-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EuPDJeQX9Be4BD+E5YrL1uKTOLETkLH0bJok4pvAOoH0OW9yNyc6I3qbkLCx6AxD IErB8xykXG0EqoEZxrQiqA== 0000914233-96-000149.txt : 19961118 0000914233-96-000149.hdr.sgml : 19961118 ACCESSION NUMBER: 0000914233-96-000149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LA TEKO RESOURCES LTD CENTRAL INDEX KEY: 0000357281 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 870483319 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10104 FILM NUMBER: 96663906 BUSINESS ADDRESS: STREET 1: 180 EAST 2100 SOUTH #204 CITY: SALT LAKE CITY STATE: UT ZIP: 84115 BUSINESS PHONE: 8014661402 MAIL ADDRESS: STREET 1: 180 EAST 2100 SOUTH STREET 2: STE 204 CITY: SALT LAKE CITY STATE: UT ZIP: 84115 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 Commission file number 0-10104 LA TEKO RESOURCES LTD. (Exact name of Registrant as specified in its charter) British Columbia, Canada 87-0483319 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 180 East 2100 South, #204 Salt Lake City, Utah 84115 (Address of principal executive offices) (Zip Code) (801) 466-1402 (Registrant's telephone number, including area code) N/A Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- As of November 10, 1996, the registrant had 23,432,258 shares of its common stock issued and outstanding. LA TEKO RESOURCES LTD. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10- K for the year ended December 31, 1995. The accompanying financial statements have not been examined by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management such financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. LA TEKO RESOURCES LTD. Condensed Consolidated Balance Sheets ASSETS September 30, December 31, 1996 1995 (Unaudited) (Audited) Current Assets Cash and short-term deposits $ 1,227,195 $ 2,972,278 Receivables 14,148 124,876 Inventories 6,295 6,295 Pre-paid expenses 51,552 176,541 ---------- ---------- Total current assets 1,299,190 3,279,990 Mineral properties and deferred costs 10,427,707 10,155,234 Plant and equipment 218,858 204,589 Investments 500,913 231,069 ---------- ---------- $12,446,668 $13,870,882 ========== ========== LIABILITIES Current Liabilities Accounts payable and accrued expenses $ 63,800 $ 240,441 Current portion of long-term debt 674,500 712,296 Total current liabilities 738,300 952,737 Long-term debt - 360,289 ---------- ---------- Total liabilities 738,300 1,313,026 ---------- ---------- SHAREHOLDERS' EQUITY Common capital stock, no par value; authorized 100,000,000 shares; issued: 23,426,258 and 22,876,838 shares 18,045,617 17,807,169 Deficit from operations (6,337,249) (5,249,313) ---------- ---------- 11,708,368 12,557,856 ---------- ---------- $12,446,668 $13,870,882 ========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated financial statements. LA TEKO RESOURCES LTD. Condensed Consolidated Statements of Operations (Unaudited) For the Three-Month Periods Ended September 30, 1996 1995 Sales of gold and silver $ - $ - Expenses Operating and mine maintenance costs 129,166 90,958 New prospect evaluation 3,171 - General and administrative expenses 140,412 157,084 Depreciation 14,243 15,292 Royalty and lease expenses 37,500 71,725 ---------- ---------- 324,492 335,059 ---------- ---------- Income (loss) from operations ( 324,492) ( 335,059) Other income (expense) Interest income (expense) (net) ( 283) 777 ---------- ---------- Net income (loss) before income taxes ( 324,775) ( 334,282) ---------- ---------- Income taxes ( 4,797) - ---------- ---------- Net income (loss) $( 329,572) $( 334,282) ========== ========== Income (loss) per share fully diluted $( .014) $( .015) ========== ========== Fully-diluted weighted average shares outstanding 23,418,106 22,918,892 ========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated financial statements. LA TEKO RESOURCES LTD. Condensed Consolidated Statements of Operations (Unaudited) For the Nine-Month Periods Ended September 30, 1996 1995 Sales of gold and silver $ - $ - Expenses Operating and mine maintenance costs 234,499 150,236 New prospect evaluation 42,504 - General and administrative expenses 667,167 458,393 Depreciation 41,040 38,343 Royalty and lease expenses 112,500 215,176 ---------- ---------- 1,097,710 862,148 ---------- ---------- Income (loss) from operation (1,097,710) ( 862,148) Other income (expense) Gain from sale of mineral property - 404,953 Interest income (expense) (net) 7,164 ( 57,087) Gain (loss) on sale of equipment 7,407 ( 8,112) Other expense - ( 1,872) ---------- ---------- Net income (loss) before income taxes (1,083,139) ( 524,266) ---------- ---------- Income taxes ( 4,797) - ---------- ---------- Net income (loss) $(1,087,936) $( 524,266) ========== ========== Income (loss) per share - fully diluted $( .046) $( .023) ========== ========== Fully-diluted weighted average shares outstanding 23,374,064 22,768,922 ========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated financial statements. LA TEKO RESOURCES LTD. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Nine-Month Periods Ended September 30, 1996 1995 Cash Flows From Operating Activities Net income (loss) $(1,087,936) $( 524,266) Charges (credits) to operations not affecting cash: Gain on sale of mineral property - ( 404,953) (Gain) loss on sale of equipment ( 7,407) 8,112 Adjust gold and silver inventory to fair market value - 1,872 Depreciation 41,040 38,343 Compensatory stock option expense 66,000 - ---------- ---------- ( 988,303) ( 880,892) ---------- ---------- Net changes (Increase) decrease in gold inventory - 5,109 (Increase) decrease in accounts receivable and pre-paid expenses 235,719 ( 67,175) (Decrease) increase in accounts payable and accrued expenses ( 176,642) ( 67,015) ---------- ---------- 59,077 ( 129,081) ---------- ---------- Net cash used in operating activities ( 929,226) (1,009,973) ---------- ---------- Cash Flows From Investing Activities Investment in mineral properties ( 84,436) ( 260,000) Exploration costs capitalized ( 188,037) ( 269,514) Proceeds from sale of equipment 9,800 2,500 Purchase of plant and equipment ( 57,703) ( 10,508) Cash proceeds from disposition of property - 2,500,000 Investment in corporate securities ( 269,844) - ---------- ---------- Net cash provided by (used in) investing activities ( 590,220) 1,962,478 ---------- ---------- Cash Flows From Financing Activities Short-term loans - net - 200,000 Reduction of debt ( 398,085) ( 201,784) Cash proceeds from stock issuance 172,448 991,066 Public offering costs - ( 32,113) Short-swing profits - 2,100 ---------- ---------- Net cash provided by (used in) financing activities ( 225,637) 959,269 ---------- ---------- Net increase (decrease) in cash and cash equivalents (1,745,083) 1,911,774 Cash and cash equivalents, beginning of period 2,972,278 275,364 ---------- ---------- Cash and cash equivalents, end of period $ 1,227,195 $ 2,187,138 ========== ========== Supplemental Disclosures of Cash Flow Information Cash paid during the period for interest $ 81,303 $ 101,932 Cash paid during the period for income taxes $ 4,797 $ - Supplementary Schedule of Non-cash Investing and Financing Activities Depreciation capitalized into deferred costs$ - $ 4,708 Depreciation costs in receivables $ - $ 1,363
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these consolidated financial statements. LA TEKO RESOURCES LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Share Capital Authorized - 100,000,000 shares having no par value Issued - 23,426,258 shares During the third quarter of 1996, 10,000 shares were issued as $16,000 was received on the exercise of $1.60 warrants. Options, Warrants and Convertible Securities Options Granted There were no options granted during the three-month period ended September 30, 1996 Options Outstanding at September 30, 1996 Grant Expiration Shares Date Date Price DIRECTORS 300,000 11/16/95 11/16/03 $ 1.60 100,000 3/14/96 3/14/01 $ 2.50 200,000 6/18/96 6/05/04 $ 2.41 PRIOR DIRECTORS 100,000 8/17/94 8/17/99 $ 1.60 50,000 11/16/95 6/05/97 $ 1.60 100,000 11/16/95 11/16/00 $ 1.60 EMPLOYEES 50,000 4/01/93 4/01/98 $ 2.13 50,000 4/01/93 4/01/99 $ 2.13 160,000 8/17/94 8/17/99 $ 1.60 105,000 11/16/95 11/16/00 $ 1.60 --------- 1,215,000
Exercise of all options outstanding is contingent upon the optionee's continued employment and/or association with the Company. Warrants Outstanding None LA TEKO RESOURCES LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Share Capital (Continued) Convertible Securities The Company has $674,500 debentures payable which are convertible into shares of stock at prices from $2.50 to $3.75 per share. Management has called $292,000 for payment in October 1996. It is anticipated that the remaining $382,500 will be called on December 31, 1996 for redemption in January 1997. Note 2 - Freegold Investment On July 27, 1994, La Teko entered into a unit purchase agreement with Freegold Minerals Development, Inc., respecting the acquisition of 750,000 units of Freegold at a price of $0.425 (CAN) per unit, each unit consisting of one common share of stock and one non-transferable share purchase warrant entitling the Company to purchase one additional common share of Freegold, for a period of two years exercisable at a price of $0.425 (CAN) per share during the first year and at $0.49 (CAN) during the second year. The unit purchase agreement was subject to approval of the Vancouver Stock Exchange. The initial 750,000 shares were acquired for $231,069 and during July 1996, the Company exercised its option and acquired an additional 750,000 shares of Freegold stock for $269,844. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The financial statements of the Company include the consolidated operations of its wholly-owned subsidiaries La Teko Resources, Inc., a Nevada corporation and Ryan Lode Mines, Inc., an Alaska corporation. All dollar amounts included herein respecting Management's discussion and Analysis are in U.S. dollars except where noted otherwise as Canadian dollars (CAN). FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by and information currently available to management. When used in this document, the words "anticipate," believe," "estimate," expect," and "intend" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties, and assumptions, including the risks and uncertainties noted. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, or intended. CAPITALIZED COSTS Costs of acquisition and deferred exploration expenditures associated with the Company's mineral properties are summarized as follows: 1996 1996 Capitalized Capitalized Balance Additions Additions Balance December 31, (Deletions) (Deletions) September 30, 1995 1st & 2nd Qtr 3rd Qtr 1996 RYAN LODE Acquisition cost $ 4,839,376 $ - $ - $ 4,839,376 Deferred exploration and development expenses 4,882,993 44,598 11,702 4,939,293 ---------- ---------- --------- ---------- Total Ryan Lode 9,722,369 44,598 11,702 9,778,669 ---------- ---------- --------- ---------- MARGARITA Acquisition cost 350,100 - - 350,100 Deferred exploration and development expenses 4,554 66,574 2,717 73,845 ---------- ---------- --------- ---------- Total Margarita 354,654 66,574 2,717 423,945 ---------- ---------- --------- ---------- JUNIPER Deferred exploration and development expenses 78,211 6,097 4,665 88,973 ---------- ---------- --------- ---------- Total Juniper 78,211 6,097 4,665 88,973 ---------- ---------- --------- ---------- TWIN BUTTES Acquisition cost - - 30,000 30,000 Deferred exploration and development expenses - 3,451 8,843 12,294 ---------- ---------- --------- ---------- Total Twin Buttes - 3,451 38,843 42,294 ---------- ---------- --------- ---------- DISCOVERY Acquisition cost - 15,000 - 15,000 Deferred exploration and development expenses - 1,107 18,142 19,249 ---------- ---------- --------- ---------- Total Discovery - 16,107 18,142 34,249 ---------- ---------- --------- ---------- CHANDLAR Deferred exploration and development expenses - - 406 406 ---------- ---------- --------- ---------- Total Chandlar - - 406 406 ---------- ---------- --------- ---------- LUCKY GULCH Acquisition cost - - 10,000 10,000 Deferred exploration and development expenses - - 19,735 19,735 ---------- ---------- --------- ---------- Total Lucky Gulch - - 29,735 29,735 ---------- ---------- --------- ---------- TRUE NORTH Acquisition cost - - 29,436 29,436 ---------- ---------- --------- ---------- Total True North - - 29,436 29,436 ---------- ---------- --------- ---------- Total mineral properties and deferred exploration and development expenses $10,155,234 $ 136,827 $ 135,646 $10,427,707 ========== ========== ========= ==========
RESULTS OF OPERATIONS The Company has no properties in production and has had no revenues from the sale of gold or silver in either the three or nine-month periods ended September 30, 1996 and 1995. Total operating expenses did not vary materially between the three- month periods ended September 30, 1996 and 1995. During the nine-month period ended September 30, 1996, total expenses increased approximately 27% over the same period of the preceeding fiscal year principally due to increases in operating and mine maintenance costs, general and administrative expenses and costs associated with the evaluation of new mining prospects. Total costs increased approximately $236,000 notwithstanding a $103,000 decrease in royalty and lease expenses. Royalty expenses applicable to the True North property, previously paid by La Teko, became the financial responsibility of Newmont in accordance with the June 1995 True North Joint Venture Agreement. During June 1995, the Company entered into a joint venture with Newmont Exploration Limited respecting the future development of its True North properties and received $2,500,000 as part of a series of payments to be made by Newmont to acquire a 65% interest in the True North property. After deducting its cost basis, the Company reported a $405,000 gain on the sale during the second quarter of 1995. In December 1995, the Company received an additional $1 million which increased its total 1995 gain on the Newmont transaction to $1,383,000. As indicated elsewhere in this report, the Company anticipates the receipt of an additional $2,500,000 from Newmont on or before December 31, 1996. The $1,088,000 net loss for the nine months ended September 30, 1996 was approximately double the $524,000 net loss for the same period of 1995, reflecting the $405,000 net gain from the sale of mining properties reported during the first six months of 1995. LIQUIDITY AND CAPITAL RESOURCES As a result of not having been in production since 1989, the Company has sustained current financial expenditures through the utilization of existing cash resources, principally from cash received from Newmont under the True North joint venture and proceeds from the sale of common stock. During the nine months ended September 30, 1996, the Company used net cash of $1,745,000, including $929,000 used in operations, $590,000 used in investing activities, principally for acquired mineral properties, plant and equipment, capitalized exploration costs and acquisition of corporate securities. An additional $398,000 was expended for redemption of convertible debentures while cash received from the sale of corporate stock was $172,500 resulting in net cash of $226,000 used in investing activities. As of September 30, 1996, the Company had cash and cash equivalents of $1,227,000. Based on discussions with Newmont and its express representations, the Company anticipates that it will receive an additional $2,500,000 from Newmont on or before December 31, 1996, under its agreement to acquire an undivided 65% interest in the True North property. The Company believes that the foregoing, totalling $3,727,000, will be sufficient to satisfy the Company's cash requirements for the foreseeable future. As discussed in Note 1 in NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS at September 30, 1996, the Company intends to redeem debentures for $292,000 during the last quarter of 1996 as well as $383,000 during the first quarter of 1997 for a total of $675,000. In addition, the Company expects that during the last quarter of 1996 it will expend approximately $370,000 for operating expenses and capital requirements, including deferred exploration costs. Based upon a recent review, the Company has determined to concentrate its focus respecting the Ryan Lode on placing the property into production through joint participation with another mining company in lieu of the Company placing the property into production itself. Although from time to time the Company has had preliminary discussions with companies expressing an initial interest in the Ryan Lode property, no joint development or production arrangements have been reached, and there can be no assurance that the Company will be successful in advancing this project to the initiation of production with any third party. The Company's efforts to complete a joint development and production arrangement with a third party, arrange required funding, and obtain necessary permits may delay beyond 1998 the expected commencement of production. If a joint-venture arrangement is not entered into respecting the Ryan Lode property, the Company may spend approximately $300,000 during 1997 for additional development, pre-production planning and permitting and royalty payments. Management has prepared an information package regarding the property which is being sent to companies that have previously expressed an interest in the Ryan Lode and other mining companies that appear to have the experience and financial capability to proceed to production in a timely manner. La Teko hopes to finalize its agreement with a qualified party in the first half of 1997. During 1996, the Company expended approximately $84,500 in the acquisition of new mining properties. It will continue with its efforts to acquire other property, principally in the vicinity of its existing True North, Juniper, Twin Buttes and Lucky Gulch properties, and may incur costs up to $250,000 through 1997 in investigating and acquiring additional properties. As discussed in Note 1 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, the Company has outstanding options to directors and employees for the future acquisition of 1,215,000 shares, 840,000 of which may be exercised immediately at a weighted average exercise price of $1.76 for an aggregate of $1,474,500. During 1996, nine employees and a director exercised options to acquire 107,780 shares for $172,448. It is not known whether optionees will exercise other stock options during the remainder of 1996, however, the exercise of such options would provide additional cash to the Company. If, notwithstanding its assurances, Newmont does not make its $2,500,000 True North payment due December 31, 1996, for Newmont to maintain its 65% interest in that property, the Company would substantially curtail its expenditures for operating costs, capital expenditures, the Ryan Lode project, and property acquisition, while redirecting its resources to obtain a replacement joint venture participant in the True North project or the funds required in order to continue exploration and development with a view toward placing the property into production. COMMITMENTS AND CONTINGENCIES The Company's operations are subject to certain lease and royalty obligations previously described in NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS at December 31, 1995. In addition, the Company may in the future be exposed to contingencies relating to environmental and other compliance (see annual report on Form 10-K for the year ended December 31, 1995, Items I and II: Business and Properties). PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company reported third quarter results of the La Teko/ Newmont True North joint venture property 14 miles northeast of Fairbanks. Results from highly successful drilling and trenching completed through the end of the quarter are shown in the attached charts. The drilling included Hindenburg and Shepard ore zone "step-out" drilling, "new target" drilling and "twin" drilling of existing core and reverse-circulation holes. The work in the Central zone (between the Hindenburg and Shepard ore zones) extends the known mineralization across an 800 by 400 foot area. Additional drilling in the fourth quarter of the year will target areas easily accessible after ground freezing. Drilling in a new area, east of the Central zone, outlined a new target known as the Chomco zone. Initial drilling identified this to be a 1,000 by 400 foot mineralized zone and additional drilling will be conducted to define how this zone connects with the Central and Hindenburg zones. New trenching was conducted in the two newest anomalies, reported in the September 11, 1996 news release. This latest trenching expanded one of the anomalies to a current measurement of 2,400 by 600 feet. The True North property consists of over 6,000 acres (approximately 10 square miles) of which La Teko and Newmont have drilled less than 10% to date. The aggressive 1996 exploration program will continue into early winter and additional results will be forthcoming. SELECTED 1996 DRILL HOLES AND TRENCHES, TRUE NORTH PROJECT SELECTED 1996 DRILL HOLES AND TRENCHES TRUE NORTH PROJECT DRILL HOLES - ---------------------------------------------------- INTERVAL HOLE ------------------- GRADE NO. AZIMUTH DIP FROM TO THICKNESS OPT. - ---------------------------------------------------- 377 -90 52 92 40 0.085 378 315 -70 9 43 34 0.135 54 75 0.012 95 120 0.016 380 -90 106. 241 134.5 0.087 5 383 225 -70 15 24 9 0.054 42.5 56 13.5 0.191 384 225 -70 19 32 13 0.044 42.3 55 12.7 0.456 385 225 -70 2.7 9.6 6.9 0.207 22.1 28.1 6 0.212 83 100 17 0.021 386 -90 0 53.5 53.5 0.101 404 315 -70 155 185 30 0.020 225 235 10 0.053 414 -90 40 65 25 0.043 125 135 10 0.022 155 175 20 0.076 415 315 -70 170 200 30 0.087 416 -90 190 200 10 0.020 210 250 40 0.089 419 -90 0 10 10 0.012 20 50 30 0.064 440 315 -70 150 185 35 0.062 150 185 35 0.062 225 235 10 0.025 320 330 10 0.061 442 315 -70 60 75 15 0.053 85 90 5 0.120 110 180 70 0.137 TRENCHES - ---------------------------------------------------- INTERVAL ------------------- NO. LENGTH AZ FROM TO LENGTH GRADE - --------------------------------------------------- STR1 170 349 0 20 20 0.02 STR2 130 350 0 10 10 0.047 TNT43 285 90 145 165 20 0.044 205 240 35 0.034 TNT44 385 268 65 125 60 0.017 135 150 15 0.021 170 180 10 0.020 250 275 25 0.015 TNT45 355 60 95 125 30 0.053 185 285 100 0.046 TNT47 734 311 0 15 15 0.015 240 245 5 0.298 295 325 30 0.029 690 700 10 0.031 TNT48 180 180 10 50 40 0.020 TNT49 750 135 155 210 55 0.041 270 285 15 0.020 565 575 10 0.037 TNT51 90 315 30 50 20 0.019 60 85 25 0.012
HOLES WITH GRADE TIMES THICKNESS OF 2.0 OR GREATER, NO RESTRICTION ON TRENCHES The data contained in the above charts has been selected from a larger number of drill hole and trench samples and reports the results of only those samples having a grade times thickness of 2.0 or greater. A determination of the existence of ore reserves and economic feasibility can only be made from data obtained from more closely spaced sampling that establishes sufficient size, shape, and grade of the mineralization to support the conclusion that it can be economically mined. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS The following exhibits are included as part of this report: SEC EXHIBIT REFERENCE NUMBER NUMBER TITLE OF DOCUMENT LOCATION 10.01 10 Form of Non-Qualified Stock Option This Filing granted to Robert W. Gentry dated March 14, 1996, at an exercise price of US $2.50 10.02 10 Form of Non-Qualified Stock Option This Filing granted to John Auston and Douglas Beaumont dated June 5, 1996, at an exercise price of US $3.30 10.02 10 Form of Option Amendment Agreement This Filing between La Teko Resources Ltd., and Gordon Fretwell, John Hardesty and Robert Gentry dated July 22, 1996, at an exercise price of US $1.50 10.03 10 Form of Non-Qualified Stock Option This Filing granted to Gordon Fretwell dated November 16, 1996, at an exercise price of US $1.60 10.04 10 Exploration Agreement and Option to This Filing Lease between La Teko Resources, Inc., and University of Alaska, effective June 1, 1996, including form of Mining Lease and Agreement (b) 8-K Reports - No reports were filed on Form 8-K during the quarter ended September 30, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LA TEKO RESOURCES LTD. Dated: November 7, 1996 By: /s/ Robert W. Gentry, President and Chief Financial Officer EX-10 2 NON-QUALIFIED STOCK OPTION It is important that you retain this document. This original Non-Qualified Stock Option must be delivered to the Company on exercise or transfer of the option. THIS NON-QUALIFIED STOCK OPTION (this "Option") is granted effective the 14th day of March, 1996 by LA TEKO RESOURCES LTD. a British Columbia, Canada corporation (the "Company") to Robert W. Gentry ("Optionee"). 1. Grant of Option. The Company hereby irrevocably grants to Optionee the right and option to purchase all or any part of an aggregate of 100,000 shares (the "Shares") of common stock, having no par value per share, of the Company (the "Common Stock") on the terms and conditions hereinafter set forth. This option shall be immediately exercisable to purchase 100,000 Shares. The Company warrants that the Optionee is a bona fide employee of the Company, subsidiary or management company providing services to the Company or subsidiary (other than investor relations). While the Company is listed on the Vancouver Stock Exchange, the Optionee warrants that he shall not, upon execution hereof, concurrently have stock options with more than 15 Vancouver Stock Exchange listed companies, nor shall any such options exceed 5% of the issued shares of the granting company. In the event that the Company is listed on the Vancouver Stock Exchange, the Company has not adopted a formal stock option plan and the incentive of stock options granted by the Company exceed 10% of the issued shares of the Company, then the Optionee hereby shall be reduced proportionately to other Company granted incentive stock options in order that the aforesaid Company options do not exceed 10% of the Company's issued share capital. 2. Exercise Price. The exercise price of this Option shall be $2.50 per share of Common Stock (the "Exercise Price"). 3. Term of Option. Subject to the other provisions of this Option, this Option may be exercised, in whole or in part, at any time or from time to time on or before 5:00 p.m., Mountain Time on March 14, 2001 . 4. Shareholder's Rights. The Optionee shall have the rights of a shareholder only with respect to Shares fully paid for by Optionee under this Option. 5. Adjustment of Exercise Price and Number of Shares. a) The number of Shares purchasable on the exercise of this Option and the Exercise Price shall be adjusted appropriately from time to time as follows: i) In the event the Company shall declare dividend or make any other distribution on any capital stock of the Company payable in Common Stock, rights to purchase Common Stock, or securities convertible into Common Stock or shall subdivide its outstanding shares of Common Stock into a greater number of shares or combine such outstanding stock into a smaller number of shares, then in each such event, the number of Shares subject to this Option shall be adjusted so that the holder shall be entitled to purchase the kind and number of Shares of Common Stock or other securities of the Company which it would have owned or have been entitled to receive after the happening of any of the events described above, had such Option been exercised immediately prior to the happening of such event or any record date with respect thereto; an adjustment made pursuant to this paragraph a) shall become effective immediately after the effective date of such event retroactive to the record date for such event. ii) No adjustment in the number of Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least 1% in the number of Shares purchasable on the exercise of this Option; provided, however, that any adjustments which by reason of this paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. iii)Whenever the number of Shares purchasable on the exercise of this Option is adjusted, as herein provided, the Exercise Price payable on exercise shall be adjusted by multiplying the Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Shares purchasable on the exercise of this Option immediately prior to such adjustment and the denominator of which shall be the number of Shares so purchasable immediately thereafter. iv) Whenever the number of Shares purchasable on the exercise of this Option or the Exercise Price of such Shares are adjusted, as herein provided, the Company shall cause to be promptly mailed by first class mail, postage prepaid, to the Optionee of this Option notice of such adjustment or adjustments and shall deliver a resolution of the board of directors of the Company setting forth the number of Shares purchasable on the exercise of this Option and the Exercise Price of such Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment, together with the computation by which such adjustment was made. Such resolution, in the absence of manifest error, shall be conclusive evidence of the correctness of adjustment. v) All such adjustments shall be made by the board of directors of the Company, which shall be binding on the Optionee in the absence of demonstrable error. b) No adjustments shall be made in connection with: i) the issuance of any Shares on the exercise of this Option; ii) the conversion of shares of preferred stock; iii)the exercise or conversion of any rights, options, warrants, or convertible securities containing the right to purchase or acquire Common Stock; iv) the issuance of additional Shares or other securities on account of the anti-dilution provisions contained in or relating to this Option or any other option, warrant, or right to acquire Common Stock; v) the purchase or other acquisition by the Company of any shares of Common Stock, evidences of its indebtedness or assets, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase Common Stock; or vi) the sale or issuance by the Company of any shares of Common Stock, evidences of its indebtedness or assets, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase Common Stock or other securities pursuant to options, warrants, or other rights to acquire Common Stock or other securities. 6. Notice of Certain Events. In the event of: a) any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividends or other distribution, or any right to subscribe for, purchase, or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other rights; b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, or any transfer of all or substantially all of the assets of the Company to any other person, or any consolidation, share exchange, or merger involving the Company; or c) any voluntary or involuntary dissolution, liquidation, or winding up of the Company, the Company will mail to the Optionee(s) of this Option, at least 20 days prior to the earliest date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, or right; the amount and character of such dividend, distribution, or right, or the date on which any such reorganization, reclassification, transfer, consolidation, share exchange, merger, dissolution, liquidation, or winding up of the Company will occur and the terms and conditions of such transaction or event. 7. Method of Exercise. This Option may be exercised, in accordance with all of the terms and conditions set forth in this Option, by delivery of this Option together with a notice of exercise, a form of which is attached hereto as Exhibit "A" and incorporated herein by this reference, indicating the number of Shares which the Optionee then elects to purchase and making payment in full for the Shares in cash. Optionee shall include with the notice of exercise a certified or official bank check payable to the order of the Company in the amount of the full option price of the Shares being purchased for cash. As soon as practicable after receipt by the Company of such notice and of payment in full of the option price of all the Shares of Common Stock with respect to which the Option has been exercised, a certificate or certificates representing such Shares of Common Stock shall be issued in the name of the Optionee, or, if the Optionee shall so request in the notice exercising the Option, in the name of the Optionee and another person jointly, with right of survivorship, and shall be delivered to the Optionee. To the extent required by the terms of this Option, all Common Stock shall be issued only upon receipt by the Company of the Optionee's representation that the shares are purchased for investment and not with a view to distribution thereof. If this Option is not exercised with respect to all Shares subject hereto, Optionee shall be entitled to receive a similar Option of like tenor covering the number of Shares with respect to which this Option shall not have been exercised. 8. Availability of Common Stock. During the term of this Option, the Company shall at all times keep available the number of Shares of Common Stock required to satisfy the Option. 9. Limitation on Exercise. If the board of directors of the Company, in its sole discretion, shall determine that it is necessary or desirable to list, register, or qualify the Common Stock under any state or federal law, this Option may not be exercised, in whole or part, until such listing, registration, or qualification shall have been obtained free of any conditions not acceptable to the board of directors. If an officer or director, the Optionee shall not exercise the Option until such time as the shareholders of the Company have approved the granting of the Option by the Company and the exercise of the Option by the Optionee. 10. Restrictions on Transfer. The Option and the Shares subject to the Option (collectively referred to as the "Securities") are subject to registration under the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities statutes. Optionee acknowledges that unless a registration statement with respect to the Securities is filed and declared effective by the Securities and Exchange Commission and the appropriate state governing agency, the Securities have or will be issued in reliance on specific exemptions from such registration requirements for transactions by an issuer not involving a public offering and specific exemptions under state statutes. Any disposition of the Securities may, under certain circumstances, be inconsistent with such exemptions. The Securities may be offered for sale, sold, or otherwise transferred only if i) registered under the Securities Act, and in some cases, under the applicable state securities acts, or, if not registered, ii) only if pursuant to an exemption from such registration requirements and only after the Optionee provides an opinion of counsel or other evidence satisfactory to the Company to the effect that registration is not required. In some states, specific conditions must be met or approval of the securities regulatory authorities may be required before any such offer or sale. The Company is under no obligation to register the Securities with the Securities and Exchange Commission or any state agency. If rule 144 is available (and no assurance is given that it will be), only routine sales of the Common Stock in limited amounts can be made after one year following the acquisition date of the Securities, as determined under rule 144(d), in accordance with the terms and conditions of rule 144. The Company is under no obligation to make rule 144 available. In the event rule 144 is not available, compliance with regulation A or some other disclosure exemption may be required before the Optionee can sell, transfer, or otherwise dispose of the Securities without registration. The Company and its registrar and transfer agent will maintain a stop transfer order against the transfer of the Securities, and this Option and any other certificate or agreement representing the Securities is subject to the following legend: THE SECURITIES REPRESENTED BY THIS OPTION, AGREEMENT, OR CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT. The Company may refuse to transfer the Securities to any transferee who does not furnish in writing to the Company the same representations and warranties set forth in this paragraph and agree to the same conditions with respect to such Securities as are set forth herein. The Company may further refuse to transfer the Securities if certain circumstances are present reasonably indicating that the proposed transferee's representations are not accurate. In any event, the Company may refuse to consent to any transfer in the absence of an opinion of legal counsel, satisfactory to and independent of counsel of the Company, that such proposed transfer is consistent with the above conditions and applicable securities laws. 11. Registration. The Company will utilize its best efforts to file and maintain the effectiveness of a registration statement on form S-8 with the Securities and Exchange Commission covering the issuance of the Shares issuable on exercise of this option and to maintain the effectiveness of such registration statement or a subsequent registration statement or other qualification in order to permit the exercise of this Option as set forth herein, although, there is no guaranty that such registration statement will be effective when the Option is exercised. If no registration statement is effective on the date of exercise of this Option, the Shares will not be issued unless and until there is available to the Company evidence, including representations from the Optionee, that such Shares are being acquired for investment and not for resale, on which the Company may reasonably rely as to the availability of an exemption from registration in issuing such Shares. 12. Assignment of Option. This Agreement shall not be assignable by the Optionee or his legal representative otherwise than by Will or the law of intestacy and the Option may be exercised, during his or her lifetime, only by the Optionee. If the Optionee dies on or prior to the Expiry Date while an officer or director of the Company, the Option, or such part thereof as remains unexercised, may be exercised by the legal representative of the Optionee at any time up to and including (but not after) the date one (1) year following the date of death of the Optionee or prior to the close of business on the Expiry Date, whichever is earlier. If the Optionee ceases to be an employee of the Company prior to the Expiry Date, the Option shall, on the earlier of the Expiry Date or thirty (30) days from the date the Optionee ceases to be an employee of the Company, terminate and be of no further force or effect whatsoever as to such of the Optioned Shares in respect to which the Option has not been exercised. 13. Amendments. If at any time during the continuance of this Agreement, the parties deem it necessary or expedient to amend, alter or add to this Agreement, they may do so by means of written agreement between them which shall supplement and form part of this Agreement. 14. Withholdings. If the grant or exercise of this Option is subject to withholding or other trust fund payment requirements of the U.S. Internal Revenue Code or applicable Canadian or U.S. Province, state or local laws, such requirements may, to the extent permitted by the then governing provisions of the Code, be met by the holder of such Option delivering shares of common stock or canceling options or other rights to acquire common stock or by the withholding shares of common stock subject to such Option, all with a fair market value equal to such requirements. To the extent that the holder of this Option is subject to the provisions of section 16(b) of the U.S. Securities Exchange Act of 1934, as amended, payment of the withholding and other trust funds requirements of the foregoing methods shall be subject to the transaction qualifying for an exemption from the provisions of section 16(b) under rule 16b- 3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, or an amendment or successor rule of like tenor. 15. Approval. The terms of this Agreement and any amendments are subject to approval by the regulatory authorities having jurisdiction over the affairs of the Company and, if the Optionee is an insider of the Company within the meaning of the Securities Act, by the shareholders of the Company IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the day and year first written above. LA TEKO RESOURCES LTD. By/s/ Gordon Fretwell Director, Secretary Signed, Sealed and Delivered ) by ) in the presence of: ) ) ) /s/ Witness ) /s/ Robert W. Gentry Signature of Witness ) ) ) Name (print) ) ) ) Address ) ) ) Occupation ) EXHIBIT A FORM OF EXERCISE (TO BE SIGNED ONLY UPON EXERCISE OF OPTION) TO: LA TEKO RESOURCES LTD. The undersigned, the owner of the attached Option, hereby irrevocably elects to exercise the purchase rights represented by the Option for, and to purchase thereunder, shares of Common Stock of La Teko Resources Ltd. Enclosed is payment in the amount of $ , the exercise price of the Common Stock to be acquired, in the form of (insert description of manner of payment) Please have the certificate(s) registered in the name of , Social Security No. and delivered to the following address: If this exercise does not include all of the Common Stock covered by the attached Option, please deliver a new option of like tenor for the balance of the Common Stock to the undersigned at the foregoing address. DATED this day of , 199 . Signature of Optionee (Signature must be guaranteed by a bank or securities broker-dealer) Signature Guarantee: EX-10 3 NON-QUALIFIED STOCK OPTION It is important that you retain this document. This original Non-Qualified Stock Option must be delivered to the Company on exercise or transfer of the option. THIS NON-QUALIFIED STOCK OPTION (this "Option") is granted effective the 5th day of June, 1996 by LA TEKO RESOURCES LTD. a British Columbia, Canada corporation (the "Company") to [name of Optionee] ("Optionee"). 1. Grant of Option (a) The Company hereby irrevocably grants to Optionee the right and option to purchase all or any part of an aggregate of 100,000 shares (the "Shares") of common stock, having no par value per share, of the Company (the "Common Stock") on the terms and conditions hereinafter set forth. The options are subject to Paragraph 1(b), exercisable in increments of 25,000 Shares each over the following terms: Shares Term 25,000 Shares 06/05/1996 - 06/05/2001 25,000 Shares 06/05/1997 - 06/05/2002 25,000 Shares 06/05/1998 - 06/05/2003 25,000 Shares 06/05/1999 - 06/05/2004 (b) In the event that the Company is subject to a merger, acquisition or other similar corporate transaction, the Optionee's 100,000-share option will be exercisable as to 50,000 shares if such transaction is consummated during the first term the Optionee participates as a director of the Company and the balance, aggregating the full 100,000 shares, will be exercisable if the consummation of such transaction were to occur after the first term that a director served in such capacity. For the purposes of this Agreement, the term "expiry Date" shall be the date which is the last day of the the latest term referred to in paragraph 1(a) above. 2. Exercise Price. The exercise price of this Option shall be CDN. $3.30 per share of (USD $2.45) Common Stock (the "Exercise Price"). 3. Term of Option. Subject to the other provisions of this Option, this Option may be exercised, in whole or in part, at any time or from time to time on or before 5:00 p.m., Mountain Time on the dates indicated under Grant of Option in Item 1 above. 4. Shareholder's Rights. The Optionee shall have the rights of a shareholder only with respect to Shares fully paid for by Optionee under this Option. 5. Adjustment of Exercise Price and Number of Shares. a) The number of Shares purchasable on the exercise of this Option and the Exercise Price shall be adjusted appropriately from time to time as follows: i) In the event the Company shall declare dividend or make any other distribution on any capital stock of the Company payable in Common Stock, rights to purchase Common Stock, or securities convertible into Common Stock or shall subdivide its outstanding shares of Common Stock into a greater number of shares or combine such outstanding stock into a smaller number of shares, then in each such event, the number of Shares subject to this Option shall be adjusted so that the holder shall be entitled to purchase the kind and number of Shares of Common Stock or other securities of the Company which it would have owned or have been entitled to receive after the happening of any of the events described above, had such Option been exercised immediately prior to the happening of such event or any record date with respect thereto; an adjustment made pursuant to this paragraph a) shall become effective immediately after the effective date of such event retroactive to the record date for such event. ii) No adjustment in the number of Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least 1% in the number of Shares purchasable on the exercise of this Option; provided, however, that any adjustments which by reason of this paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. iii)Whenever the number of Shares purchasable on the exercise of this Option is adjusted, as herein provided, the Exercise Price payable on exercise shall be adjusted by multiplying the Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Shares purchasable on the exercise of this Option immediately prior to such adjustment and the denominator of which shall be the number of Shares so purchasable immediately thereafter. iv) Whenever the number of Shares purchasable on the exercise of this Option or the Exercise Price of such Shares are adjusted, as herein provided, the Company shall cause to be promptly mailed by first class mail, postage prepaid, to the Optionee of this Option notice of such adjustment or adjustments and shall deliver a resolution of the board of directors of the Company setting forth the number of Shares purchasable on the exercise of this Option and the Exercise Price of such Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment, together with the computation by which such adjustment was made. Such resolution, in the absence of manifest error, shall be conclusive evidence of the correctness of adjustment. v) All such adjustments shall be made by the board of directors of the Company, which shall be binding on the Optionee in the absence of demonstrable error. b) No adjustments shall be made in connection with: i) the issuance of any Shares on the exercise of this Option; ii) the conversion of shares of preferred stock; iii)the exercise or conversion of any rights, options, warrants, or convertible securities containing the right to purchase or acquire Common Stock; iv) the issuance of additional Shares or other securities on account of the anti-dilution provisions contained in or relating to this Option or any other option, warrant, or right to acquire Common Stock; v) the purchase or other acquisition by the Company of any shares of Common Stock, evidences of its indebtedness or assets, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase Common Stock; or vi) the sale or issuance by the Company of any shares of Common Stock, evidences of its indebtedness or assets, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase Common Stock or other securities pursuant to options, warrants, or other rights to acquire Common Stock or other securities. 6. Notice of Certain Events. In the event of: a) any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividends or other distribution, or any right to subscribe for, purchase, or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other rights; b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, or any transfer of all or substantially all of the assets of the Company to any other person, or any consolidation, share exchange, or merger involving the Company; or c) any voluntary or involuntary dissolution, liquidation, or winding up of the Company, the Company will mail to the Optionee(s) of this Option, at least 20 days prior to the earliest date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, or right; the amount and character of such dividend, distribution, or right, or the date on which any such reorganization, reclassification, transfer, consolidation, share exchange, merger, dissolution, liquidation, or winding up of the Company will occur and the terms and conditions of such transaction or event. 7. Method of Exercise. This Option may be exercised, in accordance with all of the terms and conditions set forth in this Option, by delivery of this Option together with a notice of exercise, a form of which is attached hereto as Exhibit "A" and incorporated herein by this reference, indicating the number of Shares which the Optionee then elects to purchase and making payment in full for the Shares in cash. Optionee shall include with the notice of exercise a certified or official bank check payable to the order of the Company in the amount of the full option price of the Shares being purchased for cash. As soon as practicable after receipt by the Company of such notice and of payment in full of the option price of all the Shares of Common Stock with respect to which the Option has been exercised, a certificate or certificates representing such Shares of Common Stock shall be issued in the name of the Optionee, or, if the Optionee shall so request in the notice exercising the Option, in the name of the Optionee and another person jointly, with right of survivorship, and shall be delivered to the Optionee. To the extent required by the terms of this Option, all Common Stock shall be issued only upon receipt by the Company of the Optionee's representation that the shares are purchased for investment and not with a view to distribution thereof. If this Option is not exercised with respect to all Shares subject hereto, Optionee shall be entitled to receive a similar Option of like tenor covering the number of Shares with respect to which this Option shall not have been exercised. 8. Availability of Common Stock. During the term of this Option, the Company shall at all times keep available the number of Shares of Common Stock required to satisfy the Option. 9. Limitation on Exercise. If the board of directors of the Company, in its sole discretion, shall determine that it is necessary or desirable to list, register, or qualify the Common Stock under any state or federal law, this Option may not be exercised, in whole or part, until such listing, registration, or qualification shall have been obtained free of any conditions not acceptable to the board of directors. If an officer or director, the Optionee shall not exercise the Option until such time as the shareholders of the Company have approved the granting of the Option by the Company and the exercise of the Option by the Optionee. 10. Restrictions on Transfer. The Option and the Shares subject to the Option (collectively referred to as the "Securities") are subject to registration under the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities statutes. Optionee acknowledges that unless a registration statement with respect to the Securities is filed and declared effective by the Securities and Exchange Commission and the appropriate state governing agency, the Securities have or will be issued in reliance on specific exemptions from such registration requirements for transactions by an issuer not involving a public offering and specific exemptions under state statutes. Any disposition of the Securities may, under certain circumstances, be inconsistent with such exemptions. The Securities may be offered for sale, sold, or otherwise transferred only if i) registered under the Securities Act, and in some cases, under the applicable state securities acts, or, if not registered, ii) only if pursuant to an exemption from such registration requirements and only after the Optionee provides an opinion of counsel or other evidence satisfactory to the Company to the effect that registration is not required. In some states, specific conditions must be met or approval of the securities regulatory authorities may be required before any such offer or sale. The Company is under no obligation to register the Securities with the Securities and Exchange Commission or any state agency. If rule 144 is available (and no assurance is given that it will be), only routine sales of the Common Stock in limited amounts can be made after one year following the acquisition date of the Securities, as determined under rule 144(d), in accordance with the terms and conditions of rule 144. The Company is under no obligation to make rule 144 available. In the event rule 144 is not available, compliance with regulation A or some other disclosure exemption may be required before the Optionee can sell, transfer, or otherwise dispose of the Securities without registration. The Company and its registrar and transfer agent will maintain a stop transfer order against the transfer of the Securities, and this Option and any other certificate or agreement representing the Securities is subject to the following legend: THE SECURITIES REPRESENTED BY THIS OPTION, AGREEMENT, OR CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT. The Company may refuse to transfer the Securities to any transferee who does not furnish in writing to the Company the same representations and warranties set forth in this paragraph and agree to the same conditions with respect to such Securities as are set forth herein. The Company may further refuse to transfer the Securities if certain circumstances are present reasonably indicating that the proposed transferee's representations are not accurate. In any event, the Company may refuse to consent to any transfer in the absence of an opinion of legal counsel, satisfactory to and independent of counsel of the Company, that such proposed transfer is consistent with the above conditions and applicable securities laws. 11. Registration. The Company will utilize its best efforts to file and maintain the effectiveness of a registration statement on form S-8 with the Securities and Exchange Commission covering the issuance of the Shares issuable on exercise of this option and to maintain the effectiveness of such registration statement or a subsequent registration statement or other qualification in order to permit the exercise of this Option as set forth herein, although, there is no guaranty that such registration statement will be effective when the Option is exercised. If no registration statement is effective on the date of exercise of this Option, the Shares will not be issued unless and until there is available to the Company evidence, including representations from the Optionee, that such Shares are being acquired for investment and not for resale, on which the Company may reasonably rely as to the availability of an exemption from registration in issuing such Shares. 12. Assignment of Option. This Agreement shall not be assignable by the Optionee or his legal representative otherwise than by Will or the law of intestacy and the Option may be exercised, during his or her lifetime, only by the Optionee. If the Optionee dies on or prior to the Expiry Date while an officer or director of the Company, the Option, or such part thereof as remains unexercised, may be exercised by the legal representative of the Optionee at any time up to and including (but not after) the date one (1) year following the date of death of the Optionee or prior to the close of business on the Expiry Date, whichever is earlier. If the Optionee ceases to be an employee of the Company prior to the Expiry Date, the Option shall, on the earlier of the Expiry Date or thirty (30) days from the date the Optionee ceases to be an employee of the Company, terminate and be of no further force or effect whatsoever as to such of the Optioned Shares in respect to which the Option has not been exercised. 13. Amendments. If at any time during the continuance of this Agreement, the parties deem it necessary or expedient to amend, alter or add to this Agreement, they may do so by means of written agreement between them which shall supplement and form part of this Agreement. 14. Withholdings. If the grant or exercise of this Option is subject to withholding or other trust fund payment requirements of the U.S. Internal Revenue Code or applicable Canadian or U.S. Province, state or local laws, such requirements may, to the extent permitted by the then governing provisions of the Code, be met by the holder of such Option delivering shares of common stock or canceling options or other rights to acquire common stock or by the withholding shares of common stock subject to such Option, all with a fair market value equal to such requirements. To the extent that the holder of this Option is subject to the provisions of section 16(b) of the U.S. Securities Exchange Act of 1934, as amended, payment of the withholding and other trust funds requirements of the foregoing methods shall be subject to the transaction qualifying for an exemption from the provisions of section 16(b) under rule 16b- 3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, or an amendment or successor rule of like tenor. 15. Approval. The terms of this Agreement and any amendments are subject to approval by the regulatory authorities having jurisdiction over the affairs of the Company and, if the Optionee is an insider of the Company within the meaning of the Securities Act, by the shareholders of the Company IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the day and year first written above. LA TEKO RESOURCES LTD. By /s/ Robert W. Gentry, President Signed, Sealed and Delivered ) by ) in the presence of: ) ) ) /s/ Witness ) /s/ [Optionee] Signature of Witness ) ) EXHIBIT A FORM OF EXERCISE (TO BE SIGNED ONLY UPON EXERCISE OF OPTION) TO: LA TEKO RESOURCES LTD. The undersigned, the owner of the attached Option, hereby irrevocably elects to exercise the purchase rights represented by the Option for, and to purchase thereunder, shares of Common Stock of La Teko Resources Ltd. Enclosed is payment in the amount of $ , the exercise price of the Common Stock to be acquired, in the form of (insert description of manner of payment) Please have the certificate(s) registered in the name of , Social Security No. and delivered to the following address: If this exercise does not include all of the Common Stock covered by the attached Option, please deliver a new option of like tenor for the balance of the Common Stock to the undersigned at the foregoing address. DATED this day of , 199 . Signature of Optionee (Signature must be guaranteed by a bank or securities broker-dealer) Signature Guarantee: EX-10 4 FORM OF STOCK OPTION AMENDMENT AGREEMENT THIS AGREEMENT made as of the 22nd day of July, 1996. BETWEEN: [OPTIONEE NAME AND ADDRESS](hereinafter called the "Optionee") OF THE FIRST PART AND: LA TEKO RESOURCES LTD., a company duly incorporated under the laws of the Province of British Columbia and having a registered office at Suite 800, 889 West Pender Street, Vancouver, British Columbia V6C 3B2 (hereinafter called the "Company") OF THE SECOND PART WHEREAS: A. The Optionee and the Company entered into a stock option agreement effective the 16th day of November, 1995 (the "Stock Option Agreement") whereby the Company granted to the Optionee an option to purchase 100,000 shares of the Company (the "Option"). B. The Company and the Optionee wish to amend the Stock Option Agreement to provide for the proper exercise price of US$1.60 for all of the options that vest in future years and to amend the number of stock options that immediately vest with the Optionee in the event of certain corporate transactions. NOW THEREFORE in consideration of the sum of $1 (One Dollar) paid by each of the Optionee and the Company to each other (the receipt and sufficiency of which is hereby acknowledged), the Optionee and the Company hereby agree as follows: 1. Section 1 of the Stock Option Agreement is deleted and the following is substituted in place thereof: "1. Grant of Option (a) The Company hereby irrevocably grants to Optionee the right and option to purchase all of or any part of an aggregate of 100,000 shares (the "Shares") of common stock, having no par value per share, of the Company (the "Common Stock") on the terms and conditions hereinafter set forth. The options are, subject to Paragraph 1(b), exercisable in increments of 25,000 Shares each over the following terms: Shares Term 25,000 Shares 11/16/1995 - 11/16/2000 25,000 Shares 11/16/1996 - 11/16/2001 25,000 Shares 11/16/1997 - 11/16/2002 25,000 Shares 11/16/1998 - 11/16/2003 (b) In the event that the Company is subject to a merger, acquisition or other similar corporate transaction, the Optionee's 100,000-share option will be exercisable as to 50,000 shares if such transaction is consummated during the first term the Optionee participates as a director of the Company and the balance, aggregating the full 100,000 shares, will be exercisable if the consummation of such transaction were to occur after the first term that a director served in such capacity. For the purposes of this Agreement, the term "Expiry Date" shall be the date which is the last day of the latest term referred to in paragraph 1(a) above." 2. Section 2 of the Stock Option Agreement is deleted and the following is substituted in place thereof: "2. Exercise Price The exercise price of this Option shall be US$1.60 per share of Common Stock (the "Exercise Price")." 3. The second paragraph of Section 9 is amended by deleting the last nine workds "...and the exercise of the Option by the Purchaser." 4. The second paragraph of Section 12 is amended by adding the words "... or director..." after the word employee in lines one and three. 5. The terms of this Agreement are subject to regulatory approval. IN WITNESS WHEREOF the parties hereto have executed these presents as of the date and year first above written. LA TEKO RESOURCES LTD. Per: /s/ Gordon J. Fretwell Authorized Signature SIGNED, SEALED AND DELIVERED ) by [OPTIONEE] in the ) presence of: ) ) /s/ Witness ) /s/ [Optionee] ) [Address] ) ) [Occupation] ) EX-10 5 NON-QUALIFIED STOCK OPTION It is important that you retain this document. This original Non-Qualified Stock Option must be delivered to the Company on exercise or transfer of the option. THIS NON-QUALIFIED STOCK OPTION (this "Option") is granted effective the 16th day of November, 1995, by LA TEKO RESOURCES LTD. a British Columbia, Canada corporation (the "Company") to Gordon Fretwell ("Optionee"). 1. Grant of Option. The Company hereby irrevocably grants to Optionee the right and option to purchase all or any part of an aggregate of 100,000 shares (the "Shares") of common stock, having no par value per share, of the Company (the "Common Stock") on the terms and conditions hereinafter set forth. The options are exercisable in increments of 25,000 Shares each over the following terms: Shares Term 25,000 Shares 11/16/1995 - 11/16/2000 25,000 Shares 11/16/1996 - 11/16/2001 25,000 Shares 11/16/1997 - 11/16/2002 25,000 Shares 11/16/1998 - 11/16/2003 2. Exercise Price. The exercise price of this Option shall be $1.60 per share of Common Stock (the "Exercise Price") for the first 25,000 Shares listed in Item 1 above. The Exercise Price of the succeeding 25,000-Share option increments shall be the closing market price on each of the November 16, 1996, 1997 and 1998 dates less the applicable discount authorized by the Vancouver Stock Exchange as authorized in the Listings Policy Statement of the Vancouver Stock Exchange as of said dates. 3. Term of Option. Subject to the other provisions of this Option, this Option may be exercised, in whole or in part, at any time or from time to time on or before 5:00 p.m., Mountain Time on the dates indicated under Grant of Option in Item 1 above. 4. Shareholder's Rights. The Optionee shall have the rights of a shareholder only with respect to Shares fully paid for by Optionee under this Option. 5. Adjustment of Exercise Price and Number of Shares. a)The number of Shares purchasable on the exercise of this Option and the Exercise Price shall be adjusted appropriately from time to time as follows: i) In the event the Company shall declare dividend or make any other distribution on any capital stock of the Company payable in Common Stock, rights to purchase Common Stock, or securities convertible into Common Stock or shall subdivide its outstanding shares of Common Stock into a greater number of shares or combine such outstanding stock into a smaller number of shares, then in each such event, the number of Shares subject to this Option shall be adjusted so that the holder shall be entitled to purchase the kind and number of Shares of Common Stock or other securities of the Company which it would have owned or have been entitled to receive after the happening of any of the events described above, had such Option been exercised immediately prior to the happening of such event or any record date with respect thereto; an adjustment made pursuant to this paragraph a) shall become effective immediately after the effective date of such event retroactive to the record date for such event. ii)No adjustment in the number of Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least 1% in the number of Shares purchasable on the exercise of this Option; provided, however, that any adjustments which by reason of this paragraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. iii) Whenever the number of Shares purchasable on the exercise of this Option is adjusted, as herein provided, the Exercise Price payable on exercise shall be adjusted by multiplying the Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Shares purchasable on the exercise of this Option immediately prior to such adjustment and the denominator of which shall be the number of Shares so purchasable immediately thereafter. iv)Whenever the number of Shares purchasable on the exercise of this Option or the Exercise Price of such Shares are adjusted, as herein provided, the Company shall cause to be promptly mailed by first class mail, postage prepaid, to the Optionee of this Option notice of such adjustment or adjustments and shall deliver a resolution of the board of directors of the Company setting forth the number of Shares purchasable on the exercise of this Option and the Exercise Price of such Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment, together with the computation by which such adjustment was made. Such resolution, in the absence of manifest error, shall be conclusive evidence of the correctness of adjustment. v) All such adjustments shall be made by the board of directors of the Company, which shall be binding on the Optionee in the absence of demonstrable error. b) No adjustments shall be made in connection with: i) the issuance of any Shares on the exercise of this Option; ii)the conversion of shares of preferred stock; iii) the exercise or conversion of any rights, options, warrants, or convertible securities containing the right to purchase or acquire Common Stock; iv)the issuance of additional Shares or other securities on account of the anti-dilution provisions contained in or relating to this Option or any other option, warrant, or right to acquire Common Stock; v) the purchase or other acquisition by the Company of any shares of Common Stock, evidences of its indebtedness or assets, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase Common Stock; or vi)the sale or issuance by the Company of any shares of Common Stock, evidences of its indebtedness or assets, or rights, options, warrants, or convertible securities containing the right to subscribe for or purchase Common Stock or other securities pursuant to options, warrants, or other rights to acquire Common Stock or other securities. 6. Notice of Certain Events. In the event of: a) any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividends or other distribution, or any right to subscribe for, purchase, or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other rights; b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, or any transfer of all or substantially all of the assets of the Company to any other person, or any consolidation, share exchange, or merger involving the Company; or c) any voluntary or involuntary dissolution, liquidation, or winding up of the Company, the Company will mail to the Optionee(s) of this Option, at least 20 days prior to the earliest date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, or right; the amount and character of such dividend, distribution, or right, or the date on which any such reorganization, reclassification, transfer, consolidation, share exchange, merger, dissolution, liquidation, or winding up of the Company will occur and the terms and conditions of such transaction or event. 7. Method of Exercise. This Option may be exercised, in accordance with all of the terms and conditions set forth in this Option, by delivery of this Option together with a notice of exercise, a form of which is attached hereto as Exhibit "A" and incorporated herein by this reference, indicating the number of Shares which the Optionee then elects to purchase and making payment in full for the Shares in cash. Optionee shall include with the notice of exercise a certified or official bank check payable to the order of the Company in the amount of the full option price of the Shares being purchased for cash. As soon as practicable after receipt by the Company of such notice and of payment in full of the option price of all the Shares of Common Stock with respect to which the Option has been exercised, a certificate or certificates representing such Shares of Common Stock shall be issued in the name of the Optionee, or, if the Optionee shall so request in the notice exercising the Option, in the name of the Optionee and another person jointly, with right of survivorship, and shall be delivered to the Optionee. To the extent required by the terms of this Option, all Common Stock shall be issued only upon receipt by the Company of the Optionee's representation that the shares are purchased for investment and not with a view to distribution thereof. If this Option is not exercised with respect to all Shares subject hereto, Optionee shall be entitled to receive a similar Option of like tenor covering the number of Shares with respect to which this Option shall not have been exercised. 8. Availability of Common Stock. During the term of this Option, the Company shall at all times keep available the number of Shares of Common Stock required to satisfy the Option. 9. Limitation on Exercise. If the board of directors of the Company, in its sole discretion, shall determine that it is necessary or desirable to list, register, or qualify the Common Stock under any state or federal law, this Option may not be exercised, in whole or part, until such listing, registration, or qualification shall have been obtained free of any conditions not acceptable to the board of directors. If an officer or director, the Optionee shall not exercise the Option until such time as the shareholders of the Company have approved the granting of the Option by the Company and the exercise of the Option by the Optionee. 10. Restrictions on Transfer. The Option and the Shares subject to the Option (collectively referred to as the "Securities") are subject to registration under the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities statutes. Optionee acknowledges that unless a registration statement with respect to the Securities is filed and declared effective by the Securities and Exchange Commission and the appropriate state governing agency, the Securities have or will be issued in reliance on specific exemptions from such registration requirements for transactions by an issuer not involving a public offering and specific exemptions under state statutes. Any disposition of the Securities may, under certain circumstances, be inconsistent with such exemptions. The Securities may be offered for sale, sold, or otherwise transferred only if i) registered under the Securities Act, and in some cases, under the applicable state securities acts, or, if not registered, ii) only if pursuant to an exemption from such registration requirements and only after the Optionee provides an opinion of counsel or other evidence satisfactory to the Company to the effect that registration is not required. In some states, specific conditions must be met or approval of the securities regulatory authorities may be required before any such offer or sale. The Company is under no obligation to register the Securities with the Securities and Exchange Commission or any state agency. If rule 144 is available (and no assurance is given that it will be), only routine sales of the Common Stock in limited amounts can be made after one year following the acquisition date of the Securities, as determined under rule 144(d), in accordance with the terms and conditions of rule 144. The Company is under no obligation to make rule 144 available. In the event rule 144 is not available, compliance with regulation A or some other disclosure exemption may be required before the Optionee can sell, transfer, or otherwise dispose of the Securities without registration. The Company and its registrar and transfer agent will maintain a stop transfer order against the transfer of the Securities, and this Option and any other certificate or agreement representing the Securities is subject to the following legend: THE SECURITIES REPRESENTED BY THIS OPTION, AGREEMENT, OR CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT. The Company may refuse to transfer the Securities to any transferee who does not furnish in writing to the Company the same representations and warranties set forth in this paragraph and agree to the same conditions with respect to such Securities as are set forth herein. The Company may further refuse to transfer the Securities if certain circumstances are present reasonably indicating that the proposed transferee's representations are not accurate. In any event, the Company may refuse to consent to any transfer in the absence of an opinion of legal counsel, satisfactory to and independent of counsel of the Company, that such proposed transfer is consistent with the above conditions and applicable securities laws. 11.Registration. The Company will utilize its best efforts to file and maintain the effectiveness of a registration statement on form S-8 with the Securities and Exchange Commission covering the issuance of the Shares issuable on exercise of this option and to maintain the effectiveness of such registration statement or a subsequent registration statement or other qualification in order to permit the exercise of this Option as set forth herein, although, there is no guaranty that such registration statement will be effective when the Option is exercised. If no registration statement is effective on the date of exercise of this Option, the Shares will not be issued unless and until there is available to the Company evidence, including representations from the Optionee, that such Shares are being acquired for investment and not for resale, on which the Company may reasonably rely as to the availability of an exemption from registration in issuing such Shares. 12.Assignment of Option. This Agreement shall not be assignable by the Optionee or his legal representative otherwise than by Will or the law of intestacy and the Option may be exercised, during his or her lifetime, only by the Optionee. If the Optionee dies on or prior to the Expiry Date while an officer or director of the Company, the Option, or such part thereof as remains unexercised, may be exercised by the legal representative of the Optionee at any time up to and including (but not after) the date one (1) year following the date of death of the Optionee or prior to the close of business on the Expiry Date, whichever is earlier. If the Optionee ceases to be an employee of the Company prior to the Expiry Date, the Option shall, on the earlier of the Expiry Date or thirty (30) days from the date the Optionee ceases to be an employee of the Company, terminate and be of no further force or effect whatsoever as to such of the Optioned Shares in respect to which the Option has not been exercised. 13.Amendments. If at any time during the continuance of this Agreement, the parties deem it necessary or expedient to amend, alter or add to this Agreement, they may do so by means of written agreement between them which shall supplement and form part of this Agreement. 14.Withholdings. If the grant or exercise of this Option is subject to withholding or other trust fund payment requirements of the U.S. Internal Revenue Code or applicable Canadian or U.S. Province, state or local laws, such requirements may, to the extent permitted by the then governing provisions of the Code, be met by the holder of such Option delivering shares of common stock or canceling options or other rights to acquire common stock or by the withholding shares of common stock subject to such Option, all with a fair market value equal to such requirements. To the extent that the holder of this Option is subject to the provisions of section 16(b) of the U.S. Securities Exchange Act of 1934, as amended, payment of the withholding and other trust funds requirements of the foregoing methods shall be subject to the transaction qualifying for an exemption from the provisions of section 16(b) under rule 16b- 3 promulgated pursuant to the Securities Exchange Act of 1934, as amended, or an amendment or successor rule of like tenor. 15.Approval. The terms of this Agreement and any amendments are subject to approval by the regulatory authorities having jurisdiction over the affairs of the Company and, if the Optionee is an insider of the Company within the meaning of the Securities Act, by the shareholders of the Company IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the day and year first written above. LA TEKO RESOURCES LTD. By /s/ Sharon Mansfield, Secretary Signed, Sealed and Delivered ) by ) in the presence of: ) ) ) /s/ ) /s/ Gordon Fretwell Signature of Witness ) ) ) Name (print) ) ) ) Address ) ) ) Occupation ) EXHIBIT A FORM OF EXERCISE (TO BE SIGNED ONLY UPON EXERCISE OF OPTION) TO: LA TEKO RESOURCES LTD. The undersigned, the owner of the attached Option, hereby irrevocably elects to exercise the purchase rights represented by the Option for, and to purchase thereunder, shares of Common Stock of La Teko Resources Ltd. Enclosed is payment in the amount of $ , the exercise price of the Common Stock to be acquired, in the form of (insert description of manner of payment) Please have the certificate(s) registered in the name of , Social Security No. and delivered to the following address: If this exercise does not include all of the Common Stock covered by the attached Option, please deliver a new option of like tenor for the balance of the Common Stock to the undersigned at the foregoing address. DATED this day of , 199 . Signature of Optionee (Signature must be guaranteed by a bank or securities broker-dealer) EX-10 6 FORM OF EXPLORATION AGREEMENT AND OPTION TO LEASE THIS EXPLORATION AGREEMENT AND OPTION TO LEASE (hereinafter referred to as the "Agreement") is made effective June 1, 1996, (hereinafter referred to as the "Effective Date") between the UNIVERSITY OF ALASKA, a corporation organized and existing under the constitution and laws of the State of Alaska, whose address is 910 Yukon Drive, Suite 211, Fairbanks, Alaska 99775, (hereinafter referred to as "the University") and LA TEKO RESOURCES, INC., a Nevada corporation and qualified to do business in the State of Alaska, whose address is 2173 University Avenue South, Suite 101, Fairbanks, Alaska 99709, (hereinafter referred to as "La Teko"). RECITALS A The University is the fee owner of the subsurface estate described in Exhibit A, attached hereto and by this reference made a part hereof (hereinafter referred to as the "Mineral Estate"), and therefore has the sole and exclusive mineral exploration, development, and mining rights thereto. The University also owns the surface estate overlying the Mineral Estate (hereinafter referred to as the "Surface Estate"). Except as noted herein, the Mineral Estate and the Surface Estate as described in Exhibit A when together referred to herein shall be known as the "Property"; B. The University has agreed to grant to La Teko certain rights to the Property as described herein, upon the conditions described herein; and C. The University has further agreed to grant to La Teko an option to enter into a Mining Lease on the Designated Area within the Property upon the terms and conditions described herein. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the benefits and advantages to be gained by each of the parties and in consideration of the mutual covenants and promises hereinafter set forth, the parties agree as follows: ARTICLE 1. DEFINITIONS The following words, when used in this Agreement, shall have the following definitions (a) Costs means any and all reasonable costs, expenses, and expenditures incurred or made by La Teko in its operations on the Property, including but not limited to its costs, expenses, or expenditures made or incurred for construction, buildings, equipment, and the cost of installation, replacement, expansion, or modification thereof; and including La Teko's costs, expenses, or expenditures made or incurred for Exploration and Development and any and all other expenses, costs, or expenditures made for or on account of La Teko's operations on the Property. Such costs shall, more specifically, but not in limitation, include: (1) Costs of wages, supplies, salaries, and other services incurred by La Teko for the benefit of the Property while on the Property; it being understood, however, that any and all expenses or costs for services rendered by La Teko's engineers, geologists, payroll, data processing (except as relating to accounting), training and safety, and other personnel employed at the head office of La Teko or somewhere other than at the Property, and directly attributable to the Property on a specific assignment basis, shall be based on La Teko's actual cost thereof allocated on a pro rata time basis with La Teko's other operations. Costs shall include not only the costs of actual wages and salaries but shall also include, but not be limited to, social security and unemployment taxes, worker's compensation costs, vacation pay, disability benefits, life insurance, health and accident insurance, pension costs. (2) Rental charges for machinery and/or equipment used by La Teko in connection with its operations hereunder shall be such rentals as are customarily charged in the mining industry for machinery and equipment of like character. (3) All monies to be paid, if any, with respect to the Property, but not including royalties, rentals, or other payments to be paid to the University under Article 5 of this Agreement. (4) The annual cost of insurance premiums for all forms of insurance protection which La Teko carries with respect to operation of the Property, including but not limited to, fire, theft, property damage, machinery breakdown, worker's compensation and disability, public liability, forgery, and use and occupancy and business interruption. (5) All property taxes accrued and payable arising from La Teko's operation of the Property. (6) The cost of reclamation and related activities conducted on the Property pursuant to this Agreement and applicable federal, state, and local laws and regulations. (7) Reasonable legal costs for the maintenance of the Property. Such Costs shall not include: (1 ) any charge for depletion, depreciation, or amortization. (2) federal and state income taxes and mining license taxes. (3) services performed by the officers or senior management of La Teko or for expenses incurred in the head office of La Teko relative to accounting, including salaries and related payroll expenses, postage, printing and stationary, auditing, directors' expense, stock transfer expense, bonuses, or for general corporate expenses of La Teko. (4) the cost to La Teko of any judgment or lien paid in connection with the Property. (b) Designated Area means a separate area of land within the Property made up of surveyed tracts of land by legal subdivision of one thousand two hundred eighty acres. (c) Development means all preparations for the removal and recovery of Minerals from the Property, including the construction or installation of a mine, mill or any other improvements to be used for the Mining, handling, milling, processing, or other beneficiation of Minerals from the Property.. (d) Exploration means the activity, operations, or work performed for the purpose of ascertaining the existence, location, quantity, quality, or extent of deposits of Minerals within the Property, including drilling, assaying, geological, geophysical, and geochemical surveys and studies, mapping, surveying, trenching, sampling (including bulk sampling), field support, and engineering, on-site office and administration activities, and necessary road construction. (e) Mineral or Minerals means all metals, ores,-minerals, and materials of every kind and character whatsoever which would have been locatable on public domain lands under the General Mining Law of 1872, as amended (30 U.S.C. Section22, et seq.), but shall not include oil, gas and associated hydrocarbons, coal, sand, gravel, rock, building stone, earth, soil, clay, surface and ground water, geothermal resources, or any material not locatable under such law. (f) Mining means the mining, extracting, producing, handling, milling, or other processing of Minerals, and all activities on the Property attendant thereto. (g) Other terms defined in the Mining Lease shall have those same definitions in this Agreement. ARTICLE 2 - REPRESENTATIONS AND WARRANTIES (a) Representations and Warranties of La Teko - La Teko makes the following representations and warranties effective the date hereof, (1 ) Corporate Status - La Teko is a corporation duly organized, existing and in good standing under the laws of the State of Nevada, and is qualified to conduct business in Alaska. (2) Corporate Authorization - The execution, delivery, and performance of this Agreement by La Teko has been duly authorized by all necessary corporate action on its part and will not violate any provision of the Certificate of Incorporation or Bylaws of La Teko or any provision of any agreement, indenture instrument, lease, contract, or other undertaking to which La Teko is a party or by which La Teko or its property is bound or requires the consent of any third party, except consents, approvals, and licenses which have been obtained and are in effect. (3) Broker's or Finder's Fees - La Teko has not engaged or employed any broker or finder in connection with the negotiation, execution, or delivery of this Agreement, and no broker's or finder's fee or commission is due with respect thereto. (4) Binding Obligation - When duly executed by the parties, this Agreement will constitute a valid and binding obligation of La Teko, enforceable against La Teko, in accordance with its terms. (5) Diligent Development - La Teko shall, in accordance with this Agreement and in a diligent and reasonable manner, explore and develop the Property, provided that such Exploration and Development shall comply with all applicable laws and shall be conducted in accordance with careful workmanlike manner and accepted mining practices. (b) Representations and Warranties of the University - The University makes the following representations and warranties effective the date hereof: (1 ) Status - The University is a corporation duly organized, existing in good standing under the Constitution and the laws of the State of Alaska. (2) Authorization - The execution, delivery and performance of this Agreement by the University has been duly authorized by all necessary action on its part. (3) Broker's or Finder's Fees - The University has not engaged or employed any broker or finder in connection with the negotiation, execution or delivery of this Agreement, and no broker's or finder's fee or commission is due with respect thereto. (4) Binding Obligation - When duly executed by the parties, this Agreement will constitute a valid and binding obligation of the University, enforceable against the University in accordance with its terms. (5) Title to Property - The University makes no representations or warranties respecting title to the Property, the suitability of the Property to operations hereunder, the presence of any Minerals on, in, or under the Property, or the merchantability of any Minerals situated on, in, or under the Property. The Agreement is granted subject to all valid existing rights of third parties in and to the Property, if any. (6) Lesser Interest - If the University's title to the Property (or any portion thereof) is less than the entire interest or is subject to a superior adverse interest, La Teko shall have the right to accept such title as the University has by giving notice of such election to the University in accordance with Article 21. Since the payments set forth in Article 5 are predicated upon the University's owning the entire interest in the Property free and clear of any superior adverse interests, if the University owns less than the entire interest or such interest is subject to a superior adverse interest, then such payments shall be reduced proportionally. ARTICLE 3 - GRANT AND LAND ACQUISITION (a) Grant of Initial Non-Exclusive Access - The University grants to La Teko an initial non-exclusive right, for a period not to exceed three (3) months from the Effective Date, to enter into and upon the Property for limited mineral exploration which does not involve any surface disturbance of the Mineral Estate, including but not limited to hand sampling, geophysical survey, and mapping. La Teko agrees, as a condition to the rights granted by this paragraph, to provide the University with copies of all factual data and exploration and mineral reconnaissance data obtained from the Property. This date shall be given to the University within 60 days following the expiration of the three (3) month period. (b) Grant of Exclusive Option - Following the three (3) month period described above in subsection (a) and subject to the terms contained herein, the University hereby grants to La Teko, for a five year period, the sole, exclusive, and irrevocable right to enter into and upon the Property and each and every part thereof and, except as otherwise expressly provided in this Agreement, to explore for, drill, test, and develop any and all metals and ores of every kind and character whatsoever, precious and base, which are or may hereafter be found in, on, or under the Property. The University further grants to La Teko, for a period not to exceed five (5) years following the three (3) month period described above in subsection (a), the sole and exclusive right to exercise the option to lease a one hundred (100%) undivided interest in any one or more Designated Areas and to enter into one or more Mining Leases (the "Option"); provided that La Teko's right to exercise their Option as granted herein shall be subject to Article 7. Nothing contained in this Agreement shall be deemed to require La Teko to exercise any of the rights and privileges granted to it by this Agreement, except as and to the extent that La Teko deems it desirable so to do. ARTICLE 4 - TERM La Teko's right to enter upon the Property and conduct Exploration and Development, and to exercise the sole and exclusive Option to lease a one hundred percent (100%) undivided interest in all or any part of the Property, exercisable at any time or from time to time in accordance with this Agreement, shall continue for a period of five (5) years from September 1, 1996 (the "Option Period"), upon which time La Teko's rights under this Agreement shall terminate. ARTICLE 5 - OPTION PAYMENTS In order to maintain the Option, La Teko shall pay the University annual Option Payments (the "Option Payments"), as set forth below, during the term of this Agreement, which amounts shall not be recoupable from the University's share of future Royalties, if any, related to the Property. The first payment shall be made by La Teko on or before September 1, 1996; the payment for each subsequent year as set forth below shall be made on or before the anniversary of the Effective Date of this Agreement, for so long as this Agreement is in effect. Annual Option Payments September 1, 1996 $30,000.00 1st anniversary (1997) $45,000.00 2nd anniversary (1998) $60,000.00 3rd anniversary ( 1999) $60,000.00 4th anniversary (2000) $75,000.00 Pursuant to Article 8, the University may terminate this Agreement if La Teko does not make any of the Option Payments within the time periods specified above. ARTICLE 6 - WORK COMMITMENT In order to maintain the Option, La Teko commits to expend the monetary amounts specified below in Costs in the Exploration of the Property (hereinafter "Work Commitments"). Annual Work Commitment Year 1 (1996-97) $100,000.00 Year 2 (1997-98) $200,000.00 Year 3 (1998-99) $250,000.00 Year 4 (1999-2000) $500,000.00 Year 5 (2000-01) $500,000.00 The work commitment shall not include any costs incurred by La Teko during the three month grant of initial non-exclusive access. La Teko shall have the right to carry forward excess Costs spent in any one year and apply those excess Costs towards the next year's Work Commitment due, provided, however, that La Teko shall expend no less than 20% of the Work Commitment for any one year in which La Teko carries forward excess Costs. Should La Teko fail to expend the above sums on or for the benefit of the Property on or before the due dates for such expenditures, in order to maintain this Agreement in good standing, La Teko shall pay to the University, within 10 days after the anniversary date of this Agreement, the difference between the amount due and the amount expended on or for the benefit of the Property for the applicable period. Pursuant to Article 8, the University may terminate this Agreement for La Teko's failure to expend the above referenced Work Commitment amounts or to make payment to the University in lieu thereof within the time periods specified above. ARTICLE 7 - EXERCISE OF OPTION AND EXECUTION OF LEASE During the term of this Agreement, La Teko may elect to exercise its Option to lease a Designated Area(s) included within the Property by giving written notice to the University and submitting an executed Mining Lease for the Designated Area together with proof of insurance and initial payment. A Mining Lease entered into pursuant to the exercise of the Option shall be in the form of Exhibit "B," with such change or changes, if any, as may be agreed upon in writing by the University and La Teko. La Teko's right to exercise its Option is subject to the following before the Option can be exercised and such property made subject to the Mining Lease: 1) La Teko shall be in full compliance with and shall not be in default with any of the terms and conditions of this Agreement, and 2) A minimum of one hundred thousand dollars ($100,000) of Costs must have been spent on the Designated Area. The Designated Area shall cease to be governed by the terms of this Agreement from and after the Effective Date of the Mining Lease provided, however, that should any property be released from operation of the Mining Lease, or should the Mining Lease be terminated during the term of this Agreement, the property in question shall revert to the University, free and clear of any and all interests of La Teko including particularly this Agreement and/or the Mining Lease. ARTICLE 8 - TERMINATION OF RIGHT TO EXERCISE OPTION The right to exercise the Option and this Agreement shall terminate if (a) La Teko notifies the University at any time of its intention to terminate this Agreement and not to exercise the Option; (b) La Teko fails to make any of the Option Payments described in Article 5, or (c) La Teko fails to satisfy the Work Commitments or payments in lieu thereof specified in Article 6. If La Teko-fails to make any such payments, termination shall not take place until ten (10) days after the University notifies La Teko of such failure. If La Teko makes such payments within the said ten (10) day period, no termination shall take place. Any termination pursuant to this Article 8 shall not be considered to be a default by La Teko under this Agreement. ARTICLE 9 - RELATIONSHIP OF MINING LEASE TO THIS AGREEMENT A Mining Lease entered into pursuant to this Agreement shall be deemed separate from this Agreement. To the extent of any overlap or conflict in subject matter between the Mining Lease and this Agreement, the provisions of the Mining Lease shall be controlling for the duration of the Mining Lease with respect to any lands or interests in lands which are part of the Designated Area under the Mining Lease and for so long as such lands or interests in lands remain a part of the Designated Area. There shall be no merger of the terms and conditions of this Agreement into the Mining Lease or into any other grants that may be made pursuant to this Agreement, and the Property shall revert to the University upon the termination or expiration of the Mining Lease or other agreements between the parties affecting the Property or portions thereof. If this Agreement terminates for any reason, the Mining Lease shall remain in effect. ARTICLE 10 - EXPLORATION AND DEVELOPMENT ACTIVITIES Subject to Article 3(a), the University and La Teko agree that, during the Option Period or until the earlier termination of this Agreement, La Teko shall have the sole and exclusive right, subject to the University's right of access to enter upon the Property, to carry out such prospecting, Exploration, and Development work thereon, therein, and thereunder in the manner end to the extent that La Teko, in its sole discretion subject to Paragraph 11(a), deems advisable. La Teko may bring upon the Property such equipment, buildings, machinery, appliances, and tools as La Teko may deem advisable and remove same. La Teko may remove Minerals from the Property for the purpose of making assays and tests relevant to judging whether a commercial operation is feasible, such as removal of sufficient amounts of material for bulk samples for mill and pilot plant tests and for metallurgical tests of all kinds. La Teko's right to remove Minerals from the Property shall be within the scope of standard industry practices for said activities. ARTICLE 11 - SURFACE OBLIGATIONS OF LA TEKO The University acknowledges that Exploration and Development activities are, by their nature, disruptive to the Surface Estate. However, the parties acknowledge their desire to minimize the destruction of the Surface Estate and therefore it is agreed that La Teko shall take the following measures: (a) Before conducting Exploration and Development activities and before April 1 of each year of this Agreement, La Teko shall submit to the University a plan of operations setting forth the proposed activity or activities and the approximate location thereof (the "Plan") for the University's review and approval. Such approval shall not be unreasonably withheld. La Teko agrees to consult closely with the University as to the location of any facilities and improvements placed upon the Surface Estate. (b) In the course of exercising its rights under this Agreement, La Teko will, to the extent it can do so without interfering with the development of the Mineral Estate, use reasonable care and exert good faith efforts to minimize disruption or interference with the Surface Estate. (c) La Teko will preserve, as much as practical, the integrity of the Surface Estate consistent with its ability to conduct Exploration and Development in the manner best suited to development of the Mineral Estate. (d) La Teko shall be responsible for obtaining all required permits and other governmental approvals necessary for its activities on the Surface Estate, and will comply with all federal, state and local laws and regulations pertaining to the conduct for its Exploration and Development or other related uses of the Surface Estate. The University will cooperate with La Teko in the acquisition of all permits and governmental approvals. (e) La Teko will conduct all Exploration and Development in a prudent, efficient, and workmanlike manner, in accordance with sound engineering and mining industry practices. All areas of La Teko's operations shall be kept in a neat, clean, orderly, safe, and sanitary condition. No littering shall be permitted, and all trash, nonnatural debris. and other waste material resulting from its operations shall be disposed of in a manner approved by state and/or federal authorities. (f) La Teko agrees to store, transport, and dispose of all hazardous substances, as defined by AS 46.03.826, and all hazardous wastes, as defined by AS 46.03.900 or by any other applicable state or federal law, in accordance with all local, state, and federal laws, including the "Resource Conservation and Recovery Act' ("RCRA") and the "Comprehensive Environmental Response, Compensation and Liability Act" ("CERCLA"), as amended, regarding the same. La Teko shall not dispose of any hazardous wastes upon the Property. Further, the University and La Teko acknowledge and agree that in the event mining wastes are regulated by CERCLA, or by any other statute, La Teko may dispose of such wastes on the Property provided La Teko complies fully with such laws and shall be solely responsible for any contamination or other environmental damage found on the Property resulting from La Teko's operations, including the cost of clean-up. Hazardous substances and estimated quantities thereof shall be disclosed in the Plan prior to their being brought onto the Property. At the end of each year, La Teko shall notify the University of all hazardous substances and hazardous wastes and the quantities brought to, stored upon, used on, or transported from the Property. (g) La Teko shall take all necessary precautions to prevent and suppress forest, brush, and grass fires, and no open fires shall be permitted on the Property. La Teko shall be responsible only for forest, brush, and grass fires which are caused by La Teko, its employees, agents, and assigns; and La Teko, its agents and assigns shall indemnify and hold the University harmless from claims or damages if such fires should cause injury or damage to the person or property of any third parties. (h) La Teko shall protect all survey monuments, witness corners, reference monuments, and bearing trees against damage, destruction, or obliteration. Any damaged or obliterated monuments shall be reestablished by La Teko in accordance with accepted survey practices of the United States Department of Interior, Bureau of Land Management. (i) If requested, La Teko shall make a written report in addition to work progress reports, on all matters relevant to the character, conduct, and status of operations. La Teko shall make written notice to the University upon completion of its operations. (j) La Teko agrees that standing timber on the Property shall be protected to the maximum extent possible, consistent with prudent mining operations. (k) La Teko shall not be permitted to use the Property to deposit, store, or dispose of any waste, overburden, surface stripping, and other materials from adjoining or nearby property owned or controlled by La Teko, without the express written permission from the University which may be withheld for any reason. ARTICLE 12 - ENVIRONMENTAL PROTECTION La Teko shall take all reasonable precautions to prevent the improper disposal of hazardous wastes and the pollution of air and water by La Teko's operations. Any facilities for employees established on the Property shall be operated in a sanitary manner, and refuse and waste resulting from La Teko's use, servicing, repair, or abandonment of equipment shall be removed from the Property. It shall be La Teko's sole responsibility to comply with all applicable environmental laws or regulations, subject to La Teko's right to contest the same. If the University finds physical evidence that air, land, water quality, or other environmental damage has occurred or is about to occur due to La Teko's non-compliance with said environmental laws or regulations, the University shall have the right, upon written notice to La Teko, to require La Teko or its contractors, agents, or assigns to cease, alter, or modify immediately that portion of operations on the Property which is causing or is about to cause such air, land, water quality, or other environmental damage; and to direct La Teko in writing to take immediate action to correct or eliminate said damage or threat thereof. La Teko shall then, in consultation with the University, review the operations to determine if additional actions are necessary to correct or eliminate such damage or threat. The University's rights under this provision shall not release La Teko of its obligation hereunder, nor shall they constitute a waiver of the University's rights as provided by this Agreement and/or by law. The University shall be under no obligation to provide for any inspections as to environmental practices of La Teko, or to take any responsibility whatsoever for La Teko's actions, it being agreed that compliance therefor is the sole responsibility of La Teko. Liability for any environmental or water quality damage that is caused by La Teko or its contractors, agents, or assigns, shall be borne by and at the sole expense of La Teko. If La Teko fails or refuses to correct or repair within a reasonable time any environmental damage caused by La Teko's failure to comply with applicable laws or with any obligation or covenant of this Agreement after being directed to do so, then the University shall have the right to contract with any qualified party to correct said condition, and La Teko shall pay to the University on demand for all costs including attorney's fees of said correction or repair. La Teko's obligations under this paragraph shall survive the termination of this Agreement. Notwithstanding any other provision, La Teko shall indemnify and defend the University from any and all losses, damages, expenses, claims, demands, and civil or criminal liabilities or penalties; clean-up lawsuits and other proceedings, and all costs and expenses including damages, attorneys' fees, and disbursements which accrue to or are incurred by the University, arising directly or indirectly from, or out of, or which are in any way connected with La Teko's acts or omissions which cause environmental or water quality damage as defined by non-compliance with federal, state or local regulations, orders, or laws; or which cause losses, damages, expenses, claims, demands, or civil or criminal penalties or sanctions to be incurred. ARTICLE 13 - RIGHT TO INSPECT The University or its authorized agents shall have the right to inspect La Teko's operations on the Property upon reasonable notice and during normal working hours. ARTICLE 14-WORK PROGRESS REPORTS On or before April 1 of each year of this Agreement, La Teko shall furnish to the University yearly progress reports showing the character and amount of work performed by La Teko on the Property during the preceding year and the place or places where work was performed. Such reports shall include an accounting of funds spent and shall include the volume of material removed from the Property for bulk sampling as allowed in Article 10. La Teko shall also make available for the University's inspection at the office where such records are kept, any cores and other geological samples collected by La Teko under this Agreement, and shall provide for the University's inspection and reproduction of all sample data and geological maps resulting from such work, and ail geologic reports supporting such progress reports. Any data, reports, or other information furnished to the University shall be the same as that La Teko customarily prepares or obtains for its own records. La Teko further agrees to supply the University with copies of all geological maps, cross-sections, drill logs, and other factual and computer generated data, disks, or reports generated under this Agreement. The University shall keep confidential, as provided in Article 22, all information received from La Teko through such reports, samples, data, and maps. ARTICLE 15 - OWNERSHIP OF FACILITIES Any machinery, buildings, or equipment, including supplies or any and all other items which La Teko acquires for the benefit of the Property under this Agreement, shall belong to La Teko and may be removed by La Teko at any time this Agreement is in effect, and shall be removed within one (1 ) year after termination of the Agreement. Any machinery, buildings, or equipment not removed after one (1) year from termination shall become the property of the University or, at its election, may be removed by the University at La Teko's expense. All machinery, buildings, equipment, and supplies, until they become the University's property or are removed from the Property, shall be the sole responsibility of La Teko and the University shall have no liability with regard thereto. In the event that a regulatory agency requires additional reclamation work or monitoring beyond the one year period, the one year period shall be extended as the University deems appropriate; provided that La Teko shall continue to carry insurance and identify the University as required in this Agreement during any extension period. ARTICLE 16 - COMPLIANCE WITH LAWS - INSURANCE AND INDEMNIFICATION - TAXES (a) Compliance with Laws - La Teko shall conduct all operations on the Property in a careful, workmanlike manner and, during all periods in which La Teko is operating on the Property pursuant to this Agreement and with respect to all work of whatsoever character in any manner connected therewith, La Teko shall comply with all laws and regulations of the State of Alaska, any legal subdivision thereof, and the United States of America, and all rules, permits, orders, and directives made in conformity therewith. Without limitation of the foregoing, La Teko shall comply with all laws, regulations, permits, rules, orders, and directives relating to Mining, Alaska's Mining License and notice, reclamation, mine waste disposal, fire prevention, safety, fisheries, environment, water quality and pollution, employees, and the Mine Safety and Health Act ("MSHA"). La Teko reserves the right to challenge any such laws, regulations, rules, required permits, orders, or directives if La Teko, in good faith, believes that the same are unconstitutional, unlawful, inapplicable, or are being directed against La Teko and La Teko's operations on the Property in an arbitrary or capricious manner. La Teko shall comply with all health, safety, and fire prevention measures prescribed by law or described in this Agreement and in the attached Exhibit "B". Should La Teko assume, during the term of this Agreement, any permits obtained by the University, La Teko shall be solely responsible for continuing compliance with such permits, to the extent that such compliance is within the control of La Teko; but La Teko shall not be required to fulfill any requirements under such permits relating to conditions created by the University prior to La Teko's assumption of such permits. If any additional permits, permit waivers, or permit modifications or amendments are required in furtherance of La Teko's. obligations under this Agreement, the University shall cooperate and provide all reasonable manner of assistance to La Teko in expediting additional permit applications and related matters. La Teko agrees to cease operations where required by laws, regulations, rules, permits, orders, and directives made in conformity thereto, subject to La Teko's right as set forth above to challenge the same without suspension of La Teko's obligation under Article 5 until said additional permits, permit waivers, modifications, or amendments are obtained. Upon expiration or earlier termination of this Agreement upon the University's request, any permits, licenses, leases, or similar matters secured on behalf of or procured by La Teko hereunder which are no longer necessary or convenient to La Teko to conduct its operations upon the Property shall be transferred to the University at University's sole option, to the extent that La Teko has the right to effect such transfer. (b) Insurance and Indemnification i) Insurance - Without limiting La Teko's indemnification, it is agreed that La Teko shall purchase, at its own expense, and maintain in force at all times during the term of this Agreement, the policies of insurance specified below. Where specific limits are shown, it is understood that they shall be the minimum acceptable limits. If La Teko's policy contains higher limits, the University shall be entitled to coverage to the extent of such higher limits. Certificates of Insurance must be furnished to the University upon signing this Agreement and must provide for thirty (30) day prior notice to the University of cancellation, nonrenewal or material change of the policies. Failure to furnish satisfactory evidence of insurance or the lapse of a policy is a default and grounds for termination of this Agreement. Each Workers' Compensation Insurance policy shall be endorsed with a waiver of subrogation in favor of the University. ALL other insurance policies required by this Agreement shall be endorsed to provide that such insurance shall apply as primary insurance and that any insurance or self-insurance carried by the University will be excess only and will not contribute with the insurance required by this Agreement; shall be endorsed to name the University as an additional insured; and shall provide for a waiver of subrogation in favor of the University. All endorsements shall reference this Agreement. All insurance shall be on an occurrence and not a "claims made" basis. (a) Workers' Compensation Insurance: La Teko shall provide and maintain, for all employees of La Teko engaged in work under this Agreement, Workers' Compensation Insurance and Employer's Liability Insurance in accordance with the laws of the State of Alaska. La Teko shall be responsible for Workers' Compensation Insurance for any subcontractor who directly or indirectly provides services under this Agreement. This-coverage must include statutory coverage for states in which employees are engaging in work and employer's liability protection not less than One Million Dollars ($1,000,000.00) per person, One Million Dollars ($1,000,000.00) per occurrence. Where applicable, coverage for all federal acts (i.e., U.S.L. & H and Jones Acts) must also be included. (b) Comprehensive (Commercial) General Liability Insurance: With coverage limits not less than Two Million Dollars ($2,000,000.00) combined single limit per occurrence and annual aggregate where generally applicable, including premises-operations, independent contractors, products/completed operations, broad form property damage, blanket contractual and personal injury endorsements. Limits may be a combination of primary and excess (umbrella) policy forms. (c) Comprehensive Automobile Liability Insurance: Covering all owned, hired, and non-owned vehicles with coverage limits not less than One Million Dollars ($1,000,000.00) combined single limit per accident bodily injury and property damage. (d) In the event La Teko acquires or uses aircraft in conjunction with its operations under this Agreement which are not covered under La Teko's insurance obligation under 15(b)(i)(a) above, La Teko shall then obtain liability and indemnity insurance with a combined single km it of not less than $2,000,000.00 The insurance shall be placed with an insurance carrier or carriers reasonably satisfactory to the University and, unless otherwise agreed, with a Best Guide rating of A/XIII and shall provide that no failure of La Teko to comply with any term or condition of this Agreement, or other conduct of La Teko, its agent, representatives, contractors, and employees, shall void or otherwise affect the protection under any insurance policy attached to the University. If La Teko fails to comply with these insurance requirements, the University may obtain and pay for such insurance and keep the same in force and effect, and La Teko shall pay the University on demand for the premium costs thereof. La Teko shall provide written proof of insurance, bye certificate of insurance, to the University, reflecting full compliance with the requirements set forth in Article 14(b)(i)(a-d) above. In order to maintain the same level of coverage that will exist at the commencement of this Agreement, the types and amounts of coverage called for herein shall be subject to review at the end of each five (5) year period from the Effective Date of this Agreement, unless a major change in La Teko's operation on the Property occurs, in which case said review shall be done at the time of the occurrence and. if appropriate, the insurance requirement shall be adjusted upward or downward or extended as the parties may agree to provide the amounts and types of coverage then prudently carried by entities engaged in Exploration, Development, and Mining operations similar to those to be conducted pursuant to this Agreement. La Teko shall maintain insurance policies under which, at a minimum, the above-described amounts of insurance shall be maintained in effect throughout the time during which such insurance is required under this Agreement, even if successful claims are asserted against any such policies during their terms. La Teko shall not acquire any rights whatsoever under this Agreement until La Teko has submitted to the University proof, furnished by the insurance carriers, of current coverage as required herein, which must specifically include workers' compensation insurance from an insurance company or association authorized to transact the business of workers' compensation insurance in the State of Alaska, or proof, furnished by the Workers' Compensation Board of the State of Alaska of a current certificate of self-insurance issued by the Board. If the University should receive notice that an applicable insurance policy under this Agreement has been canceled without being replaced by a comparable policy, the University may obtain and pay for such insurance and keep the same in force and effect, and La Teko shall pay the University on demand for the premium costs thereof. (2) Indemnification - La Teko agrees to assume full control and responsibility for the activities or conduct of its agents or employees with respect to its performance under this Agreement. La Teko shall defend and save harmless the University or any representative thereof from and against all losses, damages, liabilities, expenses, claims, and demands of whatsoever character, direct or indirect, arising out of, or in any way connected with the performance of La Teko or any employee, subcontractor, agent, or other representative of La Teko under the terms of this Agreement. This indemnification shall survive termination of this Agreement. (c) Taxes - La Teko shall pay its own federal and state income taxes and mining license taxes, if any, and shall file its own returns related thereto based, in the case of income taxes, upon the income received by La Teko. Should any liens or encumbrances hereafter be created on the Property or on any Minerals therefrom as a result of failure by La Teko to pay taxes when due, pursuant to the preceding sentence, the University may, in addition to other remedies available at law, at its option, satisfy such liens or encumbrances, and La Teko shall reimburse the University for such amounts and any associated costs, including attorney's fees. court costs and interest on amounts due at the highest rate allowable by law, upon notice thereof by the University. If La Teko should fail to repay the University within thirty (30) days of notice thereof, the University may serve notice of default to La Teko in accordance with Article 17. Any and all other taxes or licenses of whatsoever character, including, among others, real and personal property taxes related to the Property and relating to operations carried on after the Effective Date of this Agreement, shall be paid by La Teko and treated as Costs as defined in Article 1 of this Agreement. During the term of this Agreement, La Teko shall pay when due all taxes assessed against its personal property and all improvements placed upon the Property, and ad valorem taxes assessed against the Property which result from La Teko's activities on the Property. La Teko shall have the right, at its option, to contest, in the courts or otherwise, the validity or amount of any such taxes or assessments, if it deems the same unlawful, unjust, unequal, or excessive, or to take such other steps or proceedings as it deems necessary to secure a cancellation, reduction, readjustment, or equalization thereof, before it shall be required to pay the same. (d) No Third Party Beneficiary - This Agreement specifies the rights and obligations of the parties hereto and is not intended to create any rights or causes of action in any third party. ARTICLE 17 - DEFAULTS The University shall have the right to terminate this Agreement only for default by La Teko. In the event that the University claims that a default has occurred or is occurring in La Teko's performance of any obligation or obligations under the terms of this Agreement, the University may serve written notice upon La Teko that La Teko is, or is believed to be, in default, stating in such notice the particulars of the alleged default and requesting the correction thereof. Within thirty (30) days of receipt of any such notice, La Teko shall fully correct any and all defaults specified in such notice. Notwithstanding the foregoing, in the case of defaults which threaten or affect health and/or safety standards, La Teko shall begin the correction of said defaults immediately upon notice or as soon as practicable thereafter. If any default or defaults which have been specified in any such notice are not remedied in the manner specified in this Article 17, then the University may, at its option and by written notice, declare this Agreement terminated. In the event the University terminates this Agreement on account of breach by La Teko, La Teko shall be under no further liability to the University as a result of La Teko's activities on the Property or as a result of the terms of this Agreement from and after the date of such termination, except for liabilities and obligations to the University accrued prior to the date of such termination and its obligations hereunder arising upon termination as a result of operations upon the Property by La Teko. ARTICLE 18 -TERMINATION OR RELINQUISHMENT OF PROPERTY (a) Relinquishment - At any time after La Teko makes the first payment and satisfies the Work Commitment with respect to the Property during the appropriate time period, La Teko may release any portion or all of the Property for which all payments and expenditures have been made by giving the University forty-five (45) days prior written notice. Upon receipt of such notice, the property specified in the notice shall no longer be subject to this Agreement or the Option and La Teko shall release and quitclaim to the University ail of its interest in the property specified in the notice. La Teko's obligation under Articles 12, and 23 shall continue with respect to any Property relinquished pursuant to this paragraph. La Teko's obligation to carry insurance and indemnify the University shall continue as to any Property relinquished pursuant to this paragraph until all obligations under Articles 12 and 23 are fulfilled. (b) Termination - Upon termination of this Agreement for any reason, La Teko, subject to the obligations under Articles 11, 12, 16 and 23 of this Agreement, will surrender peaceable possession of the Property; the University shall thereupon have the right to take full and complete possession hereof, subject to the rights of La Teko to go upon the Property for a period not to exceed one year for the purpose of reclamation and the removal and disposal of machinery, equipment, and supplies as provided in Article 15 of this Agreement. Within one (1) year after termination, La Teko agrees to suitably store on the Property, or return at its cost, the splits if available in Alaska of all exploration samples, drill cuttings, and drill cores and other samples collected during this Agreement, and to provide the University with the location and description of all exploration work and test results, a report of the status and location of any remaining reserves, and copies of all factual data generated by La Teko's activities on the Property prior to termination. Upon such termination, La Teko shall leave all artificial ground support in place without warranty as to condition or fitness, but La Teko shall not otherwise be obligated to leave any mine workings or openings in the Property, including ventilation openings, in any particular condition or state of repair, except as otherwise required by federal, state, or local laws, and Article 23. ARTICLE 19 - FORCE MAJEURE Except for the payment of the Option Payments to the University by La Teko pursuant to Article 5, should La Teko be prevented or delayed from performing any obligations of this Agreement by reason of an act of nature, or fire, flood, war, insurrection or mob violence, then and in such event, any such failure to perform shall not be deemed a breach of this Agreement. Performance of said obligations shall be suspended during such period of disability, and the time for the performance of said obligations shall be extended for a period equal to the period of disability; in such event, the term of this Agreement shall be extended for the time such condition of force majeure is in effect. La Teko shall make all reasonable efforts to eliminate the cause of the force majeure condition. ARTICLE 20 - ENCUMBRANCES - ASSIGNMENT (a) Encumbrances - During the term of this Agreement, La Teko shall not allow liens or encumbrances which arise out of any act or omission upon the part of La Teko to attach to or remain on the Property. (b) Assignment- This Agreement shall be binding upon and inure to the benefit of La Teko and the University, and their respective heirs, assigns, affiliates, and successors. This Agreement may be assigned by any party upon the written notice to and written consent of the other party, except such consent shall not be required for any assignment for security purposes only. Said consent shall not be unreasonably withheld. Any purported assignment by any party without such notice or consent, or which if effective would change any right or obligation of the other party hereto, shall be void and unenforceable, it being the intent of the parties that the provisions of this Agreement shall run with the land. Further, no assignment by any party will be valid unless the assigning party has provided to the other party a written statement effective the date of the assignment, signed by the assignee, agreeing to be bound by the terms and conditions of this Agreement to the same extent and nature as the assigning party; and provided further that the assignee has given reasonable assurances of its ability to fully and faithfully perform all terms, conditions, and obligations of this Agreement, including without limitation the payment of Option Payments and the performance of Work Commitments. Notwithstanding the foregoing, in the event La Teko or its successors or assigns shall become insolvent, bankrupt, or make any assignment for the benefit of creditors, or if it or its interests herein shall be levied upon or sold under execution or other legal process, the University may terminate this Agreement. ARTICLE 21 - NOTICES Any notice hereunder shall be given in writing, delivered via certified or registered mail, return receipt requested, to the following addresses: La Teko: Robert Gentry, President La Teko Resources, Inc. 2173 University Avenue South, Suite 101 Fairbanks, Alaska 99709 Phone:(907) 474-2080 Fax: (907) 474-2082 The University: The University of Alaska Statewide Office of Land Management Northern Regional Office 910 Yukon Drive, Suite 211 Fairbanks, Alaska 99775-5280 Phone: (907) 474-7421 Fax: (907) 474-5972 or to other such address as may be provided from time to time. If such notice is so mailed, the act and time of the posting thereof shall be deemed the act and time of giving such notice. ARTICLE 22 - CONFIDENTIALITY The University and La Teko agree that all information developed or acquired as a result of work under this Agreement, including but not limited to information relating to ore reserves, mineral discoveries, mining methods, plans and production schedules, and other information, including the terms of this Agreement, shall be kept confidential and shall not be voluntarily released or made public by one party without the party's express prior written consent during such period that this Agreement is in effect; provided, however, that nothing herein shall be construed to interfere with any responsibility of the University or La Teko to make reasonable disclosures required under any applicable securities' public disclosure, or other laws. In the event either party deems it necessary to make such disclosures for the reasons stated, that party agrees to confer with the other party prior to making such disclosures. ARTICLE 23 - RECLAMATION On cessation of the Exploration or Development, or upon the termination of the rights and privileges granted herein by this Agreement, La Teko will, within one year of cessation or termination, reclaim that portion of the Surface Estate impacted by La Teko's Exploration or Development to a condition of use suitable for the use by the University in a way that portion of the Surface Estate was previously used, or to such alternate condition as La Teko may request and is approved by the University in writing. In the event that a regulatory agency requires additional reclamation work or monitoring beyond the one year period, the one year period shall be extended as the University deems appropriate provided that La Teko shall continue to insure and indemnify the University as required in this Agreement during the extension period. In any event, ail reclamation work and effects by La Teko shall be in accordance with the requirements of all applicable federal, state, and local laws and regulations, as amended. La Teko's obligations hereunder shall survive termination of this Agreement. ARTICLE 24 - PERFORMANCE BOND La Teko shall post a performance bond ("Bond") with the University as beneficiary in the amount of Twenty-five Thousand Dollars ($25,000). The purpose of the Bond is to ensure La Teko's full performance and observance of each and every provisions of the Agreement including reclamation. - If, within one (1) year after the termination or relinquishment of the Agreement, La Teko has satisfactorily performed all of its obligations under the Agreement, the University will release La Teko from the Bond. All bonding required to be provided by La Teko shall be issued by bonding companies authorized to do business in the State of Alaska. Bonding company selection shall be subject to prior written approval of the University. ARTICLE 25 - SAND, ROCK AND GRAVEL The University grants to La Teko its right to use all sand, rock, shot rock and gravel located on the Property for the benefit of the Property; provided no sand, rock, shot rock, or gravel is sold or transferred to any third party nor moved outside the boundaries of the Property. ARTICLE 26 - GENERAL (a) Entire Agreement - This Agreement, including the attached Exhibits, represents the entire understanding between the parties with respect to the subject matter of this Agreement, and no modification hereof shall be effective unless in writing and executed by the parties hereto. This Agreement shall be binding upon the successors and assigns of the parties hereto. (b) Titles - The titles to the respective articles hereof shall not be deemed a part of this Agreement but shall be regarded as having been used for convenience only. (c) Time - Time is of the essence in this Agreement. (d) Invalidity - If any provision of this Agreement is determined to be invalid, such invalidity shall not affect the enforceability of any other provision of this Agreement. (e) Interpretation - Venue - This Agreement shall be interpreted under the laws of the United States and the State of Alaska, and venue for any actions arising hereunder shall be in the Superior court of the Fourth Judicial District, State of Alaska, or in the United States District Court for the District of Alaska, as appropriate. (f) Construction - The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party hereto. (g) Recordation - Neither party shall record this Agreement; however, the University agrees to execute, upon request by La Teko, a short-form notice of this Agreement for purposes of recordation in the real property records of the Recording District in which the Property is located. (h) Relationship - This Agreement shall in no way be construed so as to create a joint venture, agency, employment or partnership relationship between the University and La Teko. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date first above set forth. UNIVERSITY OF ALASKA LA TEKO, INC. /s/ Martin Epstein /s/ Richard Hughes Director SOLM Project Manager STATE OF ALASKA ) )ss: FOURTH JUDICIAL DISTRICT ) On this 12th day of April, 1996, before me, the undersigned, a Notary Public in and for the State of Alaska, personally appeared Martin Epstein known or identified to me to be the Director SOLM of UNIVERSITY OF ALASKA, the individual who executed the instrument on behalf of said corporation, and acknowledged to me that such corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial seal the day and year in this certificate first above written. /s/ Notary Public for the State of Alaska My Commission Expires: STATE OF ALASKA ) )ss: FOURTH JUDICIAL DISTRICT ) On this 9th day of April, 1996, before me, the undersigned, a Notary Public in and for the State of Alaska, personally appeared Richard Hughes, of LA TEKO RESOURCES, INC., a corporation whose name is subscribed to the foregoing instrument and acknowledged to me that said officers executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial seal the day and year in this certificate first above written. /s/ Notary Public [map omitted] MINING LEASE AND AGREEMENT THIS MINING LEASE AGREEMENT (hereinafter referred to as the "Agreement') is made effective this day of (hereinafter referred to as the "Effective Date") between UNIVERSITY OF ALASKA, a corporation organized and existing under the Alaska State Constitution and under the laws of the State of Alaska, whose address is 910 Yukon Drive, Suite 211, Fairbanks, Alaska 99775 (hereinafter referred to as "University") and LA TEKO RESOURCES, INC., a Nevada corporation registered and qualified to do business in the State of Alaska, whose address is 2173 University Avenue South, Suite 101, Fairbanks, Alaska 99709 (hereinafter referred to as "La Teko"). RECITALS The purposes of this Agreement are to provide for La Teko's Exploration, Development, and Mining of the Mineral Estate owned by the University and described in Schedule "A", attached hereto and incorporated herein by this reference (hereinafter referred to as the "Mineral Estate"). The University owns the surface estate overlying the Mineral Estate (hereinafter referred to as the "Surface Estate"). The Mineral Estate and the Surface Estate when together referred to herein shall be known as the "Property." In consideration of the benefits and advantages to be gained by each of the parties and in consideration of the mutual covenants and promises hereinafter set forth, the parties agree as follows: ARTICLE 1 DEFINITIONS (a) "Commercial Production" means production or extraction of Minerals from the Property for commercial sale. Commercial Production shall be deemed to have commenced on the date of the first day of the month following the date on which La Teko has operated its mine for a period of sixty (60) days at not less than fifty percent (50%) capacity, as shall be defined in the Feasibility Study. Within 10 days after achieving Commercial Production, La Teko shall notify the University for record keeping and accounting purposes. La Teko shall immediately notify the University in writing whenever Commercial Production shall be suspended or ceased for any reason for m ore than 10 continuous days. (b) "Costs" shall mean any and all reasonable costs, expenses, and expenditures incurred or made by La Teko in its operations on the Property, including but not limited to costs, expenses, or expenditures made or incurred for construction, buildings, equipment, and the cost of installation, replacement, expansion, or modification thereof; and La Teko's costs, expenses, or expenditures made or incurred for exploration, development, mining, milling, haulage, and any and all other expenses, costs, or expenditures made for or on account of La Teko's operations on the Property; but not including any charge for depletion, depreciation, or amortization. Such costs shall more specifically, but not in limitation, include: (i) Costs of wages, supplies, salaries, and other services incurred by La Teko for the benefit of the Property while on the Property, it being understood, however, that any and all expenses or costs for services rendered by La Teko's engineers, geologists, payroll, data processing (except as relating to accounting), training and safety, and other personnel employed at the head office of La Teko or somewhere other than at the Property that are directly attributable to the Property on a specific assignment basis, shall be based on La Teko's actual cost thereof allocated on a prorate time basis with La Teko's other operations. Costs shall include not only the costs of actual wages and salaries but shall also include, but not be limited to, social security and unemployment taxes, workmen's compensation costs, vacation pay, disability benefits, life insurance, health and accident insurance, pension costs. (ii) Costs shall not include services performed by the officers or senior management of La Teko or for expenses incurred in the head office of La Teko relative to accounting, including salaries and related payroll expenses, postage, printing and stationery, auditing, directors' expense, stock transfer expense, bonuses, or other general corporate expenses of La Teko. In addition, costs shall not include the cost to La Teko of any judgment, lien or fine paid in connection with the property. (iii) Rental charges for machinery and/or equipment used by La Teko in connection with its operations hereunder shall be such rentals as are customarily charged in the mining industry for machinery and equipment of like character. (iv) All monies to be paid, if any, with respect to the Property, but not including royalties, rentals, or other payments to be paid to the University under Article 5 of this Agreement. (v) The annual cost of insurance premiums for all forms of insurance protection which La Teko carries with respect to its operations on the Property, including but not limited to fire, theft, property damage, machinery breakdown, worker's compensation and disability, and public liability. (vi) All taxes accrued and payable arising from La Teko's operation of the Property; provided, however, that federal and state income taxes and mining license taxes, if any, shall not be included as a Cost (c) "Development" means all preparations for the removal and recovery of Minerals from the Property, including the construction or installation of a mine, mill or any other improvements to be used for the Mining, handling, milling, processing, or other beneficiation of Minerals from the Property. (d) "Exploration" shall mean the activity, operations, or work performed for the purpose of ascertaining the existence, location, quantity, quality, or extent of deposits of Minerals within the Property, including drilling, assaying, geological, geophysical and geochemical surveys, studies, mapping, surveying, trenching, sampling (including bulk sampling), held support and engineering, on-site office and administration activities, and necessary road construction. (e) "Feasibility Study" shall mean for the purposes of this Agreement a written report that is prepared for the La Teko Board of Directors outlining an analysis is of the economic and commercial viability of conducting operations for the production, marketing, and sale of ores, Minerals, and other products produced from the Property and that recommends that all or part of the Property should be brought into Commercial Production. The Feasibility Study shall also outline the method by which Commercial Production should be achieved and continued. Such analysis shall be in a form satisfactory to substantial international financing institutions for the purpose of determining the advisability of providing project financing on a commercially competitive basis, taking into consideration all relevant criteria deemed to be both normal and prudent for the mining industry. (f) "Mineral or Minerals" means all metals, ores, Minerals, and materials of every kind and character whatsoever which would have been locatable on public domain lands under the General Mining Law of 1872, as amended (30 U.S.C. Section22, et seq.), but shall not include oil, gas and associated hydrocarbons, coal, sand, gravel, building stone, earth, soil, clay, surface and ground water, geothermal resources, or any materiel not currently locatable under such law. (g) "Mining" means the Mining, extracting, producing, handling, milling, or other processing of Minerals, and all activities on the Property attendant thereto. (h) "Net Operating Losses" shall mean such Operating Costs that are in excess of Net Smelter Returns. (i) "Net Operating Profits" shall mean Net Smelter Returns and any and all proceeds, revenues, and monies received by La Teko in connection with the Property, including but not limited to: (i) the proceeds (or prorate portion thereof) received from the sale, lease, rental, or other disposition of any property, the cost of which has been charged, in whole or in part, as a Cost to the operation of the Property; (ii) the gross insurance proceeds received (including proceeds paid to or held by a third party under a joint operating or similar agreement or otherwise) for loss of or damage to any property the cost of which has been charged, in whole or in part, as a Cost to the operation of the Property, less the actual costs incurred by La Teko in replacing or repairing the same; (iii) the gross proceeds of all judgments and claims collected (including proceeds paid to or held by a third party under a joint operating or similar agreement or otherwise) on account of an interest in the Property, or involving the Property or any portion thereof or interest therein, or involving any other property the cost of which has been charged, in whole or in part, as a Cost to the operation of the Property; less Operating Costs. (j) "Net Smelter Returns" means the amount paid to or for or on account of La Teko by or from a smelter or other purchaser (the "gross proceeds") for Minerals, including ores and concentrates thereof or other Mineral materials produced and sold from the Property but not less than the amount that would have been paid in bona fide arms length transaction, less the deductions specified below, but not more than the amount that would have been deducted in a bona fide arms length transaction: (i) All reasonable charges and penalties imposed by the smelter, refinery, or other purchaser or paid by La Teko, not including any costs of milling or concentrating ore; (ii) Reasonable sampling, weighing, and assaying charges; (iii) Reasonable marketing expenses attributable to the Minerals, ores, concentrates, or other Mineral materials sold; (iv) Government sales, severance, and production taxes (but not including any federal, state income taxes or Alaska's Mining License tax); and (v) Reasonable transportation charges, but not including the charges associated with transporting from mine to mill. (k) "Operating Costs" shall mean Costs incurred by La Teko after Commercial Production. (l) "Working Capital" represents the amount of money beyond fixed capital (those amounts generally capitalized under generally accepted accounting principles ("GAP") needed to begin the operation and meet subsequent obligations during project start-up. Without limitation to the foregoing, the cost items typically associated with working capital are: 1) inventories: (a) raw materials, (b) spare parts, (c) supplies, (c) materials-in-process, and (e) finished products; 2) accounts receivable; 3) accounts payable; and 4) cash on hand (payroll, utilities, etc.). ARTICLE 2 GRANT (a) Grant - The University does hereby lease, let, and demise to La Teko, its successors and assigns, the Property and any and all ores in or upon the Property. During the entire life of this Agreement, La Teko shall have the exclusive right to perform in or upon the Property and any end every part thereof such Exploration, Development, and Mining operations as La Teko may, in its sole discretion, wish to perform. La Teko shall be entitled to Mine and market for La Teko's sole account, upon the terms and conditions herein set out, any and all ore which may have been extracted from the Mineral Estate. La Teko shall also have the right to place or construct such buildings or other structures as La Teko may wish to place or construct on the Property and shall have the right to place or install in or upon the Property such machinery and equipment as La Teko may deem necessary for use in connection with La Teko's operations, and to do all other things reasonably related to such uses. The University furthermore grants to La Teko, its successors and assigns, the exclusive right to use shafts, openings, or pits in or upon the Property, and structures, facilities, equipment, roadways, haulageways, and all other appurtenances installed on the Property for the additional purpose of producing, removing, treating, or transporting ores from adjoining or nearby property owned or controlled by La Teko, for which La Teko s hall pay to the University a facilities charge of 0.5% of the Net Smelter Return value of ore from lands other than the Property, treated on or transported through or across the Property. La Teko's operations hereunder, and its mining of adjoining or nearby lands, maybe conducted upon the Property and upon such other lands as a single mining operation to the extent as if the Property and all such other lands constituted a single tract of land. La Teko shall have the right to commingle as set forth below. La Teko shall have the right, at any time during the term of this Agreement, to stockpile, for a period not to exceed six months, an ore or material Mined or produced from the Property at such place or places as La Teko may elect, either upon the Property or upon other lands owned or controlled by La Teko. Waste, overburden, surface stripping, and other materials from the Property only may be deposited on or of the Property, as further provided in Articles 8, 9, and 14(a). (b) Commingling - La Teko shall have the right to commingle ore and Minerals from the Property with ore from other lands and properties, provided that La Teko shall calculate from representative samples the average grade of the ore and shall weigh or measure the ore by volumetric survey, truck factors, or other industry practices, prior to commingling and in such a manner that will permit the computation of royalty payments to be made under the terms of this Agreement. If concentrates are produced from the commingled ores by La Teko, La Teko shall calculate from representative samples the average recovery percentage for all concentrates produced during the royalty payment period. Payments under this Agreement will be calculated on the teas is of the greater of: (1 ) the experienced recovery, or (2) the recovery that would have been achieved if the ores from the Property had been beneficiated separately in obtaining representative samples and calculating the average grade of the ore and average recovery percentages, La Teko will use procedures accepted in the mining and metallurgical industry which it believes suitable for the type of Mining and processing activity being conducted and, in the absence of fraud, its choice of such procedures shall be final and binding on the University. In addition, comparable procedures maybe used by La Teko to apportion penalty charges, if any, among the commingled ores, as imposed by the purchaser of such ores or concentrates. ARTICLE 3 REPRESENTATIONS AND WARRANTIES (a) Representations and Warranties of La Teko - La Teko makes the following representations and warranties effective the date hereof: (i) Corporate Status - La Teko is a corporation duly organized, existing, and in good standing under the laws of the State of Nevada, and is qualified to conduct business in Alaska. (ii) Corporate Authorization - The execution, delivery, and performance of this Agreement by La Teko has been duly authorized by all necessary corporate action on its part and will not violate any provision of the Certificate of Incorporation or Bylaws of La Teko or any provision of any agreement, indenture, instrument, lease, contract, or other undertaking to which La Teko is a party or by which La Teko or its property is bound or requires the consent of any third party, except consents, approvals, and licenses which have been obtained and are in effect. (iii) Broker's or finder's Fees - La Teko has not engaged or employed any broker or finder in connection with the negotiation, execution, or delivery of this Agreement, and no broker's or finder's fee or commission is due with respect thereto. (iv) Binding Obligation - When duly executed by the parties, this Agreement will constitute a valid and binding obligation of La Teko, enforceable against La Teko in accordance with its terms. (v) Diligent Development - La Teko diligently and reasonably shall Develop the Property, provided that such Development shall comply with all applicable laws, and shall conduct all operations on the Property in a careful, good, and workmanlike manner in accordance with accepted mining practices. (b) Representations and Warranties of the University - The University makes the following representations and warranties effective the date hereof: (i) Corporate Status - The University is a corporation existing and in good standing under the Constitution and the laws of the State of Alaska. (ii) Corporate Authorization - The execution, delivery and performance of this Agreement by the University has been duly authorized by all necessary corporate action on its part and will not violate any provision of the Articles of Incorporation or Bylaws of the University or any provision of any agreement, indenture, instrument, lease, contract, or other undertaking to which the University is a party or by which the University or its property is bound or require the consent of any third party, except consents, approvals, and licenses which have been obtained and are in effect. (iii) Broker's or Finder's Fees - The University has not engaged or employed any broker or finder in connection with the negotiation, execution, or delivery of this Agreement, and no broker's or finder's fee or commission is due with respect thereto. (iv) Binding Obligation - When duly executed by the parties, this Agreement will constitute a valid and binding obligation of the University, enforceable against the University in accordance with its terms. (v) Title to the Property - The University makes no representa- tions or warranties respecting title to the Property, the suitability of the Property to operations hereunder, the presence of any Minerals on, in, or under the Property, or the merchantability of any Minerals situated on, in, or under the Property. The Agreement is granted subject to all valid existing rights of third parties in and to the Property, if any. (vi) Lesser Interest - If the University's title to the Mineral Estate (or any portion thereof) is less than the entire interest or is subject to a superior adverse interest, La Teko shall have the right to elect to rescind this Agreement or accept such title as the University has by giving notice of such election to the University in accordance with Article 19. Since the payments set forth in Article 5 are predicated upon the University owning the entire interest in the Mineral Estate free and clear of any superior adverse interests, if the University owns less than the entire interest or such interest is subject to a superior adverse interest, then such payments shall be reduced proportionally. ARTICLE 4 TERM (a) This Agreement shall continue in full force and effect for a period of ten (10) years from the Effective Date hereof and for so long thereafter as ores or Minerals from the Property are being Mined. processed, or marketed on a continuing basis or other payments are being made to the University by La Teko; subject, however, to the provisions of Articles 14, 15, 16 and 17 of this Agreement and further subject to the condition that should La Teko either fail to reach Commercial Production within four (4) years of the completion and approval by La Teko's Board of Directors of its Feasibility Study for the project upon the Property or, upon having achieved the Commercial Production, cease Commercial Production, for any reason (except as provided in Article 17), for a continuous period of four (4) years, then the University shall have the right to terminate this Agreement upon thirty (30) days' notice to La Teko. (b) If La Teko is not in Commercial Production by the end of the ten year period discussed above, this Agreement maybe renewed for an additional four year period upon the written request of La Teko given to the University within six (6) months of the end of the ten year period, and upon La Teko demonstrating to the University's sole satisfaction that it is diligently pursuing Development and Commercial Production by providing satisfactory evidence including a completed and approved Feasibility Study and proof of financing, that Commercial Production will be achieved within one (1 ) year. ARTICLE 5 OPTION PAYMENT; ADVANCE MINIMUM AND PRODUCTION ROYALTIES La Teko shall pay any and all Costs incurred under this Agreement for the Exploration, Development, and Operation of the Property, and La Teko shall also pay to the University certain other amounts as set forth below. (a) Option Payment - La Teko shall pay to the University a $75,000 option payment (hereinafter referred to as "Option Payment") to the University upon execution of this Agreement. The Option Payment shall not be considered an advance minimum royalty payment and shall not be recoupable from the University's share of future royalties. (b) Advance Minimum Royalties - Until a production royalty as defined herein is payable, La Teko shall be obligated to pay the University annual advance minimum royalties as set forth below during the term of this Agreement, which amounts shall be recoupable from the University's share of future royalties, if any, related to the Property. The first payment shall be made upon La Teko's receipt of the executed Agreement from the University, the payment for each subsequent year as set forth below shall be made on or before the anniversary of the Effective date of this Agreement, for so long as this Agreement is in effect. Beginning upon the third year from the Effective date of this Agreement, the monetary amounts specified below to be paid annually as advance minimum royalties shall be adjusted proportionately, on an annual basis to the changes made in the Consumer Price Index for "All Items" based for Anchorage, Alaska. The base year for these payments shall be the second year from the Effective Date of the Agreement, and the parties shall use the most recent monthly Index published prior to the anniversary date of this Agreement. All payments made pursuant to this Article 5(a) shall be subject to proportionate reduction in accordance with Article 3(bXvii). MINIMUM PAYMENT AMOUNT DUE DATE $75,000.00 First anniversary of Effective Date of the Agreement $85,000.00 Second anniversary of Effective Date of the Agreement 595,00 0.00 Third anniversary of Effective Date of the Agreement $105,000.00 Fourth anniversary of Effective Date of the Agreement $115,000.00 Fifth anniversary of Effective Date of the Agreement and then a $10,000 increase annually thereafter up to a maximum Advance Minimum Royalty payment of $150,000, which shall be paid annually thereafter until production royalties are payable. (c) Production Royalties - The sum total of all Costs incurred by La Teko from and after the Effective date of this Agreement and prior to the commencement of Commercial Production, less the aggregate Net Smelter Returns received by La Teko prior to the Commercial Production, if any, shall be accumulated and carried forward. After commencement of the Commercial Production, La Teko shall retain ninety-seven percent (97%) of the Net Smelter Returns thereafter realized, and shall pay the University three percent (3%) of the Net Smelter Returns, until the total of such Net Smelter Returns realized by La Teko shall be equal to the sum of the total of all Costs incurred prior to the commencement of Commercial Production, and, if applicable, the total of all accumulated Net Losses incurred in any calendar quarter after commencement of the Commercial Production less Net Smelter Returns received prior to the commencement of the Commercial Production. After the above-mentioned retention has occurred, the University shall be entitled to receive a production royalty equal to four and one-half percent (4.5%) of total Net Smelter Returns for precious metals, and three percent (3.0%) for base metals, realized during each calendar quarter from La Teko's Mining of the Mineral Estate, but at no time after the commencement of Commercial Production, including any periods in which La Teko ceases Commercial Production, shall the royalty payment to the University be less than $150,000.00 plus CPI increase per year. All production royalties shall be paid to the University within thirty (30) days after the end of each calendar quarter in which they have accrued. (c) Provisional Royalty - If La Teko stockpiles any ores, Minerals, concentrates, or other products upon other property for a period longer than six (6) months, La Teko shall pay the University a provisional royalty of 50% of the estimated royalty. When such ores, Minerals, or other products are sold or processed by La Teko, La Teko shall pay to or recover from the University the difference between the provisional royalty paid and the amount of royalty determined as provided above and shall be paid within thirty days of processing. (d) Financial Reports - La Teko shall keep at the Property and/or at La Teko's Alaskan office accurate books of account and records, in accordance with GAP, covering the Mining operations related to the Property, including data related to Mining, milling, sale, and disposal of ores and concentrates (or other products) from the Property. During the term of this Agreement, La Teko shall, before the end of each calendar quarter, furnish written statements to the University showing, when applicable, the tonnage of ore Mined, the tonnage of ore milled, the tonnage of concentrates or other products produced therefrom, and a detailed statement of the computation of royalties paid and total Costs which have been charged by La Teko against the Property for the preceding quarter. Within ninety (90) days after the expiration of each lease year, La Teko shall deliver to the University a statement certified without material qualification by an independent CPA regularly retained by La Teko, setting forth the amount of Net Smelter Returns, Costs, and Net Operating Profits for each such lease year. La Teko represents and warrants that each of La Teko's income statements shall include all income of any sublessee made during the same period. If the University objects to all or any part of such statement, the University shall notify La Teko in writing thereof within nine (9) months after the close of the calendar year to which such statements apply, or within three (3) months after the receipt of the audit report for that calendar year, and such writing shall set out in detail the reason or reasons for such objections. If no such objections are made within said period, then the statement or statements shall be considered and treated as correct and shall not thereafter be subject to question. Any and all questions which may arise with respect to the Costs which La Teko charges against the Property; against Exploration, Development, and Mining; or against the treatment and sale of Minerals, or with respect to the accounting procedure which is employed in arriving at the proper settlements between La Teko and the University shall be settled, if possible, by conferences between the parties end shell be finally disposed of, if agreement is reached, by an exchange of letters. In case of any dispute between the parties arising under this Article 5(d) which cannot be settled between the parties, the same shall be submitted to a national accounting firm acceptable to both parties for final resolution. If a mutually acceptable accounting firm is not found, the choice of accounting firm (and no other issue) shall be referred to the American Arbitration Association. Upon selection of an accounting firm, each party shall describe its position with respect to the disputed issue in writing to said firm, with copies to the other party, and said firm shall render an opinion regarding the suitability of any charge based upon the terms of this Agreement and generally accepted accounting principles which shall be binding upon both parties. The costs associated with the resolution made by any firm of accountants shall be charged to Costs. All books and records of La Teko, insofar as they may relate to the operation of the Property under this Agreement, shall be open to inspection by the University or its agents or duly authorized representatives at reasonable times. Such books, records, and evidence shall be kept et least thirty-six(36) months after the expiration of the lease year to which the same pertain and, if the University shall inspect or audit La Teko's statement for such lease year, such books, records, and evidence shall continue to be kept until such inspection or audit shall have been concluded. The University, at it own expense, may make or have made audits of the records (by independent auditors ) connected with La Teko's operations of the Property, but not m ore than once each year. ARTICLE 6 WORK COMMITMENTS La Teko shall diligently, in good faith, and in a good workmanlike manner, begin to or prosecute Exploration, Development and Mining on the Property. La Teko shall perform the following amounts of work in connection with and in furtherance of the exploration, development or Mining of the Property Lease Year Amount ,~ During Lease Year 1 $ 500,000 During Lease Year 2 $ 750,000 During Lease Year 3 $1,000,000 During Lease Year 4 $1,250,000 During Lease Years and $1,500,000 each succeeding lease year La Teko shall have the right to carry forward excess Costs spent in any one year and apply those excess Costs towards the next year's Work Commitment due; provided, however, that La Teko shall expend no less than 20% of the Work Commitment for any one year in which La Teko carries forward excess Costs. Should La Teko fail to expend the above sums on or for the benefit of the Property on or before the due dates for such expenditures, in order to maintain this Agreement in good standing, La Teko shall pay to the University, within 10 days after the anniversary date of this Agreement, the difference between the amount due and the amount expended on or for the benefit of the Property for the applicable period. Pursuant to Article 14, the University may terminate this Agreement for La Teko's failure to expend the above referenced Work Commitment amounts or to make payment to the University in lieu thereof within the time periods specified above ARTICLE 7 SURFACE OBLIGATIONS OF LA TEKO (a) Before conducting any Exploration, Development and Mining Operations, La Teko shall submit a Plan of Operations ("Plan") to the University for its review and approval which shall not be unreasonably withheld, which sets forth the proposed activity or activities and the approximate location thereof. La Teko agrees to consult closely with the University as to the location of any facilities and improvements placed upon the Surface Estate. (b) In the course of exercising its rights under this Agreement, La Teko will, to the extent it can do so without interfering with the development of the Mineral Estate,- use reasonable care and will exert good faith efforts to minimize disruption or interference of the Surface Estate. (c) La Teko will preserve as far as practical the integrity of the Surface Estate consistent with its ability to conduct Exploration, Development and Mining Operations in the manner best suited to development of the Mineral Estate. (d) La Teko shall be responsible for obtaining all required permits and other governmental approvals necessary for its activities on the Surface Estate, and will comply with all federal, state and local laws and regulations pertaining to the conduct for its exploration and development operations or other related uses of the Surface Estate. The University will cooperate with La Teko in the acquisition of all permits and governmental approvals. (e) La Teko will conduct all Exploration. Development, and Mining Operations in a prudent, efficient, and workmanlike manner, in accordance with sound engineering and mining industry practices. All areas of La Teko's operations shall be kept in a neat clean, orderly, safe and sanitary condition. No littering shall be permitted and all trash, non-natural debris and other waste material resulting from its operations shall be disposed of in a manner approved by state and federal authorities. (f) La Teko agrees to store, transport, and dispose of all hazardous substances, as defined by AS 46.03.826, and all hazardous wastes, as defined by AS 46.03.900 or under any other applicable state or federal law, in accordance with all local, state, and federal laws, including the "Resource Conservation and Recovery Act" ("RCRA") and the "Comprehensive Environmental Response, Compensation and Liability Act" ("CERCLA"), as amended, regarding the same, and La Teko shall not dispose of any hazardous wastes upon the Property. Further, La Teko and the University acknowledge and agree that in the event mining wastes are regulated by CERCLA or by any other statute, La Teko may dispose of such wastes on the Property provided La Teko complies fully with such laws and shall be solely responsible for any contamination or other environmental damage found on the Property resulting from La Teko's operations, including the cost of clean-up. Hazardous substances and estimated quantities thereof shall be disclosed in the Plan of Operation prior to being brought onto the Property. At the end of each year, La Teko s hall notify the University of all hazardous substances and any hazardous wastes and the quantities brought to, stored upon, used on, or bans ported from the Property. (g) La Teko shall take all necessary precautions to prevent and suppress forest, brush, and grass fires, and no open fires shall be permitted on the Property. La Teko shall be responsible only for forest, brush, and grass fires which are proximately caused by La Teko, its employees, agents, and assigns; and La Teko, its agents, and assigns shall indemnify and hold the University harmless from claims or damages if such fires should cause injury or damage to the person or property of any third parties (h) La Teko shall protect all survey monuments, witness corners, reference monuments, and bearing trees against damage, destruction, or obliteration. Any damaged or obliterated monuments shall be reestablished by La Teko in accordance with accepted survey practices of the United States Department of Interior, Bureau of Land Management. (i) If requested, La Teko shall make a written report to the University on all matters relevant to the character, conduct, and status of operations. Upon completion of its operations, La Teko shall notify the University in writing. (j) La Teko shall not be permitted to use the Property to deposit, store, or dispose of any waste, overburden, surface stripping, and other materials from adjoining or nearby property owned or controlled by La Teko, without the express written permission from the University. (k) La Teko agrees that standing timber shall be protected to the maximum extent possible. (1) Prior to constructing, erecting, or installing any major buildings, structures, dams or other major facilities on the Property, La Teko shall reasonably determine, through the use of geological methods appropriate under the circumstances that the lands to be affected by such building, structures, dam s or other facilities do not contain deposits of Minerals that are likely to be mineable during the term of this Agreement. ARTICLE 8 ENVIRONMENTAL PROTECTION La Teko shall take all reasonable precautions to prevent improper disposal of hazardous wastes and the pollution of air and water by La Teko's operations. Any facilities for employees established on the Property shall be operated in a sanitary manner, and refuse and waste resulting from La Teko's use, servicing, repair, or abandonment of equipment shall be removed from the Property. It shall be La Teko's sole responsibility to comply with all applicable environmental laws or regulations, subject to La Teko's right to contest the same. Liability for any environmental or water quality damage that is caused by La Teko's lack of compliance with this Article shall be borne solely by La Teko. If the University finds evidence which reasonably indicates that air, land, water quality, or other environmental dam age has occurred or is about to occur, the University shall have the right, upon written notice to La Teko, to require La Teko or its contractors, agents, or assigns to cease immediately that portion of operations on the Property which is causing or is about to cause such air, land, water quality, or other environmental damage and to direct La Teko in writing to take immediate action to correct or eliminate said damage or threat thereof prior to recommencing such portions of operations. The University's rights under this provision shall not release La Teko of its obligation hereunder, nor shall it constitute a waiver of the University's rights as provided by this Agreement and/or by law, and shall not create an obligation on the University's part to provide for any inspections as to environmental practices of La Teko, or to take any responsibility whatsoever for La Teko's actions, it being agreed that compliance therefor is the sole responsibility of La Teko. Liability for any environmental or water quality damage that is caused by La Teko or its contractors, agents, or assigns shall be borne by and at the sole expense of La Teko. If La Teko fails or refuses to correct or repair any environmental damage within a reasonable time after having received written notice thereof from the University, and such environmental damage was caused by La Teko's failure to comply with applicable laws or with any obligation or covenant of this Agreement after being directed to do so, then the University shall have the right to contract with any qualified party to correct said condition, and La Teko shall pay to the University on demand for all costs including attorneys fees of said correction or repair. La Teko's obligations under this paragraph and the University's rights shall survive the termination of this Agreement. Notwithstanding any other provision, La Teko shall indemnify and defend the University from any end all losses, damages, expenses, claims, demands, and civil or criminal liabilities or penalties; clean up lawsuits and other proceedings; and all costs and expenses including damages, attorneys' fees, and disbursements which accrue to or are incurred by the University, arising directly or indirectly from, or out of, or which are in any way connected with La Teko's acts or omissions which cause environmental or water quality damage as defined by noncompliance with federal, state, and local laws, regulations or orders; or which cause losses, damages, expenses, claims, demands, or civil or criminal penalties or sanctions to be incurred. ARTICLE 9 RIGHT TO INSPECT The University or its authorized agents shall have the right to inspect La Teko's operations on the Property upon reasonable notice and during normal working hours. ARTICLE 10 WORK PROGRESS REPORTS On or before April 1 of each year of this Agreement, La Teko shall furnish to the University yearly progress reports showing the character and amount of work performed by La Teko on the Property during the preceding year and the place or places where work was performed and ore or material mined, and shall make available for the University's inspection, at the office where such records are kept, any other drill cuttings, cores, and other geological samples collected by La Teko under this Agreement, as well as provide for the University's inspection and reproduction all sample data and geological maps resulting from such work and all geologic reports supporting such progress reports. Any data, reports, or other information furnished to the University shall be the same as La Teko customarily prepares or obtains for its records. La Teko further agrees to supply the University with copies of all geological maps, cross-sections, drill logs, and other factual and/or interpretive or computer generated data or reports generated under the terms of this Agreement. The University shall keep confidential, as provided in Article 20, all information received from La Teko through such reports, samples, data and maps; and La Teko shall not be required to generate any reports or collect any data that it has not otherwise prepared or generated for its own use. ARTICLE 11 OWNERSHIP OF FACILITIES Any machinery, buildings, or equipment, including supplies or any end all other items which La Teko acquires for the benefit of the Property under this Agreement, shall belong to La Teko and may be removed by La Teko at any time this Agreement is in effect, and shall be removed within one year after termination of the Agreement; provided, however, that any proceeds realized from the sale of such machinery, buildings, or equipment acquired solely for the benefit of the Property and which have been charged to Costs hereunder shall be credited to Costs incurred by La Teko. In the event of termination of the Agreement after La Teko has commenced Commercial Production, La Teko shall martial all the available assets, including Working Capital, placed upon the Property by La Teko and charged to Costs (but excluding any capital assets which may belong solely to the University), and shall sell the same, and the proceeds therefrom shall be credited to Costs. Nothing herein prohibits the University from being a purchaser at any sale held by La Teko hereunder. Any machinery, buildings, or equipment, including supplies, not removed or sold within one year of termination shall, at University's sole discretion, upon election and written notice to La Teko by the University, become the property of the University free and clear of La Teko's interests, and the University shall be entitled to dispose, remove, or sell such property without any further interest or claim by La Teko. In the event that the University does not elect to accept machinery, buildings or equipment left on the Property within one year of termination, such machinery, buildings or equipment maybe disposed of or removed by the University and La Teko shall reimburse the University for all costs. In the event that a regulatory agency requires additional reclamation work on monitoring beyond the one year period, the one year period shall be extended as the University deems appropriate provided that La Teko shall continue to insure and indemnify the University as required by this Agreement during the extension period. ARTICLE 12 TAXES La Teko shall pay its own federal and state income taxes and mining license taxes, if any, and shall file its own returns related thereto based, in the case of income taxes, upon the income received by La Teko. Should any liens or encumbrances hereafter be created on the Property or on any Minerals therefrom as a result of failure by La Teko to pay taxes when due, pursuant to the preceding sentence, the University may, in addition to other remedies available at law, at its option, satisfy such liens or encumbrances, and La Teko shall reimburse the University for such amounts and any associated costs, including attorneys fees and court costs, upon notice thereof by the University. If La Teko should fail to repay the University within thirty (30) days of notice thereof, the University may serve notice of default to La Teko in accordance with Article 15. Any and all other taxes or licenses of whatsoever character, including, among others, real and personal property taxes related to the Property and relating to operations carried on after the Effective Date of this Agreement, shall be paid by La Teko and treated as Costs as defined in Article 1 of this Agreement. During the term of this Agreement, La Teko shall pay when due all taxes assessed against its personal property and all improvements placed upon the Property, and ad valorem taxes assessed against the Property which result from La Teko's activities on the Property. La Teko shall have the right, at its option, to contest, in the courts or otherwise, the validity or amount of any such taxes or assessments, if it deems the same unlawful, unjust, unequal, or excessive, or to take such other steps or proceedings as it deems necessary to secure a cancellation, reduction, readjustment, or equalization thereof, before it shall be required to pay the same. ARTICLE 13 COMPLIANCE WITH LAWS - SAFETY AND FIRE PROTECTION - INSURANCE AND INDEMNIFICATION (a) Compliance with Laws- During all periods in which La Teko is operating on the Property pursuant to this Agreement, and with respect to all work of whatsoever character in any manner connected therewith, La Teko shall comply with all laws and regulations of the State of Alaska, any legal subdivision thereof, and the United States of America, and all rules, permits, orders, and directives made in conformity "herewith. Without limitation of the foregoing, La Teko shall comply with all laws, regulations, permits, rules, orders, and directives relating to Mining, Alaska's mining license and notice, reclamation, mine waste disposal, fire prevention, safety, fisheries, environment, water quality and pollution, employees, and the Mine Safety and Health Act ("MSHA"). La Teko reserves the right to challenge any such laws, regulations, rules, required permits, orders, or directives if La Teko, in good faith, believes that the same are unconstitutional, unlawful, or are otherwise being directed against La Teko and La Teko's operations on the Property in an arbitrary or capricious manner. La Teko shall comply with all health, safety, and fire prevention measures prescribed by law. Should La Teko assume, during the term of this Agreement, any permits obtained by the University, La Teko shall be solely responsible for continuing compliance with such permits to the extent that such compliance is within the control of La Teko, but La Teko shall not be required to fulfill any requirements under such permits relating to conditions created by the University prior to La Teko's assumption of such permits. If any additional permits, permit waivers, or permit modifications or amendments are required in furtherance of La Teko's obligations under this Agreement, the University shall cooperate and provide all reasonable manner of assistance to La Teko in expediting additional permit applications and related matters. La Teko agrees to cease operations where required by laws, regulations, rules, permits, orders, and directives made in conformity/hereto, subject to La Teko's right as set forth above to challenge the same, without suspension of La Teko's obligations under Article 5 until said additional permits, permit waivers, modifications, or amendments are obtained. Upon expiration or termination of this Agreement or earlier upon the University's request, any permits, licenses, leases, or similar matters secured on behalf of or procured by La Teko hereunder which are no longer necessary or convenient to La Teko to conduct its operations upon the Property shall be transferred to the University, to the extent that La Teko has the right to effect such transfer. (b) Insurance and Indemnification (i) Insurance - Without limiting La Teko's indemnification, it is agreed that La Teko shall purchase, at its own expense, and maintain in force at all times during the term of this Agreement, the policies of insurance specified below. Where specific limits are shown, it is understood that they shall be the minimum acceptable limits. If La Teko's policy contains higher limits, the University shall be entitled to coverage to the extent of such higher limits. Certificates of Insurance must be furnished to the University upon signing this Agreement and must provide for thirty (30) day prior notice to the University of cancellation, nonrenewal or material change of the policies. Failure to furnish satisfactory evidence of insurance or the lapse of a policy is a default and grounds for termination of this Agreement. Each Workers' Compensation Insurance policy shall be endorsed with a waiver of subrogation in favor of the University. ALL other insurance policies required by this Agreement shall be endorsed to provide that such insurance shall apply as primary insurance and that any insurance or self insurance carried by the University will be excess only and will not contribute with the insurance required by this Agreement; shall be endorsed to name the University as an additional insured; and shall provide for a waiver of subrogation in favor of the University. All endorsements shall reference this Agreement. All insurance shall be on an occurrence and not a "claims made" basis. (a) Workers' Compensation Insurance: La Teko shall provide and maintain, for all employees of La Teko engaged in work under this Agreement, Workers' Compensation Insurance and Employer's Liability Insurance in accordance with the laws of the State of Alaska. La Teko shall be responsible for Workers' Compensation Insurance for any subcontractor who directly or indirectly provides services under this Agreement. This coverage must include statutory coverage for states in which employees are engaging in work and employer's liability protection not less than One Million Dollars ($1,000,000.00) per person, One Million Dollars ($1,000,000.00) per occurrence. Where applicable, coverage for all federal acts (i.e., U.S.L. & H and Jones Acts) must also be included. (b) Comprehensive (Commercial)-General Liability Insurance: With coverage limits not less than Two Million Dollars ($2,000,000.00) combined single limit per occurrence and annual aggregate where generally applicable, including premises-operations, independent contractors, products/completed operations, broad form property damage, blanket contractual and personal injury endorsements, which insurance shall include coverage for XCU (explosion, collapse and underground) hazard, completed operations and contractual liability. Limits may be a combination of primary and excess (umbrella) policy forms. (c) Comprehensive Automobile Liability Insurance: Covering all owned, hired, and non-owned vehicles with coverage limits not less than One Million Dollars ($1,000,000.00) combined single limit per accident bodily injury and property damage. (d) In the event La Teko acquires or uses aircraft in conjunction with its operations under this Agreement which are not covered under La Teko's insurance obligation under 15(b)(i)(a) above, La Teko shall then obtain liability and indemnity insurance with a combined single limit of not less than $2,000,000.00 The insurance shall be placed with an insurance carrier or carriers reasonably satisfactory to the University and, unless otherwise agreed, with a Best Guide rating of A/XIII and shall provide that no failure of La Teko to comply with any term or condition of this Agreement, or other conduct of La Teko, its agent, representatives, contractors, and employees, shall void or otherwise affect the protection under any insurance policy attached to the University. If La Teko fails to comply with these insurance requirements, the University may obtain and pay for such insurance and keep the same in force and effect, and La Teko shall pay the University on demand for the premium cost thereof. La Teko shall provide written proof of insurance, by a certificate of insurance, to the University, reflecting full compliance with the requirements set forth in Article 14(b)(i)(a) above. In order to maintain the same level of coverage that will exist at the commencement of this Agreement, the types and amounts of coverage called for herein shall be subject to review at the end of each five (5) year period from the Effective D ate of this Agreement, unless a major change in La Teko's operation on the Property occurs, in which case said review shall be done at the time of the occurrence and, if appropriate, the insurance requirement shall be adjusted upward or downward or extended as the parties may agree to provide the amounts and types of coverage then prudently carried by entities engaged in Exploration, Development, and Mining operations similar to those to be conducted pursuant to this Agreement. La Teko shall maintain insurance policies under which, at a minimum, the above-described amounts of insurance shall be maintained in effect throughout the time during which such insurance is required under this Agreement, even if successful claims are asserted against any such policies during their terms. La Teko shall not acquire any rights whatsoever under this Agreement until La Teko has submitted to the University proof, furnished by the insurance carriers, of current coverage as required herein, which must specifically include workers' compensation insurance from an insurance company or association authorized to transact the business of workers' compensation insurance in the State of Alaska, or proof, furnished by the Workers' Compensation Board of the State of Alaska of a current certificate of self-insurance issued by the Board. If the University should receive notice that en applicable insurance policy under this Agreement has been canceled without being replaced by a comparable policy, the University may obtain and pay for such insurance and keep the same in force and effect, and La Teko shall pay the University on demand for the premium costs thereof. (ii) Indemnification - La Teko agrees to assume full control and responsibility for the activities or conduct of its agents or employees with respect to this Agreement. La Teko shall defend and save harmless the University or any representative thereof from and against all losses, damages, liabilities, expenses, claim s, and demands of whatsoever character. direct or indirect, arising out of, or in any way connected with, claims or demands resulting from any act or omission of La Teko or any employee, subcontractor, agent, or other representative of La Teko relating to performance under the terms of this Agreement whether such claims or demands arise during or after termination of this Agreement. (c) No Third Party Beneficiary- This Agreement specifies the rights and obligations of the parties hereto and is not intended to create any rights or causes of action in any third parties. ARTICLE 14 TERMINATION AND RELINQUISHMENT OF PROPERTY If La Teko fails to make the payments required by Article 5 or Article 6, this Agreement shall automatically terminate; and any payments by La Teko theretofore made to the University shall be the sole property of the University. Upon termination, the Property shall no longer be subject to this Agreement and La Teko shall release and quitclaim to the University any and all of its interests in the Property. Liabilities and obligations to the University accrued prior to the date of such termination or relinquishment and any obligations hereunder arising upon termination or relinquishment as a result of operations upon the Property by La Teko Agreement shall survive termination or relinquishment. ARTICLE 15 DEFAULTS - FORFEITURE The University shall have the right to terminate this Agreement only for default by La Teko. In the event that the University claims that a default has occurred or is occurring in La Teko's performance of any obligation or obligations under the terms of this Agreement, the University may serve written notice upon La Teko that La Teko is, or is claimed to be, in default, stating in such notice the particulars of the alleged default and requesting the correction thereof. Upon receipt of any such notice, La Teko shall within thirty (30) days from and after receipt of such notice fully correct any and all defaults specified in such notice. Notwithstanding the foregoing, in the case of defaults which threaten or affect health or safety standards, La Teko shall begin the correction of said defaults immediately upon notice or as soon as practicable thereafter. Neither the service of the notice nor the performance of any acts by La Teko aimed to meet all or any of the alleged defaults shall be deemed an admission or presumption that La Teko has failed to perform all of its obligations hereunder. If any default or defaults which have been specified in any such notice are not remedied in the manner specified herein, then the University may, at its option and by written notice, declare this Agreement terminated. In the event the University terminates this Agreement on account of breach by La Teko, La Teko shall be under no further liability to the University as a result of La Teko's activities on the Property or as a result of the terms of this Agreement from and after the date of such termination, except for liabilities end obligations, including lienable matters, to the University accrued prior to the date of such termination and its obligations hereunder arising upon termination as a result of operations upon the Property by La Teko. ARTICLE 16 SURRENDER OF POSSESSION ON TERMINATION Upon termination of this Agreement for any reason, La Teko, subject to the obligations under Article 14 and Article 21, will surrender peaceable possession of the Property, and the University shall thereupon have the right to take full and complete possession thereof, subject to the rights of La Teko to go upon the Property for a period not to exceed one year for the purpose of reclamation, and removing and disposing of the machinery, equipment, and supplies as further provided in Article 11 of this Agreement. Within one (1 ) year after termination, La Teko agrees to return all exploration samples, drill cuttings and drill cores, and other samples collected d-tiring this Agreement, and to provide the University with the location and description of all exploration work and test results, a report of the status and location of any remaining reserves, and copies of all factual data generated by La Teko's activities on the Property prior to termination. All such data, reports, or other information furnished to the University shall be the same as La Teko customarily prepares or obtains for its own records, and La Teko shall not be required to generate any reports or collect any data that it has not otherwise prepared or generated for its own use. Upon such termination, La Teko shall leave all artificial ground support in place without warranty as to condition or fitness, but La Teko shall not otherwise be obligated to leave any mine workings or openings in the Property, including ventilation openings, in any particular condition or state of repair, except as otherwise required by federal, state, or local laws and the requirements of Article 8 and Article 21. Upon termination La Teko shall release and quitclaim to the University all of its interest in the property. ARTICLE 17 FORCE MAJEURE Except for all royalties due to the University by La Teko pursuant to Article 5, should La Teko be prevented or delayed from performing any other obligations of this Agreement by reason of an act of nature, or fire, flood, delay in transportation, war, insurrection or mob violence, then and in such event any such failure to perform shall not tee deemed a breach of this Agreement. Performance of said obligations shall be suspended during such period of disability, and the time for the performance of said obligations shall be extended fore period equal to the period of disability; in such event the term of this Agreement shall be extended for the time such condition of force majeure is in effect. La Teko shall make all reasonable efforts to eliminate the cause of the force majeure condition. ARTICLE 18 ENCUMBRANCES - - ASSIGNMENTS (a) Encumbrances - During the term of this Agreement, La Teko shall not allow liens or encumbrances which arise out of any act or omission upon the part of La Teko to remain on or attach to the Property. (b) Assignment- This Agreement shall be binding upon and inure to the benefit of La Teko and the University, and their respective heirs, assigns, affiliates, and successors. This Agreement may be assigned by any party upon the written notice to and the written consent of the other party, except such consent shall not be required for any assignment for security purposes only, as provided in Article 18(b). Said consent shall not be unreasonably withheld. Any purported assignment by any party without such notice, consent, or which if effective would change any right or obligation of the other party hereto, shall be void and unenforceable, it being the intent of the parties that the provisions of this Agreements hall run with the land. Further, no assignment by any party will be valid unless the assigning party has provided to the other party a written statement effective the date of the assignment, signed by the assignee, agreeing to be bound by the terms and conditions of this Agreement to the same extent and nature as the assigning party; and provided further that the assignee has given reasonable assurances of its ability to fully and faithfully perform all terms, conditions, and obligations of this Agreement, including without limitation, the payment of royalties and the performance of work commitments. ARTICLE 19 NOTICES Any notice hereunder shall be given in writing, delivered via certified or registered mail, return receipt requested, to the following addresses: La Teko: Robert Gentry, President La Teko Resources, Inc. 2173 University Avenue South, Suite 101 Fairbanks, Alaska 99709 Phone: (907) 474-2080 Fax: (907) 474-2082 The University: The University of Alaska Statewide Office of Land Management Northern Regional Office 910 Yukon Drive, Suite 211 Fairbanks, Alaska 99775-5280 Phone: (907) 474-7421 Fax: (907) 474-972 or to other such addresses as maybe provided from time to time. If such notice is so mailed, the act and time of the posting thereof shall be deemed the act and time of giving such notice. ARTICLE 20 CONFIDENTIALITY The University and La Teko mutually agree that all information developed or acquired as a result of work under this Agreement, including but not limited to information relating to ore reserves, Mineral discoveries, Mining methods, plans and production schedules, and other information, including the terms of this Agreement, shall be kept confidential and shall not be voluntarily released or made public by one party without the other parties express prior written consent during such period that this Agreement is in effect; provided, however, that nothing herein shall be construed to interfere with any responsibility of the University or La Teko to make reasonable disclosures required under any applicable securities, public disclosure, or other laws. In the event any party deems it necessary to make such disclosures for the reasons stated, that party agrees to confer with the other party prior to making such disclosures. ARTICLE 21 RECLAMATION On cessation of the Exploration, Development or Mining, or upon the termination of the rights and privileges granted herein by this Agreement, La Teko will, within one year of the cessation or termination, reclaim that portion of the Surface Estate impacted by La Teko's Exploration, Development, or Mining to a condition of use suitable for use by the University in a way that portion of the Surface Estate was previously used, or to such reasonable alternate condition as maybe approved by the University in writing. in any event, all reclamation work by La Teko shall be in accordance with the requirements of all applicable federal, state, and local laws and regulations, as amended. La Teko's obligations hereunder shall survive termination of this Agreement. La Teko shall undertake reclamation as an ongoing task and will reclaim unneeded portions of the Property as soon as possible. In the event that a regulatory agency requires additional reclamation work or monitoring beyond the one year period, the one year period shall be extended as the University deems appropriate, provided that La Teko shall insure and indemnify the University as required in this Agreement during the extension period. ARTICLE 22 PERFORMANCE BOND La Teko shall post a performance bond ("Bond") with the University as beneficiary in the amount of One Hundred Thousand Dollars ($100,000). The purpose of the Bond is to ensure La Teko's full performance and observance of each and every provision of the Agreement including reclamation. If, within one (1) year after the termination or relinquishment of the Agreement, La Teko has satisfactorily performed all of its obligations under the Agreement, the University will release La Teko from the Bond. All bonding required to be provided by La Teko shall be issued by bonding companies authorized to do business in the State of Alaska. Bonding company selection shall be subject to prior written approval of the University. ARTICLE 23 WATER USE RIGHTS La Teko may appropriate and use water upon or appurtenant to the Property in connection with its respective interest under this Agreement, and in accordance with applicable state law. ARTICLE 24 SAND, ROCK AND GRAVEL The University grants to La Teko its right to use all sand, rock shot rock and gravel located on the Property for the benefit of the Property; provided no sand, rock shot rock or gravel is sold or transferred to any third party nor moved outside the boundaries of the Property. ARTICLE 25 GENERAL (a) This Agreement, including the attached Schedules, is the entire understanding between the parties with respect to the subject matter of this Agreement, and no modification hereof shall be effective unless in writing and executed by the parties hereto. This Agreement shall be binding upon the successors and assigns of the parties hereto. (b) The titles to the respective articles hereof shall not be deemed a part of this Agreement but shall be regarded as having been used for convenience only. (c) Time is of the essence in this Agreement. (d) If any provision of this Agreement is determined to be invalid, such invalidity shall not affect the enforceability of any other provision of this Agreement. (e) This Agreement shall be interpreted under the laws of the United States and the State of Alaska, and venue for any actions arising hereunder shall be in the Superior Courts of the Fourth Judicial District, the State of Alaska or in the United States District Court for the District of Alaska, as appropriate. (f) The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party hereto. (g) Neither party shall record this Agreement, however, the University agrees to execute, upon request by La Teko, a short-form notice of this Agreement for purposes of recordation in the real property records of the recording districts in which the Property is located. (h) This Agreement shall in no way be construed so as to create a joint venture, agency, employment or partnership relationship between the University and La Teko. (i) Any amount not paid when due hereunder shall bear simple interest at the maximum rate allowed by law from time to time. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date first above set forth. UNIVERSITY OF ALASKA LA TEKO RESOURCES, INC. By By EX-27 7 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1996, AND STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9 MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,227,195 500,913 14,148 0 6,295 1,299,190 218,858 689,413 12,446,668 738,300 0 18,045,617 0 0 0 12,446,668 0 0 0 1,097,710 (7,407) 0 (7,164 (1,083,139) 4,797 (1,087,936) 0 0 0 (1,087,936) (.046) (.046)
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