Exhibit 10.1
Option Agreement
OPTION AGREEMENT
THIS AGREEMENT is dated for reference the 4th day of October, 2002.
BETWEEN:
TERRY LONEY An Ontario resident with an address at
326 Penman Avenue
Garson, Ontario P3L 1S5
(the "Optionor")
OF THE FIRST PART
AND:
MANCHESTER INC.
a Nevada corporation with its registered address at
Suite 880, 50 West Liberty Drive
Reno, Nevada 89501
("Manchester")
OF SECOND PART
WHEREAS:
A. The Optionor is the owner of an undivided 100% right, title and
interest in and to mineral claims described in this Agreement;
B. Manchester wishes to acquire the option to acquire a 80% interest in
the Optionor's property on the terms and subject to the conditions
contained in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the mutual covenants and agreements hereinafter contained, the
parties hereto agree as follows:
1. DEFINITIONS
1.1 In this Agreement, the following terms will have the meaning set forth
below:
(A) "Exploration and Development" means any and all activities comprising
or undertaken in connection with the exploration and development of the
Property, the construction of a mine and mining facilities on or in
proximity to the Property and placing the Property into commercial
production;
(B) "Property" means and includes:
(i) the mining claims in the Sudbury Mining District, Ontario, Canada
listed in Schedule A to this Agreement; and
(ii) all rights and appurtenances pertaining to the mining claims listed in
Schedule A, including all water and water rights, rights of way, and
easements, both recorded and unrecorded, to which the Optionor is entitled;
(C) "Property Expenditures" means all reasonable and necessary monies
expended on or in connection with Exploration and Development as determined
in accordance with generally accepted accounting principles including,
without limiting the generality of the foregoing:
(i) the cost of entering upon, surveying, prospecting and drilling on the
Property;
(ii) the cost of any geophysical, geochemical and geological reports or
surveys relating to the Property;
(iii) all filing and other fees and charges necessary or advisable to
keep the Property in good standing with any regulatory authorities having
jurisdiction;
(iv) all rentals, royalties, taxes (exclusive of all income taxes and
mining taxes based on income and which are or may be assessed against any
of the parties hereto) and any assessments whatsoever, whether the same
constitute charges on the Property or arise as a result of the operation
thereon;
(v) the cost, including rent and finance charges, of all buildings,
machinery, tools, appliances and equipment and related capital items that
may be erected, installed and used from time to time in connection with
Exploration and Development;
(vi) the cost of construction and maintenance of camps required for
Exploration and Development;
(vii) the cost of transporting persons, supplies, machinery and
equipment in connection with Exploration and Development;
(viii) all wages and salaries of persons engaged in Exploration and
Development and any assessments or levies made under the authority of any
regulatory body having jurisdiction with respect to such persons or
supplying food, lodging and other reasonable needs for such persons;
(ix) all costs of consulting and other engineering services including
report preparation;
(x) the cost of compliance with all statutes, orders and regulations
respecting environmental reclamation, restoration and other like work
required as a result of conducting Exploration and Development; and
(xi) all costs of searching for, digging, working, sampling, transporting,
mining and procuring diamonds, other minerals, ores, and metals from and
out of the Property;
2. OPTION
2.1 The Optionor hereby grants to Manchester the exclusive right and
option to acquire an undivided 80% right, title and interest in and to the
Property (the "Option") for total consideration consisting of a 1% Net
Smelter Return attached as schedule "C" hereto, cash payments to the
Optionor totalling $8,000 US and the incurrence of Property Expenditures
totalling $209,800 US to be made as follows:
(A) upon execution of this Agreement, the payment to the Optionor of
the sum of $8,000 US;
(B) by October 31, 2003, the incurrence of Property Expenditures in
the amount of $23,800 US;
(C) by October 31, 2004, the incurrence of Property Expenditures in
the further amount of $186,000 US for total aggregate Property
Expenditures of $209,800 by October 31, 2004, provided that
any Property Expenditures incurred prior to October 31, 2003 which
are in excess of $23,800 will be applied to the further required
amount of $186,000.
Upon making the cash payments and Property Expenditures as specified in
Paragraph 2.1, Manchester shall have acquired an undivided 80% right, title
and interest in and to the Property.
This Agreement is an option only and the doing of any act or the making of
any payment by Manchester shall not obligate Manchester to do any further
acts or make any further payments.
3. TRANSFER OF TITLE
3.1 Upon execution of this Agreement, Manchester shall be entitled to
record this Agreement against title to the Property.
3.2 Upon making the cash payments and Property Expenditures as specified
in Paragraph 2.1, the Optionor shall deliver to Manchester a duly executed
bill of sale or quit claim deed and such other executed documents of
transfer as required, in the opinion of Manchester's lawyers, for the
transfer of an undivided 80% interest in the Property to Manchester.
4. JOINT VENTURE
4.1 Upon Manchester acquiring an interest in the Property pursuant to
paragraph 2.1, the Optionor and Manchester agree to join and participate in
a single purpose joint venture ( the "Joint Venture") for the purpose of
further exploring and developing and, if economically and politically
feasible, constructing and operating a mine on the Property. The Joint
Venture shall be governed by an agreement which shall be in the form of
joint venture agreement attached as Schedule B hereto.
5.
RIGHT OF ENTRY
5.1 During the currency of this Agreement, Manchester, its servants,
agents and workmen and any persons duly authorised by Manchester, shall
have the right of access to and from and to enter upon and take possession
of and prospect, explore and develop the Property in such manner as
Manchester in its sole discretion may deem advisable for the purpose of
incurring Property Expenditures as contemplated by Section 2, and shall
have the right to remove and ship therefrom ores, minerals, metals, or
other products recovered in any manner therefrom.
6. COVENANTS OF MANCHESTER
6.1 Manchester covenants and agrees that:
(A) during the term of this Agreement, Manchester shall keep the Property
clear of all liens, encumbrances and other charges and shall keep the
Optionor indemnified in respect thereof;
B) Manchester shall carry on all operations on the Property in a good and
workmanlike manner and in compliance with all applicable governmental
regulations and restrictions including but not limited to the posting of
any reclamation bonds as may be required by any governmental regulations
or regulatory authorities;
C) during the term of the option herein, Manchester shall pay or cause to
be paid any rates, taxes, duties, royalties, workers' compensation or other
assessments or fees levied with respect to its operations thereon and in
particular Manchester shall pay the yearly claim maintenance payments
necessary to maintain the claims in good standing;
(D) Manchester shall maintain books of account in respect of its
expenditures and operations on the Property and, upon reasonable notice,
shall make such books available for inspection by representatives of the
Optionor;
(E) Manchester shall allow any duly authorised agent or representative of
the Optionor to inspect the Property at reasonable times and intervals and
upon reasonable notice given to Manchester, provided however, that it is
agreed and understood that any such agent or representative shall be at his
own risk in respect of, and Manchester shall not be liable for, any injury
incurred while on the Property, howsoever caused;
(F) Manchester shall allow the Optionor access at reasonable times to all
maps, reports, sample results and other technical data prepared or obtained
by Manchester in connection with its operations on the Property;
(G) Manchester shall indemnify and save the Optionor harmless of and from
any and all costs, claims, loss and damages whatsoever incidental to or
arising out of any work or operations carried out by or on behalf of
Manchester on the Property, including any liability of an environmental
nature.
7. REPRESENTATIONS AND WARRANTIES
7.1 The Optionor hereby represents and warrants that:
(A) the Property is in good standing with all regulatory authorities
having jurisdictions and all required claim maintenance payments have been
made;
(B) it has not done anything whereby the mineral claims comprising the
Property may be in any way encumbered;
(C) it has full corporate power and authority to enter into this Agreement
and the entering into of this Agreement does not conflict with any
applicable laws or with its charter documents or any contract or other
commitment to which it is party; and
(D) the execution of this Agreement and the performance of its terms have
been duly authorised by all necessary corporate actions including the
resolution of its Board of Directors.
7.2 Manchester hereby represents and warrants that:
(A) it has full corporate power and authority to enter into this Agreement
and the entering into of this Agreement does not conflict with any
applicable laws or with its charter documents or any contract or other
commitment to which it is party; and
(B) the execution of this Agreement and the performance of its terms have
been duly authorised by all necessary corporate actions including the
resolution of its Board of Directors.
8. ASSIGNMENT
8.1 With the consent of the other party, which consent shall not be
unreasonably withheld, Manchester and the Optionor has the right to assign
all or any part of its interest in this Agreement and or in the Property,
subject to the terms and conditions of this Agreement. It shall be a
condition precedent to any such assignment that the assignee of the
interest being transferred agrees to be bound by the terms of this
Agreement, insofar as they are applicable.
9. CONFIDENTIALITY OF INFORMATION
9.1 Each of Manchester and the Optionor shall treat all data, reports,
records and other information of any nature whatsoever relating to this
Agreement and the Property as confidential, except where such information
must be disclosed for public disclosure requirements of a public company.
10. TERMINATION
10.1 Until such time as Manchester has acquired an undivided 80% interest
in the Property pursuant to Section 2, this Agreement shall terminate upon
any of the following events:
(A) upon the failure of Manchester to make a payment or incur Property
Expenditures required by and within the time limits prescribed by Paragraph
2.1;
(B) in the event that Manchester, not being at the time in default under
any provision of this Agreement, gives 30 day's written notice to the
Optionor of the termination of this Agreement;
(C) in the event that Manchester shall fail to comply with any of its
obligations hereunder, other than the obligations contained in Paragraph
2.1, and subject to Paragraph 11.1, and within 30 days of receipt by
Manchester of written notice from the Optionor of such default, Manchester
has not:
(i) cured such default, or commenced proceedings to cure such default and
prosecuted same to completion without undue delay; or
(ii) given the Optionor notice that it denies that such default has
occurred.
(D) delivery of notice of termination by Manchester pursuant to Paragraph
2.1 in the event the Geological Report is not acceptable;
(E) the inability of Manchester to complete the private placement referred
to in Paragraph 2.1(c).
In the event that Manchester gives notice that it denies that a default has
occurred, Manchester shall not be deemed in default until the matter shall
have been determined finally through such means of dispute resolution as
such matter has been subjected to by either party.
10.2 Upon termination of this Agreement under Paragraph 10.1, Manchester
shall:
(A) transfer any interest in title to the Property, in good standing to
the Optionor free and clear of all liens, charges, and encumbrances;
(B) turn over to the Optionor copies of all maps, reports, sample results,
contracts and other data and documentation in the possession of Manchester
or, to the extent within Manchester's control, in the possession of its
agents, employees or independent contractors, in connection with its
operations on the Property; and
(C) ensure that the Property is in a safe condition and complies with all
environmental and safety standards imposed by any duly authorised
regulatory authority.
10.3 Upon the termination of this Agreement under Paragraph 10.1,
Manchester shall cease to be liable to the Optionor in debt, damages or
otherwise save for the performance of those of its obligations which
theretofore should have been performed, including those obligations in
Paragraph 10.2.
10.4 Upon termination of this Agreement, Manchester shall vacate the
Property within a reasonable time after such termination, but shall have
the right of access to the Property for a period of six months thereafter
for the purpose of removing its chattels, machinery, equipment and
fixtures.
11. FORCE MAJEURE
11.1 The time for performance of any act or making any payment or any
expenditure required under this Agreement shall be extended by the period
of any delay or inability to perform due to fire, strikes, labour
disturbances, riots, civil commotion, wars, acts of God, any present or
future law or governmental regulation, any shortages of labour, equipment
or materials, or any other cause not reasonably within the control of the
party in default, other than lack of finances.
12. REGULATORY APPROVAL
12.1 If this Agreement is subject to the prior approval of any securities
regulatory bodies, then the parties shall use their best efforts to obtain
such regulatory approvals.
13. NOTICES
13.1 Any notice, election, consent or other writing required or permitted
to be given hereunder shall be deemed to be sufficiently given if delivered
or mailed postage prepaid or if given by telegram, telex or telecopier,
addressed as follows:
In the case of the Optionor: Terry Loney
326 Penman Avenue
Garson, Ontario
Canada P3L 1S5
Telecopier: (705) 693-7705
In the case of Manchester : Manchester Inc.
#200-675 West Hastings Street
Vancouver, BC
Canada V6B 1N2
Telecopier: (604) 681-7622
and any such notice given as aforesaid shall be deemed to have been given
to the parties hereto if delivered, when delivered, or if mailed, on the
third business day following the date of mailing, or, if telegraphed,
telexed or telecopied, on the same day as the telegraphing, telexing or
telecopying thereof PROVIDED HOWEVER that during the period of any postal
interruption in Canada any notice given hereunder by mail shall be deemed
to have been given only as of the date of actual delivery of the same. Any
party may from time to time by notice in writing change its address for the
purposes of this Paragraph 13.1.
14. GENERAL TERMS AND CONDITIONS
14.1 The parties hereto hereby covenant and agree that they will execute
such further agreements, conveyances and assurances as may be requisite, or
which counsel for the parties may deem necessary to effectually carry out
the intent of this Agreement.
14.2 This Agreement shall constitute the entire agreement between the
parties with respect to the Property. No representations or inducements
have been made save as herein set forth. No changes, alterations or
modifications of this Agreement shall be binding upon either party until
and unless a memorandum in writing to such effect shall have been signed by
all parties hereto. This Agreement shall supersede all previous written,
oral or implied understandings between the parties with respect to the
matters covered hereby.
14.3 Time shall be of the essence of this Agreement.
14.4 The titles to the sections in this Agreement shall not be deemed to
form part of this Agreement but shall be regarded as having been used for
convenience of reference only.
14.5 Unless otherwise noted, all currency references contained in this
Agreement shall be deemed to be references to United States funds.
14.6 Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision shall be prohibited by or be invalid under
applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14.7 The Schedules to this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if they were set
forth verbatim herein.
14.8 Defined terms contained in this Agreement shall have the same meanings
where used in the Schedules.
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14.9 This Agreement shall be governed by and interpreted in accordance with
the laws of British Columbia and the laws of Canada applicable therein.
14.10 This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
WITNESS WHEREOF this Agreement has been executed by the parties hereto as
of the day and year first above written.
TERRY LONEY
______________________________
Signature of Authorised Signatory
______________________________
Name of Authorised Signatory
______________________________
Position of Authorised Signatory
MANCHESTER INC.
by its authorised signatory:
______________________________
Signature of Authorised Signatory
______________________________
Name of Authorised Signatory
______________________________
Position of Authorised Signatory
SCHEDULE "A"
PROPERTY DESCRIPTION
G.P.S. CO-ORDINATES: 5166000N and 522000E
SUDBURY MINING DISTRICT
ONTARIO
CANADA
List of Claims
CLAIM NUMBERS TOWNSHIP/AREA CURRENT EXPIRY DATE
3004260 - 9 UNITS MACLENNAN AUGUST 24, 2004
3004261 - 2 UNITS MACLENNAN AUGUST 24, 2004
SCHEDULE "B"
JOINT VENTURE AGREEMENT
SCHEDULE "C"
NET SMELTER RETURNS
For the purposes of this agreement, the term "Net Smelter Returns" shall
mean the net proceeds actually paid to Manchester from the sale by
Manchester of minerals mined and removed from the Property, after deduction
of the following:
(a) smelting costs, treatment charges and penalties including, but not
being limited to, metal losses, penalties for impurities and charges for
refining, selling and handling by the smelter, refinery or other
purchaser;
provided, however, in the case of leaching operations or other solution
mining or beneficiation techniques, where the metal being treated is
precipitated or otherwise directly derived from such leach solution, all
processing and recovery costs incurred by Manchester, beyond the point at
which the metal being treated is in solution, shall be considered as
treatment charges;
(b) costs of handling, transporting and insuring ores, minerals and other
materials or concentrates from the Property or from a concentrator,
whether situated on or off the Property, to a smelter, refinery or other
place of treatment; and
(c) ad valorem taxes and taxes based upon production, but not income
taxes.
In the event Manchester commingles minerals from the Property with minerals
from other properties, Manchester shall establish procedures, in accordance
with sound mining and metallurgical techniques, for determining the
proportional amount of the total recoverable metal content in the
commingled minerals attributable to the input from each of the properties
by calculating the same on a metallurgical basis, in accordance with
sampling schedules and mining efficiency experience, so that production
royalties applicable to minerals produced from the Property may reasonably
be determined.