Document:

Exhibit 10.16

 

ITC HOLDINGS CORP.

EXECUTIVE GROUP SPECIAL BONUS

PLAN

 

 

JUNE 15, 2005

 

 

ARTICLE I

INTRODUCTION

 

The Plan is established effective as of June 15,
2005 by ITC Holdings Corp. for the purpose of providing special bonuses to executives
of ITC Holding Corp. and its Subsidiaries.

 

ARTICLE II

DEFINITIONS

 

The following capitalized terms used in the
Plan have the respective meanings set forth in this Article II:

 

2.1.                              “Affiliate” shall mean with respect to any Person, any
entity directly or indirectly controlling, controlled by or under common
control with such Person.

 

2.2.                              “Beneficiary” shall mean such person or legal entity
as may be designated by a Participant under Section 5.5 to receive
benefits hereunder after such Participant’s death or Permanent Disability.

 

2.3.                              “Board” shall mean the board of directors of the
Company (or any successor entity thereto).

 

2.4.                              “Change in Control” means, and occurs on,: (i) the
date that any one Person, or more than one Person acting as a Group, acquires
ownership of stock of the Company that, together with stock held by such Person
or Group, constitutes more than fifty percent (50%) of the total fair market
value or total voting power of the stock of the company; (ii) the date
that either: (A) any one Person, or more than one Person acting as a Group,
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such Person or Persons) ownership of Company stock
representing thirty-five percent (35%) or more of the total voting power, or (B) a
majority of members of the Company’s Board of Directors is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the directors in office prior to the date of the appointment or
election; or (iii) the date that any one Person, or more than one Person
acting as a group acquires (or has acquired during the 12-month period ending
on the date of the most recent acquisition by such person or persons) assets
from the corporation that have a total gross fair market value equal to or more
than 40 percent of the total gross fair market value of all of the assets of
the corporation immediately prior to such acquisition or acquisitions.

 

2.5.                              “Committee” shall mean the compensation committee of
the Board.

 

2.6.                              “Common Stock” or “Share” shall mean common
stock of the Company.

 

2.7.                              “Company” shall mean ITC Holdings Corp., its
successors and assigns.

 

2.8.                              “Deferral Election” shall mean the deferral agreement
described in Section 4.3 of the Plan.

 

 

2.9.                              “Eligible Employee”
shall mean an active Employee who holds outstanding Options.

 

2.10.                        “Employee” shall mean
an executive, who is currently employed by the Company.

 

2.11.                        “Employer” shall mean the Company and each Subsidiary
or Affiliate of the Company designated by the Company that employs one or more
Eligible Employees who have become Participants in accordance with Article III.

 

2.12.                        “Exchange Act” shall mean The Securities Exchange Act
of 1934, as amended, or any successor thereto.

 

2.13.                        “Fair Market Value Per Share”
means (a) the last reported sale price of a Share as reported by the
principal stock exchange on which the Common Stock is listed, or (b) if
the Common Stock is not so listed, as determined in accordance with any applicable
resolutions or regulations of the Board in effect at the relevant date.

 

2.14.                        “Group” shall mean “group”
as such term is used for purposes of Section 13(d) or 14(d) of
the Exchange Act.

 

2.15                           “Option Plan” shall
mean the Amended and Restated 2003 Stock Purchase and Option Plan of ITC
Holdings and Its Subsidiaries, as from time to time amended.

 

2.15.                       “Options” shall mean
those outstanding, unexercised options to purchase Common Stock granted to any
Participant under the Option Plan.

 

2.16.                        “Participant” shall mean an Eligible Employee who is
selected by the Committee to participate in the Plan.

 

2.17.                        “Permanent Disability” shall mean either: (i) that
the Participant is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve months, or (ii) the Participant is, by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve months, receiving income replacement benefits for a period of
not less than three months under an accident and health plan covering employees
of the Company.

 

2.18.                        “Person” shall mean a person as such term is used for
purposes of Section 13(d) or 14(d) of the Exchange Act.

 

2.19.                        “Plan” shall mean the ITC Holdings Corp Special Bonus
Plan, as amended from time to time.

 

2.20.                        “Plan Year” shall mean, for the first Plan Year, the
period beginning June 15, 2005 and ending December 31, 2005, and
thereafter, the period beginning January 1 and ending December 31 of
each calendar year.

 

 

2.21.                        “Record Date” shall mean any given record date established
by the Board for purposes of calculating and paying dividends on the then outstanding
shares of Common Stock.

 

2.22.                        “Special Bonus Account” shall mean the notional
account established and maintained by the Company for each Participant, as
described in Article IV of the Plan. 
Special Bonus Accounts shall be maintained solely as bookkeeping entries
to evidence unfunded obligations of the Company.

 

2.23.                        “Special Bonus Amount” shall mean a bookkeeping entry credited
to a Participant’s Special Bonus Account representing a special bonus awarded by
the Board to the Participant.

 

2.24.                        “Subsidiary” means any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations,
or group of commonly controlled corporations, other than the last corporation
in the unbroken chain then owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

ARTICLE III

PARTICIPATION BY ELIGIBLE EMPLOYEES

 

3.1                                 Participation.  Participation in the Plan is limited to
Eligible Employees. An Eligible Employee shall be selected to participate in
the Plan as determined by the Committee in its sole discretion This Plan is
intended to be limited to a select group of management or highly compensated
employees of the Employers.  To the
extent that the Committee determines that an employee no longer qualifies as
part of such a group, the Committee can provide that such employee is
ineligible for additional credits under the Plan.

 

3.2                                 Continuity of Participation.
 A Participant who separates from service
with all of the Employers shall immediately cease active participation under
the Plan.  Unless otherwise determined by
the Committee, however, the separation from service of a Participant with one
Employer will not interrupt the continuity of the Participant’s active
participation in the Plan if, concurrently with such separation or as part of a
coordinated transfer from one Employer to another, the Participant is employed
by one or more of the other Employers.

 

ARTICLE IV

SPECIAL BONUS AMOUNTS AND
SPECIAL BONUS ACCOUNTS

 

4.1.                              Special Bonus Amounts.  For each Plan Year, the Committee, in its
sole discretion, shall determine with respect to each Eligible Employee whether
such Eligible Employee shall be entitled to a Special Bonus Amount for such
Plan Year and, if so, in what amount.  In
determining the amount of the Special Bonus Amount, the Board shall give
consideration to dividends paid, or expected to be paid, on Common Stock during
such Plan Year and to the number of Options issued and outstanding to each
Eligible Employee during such Plan Year. 
Neither such factors, nor the fact that an Eligible Employee has been
granted a Special Bonus Amount with respect to prior Plan Years shall in any
way restrict the Committee’s

 

 

discretion
with respect to Special Bonus Amounts.

 

4.2.                              Establishment of Special Bonus Accounts.  A Special Bonus
Account will be established for each Participant, as determined by the
Committee.  To the extent that an
Eligible Employee is designated as entitled to receive a Special Bonus Amount
for a Plan Year, the Eligible Employee’s Special Bonus Account shall be
credited with such Special Bonus Amount from time to time, as provided in the
award of the Special Bonus Amount.

 

4.3.                              Election of Investment Options.  Each Participant shall, by filing an election
with the Company, in a format approved by the Company, elect the investment
options in which each Special Bonus Amount is to be invested.  Investment options available under the Plan
and the ability to change such investment elections shall be at the discretion
of the Committee.  Participants shall
bear the investment risk in their Special Bonus Account.

 

ARTICLE V

DISTRIBUTIONS

 

5.1.                              Timing of Distribution
of Special Bonus Account.  Except as
otherwise provided in a Deferral Election made pursuant to section 5.3, a
Special Bonus Amount that was not vested in accordance with the provisions of Article VI
below at the time credited to the Participant’s Special Bonus Account shall be
distributed in a lump sum payment, as soon as administratively feasible, after
the first to occur of the Participant’s death, Permanent Disability, Change in
Control, or the fifth anniversary of the date on which each such Participant
was first granted the Option.

 

To the extent a Special Bonus Amount was
vested in accordance with the provisions of Article VI below at the time
credited to the Participant’s Special Bonus Account, such Special Bonus Amount
shall be distributed within fifteen days from the date the Committee credits
the Special Bonus Account, unless the Participant makes a Deferral Election
pursuant to Section 5.3.

 

5.2.                              Form of Distribution.  Distributions shall be made in a single, lump
sum payment, except as provided in an election made in accordance with section 5.3.

 

5.3.                              Deferral Election.  With respect to Special Bonus Amounts, prior
to the beginning of each Plan Year, a Participant is permitted to make an
election with respect to the Special Bonus Amount, if any, to which the
Eligible Employee is entitled for the next following Plan Year.  The following elections are permissible:

 

(a)           Deferral of Special
Bonus Amount.  A Participant is
permitted to elect to defer the vested portion of his Special Bonus Amount.

 

(b)          Timing of
Distributions.  A Participant is
permitted to elect that distributions begin on the first to occur of the Participant’s death, Permanent Disability, a
Change of Control, or either (i) the Participant’s separation from service
or (ii) a set date no earlier than the second anniversary of the date as
of which the Special Bonus Amount is credited to the Participant’s
Special Bonus Account.

 

 

(c)           Form of
Distribution.  A Participant is
permitted to elect that distributions to be made as elected pursuant to
paragraph (b) of this section be payable in annual installments over
a period not less than one year and not more than 15 years.

 

5.4.                              Mandatory Participation by Covered Employees.  The Committee is
permitted to reject, in its sole discretion, any election with respect to
timing of a distribution to the extent that such election can be expected to result
in the payment of compensation that would not be deductible as a result of the
application of Internal Revenue Code Section 162(m) and the regulations
thereunder.

 

5.5.                              Beneficiary Designation.
 Each Participant shall have a right to
designate a beneficiary with respect to amounts payable under the Plan.  A Participant may from time to time change his
designated Beneficiary without the consent of such Beneficiary by filing a new
designation in writing with the Company or its designee.  If no Beneficiary designation is in effect at
the time of the Participant’s death, or if the designated Beneficiary is
missing or has predeceased the Participant, distribution shall be made to the
Participant’s estate.

 

ARTICLE VI

VESTING

 

6.1                                 Vesting in Special Bonus Amounts.  Each Participant shall
have a vested right in his Special Bonus Amount based on the vested percentage of
all grants held by the Participant under the Option Plan at the time the
Special Bonus Amount is credited.  For
example, if a Participant is 40% vested in his outstanding Options when a
Special Bonus Amount is credited, he will have a 40% vested interest in any Special
Bonus Amount credited to his Special Bonus Account.  The portion of a Special Bonus Amount that is
not fully vested when credited shall become vested on the fifth anniversary of
the date on which each such Participant was first granted the Option.  Except as otherwise provided in this Article VI,
a Participant who separates from service with the Employer prior to the fifth
anniversary of the date on which such Participant was first granted the Option
will forfeit any Special Bonus Amount that remains unvested.

 

6.2.                              Vesting on Death, Disability or Change in Control.  Each participant
shall become 100% vested in his Special Bonus Account upon death, Permanent
Disability, or the occurrence of a Change in Control.

 

ARTICLE VII

FUNDING AND PARTICIPANT’S
INTEREST

 

The Plan shall be unfunded and the Company
shall pay all distributions from its general assets; and a Participant (or the
Participant’s Beneficiary) shall have the rights of a general, unsecured
creditor against the Company for any distributions due hereunder.

 

 

 

ARTICLE VIII

ADMINISTRATION AND
INTERPRETATION

 

8.1.                              Administration.  The Committee shall be responsible for administering
the Plan. However, the Committee may delegate its duties and powers in whole or
in part as it determines. The Committee has full discretionary authority to
construe and interpret the terms and provisions of the Plan; to adopt, alter
and repeal administrative rules, guidelines and practices governing the Plan;
to perform all acts, including the delegation of its administrative
responsibilities to advisors or other persons who may or may not be employees
of the Employers; and to rely upon the information or opinions of legal counsel
or experts selected to render advice with respect to the Plan, as it shall deem
advisable, with respect to the administration of the Plan.

 

8.2.                              Interpretation.  The Committee may take any action, correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in
any election hereunder, in the manner and to the extent it shall deem necessary
to carry the Plan into effect or to carry out the Company’s purposes in
adopting the Plan.  Any decision,
interpretation or other action made by the Committee arising out of or in
connection with the Plan, shall be final, binding and conclusive on the
Employers and all Participants and Beneficiaries and their respective heirs,
executors, successors and assigns.  The
Committee’s determinations hereunder need not be uniform, and may be made
selectively among Eligible Employees, whether or not they are similarly situated.

 

ARTICLE IX

AMENDMENT AND TERMINATION

 

9.1.                              Amendment and Termination.
 The Committee shall have the right, at
any time, to amend or terminate the Plan, in whole or in part, provided
that such amendment or termination shall not materially and adversely affect
the accrued and vested rights of any Participant or Beneficiary under the Plan.
 Notwithstanding the foregoing, the
Committee shall have the right to amend the Plan in such manner as it deems
necessary to preserve all applicable laws and/or favorable accounting treatment
by the Company of the benefits provided under this Plan (including, without
limitation, to make any amendment to this Plan that would be necessary in order
to cause the Plan, in form and/or in operation, to be compliant with Section 409A
of the U.S. Internal Revenue Code of 1986, as amended, and to avoid any tax
thereunder being imposed on any Participant). 
The Company reserves the right, in its sole discretion, to discontinue
the crediting of Special Bonus Amounts, or completely terminate the Plan at any
time.

 

ARTICLE X

MISCELLANEOUS PROVISIONS

 

10.1.                       Right to
Employment.  The
adoption and maintenance of the Plan shall not be deemed to constitute a
contract between an Employer and any Eligible Employee, or to be a
consideration for, or an inducement or condition of, the employment of any
individual.  Nothing herein contained, or
any action hereunder, shall be deemed to give any Eligible Employee the right
to be retained in the employ of an Employer or to interfere with the right of any
Employer to terminate any Eligible Employee at any time.

 

10.2.                        Alienation or Assignment of Benefits.  Other than by will,
the laws of descent and

 

 

distribution, or by appointing a Beneficiary, a Participant’s
rights and interest under the Plan shall not be assigned or transferred except
as otherwise permitted by the Committee, and a Participant’s rights to benefit
payments under the Plan shall not be subject to alienation, pledge or
garnishment by or on behalf of creditors (including heirs, beneficiaries, or
dependents) of the Participant or of a Beneficiary.  The Company may assign its rights and
obligations under the Plan to a Person or entity, which is an Affiliate or a
successor in interest to substantially all of the business operations of the Company.

 

10.3.                        Severability.  In the event that any provision of the Plan
shall be declared illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of the Plan but shall be
fully severable, and the Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.

 

10.4.                        Right to Withhold.  To the extent required by applicable law in
effect at the time a distribution is made from the Plan, the Company, any
Employer or their respective agents shall have the right to withhold or deduct
from any distributions or payments hereunder any taxes required to be withheld
by federal, state or local governments prior to making any such distributions
or payments.

 

10.5.                        Governing Law. The
validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the
laws of the State of Michigan, without giving effect to principles of conflicts
of laws to the extent not pre-empted by federal law.

 

10.6.                        Effective Date. The
effective date of the Plan is June 15, 2005.Filed by Automated Filing Services Inc. (604) 609-0244 - Evolving Gold Corp. - Exhibit 4.9

 OPTION AND ROYALTY AGREEMENT 

 Dated for reference the 4th day
  of May, 2005 

BETWEEN: 

  
    
      
         GEOCORE EXPLORATION INC., a corporation duly
          incorporated pursuant to the laws of British Columbia and having an
          office at Box 152 Pine Lake, Alberta T0M 1S0 (the “Optionor”)
        

      

    

  

AND: 

  
    
      
         EVOLVING GOLD CORP., a corporation duly incorporated
          pursuant to the laws of Canada and having an office at Suite 1200, 1188
          West Georgia Street, Vancouver, British Columbia V6E 4A2 (the "Optionee”)
        

      

    

  

WHEREAS: 

	 A.      	 The Optionor is the sole legal and beneficial owner
        of the licence listed in Schedule “A” to this Agreement (the
        “Licences”), all of which are located in Newfoundland
        and Labrador, Canada, as more particularly described in Schedule “A”;
      

	 
	 B.      	 The Optionor has exclusive possession of and the
        right to explore and mine the Licences free and clear of all claims, liens
        or encumbrances; and 

	 
	 C.      	 The parties now wish to enter into an agreement
        whereby the Optionor will grant two options to the Optionee to purchase
        in aggregate 80% of the right, title and interest in and to the Licences
        on the terms and conditions as hereinafter set forth; 

THE PARTIES AGREE AS FOLLOWS: 

	 1.      	 INTERPRETATION 

	 
	 1.1      	 In this Agreement: 

	 
	 	 (a)      
	 “Additional Licences” has
        that meaning set out in Subsection 7.1; 

	 
	 	 (b)      
	 "Licences" means that licence set out
        in Schedule "A" of this Agreement and includes: 

	 
	 	 	 (i)     
      
	 any Additional Licences; and 

	 
	 	 	 (ii)      
	 any licences covering any portion of the ground
        currently covered by the Licences which may have been re-acquired by the
        Optionee or its successors, assigns or associates as a result of any of
        the Licences having been previously abandoned; 

	 
	 	 (c)      
	 “Defaulting Party” has that
        meaning set out in Subsection 18.1 of this Agreement; 

	 
	 	 (d)      
	 "Dollars ($)" means legal currency
        of Canada. 

 - 2 - 

	 	 (e)     
      
	 “First Option” has that meaning
        set out in Subsection 3.1 of this Agreement. 

	 
	 	 (f)      
	 “Intervening Event” has that
        meaning set out in Subsection 22.1 of this Agreement; 

	 
	 	 (g)      
	 "NSR Royalty" means a net smelter returns
        royalty, to be paid by the Optionee to the Optionor pursuant to Subsection
        11.1 of this Agreement; 

	 
	 	 (h)      
	 "Net Smelter Returns" means the proceeds
        received by the Optionee from any smelter or other purchaser from the
        sale of any ores, concentrates or minerals produced from the Licences
        after deducting from such proceeds the following charges only to the extent
        that they are not deducted by the smelter or other purchaser in computing
        the proceeds: 

	 
	 	 	 (i)     
      
	 the cost of transportation of the ores, concentrates
        or minerals from the Licences to such smelter or other purchaser, including
        related transport; 

	 
	 	 	 (ii)      
	 smelting and refining charges including penalties;
      

	 
	 	 	 (iii)      
	 marketing costs; and 

	 
	 	 (i)      
	 “Second Option” has that meaning
        set out in Subsection 3.2 of this Agreement. 

	 
	 2.      	 REPRESENTATIONS AND WARRANTIES
      

	 
	 2.1      	 The Optionee represents and warrants to
        the Optionor that: 

	 
	 	 (a)      
	 it is a body corporate duly incorporated,
        organized and validly subsisting under the laws of Canada; 

	 
	 	 (b)      
	 it has full power and authority to carry
        on its business and to enter into this Agreement and any agreement or
        instrument referred to or contemplated by this Agreement; 

	 
	 	 (c)      
	 neither the execution and delivery of
        this Agreement nor any of the agreements referred to herein or contemplated
        hereby, nor the consummation of the transactions hereby contemplated will
        conflict with, result in the breach of or accelerate the performance required
        by any agreement to which the Optionee is a party or by which it is bound;
        and 

	 
	 	 (d)      
	 the execution and delivery of this Agreement
        and the agreements contemplated hereby will not violate or result in the
        breach of the laws of any jurisdiction applicable or pertaining thereto.
      

	 
	 2.2      	 The Optionor represents and warrants to
        the Optionee: 

	 
	 	 (a)      
	 it is a corporation duly incorporated
        pursuant to the laws of British Columbia and is in good standing with
        respect to filing annual reports; 

	 
	 	 (b)      
	 it has full power and authority to carry
        on its business and to enter into this Agreement and any agreement or
        instrument referred to or contemplated by this Agreement; 

	 
	 	 (c)      
	 neither the execution and delivery of
        this Agreement nor any of the agreements referred to herein or contemplated
        hereby, nor the consummation of the transactions hereby 

 - 3 - 

	 	  	contemplated will conflict with, result in the breach
        of or accelerate the performance required by any agreement to which the
        Optionor is a party or by which it is bound; and 

	 
	 	 (d)     
      
	 the Licences have been duly and validly located,
        staked and recorded, are accurately described in Schedule "A", are presently
        in good standing under the laws of the jurisdiction in which they are
        located and, except as set forth herein, are free and clear of all liens,
        charges and encumbrances; 

	 
	 	 (e)      
	 the Optionor is the sole beneficial owner of a 100%
        interest in and to the Licences and has the exclusive right to enter into
        this Agreement and all necessary authority to dispose of a 100% interest
        in and to the Licences in accordance with the terms of this Agreement;
      

	 
	 	 (f)      
	 the Optionor is the sole registered owner of the
        Licences; and 

	 
	 	 (g)      
	 no person, firm or corporation has any proprietary
        or possessory interest in the Licences other than the Optionor and no
        person is entitled to any royalty or other payment in the nature of rent
        or royalty on any diamonds, minerals, ores, metals or concentrates or
        any other such products removed from the Licences. 

	 
	 2.3      	 The representations and warranties hereinbefore
        set out are conditions on which the parties have relied in entering into
        this Agreement and will survive the acquisition of any interest in the
        Licences by the Optionee and each party will indemnify and save the other
        party harmless from all loss, damage, costs, actions and suits arising
        out of or in connection with any breach or any representation, warranty,
        covenant, agreement or condition made by the other party and contained
        in this Agreement. 

	 
	 3.      	 GRANT OF OPTION TO PURCHASE 

	 
	 3.1      	 The Optionor hereby grants to the Optionee
        the exclusive and irrevocable option (the “First Option”)
        to acquire, free of all liens, charges, encumbrances, claims or rights
        of others, an undivided 60% right, title and interest in and to the Licences,
        exercisable by the Optionee: 

	 
	 	 (a)      
	 paying to lawyer for the Optionor in trust for the
        Optionor $35,000 on the execution of this Agreement; 

	 
	 	 (b)      
	 incurring exploration expense of at least $200,000
        on the Licences by October 31, 2006; and 

	 
	 	 (c)      
	 incurring cumulative exploration expense of at least
        $500,000 by October 31, 2007. 

	 
	 3.2      	 Subject to the exercise of the First Option
        and subject to the Optionee advising the Optionor in writing of its intention
        to proceed to attempt to exercise the Second Option, the Optionor hereby
        grants to the Optionee the exclusive and irrevocable option (the “Second
        Option”) to acquire, free of all liens, charges, encumbrances,
        claims or rights of others, an additional undivided 20% right, title and
        interest in and to the Licences, exercisable by the Optionee: 

	 
	 	 (a)      
	 incurring cumulative exploration expense of at least
        $1,000,000 on the Licences by October 31, 2008; and 

	 
	 	 (b)      
	 delivering to the Optionor by October 31, 2008 a
        written notice of intention to exercise the Second Option. 

 - 4 - 

	 4.      	 EXERCISE OF OPTION – COMMENCEMENT
        OF JOINT VENTURE 

	 
	 4.1      	 Upon the completion of the payments, incurring
        the exploration expense and providing the notice of election to exercise
        set out in Subsection 3.1 in accordance with the terms of this Agreement
        the First Option shall be exercised and the Optionee will, subject to
        the right of the Optionor to receive the NSR Royalty, own 60% of the right,
        title and interest in and to the Licenses. 

	 
	 4.2      	 Upon incurring the exploration expense
        and providing the notice of election to exercise set out in Subsection
        3.2 in accordance with the terms of this Agreement, the Second Option
        shall be exercised and the Optionee will, subject to the right of the
        Optionor to receive the NSR Royalty, own 80% of the right, title and interest
        in and to the Licenses. 

	 
	 4.3      	 Upon either: 

	 
	 	 (a)     
      
	 the exercise of the First Option and the failure
        by the Optionee to provide the Optionor notice in accordance with Section
        3.2 of its intention to attempt to exercise the Second Option; or 

	 
	 	 (b)      
	 the exercise of the Second Option, 

	 
	 	 all operations shall be conducted as a
        joint venture in accordance with a Joint Venture Agreement the salient
        provisions of which are set forth in Schedule “B”. The establishment
        of the Joint Venture Agreement and the assignment of interests in the
        Licenses in accordance with the terms of this Agreement shall be effected
        in the manner as may be determined by the Optionor and the Optionee to
        be the most advantageous having regard to the mining and taxation laws
        applicable at that time. 

	 
	 5.      	 TRANSFER OF TITLE 

	 
	 5.1      	 Upon completion of the exercise of the
        First Option, the Optionor will deliver to the Optionee a duly executed
        transfer in registrable form of 60% right, title and interest in and to
        the Licences in favour of the Optionee which the Optionee will be entitled
        to register against title to the Licences. 

	 
	 5.2      	 Upon completion of the exercise of the
        Second Option, the Optionor will deliver to the Optionee a duly executed
        transfer in registrable form of a further 20% right, title and interest
        in and to the Licences in favour of the Optionee which the Optionee will
        be entitled to register against title to the Licences. 

	 
	 6.      	 OPTION ONLY 

	 
	 6.1      	 This Agreement is for an option only.
        Except for the payment of cash under Subsection 3.1(a) the Optionee is
        not obliged to make any payment of money to the Optionor, issue and deliver
        any shares in the capital of the Optionee or incur exploration expense
        on the Licences. The Optionor hereby agrees that the Optionee may terminate
        the Option at any time. The Optionee will pay all taxes and assessments
        required to maintain the Licences in good standing during the term of
        the First Option and the Second Option and, in the event that the First
        Option or Second Option is terminated or expires without being exercised,
        then the Optionee will pay all taxes and assessments required to maintain
        the Licences in good standing for a period of one year from such termination
        or expiration of the such option. 

 - 5 - 

	 7.      	 OTHER ACQUISITIONS 

	 
	 7.1      	 The parties agree that a 100% interest
        in any and all mineral interests staked, located, granted or acquired
        by or on behalf of any party during the currency of this Agreement which
        are located wholly or partially within two kilometers of the Licences
        (the “Additional Licences”) shall, at the option of
        the other party, form part of the Licences and be subject to the terms
        of the First Option and Second Option provided that if such mineral interests
        are acquired by: 

	 
	 	 (a)      
	 the Optionor, the Optionee will first
        be required to reimburse the Optionee for its acquisition costs; and 

	 
	 	 (b)      
	 the Optionee: 

	 
	 	 	 (i)     
      
	 any acquisition costs incurred by the Optionee pursuant
        to such mineral interests shall be applied to and reduce any outstanding
        exploration expenses required pursuant to section 3.1 and 3.2, as the
        case may be; and 

	 
	 	 	 (ii)      
	 if there is an existing royalty payable on such
        acquisition of 1.5% or greater, then no NSR Royalty shall be paid with
        respect to such mineral interests and if there is an existing royalty
        payable on such acquisition being less than 1.5%, then the amount of the
        NSR Royalty payable with respect to such mineral interests will be that
        amount such that the sum of that amount and the existing royalty payable
        is 1.5%. 

	 
	 8.      	 RIGHT OF ENTRY 

	 
	 8.1      	 During the currency of this Agreement,
        the Optionee, its employees, agents and independent contractors, will
        have the sole and exclusive right to: 

	 
	 	 (a)      
	 enter upon the Licences; 

	 
	 	 (b)      
	 have exclusive and quiet possession thereof,
      

	 
	 	 (c)      
	 do such prospecting, exploration, development
        or other mining work thereon and thereunder as the Optionee in its sole
        discretion may consider advisable; and 

	 
	 	 (d)      
	 bring and erect upon the Licences such
        facilities as the Optionee may consider advisable. 

	 
	 8.2      	 If the Optionee terminates the First Option
        or the First Option otherwise expires, the Optionee shall restore the
        land pertaining to the Licences to a condition acceptable to the Optionor,
        acting reasonably, and all buildings, plant, equipment, machinery, tools,
        appliances and supplies which the Optionee may have brought on the land
        pertaining to the Licences, may be removed by the Optionee at any time
        not later than six months thereafter. Any buildings, plant, equipment,
        machinery, tools, appliances and supplies left on the land pertaining
        to the Licences during the six-month period shall be at the Optionee’s
        sole risk and, if not removed after the six-month period, shall become
        the property of the Optionor. If the Optionor chooses to have such property
        or any part thereof removed and dispersed of, the Optionee shall reimburse
        the Optionor for its costs so incurred. 

 - 6 - 

	 9.      	 COVENANTS OF THE OPTIONOR 

	 
	 9.1      	 During the currency of this Agreement
        the Optionor will: 

	 
	 	 (a)      
	 not do any act or thing which would or
        might in any way adversely affect the rights of the Optionee hereunder;
      

	 
	 	 (b)      
	 make available to the Optionee and its
        representatives all records and files in the possession of the Optionor
        relating to the Licences and permit the Optionee and its representatives
        at its own expense to take abstracts therefrom and make copies thereof;
        and 

	 
	 	 (c)      
	 promptly provide the Optionee with any
        and all notices and correspondence received by the Optionor from government
        agencies in respect of the Licences. 

	 
	 10.      	 COVENANTS OF THE OPTIONEE 

	 
	 10.1      	 During the currency of this Agreement,
        the Optionee will: 

	 
	 	 (a)      
	 keep the Licences free and clear of all
        liens, charges and encumbrances arising from its operations hereunder;
      

	 
	 	 (b)      
	 keep the Licences in good standing during
        the term of the First Option and Second Option by the doing and filing
        of all necessary work and assessments and by the doing of all other acts
        and things and paying all taxes and making all other payments which may
        be necessary in that regard; 

	 
	 	 (c)      
	 ensure that reports on all work performed
        before each anniversary date of the Licences are filed within 60 days
        of that anniversary date of any of the Licences; 

	 
	 	 (d)      
	 permit the Optionor, or its representatives
        duly authorized by it in writing, at its own risk and expense, access
        to the Licences at all reasonable times and to all records prepared by
        the Optionee in connection with work done on or with respect to the Licences;
      

	 
	 	 (d)      
	 provide the Optionor with copies of all
        geological reports or other like reports prepared by the Optionee or prepared
        for the Optionee within 90 days of either: 

	 
	 	 	 (i)     
      
	 the abandonment of the First Option, or 

	 
	 	 	 (ii)      
	 the date of the abandonment of the Second Option
        or the exercise of the Second Option, the Optionee will have prepared
        and delivered to the Optionor a geological report prepared in accordance
        with National Instrument 43-101; and 

	 
	 	 (f)      
	 conduct all work on or with respect to
        the Licences in a careful and minerlike manner and in compliance with
        all applicable Federal, provincial and local laws, rules, orders and regulations,
        and indemnify and save the Optionor harmless from any and all claims,
        suits, actions made or brought against it as a result of work done by
        the Optionee on or with respect to the Licences. 

 - 7 - 

	 11.      	 NSR ROYALTY 

	 
	 11.1      	 Subject to Subsection 7.1(b)(ii), the Optionee will
        pay to the Optionor a royalty equal to a one and one-half percent (1.5%)
        in aggregate net smelter returns royalty (as defined in Subsection 1.1),
        subject to Subsection 11.4 of this Agreement. 

	 
	 11.2      	 Payment of the NSR Royalty will be made quarterly
        within 30 days after the end of each yearly quarter based upon a year
        commencing on the 1st day of January and expiring on the 31st day of December
        in any year in which ores, concentrates or minerals are removed from the
        Licences. Within 60 days after the end of each year for which the NSR
        Royalty is payable, the records relating to the calculation of the NSR
        Royalty for such year will be audited by the Optionee and any adjustments
        in the payment of the NSR Royalty will be made forthwith after completion
        of the audit. All payments of the NSR Royalty for a year will be deemed
        final and in full satisfaction of all obligations of the Optionee in respect
        thereof if such payments or calculations thereof are not disputed by the
        Optionor within 60 days after receipt by The Optionor of the said audit
        statement. The Optionee will maintain accurate records relevant to the
        determination of the NSR Royalty and the Optionor, or its authorized agent,
        shall be permitted the right to examine such records at all reasonable
        times. 

	 
	 11.3      	 The determination of the NSR Royalty hereunder is
        based on the premise that production will be developed solely on the Licences
        except that the Optionee will have the right to commingle ore mined from
        the Licences with ore mined and produced from other properties provided
        the Optionee will adopt and employ reasonable practices and procedures
        for weighing, sampling and assaying, in order to determine the amounts
        of products derived from, or attributable to ore mined and produced from
        the Licences. The Optionee will maintain accurate records of the results
        of such sampling, weighing and analysis with respect to any ore mined
        and produced from the Licences. The Optionor or its authorized agents
        will be permitted the right to examine at all reasonable times such records
        pertaining to commingling of ore or to the calculation of Net Smelter
        Returns. 

	 
	 11.4      	 The Optionee shall have the right at any time to
        purchase up to 50% of the NSR Royalty (0.75%) by paying to the Optionor
        $250,000 for each 0.25% of the NSR Royalty, such that the Optionee
        will have to pay an aggregate sum of $750,000 for 50% of the NSR Royalty.
      

	 
	 12.      	 REGISTRATION OF AGREEMENT 

	 
	 12.1      	 Notwithstanding any term of this Agreement, the
        Optionee will have the right at any time to register this Agreement or
        a Memorandum thereof against title to the Licences. 

	 
	 14.      	 CONFIDENTIAL NATURE OF INFORMATION 

	 
	 14.1      	 The parties agree to hold in confidence all information
        obtained in confidence in respect of the Licences or otherwise in connection
        with this Agreement other than in circumstances where a party has an obligation
        to disclose such information in accordance with applicable securities
        legislation. 

	 
	 15.      	 FURTHER ASSURANCES 

	 
	 15.1      	 The parties hereto agree that they and each of them
        will execute all documents and do all acts and things within their respective
        powers to carry out and implement the provisions or intent of this Agreement.
      

 - 8 - 

	 16.      	 NOTICE 

	 
	 16.1      	 Any notice, direction or other instrument required
        or permitted to be given under this Agreement will be in writing and will
        be given by the delivery or the same or by mailing the same by prepaid
        registered or certified mail in each case addressed as provided in page
        1 of this Agreement. 

	 
	 16.2      	 Any notice, direction or other instrument aforesaid
        will, if delivered, be deemed to have been given and received on the day
        it was delivered, and if mailed, be deemed to have been given and received
        on the tenth business day following the day of mailing, except in the
        event of disruption of the postal services in which event notice will
        be deemed to be received only when actually received. 

	 
	 16.3      	 Any party may at any time give to the other notice
        in writing of any change of address of the party giving such notice and
        from and after the giving of such notice, the address or addresses therein
        specified will be deemed to be the address of such party for the purpose
        of giving notice hereunder. 

	 
	 17.      	 HEADINGS 

	 
	 17.1      	 The headings to the respective sections herein will
        not be deemed part of this Agreement but will be regarded as having been
        used for convenience only. 

	 
	 18.      	 DEFAULT 

	 
	 18.1      	 If any party (a "Defaulting Party") is in
        default of any requirement herein set forth (including any provision of
        Subsection 3.1 of this Agreement), the party affected by such default
        will give written notice to the Defaulting Party specifying the default
        and the Defaulting Party will not lose any rights under this Agreement,
        unless within 30 days after the giving of notice of default by the affected
        party the Defaulting Party has not cured the default by the appropriate
        performance and if the Defaulting Party fails within such period to cure
        any such default, the affected party will be entitled to seek any remedy
        it may have on account of such default. 

	 
	 19.      	 PAYMENT 

	 
	 19.1      	 All references to monies hereunder will be in Canadian
        funds except where otherwise designated. All payments to be made to any
        party hereunder will be either wired to the bank account of the intended
        party or mailed or delivered to such party at its address for notice purposes
        as provided herein, or for the account of such party at such bank or banks
        as such party may designate from time to time by written notice. Said
        bank or banks will be deemed the agent of the designating party for the
        purpose of receiving, collecting and receiving such payment. 

	 
	 20.      	 ENUREMENT 

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

	 
	 21.      	 TERMS 

	 
	 21.1      	 The terms and provisions of this Agreement shall
        be interpreted in accordance with the laws of British Columbia. 

 - 9 - 

	 22.      	 FORCE MAJEURE 

	 
	 22.1      	 No party will be liable for its failure to perform
        any of its obligations under this Agreement due to a cause beyond its
        control (except those caused by its own lack of funds) including, but
        not limited to acts of God, fire, flood, explosion, strikes, lockouts
        or other industrial disturbances, laws, rules and regulations or orders
        of any duly constituted governmental authority or non- availability of
        materials or transportation (each an "Intervening Event"). 

	 
	 22.2      	 All time limits imposed by this Agreement will be
        extended by a period equivalent to the period of delay resulting from
        an Intervening Event described in Subsection 22.1 of this Agreement. 

	 
	 22.3      	 A party relying on the provisions of Subsection
        22.1 of this Agreement will take all reasonable steps to eliminate an
        Intervening Event and, if possible, will perform its obligations under
        this Agreement as far as practical, but nothing herein will require such
        party to settle or adjust any labour dispute or to question or to test
        the validity of any law, rule, regulation or order of any duly constituted
        governmental authority or to complete its obligations under this Agreement
        if an Intervening Event renders completion impossible. 

	 
	 23.      	 ENTIRE AGREEMENT 

	 
	 23.1      	 This Agreement constitutes the entire agreement
        between the parties and replaces and supersedes all prior agreements,
        memoranda, correspondence, communications, negotiations and representations.
      

	 
	 24.      	 TIME OF ESSENCE 

	 
	 24.1      	 Time will be of the essence in this Agreement. 

	 
	 25.      	 EXECUTION OF AGREEMENT 

	 
	 25.1      	 This Agreement may be signed in counterpart and
        by fax. 

	 GEOCORE EXPLORATION INC.  	 )  	 
	 	  	 )  	 
	 	  	 )  	 
	Per: 	 “Alan Finlayson”  	 )  	 
	 Name of Authorized Signatory  	 )  	 
	 	  	 	 
	 	  	 	 
	 EVOLVING GOLD CORP.  	 )  	 
	 	  	 )  	 
	 	  	 )  	 
	Per: 	 “Lawrence A. Dick”  	 )  	 
	 Name of Authorized Signatory  	 )  	 

 Schedule “A” 

  This is Schedule "A" to the Option Agreement dated May 4, 2005 between Geocore
  

  Exploration Inc., as optionor and Evolving Gold Corp., as optionee 

The Licences: 

	 Licence 
 Number 	 Registered  
 Owner 
    	 Status 	 Location  	 Original  
 No. Of  

      Claims  	 Renewal  
 Date  
	 9710M 	 Geocore  
 Exploration Inc.  	 Issued 
 (Extended 
 2004/12/22) 	 Ikadlivik  
 Brook  	 192  	 December  
 22, 2009  

 Schedule “B” 

  This is Schedule "B" to the Option and Royalty Agreement dated May 4, 2005 between

  Geocore Exploration Inc., as optionor and Evolving Gold Corp., as optionee 

 MINIMUM TERMS OF JOINT VENTURE

 The Joint Venture Agreement that will result from the terms
  of the Option and Royalty Agreement dated May 4, 2005 (the “Option
  and Royalty Agreement”) between Geocore Exploration Inc. and Evolving
  Gold Corp. will contain the following minimum terms together with such other
  terms and conditions as the respective counsel for the parties may reasonably
  request in order that the affairs of the Optionor and the Optionee (together
  the "Participants") in respect of the Licenses may be reasonably carried
  out as a joint venture operation (the “Joint Venture”): 

	 1.      	 On the date that the Optionee has exercised the
        First Option in full and acquired its 60% interest in the Licenses, the
        Optionor will hold a 40% participating interest and the Optionee will
        hold a 60% participating interest in the Joint Venture (the "Proportionate
        Interests"). 

	 
	 2.      	 Subject to Subsection 4.3(a) of the Option and Royalty
        Agreement, each Participant will have deemed to incur exploration expenditures
        under the Option and Royalty Agreement in the amount set out in the below
        table (also called the “Participant’s Initial Contribution”):
      

	 Participant  	 Participant’s Initial Contribution  
	 The Optionee  	 $500,000 (deemed)
	 The Optionor  	 $333,333 (deemed)

	 3.      	 Subject to Subsection 4.3(b) of the Option and Royalty
        Agreement, each Participant will have deemed to incur exploration expenditures
        under the Option and Royalty Agreement in the amount set out in the below
        table (also called the “Participant’s Initial Contribution”):
      

	
Participant 
		
Participant’s Initial Contribution 
	
	
The Optionee 
		
$1,333,332 (deemed) 
	
	
The Optionor 
		
$333,333 (deemed) 
	

	 4.      	 The objectives of the Joint Venture will be to further
        explore and, if feasible, to place the Licenses or some part thereof into
        commercial production. 

	 
	 5.      	 The affairs of the Joint Venture will be governed
        by the direction and control of a management committee (the "Management
        Committee") to be composed of one representative and one alternate
        from each of the Participants, with decisions of the Management Committee
        to be determined by a majority of the percentage interests in the Licenses
        as voted by the representatives, except that if there is a deadlock, the
        deciding vote will be cast by the Operator, as defined below. 

	 
	 6.      	 Any decision to place the Licenses into commercial
        production is to be based on a feasibility study approved by the Management
        Committee; 

 - 12 - 

	 7.      	 The Optionee will act as the initial operator
        (the “Operator”) of the Joint Venture, subject the budget
        and programmes which when duly approved by the parties under the Joint
        Venture shall be “Approved Programme and Budget” as
        determined by the Management Committee and the Management Committee will
        have such other powers and duties as required to carry out that function.
        If the Optionee's interest falls below 50%, then the Optionor may request
        a change of Operator. The Operator will be paid a fee as follows: 

	 
	 	 (a)     
      
	 following formation of a Joint Venture between the
        Participants but prior to the commencement of commercial production, 4%
        of all exploration expenditures except in the case of exploration expenditures
        under a single contract in excess of $100,000 in which case the fee
        will be 2% of those expenditures; and 

	 
	 	 (b)      
	 after the commencement of Commercial Production,
        3% of all development and production expenditures except in the case of
        development and production expenditures under a single contract in excess
        of $100,000 in which case the fee will be 2% of such development and
        production expenditures. 

	 
	 8.      	 The joint operations under the Joint Venture
        will commence automatically on the date as set out in Section 4.3 of the
        Option and Royalty Agreement, whether or not a formal joint venture agreement
        has been entered into. The Management Committee will hold its first joint
        venture meeting within 60 days of the relevant option exercise in Section
        .4.3 of the Option and Royalty Agreement and the parties agree to have
        a formal joint venture agreement finalized within 190 days of such exercise.
      

	 
	 9.      	 Each Participant is entitled to elect
        to participate, in proportion to its interest (“Proportionate
        Share”), in the exploration, development, and mining operation
        of the Licenses subject to the following: 

	 
	 	 (a)      
	 If a Participant elects not to contribute its share
        of costs and the other Participant elects to contribute to the shortfall
        which has been created thereby, the interests of the Participants shall
        be adjusted so that each Participant holds an interest which is proportionate
        to its contribution to the total exploration, development and mining operation
        costs. If a Participant permits its interest to be reduced to 5% or less,
        then that Participant shall be deemed to have withdrawn from the Joint
        Venture and its interest will be converted to a 0.5% Net Smelter Returns
        Royalty (“NSR Royalty”); 

	 
	 	 (b)      
	 If a Participant elects not to contribute its share
        of costs, or elects to contribute less than its agreed upon share of costs,
        and the other Participant is unwilling or unable to contribute to the
        shortfall which has been created thereby, that Participant may elect to
        continue with the programme based on its proportionate share of costs,
        and the interests of the Participants shall be adjusted so that each Participant
        holds an interest which is proportionate to its contribution to the total
        exploration costs. If a Participant permits its interest to be reduced
        to 5% or less, then that Participant shall be deemed to have withdrawn
        from the Joint Venture and its interest will be converted to a 0.5% NSR
        Royalty; and 

	 
	 	 (c)      
	 In the event that a Participant’s interest
        is converted to a 0.5% NSR Royalty as a result of Sections 9(a) or (b)
        of this joint venture agreement, such Participant shall have the right
        at any time to purchase up to 50% of such NSR Royalty (0.25%) by paying
        to the other Participant the sum of $250,000. 

 - 13 - 

	 10.      	 A Participant contributing its Proportionate
        Share of mine costs is entitled to receive, in kind, its Proportionate
        Share of any minerals produced from a mine on the property and to separately
        dispose of the same. 

	 
	 11.      	 Each Participant will have a right of
        first refusal for thirty days in respect of the other Participant wishing
        to dispose all or a part of its Proportionate Share in the Joint Venture.
      

	 
	 12.      	 If a Participant defaults in paying its
        share of expenditures related to an Approved Programme and Budget in which
        it elected to participate, the non-defaulting Participant shall apprise
        the defaulting Participant of the default whereupon the defaulting Participant
        shall have 30 days to pay the moneys owed. If, after receiving the notice
        and opportunity to cure the default of the monies remaining unpaid, the
        defaulting Participant's interest will be reduced according to the following
        formula: 

	 
	 	 Divide the sum of: 

	 
	 	 (i)     
      
	 the agreed value of the Participant's Initial Contribution;
      

	 
	 	 (ii)      
	 the total of all of the Participant's Contribution
        under the Joint Venture; and 

	 
	 	 (iii)      
	 the amount, if any, the Participant elects to contribute
        and does contribute (including such amount paid on account of default
        of another Participant) to the adopted Approved Programme and Budget;
      

	 
	 	 by the sum of (i), (ii), and (iii) for
        all Participants; and Multiply the result by 100.

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