RIYADH PROPERTY
OPTION EXERCISE AGREEMENT
This Option Exercise Agreement (the "Agreement") is entered into this
20th day of April, 2007 among OROVI GHANA LIMITED, a company
incorporated under the laws of Ghana (the "Optionor"), PINNACLE
RESOURCES, INC., a corporation incorporated under the laws of Colorado
("Pinnacle"), GOLDEN STAR RESOURCES LTD., a corporation amalgamated
under the federal laws of Canada ("Golden Star") and Golden Star
(Bogoso/Prestea) Limited (previously call Bogoso Gold Limited), a
limited liability company, incorporated under the laws of Ghana (the
"Optionee").
1. WHEREAS the Optionor, Orovi Corporation, Golden Star and the
Optionee entered into an option agreement (the "Option Agreement")
dated as of November 15, 1999 as amend by letter agreements on
November 8, 2000, August 1, 2002, June 11, 2003 and June 11, 2004
pursuant to which the Optionee was granted an option to acquire a
100% interest in that certain gold prospecting license granted to
Riyadh Mining Company Limited ("Riyadh") commonly referred to as the
"Riyadh Property");
2. AND WHEREAS Pursuant to a Deed of Transfer dated 9th December
2003, Pinnacle acquired from Orovi Corporation 460 shares which
Orovi Corporation represented as being all issued and outstanding
securities of the Optionor (the "Majority Interest") and was
substituted for Orovi Corporation in the Option Agreement pursuant
to the letter agreement dated June 11, 2003;
3. AND WHEREAS it has now been legally established that as of the
date Pinnacle acquired the Majority Interest, 14 out of the 460
issued and outstanding shares of the Optionor (the "Minority
Interest") were owned by Bugudon Mining Company Limited ("Bugudon")
and the said Minority Interest was subsequently acquire by the
Optionee for a total consideration of US$125,000 pursuant to a Court
settlement dated 22/08/2006 in respect of the Accra High Court Suit
No. A (IV) 1/2006 instituted by Bugudon against the Optionee (the
"Bugudon Litigation").
4. AND WHEREAS pursuant to an agreement (the "Loan Agreement")
dated 12th July 2005 made among Pinnacle, the Optionor, Golden Star
and the Optionee the parties acknowledged agreed and confirmed that
the Purchase Price (as that term is defined in the Option Agreement)
shall be US$470,00 notwithstanding any provisions of the Option
Agreement to the contrary and that US$270,000 of the Purchase Price
had been advanced to Pinnacle and the Optionor prior to the date of
the Loan Agreement and further that there will be no further
increases to the Purchase Price pursuant to Section 2.1 of the
Option Agreement.
5. AND WHEREAS pursuant to the Loan Agreement, Golden Star
advanced an amount of US$145,690 (the "Principal Amount") to
Pinnacle on the specific condition that the said Principal Amount
shall be due and payable without further demand on June 30, 2006
(the "Maturity Date") failing which Golden Star and the Optionee
shall be entitled at any time upon written notice to Pinnacle and
the Optionor, to convert any Principal Amount outstanding into the
Purchase Price such that the amount of the Purchase Price to be paid
under the Option Agreement in connection with the exercise of the
Option shall be reduced by the amount of the Principal Amount so
converted.
6. AND WHEREAS Pinnacle represented to Golden Star and the
Optionor as of the date of the Loan Agreement that it had entered
into a valid and subsisting agreement (the "Memorandum of Agreement"
dated 3rd November 2003 with Riyadh pursuant to which Riyadh had
agreed to assign and transfer it 7.5% Net Smelter Royalty ("NSR")
interest in the Riyadh Property which interest would include
entitlement to 10% of the Purchase Price payable under the Option
Agreement.
7. AND WHEREAS Riyadh subsequently challenged the legal validity
of the Memorandum of Agreement by instituting a Civil Suit No.
BDC/11/05 in the High Court, Acera (the "Riyadh Litigation") and the
said High Court by a judgment dated 13th February, 2007 ordered that
the Memorandum of Agreement be set aside as rescinded by Riyadh and
thereby restoring the 7.5% NSR interest held by Riyadh in the Riyadh
Property. The High Court also ordered Pinnacle to pay to Riyadh the
total sum of US$22,145 made up of (a) US$20,000 being 10% of the
US$200,000 Pinnacle had received as part of the Purchase Price and
(b) $20,000,000 (i.e. US$2,145 at the prevailing bank rate) as costs
of the litigation. Golden Star has upon mutual agreement with
Pinnacle paid to Riyadh the said sum of $US22,145 which amount shall
be set off against the Purchase Price payable under the Option
Agreement.
8. AND WHEREAS at the request of Pinnacle, Golden Star expended an
amount of US$15,000 to defend the Riyadh Litigation on behalf of
Pinnacle upon the mutual agreement that the said sum of US$15,000
shall also be set off against the Purchase Price due and payable
under the Option Agreement.
9. AND WHEREAS Pinnacle defaulted in the payment of the Principal
Amount on the Maturity Date and Golden Star and Pinnacle have
mutually agreed to convert into the Purchase Price the aggregate sum
of US$190335 representing the unpaid Principal Amount of US$145,690,
the sum of US$1500 BEING LEGAL EXPENSES INCURRED BY Golden Star on
behalf of Pinnacle in the defense of the Riyadh Litigation ("Riydah
Litigation Expenses") and the sum of US$22,145 being legal costs
awarded against Pinnacle in respect of the Riyadh Litigation
("Riyadh Legal Costs") which has been settled by Golden Star on
behalf of Pinnacle and leaving an outstanding amount of US$17,165.00
payable by Golden Star and the Optionee to Pinnacle and the
Optionee.
10. AND WHEREAS the Optionee now wishes to exercise the Option on
te terms an conditions agreed with the Optionor and as set out
herein.
11. AND WHEREAS capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Option Agreement, ad
the Loan Agreement.
NOW THEREFORE IN CONSIDERTION of th premises and the mutual covenants
contained in this Agreement and other good and valuable consideration
(the receipt and sufficient of which are hereby irrevocably
acknowledged), the parties agree as follows:
1. Purchase
Pursuant to the Loan Agreement, Pinnacle and the Optionor hereby
acknowledge, confirm to and agree with, Golden Star and the Optionee
that the sum of US$190,335 representing the Principal Amount under the
Loan Agreement, the Riyadh Litigation Expenses, Riyadh ▇▇▇▇ Costs and
the cost of renewing the Riyadh Prospecting License shall be converted
into the Purchase Price effective at the Closing Date. Accordingly,
notwithstanding, any provision of the Option Agreement, including,
without limitation, section 2.9 and 2.11 thereof, the Optionee would be
deemed to have automatically exercised the Option and become the fully
vested owner of a 100% undivided interest in the Property, without the
need to take any further action, immediately upon the payment by the
Optionee to the Optionor of the sum of US$17,165.00 at closing, such
payment to be made on or before April 20th, 2007 (the "Closing Date").
2. Representation and Warranties of the Optionor and Pinnacle
The optionor and Pinnacle do hereby jointly and severally represent and
warrant to the Optionee and Golden Star as follows and the Optionor and
Pinnacle acknowledge and confirm that the Optionee and Golden tar are
relying upon such representation and warranties in connection with the
transactions contemplated herein and that the representations and
warranties shall be true and correct on the Closing Date as if made on
and as of such date;
a) the Optionor is the beneficial and registered owner of a
100% interest in the License;
b) the License is in good standing, and free and clear of all
liens, charges, encumbrances and the rights, claims and
interests of any third party, and has been duly registered and
recorded and is valid and in full force and effect in
accordance with the Mining Law;
c) no illegal or undue payments or influence were made or
used in obtaining the License and its renewal;
d) the Optionor has the full and undisputed right to deal
with the License and any successor Mineral Right;
e) there are no actions, suits or legal, administrative or
other proceedings or investigations pending or to the best
knowledge of the Optionor and Pinnacle, threatened before any
court, agency, or other tribunal to which the Optionor or
Pinnacle is a party or in respect of the Property or the
License or against any of the property, assets or business of
the Optionor and/or Pinnacle which might materially and
adversely affect the License, the Property or the business
prospects or financial condition of the Optionor or Pinnacle
and the Optionor does not know of any facts which might result
in any such action, suit proceeding or investigation;
f) each of the Optionor and Pinnacle is a corporation duly
incorporate and in good standing under laws of its
jurisdiction of incorporation and is qualified to do business
and is in good standing in those jurisdiction were it is
necessary in order to carry out the purposes of this
Agreement;
g) each of the Optionor and Pinnacle has the capacity to
enter into and perform this Agreement and the transactions
contemplated hereby and all corporate and other actions
required to authorize it to enter into and perform this
Agreement have been properly and validly taken; and
h) this Agreement has been duly executed and delivered by the
Optionor and Pinnacle and is valid and binding upon it in
accordance with its terms.
3. Representations and Warranties of the Optionee and Golden Star
The Optionee and Golden Star do hereby jointly severally represent and
warrant to the Optionor an Pinnacle as follows and the Optionee and
Golden Star acknowledge and confirm that the Optionor and Pinnacle are
relying upon such representations and warranties in connection with the
transactions contemplated herein and that the representations and
warranties shall be true and correct on the Closing Date as if made on
and as of such date:
a) each of the Optionee and Golden Star is a corporation duly
incorporated or amalgamated and in good standing under the
laws of its jurisdiction of incorporation or continuance and
is qualified to do business and is in good standing in those
jurisdictions where it is necessary in order to carry out the
purposes of this Agreement.
b) each of the Optionee and Golden Star has the capacity to
enter into and perform this Agreement and the transactions
contemplated hereby and all corporate and other actions
required to authorize it to enter into and perform this
Agreement have been properly and validly taken; and
(a) C) this Agreement has been duly executed and delivered by
each of the Optionee and Golden Star and is valid and
binding upon in accordance with its terms.
4. Survival of Representations and Warranties
No investigations made by or on behalf of either party hereto at any
time shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty made by either
party. No waiver by either party of any condition, in whole or in
part, shall operate as a waiver of any other condition. The
representations and warranties contained in Sections 2 and 3 of this
Agreement respectively shall survive the making of this Agreement and
the Closing for a period of one year provided however that if a claim
for breach of any such representation or warranty is brought prior to
the expiration of such one year period such representation or warranty
shall, for purposes of the claim, survive the one year period until
such claim is finally resolved and all obligations with respect thereto
have been fully satisfied.
5. Conditions for Closing
The obligations of the Optionee hereunder shall be conditional upon the
Optionee receiving the following on the Closing Date:
a) the representations and warranties of the Optionor and
Pinnacle contained in this Agreement shall be true and correct
in all material respects as of the Closing Date and with the
same force and effect as if made on the Closing Date; and
b) evidence satisfactory to the Optionee and Gold Star that
Orovi Ghana and Pinnacle have obtained all necessary corporate
approvals for entering into this agreement, execution and
delivery of a Deed of Assignment in respect of the Riyadh
Property in favor of the Optionee and Golden Star together
with a duly signed letter addressed to the Minerals Commission
applying for the approval of the Minister of Lands, Forestry
and Mines for the assignment of the Riyadh Property to the
Optionee and Golden Star.
If any of the above closing conditions have not been satisfied on or
before the Closing Date Golden Star and/or the Optionee may, in their
sole discretion, (i) waive any of the above closing conditions, (ii)
make any of the above closing conditions post-closing matters to be
satisfied by the Optionee or Orovi Ghana as soon as possible following
the Closing Date and in any event, within 30 business days of the
Closing Date.
6. Closing
The closing of the exercise of the Option shall take place on the
Closing Date at the principal executive offices of Golden Star in ▇▇▇▇
▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (or at such other place
as may be agreed to in writing by the parties).
7. Indemnity by the Optionor and Pinnacle
The Optionor and Pinnacle hereby agree to jointly and severally
indemnify and save harmless the Optionee and Golden Star from all
claims, debts, damages, causes of action, suits and loss actually
incurred by the Optionee and/or Golden Star as a result of any breach
by the Optionor and/or Pinnacle or inaccuracy of any representation or
warranty contained in this Agreement.
8. Indemnity by Optionee and Golden Star
The Optionee and Golden Star hereby agree to jointly and severally
indemnify and save harmless the Optionor and Pinnacle from all claims,
debts, damages, causes of action, suits and losses actually incurred by
the Optionor and/or Pinnacle a a result of any breach by the Optionee
and/or Golden Star or inaccuracy of any representation or warranty
contained in this Agreement.
9. Arbitration
Any dispute arising out of or in connection with Agreement, including
any question regarding its existence, validity or termination, shall be
exclusively resolved by arbitration in accordance with the Arbitration
Act of Ghana 1961 (Act 38) or any statutory modifications or
replacement thereof.
10. Governing Law
This Agreement and the rights an obligations and relations of the
parties hereto shall be governed by, and construed in accordance with,
the laws of Ghana.
11. Counterparts.
This Agreement may be executed in any number of counterparts.
12. Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
13. Further Documents
Each party upon the request of the others, shall do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments,
transfers, conveyances, powers of attorney and assurances as may be
reasonable necessary or desirable to effect compete consummation of te
transactions contemplated by this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement.
OROVI GHANA LIMITED
By: /s/RA. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇▇
Title: Director
PINNACLE RESOURCES, INC.
By: /s/▇.▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇▇
Title: Director
GOLDEN STAR RESOURCES LTD.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
Title: Vice President Corporate Development
GOLDEN STAR (BOGOSO/PRESTEA) LIMITED
By: /s/Amadeus ▇▇▇▇▇ ▇▇▇▇
---------------------------
Name: Amadeus ▇▇▇▇▇ ▇▇▇▇
Title: Director