employees and lawyers shall have any responsibility whatsoever for or
      derived from the actions, omissions, operation and in general the
      management of Garuda or any of its affiliated companies nor in the
      Property. 

	  	  	  
	  	(b) 	Garuda hereby releases the Optionor and its
      affiliated companies and their shareholders, 

	 		
      principals, Board members, representatives, agents,
      employees and lawyers for whatever act or omission of Garuda or its
      affiliated companies and their shareholders, principals, Board members,
      representatives, agents, employees and lawyers thereto. Garuda binds
      itself to indemnify and hold the Optionor and its affiliated companies and
      their shareholders, principals, Board members, representatives, agents,
      employees and lawyers harmless from and against any claim or proceeding of
      any nature against them derived from the actions, omissions or
      transactions that Garuda or its affiliated companies and their
      shareholders, principals, Board members, representatives, agents,
      employees and lawyers are part of.

	 	 	 
	 	(c) 	
      Neither Garuda nor its affiliated companies and their
      shareholders, principals, Board members, representatives, agents,
      employees and lawyers shall have any responsibility whatsoever for or
      derived from the actions, omissions, operation and in general the
      management of the Optionor or any of its affiliated companies nor in the
      Property.

	 	 	 
	 	(d) 	
      The Optionor hereby releases Garuda and its affiliated
      companies and their shareholders, principals, Board members,
      representatives, agents, employees and lawyers for whatever act or
      omission of the Optionor or its affiliated companies and their
      shareholders, principals, Board members, representatives, agents,
      employees and lawyers thereto. The Optionor binds itself to indemnify and
      hold Garuda and its affiliated companies and their shareholders,
      principals, Board members, representatives, agents, employees and lawyers
      harmless from and against any claim or proceeding of any nature against
      them derived from the actions, omissions or transactions that the Optionor
      or its affiliated companies and their shareholders, principals, Board
      members, representatives, agents, employees and lawyers are part
  of.

ASSIGNMENT OF INTEREST 

	23. 	
      The Optionor may assign its interest in the Property and
      this Agreement without the consent of Garuda, which assignment may occur,
      without limitation, by way of a statutory arrangement, dividend-in-kind,
      return of capital transaction, merger or such other reorganizational
      transaction in which the Optionor's interest in the Property and this
      Agreement may be transferred to another entity.

	 	 	 
	25. 	
      Garuda may at any time sell, transfer or otherwise
      dispose of all or any portion of its interest to the property, this letter
      of intent and the Formal Agreement, except that its obligations hereunder
      shall continue unless released in writing by the Optionor.

	 	 	 
	26. 	
      Any purchaser, assignee or transferee of the interest’s
      of Garuda must first deliver to the other party to this Agreement, its
      agreement binding itself to this agreement and containing:

	 	 	 
		(a) 	
      a covenant by such transferee to perform all of the
      obligations of the transferring party to be performed under this letter of
      intent and the said letter of intent in respect of the interest to be
      acquired by it from the transferring party; and

	 	 	 
		(b) 	
      a provision subjecting any further sale, transfer or
      other disposition of such interest in the Property and this letter of
      intent or any portion thereof to the restrictions contained in this
      Section;

FORCE MAJEURE 

	27. 	
      Except for the obligation to make payments when due
      hereunder, the obligations of a party shall be suspended to the extent and
      for the period that performance is prevented by any cause,
  whether

foreseeable or unforeseeable, beyond
its reasonable control, including, without limitation, labour disputes (however
arising and whether or not employee demands are reasonable or within the power
of the party to grant); acts of God; laws, instructions or requests of any
government or governmental entity; judgments or orders of any court;; acts of
war or conditions arising out of or attributable to war, whether declared or
undeclared; riot, civil strife, insurrection or rebellion; fire, explosion,
earthquake, storm, flood, sink holes, drought or other adverse weather
condition; actions by native rights groups, environmental groups, or other
similar special interest groups; or any other cause whether similar or
dissimilar to the foregoing provided that Garuda has used reasonable efforts to
comply with the terms of this Agreement. The affected party shall promptly give
notice to the other party of the suspension of performance, stating therein the
nature of the suspension, the reasons therefor, and the expected duration
thereof. The affected party shall resume performance as soon as reasonably
possible. During the period of suspension the obligations of both parties to
advance funds pursuant to this Agreement shall be reduced to levels consistent
with the current operations. 

JURISDICTION 

	28 	
      The Participants attorn the jurisdiction of British
      Columbia regarding any dispute, controversy or claim arising out of or
      relating to this Agreement.

CURRENCY 

	29. 	
      Unless otherwise provided, all sums of money to be paid
      or calculated pursuant to this Agreement will be calculated and paid in
      Canadian currency.

NOTICE 

	30. 	
      All notices, demands and requests required or permitted
      to be given under this Agreement shall be in writing and may be delivered
      personally, sent by electronic mail or by facsimile or may be forwarded by
      first class prepaid registered mail. Any notice delivered personally or
      sent by electronic mail or by facsimile shall be deemed to have been given
      and received on the same business day as sent, subject, in the case of
      notice given by facsimile, to written acknowledgment of receipt from the
      original recipient. Any notice mailed as aforesaid shall be deemed to have
      been given and received on the seventh calendar day following the date it
      is posted. Notices shall be addressed as
follows:

	 	(a) 	
      if to Garuda:

	 	#502 – 1978 Vine Street 
	 	Vancouver, British Columbia V6K 4S1 
	 	Facsimile No.: 	******* 
	 	Attention: 	C. Robin Relph, President 
	 	if to the Optionor: 
	 	3465 Commercial Street, 
	 	Vancouver, British Columbia, V5N 4E8 
	 	Facsimile No.: 	(604) 871-9926 
	 	Attention: 	W. Gennen McDowall, President
  

or to such other address or addresses
as either party may, from time to time, specify by notice to the other;
provided, however, that if there shall be a mail strike, slowdown or other
labour dispute, which might affect delivery of the notice by mail, then the
notice shall be effective only if actually delivered. 

ENTIRE AGREEMENT 

	31. 	
      This Agreement supersedes and invalidates all other
      commitments, representations and warranties, including without limitation
      a certain letter agreement among the parties dated June 26, 2006 relating
      to the subject matter hereof which may have been made by the parties
      hereto either orally or in writing prior to the date hereof, and all of
      which shall become null and void from the date this Agreement is signed.
      The recitals and schedules are incorporated by reference into and form a
      part of this Agreement.

FURTHER ASSURANCES 

	32. 	
      Each of the parties hereto shall from time to time and at
      all times do all such further acts and execute and deliver all further
      deeds and documents as shall be reasonably required in order fully to
      perform and carry out the terms of this Agreement.

HEADINGS 

	33. 	
      The subject headings herein are included for purposes of
      convenience only, and shall not affect the construction or interpretation
      of any of its provisions.

WAIVER 

	34. 	
      No party will be deemed to have waived the exercise of
      any right that it holds under this Agreement unless such waiver is made in
      writing. No waiver made with respect to any instance involving the
      exercise of any such right will be deemed to be a waiver with respect to
      any other instance involving the exercise of the right or with respect to
      any other such right.

REMEDIES 

	35. 	
      Failure by either party to exercise any of its rights,
      powers or remedies hereunder or its delay to do so shall not constitute a
      waiver of those rights, powers or remedies. The single or partial exercise
      of a right, power or remedy shall not prevent its subsequent exercise or
      the exercise of any other right, power or remedy.

AMENDMENTS 

	36. 	
      If at any time during the continuance of this Agreement
      the parties shall deem it necessary or expedient to make any alteration or
      addition to this Agreement they may do so by means of a written agreement
      between them which shall be supplemental and form part of this
      Agreement.

COUNTERPARTS 

	37. 	
      This Agreement may be executed in any number of
      counterparts and each counterpart shall be deemed an original, but all
      counterparts together shall constitute one and the same instrument. Any
      facsimile signature shall be taken as an
original.

GOVERNING LAW 

	38. 	
      This Agreement will be governed by and be construed in
      accordance with the laws of British Columbia and the laws of Canada
      applicable therein.

TIME

	39. 	
      Time is of the essence hereof.

SEVERABILITY 

	40. 	
      If any provision of this Agreement is determined to be
      invalid or unenforceable in whole or in part, such invalidity or
      unenforceability shall attach only to such provision and everything else
      in this Agreement shall continue in full force and
  effect.

TERMS REGARDING SHARES 

	41. 	
      The Shares and any interest in the Shares granted by this
      agreement shall hereinafter be referred to as the Securities. Optionor
      acknowledges and understands that the Securities have not been registered
      under the US Securities Act or any other securities laws, are not
      qualified for resale in the US until registered under the US Securities
      Act or an exemption from such registration is available.

	 	 
	42. 	
      Optionor acknowledges that Garuda Capital Corp. shall
      refuse to register any transfer of the Securities not made in accordance
      with the provisions of Regulation S of the US Securities Act pursuant to
      registration under the US Securities Act, or pursuant to an available
      exemption from registration.

	 	 
	43. 	
      Optionor also acknowledges and understands that the
      certificates representing the Shares will be stamped with the following
      legend (or substantially equivalent language) restricting transfer in the
      following manner:

“The transfer of the securities
represented by this certificate is prohibited except in accordance with the
provisions of Regulation S promulgated under the United States Securities Act of
1933, as amended (the “Act”), pursuant to registration under the Act or pursuant
to an available exemption from registration. In addition, hedging transactions
involving such securities may not be conducted unless in compliance with the
Act.” 

Optionor hereby consents to Garuda
making a notation on its records or giving instructions to any transfer agent of
the Securities in order to implement the restrictions on transfer described in
this Agreement. 

	44. 	
      Optionor certifies that:

	 	 	 
		(a) 	
      Optionor is not a US person and is not acquiring the
      Securities for the account or benefit of any US person; or

	 	 	 
		(b) 	
      Optionor is a US person who purchased the Securities in a
      transaction that did not require registration under the US Securities
      Act.

	 	 	 
	45. 	
      Optionor agrees not to engage in hedging transactions
      with regard to the Securities unless in compliance with the US Securities
      Act.

SCHEDULE "A" 

NET SMELTER RETURN 

1. For the purposes of this Schedule A and of calculating the
amount of royalty payable hereunder: 

     (a) "net smelter return" - means
the amount of money actually received from the sale of the ores mined from the
Property or from the sale of the concentrates or other products derived
therefrom, less all taxes, costs or expenses incurred with respect to freight,
trucking or handling of ores, concentrates or other products ex headframe in the
case of ores and ex mill or other treatment facility in the case of concentrates
or other products; 

     (b) "Operator" - means the party
responsible for the carrying on of the operations relating to the Property; 

     (c) "Owner" - means the person or
persons that own an interest in The Claims as at the relevant time including,
without limitation, the Operator if the Operator has such an interest; 

     (d) "Property" - means The Claims
as defined in the annexed agreement; 

     (e) "Recipient" - means the party
or parties that are from time to time entitled to be paid the royalty hereunder;

     (f) "year" - means the calendar
year and a reference to a subdivision of a year means a reference to the
relevant subdivision of a calendar year; 

     (g) those terms defined in the
agreement of which this Schedule B is part shall have the same meanings as so
defined (save as otherwise provided in this Schedule B). 

2. All calculations and computations relating to the royalty
shall be carried out in accordance with generally accepted accounting principles
and good mining practice. 

3. Subject to the provisions hereof, the amount of royalty
payable to the Recipient hereunder shall be calculated by the operator as at the
end of each quarter and shall be payable to the Recipient on or before the 15th
day of the next following quarter; provided, however, that the Operator shall
deduct from royalty otherwise payable the amount of any advance royalty paid
pursuant to the annexed agreement until such time as the aggregate amount of the
advance royalty so paid has been so deducted. 

4. With each payment of royalty, the Operator shall deliver to
the Recipient a statement indicating the nature of the payment being made, if
any, the manner in which it was determined and, as at the date of such
calculation, the aggregate amount of advance royalty (if any) paid and not
deducted hereunder. If no royalty is payable in any quarter, the Operator shall
deliver a statement accordingly. Within 90 days after the end of each year in
which royalty is payable, or save for deduction of advance royalty previously
paid would be payable, the Operator shall deliver to the Recipient a certificate
confirming the determination of the amount of royalty paid or otherwise payable
during the said year. 

5. The Operator shall keep separate accounts relating to its
operations hereunder and, upon the prior written request of the Recipient, duly
authorized representatives of the Recipient may have access to such accounts for
the purpose of confirming any information contained in a statement delivered to
the Recipient pursuant to the provisions of paragraph 4 hereof; provided,
always, that such access shall not interfere with the affairs of the Operator.
The Recipient shall have the right to make copies of or take extracts from such
accounts (but only for his own use). 

6. (a) For the purpose of calculating the amount of royalty
payable to the Recipient hereunder only, if any ore or product derived from ore
mined from the property is retained by the Operator or Owner or sold to a
company associated with the Operator or Owner, and if the sale price of such
product is not negotiated on an arm's length basis, the Operator shall, for the
purposes of calculating net smelter return available to pay the royalty
hereunder only and notwithstanding the actual amount of such sale price, add to
any moneys actually received with respect to such sale an amount which the
Operator considers sufficient to make the same represent a reasonable sale price
for such product as if negotiated at arm's length. 

     (b) The Operator shall by notice
inform the Recipient of the quantum of such reasonable sale price and, if the
Recipient does not object thereto within 45 days after receipt of such notice,
said quantum shall be final and binding for the purposes of this paragraph 6.

     (c) If the Recipient objects to
such quantum by notice delivered to the Operator within the said 45 days, then
the quantum of such reasonable sale price shall be decided by arbitration as
follows: the Recipient shall nominee one arbitrator and shall notify the
Operator of such nomination and the Operator shall, within 45 days after
receiving such notice, nominate an arbitrator and the two arbitrators shall
select an umpire to act jointly with them. If the said arbitrators shall be
unable to agree in the selection of such umpire, the umpire shall be a person
designated by the President or any Vice-President of the Canadian Institute of
Mining and Metallurgy, provided that such person is not an employee of the Owner
or any company affiliated with the Owner. The umpire shall fix the time and
place for the purpose of hearing such evidence and representations as either or
the parties hereto may present and, subject to the provisions hereof, the
decision of the arbitrators and umpire, or any two of them, in writing shall be
binding upon the parties hereto. The said arbitrators and umpire shall, after
hearing any evidence and representations that the parties may submit, make their
award, reduce the same to writing and deliver one copy thereof to each of the
parties hereto. The majority of the umpire and arbitrators may determine any
matters of procedure for the arbitration not specified herein. If the Operator
fails within the said 45 days to nominate an arbitrator, then the arbitrator
nominated by the Recipient may proceed alone to determine the dispute in such
manner and at such time as he shall think fit and his decision shall, subject to
the provisions hereof, be binding upon the parties hereto. 

(d) The expense of the arbitration shall be paid by the
Recipient if the decision reached hereunder does not increase such quantum by
more than 1% of the quantum set forth in the notice hereinbefore referred to and
otherwise by the Operator. Insofar as they do not conflict with the provisions
hereof, the Rules for the Conduct of Arbitrations of the Arbitrators Institute
of Canada Inc., as amended or replaced from time to time, shall be applicable.
Appeal from the decision of the arbitrators shall be in accordance with the
provisions of the said Rules.

19

SCHEDULE "B" 

PROPERTY DESCRIPTION 

The Property is located approximately 312 miles NNW of
Yellowknife and 90 miles SW of Kugluktuk (Coppermine, straddling the Northwest
Territories / Nunavut Territory border. The property is approximately 312 miles
NNW of Yellowknife and 90 miles SW of Kugluktuk (Coppermine).

	Mineral Claim 	Tag # 	Acreage 
	RAH 1 	F53535 	206.6 
	RAH 2 	F53536 	206.6 
	WET 	F53534 	206.6 
	COR 1 	F92341 	1033 
	COR 2 	F92342 	2582.5 
	COR 3 	F92343 	1291.25 
	COR 4 	F92344 	1394.55 
	COR 5 	F92345 	2479.2 
	COR 6 	F92346 	2582.5 
	COR 7 	F92355 	2582.5 
	COR 8 	F92348 	2582.5 
	COR 9 	F92356 	1549.5 
	COR 10 	F92350 	2582.5 
	COR 11 	F92351 	1549.5 
	COR 12 	F92352 	1549.5 
	COR 13 	F92353 	2582.5 
	COR 14 	F92354 	1084.65 
	COR 15 	F92328 	2582.5 
	TOTAL 	  	30628.45

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]