Exhibit 10.3
DATED DECEMBER 3, 1998
(1) TOUCAN MINING LIMITED
- and -
(2) TOUCAN GOLD CORPORATION INC.
- and -
(3) ANAGRAM LIMITED
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OPTION AGREEMENT
RE
MINERADORA DE BAUXITA LTDA
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MATHESON ORMSBY PRENTICE
POUNTNEY HILL HOUSE
6 LAURENCE POUNTNEY HILL
LONDON EC4R 0BL
TEL: 0171 404 0998
FAX: 0171 583 5644
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THIS AGREEMENT is made the 3rd day of December, 1998
BETWEEN:
(1) TOUCAN MINING LIMITED, a private limited company incorporated under the
laws of Isle of Man whose registered office is at Celtic House,
Victoria Street, Douglas, Isle of Man (the "Optionor"); and
(2) TOUCAN GOLD CORPORATION INC., a public limited company incorporated
under the laws of the State of Delaware, and whose Principal Executive
Offices are situate at 8201 Preston Road, Suite 600, Dallas, Texas
75225, USA, (the "Parent"); and
(3) ANAGRAM LIMITED a private limited company incorporated under the laws
of the Isle of Man whose registered office is at Celtic House, Victoria
Street, Douglas, Isle of Man, (the "Optionee"):
RECITALS:
(A) Mineradora de Bauxita Ltda ("the Company") is a company
incorporated under the laws of Brazil and has an authorised share capital of
R$10,000 comprising 10,000 quotas of R$1 each.
(B) The Optionor is the registered owner of the entire issued share
capital of the Company (hereafter referred to as the "Option Shares") and has
agreed to grant an option to the Optionee to purchase the Option Shares of the
Company. In addition the Parent has agreed to grant to the Optionee an option to
acquire the Inter-Company Debt (as defined herein) on the terms and subject to
the conditions set out herein.
NOW IT IS AGREED as follows:
1. Interpretation
In this Agreement the following words and phrases shall have
the following meanings:
"Assignment of Loan Note" means the assignment of the Inter-Company
Debt from the Parent to the Optionee in the
agreed form and attached hereto in
Schedule 4;
"the Claims" means the priority exploration claims
and applications of the Company in
respect of various locations in the
Cuiaba region, Brazil, as more fully
set out in Schedule 5;
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"Exercise Date" means the date on which the Option Notice is
given;
"Inter-Company Debt" means all monies owing and due by the
Company to the Parent as evidenced more
particularly in the Loan Note attached hereto
as Schedule 3;
"the Option" means the options referred to in Clause 2
below;
"Option Notice" means a notice in the form set out in
Schedule 1 below;
"Option Period" means the period commencing on 1
November 1998 and expiring on
the happening of the first of the
following four events, namely:
(i) the Option is exercised by the
Optionee; or
(ii) the Optionee notifies
the Optionor in writing
that it wishes to terminate
the Option; or
(iii) 30 June 1999, or such
later date as may be
agreed by all the
parties to the Option
Agreement; or
(iv) the breach by the
Optionee of its
obligation more
particularly referred
to in Clause 5.1(iv)
herein;
"Option Price" means the consideration for the
acquisition of the Option Shares
and the acquisition of the
Inter-Company Debt as set out
respectively in the Share Purchase
Agreement and the Assignment of Loan
Note;
"Option Shares" means the entire issued share capital of the
Company legally and beneficially owned by
the Optionor;
"R$" means Reals, the lawful currency of Brazil;
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"Share Purchase Agreement" means the agreement between the parties
hereto in the agreed form and attached hereto
in Schedule 2;
"US$" means the lawful currency of the United
States of America;
"Warrantors" means the Optionor and the Parent;
"(British Pound)" Sterling, the lawful currency of the United
Kingdom.
1.2 A document is in "the agreed form" if it is in the form
agreed between and initialled by or on behalf of the parties hereto on or before
the date hereof and annexed hereto.
2. The Option
2.1 Subject to the terms and conditions hereinafter appearing
and in consideration of the assumption by the Optionee of the obligations set
out in Clause 5 below by the Optionor the Optionor hereby grants to the Optionee
an option to purchase from the Optionor at the Option Price the Option Shares,
free from all charges, liens and encumbrances and together with the right to
receive and retain all dividends and other distributions declared paid or made
thereon at any time after the Exercise Date and with the benefit of all accrued
benefits rights and privileges attaching thereto at the Exercise Date.
2.2 Subject to the terms and conditions hereinafter appearing
and in consideration of the payment by the Optionee to the Parent of US$275,000
which shall be payable by the Optionee within three days after the date hereof,
the Parent hereby grants to the Optionee an Option to purchase the Inter-Company
Debt for the Option Price.
3. Exercise of the Option
3.1 The Option may only be exercised by the Optionee during
the Option Period by the Optionee giving the Option Notice to the Optionor and
the Parent.
3.2 The Option shall only be exercisable on one occasion and
in respect of the whole of the Option Shares and the Inter-Company Debt.
4. Obligations of Optionor during the Option Period and thereafter
The Optionor shall be responsible during the Option Period and at any
time thereafter in this instance to ensure the prompt payment of all creditors
of the Company as at 1 November 1998 some (but not necessarily all) of which are
detailed in the list of creditors in the agreed form. For the avoidance of doubt
and for the sake of clarity notwithstanding that a specific creditor of the
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Company is not specifically referred to in the agreed form list but specifically
relates to activities of the Company whether by act or omission prior to 1
November 1998 these shall be the responsibility of the Optionor.
5. Obligations of Optionee during the Option Period
5.1 The Optionee shall;
(i) as soon as reasonably practicable hereafter
commence and thereafter diligently proceed with and complete a survey
of the claims including a ground geophysical orientation survey,
additional geological mapping and an airborne geophysical survey (to
include magnetics and radio metrics) (the "Exploration Plan");
(ii) prepare and complete all appropriate plans, logs
and records of the Exploration Plan and shall supply copies thereof to
the Company at no cost to the Company;
(iii) in so far as the Optionee shall not have
expended the sum of US$500,000 on the Exploration Plan by the end of
the Option Period (which, for the avoidance of all doubt, incorporates
all expenditure of the Optionee referred to in subclauses (iv) and (v)
below) then if the Option shall not be exercised the Optionee shall pay
to the Optionor at the end of the Option Period an amount equal to the
difference between the amount that it shall have so expended and the
sum of US$500,000
(iv) assume responsibility for and pay all reasonable
overheads and other costs incurred by the Company as from 1st November
1998 and relating to the acitivites of the Company after 1 November
1998 until the end of the Option Period. For the avoidance of all
doubt, such reasonable costs are to include the salary of Mr David
Carmichael, all annual exploration fees and any taxation that may
become payable on the registration of the Claims under the laws of
Brazil during the Option Period;
(v) on the signing hereof pay to the Optionor an
agreed sum being the amount of the overheads and other costs incurred
by the Company during the period from 1 November 1998 until the date
hereof as agreed by the parties; and
(vi) for the avoidance of doubt in the event that the
Option shall not be exercised none of the Company the Optionor or the
Parent shall be liable to refund to the Optionee any money paid by the
Optionee pursuant to the provisions of sub-clauses (iv) and (v) hereof.
5.2 The Optionor shall procure that the Company will in so far
as it is able and at the cost of the Optionee give the Optionee full access to
the Claims, office facilities, documentation, information, staff and give the
Optionee all other necessary assistance in order to facilitate the exploration
referred to in this Clause 5.
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5.3 The Optionee hereby undertakes to act reasonably to
protect and not dissipate the assets of the Company or do any such thing which
may adversely effect the Claims during the Option Period in any way whatsoever
by the Company, the Parent and the Optionor or indeed any other third party.
5.4 For the sake of clarity, if the Option is not exercised by
the Optionee the Optionee shall not take any action that may impede the use by
the Optionor of the Exploration Plan pursuant to the laws of Brazil.
6. Committee
6.1 The Optionor and the Optionee hereby agree to establish a
Committee during the Option Period, consisting of two representatives of each of
the Optionor and Optionee. The Committee will approve and monitor the
Exploration Plan undertaken by the Optionee during the Option Period together
with the incurring of any liabilities and the making of any disbursements of the
Company.
6.2 It is hereby agreed and acknowledged that save with the
consent of the Optionee (which consent shall not be unreasonably withheld or
delayed) the Company shall not during the Option Period:
(i) withdraw any of the Claims;
(ii) incur any new obligations of any nature
whatsoever;
(iii) enter into any joint venture involving the
Claims;
(iv) do any matter which would fundamentally alter
the corporate or financial status of the
Company.
7. Completion
7.1 Completion of the sale and purchase of the Option Shares
and the assumption of the Inter-Company Debt shall take place within seven days
of the Exercise Date and shall be in accordance with the terms and conditions of
the Share Purchase Agreement.
7.2 The Parent confirms that in further consideration of an
amount of (British Pound) 1 duly acknowledged by the Parent hereunder and
received from the Optionee it hereby unconditionally agrees to guarantee all the
obligations of the Optionor arising hereunder to the Optionee.
8. Matters requiring the Optionee's consent
Without prejudice to the provisions of clause 6, the Optionor hereby
covenants with and undertakes to the Optionee that whilst the Option remains
unexercised it will procure so far as it lawfully can (whether by exercising or
procuring the exercise of voting rights or otherwise) that the Company shall in
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no circumstances increase its issued share capital or loan capital (if any) or
create or issue any warrants, options or other rights over its issued share
capital nor purchase or redeem any of its issued share capital from time to time
and shall not without the prior written consent of the Optionee (which shall not
be unreasonably withheld or delayed):-
(i) sell, lease, transfer or otherwise dispose of its under-
taking or a substantial part thereof;
(ii) consolidate, amalgamate with or acquire any interest in
any other company, association partnership or legal entity;
(iii) change the nature of its business;
(iv) acquire or dispose of land or any interest in land;
(v) cease any business operation;
(vi) make or have any borrowing, other than normal trade
credit and loans from the Optionor or the Parent;
(vii) create or have any mortgage, charge, lien, encumbrance
or other security interest over any of its assets (other than liens
arising in the normal course of business);
(viii) enter into or have any contract of a material nature
outside the normal course of its business or on other than arm's length
terms.
9. Security
The Optionor shall at the reasonable request of the Optionee do all
such matters as the Optionee may request and which may be permissible under
Brazilian law in relation to the provision of ongoing security to the Optionee
as to the due and proper performance of the obligations of the Optionor relating
to the transfer of the Option Shares to the Optionee. It is hereby agreed by the
parties that any documentation arising hereunder shall be retained by the
Optionor's Solicitors until such time as the Option is exercised, provided that
if the Option is not exercised during the Option Period, any documentation
arising hereunder shall be returned forthwith to the Optionor.
10. Warranty
10.1 The Warrantors hereby agree to indemnify and keep
indemnified the Optionee from and against all claims demands actions damages
losses (including loss of profit) liabilities penalties and expenses sustained
by the Optionee directly or indirectly in respect of any breach by the
Warrantors in respect of the warranties referred to at 10.2 below.
10.2 The Warrantors warrant that:
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(i) the Optionor shall sell the Option Shares as
beneficial owner entitled to all the proceeds thereof and hereby
warrants that the Optionee shall obtain a good title to the Option
Shares free from all liens charges encumbrances or other security
interests of whatsoever nature;
(ii) all the Option Shares are fully paid up and
neither the Company nor any third party has exercised or purported to
exercise or claimed any lien over any of them, in addition no person
has the right to call for the issue of any share or loan capital of the
Company by reason of any conversion rights or under any option or other
agreement;
(iii) the Optionor and the Parent have the respective
power and authority to enter into this Agreement without infringing any
applicable law and also has the power and authority to complete the
subsequent sale and purchase arrangements envisaged pursuant to this
Agreement, such authority being evidenced by formal legal opinions from
Foreign Counsel to the satisfaction of the Optionee as annexed hereto
at Schedule 6;
(iv) all material creditors of the Company as at 1
November 1998 are detailed in the list of creditors of the Company in
the agreed form.
11. Restriction on Transfer
The Optionor undertakes that during the Option Period it shall not sell
transfer dispose of or otherwise deal in any interest the Optionor may have in
the Option Shares without the prior written consent of the Optionee.
12. Notices
Any notice under this Agreement shall be in writing and shall be given
or served by personal delivery, telex or by leaving it or sending it by pre-paid
first-class recorded delivery or registered post at in the case of the Optionor
and the Parent 27 Albermarle Street, London W1X 4LQ and in the case of the
Optionee hereinbefore set forth or such other address which it may notify in
writing to the other in accordance with the terms hereof. Any notice so given or
served shall, unless the contrary is proved, be deemed to have been duly given
or served on the date of delivery (if by personal delivery), proper despatch (if
by telex), or forty-eight hours from the time of posting (if by post).
13. Expiry/ Termination of Option Period
On expiry of the Option Period, this Agreement shall cease and be of no
further effect, save as regards any rights of any of the parties hereto as the
result of the breach prior to such expiry or completion by any other party of
its obligations hereunder.
14. Time of the Essence
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Time shall be of the essence in relation to all dates and periods
hereunder.
15. Costs
The Optionee agrees to contribute to the reasonable costs and expenses
of the Optionor in relation to the preparation and execution of this Agreement,
and all documents ancilliary thereto with the relevant amount to be agreed
between the parties as at the date hereof.
16. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of England and Wales and the parties agree to submit to the
non-exclusive jurisdiction of the English courts as regards any claim or matter
arising in relation to this Agreement.
17. Joint and Several
The liability of the Warrantors hereunder to the Optionee shall be
joint and several.
AS WITNESS the hands of the authorised representatives of the parties
hereto the day and year first before written.
TOUCAN MINING LIMITED
By: /s/ R.P. Jeffcock
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R.P. Jeffcock
TOUCAN GOLD CORPORATION
By: /s/ R.P. Jeffcock
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R.P. Jeffcock
MINIMET PLC
By: /s/ Michael Nolan
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Michael Nolan
By: /s/ Gordon P. Riddler
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Gordon P. Riddler
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SCHEDULE 1
Option Notice
To: Toucan Mining Limited
Celtic House
Victoria Street
Douglas
Isle of Man
and: Toucan Gold Corporation Inc
8201 Preston Road
Suite 600
Dallas
Texas 75225
USA
Pursuant to an Agreement dated _____ December, 1998, and made between
us whereby you granted to us an option to purchase the Shares (as defined in the
said Agreement) now held by you and the Inter-Company Debt (as further defined
in the said Agreement), we hereby GIVE NOTICE that we wish to exercise our
rights under the said Agreement and require you to join with us in performing
our respective obligations thereunder at the registered office of the Company at
_____ am/pm on the _____ day of ____________, 19__, being within seven days but
not before five days after the giving of this Option Notice.
Dated this _____ day of __________, 199_.
For and on behalf of
ANAGRAM LIMITED
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SCHEDULE 2
Share Purchase Agreement
(Omitted. See Exhibit 10.4)
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