Exhibit 10.19
EXECUTION VERSION
OPTION AND JOINT VENTURE AGREEMENT
THIS AGREEMENT is made as of the 15th day of March, 2001, by and
between MINERA ANDES INC., a corporation formed under the laws of Canada
("MAI"), MINERA ANDES S.A., a corporation formed under the laws of Argentina
("MASA") and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA., a corporation formed under the
laws of Peru ("MHC").
WHEREAS, MAI, through its wholly-owned subsidiary MASA, owns or
holds the right to explore, and has applied for exploitation concessions in
respect of, certain areas of interest located in the Deseado Massif of the
Province of Santa ▇▇▇▇, Argentina, including, but not limited to, the areas of
interest referred to as Huevos Verdes, El Pluma Oeste, ▇▇▇▇▇▇▇▇ Oeste, ▇▇▇▇▇▇▇▇
Central and La Sorpresa, all as more particularly described in Schedule A hereto
(all such rights to explore, applications for exploitation concessions,
resulting exploitation concessions, and any related easements, rights-of-way,
permits, filings and proceedings being herein referred to as the "Rights"); and
WHEREAS, MAI wishes to grant MHC an option to acquire an interest in
the Rights by (i) causing MASA to transfer all the Rights to a newly formed
corporation organized under the laws of Argentina and wholly owned, directly or
indirectly, by MAI ("Newco") and (ii) granting to MHC an option to acquire
fifty-one percent (51%) or more of the share capital of Newco, all on the terms
and subject to the conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, agreements, representations and warranties contained in
this Agreement, and intending to be legally bound, the parties hereto agree as
follows:
1. DEFINITIONS
1.1 For the purposes of this Agreement, the following words and expressions
shall have the meanings indicated:
(a) "Affiliate" means with respect to any person, any other person
controlling, controlled by or under common control with such person.
(b) "Capital Advances" shall have the meaning set forth in Section 4.6.
(c) "Cash Payments" means any of the cash payments owing by MHC to MAI
under Article 5.
(d) "Development" means all preparation for the removal and recovery of
minerals not constituting Exploration, including the construction,
installation or expansion
of a Pilot Plant or a full scale mine or mill or any other
improvements to be used for the mining of minerals, prior to the
commencement of commercial production of minerals either from a
Pilot Plant or full scale mine on the Property.
(e) "Expenditures" mean all cash, expenses, obligations and liabilities
of whatever kind or nature spent or incurred at any time in
connection with the Exploration, Development or Mining of all or any
part of the Property including, without limiting the generality of
the foregoing, monies expended in (i) constructing, leasing or
acquiring all facilities, buildings, machinery and equipment in
connection with Exploration, Development or Mining, (ii) paying any
taxes, duties, fees, Mining Payments, charges, payments or rentals
(including payments in lieu of assessment work) or otherwise to keep
the Rights, and any other rights of Newco or MASA in or to the
Property or any portion thereof, in good standing (including any
payment to or in respect of acquiring any agreement or confirmation
from any holder of surface rights respecting the Property or any
portion thereof), (iii) carrying out any survey of the Property or
any portion thereof, (iv) doing geophysical, geochemical and
geological surveys, (v) drilling, assaying, metallurgical testing,
bulk sampling, engaging in or commissioning one or more
pre-feasibility or bankable feasibility studies, environmental
reports and pilot plant operations, (vi) paying the fees, wages,
salaries, traveling expenses, fringe benefits (whether or not
required by law) of all persons engaged in work with respect to and
for the benefit of the Property or any portion thereof, or otherwise
in furtherance of the mining projects contemplated by this
Agreement, (vii) paying for the food, lodging and other reasonable
needs of such persons, (viii) preparing any reports, (ix)
supervising and managing any work done with respect to and for the
benefit of the Property or any portion thereof, or (x) any other
respects necessary for the carrying out of Exploration, Development
or Mining on the Property. Expenditures shall not include overhead
expenses relating to MHC offices or operations outside of Argentina
but shall include overhead expenses of any MHC offices located in
Argentina and wages of MHC personnel in Argentina and elsewhere to
the extent (but only to the extent) devoted to Exploration,
Development and Mining on the Property and the supervision and
management thereof. None of the Cash Payments made pursuant to
Article 5 shall be Expenditures for purposes of this Agreement.
(f) "Exploration" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of
deposits of minerals, but does not include any activities directed
toward Development or Mining. By way of example and without
limitation, Exploration includes the taking of soil samples, chip
samples, core samples and bulk samples; conducting geological,
geochemical and geophysical studies; assaying samples; computer
modeling and financial analysis, including the preparation of
prefeasibility studies and feasibility studies; exploratory
drilling, opening of shafts and other surface or underground mining
activity carried out primarily for exploratory purposes; all for the
purpose of determining the existence or extent of one or more ore
deposits on the Property
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that can be mined at a profit. Exploration also includes payments
made to maintain and perfect the Rights. Exploration does not
include close spaced drilling required for mine development,
construction of haul roads, pits, declines, stripping of overburden,
tailings or waste facilities, crushers or processing facilities and
related utilities to be used primarily for the commercial production
of minerals from either a Pilot Plant or a mine on the Property.
(g) "First Carry Option" shall have the meaning set forth in Section
6.1.
(h) "First No Dilution Period" shall have the meaning set forth in
Section 6.2(b).
(i) "Huevos Verdes" means those portions of the Property described in
Schedule B.
(j) "Mine" means facilities constructed on the Property for the
extraction, crushing, processing and beneficiation of commercially
valuable minerals, including all necessary facilities for compliance
with applicable laws, including environmental laws, governing mining
activity in Argentina.
(k) "Mine Completion Date" means the date on which (i) a Mine has been
constructed on the Property, (ii) MHC has exposed and is prepared to
mine and process sources of ore reasonably expected to allow such
Mine to operate at a commercially reasonable level, and (iii) the
Mine has been certified by an independent and reputable firm of
engineers as being capable of extracting, crushing, processing and
beneficiating not less than five hundred tons of ore per day (500
tpd). MHC shall give written notice to MAI of the occurrence of the
Mine Completion Date.
(l) "Mining Payments" shall have the meaning specified in Section
2.2(e).
(m) "Mining" means the mining, extracting, producing, handling, milling
and other processing of minerals from a Pilot Plant or Mine on the
Property other than as part of Development or Exploration.
(n) "Mining Work" means any of Exploration, Development and Mining.
(o) "No Dilution Period" means any of the First No Dilution Period and
the Second No Dilution Period.
(p) "Notice of Exercise" means the notice given by MHC in accordance
with Section 4.2.
(q) "Option" means the option granted by MAI to MHC under Section 4.1.2.
(r) "Option Period" means the three-year period referred to in Section
4.1.1.
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(s) "Other Properties" means those portions of the Property not
described in Schedule B.
(t) "Pilot Plant" means a pilot plant for the Property as described in
Schedule C hereto and having a capacity to process not less than
fifty tons of ore per day (50 tpd).
(u) "Pilot Plant Completion Date" means the date on which (i) the Pilot
Plant has been installed, (ii) its capacity to process not less than
fifty tons of ore per day (50tpd) has been confirmed by testing and
(iii) MHC has exposed and is prepared to mine and process sources of
ore at such Pilot Plant. MHC shall give written notice to MAI of the
occurrence of the Pilot Plant Completion Date and shall give MAI
sufficient notice prior to that date to allow MAI to observe the
testing of the Pilot Plant's capacity.
(v) "Property" means the properties and land, both surface and
subsurface, that are covered by or the subject of the Rights.
(w) "Rights" has the meaning set forth in the preamble of this
Agreement.
(x) "Second Carry Option" shall have the meaning set forth in Section
6.4.
(y) "Second No Dilution Period" shall have the meaning set forth in
Section 6.5(b).
(z) "Second Year Election" shall have the meaning set forth in Section
4.1.2(c).
(aa) "Third Year Election" shall have the meaning set forth in Section
4.1.2(d).
(bb) "Vesting Date" means the date on which MHC gives the Notice of
Exercise to MAI.
1.2 In this Agreement, all amounts expressed in dollars shall mean lawful
currency of the United States of America, unless specifically provided to the
contrary. References to tons shall mean metric tons.
1.3 The titles of the respective Articles hereof shall not be deemed to be a
part of this Agreement but shall be regarded as having been used for convenience
only. A reference to an Article, Section, Subsection or Schedule shall be a
reference to that Article, Section, Subsection or Schedule of or to this
Agreement.
1.4 Words used herein importing the singular number shall include the plural,
and vice-versa, words importing the masculine gender shall include the feminine
and neuter genders, and vice-versa, and words importing persons shall include
individuals, firms, partnerships, corporations and other legal entities.
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2. REPRESENTATIONS AND WARRANTIES
2.1 Each party represents and warrants to the others that:
(a) it is a company duly incorporated, validly subsisting and in good
standing under the laws of the jurisdiction of its incorporation;
(b) it has full power and authority to carry on its business and to
enter into this Agreement and any agreement or instrument referred
to in or contemplated by this Agreement and to carry out and perform
all of its obligations and duties hereunder;
(c) it has duly obtained all corporate authorizations for the execution,
delivery and performance of this Agreement, and such execution,
delivery and performance and the consummation of the transactions
herein contemplated will not conflict with or contravene the
provisions of its charter, by-laws or other organizational
documents; and
(d) the execution by such party of this Agreement and the consummation
of the transactions contemplated herein will not violate or
contravene any provision of any law, rule, regulation, license,
permit, order, judgment or decree or of any contract or other
agreement to which such party is subject or by which it or its
property is bound.
2.2 MAI represents and warrants to MHC that:
(a) MAI owns 95% of the share capital of MASA, free and clear of any
lien, claim, charge or encumbrance.
(b) All contractors, agents and third parties hired or used by any of
MAI, MASA or any Affiliate of either MAI or MASA to perform Mining
Work or any other work or activity on or in respect of the Property
have been fully paid or will be paid in the ordinary course of
business and none of them has any claims against the Property or the
Rights.
(c) MASA validly holds the Rights free and clear of any lien, claim,
charge or encumbrance. No registrations, filings, licenses or
permits of any kind other than the Rights are required under the
laws of Argentina (federal, provincial or local) to permit MASA or
Newco (upon transfer of the Rights to Newco) to explore the Property
and apply for exploitation concessions in respect of the Property.
To the best of MAI's knowledge, there are not any existing facts or
circumstances that would interfere with or prevent MASA or Newco
(upon transfer of the Rights to Newco) being granted exploitation
concessions in respect of any of the Property upon due application
therefor.
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(d) The Rights constitute all of the permits and rights of MASA to
explore and/or exploit the Property and are in good standing under
the laws of Argentina. To the best of MAI's knowledge, no person or
entity other than MASA currently has the right to explore or to
exploit any portion of the Property.
(e) MASA has made all payments of in respect of fees, mining canon,
royalties, surface taxes, concession payments, holding fees, mining
duties and similar such payments relating to the Rights or the
Property (collectively "Mining Payments") that MASA is obligated to
make as of the date of this Agreement in order to maintain the
Rights in good standing.
(f) To the best of MAI's knowledge, there is not any adverse claim or
challenge against or to the ownership by MASA of the Rights, or any
portion thereof.
(g) MAI or MASA has made available to MHC's Argentine counsel for
inspection originals or true and correct copies of all contracts,
permits, concessions and other relevant documents evidencing the
Rights currently in effect, and no material amendment or
modification to such documents has been made since such documents
were made available for such inspection and not disclosed to MHC or
its Argentine counsel. After the date hereof and until the Vesting
Date neither MASA nor Newco shall in any material respect amend,
alter or release any rights under any of the contracts, permits and
other instruments relating to MASA's or Newco's rights to explore
and/or exploit the Property without the prior written consent of
both MAI and MHC.
(h) There are no existing material defaults by MASA or any Affiliate of
MASA with respect to Mining Payments or taxes relating to any of the
Rights or the Property.
(i) To the best of their knowledge, each of MAI and MASA is and has at
all times been in full compliance with all of the terms and
requirements of each judicial or governmental order or regulation to
which the Rights or the Property may be subject, including those
related to the protection of the environment, except for such
failures of compliance that do not or will not in the aggregate
create material liabilities for Newco or MHC (or its Affiliates) or
otherwise materially adversely affect the Rights or impair Newco's
ability to explore and/or exploit any of the Property. Neither MAI
nor MASA has been notified by any Argentine authority of, and
neither of them has knowledge of, any violation by either of them of
any laws or requirements relating to the Rights or the Property.
(j) No claim has been made against MASA or MAI in respect of, and to the
best of their knowledge, neither MASA nor MAI has incurred any
liabilities to surface owners or tenants within the Property
regarding, compensation for the use of land or damages of any sort.
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2.3 Each party represents to the other party that, with respect to it, no filing
is required pursuant to Argentine Law No. 25,256 in connection with the
transactions described in this Agreement.
2.4 The representations, warranties and covenants set out in this Article 2
shall, regardless of any investigation which may have been made by or on behalf
of any party as to the accuracy of such representations and warranties, survive
the closing of the transaction contemplated hereby, and each of the parties will
indemnify and save the other harmless from all loss, damage, costs, actions and
suits arising out of or in connection with any breach of any such
representation, covenant or warranty.
2.5 Each party shall, and shall cause each of its Affiliates to, perform all of
its respective obligations under this Agreement. MAI shall also cause each of
MASA and Newco to give MHC all such information concerning its assets,
liabilities or operations that relates to the subject of this Agreement as MHC
may reasonably request. MAI's obligations under this Section 2.4 in respect of
Newco shall terminate when MHC (or an Affiliate of MHC) acquires a majority of
the outstanding shares of Newco.
3. ORGANIZATION OF NEWCO; TRANSFER OF PROPERTY TO NEWCO
3.1 Promptly following the execution of this Agreement, MAI and MHC shall cause
Newco to be incorporated as an Argentine corporation. The cost of such
incorporation shall be borne by MHC, which cost shall be treated as an
Expenditure for purposes of this Agreement. The articles of incorporation (acta
constitutiva) of Newco shall be in the form attached hereto as Schedule D. Until
the earlier to occur of the Vesting Date and the termination of this Agreement,
MAI shall be the sole shareholder of Newco, except for a nominal number of
shares, which shall be held by MHC or an Affiliate of MHC (the "MHC
Shareholder").
3.2 The articles of incorporation of Newco shall provide that the Board of
Directors of Newco shall consist of two directors, one of whom shall be a
nominee of MHC (the "MHC Nominee"). MAI shall vote its shares of Newco to ensure
that until the earlier to occur of the Vesting Date and the termination of this
Agreement the Board of Directors of Newco shall at all times consist of one
nominee of MAI and the MHC Nominee.
3.3 Promptly following the execution of this Agreement, MASA shall transfer, and
MAI shall cause MASA to transfer, full ownership of all of the Rights to Newco
for a purchase price of US$1,000,000 pursuant to a Transfer of Rights agreement
in form and substance acceptable to each of MAI and MHC. Such agreement shall
provide for Newco to pay such purchase price to MASA by delivering to MASA a
promissory note for US$1,000,000. MAI and MHC shall cause Newco to enter into
such Transfer agreement with MASA to purchase all of the Rights for such
purchase price promptly following the execution of this Agreement. Concurrent
with such purchase, MASA shall subscribe for additional shares of Newco for a
subscription price of US$1,000,000, which MASA shall satisfy by canceling the
promissory note given by Newco to purchase the Rights. Any taxes incurred by
MASA or Newco in Argentina arising from the transfer of the Rights to Newco
shall be reimbursed by MHC and the amount thereof shall be
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deemed an Expenditure for purposes of this Agreement. In addition, any cost
arising from the formation and maintenance of Newco, including reasonable
director fees incurred by MAI, shall be reimbursed by MHC and the amount of any
such reimbursement shall be deemed an Expenditure for purposes of this
Agreement.
3.4 Until the earlier to occur of the Vesting Date and the termination of this
Agreement, the parties shall ensure, by instructing their respective nominees to
the Board of Directors of Newco and voting their shares accordingly, that:
(a) Newco shall not sell, transfer, encumber or grant any lien against
any of its assets or properties, including but not limited to the
Rights or any other rights relating to any portion of the Property,
without the prior written consent of the MHC Nominee;
(b) Newco shall not incur any debt or obligation, or enter into any
contract or commitment, without the prior written consent of the MHC
Nominee; and
(c) Newco shall not issue or enter into any agreement to issue any
shares of its capital stock, any options to acquire any such shares,
or any securities convertible into such shares, without the prior
written consent of the MHC Nominee.
MAI and MHC shall cause their respective representatives on the Board of
Directors of Newco to adopt such resolutions of its Board of Directors as MHC
may reasonably request to put into effect the foregoing limitations on the
activities of Newco, to the maximum extent permitted by the laws of Argentina.
3.5 In order to secure the due performance by MAI of its obligations under this
Agreement with respect to the management of Newco and the issuance of shares of
capital stock of Newco as provided in this Agreement, MAI or its relevant
Affiliate, as the case may be, shall, immediately following the incorporation of
Newco, execute and deliver to MHC or its nominee an irrevocable proxy (the
"Proxy") to vote in favor of any issuance of shares to MHC that is required
under the terms of this Agreement, which Proxy shall be effective as to all
shares of Newco owned by MAI or any Affiliate of MAI and shall continue in
effect until (a) MHC or any Affiliate of MHC acquires fifty-one percent (51%) of
the shares of Newco pursuant to Section 4.3 and the amendments to the by-laws of
Newco required pursuant to Section 11.3 have been completed or (b) the
termination of this Agreement, whichever occurs earlier. The Proxy shall be in
the form of Schedule E hereto. MAI shall cause Newco to register the Proxy in
its stock ledger and to cause a legend disclosing the existence of the Proxy on
certificates for shares subject thereto.
4. RIGHT TO EXPLORE; GRANT OF OPTION; CAPITAL ADVANCES
4.1 MAI and MASA hereby grant to MHC (and any Affiliate designated by MHC), and
shall cause Newco to grant to MHC (and any Affiliate designated by MHC):
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4.1.1 the sole and exclusive right to explore and perform Mining Work on or in
respect of the Property, or any portion thereof, for a period of three (3)
years, or such shorter period as may be provided in Section 4.5,
commencing as from the date of execution hereof, and ending on the third
anniversary thereof (the "Option Period"); provided, that, MAI or any
Affiliate designated by MAI shall at all times have the right, at its own
expense, to send one or more of its officers or employees to observe and
participate in the work conducted by MHC as further provided in Section 7
below; and
4.1.2 an irrevocable option (the "Option") to acquire fifty-one percent (51%) of
the issued and outstanding share capital of Newco free and clear of any
lien, claim, charge or encumbrance, subject to increase in accordance with
the terms of Section 6.2 and 6.5. MHC may exercise the Option in
accordance with Section 4.2 only after MHC has fully performed each of the
following requirements:
(a) MHC or its Affiliates (which shall include Newco to the extent
provided in Section 4.8) shall incur Expenditures in the aggregate
amount of Three Million Dollars ($3,000,000) as follows:
(i) not less than an aggregate of One Million Dollars ($1,000,000)
on or before the first anniversary of the date of this
Agreement, of which not less than One Hundred Thousand Dollars
($100,000) shall be in respect of Exploration of the Other
Properties;
(ii) not less than an aggregate of Two Million Dollars ($2,000,000)
on or before the second anniversary of the date of this
Agreement, of which not less than Two Hundred Thousand Dollars
($200,000) shall be in respect of Exploration of the Other
Properties (it being understood that any Expenditures counted
towards satisfying the condition set forth in paragraph (i)
above shall be included in the Expenditures counted towards
satisfying the condition set forth in this paragraph (ii));
(iii) not less than an aggregate of Three Million Dollars
($3,000,000) on or before the termination of the Option
Period, of which not less than Three Hundred Thousand Dollars
($300,000) shall be in respect of Exploration of the Other
Properties (it being understood that any Expenditures counted
towards satisfying the conditions set forth in paragraphs (i)
and (ii) above shall be included in the Expenditures counted
towards satisfying the condition set forth in this paragraph
(iii)); and
(iv) not less than One Million Five Hundred Thousand Dollars
($1,500,000) of the total Three Million Dollars ($3,000,000)
of Expenditures shall be in respect of Exploration.
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(b) MHC or its Affiliates shall timely make all Cash Payments to which
MAI may be entitled under Section 5.1 prior to the Vesting Date;
(c) MHC shall give notice to MAI on or before the first anniversary of
the date of this Agreement that MHC elects to proceed into the
second year of this Agreement (the "Second Year Election"); and
(d) MHC shall give notice to MAI on or before the second anniversary of
the date of this Agreement that MHC elects to proceed into the third
year of this Agreement (the "Third Year Election"); provided, that,
if MHC and its Affiliates shall have already fulfilled the
requirements set forth above in Section 4.1.2(a), (b) and (c) prior
to the second anniversary of the date of this Agreement, MHC shall
be deemed to have made or given the Third Year Election without any
further action on its part.
4.1.3 MHC shall account for Expenditures in accordance with the accounting
procedures set forth in Schedule F hereto. MHC shall provide MAI with a
statement within thirty (30) days after the end of each month showing the
Expenditures incurred during such month.
4.2 Upon fulfilling the requirements set forth in Section 4.1.2 and subject to
clause (iii) of Section 4.5, MHC may exercise the Option by giving written
notice thereof (the "Notice of Exercise") to MAI within one hundred twenty (120)
days after the date on which all such requirements are fulfilled or within
thirty (30) days after the end of the Option Period, whichever occurs earlier.
4.3 Upon delivery by MHC of the Notice of Exercise in accordance with Section
4.2, Newco shall, and MAI shall cause Newco to, issue immediately to MHC or its
designated Affiliate an additional number of shares in the capital stock of
Newco that, when added to the shares issued to MHC as provided in Section 3.1,
will equal fifty-one percent (51%) of the outstanding shares of Newco. Such
shares shall be fully paid, nonassessable, and, when issued, free and clear of
any lien, claim, charge or encumbrance. In connection with the issuance of such
shares by Newco, all Capital Advances theretofore made by the MHC Shareholder to
Newco pursuant to Section 4.6 shall be capitalized into such shares. MAI and
MASA hereby irrevocably waive any direct or indirect preemptive rights either
may have to subscribe for any portion of such newly issued shares under this
Section 4.3, but expressly retain and shall be entitled to preemptive rights
with respect to any subsequent issuance of shares by Newco except as otherwise
provided in this Agreement.
4.4 By its execution hereof, MHC agrees that it and its Affiliates (which shall
include Newco to the extent provided in Section 4.8) shall be obligated to incur
Expenditures in respect of the Property in the aggregate amount, and as between
Huevos Verdes and the Other Properties, as set forth in Section 4.1.2(a)(i). If
MHC gives MAI the Second Year Election, then MHC and its Affiliates (which shall
include Newco to the extent provided in Section 4.8) shall be obligated
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to incur Expenditures in respect of the Property on or before the second
anniversary of the date of this Agreement in the aggregate amount, and as
between Huevos Verdes and the Other Properties, as set forth in Section
4.1.2(a)(ii). If MHC gives MAI the Third Year Election, then MHC and its
Affiliates (which shall include Newco to the extent provided in Section 4.8)
shall be obligated to incur Expenditures in respect of the Property on or before
the third anniversary of the date of this Agreement in the aggregate amount, and
as between Huevos Verdes and the Other Properties, as set forth in Section
4.1.2(a)(iii).
4.5 If MHC does not give (i) the Second Year Election to MAI on or before the
first anniversary of the date of this Agreement, (ii) the Third Year Election on
or before the second anniversary of the date of this Agreement, or (iii) the
Notice of Exercise to MAI within one hundred twenty (120) days after fulfillment
of all obligations under Section 4.1.2 above or within thirty (30) days
following the end of the Option Period, whichever occurs earlier, then in each
such case this Agreement and any other agreements between any of the parties
relating to the Rights or the Property shall terminate. Upon any such
termination, the MHC Shareholder shall promptly transfer and convey to MAI or
its designee any and all right and interest it may have in Newco, its assets or
the product of work performed by or at the direction and expense of MHC as
provided in Section 4.1 and shall provide to MAI such documents and other
materials as may be appropriate in order to implement any such transfer and
conveyance. Thereafter, MHC shall own no interest in Newco or the Property or in
any such work product and shall be entitled to no reimbursement or other payment
from Newco or MAI or their respective affiliates in respect of this Agreement.
4.6 During the Option Period the MHC Shareholder shall have the right to make
irrevocable capital advances ("Capital Advances") to Newco which shall be used
by Newco for the purpose of incurring Expenditures solely as directed by MHC. No
interest shall be payable by Newco in respect of the Capital Advances and
Capital Advances shall be convertible into shares of Newco only as provided in
Section 4.3.
4.7 Promptly following the incorporation of Newco, the parties shall cause Newco
to open a bank account at such bank in Argentina as shall be selected by MHC for
the purpose of receiving Capital Advances (the "Capital Advance Account"). The
authorized signatories on the Capital Advance Account during the Option Period
shall only be persons designated by MHC. MHC shall have the right to direct the
disbursement of all funds from the Capital Advance Account during the Option
Period. Newco shall, if requested by MHC in its sole discretion, retain an
Argentine Affiliate of MHC for the purpose of conducting Mining Work in respect
of the Property and MHC may direct the disbursement of funds from the Capital
Advance Account to such Affiliate in connection with the carrying out of such
Mining Work; provided, that, the consideration and terms of any such arrangement
shall be no more favorable to such Affiliate than the consideration and terms
that would be given to an arms' length third party contractor providing the same
services.
4.8 Any Expenditures incurred by Newco out of funds deposited into the Capital
Advance Account shall, to the extent not already counted as an Expenditure
incurred by MHC or its Affiliates, count as an Expenditure for purposes of
Sections 4.1.2(a). MHC and its Affiliates
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may also incur Expenditures with funds not from the Capital Advance Account, it
being understood by the parties that use of the Capital Advance Account is in
the absolute discretion of MHC. Regardless of whether Expenditures are incurred
from the Capital Advance Account or otherwise, the assets purchased with and the
work product resulting from all such Expenditures shall be and remain the sole
and exclusive property of Newco and neither MHC nor any person claiming through
MHC shall assert any right, title or interest in any such assets or work
product. During the Option Period, any such assets or work product in
documentary form (either hard or electronic) shall be made available to MAI upon
its request at any reasonable time.
5. CASH PAYMENTS TO MAI
5.1 MHC shall pay Two Hundred Thousand Dollars ($200,000) to MAI upon the
signing of this Agreement by wire transfer to such account as MAI shall specify
in writing. Subject to Section 5.3, MHC shall pay an additional Two Hundred
Thousand Dollars ($200,000) to MAI on the date five months after the signing of
this Agreement by wire transfer to such account as MAI shall specify in writing.
5.2 Subject to Section 5.3, unless MHC shall terminate this Agreement in
accordance with Section 8.1 or 8.2 on or prior to the first anniversary of this
Agreement, MHC shall pay to MAI on such first anniversary and at the end of each
six month period thereafter the amount of Two Hundred Thousand Dollars
($200,000) until the earlier to occur of:
(a) the Pilot Plant Completion Date; and
(b) the date this Agreement terminates.
5.3 Except for the Cash Payment to be made upon the signing of this Agreement
pursuant to Section 5.1, MHC shall not have any obligation to make any Cash
Payment to MAI unless and until MAI and MASA shall, at the time any such Cash
Payment is due, have fulfilled in all material respects all of their obligations
under Article 3 of this Agreement required to be fulfilled prior to that time.
6. CARRY OPTIONS
6.1 Within thirty (30) days after the Vesting Date, MHC shall provide to MAI a
written report concerning the status of the Mining Work on the Property. Such
report shall describe the state of completion of the Pilot Plant, if any, the
Expenditures reasonably anticipated to be required after the Vesting Date to
complete such Pilot Plant and a timetable for the making of such Expenditures.
During the one hundred twenty (120) day period following the Vesting Date, MAI
shall have the option (the "First Carry Option") to elect to reduce its
ownership of Newco from forty-nine percent (49%) to thirty-five percent (35%) as
of the Pilot Plant Completion Date and proceed on a carried basis until the
Pilot Plant Completion Date. MAI may exercise such option by giving written
notice thereof to MHC during such period. If MAI does not elect the First Carry
Option, MAI shall be obligated to contribute forty-nine percent (49%) of all
funds necessary for the operations of Newco on the Property through the Pilot
Plant
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Completion Date. The parties currently contemplate that during the period
between the Vesting Date and the Pilot Plant Completion Date Newco will devote
substantially all of its resources to completion of the Pilot Plant as opposed
to conducting further Exploration, but the parties recognize that the actual
expenditure of funds during such period shall be determined at the time by the
Board of Directors of Newco and may differ from that currently contemplated,
depending upon circumstances at the time.
6.2 If MAI elects the First Carry Option:
(a) MAI shall promptly after the Pilot Plant Completion Date transfer to
MHC or its designated Affiliate for no additional consideration such
number of shares of Newco then owned by MAI as shall increase MHC's
(or its Affiliate's) ownership of Newco to sixty-five percent (65%)
and shall correspondingly reduce MAI's ownership of Newco to
thirty-five percent (35%). Such shares of Newco shall be fully paid,
non-assessable, and, when transferred, free and clear of any lien,
claim, charge or encumbrance.
(b) During the period from the Vesting Date until the Pilot Plant
Completion Date (the "First No Dilution Period"), the parties shall
not permit Newco to issue any additional equity, nor take any other
action that would reduce MAI's ownership of Newco to less than
thirty-five percent (35%). Nothing in the preceding sentence shall
prohibit MAI from transferring any of its shares of Newco in
accordance with the provisions of Section 10.2 or 10.4.
(c) During the First No Dilution Period, MHC shall arrange for Newco to
obtain all funds the Board of Directors of Newco shall deem
necessary to carry out Mining Work in respect of the Property. Such
funds shall be provided in the form of debt financing. MAI
acknowledges that such financing may be comprised of bank or private
financing, including financing provided by MHC or its Affiliates,
and that MHC, in its sole discretion, shall determine the amount of
such financing and the relative proportions of bank and private
financing. Any financing provided by MHC or its Affiliates to Newco
shall be made only on arm's-length terms.
6.3 If MAI does not elect the First Carry Option during the one hundred twenty
(120) day period following the Vesting Date, then the First Carry Option shall
terminate, MAI and its Affiliates' ownership interest in Newco at the end of
such one hundred twenty (120) day period shall be forty-nine percent (49%) and
the First No Dilution Period shall not apply.
6.4 Following the Pilot Plant Completion Date, the parties contemplate that the
sale of mineral products from the Pilot Plant operation will provide some cash
flow to Newco which will be invested in further operations on the Property, but
the parties recognize that there can be no guarantee as to the amount, if any,
of such cash flow. The parties currently contemplate that following the Pilot
Plant Completion Date, the activities of Newco shall be directed primarily
toward construction of a Mine on the Property, but the parties recognize that
the Board of Directors of Newco will at such time determine the scope of such
activities and that such
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activities may differ from that currently contemplated and may include
additional Exploration, depending upon the circumstances at the time. Both
parties contemplate that the first Mine on the Property will be project financed
to the maximum extent feasible, minimizing any equity contribution of the
parties, and MHC shall cause Newco to use reasonable efforts to seek project
financing on commercially acceptable terms to develop such Mine. The parties
recognize, however, that there can be no guarantee that Newco will be able to
obtain project financing on terms acceptable to it. Within thirty (30) days
after the Pilot Plant Completion Date, MHC shall provide to MAI a written report
concerning the likelihood of obtaining project financing for construction of
such Mine, the Expenditures reasonably anticipated to be required after the
Pilot Plant Completion Date to complete such Mine and a timetable for the making
of such Expenditures. The parties acknowledge that such report shall set forth
MHC's good faith estimates at the time and shall not bind MHC or Newco to
construct the Mine at the cost, with the financing, or within the timetable set
forth in the report. During the one hundred twenty (120) day period following
the Pilot Plant Completion Date, MAI shall have the option (the "Second Carry
Option") to elect to reduce its ownership of Newco to fifteen percent (15%) as
of the Mine Completion Date and proceed on a carried basis until the Mine
Completion Date. MAI may exercise such option by giving written notice thereof
to MHC during such one hundred twenty (120) day period and may do so whether or
not MAI elected the First Carry Option.
6.5 If MAI elects the Second Carry Option:
(a) MAI shall promptly after the Mine Completion Date transfer to MHC or
its designated Affiliate for no additional consideration such number
of shares of Newco then owned by MAI as shall increase MHC's (or its
Affiliate's) ownership of Newco to eighty-five percent (85%) and
shall correspondingly reduce MAI's ownership of Newco to fifteen
percent (15%). Such shares of Newco shall be fully paid,
non-assessable, and free and clear of any lien, claim, charge or
encumbrance.
(b) During the period from the Pilot Plant Completion Date until the
Mine Completion Date (the "Second No Dilution Period"), the parties
shall not permit Newco to issue any additional equity, nor take any
other action that would reduce MAI's ownership of Newco to less than
fifteen percent (15%). Nothing in the preceding sentence shall
prohibit MAI from transferring any of its shares of Newco in
accordance with the provisions of Section 10.2 or 10.4.
(c) During the Second No Dilution Period, MHC shall arrange for Newco to
obtain all funds the Board of Directors of Newco shall deem
necessary to carry out Mining Work in respect of the Property. Such
funds shall be provided in the form of debt financing. MAI
acknowledges that such financing may be comprised of bank or private
financing, including financing provided by MHC or its Affiliates,
and that MHC, in its sole discretion, shall determine the amount of
such financing and the relative proportions of bank and private
financing. Any financing provided by MHC or its Affiliates to Newco
shall be made only on arm's-length terms.
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6.6 If MAI does not elect the Second Carry Option during the one hundred twenty
(120) day period following the Pilot Plant Completion Date, the Second Carry
Option shall terminate.
7. POWERS, DUTIES AND OBLIGATIONS DURING OPTION PERIOD
7.1 Until the Option is exercised or terminated in accordance with the terms of
this Agreement:
7.1.1 MAI and MASA shall, and shall cause Newco to, grant to or obtain for MHC
free access to the Property, so that MHC, its servants and agents shall have the
sole and exclusive right to:
(a) enter in, under or upon the Property and conduct Mining Work;
(b) quiet possession of the Rights and the Property; and
(c) bring upon the Property and to erect thereon such mining facilities
as it may consider advisable.
7.1.2 MAI and MASA shall, and shall cause Newco to, ensure that MHC shall have
full right, power and authority to do everything necessary or desirable to
conduct Mining Work on or under the Property, and without limiting the
generality of the foregoing, the right, power and authority to:
(a) regulate access to the Property, subject only to the right of MAI
and its duly authorized representatives to have access to the
Property at all reasonable times for the purpose of observing and
inspecting work being done thereon (but at their own risk and
expense); provided, however, that said representatives shall give
not less than forty-eight (48) hours prior written notice of any
such inspection to MHC, and that said representatives shall not
interfere with the Mining Work being performed by MHC, its
Affiliates or their contractors; and
(b) conduct such title examinations and cure such title defects relating
to the Rights as may be advisable in the reasonable judgment of MHC
(i) at the expense of MAI if the title defects derive from actions
or omissions taken or incurred prior to the date of the transfer of
the Rights or relevant portion thereof to Newco in accordance with
Article 3 of this Agreement, and (ii) at the expense of MHC if the
title defects derive from actions or omissions taken or incurred
after such date.
7.1.3. MHC shall have the duties and obligations to:
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(a) keep the Rights and any portion of the Property for which MHC elects
to perform Mining Work free and clear of all liens and encumbrances
arising from its operations hereunder (except liens contested in
good faith by MHC);
(b) permit MAI and its duly authorized representatives, at their own
risk and expense, access to the Property at all reasonable times
and, at MAI's request, allow such representatives to gather their
own samples from the Property; provided, however, that said
representatives shall give not less than forty-eight (48) hours
prior written notice to MHC, and that said representatives shall not
interfere with the Mining Work being performed by MHC, its
Affiliates or their contractors. MHC shall prepare and deliver to
MAI once each calendar quarter a report on the Mining Work conducted
by MHC in respect of the Property during the preceding calendar
quarter;
(c) conduct all its work on or with respect to the Property in a careful
and minerlike manner and in accordance with all applicable Argentine
mining laws, and shall indemnify and save MAI, MASA and Newco
harmless from any and all claims, suits or actions made or brought
against any of them as a result of work done by MHC on or in respect
of the Property during such period;
(d) comply with all of its obligations under Argentine labor, social
security, tax and other laws with respect to its workers, employees,
contractors, vehicles, machinery and equipment used in connection
with the conduct of Mining Work by MHC and its Affiliates, and shall
indemnify and save MAI, MASA and Newco harmless from any and all
claims, suits or actions made or brought against any of them by the
workers, employees or contractors of MHC and its Affiliates, or by
the Argentine authorities, in respect of such matters insofar as
they relate to Mining Work conducted by MHC and its Affiliates;
(e) maintain true and correct books, accounts and records of operations
hereunder, which MAI may inspect and copy at all reasonable times;
allow MAI to audit such books and records not more than once each
calendar year, using accountants of MAI's own choosing and at MAI's
sole expense; and cooperate with such audit by making its personnel
reasonably available to answer questions and provide information to
such auditors;
(f) perform or secure the performance of all reclamation and
environmental rehabilitation work as may be required by Argentine
law during the Option Period relating to disturbances caused by the
performance of Mining Work on the Property by MHC (or its
Affiliates) during the Option Period;
(g) provide MAI with the opportunity to review and comment upon all
Exploration, Development and Mining programs MHC proposes to carry
out in respect of the Property, as well as any proposals for project
financing, and, at MAI's request,
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meet with MAI not more than once quarterly to discuss such programs
and hear MAI's comments and suggestions regarding such programs;
(h) provide MAI with a report, no less frequently than quarterly, on the
status of the Mining Work being conducted by MHC in respect of the
Property;
(i) advise MAI as to the sample handling and assay procedures to be
followed by MHC in respect of the Property, which the parties
contemplate will meet currently accepted technical, banking and
stock exchange standards, and allow MAI an opportunity to comment
thereon;
(j) as reasonably requested by MAI, provide MAI with splits of samples,
drill logs and assay data derived from Mining Work conducted at the
Property as soon as reasonably practicable, which sample splits
shall be handled in a professional manner; and
(k) procure on behalf of Newco and maintain in effect with reputable
insurance companies adequate liability insurance (which insurance
shall provide coverage to the directors of Newco) to cover the
activities of Newco. The costs of such insurance shall be deemed an
Expenditure for purposes of this Agreement.
7.1.4 MAI shall have the duties and obligations to:
(a) keep the Rights and the Property free and clear of all liens,
encumbrances, burdens or ownership limitations of any nature
whatsoever, arising from the activities, commitments and liabilities
of MAI or any Affiliate of MAI;
(b) not interfere with the Mining Work being performed on or in respect
of the Property, or any portion thereof, by MHC or its Affiliates or
any of their contractors;
(c) indemnify and save MHC and its Affiliates harmless from any and all
claims, suits or actions made or brought against any of them as a
result of work done by MAI or any Affiliate of MAI, at any time or
in respect of the Property, or any portion thereof;
(d) comply with all of its obligations under all Argentine labor, social
security, tax, and other laws with respect to its workers,
employees, contractors, vehicles, machinery and equipment, and
indemnify and save MHC and its Affiliates harmless from any and all
claims, suits or actions made or brought against any of them by the
workers, employees or contractors of MAI or its Affiliates, or by
the Argentine authorities, in respect of such matters insofar as
they relate to acts or omissions of MAI and its Affiliates;
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(e) maintain true and correct books, accounts and records of MASA and
Newco in all matters relating to the Property; and
(f) take all steps necessary to keep the Rights in good standing,
including but not limited to, making all required filings and paying
any Mining Payments that may be owing in respect of the Rights. MHC
shall reimburse MAI for all such amounts and for all reasonable
professional and administrative fees and expenses paid by it
pursuant to this paragraph (f), or shall pay such amounts directly
if so requested by MAI, and all such reimbursements or payments by
MHC shall be treated as Expenditures for purposes of this Agreement.
If MAI fails to take any step necessary to keep the Rights in good
standing, MHC shall have the right to do so on behalf of MAI, MASA
or Newco, as applicable.
7.2 The parties shall cooperate with each other during the Option Period to
ensure that the parcels comprising the Property are managed efficiently and the
Rights kept in good standing. Neither party shall take any action during the
Option Period to exclude from the Property any portion or parcel of the Property
without the consent of the other party, except in accordance with the following
procedure. If during the Option Period MHC determines that any particular
portion of the Property does not merit further exploratory work, MHC may by
written notice to MAI exclude such portion of the Property from this Agreement.
Upon the giving of any such notice to MAI by MHC, MAI shall no longer have any
obligation to keep MASA and Newco's rights to explore and/or exploit such
portion in good standing and MHC shall no longer have any obligation to
reimburse MAI or pay directly any costs relating to keeping such rights in good
standing. If then requested by MAI, MHC and MAI shall cause Newco to transfer
all of Newco's rights to such excluded portion to MASA free and clear of any
lien or encumbrance, and MHC shall pay all costs to effect such transfer. MHC
shall also perform or secure the performance of all reclamation and
environmental rehabilitation work as may be required by Argentine law relating
to disturbances caused by the performance of Mining Work on such excluded
portion of the Property by MHC (or its Affiliates).
8. TERMINATION PRIOR TO VESTING
8.1 MHC shall have the right to terminate the Option and this Agreement by
giving thirty (30) days' written notice of such termination to MAI. Upon the
effective date of termination, the Option and this Agreement shall be of no
further force and effect, except that each party shall be required to satisfy
any obligations which shall have accrued under the provisions of this Agreement
prior to such date of termination and which have not been satisfied, including
but not limited to MHC's obligations under Section 8.3.
8.2 The Option and this Agreement shall terminate if MHC fails to give or be
deemed to give MAI (i) the Second Year Election on or before the first
anniversary of the date of this Agreement, (ii) the Third Year Election on or
before the second anniversary of the date of this Agreement, or (iii) the Notice
of Exercise within thirty (30) days following the third anniversary of this
Agreement.
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8.3 In the event of termination of the Option and this Agreement pursuant to
this Article 8, MHC shall:
(a) make available to MAI at the site where located any and all reports,
samples, drill cores and engineering data pertaining to the Property
developed by MHC or its Affiliates in the course of conducting
Mining Work not previously furnished to MAI;
(b) if requested by MAI, remove all materials, supplies and equipment of
MHC from the Property; and
(c) perform or secure the performance of all reclamation and
environmental rehabilitation work as may be required by Argentine
law relating to disturbances caused by the performance of Mining
Work on the Property by MHC (or its Affiliates) during the Option
Period.
9. CONFIDENTIALITY
9.1 All information and data concerning or derived from Mining Work shall be
confidential and, except to the extent required by law or by regulation of any
securities commission, stock exchange or other regulatory body, shall not be
disclosed by any party to any person other than such party's professional
advisors.
9.2 The text of any news releases or other public statements which any party
desires to make with respect to the Rights, the Property or this Agreement shall
be subject to the prior approval of the other party, which approval shall not be
unreasonably withheld.
10. RESTRICTIONS ON TRANSFERS OF SHARES OF NEWCO
10.1 Until the earlier to occur of the Vesting Date and the termination of this
Agreement, neither MAI nor MHC shall directly or indirectly sell, transfer,
convey, assign, pledge or grant an option in respect of or grant a right to
purchase or in any manner transfer or alienate (each of the foregoing, for
purposes of this Article 10, hereinafter referred to as a "transfer") any shares
of Newco ("Newco Shares") or any shares or other equity interests in an entity
that, at the time of such transfer, owns Newco Shares or rights to acquire Newco
Shares, or permit their respective Affiliates to do any of the foregoing,
without the prior written consent of the other party, which consent such other
party may grant or withhold in its absolute discretion. Notwithstanding the
provisions of the foregoing sentence, the following transfers shall not be
restricted and shall not require the consent of the other party: (i) a transfer
that does not materially change the beneficial ownership of the Newco Shares or
rights to purchase Newco Shares; (ii) a transfer of shares or other equity
interests in an entity that owns Newco Shares or rights to purchase Newco Shares
if such transfer (or any series of related transfers) does not result in a
change in control of such entity; or (iii) transfers of shares of MAI. A bona
fide pledge of shares or other equity interests in an entity that owns Newco
Shares or rights to purchase Newco Shares shall not be deemed to cause a change
in control of such entity provided that the
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terms of such pledge do not permit the exercise of voting or other powers of the
owner of the pledged interests except upon default and foreclosure; however, a
foreclosure under such pledge (or any similar action under such pledge that has
the effect of changing control of such entity) shall be deemed a transfer. If
either party shall transfer shares or other equity interests of an entity that
owns Newco Shares or rights to purchase Newco Shares in violation of this
Article 10, the other party shall, by written notice given not less than ninety
days following notice to it of such transfer, have the right to purchase from
such entity (or any transferee of Newco Shares from such entity) all, but not
less than all, of the Newco Shares and/or rights to purchase Newco Shares owned
by such entity at a price determined using the same procedure as provided in
Section 13.3.
10.2 After the Vesting Date, a shareholder of Newco (a "Newco Shareholder") may
transfer Newco Shares only as permitted under Section 10.3 or 10.4, or in
accordance with the following provisions:
10.2.1 Any Newco Shareholder may propose to transfer all of its Newco Shares,
or, with the prior written consent of each other Shareholder, which consent may
be withheld in each such other Shareholder's sole discretion, less than all of
its Newco Shares, and it will promptly furnish to each other Newco Shareholder
written notice of the identity of the proposed transferee, the number of Newco
Shares proposed to be transferred, the terms and conditions of the proposed
transfer and such facts as reasonably demonstrate the transfer is a bona fide
transfer (a "Notice of Proposed Transfer"). (In this Section 10.2, that party
which furnishes a Notice of Proposed Transfer is called, with respect to the
transfer of Newco Shares proposed therein, the "Seller", and such other Newco
Shareholders are called, with respect to such proposed transfer, the "Offeree
Shareholders" and each individually, an "Offeree Shareholder"). Any Offeree
Shareholder may, within thirty (30) days after its receipt of the Notice of
Proposed Transfer, elect to purchase all (but not less than all) the Newco
Shares to which the Notice of Proposed Transfer relates, at the same price and
upon the same terms and conditions as shall be stated therein. If more than one
Offeree Shareholder elects to purchase such Newco Shares, then each such Offeree
Shareholder shall be entitled to, and shall, purchase that proportion of the
Newco Shares to which the Notice of Proposed Transfer relates as the number of
Newco Shares owned by him or it bears to the total number of Newco Shares owned
by all such electing Offeree Shareholders, at the same price and upon the same
terms and conditions as shall be stated therein.
10.2.2 The election provided for in Section 10.2.1 shall be made by an Offeree
Shareholder by giving to the Seller written notice of such election (the "Notice
of Election"). The Notice of Election shall specify a date, not later than
thirty (30) days after the date the Notice of Election was given, for the
closing of such purchase. The furnishing of a Notice of Election in such form
shall bind such Offeree Shareholder to purchase, and the Seller to sell, on the
date for the closing so specified, the Newco Shares described in the Notice of
Proposed Transfer, on the terms and conditions stated therein.
10.2.3 If the Offeree Shareholders do not, within the time period provided for
in this Section 10.2, elect to purchase the Newco Shares to which they are
entitled by this Section to elect to purchase, the Seller may, at any time
within sixty (60) days after the last day of such time
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periods, transfer such Newco Shares to the transferee identified in the Notice
of Proposed Transfer, at the same price and upon the same terms and conditions
stated in such Notice and upon the further condition that at the time of the
transfer of such Newco Shares the transferee shall agree in writing, in form
satisfactory to all the Offeree Shareholders, to be bound by the provisions of
this Agreement in the same manner as the Seller had been bound. If, at the end
of such period, the Shares have not been transferred to the transferee
identified in the Notice of Proposed Transfer, the agreements of the Seller not
to transfer its Newco Shares shall again apply to any proposed transfer of the
Newco Shares referred to in such Notice.
10.3 MAI may transfer Newco Shares to MHC or MHC's designated Affiliate in
accordance with the provisions of any of Section 4.3, 6.2 and 6.5.
10.4 The prohibitions of Section 10.2 shall not apply to a transfer of Newco
Shares by a Newco Shareholder to an Affiliate of such Newco Shareholder if such
Affiliate has furnished to the other parties hereto an undertaking in writing,
the performance of which is guaranteed by such Newco Shareholder, in form
reasonably satisfactory to the other parties hereto, to be bound by the
provisions of this Agreement in the same manner as the transferor of such Newco
Shares had been bound.
10.5 MAI and MHC shall each ensure that any Newco Shares directly or indirectly
owned by it or its Affiliates shall at all times, subject to compliance with the
provisions of Section 10.2, be owned by it or such Affiliates and that, if a
change in the controlling ownership of any such Affiliate is contemplated, MAI
or MHC, as the case may be, shall transfer any Newco Shares held by such
Affiliate to itself or another Affiliate prior to such change; provided,
however, that this Section 10.5 shall not apply to a transfer of interests in an
entity that is the owner of Newco Shares if such transfer is permitted under
Section 10.1.
10.6 The parties shall cause Newco to reflect the foregoing restrictions with
appropriate legends on all certificates for its stock and notations in its stock
ledger, and shall be entitled to disregard for all purposes any purported
transfer in violation of this Section 10.
11. NEWCO BOARD OF DIRECTORS AFTER VESTING
11.1 Promptly following the Vesting Date and for so long as this Agreement
remains in effect, the parties shall vote their Newco Shares and take such other
action as may be necessary to procure that the Board of Directors of Newco shall
consist of three (3) directors and that, subject to Section 11.2:
(a) at any time at which either party and its Affiliates own in the
aggregate a majority of the Newco Shares, two (2) of such directors
shall be nominated by such party;
(b) at any time at which either party and its Affiliates own in the
aggregate not less than fifteen percent (15%) of the Newco Shares,
one (1) of such directors shall be nominated by such party; and
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(c) in all other events, the directors of Newco shall be elected or
appointed as provided in Newco's articles of incorporation and
bylaws.
11.2 Promptly following the Vesting Date, the parties shall take such action as
shall be necessary to amend the by-laws of Newco to (i) fix the Board of
Directors at three (3) members, (ii) to remove those provisions of the articles
that were contained or inserted therein for the purpose of reflecting the
provisions of Section 3.2 and 3.4, and (iii) make such other amendments as the
parties shall then deem appropriate to reflect faithfully the terms of this
Agreement.
11.3 So long as each party is entitled to nominate at least one director of
Newco, the Board of Directors of Newco shall meet at least once every calendar
quarter. In lieu of any such meeting, MHC or MAI may request that
representatives of each party meet at such place, date and time as is mutually
agreed (each such meeting an "Owners Meeting") to discuss and decide such
matters as would otherwise be brought before the Board at the Board meeting. At
any such Owners Meeting, MHC and MAI shall each have that number of votes as is
equal to the number of directors of Newco it is entitled to appoint. Promptly
following any Owners Meeting, MHC and MAI shall cause their nominees on the
Board of Newco to adopt the decisions taken at the Owners Meeting.
12. FINANCING OF NEWCO AFTER VESTING; DIVIDEND POLICY
12.1 If MAI elects the First Carry Option or the Second Carry Option, or both,
and a No Dilution Period applies, then during such No Dilution Period Newco
shall finance its operations and activities only from debt and its own revenues,
if any, in such manner as the Board of Directors of Newco sees fit. During a No
Dilution Period, Newco may mortgage its properties and pledge its assets as
security for any debt financing on such terms as the Board of Directors of Newco
sees fit; provided, that, Newco may not grant a mortgage, pledge or other
security interest to secure any debt provided by a Newco Shareholder or
Affiliate of a Newco Shareholder without the prior unanimous approval of Newco's
Board of Directors.
12.2 Except as provided in Section 12.1 and Article 6, after the Vesting Date
Newco shall finance its operations and activities from such sources as the Board
of Directors of Newco sees fit. If the Board determines to raise funds by
issuing additional Newco Shares, each Newco Shareholder shall have the
preemptive right to subscribe and pay for its pro rata share of such additional
Newco Shares on the same terms and conditions as each other Newco Shareholder.
If Newco shall determine to offer Newco Shares for sale, it shall give notice
(the "Company's Notice") to each Shareholder. The Company's Notice shall set
forth a description of the Newco Shares, the number of shares to be offered and
the terms on which such Newco Shares are to be offered. Within 30 days following
the effectiveness of the Company's Notice, each Shareholder may give notice to
Newco stating the maximum number of shares of such Newco Shares that such
Shareholder is willing to purchase upon the terms set forth in the Company's
Notice. Newco shall sell to each Shareholder who gave such notice to Newco and
each such Shareholder shall purchase from Newco the number of Shares specified
in such Shareholder's notice; provided, however, that if the total number of
Newco Shares subscribed for by the Shareholders exceeds the number offered by
Newco, the offered Newco Shares shall be allocated in
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accordance with the Shareholders' percentage ownership of outstanding Newco
Shares prior to such sale. In addition to the aforementioned procedure, the
parties shall also comply with the procedure established in the Argentine
Company Law No. 19,550, as amended from time to time.
12.3 If a No Dilution Period does not apply and Newco proposes to borrow funds
from a Newco Shareholder or Affiliate thereof, prior to accepting any such loan
Newco shall offer each other Newco Shareholder (or its designated Affiliate) the
right to participate in such loan, pro rata to its shareholding in Newco, on the
same terms and conditions. Each Newco Shareholder must notify Newco whether it
wishes to participate in such loan within thirty (30) days after being so
offered.
12.4 No Newco Shareholder shall be obligated to subscribe and pay for any
additional Newco shares, nor lend or invest any additional amount to or in
Newco. If any Newco Shareholder does not subscribe and pay for its pro rata
share of any additional Newco Shares offered to it in accordance with Section
12.2 within sixty (60) days after the date of offer by Newco, each other Newco
Shareholder shall be entitled, but not obligated, to acquire its pro rata
portion of such Newco Shares on the same terms of the original offer.
12.5 It shall be the policy of Newco not to maintain excess distributable cash.
Accordingly, after the Mine Completion Date the parties shall, unless the Board
of Newco unanimously decides otherwise and subject to applicable law, cause
Newco to distribute to its shareholders on a semi-annual basis all cash not
reasonably needed by Newco for operations, maintenance, taxes, debt service,
working capital, exploration programs within the Property, reinvestment or
expansion of any existing mine or the development of any new mine within the
Property. It shall be the policy of Newco to promptly beneficiate and sell all
marketable mineral products from any Mine on the Property. Upon unanimous
agreement of the Board of Directors of Newco, Newco may issue dividends of
refined gold and silver from the Property in lieu of cash. Unless unanimously
approved by the Board of Directors of Newco, Newco shall not enter into any
futures contracts, forward sales, hedging, derivatives trading or any other
similar marketing mechanism in relation to the mineral products produced from
the Property.
13. MANAGEMENT OF NEWCO AFTER VESTING
13.1 After the Vesting Date, Newco shall not take action with respect to any of
the following items unless such item has been approved by the Board of Directors
of Newco or at a meeting of the shareholders of Newco, as applicable under the
Argentine Company Law:
(a) adoption of operating and capital budgets for Newco;
(b) adoption of exploration programs for the Property;
(c) appointment of the chief executive officer and chief financial
officer of Newco;
(d) appointment of the external auditors of Newco;
-23-
(e) commissioning any bankable feasibility study;
(f) entering into any project finance agreements or other similar
agreements to borrow funds to construct a mine on the Property;
(g) increase of the corporate capital and/or issuing any equity
securities of Newco;
(h) granting any mortgage, pledge or other security interest with
respect to any of the Rights or any assets of Newco; and
(i) entering into any contract with a Newco Shareholder or Affiliate of
a Newco Shareholder.
13.2 After the Vesting Date, and for so long as each of MHC and MAI is entitled
to appoint a director of Newco pursuant to Section 11.1, Newco shall not take
action with respect to any of the following items unless such item has been
unanimously approved by both MAI and MHC (at a shareholders or board meeting)
provided that the favorable vote at a board meeting of either party's nominee
shall be deemed an approval by that party:
(a) the sale of all or substantially all of the Rights and the assets of
Newco;
(b) any amendment of the articles of incorporation of Newco that would
have an adverse effect on the rights of any particular Shareholder
to receive its corresponding share of the profits of Newco, it being
agreed that an amendment to increase the share capital of Newco and
pursuant to which each shareholder shall have preemptive rights in
accordance with Article 12 of this Agreement shall not be subject to
this Section 13.2;
(c) entering into any new line of business not relating to Exploration,
Development or Mining of the Property or the sale of mineral
products from the Property; and
(d) acquiring real property or conducting Exploration, Development or
Mining outside of the Property, unless the same is reasonably
necessary to permit the exploitation of any part of the Property;
and
(e) any merger or other corporate combination involving Newco.
13.3 In the event of any disagreement between a party entitled under this
Agreement to appoint a majority of Newco's directors (the "Majority Owner") and
a party entitled hereunder to appoint one director (the "Minority Owner")
concerning any act of Newco that requires the unanimous approval of the Board
under this Agreement, the Majority Owner shall have the option to buy all, but
not less than all, of the Newco Shares owned by the Minority Owner at
-24-
"Fair Value", as determined below. Unless otherwise agreed by the Minority
Owner, such purchase shall be made by payment in full in cash at the closing of
such purchase. Such option must be exercised by written notice to the Minority
Owner given within thirty (30) days after the meeting of the Board (or the
Owners Meeting) at which the Minority Owner or its nominee on the Board of Newco
refuses to approve the relevant action favored by the Majority Owner. Upon the
giving of such notice, the parties shall determine the Fair Value of the Newco
Shares to be purchased hereunder as follows:
13.3.1 Within thirty (30) days after the date of such notice (the "Notice
Date"), each of the Majority Owner and the Minority Owner shall provide to the
other its initial determination of the Fair Value of the Newco Shares to be sold
hereunder. The parties shall attempt to reach agreement on such Fair Value based
upon such exchange of determinations, but if they do not agree upon such Fair
Value within sixty (60) days after the Notice Date, then such Fair Value shall
be determined by appraisers appointed in accordance with Section 13.3.2 below.
13.3.2 If appraisers are required pursuant to Section 13.3.1, each party shall
select within ninety (90) days of the Notice Date an appraiser, who shall be a
banker, accountant or other person familiar with valuing mining enterprises. The
two appraisers selected shall jointly select a third appraiser. The three
appraisers so chosen shall determine by majority vote the Fair Value of the
Newco Shares to be purchased hereunder. In making such determination, the
appraisers must select one of the initial determinations of Fair Value exchanged
between the Majority Owner and the Minority Owner. The fees and expenses of the
appraisers shall be paid by that party whose determination of Fair Value was not
selected by the appraisers.
14. ALTERNATIVE DEVELOPMENT OF ADDITIONAL MINES
14.1 At any time after the third anniversary of the Mine Completion Date, any
director of Newco appointed by MAI may present to the Board of Newco a program
to develop a portion of the Property not then under development by Newco. Such
program shall contain appropriate exploration results and other customary
information to permit the Board of Newco to make a reasoned decision whether to
develop such portion of the Property.
14.2 If (i) the Board of Newco does not decide within one year after such
presentation to undertake the development proposed by such director of Newco, or
(ii) after having decided to undertake such development, Newco does not commence
such development within two years after such decision, then MAI may elect within
sixty (60) days after such one year period or two year period, as the case may
be, by written notice to MHC to undertake such development. In such event, the
parties shall cause Newco to transfer Newco's rights to such portion of the
Property covered by such proposal to a new entity initially owned by MHC (or its
designated Affiliates) and MAI (or its designated Affiliates) in the same
proportions as such parties then own Newco. The initial share capital of such
new entity shall reflect the fair market value of the rights transferred to it
by Newco.
-25-
14.3 The parties shall cooperate to cause such new entity to develop its portion
of the Property as originally proposed by MAI, with such changes as the parties
mutually agree. Each party shall have preemptive rights to subscribe for
additional equity of the new entity and to participate in loans to the new
entity in the same manner as provided for under Section 12 of this Agreement in
respect of Newco. The parties shall enter into an appropriate shareholders or
joint venture agreement to govern such new entity, which agreement shall
faithfully reflect the relevant provisions of this Agreement; provided, that MAI
shall control the operations of the new entity, subject to normal supervisory
approval of the Board of the new entity.
15. INTER-COMPANY TRANSACTIONS
The parties shall procure that any transaction between Newco and any
Newco Shareholder or Affiliate of a Newco Shareholder shall be on commercially
reasonable terms and an arm's length basis.
16. NOTICES
16.1 Any notice, direction, or other instrument required or permitted to be
given under this Agreement shall be in writing and shall be given by the
delivery of same by hand or by a recognized international courier service or by
mailing same by prepaid registered or certified mail or by transmitting same by
facsimile or other similar form of telecommunication, in each case addressed to
the intended recipient as follows and with acknowledgement of receipt requested:
If to MAI: Minera Andes Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to MASA: Minera Andes S.A.
c/o Minera Andes Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to MHC: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Cia. Ltda.
Pasaje El ▇▇▇▇▇▇ 180
▇▇▇. ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇, ▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
-26-
16.2 Any notice, direction, or other instrument aforesaid will be deemed to have
been given on the day of receipt by the intended recipient.
16.3 Any party may at any time give notice in writing to the others of any
change of address or of representative, and from and after the giving of such
notice, the address or representative therein specified will be deemed to be the
address or representative of such party for the purposes of giving notice
hereunder.
17. FURTHER ASSURANCES
17.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds, documents and assurances as provided for in this Agreement and as may be
reasonably required in order to fully perform and carry out the terms and intent
of this Agreement.
17.2 In the event of any conflict between a provision of this Agreement and any
other agreement between all the parties, or some of them, the provisions of this
Agreement shall prevail.
18. ENUREMENT
18.1 This Agreement shall enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
19. FORCE MAJEURE
19.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its reasonable control (except those
caused by its own lack of funds) including, but not limited to, acts of God,
fire, storm, flood, explosion, earthquake, strikes, lockouts or other industrial
disturbances, acts of public enemy, war, riots, laws, rules and regulations or
orders of any duly constituted governmental authority, or non-availability of
materials or transportation (each an "Intervening Event").
19.2 All time limits imposed by this Agreement will be extended by a period
equivalent to the period of delay resulting from an Intervening Event.
19.3 A party relying on the provisions of Section 19.1 hereof, insofar as
possible, shall promptly give written notice to the other party of the
particulars of the Intervening Event, shall give written notice to the other
party as soon as the Intervening Event ceases to exist, shall take all
reasonable steps to eliminate any Intervening Event and will perform its
obligations under this Agreement as far as practicable, but nothing herein will
require such party to settle or adjust any labor dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
governmental authority or to complete its obligations under this Agreement if an
Intervening Event renders completion impossible.
-27-
20. SEVERABILITY
20.1 If any one or more of the provisions contained herein is found to be
invalid, illegal or unenforceable in any respect in any jurisdiction, the
validity, legality and enforceability of such provisions shall not in any way be
affected or impaired thereby in any other jurisdiction, and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
21. AMENDMENT
21.1 This Agreement may be modified or amended only by a written instrument
signed by all the parties hereto, and compliance with the terms and conditions
hereof may be waived only by means of a written instrument signed by or on
behalf of the party or parties granting and otherwise materially affected by
such waiver.
22. ENTIRE AGREEMENT
22.1 The memorandum of understanding dated August 28, 2000, between MHC and MAI
(the "MOU") is hereby terminated.
22.2 This Agreement constitutes the entire agreement and understanding between
the parties with respect to the subject matter hereof and supersedes the MOU and
all prior agreements and memoranda between the parties or any of them with
respect to the subject matter hereof.
23. GOVERNING LAW; ARBITRATION
23.1 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
23.2 Any dispute, controversy or claim arising out of or relating to this
Agreement shall be determined by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association in New
York, New York by three arbitrators appointed in accordance with said rules. The
language of the arbitration proceeding shall be English, but each arbitrator
shall be fluent in both English and Spanish. Any award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
-28-
IN WITNESS WHEREOF the parties have executed this Agreement as of
the day, month and year first above written.
MINERA ANDES INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President
MINERA ANDES S.A.
By: /s/ Dr. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Dr. ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: Vice-President
-29-
LIST OF SCHEDULES
Schedule "A" - Description of the Rights
Schedule "B" - Description of Huevos Verdes
Schedule "C" - Description of Pilot Plant
Schedule "D" - Form of Articles of Incorporation (Acta
Constitutiva) of Newco
Schedule "E" - Form of Irrevocable Proxy
Schedule "F" - Accounting Procedures for Expenditures
-30-
SCHEDULE A
to that certain Option and Joint Venture Agreement between
MINERA ANDES INC.,
MINERA ANDES S.A.,
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA.
made as of the 15th day of March, 2001
=========================================
Description of Rights
(1) List of Files (Expedientes)
--------------------------------------------------------------------------------
CATEO AREA, hectares FILE/EXPEDIENTE No.
--------------------------------------------------------------------------------
Cerro ▇▇▇▇▇▇▇▇ 4,000 402.84/MA/97
--------------------------------------------------------------------------------
Cateo 1 4,500 406,943/MA/98
--------------------------------------------------------------------------------
Cerro ▇▇▇▇▇▇▇▇ NE 2,500 408,766/MA/98
--------------------------------------------------------------------------------
Cateo 2 2,750 406,945/MA/98
--------------------------------------------------------------------------------
Cateo 4 4,110 406,977/MA/98
--------------------------------------------------------------------------------
Cateo 5 3,560 406,978/MA/98
--------------------------------------------------------------------------------
Cateo 6 2,875 406,979/MA/98
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MANIFESTATION of
DISCOVERY AREA, hectares FILE/EXPEDIENTE No.
--------------------------------------------------------------------------------
El Pluma 1 750 410,411/MA/99
--------------------------------------------------------------------------------
El Pluma 2 1,000 412,277/MA/99
--------------------------------------------------------------------------------
El Pluma 3 750 412,279/MA/99
--------------------------------------------------------------------------------
El Pluma 4 1,000 412,281/MA/99
--------------------------------------------------------------------------------
El Pluma E 1 1,000 410,412/MA/99
--------------------------------------------------------------------------------
El Pluma E 2 1,000 412,278/MA/99
--------------------------------------------------------------------------------
El Pluma E 3 800 412,280/MA/99
--------------------------------------------------------------------------------
Tres Colores A 1,000 411,332/MA/99
--------------------------------------------------------------------------------
-31-
--------------------------------------------------------------------------------
Tres Colores B 998.5 411,331/MA/99
--------------------------------------------------------------------------------
Tres Colores C 901 414,643/MA/00
--------------------------------------------------------------------------------
Tres Colores D 901 414,642/MA/00
--------------------------------------------------------------------------------
Tres Colores E 999.95 414,641/MA/00
--------------------------------------------------------------------------------
Tres Colores F 999.95 414,640/MA/00
--------------------------------------------------------------------------------
Tres Colores G 397.5 414,639/MA/00
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 1a 1,000 410,093/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 8 1,000 410,092/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 7a 1,000 410,090/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 2a 1,000 410,091/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 6b 800 410,094/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 5 800 410,089/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 4 800 410,095/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 3 800 410,096/MA/99
--------------------------------------------------------------------------------
Tres A 1,000 411,333/MA/99
--------------------------------------------------------------------------------
Tres B 750 411,334/MA/99
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 9 1,000 413,396/MA/00
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ 10 1,000 413,395/MA/00
--------------------------------------------------------------------------------
Tres C 980 414,264/00/MA
--------------------------------------------------------------------------------
Tres D 770.13 414,265/00/MA
--------------------------------------------------------------------------------
Tres E 1,000 414,266/00/MA
--------------------------------------------------------------------------------
Tres F 1,000 414,267/00/MA
--------------------------------------------------------------------------------
Uno A 840 413,095/MA/00
--------------------------------------------------------------------------------
Uno B 840 413,096/MA/00
--------------------------------------------------------------------------------
Uno C 820.2 413,097/MA/00
--------------------------------------------------------------------------------
Dos A 999.6 411,338/MA/99
--------------------------------------------------------------------------------
Dos B 999.6 411,337/MA/99
--------------------------------------------------------------------------------
Dos C 999.6 411,336/MA/99
--------------------------------------------------------------------------------
-32-
--------------------------------------------------------------------------------
Dos D 501.2 411,335/MA/99
--------------------------------------------------------------------------------
Dos E 911.35 414,525/MA/00
--------------------------------------------------------------------------------
Dos F 990 414,526/MA/00
--------------------------------------------------------------------------------
Dos G 990 414,524/MA/00
--------------------------------------------------------------------------------
Seis A 999.75 412,844/MA/00
--------------------------------------------------------------------------------
Seis B 999.75 412,845/MA/00
--------------------------------------------------------------------------------
Seis C 999.75 412,846/MA/00
--------------------------------------------------------------------------------
Seis D 869.75 412,847/MA/00
--------------------------------------------------------------------------------
Siete A 750 412,483/MA/99
--------------------------------------------------------------------------------
Siete B 750 412,484/MA/99
--------------------------------------------------------------------------------
Diez A 1,000 412,848/MA/00
--------------------------------------------------------------------------------
Once A 537.5 412,849/MA/00
--------------------------------------------------------------------------------
Once B 537.5 412,850/MA/00
--------------------------------------------------------------------------------
Ocho A 900 413,397/MA/00
--------------------------------------------------------------------------------
Cinco A 1,000 413,098/MA/00
--------------------------------------------------------------------------------
Cinco B 950 413,099/MA/00
--------------------------------------------------------------------------------
Cinco C 490.6 413,100/MA/00
--------------------------------------------------------------------------------
Cuatro A 750 413,101/MA/00
--------------------------------------------------------------------------------
Cuatro B 750 413,102/MA/00
--------------------------------------------------------------------------------
Cuatro C 675 413,103/MA/00
--------------------------------------------------------------------------------
Nueve A 1,000 413,104/MA/00
--------------------------------------------------------------------------------
Ocho B 1,000 414,286/MA/00
--------------------------------------------------------------------------------
Ocho C 874 414,285/MA/00
--------------------------------------------------------------------------------
Nueve B 1,000 414,268/MA/00
--------------------------------------------------------------------------------
Nueve C 671.5 414,269/MA/00
--------------------------------------------------------------------------------
Nueve D 671.5 414,270/MA/00
--------------------------------------------------------------------------------
Once F 460.1 414,780/MA/00
--------------------------------------------------------------------------------
Diez E 1,000 414,781/MA/00
--------------------------------------------------------------------------------
-33-
--------------------------------------------------------------------------------
Once C 1000 414,782/MA/00
--------------------------------------------------------------------------------
Once D 900 414,783/MA/00
--------------------------------------------------------------------------------
Diez B 700 414,784/MA/00
--------------------------------------------------------------------------------
Diez C 700 414,785/MA/00
--------------------------------------------------------------------------------
Once E 800 414,786/MA/00
--------------------------------------------------------------------------------
Diez D 1000 414,787/MA00
--------------------------------------------------------------------------------
Seis F 994 400,246/MA/01
--------------------------------------------------------------------------------
Seis G 817 400,245/MA/01
--------------------------------------------------------------------------------
Seis E 900 400,244/MA/01
--------------------------------------------------------------------------------
Total
--------------------------------------------------------------------------------
-34-
(2) Area of Interest
El Pluma/Cerro ▇▇▇▇▇▇▇▇ project boundary corners
▇▇▇▇▇-▇▇▇▇▇▇ coordinates beginning in NW corner, clockwise
Corner GK East GK North
1 2397000 4839000
2 2409300 4839000
3 2409300 4829000
4 2416000 4829000
5 2416000 4824000
6 2416960 4824000
7 2416960 4811500
8 2413600 4811500
9 2413600 4819000
10 2401000 4819000
11 2401000 4821000
12 2390300 4821000
13 2390300 4810000
14 2392500 4810000
15 2392500 4806460
16 2393600 4806460
17 2393600 4804100
18 2394500 4804100
19 2394500 4803000
20 2397500 4803000
21 2397500 4800000
22 2399500 4800000
23 2399500 4794130
24 2402750 4794130
25 2402750 4801500
26 2406750 4801500
27 2406750 4791000
28 2407000 4791000
29 2407000 4788000
30 2402500 4788000
31 2402500 4791614
32 2397500 4791614
33 2397500 4778007
34 2390500 4778007
35 2390500 4786600
36 2386500 4786600
37 2386500 4797500
38 2386300 4797500
39 2386300 4807000
40 2384343 4807000
41 2384343 4809000
42 2381000 4809000
43 2381000 4819000
44 2384343 4819000
-35-
45 2384343 4821000
46 2388335 4821000
47 2388335 4827000
48 2392500 4827000
49 2392500 4831000
50 2397000 4831000
-36-
SCHEDULE A
DESCRIPTION OF RIGHT
PERIMETER OF AREA OF INTEREST
[MAP]
-37-
SCHEDULE B
DESCRIPTION OF HUEVOS VERDES
[MAP]
-38-
SCHEDULE C
to that certain Option and Joint Venture Agreement between
MINERA ANDES INC.,
MINERA ANDES S.A.,
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA.
made as of the 15th day of March, 2001.
(the "Agreement")
=========================================
DESCRIPTION OF PILOT PLANT
The Pilot Plant shall be a mineral crushing, sorting and concentration facility
built for the purpose of conducting tests aimed at optimizing the ore
benefaction process in anticipation of, and to test the viability of, the
construction of a full scale processing facility. The pilot plant shall have a
capacity for processing not less than 50 (fifty) tons per day of mined material.
While the exact configuration of the plant will depend on metallurgical testing,
a generalized description of a possible plant follows.
The plant will have three main areas consisting of crushing, grinding and
concentration circuits. The crushing circuit shall consist of some or all of the
following equipment: coarse separator, pan feeder, jaw crusher, conveyor belts,
vibrating screens, secondary crushers and classifiers. The grinding circuit
shall consist of some or all of the following equipment: two Denver ball ▇▇▇▇▇,
a helicodial classifier, two Knelson concentrators, various pumps, various
cyclones, a spiral, and gravity separation tables. The concentration circuit
might consist of various floatation tanks including rougher, scavenger and
cleaner cells, and associated pumps. If, after metallurgical testing, leaching
of the ore is warranted, then ▇▇▇▇▇ tanks may also be included as part of the
pilot plant.
The plant will be enclosed in a metal structure and will have adequate
illumination and maintenance access. The pilot plant will be powered by diesel
generator(s).
-39-
SCHEDULE D
to that certain Option and Joint Venture Agreement between
MINERA ANDES INC.,
MINERA ANDES S.A.,
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA.
made as of the 15th day of March, 2001.
(the "Agreement")
=========================================
FORM OF NEWCO BY-LAWS
[Heading by Notary Public]
ARTICLE ONE: The company is called "____________ S.A." (hereinafter the
"Corporation") and has its domicile in the City of [Buenos Aires]. It may set up
branches, agencies or any other kind of representation within or outside the
Republic of Argentina. ARTICLE TWO: The duration of the Corporation shall be
ninety-nine years, counted as from the date of registration with the Public
Register of Commerce. ARTICLE THREE: The Corporation's principal corporate
object is to engage by itself, on account of third parties or associated with
third parties, in the country or abroad, in the following activities: a)
exploration and development of mines, extraction and processing of its minerals
and marketing of its products, by-products, components and related products; b)
elaboration or obtention of raw materials, products, by-products, related
substances and minerals; c) purchase, sale, import, export and distribution of
raw material, products, subproducts, related substances and minerals; e) finance
all the corporate activities mentioned hereinabove and grant short or long term
loans, with real estate securities or personal guarantees, with express
exclusion of the operations encompassed in the Financial Entities Law; f) carry
out all the activities necessary or convenient to explore, develop, produce,
extract, reduce, recollect, refinance, elaborate, exploit, grind, process, sell,
transport, transmit, market and distribute minerals and any other mineral
resource of any kind and description; and g) the Corporation may engage in
commissions, agencies, representations and consignments related to its corporate
object. To such end the Corporation has full legal capacity to acquire rights,
undertake obligations and carry out all the acts not prohibited by the laws or
by this by-laws. ARTICLE FOUR: The capital stock shall be equivalent to $12,000
(Twelve Thousand Pesos), and is represented by 11,990 Class A common shares, of
$1 nominal value each and entitled to one vote per share and 10 Class B common
shares,
-40-
of $1 nominal value each and entitled to one vote per share. All shares
shall be registered and non endorsable. Shares of preferred stock may be issued
pursuant to the issuance conditions established by the Shareholders Meeting.
ARTICLE FIVE: The corporate capital may be increased up to five times its
present amount through a decision adopted by the Shareholders' Ordinary Meeting
in furtherance of Section 180 of the Business Companies Law. All other capital
increase, issuance of debentures or bonds and their conversion into shares,
shall require a favorable decision of the Shareholders' Extraordinary Meeting.
ARTICLE SIX: The shares and provisional certificates to be issued will include
the provisions of Article 211 and 212 of the Business Companies Law. The Company
is allowed to issue certificates representing more than one share. ARTICLE
SEVEN: In the event of default in the paying in of the shares, the Board of
Directors may choose any of the procedures contemplated in Section 193 of the
Business Companies Law. ARTICLE EIGHT: The transfer of ownership of the shares
is effective vis-a-vis the Corporation and third parties as from when the
assignor and the assignee thereof notify the Board of Directors the assignment
or transfer and, the required recordings are made in the Registry of Shares.
8.1. No shareholder of the Company ("Company Shareholder") shall sell, transfer,
convey, assign, pledge, or grant an option in respect of, or grant a right to
purchase, or in any manner transfer or alienate (each of the foregoing, for
purposes of this Article 8, hereinafter referred to as a "transfer") any shares
of the Company ("Company Shares") prior to [to be completed with the date of the
third anniversary of the Agreement _____2004]at 8 p.m. 8.2. After [to be
completed with the date of the third anniversary of the Agreement _____, 2004]
at 8 p.m., any Company Shareholder may propose to transfer all or part of its
Company Shares, for which purpose it shall furnish to each other Company
Shareholder written notice of the identity of the proposed transferee, the
number of Company Shares proposed to be transferred, the terms and conditions of
the proposed transfer and such facts as reasonably demonstrate the transfer is a
bona fide transfer (a "Notice of Proposed Transfer"). (In this Section 8.2, that
party which furnishes a Notice of Proposed Transfer is called, with respect to
the transfer of Company Shares proposed therein, the "Seller", and such other
Company Shareholders are called, with respect to such proposed transfer, the
"Offeree Shareholders" and each individually, an "Offeree Shareholder"). Any
Offeree Shareholder may, within thirty (30) days after its receipt of the Notice
of Proposed Transfer, elect to purchase all (but not less than all) such Company
Shares to which the Notice of Proposed Transfer relates, at the same price and
upon the same terms and conditions as shall be stated therein. If more than one
Offeree Shareholder elects to purchase such Company Shares, then each such
Offeree Shareholders shall be entitled to, and shall, exercise their first
refusal rights on a pro-rata basis to each Offeree Shareholders shareholdings in
the Company. purchase that proportion of the Company Shares to which the Notice
of Proposed Transfer relates as the number of Company Shares owned by him or it
bears to the total number of Company Shares owned by all such electing Offeree
Shareholders, at the same price and upon the same terms and conditions as shall
be stated therein. 8.3. The election provided for in Section 8.2 shall be made
by an Offeree Shareholder by giving to the Seller written notice of such
election (the "Notice of Election"). The Notice of Election shall specify a
date, not later than thirty (30) days after
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the date the Notice of Election was given, for the closing of such purchase. The
furnishing of a Notice of Election in such form shall bind such Offeree
Shareholder to purchase, and the Seller to sell, on the date for the closing so
specified, such Company Shares described in the Notice of Proposed Transfer, on
the terms and conditions stated therein. 8.4. If the Offeree Shareholders do
not, within the time period provided for in this Article 8, elect to purchase
such Company Shares to which they are entitled by this Article 8 to elect to
purchase, the Seller may, at any time within sixty (60) days after the last day
of such time periods, transfer such Company Shares to the transferee identified
in the Notice of Proposed Transfer, at the same price and upon the same terms
and conditions stated in such Notice of Proposed Transfer. If, at the end of
such period, the Shares have not been transferred to the transferee identified
in the Notice of Proposed Transfer, the restrictions established in this Article
8 on Seller's ability to transfer its Company Shares shall again apply to any
proposed transfer of the Company Shares referred to in such Notice. 8.5. The
restrictions on the transfer of Company Shares established in this Article 8
shall not apply to a transfer of Company Shares by a Company Shareholder to
an/other Company Shareholder/s (or any Affiliate thereto) or to an Affiliate of
the transferring Company Shareholder if such Affiliate has furnished to the
other Company Shareholders an undertaking in writing, the performance of which
is guaranteed by the transferring Company Shareholder, in form reasonably
satisfactory to the other Company Shareholders, to be bound by the provisions of
this by-laws and any other agreement that may exist among the Company
Shareholders at the time of the transfer, in the same manner as the transferor
of such Company Shares had been bound. Affiliate means with respect to any
person, any other person controlling, controlled by or under common control with
such person. ARTICLE NINE: The direction and management of the Company shall be
entrusted to its Board of Directors which shall be composed of one (1) regular
director(1) and one (1) alternate director appointed by Class A shares and one
(1) regular director and one (1) alternate director appointed by Class B shares.
In cases of vacancy, resignation, absence or temporary or permanent impediment,
alternates shall replace regular directors in the order of their election.
Replacement shall be automatic. Directors shall hold office for one (1) fiscal
years and may be reelected for one or more terms, successive or otherwise. In
their first meeting, the Board of Directors shall elect the President. ARTICLE
TEN: The Board shall hold valid meetings at least quarterly or at the request of
any director; quorum is met with two directors being present. Decisions shall be
adopted with the unanimous vote of the two directors. A director may be
represented by another director with sufficient authority. Notice of the meeting
shall be given to each director with at least 10 days prior notice unless an
unanimous board meeting takes place. ARTICLE ELEVEN: The Board has full powers
of management and disposal, even those for which special powers are required in
accordance with Section 1881 of the Civil Code and Section 9 of Decree 5965/63.
Specifically it shall be empowered to make transactions with any kind of public
or private financial or banking institutions, to grant or revoke special or
general powers of attorney for judicial, administrative and any other purposes,
to file or defend in suits, to report and bring criminal proceedings and to
perform
--------
(1) Please note that pursuant to Argentine Business Company Law, the absolute
mayority of the directors -in this case both of them- must be Argentine
residents.
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any other act for acquiring rights or assuming obligations. The President and
the Vice-president of the Board shall jointly be vested with the legal
representation of the Corporation. ARTICLE TWELVE: The Company shall not appoint
a Syndic pursuant to the terms of Article 284 of the Business Companies Law. If
due to capital increases the Corporation would become encompassed within the
terms of item two of Article 299 of the Business Companies Law, the Shareholders
Ordinary Meeting must appoint regular and alternate syndics, who shall hold
office for one (1) fiscal years and may be reelected for one or more terms,
successive or otherwise. ARTICLE THIRTEEN: First and second calls for
Shareholders meetings may be made simultaneously, in which case the meeting on
second call shall be held one hour after the meeting on first call was
unsuccessful. The calls for meetings shall be made in the form contemplated in
the Business Companies Law and shall also be notified by mail to each
shareholder at the address that it has registered in the books of the
Corporation with at least fourteen business days prior notice to the date of the
Meeting. In the absence of such notice, the Shareholders' Meeting shall be
invalid unless all shareholders are present and all decisions are adopted
unanimously. ARTICLE FOURTEEN: At both Ordinary and Extraordinary Shareholders
Meetings, either on first or second call, quorum and majorities shall be those
established in Section 243 and 244 of the Business Company Law. ARTICLE FIFTEEN:
The fiscal year of the corporation shall end on December 31 of each year.
Financial statements shall be prepared as of such date, in accordance with legal
and technical requirements. Profits shall be allocated as follows: a) 5%, and up
to 20% of the capital stock, shall be set aside on account of legal reserve; b)
for the payment of the directors' and, if applicable, syndics' fees; c) the
remainder shall be distributed by way of dividend in cash among the Shareholders
within the year of having been approved, unless otherwise resolved by the
Shareholders Meeting. ARTICLE SIXTEEN: In the event of dissolution of the
corporation, winding up proceedings shall be carried out by the Board of
Directors under the syndic's control, if the case may be. Upon due cancellation
of the liabilities, the balance shall be allocated among the Shareholders pro
rata to their holdings. SECTION TWO: SUBSCRIPTION AND PAYMENT OF THE CAPITAL
STOCK. That they fully subscribe the capital stock in common registered
non-endorsable shares, of $1 nominal value each, entitling to one vote per
share, in the following proportions: MAI subscribes 11,990 shares, and MHC
subscribes 10 shares. The shareholders hereby pay in 25% of their respective
equity holdings in cash, the outstanding balance must be paid in within a two
year term as from the date hereof. SECTION THREE: BOARD OF DIRECTORS: The first
Board of Directors of the Corporation is appointed as follows: President:
____________; Vice-president: __________ Alternate Directors: _______________,
who shall replace _________, and __________ who shall replace ____________.
SECTION FOUR: CORPORATE DOMICILE: The corporate domiciled of the Corporation is
established at ___________, of this City. SECTION FIVE: AUTHORIZATION AND
SPECIAL POWER OF ATTORNEY: A Special Power of Attorney is granted hereby in
favor of __________, so that any of them acting individually or jointly may
request and carry out the necessary steps in order to register the corporation
with the Public Registry of Commerce (Registro Publico de Comercio) and to carry
out all the necessary steps required by the Office of Corporations (Inspeccion
General
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de Justicia), duly empowered to file any kind of briefs and requests, to file
and request documentation and publications, to deposit and withdraw the funds
referred to in Article 187 of Business Companies Law and to deliver any
supplementary, clarifying or rectifying deed. ATTENDING THIS ACT: [_________]
and [_____________], all able I attest, STATE THE FOLLOWING: That they accept
the offices to which they have been appointed in the Corporation. AT THIS STAGE
the attendees establish, in compliance with Article 256 of Law 19,550 and in
their capacities as Directors of the Corporation, special domicile at
______________. AFTER READING AND RATIFYING THIS DEED the attendees sign before
me, I attest. Signed: _____, _____, _____, _____.
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SCHEDULE E
to that certain Option and Joint Venture Agreement between
MINERA ANDES INC.,
MINERA ANDES S.A.,
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA.
made as of the 15th day of March, 2001.
(the "Agreement")
=========================================
FORM OF IRREVOCABLE PROXY
This irrevocable proxy is given pursuant to Section 3.5 of that certain
Option and Joint Venture Agreement (the "Agreement"), dated as of March __,
2001, by and between Minera Andes, Inc., a corporation formed under the laws of
Canada ("MAI"), Minera Andes S.A., a corporation formed under the laws of
Argentina ("MASA") and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Cia. Ltda., a corporation formed
under the laws of Peru ("MHC"). Capitalized terms used herein and not otherwise
defined have the meanings ascribed to them in the Agreement.
Each of MAI and MASA hereby irrevocably appoints ______________, who shall
have full power to substitute any other person, as its true and lawful proxy and
attorney-in-fact (the "Proxy-Holder") to vote on its behalf and in its name,
place and stead, all shares of [Name of Newco] ("Newco") that it now owns or may
come to own (the "Newco Shares") solely in the circumstances set forth below.
The proxy conveyed hereby is given in connection with the right of MHC under the
Agreement to acquire capital stock of Newco under certain circumstances and,
accordingly, is coupled with an interest and is irrevocable.
The Proxy-Holder may vote the Newco Shares in the following circumstances:
1. If, at any time, the Option is exercisable and is validly exercised by
MHC and, notwithstanding such exercise, MAI and/or MASA fail within a reasonable
period of time to cause Newco to take such action as may be necessary to cause
MHC (or any designated Affiliate of MHC) to acquire fifty-one percent (51%) of
the issued and outstanding share capital of Newco as provided in the Agreement,
the Proxy-Holder shall be entitled to call a meeting of the shareholders of
Newco and, at that meeting, to vote the Newco shares in any manner reasonably
necessary to cause Newco to issue and deliver to MHC, or its designated
Affiliate, as the case may be, shares of capital stock of Newco
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representing fifty-one percent (51%) of the issued and outstanding share capital
of Newco immediately following such issuance and delivery.
2. If, at any time prior to the expiration of this irrevocable proxy, the
shareholders of Newco are asked to vote upon or authorize any action that will
violate or contravene, or cause any party to violate, the provisions of the
Agreement, the Proxy-Holder shall be entitled to vote the Newco Shares against
the taking of any such action.
Except as expressly provided above, this proxy shall convey no rights to
vote or otherwise take action with respect to any Newco Shares and the holders
thereof retain any and all other voting and other rights with respect thereto.
Any dispute, controversy or claim arising out of this proxy shall be
determined in the manner set forth in Section 23.2 of the Agreement.
In order to comply with the terms of Section 1977 of the Argentine Civil
Code, it is hereby expressly agreed that this irrevocable power of attorney
shall remain in effect until (a) MHC or any Affiliate of MHC acquires 51% of the
shares of Newco pursuant to Section 4.3. of the Agreement and the amendments to
the by-laws of Newco required pursuant to Section 11.3 of the Agreement have
been completed or (b) the termination of the Agreement, whichever occurs
earlier, and shall thereafter expire.
Dated this ___ day of __________, 2001.
MINERA ANDES INC. MINERA ANDES S.A.
By:____________________ By:____________________
Title: Title:
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SCHEDULE F
to that certain Option and Joint Venture Agreement between
MINERA ANDES INC.,
MINERA ANDES S.A.,
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & CIA. LTDA.
made as of the 15th day of March, 2001.
(the "Agreement")
=========================================
ACCOUNTING PROCEDURE
(For Recording of Expenditures by MHC During Option Period)
1. INTERPRETATION
1.1 In this Schedule capitalized terms defined in the Agreement shall have the
same meanings herein and the following words, phrases and expressions shall have
the following meanings:
"Account" means the books of account maintained by the Operator to record all
Expenditures.
"Employee Benefits" means the Operator's cost of holiday, vacation, sickness,
disability benefits, field bonuses, paid to, and the Operator's costs of
established plans for employee's group life insurance, hospitalization, pension,
retirement and other customary plans maintained for the benefit of, Employees
and Personnel, as the case may be, which costs may be charged as a percentage
assessment on the salaries and wages of Employees or Personnel, as the case may
be, on a basis consistent with the Operator's cost experience.
"Employees" means those employees of the Operator who are assigned to and
directly engaged in the conduct of Mining Work, whether on a full-time or
part-time basis.
"Field Offices" means the necessary sub-office or sub-offices in each place in
Argentina where Mining Work is being conducted.
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"Government Contributions" means the cost or contributions made by the Operator
pursuant to assessments imposed by governmental authority which are applicable
to the salaries or wages of Employees or Personnel, as the case may be.
"Material" means the personal property, machinery, equipment and supplies
acquired or held for use in Mining Work.
"Offices" means Field Offices and Supervision Offices, or any of them, as the
context may require.
"Operator" means MHC and any Affiliate thereof designated by MHC to carry out
Mining Work during the Option Period.
"Personnel" means those management, supervisory, administrative, clerical or
other personnel of the Operator normally associated with the Supervision Offices
whose salaries and wages are charged directly to the Supervision Office in
question.
"Reasonable Expenses" means the reasonable expenses of Employees or Personnel,
as the case may be, for which those Employees or Personnel may be reimbursed
under the Operator's usual expense account practice; including without limiting
the generality of the foregoing, any relocation expenses necessarily incurred in
order to properly staff Mining Work.
"Supervision Offices" means the Operator's offices or department within the
Operator's offices from which Mining Work is generally supervised.
When used in this Accounting Procedure, the term "Mining Work" shall mean only
Mining Work relating to the Property.
2. DIRECT CHARGES
2.1 The Operator shall charge the Account with all Expenditures properly
chargeable under the Agreement, including but not limited to the following
items:
(a) Construction Costs: All costs relating to the construction, lease or
acquisition of facilities and buildings in connection with Mining Work.
(b) Mining Costs: All costs relating to the carrying out of any surveys of
the Property or any portion thereof and of any geophysical, geochemical and
geological surveys; drilling, assaying, metallurgical testing and bulk sampling;
and engaging in or commissioning any pre-feasibility or bankable feasibility
studies, environmental reports and pilot plant operations.
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(c) Contractors' Charges: All proper costs relative to Mining Work
incurred under contracts entered into by the Operator with third parties.
(d) Labor Charges:
(i) The salaries and wages of Employees in an amount calculated by taking
the full salary or wage of each Employee multiplied by that fraction which
has as its numerator the total time for the month that the Employees were
directly engaged in the conduct of Mining Work and as its denominator the
total normal working time for the month of the Employees;
(ii) The Reasonable Expenses of Employees; and
(iii) Employee Benefits and Government Contributions in respect of
the Employees in an amount proportionate to the charge made to
the Account in respect to their salaries and wages.
(e) Office Maintenance:
(i) The cost or a pro rata portion of the costs, as the case may
be, of maintaining and operating the Offices. The basis for
charging the Account for Office maintenance costs shall be as
follows:
(A) the expense of maintaining and operating Field Offices;
and
(B) that portion of maintaining and operating the
Supervision Offices which is equal to:
(1) the anticipated total operating expenses of the
Supervision Offices
divided by
(2) the anticipated total staff man days for the
Employees whether in connection with Mining Work
or not;
multiplied by
(3) the actual total time spent on Mining Work by the
Employees expressed in man days;
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provided, that, the Operator shall not charge the Account for
any overhead expenses relating to MHC's offices or operations
outside of Argentina as provided under the Agreement.
(ii) Without limiting the generality of the foregoing, the
anticipated total operating expenses of the Supervision
Offices shall include:
(A) the salaries and wages of the Operator's Personnel which
have been directly charged to those Offices and who have
devoted time to the conduct of Exploration, Development
or Mining on the Property;
(B) the Reasonable Expenses of such Personnel; and
(C) Employee Benefits of such Personnel.
(f) Material: Material purchased or furnished by the Operator for use on
the Property as provided under Section 3 of this Schedule F.
(g) Transportation Charges: The cost of transporting Employees and
Material necessary for Mining Work.
(h) Service Charges:
(i) The cost of services and utilities procured from outside
sources other than services covered by Subsection 2.1(j) of
this Schedule F; and
(ii) Use and service of equipment and facilities furnished by the
Operator as provided in Section 3.5 of this Schedule F.
(i) Damages and Losses to Property: All costs necessary for the repair or
replacement of assets made necessary because of damages or losses by fire,
flood, storms, theft, accident or other cause. The Operator shall furnish Newco
and MAI with written particulars of the damages or losses incurred as soon as
practicable after the damage or loss has been discovered. The proceeds, if any,
received on claims against any policies of insurance in respect of those damages
or losses shall be credited to the Account.
(j) Legal Expenses: All costs of handling, investigating and settling
litigation involving the Property, the Rights or the Operator's work with
respect thereto, including, without limiting the generality of the foregoing,
lawyer's fees, court costs, costs of investigation or procuring evidence and
amounts paid in settlement or satisfaction of any litigation or claims.
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(k) Taxes: All taxes, duties, fees, Mining Payments or assessments of
every kind and nature including income taxes assessed or levied upon or in
connection with the Property, the Rights, Mining Work, or the production
therefrom, that have been paid by the Operator.
(l) Insurance: Net premiums paid for:
(i) such policies of insurance on or in respect of Mining Work as
may be required to be carried by law; and
(ii) such other policies of insurance as the Operator may carry in
accordance with the Agreement; and
(iii) the applicable deductibles in event of an insured loss.
(m) Rentals: Fees, rentals and other similar charges required to be paid
for acquiring, recording and maintaining permits, mineral claims and mining
leases and rentals and of Mining Work.
(n) Permits: Permit costs, fees and other similar charges which are
assessed by various governmental agencies.
(o) Other Expenditures: Such other costs and expenses which are not
covered or dealt with in the foregoing provisions of this Section 2.1 of this
Schedule F as are incurred by the Operator and reasonably necessary for the
proper conduct of Mining Work or as may be contemplated in the Agreement.
3. PURCHASE OF MATERIAL
3.1 Subject to Section 3.5 of this Schedule F, the Operator shall purchase all
Materials for Mining Work.
3.2 Materials purchased and services procured by the Operator directly for
Mining Work shall be charged to the Account at the price paid by the Operator
less all discounts actually received.
3.3 So far as it is reasonably practical, the Operator shall purchase, furnish
or otherwise acquire only such Material as is consistent with efficient and
economical operations and the Operator shall attempt to minimize the
accumulation of surplus stocks of Material.
3.4 Any party may sell Material or services required in Mining Work to the
Operator at arms' length terms.
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3.5 Notwithstanding the foregoing provisions of this Section 3, the Operator
shall be entitled to supply for use in connection with Mining Work equipment and
facilities that are owned by the Operator and to charge the Account with such
reasonable costs as are commensurate with the ownership and use thereof.
4. DISPOSAL OF MATERIAL
4.1 The Operator may, from time to time, sell any Material which has become
surplus to the foreseeable needs of the Mining Work for such price and upon such
terms and conditions as are available.
4.2 Any party may purchase from the Operator any Material which may from time to
time become surplus to the foreseeable needs of the Mining Work for such price
and upon such terms and conditions as Newco may approve.
4.3 The net revenues received from the sale of any Material shall be credited to
the Account.
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