OPTION AGREEMENT
THIS AGREEMENT made as of the 20th day of May, 2001.
BETWEEN:
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(the "Optionor")
OF THE FIRST PART
AND:
PINECREST VENTURES, INC.,
a company duly incorporated pursuant to the laws
of the state of Nevada, and having an office at
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(the "Optionee")
OF THE SECOND PART
WHEREAS:
(a) The Optionor is the owner of certain mineral claims located in
the Slocan Mining Division of British Columbia;
(b) The Optionor has agreed to grant an exclusive option to the
Optionee to acquire an interest in and to the Property, on the
terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the sum of $1.00 now paid by the Optionee to the Optionor (the receipt
of which is hereby acknowledged), the parties agree as follows:
DEFINITIONS
1. For the purposes of this Agreement the following words and
phrases shall have the following meanings, namely:
(a) "Exploration Expenditures" means the sum of:
(i) all costs of acquisition and maintenance of the Property, all
expenditures on the exploration and development of the
property, and all other costs and expenses of whatsoever kind
or nature, including those of a capital nature, incurred or
chargeable by the Optionee with respect to the exploration of
the Property; and
(ii) as compensation for general overhead expenses which the
Optionor may incur, an amount equal to 10% of all amounts
included in subparagraph(i) in each year but only 5% of such
amounts when paid by the Optionor under any contract involving
payments by it in excess of $100,000 in one year;
(b) "Option" means the option to acquire a 70% undivided interest in
and to the Property as provided in this Agreement;
(c) "Option Period" means the period from the date of this Agreement
to and including the date of exercise or termination of the
Option;
(d) "Property" means the mineral claim described in Schedule "A"
hereto including any replacement or successor claims, and all
mining leases and other mining interests derived from any such
claims. Any reference herein to any mineral claim comprising
the Property includes any mineral leases or other interests into
which such mineral claim may have been converted;
(e) "Property Rights"means all licenses, permits, easements, rights-
of-way, certificates and other approvals obtained by either of
the parties either before or after the date of this Agreement
and necessary for the exploration of the Property;
(f) "Shares" means the up to 55,000 common shares in the capital
of the Optionee to be issued to the Optionor pursuant to the
exercise of the Option.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPTIONOR
2. (a) The Optionor represents and warrants to and covenants
with the Optionee that:
(i) it is legally entitled to hold the Property and the Property
Rights and will remain so entitled until the interest of
the Optionor in the Property which is subject to the Option
has been duly transferred to the Optionee as contemplated
hereby;
(ii) it is, and at the time of each transfer to the Optionee of an
interest in the mineral Claims comprising the Property pursuant
to the exercise of the Option it will be, the recorded holder
and beneficial owner of all of the mineral claims comprising the
Property free and clear of all liens, charges and claims of
others, and no taxes or rentals are or will be due in respect of
any of the mineral claims;
(a) the mineral claims comprising the Property have been duly and
validly located and recorded pursuant to the laws of the
jurisdiction in which the Property is situate and are in good
standing with respect to all filings, fees, taxes,
assessments, work commitments or other conditions on the date
hereof and until the dates set opposite the respective names
thereof in Schedule "A";
(b) there are not any adverse claim or challenges against or to the
ownership of or title to any of the mineral claims comprising
the Property, nor to the knowledge of the Optionor is
there any basis therefore, and there are no outstanding
agreements or options to acquire or purchase the Property or any
portion thereof, and no person has any royalty or other interest
whatsoever in production from any of the mineral claims
comprising the Property;
(c) no proceedings are pending for, and the Optionor is unaware of
any basis for the institution of any proceedings leading to
the placing of the Optionor in bankruptcy or subject to any
other laws governing the affairs of insolvent persons;
(b) The representations and warranties contained in this
section are provided for the exclusive benefit of the
Optionee, and a breach of any one or more thereof may be
waived by the Optionee in whole or in part at any time
without prejudice to its rights in respect of any other
breach of the same or any other representation or warranty,
and the representations and warranties contained in this
section shall survive the execution of this Agreement
and of any transfers, assignments, deeds or further
documents respecting the Property.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPTIONEE
3. (a) The Optionee represents and warrants to and covenants
with the Optionor that:
(i) it has been duly incorporated, amalgamated or continued and
validly exists as a corporation in good standing under
the laws of its jurisdiction of incorporation, amalgamation or
continuation;
(ii) it is lawfully authorized to hold mineral claims and real
property under the laws of the jurisdiction in which the Property
is situate;
(iii) it has duly obtained all corporate authorizations for the
execution of this Agreement and for the performance of this
Agreement by it, and the consummation of the transactions herein
contemplated will not conflict with or result in any breach of
any covenants or agreements contained in, or constitute a default
under, or result in the creation of any encumbrance under the
provisions of the Articles or the constating documents of the
Optionee or any shareholders' or directors resolution, indenture,
agreement or other instrument whatsoever to which the
optionee is a party or by which it is bound or to which it
or the Property may be subject;
(iv) no proceedings are pending for, and the Optionee is unaware of
any basis for the institution of any proceedings leading to, the
dissolution or winding up of the Optionee or the placing of the
Optionee in bankruptcy or subject to any other laws governing
the affairs of insolvent corporations;
(v) the Shares will, at the time of delivery to the
Optionor, be duly authorized and validly allotted and
issued as fully paid and non-assessable free of any liens,
charges or encumbrances;
(b) The representations and warranties contained in this
section are provided for the exclusively benefit of the Optionor
and a breach of any one or more thereof may be waived by the
Optionor in whole or in part at any time without prejudice to its
rights in respect of any other breach of the same or any other
representation or warranty, and the representations and warranties
contained in this section shall survive the execution hereof.
(c) The parties acknowledge and agree that the certificates
representing the Shares shall be endorsed with the following
legend pursuant to the United States Securities Act of 1933:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND ARE
PROPOSED TO BE ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY
REGULATION S PROMULGATED UNDER THE ACT. UPON ANY SALE,
SUCH SECURITIES MAY NOT BE REOFFERED FOR SALE OR
RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
GRANT AND EXERCISE OF OPTION
4. (a) The Optionor hereby grants to the Optionee the
sole and exclusive right and option to acquire a 70% undivided
interest in and to the Property free and clear of all charges,
encumbrances and claims.
(b) The Option shall be exercised by the Optionee:
(i) paying the Optionor $1,000.00 U.S. on the execution of this
Agreement, the receipt of which is hereby acknowledged by the
Optionor;
(ii) allotting and issuing to the Optionor, as fully paid and non-
assessable, the Shares as follows:
(A) 5,000 shares forthwith upon execution of this Agreement;
(B) 50,000 shares upon the completion of the third phase of an
exploration program on the Property on or before June 30, 2003
(iii) incurring Exploration Expenditures of $140,000 U.S. on the
Property on a three-phase exploration program as follows:
(A) $7,500 U.S. on or before November 30, 2001;
(B) a further $12,500 U.S. on or before June 30, 2002; and
(C) a further $120,000 U.S. on or before June 30, 2003.
In the event that the Optionee spends, in any of the above periods,
less than the specified sum, it may pay to the Optionor the difference
between the amount it actually spent and the specified sum before the
expiry of that period in full satisfaction of the Exploration
Expenditures to be incurred. In the event that the Optionee spends, in
any period, more than the specified sum, the excess shall be carried
forward and applied to the Exploration Expenditures to be incurred in
succeeding periods.
The Option shall be deemed to be exercised upon the Optionee
making all payments issuing all shares and incurring all
Exploration Expenditures in accordance with this Paragraph 4(b).
(c) if and when the Option has been exercised, a 70% undivided right,
title and interest in and to the Property shall vest in the Optionee
free and clear of all charges, encumbrances and claims.
TRANSFER OF PROPERTY
5 . The Optionor shall, forthwith after the exercise of the Option
by the Optionee, deliver to the Optionee duly executed transfers
of the appropriate interest in the Property which shall have been
acquired by the Optionee upon exercise of the Option.
RIGHT OF ENTRY
6. Throughout the Option Period the directors and officers of the
Optionee and its servants, agents and independent contractors, shall
have the right in respect of the Property to:
(a) enter thereon;
(b) have exclusive and quiet possession thereof,
(c) do such prospecting, exploration, development and other
mining work thereon and thereunder as the Optionee in its sole
discretion may determine advisable;
(d) bring upon and erect upon the Property such buildings, plant,
machinery and equipment as the Optionee may deem advisable; and
(e) remove therefrom and dispose of reasonable quantities of ores,
minerals and metals for the purposes of obtaining assays or making
other tests.
OBLIGATIONS OF THE OPTIONEE DURING OPTION PERIOD
7. During the Option Period the Optionee shall:
(a) maintain in good standing those minerals claims comprising the
Property by the doing and filing of assessment work or the making of
payments in lieu thereof, by the payment of taxes and rentals, and the
performance of all other actions which may be necessary in the regard
and in order to keep such minerals claims free and clear of all
liens and other charges arising from the Optionee's activities thereon
except those at the time contested in good faith by the Optionee;
(b) permit the directors, officers, employees and designated
consultants of the Optionor, at their own risk and expense, access to
the Property at all reasonable times, and the Optionor agrees to
indemnify the Optionee against and to save it harmless from all costs,
claims, liabilities and expenses that the Optionee may incur or
suffer as a result of any injury (including injury causing death) to
any director, officer, employee or designated consultant of the
Optionor while on the Property;
(c) do all work on the Property in a good and workmanlike fashion
and in accordance with all applicable laws, regulations, orders and
ordinances of any governmental authority;
(d) indemnify and save the Optionor harmless in respect of any
and all costs, claims, liabilities and expenses arising out of the
Optionee's activities on the Property, but the Optionee shall incur no
obligation hereunder in respect of claims arising or damages
suffered after termination of the Option if upon termination of
the Option any workings on or improvement to the Property made by
the Optionee are left in a safe condition;
(e) permit the Optionor, at its own expense, reasonable access
to the results of the work done on the Property during the last
completed calendar year,
(f) deliver to the Optionor, forthwith upon receipt thereof, copies
of all reports, maps, assay results and other technical data
compiled by or prepared at the direction of the Optionee with respect
to the Property.
TERMINATION OF OPTION BY OPTIONEE
8. (a) The Option shall terminate:
(i) upon the Optionee failing to incur or make any
expenditure or issuance of shares which must be incurred or made or
issued in exercise of the Option; or
(ii) at any other time, by the Optionee giving notice of such
termination to the Optionor.
(b) If the Option is terminated the Optionee shall:
(i) leave in good standing for a period of at least 12 months
from the termination of the Option Period those mineral claims
comprising the Property;
(ii) deliver or make available at no cost to the Optionor
within 90 days of such termination, all drill core, copies of all
reports, maps, assay results and other relevant technical data
compiled by, prepared at the direction of, or in the possession of the
Optionee with respect to the Property and not theretofore furnished to
the Optionor.
(c) Notwithstanding the termination of the Option, the Optionee
shall have the right, within a period of 180 days following the end of
the Option Period, to remove from the Property all buildings, plant,
equipment, machinery, tools, appliances and supplies which have been
brought upon the Property by or on behalf of the Optionee, and any such
property not removed within such 180 day period shall thereafter become
the property of the Optionor.
TRANSFERS
9. (a) The Optionee may at any time either during the Option Period
or thereafter, sell, transfer or otherwise dispose of all or any
portion of its interest in and to the Property and this Agreement
provided that any purchaser, grantee or transferee of any such
interest shall have first delivered to the Optionor its agreement
relating to this Agreement and to the Property, containing:
(i) a covenant to perform all the obligations of the
Optionee to be performed under this Agreement in respect of the
interest to be acquired by it from the Optionee to the same
extent as if this Agreement had been originally executed by such
purchaser, grantee or transferee; and
(ii) a provision subjecting any further sale, transfer or other
disposition of such interest in the Property and this Agreement or
any portion thereof to the restrictions contained in this paragraph
(a).
(b) No assignment by the Optionee of any interest less than its
entire interest in this Agreement and in the Property shall, as
between the optionee and the Optionor, discharge it from any of its
obligations hereunder, but upon the transfer by the Optionee of the
entire interest at the time held by it in this Agreement,
whether to one or more transferees and whether in one or in a number
of successive transfer, the Optionee shall be deemed to be
discharged from all obligations hereunder save and except for the
fulfillment of contractual commitment accrued due prior to the date
on which the Optionee shall have no further interest in this
Agreement.
(c) If the Optionor should receive a bona fide offer from an
independent third party (the "Proposed Purchaser")dealing at arms's
length with the Optionor to purchase all or a part of its interest
in the Property, which offer the Optionor desires to accept, or if the
Optionor intends to sell all or a part of its interest in the Property:
(i) The Optionor shall first offer (the "Offer) such interest in
writing to the Optionee upon terms no less favourable than those
offered by the Proposed Purchaser or intended to be offered by the
Optionor, as the case may be.
(ii) The Offer shall specify the price, terms and conditions of such
sale, the name of the Proposed Purchaser and shall, in the case of an
intended offer by the Optionor, disclose the person or persons to
whom the Optionor intends to offer its interest and, if the offer
received by the Optionor from the Proposed Purchaser provides for
any consideration payable to the Optionor otherwise than in cash, the
Offer shall include the Optionor's good faith estimate of the cash
equivalent of the non-cash consideration.
(iii) If within a period of 60 days of the receipt of the Offer the
Optionee notifies the Optionor in writing that it will accept the
Offer, the Optionor shall be bound to sell such interest to the
Optionee on the terms and conditions of the Offer. If the Offer so
accepted by the Optionee contains the Optionor's good faith
estimate of the cash equivalent of the non-cash consideration as
aforesaid, and if the Optionee disagrees with the Optionor's best
estimate, the Optionee shall so notify the Optionor at the time of
acceptance and the Optionee shall, in such notice, specify what it
considers, in good faith, the fair cash equivalent to be resulting
purchase price. If the Optionee so notifies the Optionor, the
acceptance by the Optionee shall be effective and binding upon the
Optionor and the Optionee, and the cash equivalent of any such non-
cash consideration shall be determined by binding arbitration and
shall be payable by the Optionee, subject to prepayment as hereinafter
provided, within 60 days following its determination by
arbitration. The Optionee shall in such case pay to the Optionor,
against receipt of an absolute transfer of clear and unencumbered title
to the interest of the Optionor being sold, the total purchase price
which is specified in its notice to the Optionor and such amount
shall be credited to the amount determined following arbitration of
the cash equivalent of any non-cash consideration.
(iv) If the Optionee fails to notify the Optionor before the
expiration of the time limited therefor that it will purchase the
interest offered, the Optionor may sell and transfer such
interest to the Proposed Purchaser at the price and on the terms and
conditions specified in the Offer for a period of 60 days, but the
terms of this paragraph shall again apply to such interest if the
sale to the Proposed Purchaser is not completed within such 60
days.
(v) Any sale hereunder shall be conditional upon the Proposed
Purchaser delivering a written undertaking to the Optionee, in
form and substance satisfactory to its counsel, to be bound by
the terms and conditions of this Agreement.
SURRENDER OF PROPERTY INTERESTS PRIOR TO TERMINATION OF AGREEMENT
10. The Optionee may at any time during the Option Period elect to
abandon any one or more of the mineral claims comprised in the
Property by giving notice to the Optionor of such intention.
Any claims so abandoned shall be in good standing under the laws of the
jurisdiction in which they are situated for at least 12 months from
the date of abandonment. Upon any such abandonment, the mineral
claims so abandoned shall for all purposes of this Agreement cease
to form part of the Property and, if title to such claims has been
transferred to the Optionee the Optionee shall retransfer such
title to the Optionor at the Optionee's expense.
FORCE MAJEURE
11. (a) If the Optionee is at any time either during, the
Option Period or thereafter prevented or delayed in complying with any
provisions of this Agreement by reason of strikes, lock-outs, labour
shortages, power shortages, fuel shortages, fires, wars, acts of
God, governmental regulations restricting normal operations, shipping
delays or any other reason or reasons, other than lack of funds, beyond
the control of the Optionee, the time limited for the performance by
the Optionee of its obligations hereunder shall be extended by a
period of time equal in length to the period of each such
prevention or delay, but nothing herein shall discharge the Optionee
from its obligations hereunder to maintain the Property in good
standing;
(b) The Optionee shall give prompt notice to the Optionor of each
event of force majeure and upon cessation of such event shall
furnish to the Optionor with notice to that effect together with
particulars of the number of days by which the obligations of the
Optionee hereunder have been extended by virtue of such event of
force majeure and all preceding events of force majeure.
CONFIDENTIAL INFORMATION
12. No information furnished by the Optionee to the Optionor
hereunder in respect of the activities carried out on the Property by
the Optionee, or related to the sale of minerals, ore, bullion or
other product derived from the Property, shall be published or
disclosed by the Optionor without the prior written consent of the
Optionee, but such consent in respect of the reporting of factual
data shall not be unreasonably withheld, and shall not be
withheld in respect of information required to be publicly
disclosed pursuant to applicable securities or corporation laws,
regulations or policies.
ARBITRATION
13. (a) All questions or matters in dispute under this
Agreement shall be submitted to arbitration pursuant to the terms
hereof.
(b) It shall be a condition precedent to the right of any party to
submit any matter to arbitration to the provisions hereof, that any
party intending to refer any matter to arbitration shall have given not
less than 10 days prior notice of its intention to do so to the other
party together with particulars of the matter in dispute. On the
expiration of such 10 days, the party who gave such notice may
proceed to refer the dispute to arbitration as provided in paragraph
(c).
(c) The party desiring arbitration shall appoint one arbitrator, and
shall notify the other party of such appointment, and the other party
shall, within 15 days after receiving such notice, either consent
to the appointment of such arbitrator which shall then carry
out the arbitration or appoint an arbitrator, and the two arbitrators
so named, before proceeding to act, shall, within 30 days of the
appointment of the last appointed arbitrator, unanimously agree on the
appointment of a third arbitrator to act with them and be chairman of
the arbitration herein provided for. If the other party shall fail
to appoint an arbitrator within 15 days after receiving notice of the
appointment of the first arbitrator, the first arbitrator shall be
the only arbitrator. If the two arbitrators appointed by the parties
shall be able to agree on the appointment of the chairman, the
chairman shall be appointed under the provisions of the
Commercial Arbitration Act of British Columbia. Except as specifically
otherwise provided in this section, the arbitration herein provided
for shall be conducted in accordance with such Act. The chairman, or
in the case where only one arbitrator is appointed, the single
arbitrator, shall fix a time and place in Vancouver, British Columbia,
for the purpose of hearing the evidence and representations of the
parties, and he shall preside over the arbitration and determine all
questions of procedure not provided for under such Act or this section.
After hearing any evidence and representations that the parties may
submit, the single arbitrator or the arbitrators, as the case may be,
hall make an award and reduce the same to writing, and deliver one copy
thereof to each of the parties. The expense of the arbitration
shall be paid as specified in the award.
(d) The parties agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of such arbitrator,
shall be final and binding upon each of them.
DEFAULT
14. If at any time during the Option Period the Optionee is in
default of any provision in this Agreement (other than the
provisions of subparagraph 4(b) for which no notice of default need be
given), the Optionor may terminate this Agreement but only if:
(a) it shall have first given to the Optionee a notice of
default containing particulars of the obligation which the Optionee
has not performed, or the warranty breached; and
(b) the Optionee has not, within 45 days following delivery of such
notice of default, to cured such default or commenced proceedings to
cure such default by appropriate payment or perfomance, the
Optionee hereby agreeing that should it so commence to cure any
default it will prosecute the same to completion without undue delay.
Should the Optionee fail to comply with the provision of
subparagraph (b), the Optionor may thereafter terminate this
Agreement by giving notice thereof to the Optionee.
NOTICES
15. Each notice, demand or other communication required or permitted
to be given under this Agreement shall be in writing and shall be
delivered, telegraphed or telecopied to such party at the address for
such party specified above. The date of receipt of such notice,
demand or other communication shall be the date of delivery thereof
if delivered or telegraphed or, if given by telecopier, shall be deemed
conclusively to be the next business day. Either party may at any time
and from time to time notify t he other arty in writing of a change
of address and the new address to which notice shall be given to it
thereafter further change.
GENERAL
16. (a) This Agreement shall supersede and replace any other
agreement or arrangement whether oral or written, heretofore
existing between the parties in respect of the subject matter of this
Agreement.
(b) No consent or waiver expressed or implied by either party in
respect of any breach or default by the other in the performance by
such other of its obligations hereunder shall be deemed or
construed to be a consent to or a waiver of any other breach or
default.
(c) The parties shall promptly execute or cause to be executed all
documents, deeds, conveyances and other instruments of further
assurance and do such further and other acts which may be reasonably
necessary or advisable to carry out fully the intent of this
Agreement or to record wherever appropriate the respective interest
from time to time of the parties in the Property.
(d) This Agreement shall enure to the benefit of and be binding
upon the parties and their respective successors and permitted
assigns.
(e) This Agreement shall be governed by and construed in accordance
with the laws of British Columbia.
(f) Time shall be of the essence in this Agreement.
(g) Wherever the neuter and singular is used in this Agreement it
shall be deemed to include the plural, masculine and feminine as the
case may be.
(h) Except where otherwise provided herein, any reference in this
Agreement to currency shall be deemed to be Canadian currency.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
SIGNED, SEALED AND DELIVERED )
BY )
in the presence of: )
) /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ )
-------------------------------- ) -------------------------
Signature ) Signature
▇. ▇▇▇▇▇▇▇ )
-------------------------------- )
Name )
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ )
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇ )
__________________________________)
Address )
THE COMMON SEAL OF
PINECREST VENTURES, INC.
was hereunto affixed in the
presence of:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
________________________________ C/S
Authorized Signatory
SCHEDULE "A"
Located Mineral Claims
SCHEDULE "A"
LOCATED MINERAL CLAIMS
Claim Name Record Number Year of Expiry
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▇▇▇▇▇▇ 1 385937 APRIL 29, 2002
All located in the Slocan Mining Division, British Columbia