Document:

Nayarit Gold Inc: Exhibit 4.2 - Prepared by TNT Filings Inc.

  

Exhibit 4.2 

NAYARIT GOLD INC. 

Stock Option Plan 

1. 

PURPOSE 

The purpose of this stock option plan
(the"Plan") is to authorize the grant to service providers for Nayarit Gold Inc.
(the "Corporation") of options to purchase common shares ("shares") of the
Corporation's capital and thus benefit the Corporation by enabling it to
attract, retain and motivate service providers by providing them with the
opportunity, through share options, to acquire an increased proprietary interest
in the Corporation. 

2. 

ADMINISTRATION

The Plan shall be administered by the
board of directors of the Corporation or a committee established by the board of
directors for that purpose (the "Committee"). Subject to approval of the
granting of options by the board of directors or Committee, as applicable, the
Corporation shall grant options under the Plan. 

3. 

SHARES SUBJECT
TO PLAN 

Subject to adjustment under the
provisions of paragraph 12 hereof, the aggregate number of shares of the
Corporation which may be issued and sold under the Plan will not exceed
7,160,000. The total number of shares which may be reserved for issuance to any
one individual under the Plan within any one year period shall not exceed 5% of
the outstanding issue. The Corporation shall not, upon the exercise of any
option, be required to issue or deliver any shares prior to (a) the admission of
such shares to listing on any stock exchange on which the Corporation's shares
may then be listed, and (b) the completion of such registration or other
qualification of such shares under any law, rules or regulation as the
Corporation shall determine to be necessary or advisable. If any shares cannot
be issued to any optionee for whatever reason, the obligation of the Corporation
to issue such shares shall terminate and any option exercise price paid to the
Corporation shall be returned to the optionee. 

4. 

LIMITS WITH
RESPECT TO INSIDERS 

(a) 

The maximum
number of shares which may be reserved for issuance to insiders under the Plan,
any other employer stock option plans or options for services, shall be 20% of
the shares issued and outstanding at the time of the grant (on a non-diluted
basis). 

(b) 

The maximum
number of shares which may be issued to insiders under the Plan, together with
any other previously established or proposed share compensation arrangements,
within any one year period shall be 10% of the outstanding issue. The maximum
number of shares which may be issued to any one insider and his or her
associates under the Plan, together with any other previously established or
proposed share compensation arrangements, within a one year period shall be 5%
of the shares outstanding at the time of the grant (on a non-diluted basis). 

5. 

ELIGIBILITY 

Options shall be granted only to
Eligible Persons, any registered savings plan established by an Eligible Person
or any corporation wholly-owned by an Eligible Person. The term "Eligible
Person" means: 

(a) 

an officer,
director or insider of the Corporation or any of its subsidiaries; 

(b) 

either: 

(i) 

an individual
who is considered an employee under the Income Tax Act 

(ii) 

an individual
who works full-time for the Corporation providing services normally provided by
an employee and who is subject to the same control and direction by the
Corporation over the details and methods of work as an employee of the
Corporation, but for whom income tax deductions are not made at source, or 

1

(iii) 

an individual
who works for the Corporation on a continuing and regular basis for a minimum
amount of time per week providing services normally provided by an employee and
who is subject to the same control and direction by the Corporation over the
details and methods of work as an employee of the Corporation, but for whom
income tax deductions are not made at source, 

any such individual, an "Employee";

(c) 

an individual
employed by a corporation, incorporated association or organization, body
corporate, partnership, trust, association or other entity other than an
individual (a "Company") or an individual (together with a Company, a "Person")
providing management services to the Corporation, which are required for the
ongoing successful operation of the business enterprise of the Corporation, but
excluding a Person engaged in Investor Relations Activities (as hereafter
defined) (a "Management Company Employee"); 

(d) 

an individual
(or a company wholly-owned by individuals) who: 

(i) 

provides
ongoing consulting services to the Corporation or an Affiliate of the
Corporation under a written contract; 

(ii) 

possesses
technical, business or management expertise of value to the Corporation or an
Affiliate of the Corporation; 

(iii) 

spends a
significant amount of time and attention on the business and affairs of the
Corporation or an Affiliate of the Corporation; 

(iv) 

has a
relationship with the Corporation or an Affiliate of the Corporation that
enables the individual to be knowledgeable about the business and affairs of the
Corporation; and 

(v) 

does not engage in Investor Relations Activities (as hereafter defined) 

any such individual, a "Consultant';
or 

(e) 

any Employee
engaged to provide services that promote the purchase or sale of the issued
securities (an "Investor Relations Employee"). 

For purposes of the foregoing, a Company is an 'Affiliate" of
another Company if: (a) one of them is the subsidiary of the other; or (b) each
of them is controlled by the same Person. 

The term "Investor Relations Activities" means any activities
or oral or written communications, by or on behalf of the Corporation or
shareholder of the Corporation, that promote or reasonably could be expected to
promote the purchase or sale of securities of the Corporation, but does not
include: 

(a) 

the
dissemination of information provided, or records prepared, in the ordinary
course of business of the Corporation 

(i) 

to promote the
sale of products or services of the Corporation, or 

(ii) 

to raise public
awareness of the Corporation, that cannot reasonably be considered to promote
the purchase or sale of securities of the Corporation; 

(b) 

activities or
communications necessary to comply with the requirements of 

2

(i) 

applicable securities laws,
policies or regulations, 

(ii) 

the rules, and
regulations of the TSX Venture Exchange ("TSXV") or the by-laws, rules or other
regulatory instruments of any other self regulatory body or exchange having
jurisdiction over the Corporation; 

(c) 

communications
by a publisher of, or writer for, a newspaper, magazine or business or financial
publication, that is of general and regular paid circulation, distributed only
to subscribers to it for value or to purchasers of it, if 

(i) 

the communication is only
through the newspaper, magazine or publication, and 

(ii) 

the publisher or writer
received no commission or other consideration other than for acting in the
capacity of publisher or writer; or 

(d) 

activities or communications
that may be otherwise specified by TSXV. 

For stock options to Employees, Consultants or Management
Company Employees, the Corporation must represent that the optionee is a
bonafide Employee, Consultant or Management Company Employee as the case maybe.
The terms "insider", "controlled" and "subsidiary" shall have the meanings
ascribed thereto in the Securities Act (Ontario) from time to time. Subject to
the foregoing, the board of directors or Committee, as applicable, shall have
full and final authority to determine the persons who are to be granted options
under the Plan and the number of shares subject to each option. 

6. 

LIMITS WITH
RESPECT TO CONSULTANTS AND INVESTOR RELATIONS EMPLOYEES 

(a) 

The maximum
number of shares which may be reserved for issuance to Consultants under the
Plan, any other employer stock options plans or options for services, within any
one year period, shall be 2% of the shares issued and outstanding at the time of
the grant (on a non-diluted basis). 

(b) 

The maximum
number of shares which may be reserved for issuance to Investor Relations
Employees under the Plan, any other employer stock options plans or options for
services, within any one year period shall be 2% of the shares issued and
outstanding at the time of the grant (on a non-diluted basis). 

7. 

PRICE 

The purchase price (the 'Price") for
the shares of the Corporation under each option shall he determined by the board
of directors or Committee, as applicable, on the basis of the market price,
where "market price" shall mean the prior trading day closing price of the
shares of the Corporation on any stock exchange on which the shares are listed
or last trading price on the prior trading day on any dealing network where the
shares trade, and where there is no such closing price or trade on the prior
trading day, "market price" shall mean the average of the most recent bid and
ask of the shares of the Corporation on any stock exchange on which the shares
are listed or dealing network on which the shares of the Corporation trade. In
the event the shares are listed on TSXV, the price maybe the market price less
any discounts from the market price allowed by TSXV, subject to a minimum price
of $0.10. 

8. 

PERIOD OF OPTION AND RIGHTS TO
EXERCISE 

Subject to the provisions of this
paragraph 8 and paragraphs 9, 10 and 17 below, options will be exercisable in
whole or in part, and from time to time, during the currency thereof and Options
shall not be granted for a term exceeding five years. The shares to be purchased
upon each exercise of any option (the "optioned shares") shall be paid for in
full at the time of such exercise. Except as provided in paragraphs 9, 10 and 17
below, no option which is held by a service provider may be exercised unless the
optionee is then a service provider for the Corporation. 

3

9. 

CESSATION OF PROVISION OF
SERVICES 

Subject to paragraph 10 below, if any
optionee who is a service provider shall cease to be a service provider for the
Corporation for any reason (whether or not for cause) the optionee may, but only
within the period of ninety days, or thirty days if the service provider is an
Investor Relations Employee, next succeeding such cessation and in no event
after the expiry date of the optionee's option, exercise the optionee's option
unless such period is extended as provided in paragraph 10 below. 

10. 

DEATH OF OPTIONEE 

In the event of the death of an
optionee during the currency of the optionee's option, the option theretofore
granted to the optionee shall be exercisable within, but only within, the period
of one year next succeeding the optionee's death. Before expiry of an option
under this paragraph 10, the board of directors or Committee, as applicable,
shall notify the optionee's representative in writing of such expiry. 

11. 

NON-ASSIGNABILITY AND
NON-TRANSFERABILITY OF OPTION 

An option granted under the Plan
shall be non-assignable and non-transferrable by an optionee otherwise than by
will or by the laws of descent and distribution, and such option shall be
exercisable, during an optionee's lifetime, only by the optionee. 

12. 

ADJUSTMENTS IN SHARES SUBJECT TO
PLAN 

The aggregate number and kind of
shares available under the Plan shall be appropriately adjusted in the event of
a reorganization, recapitalization, stock spilt, stock dividend, combination of
shares, merger, consolidation, rights offering or any other change in the
corporate structure or shares of the Corporation. The options granted under the
Plan may contain such provisions as the board of directors, or Committee, as
applicable, may determine with respect to adjustments to be made in the number
and kind of shares covered by such options and in the option price in the event
of any such change. If there is a reduction in the exercise price of the options
of an insider of the Corporation, the Corporation will be required to obtain
approval from disinterested shareholders. 

13. 

AMENDMENT AND TERMINATION OF THE
PLAN 

The board of directors or Committee, as applicable,
may at any time amend or terminate the Plan, but where amended, such amendment
is subject to regulatory approval. 

14. 

EFFECTIVE DATE OF THE PLAN 

The Plan becomes effective on the
date of its approval by the shareholders of the Corporation. 

15. 

EVIDENCE OF OPTIONS 

Each option granted under the Plan
shall be embodied in a written option agreement between the Corporation and the
optionee which shall give effect to the provisions of the Plan. 

16. 

EXERCISE OF OPTION 

Subject to the provisions of the Plan
and the particular option, an option may be exercised from time to time by
delivering to the Corporation at its registered office a written notice of
exercise specifying the number of shares with respect to which the option is
being exercised and accompanied by payment in cash or certified cheque for the
full amount of the purchase price of the shares then being purchased. 

Upon receipt of a certificate of an
authorized officer directing the issue of shares purchased under the Plan, the
transfer agent is authorized and directed to issue and countersign share
certificates for the optioned shares in the name of such optionee or the
optionees legal personal representative or as may be directed in writing by the
optionee's legal personal representative. 

4

17. 

VESTING RESTRICTIONS 

Options issued under the Plan may
vest at the discretion of the board of directors or Committee, as applicable,
provided that (a) the number of shares which may he acquired pursuant to the
Plan shall not exceed a specified number or percentage during the term of the
option; (b) options must vest over a period of at least 18 months and must be
released in equal stages on a quarterly basis; and (c) options issued to
Investor Relations Employees must vest in stages over not less than 12 months
with no more than one- quarter (1/4) of the options vesting in any three month
period. 

18. 

NOTICE OF SALE OF ALL OR
SUBSTANTIALLY ALL SHARES OR ASSETS 

If at any time when an option granted under this Plan
remains unexercised with respect to any optioned shares: 

(a) 

the Corporation seeks approval
from its shareholders for a transaction which, if completed, would constitute an
Acceleration Event; or 

(b) 

a third party makes a bona fide
formal offer or proposal to the Corporation or its shareholders which, if
accepted, would constitute an Acceleration Event; 

the Corporation shall notify the optionee in writing of such
transaction, offer or proposal as soon as practicable and, provided that the
board of directors or Committee, as applicable, has determined that no
adjustment shall be made pursuant to section 12 hereof, (i) the board of
directors or Committee, as applicable, may permit the optionee to exercise the
option granted under this Plan, as to all or any of the optioned shares in
respect of which such option has not previously been exercised (regardless of
any vesting restrictions), during the period specified in the notice (but in no
event later than the expiry date of the option), so that the optionee may
participate in such transaction, offer or proposal; and (ii) the board of
directors or Committee, as applicable, may require the acceleration of the time
for the exercise of the said option and of the time for the fulfilment of any
conditions or restrictions on such exercise. 

For these purposes, an Acceleration Event means: 

(a) 

the acquisition
by any "offeror" (as defined in Part XX of the Securities Act (Ontario)) of
beneficial ownership of more than 50% of the outstanding voting securities of
the Corporation, by means of a takeover bid or otherwise; 

(b) 

any
consolidation or merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares of the
Corporation would be converted into cash, securities or other property, other
than a merger of the Corporation in which shareholders immediately prior to the
merger have the same proportionate ownership of stock of the surviving
corporation immediately after the merger; 

(c) 

any sale, lease exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Corporation; or 

(d) 

the approval by the
shareholders of the Corporation of any plan of liquidation or dissolution of the
Corporation. 

19. 

RIGHTS PRIOR TO EXERCISE 

An optionee shall have no rights
whatsoever as a shareholder in respect of any of the optioned shares (including
any right to receive dividends or other distributions therefrom or thereon)
other than in respect of optioned shares in respect of which the optionee shall
have exercised the option to purchase hereunder and which the optionee shall
have actually taken up and paid for. 

5

20. 

GOVERNING LAW 

This Plan shall be construed in
accordance with and be governed by the laws of the Province of Ontario and shall
be deemed to have been made in said Province, and shall be in accordance with
all applicable securities laws. 

21.

 EXPIRY OF
OPTION 

On the expiry date of any option
granted under the Plan, and subject to any extension of such expiry date
permitted in accordance with the Plan, such option hereby granted shall
forthwith expire and terminate and be of no further force or effect whatsoever
as to such of the optioned shares in respect of which the option has not been
exercised. 

6Nayarit Gold Inc: Exhibit 4.3 - Prepared by TNT Filings Inc.

Exhibit 4.3

ASSET PURCHASE AGREEMENT

THIS AGREEMENT made the 30th day of January, 2004. BETWEEN:

NAYARIT GOLD INC., a corporation incorporated under the laws of the Province of Ontario

(hereinafter referred to as "Nayarit Gold")

OF THE FIRST PART,  

and

GREAT HORN, INC., a corporation incorporated under the laws of the State of Delaware

(hereinafter referred to as "Great Horn")

OF THE SECOND PART,  

and

BELITUNG LIMTED, a corporation incorporated under the laws of the Province of Ontario

(hereinafter referred to as "Belitung")

OF THE THIRD PART,  

and

KILDONAN INC., a corporation incorporated under the laws of the Cayman Islands

(hereinafter referred to as "Kildonan")

OF THE FOURTH PART,  

and

MINERA PORTREE de ZACATECAS S.A. de C.V., a corporation incorporated under the laws of the Republic of Mexico

(hereinafter referred to as "Minera Portree")

OF THE FIFTH PART.

 

THIS AGREEMENT WITNESSETH that for and in consideration of the mutual covenants and agreements herein contained and other lawful and valuable consideration, the receipt of which is hereby acknowledged, it is agreed by and between the parties hereto as follows:

SCHEDULES

The following schedules attached hereto shall form part of this Agreement:

	Schedule "A"	Purchased Assets
	Schedule "B"	3.5% Net Smelter
    Return Royalty
	Schedule "C"	La Estrella Property
    Conditional Purchase Agreement
	Schedule "D"	Great Horn
    Expenditures
	Schedule "E"	Consent of Diadem
    Resources Ltd.

PROPERTY TO BE PURCHASED AND SOLD

2.

Subject to the terms and conditions hereof, Minera Portree hereby sells, assigns and transfers to Nayarit Gold and Nayarit Gold hereby purchases from. Minera Portree certain assets described in Schedule "A" (the "Purchased Assets"), and Great Horn, Belitung and Kildonan each consent to such purchase and sale on the terms provided for herein.

PURCHASE CONSIDERATION

3.

The purchase consideration for the Purchased Assets shall be the following:

(a)

Reimbursement of U.S. $102,644 in cash expenditures incurred by Great Horn as detailed in Schedule "D"; and

(b)

Delivery by Nayarit Gold to Belitung Limited of a 3.5% net smelter return royalty in the form as provided in Schedule "B" (the "Orion Royalty").

PAYMENT OF THE PURCHASE PRICE

3.

The Purchase Price shall be paid and satisfied by:

(a)

delivery of a certified cheque in the amount of U.S. $102.644 payable to Great Horn concurrent with the execution hereof;
 

and

(b)

delivery of the Orion Royalty duly executed by Nayarit Gold

 

CONSENT OF DIADEM RESOURCES LTD.

 4.  

Concurrent with the execution of this Agreement, Great Horn, Belitung, Kildonan and Minera Portree shall deliver the duly executed consent of Diadem Resources Ltd. to the sale of the Purchased Assets to Nayarit Gold as provided for herein in the form attached as Schedule “E”

REPRESENTATIONS AND WARRANTIES OF THE VENDOR

5.

Each of Great Horn, Belitung and Kildonan jointly and severally represent and warrant with Nayarit Gold that:

(a)

it is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation;

(b)

it has all necessary corporate power, authority and capacity to dispose and/or authorize the disposition of the Purchased Assets and to perform its respective obligations hereunder;

(c)

Great Horn, Belitung, Kildonan and Minera Portree are the sole legal and beneficial owners of the Purchased Assets and have the exclusive right to dispose of the Purchased Assets;

(d)

the Purchased Assets are not subject to any liens, encumbrances or third party interests whatsoever except as disclosed in Schedule "A";

(e)

this Agreement is a valid and binding Agreement, enforceable against it in accordance with its terms; and

(f)

the execution and performance by the parties hereto of this Agreement does not conflict with any contracts or other obligations to which it may be bound, and does not conflict with and does not and will not result in a breach of its articles, by-laws or resolution

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

6.

         Nayarit Gold hereby represents, warrants and covenants with each of Great Horn,
Belitung and Kildonan that:

(a)

Nayarit Gold is a corporation duly organized, validly existing and in good standing under the laws of the Province of Ontario;

(b)

Nayarit Gold has all necessary corporate power, authority and capacity to acquire the Purchased Assets and to perform its obligations hereunder;

(c)

this Agreement is a valid and binding Agreement of Nayarit Gold enforceable against Nayarit Gold in accordance with its terms; and

 

(d)

the execution and performance by the parties hereto of this Agreement does not conflict with any contracts or other obligations to which Nayarit Gold may be bound, and does not conflict with and does not and will not result in a breach of its articles, by-laws or resolutions.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

7.  

Each of the aforementioned representations and warranties of the parties hereto shall survive the completion of the purchase and sale of the Purchased Assets for a period of ten years from the date hereof.

INDEMNITY AND SET-OFF

 8.  

Each of Great Horn, Belitung, Kildonan and Minera Portree (collectively, the "Indemnitors") jointly and severally agree for a period of ten years from the date hereof to indemnify, defend and hold harmless Nayarit Gold and its successors and assigns from and against all losses, liabilities, damages deficiencies, costs or expenses (including reasonable fees and expenses of counsel and agents whether or not litigation has occurred and including the cost of enforcing this section) (collectively "Losses") based upon, arising out of or otherwise incurred in respect of:

(a)

any breach of any representation or warranty of the Indemnitors, and any covenant or agreement of the Indemnitors contained in this Agreement, the Schedules referenced in this Agreement, or any other certificate or other document delivered to Nayarit Gold in connection with this Agreement;

(b)

any claim against the Purchased Assets, whether known or unknown;
 

(c)

any federal, provincial, local and foreign income, profits, franchise, sales, use, occupancy, ad valorem and other taxes, assessments, reassessments, penalties, interest and fines based upon, arising out of, relating to or otherwise incurred in respect of the Purchased Assets or arising out of, relating to or otherwise incurred in respect of the purchase and sale provided for herein; and

(g)

any person's employment or consulting relationship with the Indemnitors and/or the termination of any such employment or consulting relationship.

9.

Belitung expressly agrees that Nayarit Gold shall have the right, but not the obligation, to set off any unsatisfied Losses against any and all amounts payable to Belitung pursuant to the Orion Royalty, including the buy-out of the royalty, of any unsatisfied Losses.

FURTHER ASSURANCES

10.

The parties hereto agree to execute such further and other assurances and documents and to do all such things and actions which shall be necessary or proper for the carrying out of the purpose and intent of this Agreement. In particular, it is understood and agreed that Nayarit Gold will incorporate a subsidiary under the laws of the Republic of Mexico to take title to the Purchased Assets, and the parties hereto agree to execute such conveyancing and other documents as may be required under the laws of Mexico which are necessary to effect the transfer of title of the Purchased Assets to the Mexican subsidiary.

 

GENERAL

11.

Any headings in this Agreement are inserted for convenience of reference only and shall not affect the interpretation hereof.

12.

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the courts of such Province shall have jurisdiction to entertain any action arising in connection with this Agreement.

13.

This Agreement shall enure to the benefit of and shall be binding upon the parties hereto and their respective heirs, executors, administrators, successors and/or assigns.

14.

This Agreement supersedes and replaces all prior negotiations and/or agreements made between the parties hereto, whether oral or written, and contains the entire understanding between the parties with respect to the subject matter hereof.

15.

This Agreement may not be amended or modified in any respect except by written instrument signed by each of the parties hereto.

16.

This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together constitute one and the same instrument, and notwithstanding the date of execution shall be deemed to bear the date as of the date written in the beginning of this Agreement.

IN WITNESS WHEREOF the parties hereto have duly executed this Agreement.

 

   NAYARIT GOLD INC.

 

   GREAT HORN, INC.

 

BELITUNG LIMITED

 

KILDONAN INC.

 

MINERA PORTREE de ZACATECAS S.A. de CV

SCHEDULE "A"

DESCRIPTION OF PURCHASED ASSETS

A.  Orion Property

	
  
  CLAIM NAME

	
  
  TITLE NO.

	
  
  AREA/HECTARES

	
  
  ORION

	
  
  205616

	
  
  527.5021

Title: Title to this property is in the name of Minera Portree de Zacatecas S.A. de C.V. which company owns a 100% interest in the property subject to the following royalties:

(a)

10% net profits interest royalty held by Portree Inc. (the "Portree NPI"). The Portree NPI is not evidenced by any formal agreement other than a letter agreement dated November 30, 1999 between Diadem Resources Ltd. and Portree Inc.; and

(b)

3.5% net smelter returns royalty held by Belitung Limited in the form attached as Schedule "B" to this Agreement.

B. La Estrella Property

	
  
  CLAIM NAME

	
  
  TITLE NO.

	
  
  AREA/HECTARES

	
  
  LA ESTRELLA

	
  
  196 009

	
  
  146.3529

Title: Title to this property is in the name of Adrian Evodio Prado Gomez. Minera Portree de Zacatecas S.A. de C.V. has an interest in this property pursuant to an agreement dated November 28, 2003 between Minera Portree de Zaeat :cas S.A. de C.V. and Adrian Evodio Prado Gomez. A copy of this agreement with and English translation is attached as Schedule "C" to this Agreement. The agreement is a form of conditional purchase agreement which provides for the payment of U.S. $25,000 upon execution plus payment of the applicable value added tax, which amounts have been paid. At total of six annual payments are due over the next 6 years. This property is not subject to any other interests or encumbrances.

C. El Magnifico Property

	
  
  CLAIM NAME

	
  
  TITLE NO.

	
  
  AREA/HECTARES

	
  
  EL MAGNIFICO

	
  
  59/6,758

	
  
  7,650.4425

Title: Title to this property is in the name of Minera Portree de Zacatecas S.A. de C.V. which company owns a 100% interest in the property. This property is not subject to any other interests or encumbrances.

 

SCHEDULE "B"

ROYALTY AGREEMENT

THIS AGREEMENT MADE as of the 30th day of January, 2004.

BETWEEN:

NAYARIT GOLD INC., a corporation incorporated under the laws of the Province of Ontario

(hereinafter referred to as the "Corporation")

OF THE FIRST PART,  and

BELITUNG LIMTED, a corporation incorporated under the laws of the Province of Ontario

(hereinafter referred to as the "Royalty Holder")

OF THE SECOND PART,

WHEREAS the Corporation has acquired the Property as defined herein subject to the terms of a Royalty as defined herein; and

AND WHEREAS it is necessary to document the Royalty provided for herein;

NOW THEREFORE THIS AGREEMENT WITHNESSETH that in consideration of the premises and mutual covenants and agreements herein contained the parties covenant and agree as follows:

ARTICLE I: INTERPRETATION  

1.01

Definitions  

In this Agreement, unless something in the subject matter or context is inconsistent therewith:

 

a)

"Affiliate" means a corporation or other entity which, in relation to another corporation or other entity, is controlled by or controls such other corporation or entity or is controlled by the same person, group of persons or certain of them or by the same corporation or entity which controls such other corporation or entity and where two or more corporations or other entities are Affiliates of the same corporation or entity they are Affiliates of each other;

b)

"Control", "Controls", "Controlled" or similar expression mean the holding by a person or group of persons, directly or indirectly, of securities of a corporation or entity or comparable beneficial interests in an entity (for purposes hereof, "securities" shall include such interests) to which are attached more than 50% of the votes or similar rights of decision that may be cast to elect directors or any similar managing body of the corporation or entity, if such votes or rights are sufficient, if exercised, to elect a majority of the directors or similar managing body of the corporation or entity, other than holding such securities by way of security only, provided that control in fact of such corporation or entity, whether directly through the ownership of securities or a right or option to acquire securities or indirectly through a trust, contract, the ownership of securities of any other corporation or entity or otherwise, is not primarily exercised by a person or group of persons other than the holder of the said securities rather than by such holder, in which case such other person or group of persons shall be deemed to control such corporation or entity for all purposes hereof, and provided that for purposes hereof persons who act in concert in regard to the voting of securities or otherwise in regard to the business and affairs of a corporation or entity shall be considered a group of persons;

c)

"Dollars" or "$" means dollars of Canada unless specified otherwise;

d)

"Fair Market Value" of Product means the price for such Product quoted by the London Metal Exchange or, if such Product is not traded on or quoted by the London Metal Exchange, the price for such Product quoted by another recognized public exchange on which such Product is traded;

e)

"Net Smelter Return" and "NSR" means the aggregate amount received from the sale of Product to a third party less all charges made by the smelter or refinery purchaser including, without limitation, charges for treatment, sampling and penalties; provided that if any Product is sold to a party that is a shareholder of the Corporation or is an Affiliate of the Corporation or of any shareholder of the Corporation the amount received for the sale of such Product shall be the Fair Market Value thereof determined as of the date of the sale and the deductions for smelter charges shall be the weighted average of the charges made by a representative group of smelters or refineries which are capable of taking and treating such Product and which offer terms which are not less favourable to the seller than are reasonably available in the market; and further provided that if the Corporation or any Affiliate of the Corporation or of any shareholder of the Corporation take any Product in kind or Product is delivered in kind pursuant to a contract or agreement with a third party, the amount received and the smelter charges for such Product shall be computed as of the date of delivery of such Product as though such delivery constituted a sale of such Product by the Corporation or to such Affiliate or such third party, as the case may be and the provisions of the preceding proviso shall apply;

f)

"Product" means all ores, minerals, concentrates, metals, including precious metals and by-products mined and/or produced from any of the Property;

 

g)

"Property" means the Orion Property which may be described as follows:

 

	
  
  CLAIM NAME

	
  
  TITLE NO.

	
  
  AREA/HECTARES

	
  
  ORION

	
  
  205616

	
  
  527.5021

 

h)

"Royalty" means the royalty described in Section 2.01.  

 

1.02

Sections and Headings

 

The division of this Agreement into Articles and Sections and insertions of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof' "hereunder" and similar expressions refer to this Royalty Agreement and not to any particular Article, Section or other portion hereof and not to any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement.

1.03  

Number

Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine and neuter genders and vice versa, and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations and vice versa.

1.04  

Accounting Principles

Wherever in this Agreement reference is made to generally accepted accounting principles, such reference shall be deemed to be the generally accepted accounting principles from time to time approved by the Canadian Institute of Chartered Accountants, or any successor institute, applicable as at the date on which such calculation is made or required to be made in accordance with generally accepted accounting principals.

ARTICLE II: NET SMELTER RETURN  

 

2.01  

Grant of Royalty

 

The Corporation does hereby grant to Royalty Holder a royalty (the "Royalty") in the Property calculated as 3.5% of the Net Smelter Return from the Property.

2.02

 Payment of Royalty and Statements

The Corporation shall pay to Royalty Holder the Royalty to which it is entitled for all Product delivered during each quarter year within 15 days after the end of the quarter year to which the payment relates. Each payment shall be accompanied by a statement showing the calculation of the Net Smelter Return for the relevant quarter year including particulars of the nature, quality and quantity of Product extracted, produced, processed, sold and delivered and the computation of the Net Smelter Return. Within 90 days after the end of each calendar year the Corporation shall provide Royalty Holder with a statement of the Net Smelter Return for such year duly certified by an outside auditor for the Corporation accompanied by payment of any balance (the "Balance") owing for such year. Any overpayment made in any year shall be deducted from the payments due in any subsequent year. The Corporation shall deliver to Royalty Holder within 90 days after the end of each calendar year, an annual report setting out in reasonable detail forecasts for and results of the mining operations, levels of production and deliveries and other relevant information and shall notify Royalty Holder on a timely basis of any material change or expected change in the mining operations, production levels or delivery levels.

 

2.03  

Access to Books, Records and Data

a)

The Corporation shall at all times keep and maintain full and complete books and records of all matters affecting the mining operations, maintenance of the Property and the computation of the Net Smelter Return. Royalty Holder shall have the right, at its own risk and expense, to have its representative or auditor inspect and audit the books and records of the Corporation and make copies and extracts thereof.

b)

The Corporation shall provide information and data regularly to Royalty Holder and in any event quarterly on all activities proposed to be conducted and activities that have been conducted by the Corporation and the results thereof. Such information and data reports shall be provided for each quarter by the 30th day of the month next following.

c)

The Corporation shall permit Royalty Holder and its representatives to have access, at Royalty Holder's cost and risk, to the Property and the data and records of the Corporation.

 

2.04  

Dealing with Property

 

The Corporation shall not sell, assign, transfer or dispose of any of the Property or any interest therein without first obtaining from the purchaser or assignee, as the case may be, a covenant and agreement in favour of Royalty Holder to assume the Royalty and the obligations of the Corporation to Royalty Holder under this Agreement and to deliver to Royalty Holder a copy of such covenant and agreement which covenant and agreement shall be in form and substance satisfactory to Royalty Holder. The Corporation shall maintain all the Property in good standing and shall not abandon any of the Property without the prior consent of Royalty Holder, which consent will not be unreasonably withheld. The Corporation shall comply with all requirements of the Republic of Mexico with regard to operations on and maintenance of the Property. Royalty Holder may register or record against the title to the Property this Agreement or notice of its Royalty interest in the Property as provided in this Agreement and the Corporation shall co-operate and assist Royalty Holder to effect such registration including, without limitation, the execution of any documents or instruments which may be required to evidence the Royalty interest of Royalty Holder in the Property.

2.05  

Buyback of Royalty

The Corporation shall have the right at any time to purchase the Royalty for a value of Cdn. $250,000 (the "Royalty Buyback Price"). For greater certainty the right to purchase the Royalty provided for herein is at the sole option of the Corporation. The Corporation has the option to pay the Royalty Buyback Price to the Royalty Holder as follows:

 

(a)

delivery to the Royalty Holder of a certified cheque or bank draft in the amount of the Royalty Buyback Price; or

(b)

issuance to the Royalty Holder of that number of fully paid and non-assessable common shares (the "Shares") of the Corporation as such Shares shall be constituted at the time of purchase which equals the Royalty Buyback Price divided by the "Market Price" except that, in any event, the maximum number of Shares which may be issued hereunder shall not exceed 500,000 shares. For the purpose of this Royalty, "Market Price" means the weighted average trading price of the Shares on the TSX Venture Exchange, or other published market if the Shares are not then listed on the TSX Venture Exchange, for each of the business days on which there was a closing price falling not more than twenty (20) business days immediately prior to the date of notice of purchase of the Royalty. In the event that the Shares trade on the TSX Venture Exchange or such other published market for fewer than ten (10) of such twenty (20) business days, the Market Price shall be based upon the simple average of the following prices established for each of such twenty (20) business days:

 

(i)

the average of the bid and ask prices for each day on which there was no trading; and

(ii)

the weighted average trading price of the Shares for each day that there was trading.

No fractional certificates shall be issued and if any issuance of Shares in consideration for purchase of the Royalty would result in the Royalty Holder being entitled to receive a fraction of a Share, the Corporation shall issue the next greater number of whole Shares.

ARTICLE III: GENERAL

 

3.01  

Entire Agreement

 

This agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between the parties hereto with respect to the subject matter hereof. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, expressed, implied or statutory, between the parties other than as expressly set forth in this Agreement.

3.02  

Amendments and Waivers

No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by parties hereto. No waiver of any breach of any provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.

 

3.03  

Assignment

Except as may be expressly provided in this Agreement, neither party shall assign its respective rights or obligations under this Agreement without prior written consent of the other.

3.04  

Benefit of the Agreement

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

3.05  

Further Assurances

Each of the parties shall execute and deliver all such documents, deeds and instruments and give such further assurance and do or cause to be done all such acts and things as may be requested by the other party to fully and effectively implement the intention and purpose of this Agreement.

3.06  

Notices

Any notice, request, demand, invoice or other communication (the "Notice") required or permitted to be given hereunder shall be in writing a id may be delivered personally or by prepaid mail or by telex or facsimile communication with return receipt requested addressed to a. party.

In the case of Royalty Holder:

330 Bay Street

Suite 830 Toronto, Ontario

M5H 2S8

Tel: (416) 3687041

Fax: (416) 362-579

In the case of the Corporation:

Suite 600

15 Toronto Street  

Toronto, Ontario M5C 2E3

Tel: (416)308-3332 

Fax: (416)368-8957

or at such other address or to such other telex or facsimile number as a party may, from time to time, advise the other party by notice. A notice shall be deemed to be received if served personally on the date of delivery; if mailed, five days following the date of mailing and if sent by telex or facsimile communication, on the business day following the transmission thereof.

 

3.07  

Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario, Canada.

3.08  

Arbitration

Any dispute which may arise under this Agreement or in the interpretation hereof which cannot be settled by the parties shall be finally settled by arbitration which shall be conducted in accordance with the Rules of Arbitration under the International Commercial Arbitration Act of Ontario, Canada and if such rules do not apply the arbitration shall be conducted in accordance with the Rules of Arbitration under the Arbitration Act of Ontario, Canada. A party may submit a dispute to arbitration by notice to the other party appointing an arbitrator and the two arbitrators shall, within 30 days of the appointment of the second arbitrator, appoint a third arbitrator and failing agreement on the appointment of the third arbitrator, the third arbitrator shall be appointed by a Justice of the Ontario Court (General Division). The arbitration shall be conducted in English in Toronto, Ontario, Canada and the decision of a majority of the arbitrators shall be final and binding on the parties. The submission of the dispute to arbitration shall not delay or otherwise affect the performance of this agreement which shall continue while the arbitration proceeds.

IN WITNESS WHEREOF the parties have executed this Agreement.

"NAYARIT GOLD INC."

 

Per: Signing Officer         

"BELITUNG LIMITED" 

 

Per: Signing Officer         

 

 

SCHEDULE “C:”

LA ESTRELLA PROPERTY CONDITIONAL PURCHASE AGREEMENT

CONTRACT FOR THE EXPLORATION OF A MINING LOT AND OPTION TO PURCHASE MINING RIGHTS ENTERED INTO, ON THE ONE HAND, BY EVODIO PRADO AND, ON THE OTHER HAND, BY MINERA PORTREE DE ZACATECAS, S.A. DE C.V., REPRESENTED BY MR. LUIS EMILIO VILLANUEVA AVELLANEDA.

REPRESENTATIONS

I.

Minera Portree de Zacatecas, S.A. de C.V. (hereinafter "Portree"), by way of its representative, represents that:

I.A.

It is a Mexican mining company the incorporation of which is recorded in public document Number 54354 dated September 2 ?, 1989, executed before Gerardo Correa Etchegaray, Esq., Notary Public No. 89 of the Federal District and registered in the Public Registry for Property and Commerce of the Federal District, under Number 29, Pages 131 to 138, Volume 58, Commerce Section, on June 25, 1990 and on October 17, 1999, in the Public Mining Registry (hereinafter "PMR") under Number 53, Pages 46 (face page) to 47 (face page), Volume 29 of the Book of Mining Corporations.

I.B.

It is interested in exploring and, as the case may be, exploiting the Mining Lots.

II.

Where, in this contract, reference is made to "Mining Lots", such reference shall be construed as referring to the mining lot that is mentioned in Representation 11.B that follows, and, when reference is made to "Concessions" or to "Concession Rights", it shall refer to the mining concession rights of the Mining Lot and to the mining concession rights arising from such concessions.

III.

"Prado" (hereinafter "Prado") represents that:

II.A He is a Mexican citizen, a Bachelor of Administration, a businessman, residing at Centenario No. 7, Escuinapa, Sinaloa, Postal Code 82400 and that he has the legal capacity to contract with "Portree" as regards this contract.

II.B. He owns the mining concession rights in respect of the lot referred to below:

Lot

Title

LA ESTRELLA

196009.

 

 

II.C. Except as otherwise provided in this representation, the Concession is not encumbered by any charge or lien, nor is there any litigation or dispute with other individuals or authorities, nor any other circumstance, that could impede or prevent the free exercise of the mining concession rights, nor are they subject to any pledge or option agreement or to any contract for exploration or exploitation or any other type of agreement.

Further to the above representations, NOW, THEREFORE, the parties agree as follows:

STIPULATIONS

FIRST. Exploration and, as the case may be, Exploitation Rights. As of the date of execution of this contract ("Date of Execution"), "Prado" grants unto "Portree", and the latter acquires, the exclusive right to explore and, as the case may be, to exploit the Mining Lot, according to the terms and conditions of this contract.

 

SECOND. Term.  This contract shall be for an indefinite term, as of its Date of Execution,
subject to the termination clauses described below.

 

THIRD. Work and Minimum Investments.  Throughout the term of this contract, "Portree" shall be entitled to undertake, subject to its exclusive authority and liability, all research and exploration work that it deems useful and conducive to determining the existence of deposits of economically viable mineral substances in the Mining Lot and, as the case may be, exploiting said deposits.

 

"Prado" covenants to keep "Portree" and save it harmless from any liability whatsoever to any authorities or individuals, arising from the work performed by "Prado", its employees or its contractors in the Mining Lot.

 

As for "Portree", it covenants to keep "Prado" and save it harmless from any liability whatsoever to any authorities or individuals, arising from work not performed by "Prado", its employees or its contractors in the Mining Lot during the term of this contract.

 

FOURTH.   Proof of Work Performed. The exploration and, as the case may be, exploitation work carried out by "Portree" pursuant to the terms of the third clause above shall be sufficient to establish, in due course, before the competent mining authorities, the work performed and investments made in the Mining Lot according to the terms of the Mining Law and its Regulations. Likewise, during the term of this contract, "Portree" shall prepare and present in a timely fashion the reports necessary to establish the conduct of operations and performance of work in the Mining Lot.

 

However, should it not be legally possible, for any reason, for "Portree" to provide evidence of the work performed, the latter shall provide "Prado" with such information, reports and items as shall be sufficient and necessary to establish the performance of the work, so that "Prado" may submit the reports evidencing the operations conducted and work performed in the Mining Lot.

 

Should "Portree" decide to terminate this contract prior to term, in accordance with the Tenth Clause below, "Portree" shall provide "Prado" in a timely manner with all the items necessary to evidence the conduct of operations and the performance of work until the date of early termination of this contract..

 

FIFTH. Consideration.    In order to maintain in effect the right of exploration and,
as the case may be, exploitation granted to "Portree" in the First Clause above, "Portree" shall 5.A, make a minimum investment in Exploration and/or Exploitation Expenses in keeping with the mining law of Mexico and its regulations and, like wise, shall pay the surface rights with respect to the mining lots as determined from time to time by the General Mining Directorate, starting on January 1st, 2004.

 

5.A.

pay the following amounts to "Prado":

5.B.1. US $25,000 upon execution of this agreement

5.B.2. US $50,000 upon the first anniversary of the Date of Execution

5.B.3. US $75,000 upon the second anniversary of the Date of Execution

5.B.4. US $100,000 upon the third anniversary of the Date of Execution

5.B.5. US $100,000 upon the fourth anniversary of the Date of Execution

5.B.6. US $100,000 upon the fifth anniversary of the Date of Execution

5.B.7. US $1,000,000 upon the sixth anniversary of the Date of Execution, upon which date "Prado" shall transfer to "Portree" 100% of the mining rights arising from the Lot.

Value-added tax shall be added to the amounts described in 5.B.1 on to 5.B.7 respectively.

5.B.

Should "Portree" commence exploitation activities and commercial operations in the Mining Lot to which this contract applies, "Portree" shall repay unto "Prado", within six months following the start of the commercial activities of exploitation, all the amounts that have not yet been paid, according to Clause 5.B above.

SIXTH. Concept. The Exploration Expenses incurred by "Portree” in the Mining Lots shall represent the compensation for the right to explore and, as the case may be, to exploit the Mining Lots to which the First Clause above refers, and for the Option.

SEVENTH. Repayment. Should "Portree" terminate this contract prior to term, "Prado", its successors or assigns shall not be required to return to "Portree" any amount that "Portree" had invested in Exploration Expenses or to maintain in effect the Concessions in accordance with this contract.

EIGHTH. Payment of Mining Rights. "Portree" shall be liable to pay the mining rights for the Concessions, which rights arise as of the first semester of 2004 and for so long as this contract shall be in force.

NINTH.   Suspension of the Performance of Obligations. The obligations of “Portree”, as stipulated in this contract, shall remain suspended should an Act of God or an event of force majeure occur including, inter alia, wars, riots, strikes and legal or illegal short-term work stoppages, interruption of access to the Mining Lots for natural or man-made and similar causes.

TENTH.  Means of Termination of this Contract.  This contract shall be deemed
terminated upon the grounds set out in the following subparagraphs:

 

10.A.

Early Termination. "Portree" shall be entitled to terminate this contract in its entirety in any time by providing written notice to "Prado." As of the date of such notice, all its obligations shall cease hereunder.

"Portree" shall be required to provide "Prado", within the 90 days following the date of early termination of this contract, with a copy of the evidence of payment of surface taxes, proof of the work performed and of the engineering studies conducted in the Mining Lots.

 

10.B.

Termination Due to Non-Execution.  Should any of the parties cease executing any of the obligations stipulated in this contract, the party not in default shall provide the party in default with written notice to that effect. Should the default not be cured within thirty (30) calendar days following receipt of the notice, the party not in default shall be entitled to deem this contract to be terminated, without prejudice to its right to claim damages and injury as a result of the non-execution of this contract.

 

ELEVENTH. Assignability of this Contract. The parties shall be entitled at any time to assign the rights and obligations arising from this contract to a third party who shall possess legal capacity in relation thereto, by means of notice by certified mail or any other registered means, given in writing to the other party.

Upon assignment, the Assignor shall be entirely released from all obligations assumed in this contract. The assignee shall assume all the rights and obligations of the Assignor.

TWELFTH. Expenses and Taxes. Expenses and taxes arising from the ratification of this contract before a Notary Public shall be borne by "Portree", but not the taxes on the earnings or income received by "Prado".

THIRTEENTH. Notices. Any notice to be given by the parties to each other pursuant to this contract shall be in writing and forwarded in a reliable manner to the addresses designated by the parties to that effect.

Save notice to the contrary, the parties designate the following addresses for the receipt of notices in connection with this contract:

Minera Portree de Zacatecas, S.A. de C.V. Mr. Luis Emilio Villanueva Avellaneda Constitucion de 1917 # 115

Zacatecas, Zac. Postal Code 98040

"PRADO"

Centenario No. 7, Escuinapa, Sin.

 

 

FOURTEENTH. Jurisdiction. In respect of all disputes arising between the parties relating to the interpretation or execution of this contract, the parties attorn to the jurisdiction of the courts of the State of Sinaloa, and expressly waive their right to bring the matter before any other jurisdiction to which they would be entitled.

For registration purposes, this contract is executed in four counterparts in__________________, on

Minera Portree de Zacatecas, S.A. de C.V.

/s/Adrian Evodio Prado Gomez

    Adrian Evodio Prado Gomez

/s/Yukiko Adachi de Prado

    Yukiko Adachi de Prado

 

SCHEDULE “D”

GREAT HORN EXPENDITURES

 

	Date	Item	
    Amount (US) $
	 	 	 
	Mar./03**	-A. Ramirez,
    consultant- compile plan map, search title to mining claim, surrounding
    Orion claim report	$ 1,500
	 	 	 
	Mar./03**	-L. Villaneuva travel
    and out of pocket expenses- due diligence review with G. Langille	1,900
	 	 	 
	July/03*	-Staking El Magnifico
    Claim-fees, surveying, equipment rental.	15,927
	 	 	 
	July/03*	-Settle outstanding
    property taxes on Orion Claim	3,643
	 	 	 
	July/03**	-50% of fees air fare
    & travel expenses for H. Becker-Fluegel, P. Howe, B. Brady	4,812
	 	 	 
	Nov./03*	-initial payment to
    Adrian Prado re: purchase of La Estrella claim	28,750
	 	 	 
	Nov./03**	-airfare & travel
    expenses for H. Becker-Fluegel, P. Howe, L. Villaneuva	9,822
	 	 	 
	June-Dec./03*	-50% of monthly salary
    ($4,000/mo) of Luis Villanueva paid by Minera Portree re: local
    administration of properties, representation and due diligence	14,000
	 	 	 
	June-Dec./03*	-local (Mexico)
    general and administrative costs.	14,790
	 	 	 
	 	 	$102.644
    

* These items were paid in Mexico by Minera Portree from cash advances made to Minera Portree by Great Horn.

** These items were paid directly by Great Horn from New York.

 

 

SCHEDULE "E"

CONSENT & CONFIRMATION OF DIADEM RESOURCES LTD. TO:

 

NAYARIT GOLD INC.

AND TO:  

   

GREAT HORN INC.

BELITUNG LIMITED

KILDONAN INC.

MINERA PORTREEE de ZACATECAS S.A. de C.V.

RE:  

Asset Purchase Agreement dated January 30, 2004 among Nayarit Gold Inc., Great Horn Inc., Belitung Limited, Kildonan Inc. and Minera Portree de Zacatecas S.A. de C.V. (the "Agreement")

The undersigned acknowledges receipt of a copy of the Agreement and hereby consents to the sale of the Purchased Assets (as defined in the Agreement) to Nayarit Gold Inc. and the Undersigned hereby further confirms that upon the effective date of such sale it will have no right, title or interest in the Purchased Assets and no claim, contingent or otherwise, against the Purchased Assets or Nayarit Gold Inc. The undersigned further hereby agrees to execute such further and other assurances and documents and to do all such things and actions which shall be necessary or proper for the carrying out of the purpose an-1 intent of the Agreement.

DATED at Toronto, Ontario this 30th day of January, 2004.

DIADEM RESOURCES LTD.

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