U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
MINERA ANDES INC.
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(Name of Small Business Issuer in its charter)
Alberta, Canada None
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3303 North Sullivan Road
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Spokane, Washington 99216
(Address of principal executive offices) (zip code)
(509) 921-7322
--------------------------
Issuer's telephone number
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Shares
--------------------------
(Title of Class)
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TABLE OF CONTENTS
Item of Form 10-SB Page
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PART I
Item 1 Description of Business 4
Item 2 Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
Item 3 Description of Properties 15
Item 4 Security Ownership of Certain Beneficial Owners 52
and Management
Item 5 Directors, Executive Officers, Promoters and 55
ontrol Persons
Item 6 Executive Compensation 57
Item 7 Certain Relationships and Related Transactions 60
Item 8 Description of Securities 61
PART II
Item 1 Market Price of and Dividends on the Registrant's 62
Common Equity and Other Shareholder Matters
Item 2 Legal Proceedings 63
Item 3 Changes in and Disagreements with Accountants 63
Item 4 Recent Sales of Unregistered Securities 63
Item 5 Indemnification of Directors and Officers 65
PART F/S Consolidated Financial Statements F-1
2
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PART III
Item 1 Exhibits III-1
3
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PART I
Preliminary Note Regarding Forward-Looking Statements; Currency Disclosure
The information set forth in this report in Item 1 - "Description of
Business" and in Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and is subject to the safe harbor created by those
sections. Certain factors that realistically could cause results to differ
materially from those projected in the forward-looking statements are set forth
in Item 1 "Considerations Related to Minera Andes' Business."
All currency amounts in this report are stated in U.S. dollars unless
otherwise indicated. On May 8, 1997, the late New York trading rate of exchange,
as reported by The Wall Street Journal for conversion of United States dollars
into Canadian dollars was U.S. $1.00 = Cdn $1.386 or Cdn $1.00 = U.S. $0.721.
ITEM 1. DESCRIPTION OF BUSINESS
Minera Andes Inc. ("Minera Andes" or the "Corporation") is engaged in the
exploration and development of mineral properties located in the Republic of
Argentina. The Corporation's objective is to identify and acquire properties
with promising mineral potential, explore them to an advanced stage or to the
feasibility study stage, and then to pursue development of the properties,
typically through joint ventures or other collaborative arrangements with
partners that have expertise in mining operations.
The Corporation's business grew out of a program begun by N.A. Degerstrom,
Inc., a contract mining company based in Spokane, Washington ("Degerstrom"), to
identify properties in Argentina that possessed promising mineral potential.
Based on the study of available remote sensing satellite data and experience
gained from drilling work performed by Degerstrom, beginning in 1991 Degerstrom
identified a number of areas which it believed had exploration potential and
began the process of filing applications for exploration concessions with the
provincial governments in Argentina and negotiating option agreements with
private landowners. Degerstrom conveyed these property interests to the
Corporation in 1995. See "Description of Properties - The Degerstrom Agreement"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Corporation's current properties and projects consist of mineral rights
and applications for mineral rights covering approximately 210,000 hectares in
six provinces. The lands comprise option to purchase contracts, exploration and
mining agreements and direct interests through the Corporation's filings for
exploration concessions. The Corporation's properties are all early stage
exploration prospects. No proven or probable reserves have yet been identified.
See "Description of Properties."
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Operating Structure
The Corporation is the product of an amalgamation in November 1995 of
Minera Andes and Scotia Prime Minerals, Incorporated, a then inactive Alberta
corporation which had previously had its Common Shares listed for trading on The
Alberta Stock Exchange ("ASE"). The Corporation's interests in its Argentina
properties are held through two Argentinean subsidiaries: Minera Andes S.A.
("MASA") and NAD S.A. ("NADSA"). MASA was incorporated under the laws of the
Republic of Argentina in September 1994. NADSA was incorporated under the laws
of the Republic of Argentina in July 1994.
The corporate structure of Minera Andes is as follows:
|----------------------|
| Minera Andes Inc. |
|----------------------|
|
95%--------------------------91.6%
| |
| |
|---------| |
| Minera | |-----------|
| Andes | | NAD S.A. |
| S.A. | |-----------|
|---------|
The Corporation holds 19 of the 20 issued and outstanding shares of MASA
and 11 of the 12 issued and outstanding shares of NADSA as well as an
irrevocable transferrable option to purchase the one remaining MASA share and an
irrevocable transferrable option to purchase the one remaining NADSA share. Each
of those single shares are held by a natural person shareholder as required by
local law.
Degerstrom provides management services to the Corporation and acts as
operator of the Corporation's properties and projects pursuant to an operating
agreement entered into in March 1995 ("Operating Agreement"). Under the
Operating Agreement, Degerstrom operates and manages the exploration program on
all properties and provides related offsite administrative assistance as
required. This agreement allows the Corporation to minimize its overhead by
providing for reimbursement to Degerstrom of direct out of pocket and certain
allocated indirect costs and expenses and the payment of a management fee of
15%. See "Description of Properties - the Degerstrom Agreement" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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Degerstrom is principally involved in contract mining and operates its own
independently owned mines and mines in joint venture with other mining
companies. Degerstrom provides a full range of contract services including
geological studies, site drilling, metallurgical analysis, and engineering of
pit, process and recovery systems.
The head office and principal business address of the Corporation is 3303
North Sullivan Road, Spokane, Washington, 99216. The registered address of the
Corporation is 1600, 407 2nd Street S.W., Calgary, Alberta, T2P 2Y3 Canada.
Considerations Related to Minera Andes' Business
Ownership of the Corporation's Common Shares involves a high degree of
risk. Shareholders should consider, among other things, the following factors
relating to the Corporation's business and properties and its present stage of
development:
Risks Inherent in Minerals Exploration. There are a number of uncertainties
inherent in any exploration or development program, including location of
economic ore bodies, the development of appropriate metallurgical processes, and
the receipt of necessary governmental permits. Substantial expenditures may be
required to pursue such exploration and, if warranted, development activities.
Assuming discovery of an economic ore body and depending on the type of mining
operation involved, several years may elapse from the initial stages of
development until commercial production is commenced. New projects frequently
experience unexpected problems during exploration and development stages and
frequently result in abandonment of the properties as potential development
projects. Most exploration projects do not result in the discovery of minable
deposits of ore. There can be no assurance that the Corporation's exploration
efforts will yield reserves or result in any commercial mining operations.
Many of the properties that the Corporation intends to explore in Argentina
are the subject of applications for concessions, many of which have not yet been
granted. The filing of an application for concession grants the holder the
exclusive right to obtain the concession conditioned on the outcome of the
approval process. The approval process is an administrative procedure under the
authority of the Province in which the property is located. The process includes
a public notice and approval procedure allowing third parties to give notice of
opposition or prior claim, if any, before the title to the concession is
granted. The approval process may take many months to complete. Although the
Corporation believes that it has taken all necessary steps with respect to the
application, approval and registration process for the property concessions it
has currently applied for and property transactions to which it is a party,
there is no assurance that any or all applications will result in issued
concessions or that the public registrations will be timely approved.
Risks Inherent in the Mining Industry. Exploration, development and mining
operations are subject to a variety of laws and regulations relating to
exploration, development, employee safety and environmental protection; mining
activities are subject to substantial operating
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hazards including rock bursts, cave-ins, fires and flooding, some of which are
not insurable or may not be insured for economic reasons. The Corporation
currently has no insurance against such risks. The Corporation may also incur
liability as a result of pollution and other casualties involved in the drilling
and mining of ore. There may be limited availability of water and power, which
are essential to mining operations; and interruptions may be caused by adverse
weather conditions.
The Corporation or joint venture or investment partners must obtain
necessary governmental approvals and make necessary capital expenditures before
production may commence on most of its projects. Significant capital
expenditures will also be required to bring them into production. The
Corporation may obtain funds for a portion of these capital expenditures from
joint venture or investment partners. However, there can be no assurance that
such joint venture or investment partners will provide such funds or that such
project financing will be available to the Corporation on acceptable terms. The
number of potential sources of third-party project financing for mining projects
is limited.
Minera Andes is subject to additional risks, including that a large number
of companies, many of which are significantly larger and have greater financial
and technical resources than Minera Andes, compete in the acquisition,
exploration and development of mining properties; mining projects are highly
speculative and involve substantial risks, even when conducted on properties
known to contain significant quantities of mineralization.
Need for Additional Capital. The exploration and, if warranted, development
of Minera Andes' properties will require substantial financing. The
Corporation's ability to obtain additional financing will depend, among other
things, on the price of gold, silver, copper and other metals and the industry's
perception of their future price. Therefore, availability of funding depends
largely on factors outside of the Corporation's control, and cannot be
accurately predicted. Failure to obtain sufficient financing could result in
delay or indefinite postponement of exploration, development or production on
any or all of Minera Andes' projects or loss of properties. For example, certain
of the agreements pursuant to which the Corporation has the right to conduct
exploration activities carry work commitments which, if not met, could result in
the Corporation losing its right to acquire an interest in the subject property.
There can be no assurance that additional capital or other types of financing
will be available when needed or that, if available, the terms of such financing
will be favorable to Minera Andes.
Foreign Operations. All of Minera Andes' properties are located in
Argentina. Argentina has recently emerged from periods of political and economic
instability. While current indications are that such instability is diminishing,
there are no guarantees that this will continue. Foreign properties, operations
and investments may be adversely affected by local political and economic
developments, including nationalization, exchange controls, currency
fluctuations, taxation and laws or policies as well as by laws and policies of
the United States and Canada affecting foreign trade, investment and taxation.
It is important that the Corporation maintain good relationships with the
governments in Argentina. The Corporation
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may not be able to maintain such relationships if the governments change.
Argentina has and is developing new bodies of law that will impact the conduct
of business generally and mining operations in particular. Future laws
(including tax laws) could adversely affect the conduct of business and mining
operations.
Difficulties in Developing Remote Areas. Many of the areas in which the
Corporation is conducting exploration and, if warranted, development activities
are in particularly remote and mountainous regions, with limited infrastructure
and limited access to essential resources. Exploration or development projects
in these areas may require the Corporation or its joint venture partners to
develop power sources, transportation systems and communications systems, and to
secure adequate supplies of fuel, machinery, equipment and spare parts.
Consequently, exploration and development in these areas is particularly
difficult, requiring significant capital expenditures, and may be subject to
cost over-runs or unanticipated delays.
Fluctuation in the Price of Minerals. The market price of minerals is
volatile and beyond the control of the Corporation. If the price of a mineral
should drop dramatically, the value of the Corporation's properties which are
being explored or developed for that mineral could also drop dramatically and
the Corporation might not be able to recover its investment in those properties.
The decision to put a mine into production, and the commitment of the funds
necessary for that purpose, must be made long before the first revenues from
production will be received. Price fluctuations between the time that such a
decision is made and the commencement of production can change completely the
economics of the mine. Although it is possible to protect against price
fluctuations by hedging in certain circumstances, the volatility of mineral
prices represents a substantial risk in the mining industry generally which no
amount of planning or technical expertise can eliminate.
Environmental and Other Laws and Regulations. Mining operations and
exploration activities in Argentina are subject to various federal, provincial
and local laws and regulations governing mineral rights, exploration,
development and mining, exports, taxes, labor, protection of the environment and
other matters. Compliance with such laws and regulations may necessitate
significant capital outlays, materially affect the economics of a given project,
or cause material changes or delays in the Corporation's intended activities.
Minera Andes has obtained or is in the process of obtaining authorizations
currently required to conduct its operations. New or different standards imposed
by governmental authorities in the future or amendments to current laws and
regulations governing operations and activities of mining companies or more
stringent implementation thereof could have an adverse impact on Minera Andes'
activities.
Control by Single Shareholder; Conflicts of Interest. Degerstrom
beneficially owns approximately 26% of the outstanding voting securities of the
Corporation and therefore can exert significant influence in the election of the
Corporation's directors and have substantial voting power with respect to other
matters submitted to a vote of the shareholders. The interests of Degerstrom
with respect to any transaction involving actual or potential change in
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control of the Corporation or other transactions may differ from those of the
Corporation's other shareholders.
Certain directors and officers of the Corporation are also directors,
officers or employees of the Corporation's majority shareholder, Degerstrom and
of other natural resource and mining companies. As a result, conflicts may arise
between the obligations of these directors to the Corporation and to these other
entities. Certain directors and officers of the Corporation have other full time
employment or other business or time restrictions placed on them and
accordingly, these directors and officers may not be able to devote full time to
the affairs of the Corporation.
Transactions With Degerstrom; Dependence on Key Personnel. The Corporation
has entered into an Operating Agreement with Degerstrom. See "Description of
Properties - The Degerstrom Agreement." This agreement is not the result of
arm's-length negotiations between independent parties. There can be no assurance
that the Operating Agreement or any future agreements will be effected on terms
comparable to those that would have resulted from negotiations between
unaffiliated parties. Such agreements may be amended by the Corporation and
Degerstrom, by mutual agreement. Degerstrom is not required to devote its
personnel and resources exclusively to, or for the benefit of, the Corporation.
There can be no assurance that the services to be provided by Degerstrom will be
available to the Corporation at all times. Moreover, the Corporation's success
will be dependent upon the services of certain executive officers, including
Allen Ambrose and Brian Gavin, who are also employees of Degerstrom. Degerstrom
pays compensation and provides other benefits to these individuals. Minera Andes
does not have employment contracts with nor does it maintain key person life
insurance for Mr. Ambrose or Mr. Gavin.
Liquidity; Limited Trading Market. There currently is a limited trading
market for the Corporation's securities. There is no assurance that an active
trading market will ever develop. Investment in the Corporation is not suitable
for any investor who may have to liquidate such investment on a timely basis and
should only be considered by investors who are able to make a long-term
investment in the Corporation.
Glossary of Geologic and Mining Terms; Statement of Abbreviations and Conversion
Factors
"anomalous" means either a geophysical response that is higher or lower
than the average background or rock samples that return assay values greater
than the average background;
"Bankable Feasibility Study" means the study, prepared to industry
standards, based upon which a bank or other lending institution may loan the
Corporation, MASA or NADSA funds for production development on the Claims;
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"breccia" means a course grained rock, composed of angular broken rock
fragments held together by a finer grained matrix;
"Cateo" means an exploration concession for mineral rights granted to an
individual or company in the Republic of Argentina, as defined by the Republic
of Argentina Mining Code, as amended;
"Claims" means the Cateos, Manifestacion de Descubrimiento, Mina, Estaca
Mina (as defined by the Republic of Argentina Mining Code, as amended) described
herein issued to NADSA, MASA or the Corporation by the government of Argentina
or any provincial government;
"Estaca Mina" means areas granted to extend the area covered by existing
Minas;
"grab sample" means one or more pieces of rock collected from a mineralized
zone that when analyzed do not represent a particular width of mineralization
nor necessarily the true mineral concentration of any larger portion of a
mineralized area;
"igneous rock" means a rock formed by the cooling of molten rock either
underground or at the surface of the earth;
"intrusive rock" means an igneous rock that, when in the molten or
partially molten state, penetrated into or between other rocks, but cooled
beneath the surface.
"Manifestacion de Descubrimiento" (literally, manifestation of discovery)
means the intermediate stage between the exploration phase and exploitation
phase of development;
"metamorphic rock" means an igneous or sedimentary rock that has been
altered by exposure to heat and pressure (resulting from deep burial, contact
with igneous rocks, compression in mountain building zones or a combination of
these factors) but without complete melting. Metamorphosis typically results in
partial recrystallization and the growth of new minerals. "Metasediment" refers
to metamorphosed sedimentary rock. "Metavolcanics" refers to metamorphosed
volcanic rock.
"Mina" means an exploitation grant based on Manifestacion de
Descubrimiento;
"net smelter return royalty" is a form of royalty payable as a percentage
of the value of the final product of a mine, after deducting the costs of
transporting ore or concentrate to a smelter, insurance charges for such
transportation, and all charges or costs related to smelting the ore. Normally,
exploration, development and mining costs are not deducted in calculating a net
smelter return royalty. However, such royalties are established by contract or
statute (in the case of property owned by governments), and the specific terms
of such contracts or statutes govern the calculation of the royalty.
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"net profits royalty" is a form of royalty payable as a percentage of the
net profits of a mining operation. In contrast to net smelter return royalties,
costs relating to exploration, development and mining may be deducted from the
net proceeds of the operation in calculating the royalty. However, such
royalties are established by contract or statute (in the case of property owned
by governments), and the specific terms of such contracts or statutes govern the
calculation of the royalty.
"porphyry" means an igneous rock of any composition that contains
conspicuous large mineral crystals in a fine-grained groundmass;
"Underlying Royalty" means any royalties on the Claims that are part of the
lease, purchase or option of said Claim from the owner or any royalties that may
be imposed by the provincial government;
"vein" means a mineral filling of a fault or fracture in the host rock,
typically in tabular or sheetlike form;
"VLF-EM" means a very low frequency electromagnetic geophysical instrument
used in exploration to measure variances of conductivity in surficial sediments
and bedrock;
"volcanic rock" (basalt, pillowed-flows, rhyolite) means an igneous rock
that has been poured out or ejected at or near the earth's surface;
"volcanoclastic rock" (wacke, tuff, turbidite) means a sedimentary rock
derived from the transportation and deposition of volcanic rock fragments by air
(tuff) or water (wacke or turbidite)
The following is a list of abbreviations used throughout this Report for
technical terms:
Ag silver
Au gold
As arsenic
Cu copper
g/t Au grams per tonne gold
g/t Ag grams per tonne silver
g/t grams per tonne
ha hectare(s)
Hg Mercury
IP/RES induced polarization and resistivity (survey)
kg kilogram(s)
km kilometre(s)
m metre(s)
Mo molybdenum
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NSR Net Smelter Return
oz ounce
Pb lead
ppb parts per billion
ppm parts per million
Sb antimony
sq. square
VLF-EM very low frequency electromagnetic (survey)
Zn zinc
The following table sets forth certain standard conversions from Standard
Imperial units to the International System of Units (or metric units).
To Convert From Imperial To metric Multiply by
acres hectares 0.404686
feet metres 0.30480
miles kilometres 1.609344
tons tonnes 0.907185
ounces (troy)/ton grams/tonne 34.2857
1 mile = 1.609 kilometres
1 yard = 0.9144 metres
1 acre = 0.405 hectares
2,204.62 pounds = 1 metric ton = 1 tonne
2,000 pounds (1 short ton) = 0.907
tonnes 1 ounce (troy) = 31.103 grams
1 ounce (troy)/ton = 34.2857 grams/tonne
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Corporation's audited consolidated financial statements for the years ended
December 31, 1996 and 1995, and the unaudited consolidated financial statements
for the three months ended March 31, 1997 and 1996 included elsewhere in the
report. The Corporation's financial condition and results of operations are not
necessarily indicative of what may be expected in future years.
Overview
The principal business of the Corporation is the exploration and
development of mineral properties located in the Republic of Argentina. The
Corporation carries out its business by acquiring, exploring and evaluating
mineral properties through its ongoing exploration program, and either joint
venturing or developing these properties further, or disposing of them if the
properties do not meet the Corporation's requirements.
The Corporation's current properties and projects consist of mineral rights
and applications for mineral rights covering approximately 210,000 hectares in
six provinces. The lands comprise option to purchase contracts, exploration and
mining agreements and direct interests through the Corporation's filings for
exploration concessions. The Corporation's properties are all early stage
exploration prospects. No proven or probable reserves have yet been identified.
See "Description of Properties."
The Corporation was incorporated in Alberta in July 1994. In November 1995,
the Corporation effected an amalgamation with Scotia Prime Minerals,
Incorporated, also an Alberta corporation, which at that time was an inactive
corporation that previously had been a reporting issuer under Alberta law and
had its common shares traded on The Alberta Stock Exchange. The business
combination between Minera Andes and Scotia Prime Minerals was accounted for
using the purchase method of accounting. Under this method of accounting, Minera
Andes is identified as the acquiror. See "Note 2 of Notes to Consolidated
Financial Statements."
Plan of Operations
The Corporation has budgeted and plans to spend approximately $2.7 million
for mineral property and exploration activities on its properties in Argentina
through the end of the 1997/1998 field season, which the Corporation expects
will end near the end of May 1998. See "Description of Properties - Planned
Exploration and Development Program - Summary." The Corporation believes that
its existing funds and projected sources of funds will be sufficient to finance
this planned exploration and the related operating activities for this future
period. If the Corporation were to determine to develop a property or group of
properties beyond the Phase I and Phase II levels described in this Report,
substantial additional financing would be necessary. Such financing would likely
be in the form of equity, debt or a combination of equity and debt.
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The Corporation has no current plan to seek such financing and there is no
assurance that such financing, if necessary, would be available to the
Corporation on favorable terms.
Results of Operations
Three Months Ended March 31, 1997 Compared to Three Months Ended
March 31, 1996
The Corporation had a net loss of $0.22 million for the three months ended
March 31, 1997 compared with a net loss of $0.16 million for the three months
ended March 31, 1996. This increase in net loss resulted primarily from an
increase in general and administrative expenses and office overhead incurred as
a result of the Corporation's financing activities and expanded operations.
These additional expenses were offset by interest income of $41,000 earned on
invested balances received as a result of the Company's 1996 equity financings.
The Corporation had no interest income in the comparable period in 1996. See
"Liquidity and Capital Resources."
1996 Compared to 1995
The Corporation had a net loss of $1.2 million in 1996 compared with a net
loss of $1.5 million in 1995. The reduction in the loss for the year was a
function of higher general and administrative expenditures, more than offset by
a reduced write-off of deferred expenditures in connection with the abandonment
of certain property interests.
General and administrative expenses increased from $0.5 million to $0.75
million primarily because 1996 was the Corporation's first full year as a
Canadian reporting company. Legal and travel expenses in 1996 reflected the
financing activity undertaken during the year, which included two special
warrant financings. Office overhead costs also increased as a result of the
Corporation's leasing of additional office space in Mendoza, Argentina, printing
and copying expenses and the costs of preparing shareholder reports and investor
relations materials.
The write-off of mineral property and deferred exploration costs was $0.5
million in 1996, compared with $1.0 million in 1995. The Corporation's
exploration program involves nearly continuous prospecting, acquisition,
exploration and evaluation of property interests. If a property does not meet
the Corporation's requirements, costs associated with the abandonment of the
property will result in a charge to operations. The Company expects to incur
additional write-offs in future periods, although the amounts of such write-offs
are difficult to predict as they will be determined by the results of future
exploration activities.
Total mineral property costs and exploration costs were $2.1 million in
1996 and in 1995, but there were some significant differences within categories
of expenditure in 1996 compared to 1995. In 1996 the Corporation reached a more
advanced stage of work on several properties. As a result, the Corporation
incurred greater expenses in 1996 than in 1995 for construction, trenching and
drilling, with the bulk of these expenses being incurred on the 100%
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owned La Horqueta property. Proceeds were received from the mineral property
options granted to Newcrest Resources, Inc., a subsidiary of Newcrest Mining
Ltd. of Australia ("Newcrest") (on Agua Blanca), and Cominco Ltd. ("Cominco")
(on Santa Clara and Pino Andino), which offset deferred acquisition and
exploration costs. Under the terms of the agreement with Cominco, 25% of the
amount received from the Cominco private placement was spent during 1996 on
continuing exploration and road building at the Santa Clara and Pino Andino
properties. After the effect on operations of the write-offs described above and
the offsetting impact of option payments, deferred expenditures related to
mineral properties and exploration increased from $2.5 million in 1995 to $3.4
million in 1996.
Liquidity and Capital Resources
Due to the nature of the mining business, the acquisition, exploration and
development of mineral properties requires significant expenditures prior to the
commencement of production. To date, the Corporation has financed its activities
through the sale of equity securities and joint venture arrangements. The
Corporation expects to use similar financing techniques in the future.
The Corporation's exploration and development activities and funding
opportunities, as well as those of its joint venture partners, may be materially
affected by precious and base metals price levels and changes in those levels.
The market prices of precious and base metals are determined in world markets
and are affected by numerous factors which are beyond the Corporation's control.
At March 31, 1997 the Corporation had cash and cash equivalents of $7.5
million, compared to cash and cash equivalents of $1.6 million as of March 31,
1996. This significant increase in the Company's cash and equivalents position
is due to the receipt of proceeds from the Corporation's 1996 equity financings.
Working capital at March 31, 1997 was $7.4 million.
Net cash used in operating activities during 1996 was $0.7 million,
compared with $0.5 million in 1995. This reflects the additional general and
administrative expenditures as a result of the Corporation being a Canadian
reporting company for the full 1996 year.
Financing activities during the first quarter of 1997 and during 1996
included two equity private placements, principally in Canada, the Cominco
private placement and the issuance of Common Shares upon exercise of warrants.
See "Properties - Santa Clara Project Summary." Funds received from the
Corporation's December 1996 private placement are shown as subscriptions
received at year end given that the Common Shares were not issued until the
second quarter of 1997 following Canadian regulatory approval of the related
Prospectus. Funds received during the first quarter of 1997 totaled $1.7 million
as a result of the exercise of previously issued warrants. The Corporation's
working capital improved during 1996 also as a result of the Corporation's
satisfaction of a debt of $1.14 million owing to Degerstrom in
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connection with a private issuance of Common Shares to Degerstrom. See "Certain
Relationships and Related Transactions."
Net cash used in investing activities during 1996 was $1.5 million,
compared to $2.1 million for 1995. This reflects a relatively comparable level
of mineral property and exploration expenditures during 1996 and 1995, with the
advantage in 1996 of the Corporation receiving $0.7 million from mineral
property option proceeds.
ITEM 3. DESCRIPTION OF PROPERTIES
The principal business of the Corporation is the exploration and
development of mineral properties ("Claims") located in the Republic of
Argentina. The Corporation's interests in the Claims are held through MASA and
NADSA. MASA holds properties and is the company in which the daily business
operations are conducted. NADSA holds properties and drilling equipment under a
temporary importation permit. MASA and NADSA were formed and registered as
mining companies in order for the Corporation to receive the benefits of the new
mining laws in Argentina. The principal properties of the Corporation are
described under the heading "Principal Properties" below.
The Degerstrom Agreement
A number of the Claims were originally held by Degerstrom. Pursuant to the
March 1995 Asset and Share Acquisition Agreement to which the Corporation, MASA,
NADSA and Degerstrom are parties (the "Degerstrom Agreement"), Degerstrom
transferred its interest in those Claims to NADSA and MASA in consideration for
a royalty. Degerstrom also conveyed the MASA and NADSA capital stock it held to
the Corporation. In consideration for those shares, Minera Andes (i) issued to
Degerstrom 4,000,000 Common Shares and the right to acquire an additional
1,213,409 Common Shares if any of the properties comprising the Claims became
the subject of a Bankable Feasibility Study, (ii) agreed to pay a royalty on any
existing or future properties held by the Corporation or its affiliates as
described below, and (iii) agreed to pay the aggregate amount of the cost and
expenses incurred by Degerstrom on behalf of the Corporation from July 1, 1994
through March 15, 1995. Minera Andes also acquired from Brian Gavin, an officer
of the Corporation, the shares he held in MASA.
The royalty payable to Degerstrom by both NADSA and MASA will be a
percentage of the net smelter return earned on those Claims or any future Claims
acquired by those parties. The Claims are subject to a royalty equal to the
difference between 3 percent and the Underlying Royalty, subject to a maximum
royalty of 2 percent. If any party acquires all or part of the Underlying
Royalty, the royalty payable, if any, to Degerstrom will not increase. If
Degerstrom collects a royalty on any of the Claims held by the parties, each
party shall at any time have the option, upon giving notice to Degerstrom, to
repurchase up to one-half of the royalty payable to Degerstrom upon payment of
$1,500,000, for each one percent of the royalty repurchased.
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NADSA, MASA, Degerstrom and the Corporation also entered into an Operating
Agreement, appointing Degerstrom as operator of the Claims and any future Claims
acquired in Argentina. Under the terms of the Operating Agreement, Degerstrom
operates and manages the exploration program on all properties and provides
related offsite administrative assistance as required. In consideration for
these operating services, Degerstrom is entitled to reimbursement for its costs
of labor, materials and supplies incurred in connection with its services plus
an additional 15% of such costs as a management fee. Included in the Operating
Agreement are fixed rates for the equipment owned by Degerstrom. Degerstrom has
the right to terminate the Operating Agreement if the Corporation does not
maintain a program and budget in excess of Cdn $300,000 per year. If the
Corporation elects to develop a property and contract with a third party for
development or production, the Corporation must give notice to Degerstrom of the
terms and conditions of the proposed arrangement. Degerstrom has the right for a
period of 30 days to meet the contract bid by a third party.
PRINCIPAL PROPERTIES
Recent Mining and Economic History in Argentina
Argentina is the second largest country in South America, over 2.7 million
square kilometres in area. In 1983, Argentina returned to a multi-party
democracy, which brought to an end nearly a half century of military
intervention and political instability. The country then began to stabilize;
however, it was not until 1989, with the election of the current government
under president Carlos Menem, that Argentina's economy began to improve. Menem
initiated serious economic reforms that included the privatization of many state
companies and the implementation of the Convertibility Plan, which fixed the
Argentine peso to the US dollar at par, fully backed by reserves of foreign
exchange, gold and dollar-denominated bonds of the Central Bank of Argentina.
Results of the reforms have been positive; Argentina's gross domestic product
grew at up to 8% per annum in the early 1990's and inflation has dropped to
between 1 and 3% per annum. However, Argentina is currently recovering from a
recession. The government is focused on diversifying the economy to increase
exports and decrease Argentina's dependency on imports. The country is
encouraging foreign investment.
The government is actively revitalizing the mineral sector. In 1993, the
Mining Investments Act instituted a new system for mining investment to
encourage mineral exploration and foreign investment in Argentina. Key
incentives provided by the Act include: guaranteed tax stability for a 30 year
period, 100% income tax deductions on exploration costs, accelerated
amortization of investments in infrastructure, machinery and equipment, and the
exemption from import duties on capital goods, equipment and raw materials used
in mining and exploration. Repatriation of capital or transfer of profits are
unrestricted. Argentina's mineral resources, owned by its 23 provinces, are
subject to a provincial royalty capped at 3% of the "mouth of mine" value of
production, although provinces may opt to waive their royalties.
Argentina's mineral potential is largely unknown, particularly in
comparison to that of its immediate neighbors. Until recently, Argentina has
been relatively underexplored and, as a
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consequence, there is a lack of information pertaining to the country's resource
base. Copper and gold mineralization discovered to date occurs predominantly in
the southern Andean copper belt which extends over 1,000 km through northwestern
Argentina. Deposits that are currently under development include the Bajo de la
Alumbrera, Agua Rica and El Pachon deposits. In addition, gold deposits are
concentrated in the Argentine portion of the Central Andes' Maricunga-El Indio
gold belts and in the newly discovered Santa Cruz gold belt in southern
Patagonia.
In 1989, fewer than a dozen foreign exploration companies had offices in
Argentina; currently there are approximately 60 such companies. Exploration
expenditures have grown from $5 million in 1991 to over $90 million in 1995.
The Corporation initiated gold exploration in Argentina in 1991, in
conjunction with Degerstrom. As of May 1997, the Corporation had Argentine
landholdings totalling 209,377 hectares ("Ha") in six Argentine provinces
(Figure 1). The Corporation's exploration efforts initially focused on
evaluating prospects generated by 1960's United Nations development exploration
programs and on targets generated by satellite image analysis. The Corporation
developed techniques of processing and interpreting satellite imagery to assist
in identifying promising exploration targets. Currently, the Corporation is
completing exploration work that includes geophysical surveys, mechanical
trenching and reverse circulation drilling on the most advanced targets in their
property portfolio, and conducting grassroots exploration to evaluate their
other properties and to generate new targets.
Property And Title
The laws, procedures and terminology regarding mineral title in Argentina
differ considerably from those in the United States and in Canada. Mineral
rights in Argentina are separate from surface ownership and are owned by the
federal government or the provinces, depending on the territory in which they
are located. Mineral rights are administered by the provinces. The following
summarizes some of the Argentinean mining law terminology in order to aid in
understanding the Corporation's land holdings in Argentina.
1. Cateo: A cateo is an exploration concession which does not permit mining but
gives the owner a preferential right to a mining concession for the same area.
Cateos are measured in 500 Ha unit areas. A cateo cannot exceed 20 units (10,000
Ha). No person may hold more than 400 units in a single province. The term of a
cateo is based on its area: 150 days for the first unit (500 Ha) and an
additional 50 days for each unit thereafter. After a period of 300 days, 50% of
the area over 4 units (2,000 Ha) must be dropped. At 700 days, 50% of the area
remaining must be dropped. Time extensions may be granted to allow for bad
weather, difficult access, etc. Cateos are identified by a file number or
"expediente" number.
Cateos are awarded by the following process:
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(a) Application for a cateo covering a designated area. The application
describes a minimum work program for exploration;
(b) Approval by the province and formal placement on the official map or
graphic register;
(c) Publication in the provincial official bulletin;
(d) A period following publication for third parties to oppose the claim.
(e) Awarding of the cateo.
The length of this process varies depending on the province, and commonly takes
up to 2 years. Accordingly, cateo status is divided into those that are in the
application process and those that have been awarded. If two companies apply for
cateos on the same land, the first to apply has the superior right. During the
application period, the first applicant has rights to any mineral discoveries
made by third parties in the cateo without its prior consent. While it is
theoretically possible for a junior applicant to be awarded a cateo, because
applications can be denied, the Corporation knows of no instances where this has
happened.
Applicants for cateos may be allowed to explore on the land pending formal
award of the cateo, with the approval of the surface owner of the land. The time
periods after which the owner of a cateo must reduce the quantity of land held
does not begin to run until 30 days after a cateo is formally awarded. The
Corporation's goal is to determine whether its cateos contain commercial grade
ore deposits before portions of the cateos must be relinquished. The
Corporation's ability to do so is dependent upon adequate financing for
exploration activities. It is likely that several of the Corporation's cateos
will be relinquished after preliminary exploration because no promising mineral
deposits have been discovered.
Until August 1995, a "canon fee", or tax, of $400 per unit was payable upon
the awarding of a cateo. A recent amendment to the mining act requires that this
canon fee be paid upon application for the cateo.
2. Mina: To convert an exploration concession to a mining concession, some or
all of the area of a cateo must be converted to a "mina". Minas are mining
concessions which permit mining on a commercial basis. The area of a mina is
measured in "pertenencias". Each mina may consist of two or more pertenencias.
"Common pertenencias" are six Ha in size and "disseminated pertenencias", 100 Ha
(relating to disseminated deposits of metals rather than discrete veins). The
mining authority may determine the number of pertenencias required to cover the
geologic extent of the mineral deposit in question. Once granted, minas have an
indefinite term assuming exploration development or mining is in progress. An
annual canon fee of $80 per pertenencia is payable to the province.
Minas are obtained by the following process:
(a) Declaration of manifestation of discovery ("MD"), in which a point
within a cateo is nominated as a discovery point. The MD is used as a
basis for location of pertenencias of the sizes described above. MD's
do not have a definite area
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until pertenencias are proposed. Within a period following designation
of an MD, the claimant may do further exploration, if necessary, to
determine the size and shape of the orebody.
(b) Survey ("mensura") of the mina. Following a publication and opposition
period and approval by the province, a formal survey of the
pertenencias (together forming the mina) is completed before the
granting of a mina. The status of a surveyed mina provides the highest
degree of mineral land tenure and rights in Argentina.
3. Estaca Minas: These are six-Ha extensions to existing surveyed minas that
were granted under previous versions of the mining code. Estaca minas are
equivalent to minas. Estaca minas were eliminated from the mining code in August
1996.
4. Provincial Reserve Areas: Provinces are allowed to withdraw areas from the
normal cateo/mina process. These lands may be held directly by the province or
assigned to provincial companies for study or exploration and development.
All mineral rights described above are considered forms of real property
and can be sold, leased or assigned to third parties on a commercial basis.
Cateos and minas can be forfeited if minimum work requirements are not performed
or if annual payments are not made. Generally, notice and an opportunity to cure
defaults is provided to the owner of such rights.
Grants of mining rights include water rights, subject to the rights of
prior users. Further, the mining code contains environmental and safety
provisions, administered by the provinces. Prior to conducting operations,
miners must submit an environmental impact report to the provincial government,
describing the proposed operation and the methods to be used to prevent undue
environmental damage. The environmental impact report must be updated
biennially, with a report on the results of the protection measures taken. If
protection measures are deemed inadequate, additional environmental protection
may be required. Mine operators are liable for environmental damage. Violators
of environmental standards may be caused to shut down mining operations.
General Discussion of Andean Geology as it Relates to Mineral Deposits
The Andes Mountain Range running along the western edge of South America,
including the western portions of Argentina, is a dynamic portion of the earth's
crust. Conditions there have been favorable for the formation of metal ore
deposits for the past 100 million years. Since the late 1960's geologists around
the world have realized that the continents and ocean floors of the earth's
crust consist of many individual plates which move against each other, more or
less "floating" on the next deeper layer of the earth, referred to as the
mantle. Where these crustal plates rub against each other, earthquakes are
common. Where one plate is overridden by another (referred to as a "subduction
zone"), the lower plate may partially melt, causing liquid rock to rise through
the plates.
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In particular, along the western edge of South America, the Pacific Ocean
floor is being overridden by South America, creating many folds and faults in
the edge of the continent, with attendant earthquakes. As the ocean floor is
pushed under the continent, parts of the slab (up to 70 km thick) are melted and
rise upward, intruding into the crust of South America. Some of this melted rock
cools underground, creating bodies of granite. The granite may later be exposed
by erosion of the mountain ranges. Other portions of the molten rock reach the
surface and form the volcanoes of the Andes. With the molten rock come
superheated fluids that carry sulphur and metals such as copper and gold. These
minerals are deposited in and around the intrusive and volcanic rocks.
Persistent hot springs, as in Yellowstone National Park, may concentrate
deposits of metals. Weathering of ore deposits can cause metals in the rock and
soil to dissolve and be concentrated at lower levels.
There has been relatively continuous intrusive and volcanic activity along
the Andean chain for over 100 million years, creating a very good environment
for metal deposits. As explained above, while numerous gold and copper deposits
have been developed in the Andes Mountains in neighboring Chile, the similar
terrain in Argentina has only recently been opened to exploration. Minera Andes
was one of the first companies to obtain valuable exploration rights in
Argentina, and has a substantial number of promising properties which it is
systematically exploring for metal deposits.
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Minera Andes Properties
The sections that follow discuss certain of the properties that are or have
been the subject of joint venture agreements with third parties or which have
been more intensively explored by the Corporation.
Figure 1
[Map illustrating Minera Andes current projects and mines]
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A. Santa Clara Project Summary
1. Santa Clara Project Location
The Santa Clara project area is located in northwest Mendoza Province,
approximately 63 km west of the city of Tupungato, at latitude 33o12'00"S and
longitude 69o37'00"W. Good road access exists to the project area and a 25 km
gravel road was recently constructed to fully access the property. Elevations at
Santa Clara range from 2,500 m to 4,600 m with moderate to rugged relief. The
climate permits exploration work for approximately eight months of the year, as
snow and cold temperatures hinder working in the winter months.
2. Santa Clara Project Exploration
The Santa Clara project was first explored in the 1960's under the United
Nations-Argentine Government Plan Cordillerano. The property was recognized as
hosting porphyry copper potential and an exploration campaign consisting of
geological mapping, geochemical surveys (stream sediment, soil and rock chip)
and an induced polarization geophysical survey was completed. In addition, a
total of 2,037 m of diamond drilling was completed in 28 holes to depths ranging
from 70 m to 110 m). In 1982-83, Fabricaciones Militares, the mining branch of
the Argentine military, explored the Quebrada del Medio area, south of Tres
Quebradas, for molybdenum. The work consisted of geologic mapping, planimetric
surveys, an induced polarization geophysical survey and two drill holes, drilled
to depths of 210 m and 250 m. The holes intersected granitic porphyry, with
argillic alteration and disseminated pyrite, traces of chalcopyrite, molybdenite
and chalcocite.
None of the samples collected during these periods of exploration were
analyzed for precious metal content.
3. Santa Clara Project Geology
The Santa Clara project is located within metamorphic and intrusive rocks
of the Frontal Cordillera. Basement rocks at Santa Clara comprise metasediments
and igneous rocks and volcanic sediments ranging in age from billions of years
old to about 300 million years old. These rocks are intruded by granite and
other intrusive and volcanic rocks with ages ranging from 200 million years old
to the present. These igneous rocks are being generated as the Pacific Ocean
floor is continually thrust under South America, into the earth's upper mantle.
Portions of the descending ocean floor melt and rise beneath the Andes,
producing intrusive rocks and volcanoes. These molten rocks also bring
superheated fluids containing sulphur and metals such as copper and gold. The
superheated fluids contribute to the formation of ore deposits.
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4. Summary of Work Completed
In 1994, Minera Andes initiated an aggressive exploration program to
evaluate the Santa Clara property's potential of hosting gold mineralization
associated with, or peripheral to, the copper porphyry system. The first phase
of work included property-wide prospecting and stream sediment sampling survey.
Analytical results clearly defined the porphyry copper center at Tres Quebradas
and its associated base-metal zonation. In addition, four areas of anomalous
gold values were outlined; Tres Quebradas (north of the copper zone), Quebrada
del Norte, Quebrada del Azufre and Arroyo Metales. Each of these targets was
systematically explored by detailed mapping and sampling in subsequent
exploration programs. A total of 1200 rock samples were collected and analyzed.
In addition to the exploration programs detailed below, in 1996 MASA
contracted the construction of 25 km of road to better access the Santa Clara
property. Road building was completed in July 1996. The current focus of
exploration at Santa Clara with Cominco as operator of the work program is the
evaluation of the area's porphyry copper potential. Cominco's work program,
which included road construction and reverse circulation drilling of the
Quebrada del Azufre anomaly, was completed at the end of May 1997.
5. Cominco Agreement
The Corporation signed a Memorandum of Understanding in March 1996 with
Cominco providing for a joint venture on the Santa Clara and Pino Andino
properties. Cominco has an option to earn a 51% interest in the Santa Clara
property by making cash payments of $250,000 and funding exploration over four
years up to $5,000,000 and paying all associated option and land payments.
Cominco has agreed to the following cumulative expenditures on Santa Clara:
$50,000 by October 31, 1996 (paid); $500,000 by October 31, 1997 (firm);
$1,300,000 by October 31, 1998 (optional); $2,750,000 by October 31, 1999
(optional); $4,750,000 by October 31, 2001 (optional). Cominco agreed to make
the following cumulative expenditures on the Pino Andino property: $400,000 by
March 31, 1997 (firm); $1,200,000 by March 31, 1998 (optional); $2,650,000 by
March 31, 1999 (optional); $4,650,000 by March 31, 2000 (optional). However,
Cominco terminated the Memorandum of Understanding with respect to Pino Andino
on February 27, 1997.
Once Cominco has earned the interest in the Santa Clara property, Cominco
may, at the Corporation's option, earn an additional 11% interest by spending up
to an additional $22,000,000 or completing a bankable feasibility study. If less
than $22,000,000 is spent, Cominco will increase its percentage on a pro rata
basis. Consequently, the Corporation could have a 49% participating interest or
may elect to reduce to a 38% participating interest and would be required to
contribute to exploration costs on a pro rata basis or dilute its interest. If
the Corporation's participating interest were to fall to less than 20%, that
interest would convert to a 20% deferred carried interest. This could occur in
two instances: i) if the Corporation does not contribute to exploration costs on
a pro rata basis; or ii) if the Corporation elects not to contribute to the cost
of bringing either property into commercial
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production. The Corporation will receive an advance royalty of 2% of net smelter
returns, up to a maximum of $500,000 per year, from the net proceeds from
production if its interest has converted into a 20% deferred carried interest.
As part of the Memorandum of Understanding, Cominco also purchased from the
Corporation 877,194 Units (the "Cominco Units") for a price of Cdn $3,000,003.
Each Cominco Unit consists of one Common Share and one warrant to purchase
Common Shares. Two Cominco Warrants entitle Cominco to purchase one Common Share
at a per share price of Cdn $3.98 until May 10, 1998. See "Description of
Securities." The Corporation used twenty-five percent of the Cdn $3,000,003 for
exploration of Santa Clara and Pino Andino.
Through April 1, 1997, the Corporation and Cominco have expended a total of
$841,809 at the Santa Clara project. The Corporation continues to believe that
the Santa Clara project may lead to the discovery of a commercial gold or copper
deposit.
6. Santa Clara Project Ownership
The Santa Clara project comprises at total of 26,720 Ha in 8 cateos and 14
manifestations of discovery. All landholdings are currently held by MASA under
an option to purchase agreement, or directly.
MASA is party to an option-to-purchase agreement with Carotti and
Giustozzi, of the city of Mendoza. MASA can earn 100% interest in the property
by making payments totalling $1,950,000 by October, 1998. The property is
subject to a 0.5% net smelter return royalty to the owner or, in the case of
their cateo being superseded by a manifestation of discovery from an adjacent
cateo belonging to MASA, a 2.5% net smelter royalty on ore mined from their
cateo capped at the total option price. MASA may also exercise the Santa Clara
option at any time by paying the balance in five semi-annual payments from the
date of exercise.
On June 30, 1995, the owners and the Corporation signed a complementary
agreement to the option to purchase agreement postponing all but $5,000 of the
scheduled $35,000 payment due on July 5, 1995 to December 15, 1995. On December
13, 1995, a second complementary agreement was signed which extended the term of
option to purchase agreement from May 12, 1998 to October 15, 1998 and
rescheduled the payments due under the option to purchase contract. This was
done because two of the seven cateos and one of the twelve manifestations of
discovery were pending in a provincial park boundary dispute which could have
affected a portion of the property. The boundaries of the Volcan Tupungato
Provincial Park were extended in April 1994 to cover sixty percent of the
pre-existing mineral rights at Santa Clara. This status would have prohibited
mining. The provincial mining authorities confirmed the validity of the mining
rights at Santa Clara in January 1996, and permission was received for continued
exploration in March 1996. Provincial Law 6459 was passed on January 2, 1997 to
exclude existing mineral properties from the provincial park.
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Through April 1, 1997, option payments totalling $175,000 have been made
and the Corporation expects to make approximately $125,000 in additional
payments over the next twelve month period.
Canon fees due on these Santa Clara properties in 1997 total $12,280. Mina
survey costs are estimated at $30,000 for 1997. Mendoza province has waived its
rights to a royalty.
B. Pino Andino Project Summary
1. Pino Andino Project Location
The Pino Andino project property package currently consists of three
individual contiguous properties: the Pino Andino reserve area, the Mulichinco
cateo and the Dos Guanacos properties.
The Pino Andino Project is located 250 km northwest of the city of Neuquen,
in Neuquen Province at latitude 38(degrees)02'00"S and longitude
70(degrees)29'00"W. Year-round access is provided to the property by well-
maintained gravel roads from the city of Loncopue, located 20 km west of the
project area. A network of smaller roads accesses most of the property.
Topography in the area consists of gentle rolling hills; elevations range from
900 m to 2,300 m. Outcrop is limited to hills and drainages. The climate is
arid, with hot, dry summers and mild winters that allow for year-round
exploration. Basic supplies can be purchased in Loncopue.
2. Pino Andino Project Exploration
A number of old trenches, test pits and minor open cuts are evidence of
historical exploration of galena- bearing quartz veins. Similar evidence exists
at numerous copper carbonate (malachite) occurrences scattered throughout the
property. Historical work was also completed at Barite Hill, to explore the
barite veins that outcrop in this area.
3. Pino Andino Project Geology
The Pino Andino project area is principally underlain by Jurassic
sedimentary rocks that dip gently to the east into the Neuquen Basin. The
Jurassic sequence comprises black shales and lesser sandstone, tuffaceous
sandstone, tuffs and limestones. Bedded anhydrite occurs in the uppermost
Jurassic rocks. Cretaceous diorite and granodiorite intrudes the Jurassic
sequence in the western property area. The stocks are part of an extensive
north-south belt of intrusions, and possibly are apophyses of a large batholith
at depth. Late Tertiary to Quaternary tuffs occur in the extreme west. This
unit, and the basalt remnants that occur at high elevations in the center of the
property, are manifestations of recent volcanic activity that occurred to the
west, in the principal cordillera.
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A high angle fault (or faults) is interpreted to occur along the western
margin of the project area and forms the eastern boundary of the Loncopue
graben. Poorly defined, high angle splays of this fault have been identified on
satellite images of the area.
4. Summary of Work Completed
Since the acquisition of the property in 1994, MASA has completed
property-scale and detailed exploration work at Pino Andino, including a 10 hole
reverse circulation drill program in 1995 and ground geophysical surveys in
1996. Results outlined a zone of gold mineralization and a potentially large
zone of copper porphyry mineralization. The nature of the topography at Pino
Andino hinders exploration as only limited outcrop occurs. The following is a
summary of work completed to date on the project.
In 1994, the regional geology of the area was compiled at 1:50,000 using
satellite images, air photos and field investigation. A 400-sample regional
stream sediment sampling program was completed, the results of which defined an
area anomalous in gold, copper, arsenic and mercury north of Arroyo Mulichinco
at Barite Hill.
Follow-up examination of the stream sediment anomaly located the area of
historic barite prospecting at Barite Hill. Barite veins, to 1 m widths, occur
in Jurassic sandstones, tuffaceous sandstones and conglomerates which are
intruded and hydrothermally altered by Cretaceous granodiorite to diorite
intrusions. Quartz-barite-pyrite veins occur in a zone of structurally
disturbed, silicified and sericitized tuffaceous sandstones over an area 2 km by
4 km in size. A thin bed of silica-barite replacing limestone occurs in the
northeastern part of Barite Hill.
A program comprising soil sampling and rock chip sampling was completed
over the Barite Hill area on a 2 km2 grid of 100 m line spacings and 50 m
station intervals. In addition, channel sampling was completed on the east side
of Barite Hill. A total of 730 soil samples and 287 rock chip samples were
collected. Results outline a broad gold-copper soil anomaly (greater than 30 ppb
Au, greater than 30 ppm Cu) over a 1.5 km x 2 km area. Within this zone, strong
gold and copper soil anomalies (50-500 ppb Au, 50-500 ppm Cu) occur in the
southwest, northwest and east. The strongest gold anomalies are associated with
zones of sericitization, silicification and quartz-pyrite-barite veining. The
southwest gold and copper soil anomaly terminates at the contact of Tertiary
unlithified tuffs. The anomaly may persist in Jurassic rocks that underlie the
Tertiary deposits.
Rock chip sample results returned anomalous gold and copper values (greater
than 100 ppb Au, greater than 500 ppm Cu), commonly in the areas of anomalous
soil samples. Twenty six samples returned gold values greater than 1 g/t Au and
91 samples greater than 100 ppb Au. A sample of silicified, tuffaceous sandstone
returned 5,411 ppb Au. Anomalous gold values are associated with zones of
silicification, sericitization and/or quartz-barite-pyrite veins.
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Anomalous copper values (1,000 ppm - 7,000 ppm Cu) occur in rocks in the
southwest area, at Copper Canyon, and in the center of the Barite Hill area (500
ppm to 1,500 ppm Cu). Copper mineralization is associated with sericitization
and potassic alteration.
In late 1995, a 10 hole, 1,005 m reverse circulation drill program was
completed at Pino Andino. The holes were targeted to test soil geochemical
anomalies in an area of relatively sparse outcrop. Eight of 10 holes returned
significant intercepts of copper and/or gold mineralization. Hole PA-3
intersected hydrothermally altered tuffaceous sediments that ran 1.2 g/t Au over
55 ft. Hole PA-5 intersected 0.32% Cu over 305 ft., hosted in argillically
altered tuffaceous sediments and diorite. A 190 ft. intercept in PA-9 returned
0.38% Cu, including 45 ft. of 0.52% Cu and 35 ft. of 0.51% Cu. The best
intersections in PA-7 and PA-8 were 60 ft. of 0.32% Cu, 0.20 g/t Au and 35 ft.
grading 0.29% Cu, 0.15 g/t Au respectively. Gold values ranged to 10 ft. of 0.87
g/t Au in PA-8 and 5 ft. of 0.98 g/t Au in PA-9. Hole PA-10 did not intersect
significant mineralization.
In 1996, with Cominco as operator of the joint venture a topographic map
was prepared for the Pino Andino area. An exploration program including
geophysical surveys and reverse circulation ("RC") drilling was initiated.
Approximately 37.5 km of induced polarization and 55.3 km of ground magnetic
survey were completed. The results of these surveys indicate the presence of two
strong chargeability anomalies; one in the area of 1995's drilling and having
characteristics consistent with the signature of Cu-Au porphyry mineralization,
the other 1 km to the southwest that may represent a structurally controlled
zone of gold mineralization peripheral to a porphyry system. Magnetic survey
data indicates that zones of magnetic lows coincide with the chargeability
anomalies, and may represent the destruction of magnetite in an altered
intrusion. In addition, 113 rock chip samples were collected and alteration
mapping was done over a 10 sq. km area.
Also in 1996, Cominco planned and executed a campaign of RC drilling (10
holes totalling 2,000 m). Five holes tested I.P./Resistivity anomalies
coincident with magnetic lows, four holes tested geological targets and one hole
tested a combined geological/geochemical target. The drill holes intersected
mostly pyritic mineralization (1-5 vol%) with local traces of chalcopyrite,
chalcocite and sphalerite hosted in sericitically altered tuffaceous sandstones.
Mineralized intersections are summarized in the table below. Enrichment appears
to be poorly developed. Cominco concluded that within the drill zone there is
little possibility of encountering an open pittable economic reserve (i.e. in
the top 200 m). Work by Cominco did not include additional exploration of the
gold mineralization encountered in drill holes PA-1, 2 and -3. Cominco
terminated the Memorandum of Understanding with regard to Pino Andino on
February 27, 1997.
The Corporation recently completed a drilling program on the gold targets
at Pino Andino and results are pending.
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5. Pino Andino Project Ownership
The Pino Andino Project is comprised of three individual contiguous
properties:
a. Pino Andino Reserve Area
The Pino Andino reserve area was acquired under an October 1994 exploration
contract with a mining option from CORMINE S.E.P., a provincial corporation.
Terms of the agreement call for MASA to make monthly exploration payments of
$0.07 per hectare. Work commitments total $850,000 over four years and a 2% net
smelter return royalty from production is payable. Rental payments for 1997
amount to $10,511.
The land originally contracted from CORMINE was reduced from 29,840 Ha to
10,163 Ha. and subsequently amplified to 12,513 Ha. Areas evaluated and deemed
without exploration potential were returned to reduce land holding costs.
Province of Neuquen presently has no net smelter royalty in place on
mineral properties.
b. Dos Guanacos (Gonzalez)
MASA has entered into a four-year option-to-purchase contract dated March
30, 1995, with Gonzalez et al. on a group of minas within the reserve area and
the Mulichinco cateo (see below). Under the terms of the contract MASA can earn
a 100% interest in the properties by making quarterly rental payments of $6,000
totalling $96,000 over four years with an option-to-purchase of $200,000. This
is all subject to a 1% net smelter return royalty. Rental payments for 1997
total $24,000 on the minas. The contracted land consists of 410 hectares.
c. Mulichinco
The Mulichinco makes up the remainder of the property in the Neuquen
project area and consists of a cateo and a manifestation of discovery owned 100%
by MASA. The cateo has been granted and there are no holding costs. Holding
costs for the manifestation is $80 per year. Survey costs for converting the
manifestation of discovery to a mina are estimated at $10,000.
Total area of lands under option or owned directly in the Pino Andino
project area is 14,570 hectares.
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C. San Juan Project Summary
1. San Juan Project Location
The San Juan Province Project comprises nine properties, located in the
southwestern province area. Access to the cateos is limited to all terrain
vehicles, mules or helicopter support. The general area is rugged, with
elevation ranges from 2,500 m to 5,500 m and moderate to high relief. Vegetation
is minimal and water runs only in the major drainages. The climate is typical of
mountainous terrain; cold and snowy winters limit exploration from June to
September.
2. San Juan Project Exploration
No formal records of previous exploration in the project area exist. The
area's proximity to the Chilean border, where numerous Cu-Pb-Zn-Mo-Au showings
occur, is evidence that the Argentine side of the border must have been
prospected historically by both Argentines and Chileans. Evidence of prospecting
(small trenches or holes) exists on some of the cateos. The area is currently
active with predevelopment at the El Pachon copper deposit and advanced
exploration at the Araya (Cu), Los Piuquenes (Cu), Cenicero (Au) and La Poposa
(Au) projects.
Through May 1997, Degerstrom and the Corporation have evaluated and dropped
eleven cateos in the San Juan Project area.
MASA personnel are assessing their extensive landholdings within the San
Juan area. Results through May 1997 indicate that Los Chonchones has significant
gold/copper porphyry potential and merits detailed exploration.
Through April 1, 1997, the Corporation has expended $363,994 on the San
Juan Project.
3. San Juan Area Project Geology
The project area extends from the western margin of the Cordillera Frontal
to the Cordillera Principal. The area is principally underlain by Permo-Triassic
Choiyo Group volcanic rocks, a multiphase igneous sequence comprising volcanic
breccias, ignimbrites, tuffs and rhyolites, intruded by granites and overlain by
extrusive acidic volcanic rocks. Jurassic continental, marine and volcanic
derived sedimentary rocks unconformably overly Permo-Triassic rocks. The
youngest rocks in the project area comprise Tertiary volcanic and intrusive
rocks, which are common hosts of epithermal gold mineralization as evidenced by
deposits in the Chilean Andes.
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4. Summary of Work Completed
The San Juan Province Project is a regional reconnaissance program, focused
on epithermal gold and gold porphyry targets in the eastern cordillera. Work
through June 1997 is divided into two categories: a) Work on lands controlled by
the Corporation; and, b) Generative work on lands being considered for
acquisition.
a. The Corporation Lands
All of the cateos in the project were staked based on the results of
satellite image analysis which indicated the presence of colour anomalies,
possibly representing zones of hydrothermal alteration, in each of the areas.
Through June 1997, seven of the nine cateos in the project have been visited. A
preliminary field examination, including rock chip sampling and property-wide
stream sediment sampling was completed at each.
The Los Chonchones property returned the most interesting results in the
project's preliminary survey and a second exploration program was completed on
the property in April 1996. The program included reconnaissance scale geologic
mapping and geochemical surveys. Mapping determined that Los Chonchones is
underlain by a thick sequence of Permo-Triassic andesites and tuffs, overlain by
a complex sequence of Tertiary tuffaceous andesites and rhyolites. Hornblende
diorite and porphyritic quartz latite intrude the sequence as dykes and sills.
Argillic alteration and iron oxide staining are widespread on the property and
correspond to the area of the satellite image colour anomalies. Sericitization
and silicification occur locally. Quartz veining, quartz stock working and
disseminated pyrite occur locally in the altered sequence. Potassic alteration,
with intense magnetite veinleting and traces of chalcopyrite mineralization,
occurs in the southwestern colour anomaly. A total of 53 rock chip, 69 stream
sediment and 9 sets of drainage samples (stream sediment, bulk extractable
leached gold and pan concentrates) were collected at Los Chonchones in 1995 and
1996. Results returned a number of anomalous gold and/or copper values in all
sample types, scattered throughout the colour anomalies and concentrating in the
center of the southwest anomaly. Several major mining companies are looking at
Los Chonchones for a possible joint venture.
b. Generative Program
Due to the intense competitor activity in western San Juan province
generative work is concentrated on evaluating available third-party properties.
A large number of property submittals are under review by the Corporation.
To date, preliminary target generation and evaluation has discovered a zone
of hydrothermal alteration with anomalous copper and gold values at the Los
Chonchones property. Exploration work on this project has been limited to
property-scale mapping and sampling. The alteration and mineralization may be
indicative of a weak porphyry system. Additional work, consisting of detailed
(1:1000) mapping, grid sampling and a magnetometer
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survey should be completed in order to establish the size and tenor of the
mineralized system. A program of preliminary field evaluation of the four cateos
that have not yet been visited and follow-up programs of mapping and sampling is
planned for the other properties in the project portfolio. Generative work will
continue and will include additional satellite image processing and the
acquisition of geophysical data that has recently become available for the area.
5. San Juan Area Project Ownership
The cateos, at present, are not subject to a royalty, however, the
government of San Juan has not waived its rights to retain up to a 3% "mouth of
mine" royalty from production. Property canons for all properties are $40,201
per annum. Mina survey costs are estimated to be $30,000.
D. Agua Blanca Project Summary
1. Agua Blanca Project Location
The Agua Blanca project is located approximately 220 km northwest of the
city of San Juan in San Juan Province, at latitude 30o08'00"S, longitude
69o45'00"W . The property lies in the southeastern extension of the El Indio
Gold Belt which hosts the El Indio, Tambo and Pascua (Nevada) epithermal Au-Ag
deposits. Agua Blanca is accessed by paved Provincial Route 436 to the town of
Las Flores, 180 km northwest of San Juan, and from there by 25 km of gravel road
to the base of the Quebrada Mondaca. A rough, four wheel drive road continues 25
km up the quebrada to reach the center of the property. The city of San Juan
offers the most complete range of services and camp supplies.
Elevations on the property range from 3,300 m to 5,300 m, with moderate
relief that permits foot access to most areas of the property. Vegetation is
limited to altiplano-type grasses and lichens. Water is plentiful in most of the
areas major drainages, but freezes in winter months. The climate is consistent
with semi-arid to arid Andean locations, hot dry days and cool nights for much
of the year. Winter months are snowy with sub-zero temperatures, which limits
exploration activity from June to September.
2. Agua Blanca Project Exploration
Between 1985 and 1994, a number of limited prospecting and sampling
excursions were conducted in the Agua Blanca property area by the Asociacion
Cooperadora Instituto de Investigaciones Mineras ("ACIIM") in conjunction with
the property owner, Adonis Cantoni. Their work succeeded in outlining zones of
intense hydrothermal alteration with anomalous values of gold and silver,
occurring in a quartz stock work and narrow veinlets. Analytical results
reported from their sampling include values from 0.4 g/t Au to 5.1 g/t Au in
stockwork mineralization and 1.8 g/t Au to 12.0 g/t Au in veinlets. ACIIM and
Cantoni also examined the potential of alluvial gold deposits in the area.
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3. Agua Blanca Project Geology
The eastern portion of the property is underlain by Agua Blanca Formation
sedimentary rocks that are assigned a Carboniferous age, and by extensive
outcropping of the Permo-Triassic Colanguil Batholith granitoids. To the west,
volcanic rocks of probable Tertiary age predominate. The sequence of volcanic
rocks ranges in composition from andesite to rhyolite and includes flows, tuffs
and, possibly, volcanoclastic rocks. The stratigraphy strikes northerly and dips
gently to the east. A number of diorite plugs, which range from coarse grained
to porphyritic in texture, intrude the volcanic package.
Exploration to date has focused on the Tertiary sequence in two main areas,
Quebrada Mondaca and Arroyo del Agua Blanca, where numerous zones of intense
hydrothermal alteration occur that are also visible on satellite images of the
area. Argillic (kaolinite) and sericitic alteration predominates in volcanic
rocks; intense potassic alteration occurs in diorite. Silicification occurs
locally in all rock types and magnetite veining to magnetite breccias occur
extensively throughout the dioritic unit. Weak, propylitic alteration is
widespread on the property. Disseminated pyrite mineralization occurs variably
throughout the zones of alteration. Minor chalcopyrite and arsenopyrite
mineralization occur locally, associated with potassic alteration and
silicification respectively.
4. Newcrest Joint Venture
The Corporation signed an agreement in April 1996 with Newcrest creating a
joint venture relating to the Agua Blanca property. Newcrest was given the
option to earn a 51% interest in the joint venture by making exploration
expenditures of $3,800,000 over four years, paying all associated land and
option payments, and making cash payments totalling $350,000 during the first
year. Newcrest made a $100,000 cash payment to the Corporation upon formation of
the joint venture. After conducting a drilling program during 1996, Newcrest
elected to return the property to the Corporation in March 1997. The Corporation
is now responding to expressions of interest from other mining companies who
wish to participate in exploration of the property. Management believes that the
results on the property to date justify further exploration expenditures.
5. Summary of Work Completed
Since 1994, MASA has completed three exploration programs at Agua Blanca to
explore the Quebrada Mondaca and Arroyo del Agua Blanca areas. In 1995, MASA
constructed a 25 km road to access the property from the head of Quebrada
Mondaca drainage. Exploration efforts have included property-scale geologic
mapping, prospecting and detailed sampling. Results indicate that a gold or
copper-gold porphyry system of mineralization may exist in the area of the
Quebrada Mondaca headwaters where numerous rock chip samples returned anomalous
copper and/or gold values. The occurrence of arsenic, mercury and gold anomalies
peripheral to the Quebrada Mondaca headwaters may
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indicate epithermal gold-type mineralization in that area. A total of 532 rock
chip, talus and stream sediment samples have been collected on the property.
During the 1996 Newcrest evaluation period, the following work was
completed:
a) Geologic mapping (1:5,000) and rock chip sampling in the target area at
the headwaters of Quebrada Mondaca. Some 330 rock chip samples and 144 trench
samples were collected. Geologic and alteration mapping was done over 24 sq km.
b) Completion of 32 line kilometres of ground magnetics and 29 line
kilometres of I.P. Geophysical results were interpreted and integrated on-site
with magnetic susceptibility measurements and outcrop geology. A strong, EW
magnetic high defines the limits of known potassic altered intrusive outcrops,
whereas individual magnetic highs correlate with quartz-magnetite stock work
zones. Areas with magnetic signatures indicative of more consistent magnetic
character and deeper magnetic roots have been prioritized as drill targets.
Chargeability anomalies identified by gradient I.P. surveys flank the
magnetic high, and appear to correspond in part to outcropping phyllic
(quartz-sericite-pyrite) alteration, and in part to propylitic assemblages which
also contain some disseminated pyrite. Overall, there remains the clear
suggestion of strong structural control on the distribution of alteration and
mineralization.
c) Construction of approximately five kilometres of bulldozer access roads
and drill pads.
d) In March 1997 Newcrest completed a 12-hole, 2819 meter RC drilling
program, which showed the area to be widely mineralized in both gold and copper.
Gold mineralization is present in both potassically altered rock, and, at higher
concentrations, in zones of phyllic alteration. The grade tends to improve with
depth. Potassic alteration, including zones of quartz-magnetite stockwork, and
phyllic alteration, are mapped as scattered occurrences over an area in excess
of ten square kilometers, and extend from the site of the current drilling in
Quebrada Mondaca into the adjacent Quebrada Agua Blanca drainage. Additional
drilling, particularly to target the phyllic alteration zones, appears to be
warranted.
As of April 1, 1997, the Corporation had spent $532,012 on Agua Blanca.
Newcrest paid all expenditures on the project between April 1996 and March 1997,
and incurred expenses of approximately $429,000 during that time.
6. Agua Blanca Project Ownership
The Agua Blanca is currently held by MASA under a four year
option-to-purchase with Adonis Cantoni dated June 21, 1995. This
option-to-purchase calls for option payments
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totalling $920,000 and a final buy out of $1,080,000 to earn 100% interest in
the property claims. The property is subject to a net smelter royalty equal to
the difference between 4.5% and the amount charged by the province, with a
maximum of 3% to the owner.
Option payments for 1997 amount to $115,000.
E. Mendoza Project Summary
The Mendoza Project is a regional program focused on epithermal,
porphyry-related, or skarn gold mineralization.
1. Mendoza Project Location
The Mendoza Project consists of four MASA properties and a generative
program targeting the western or Andean part of Mendoza province. Access to the
properties is generally by pack animal as helicopter services are scarce and
unreliable at present. Most of the properties are workable on a seasonal basis
as they are located at elevations greater than 3000 metres in generally rugged
terrain with limited water and minimal vegetation.
2. Mendoza Project Exploration
The cordilleran part of Mendoza Province was explored in the late 1960's
and early 1970's under the Plan Cordillerano of the United Nations and the
Argentine government. That program identified skarn copper and iron occurrences
as well as several significant copper and/or molybdenum resources and prospects.
The area of the Mendoza Project has historically been explored by individual
prospectors and small companies, and international mining and exploration
companies have acquired extensive land holdings in the past five years.
3. Mendoza Project Geology
The Mendoza project is focused on those areas of Cordilleran Mendoza that
are underlain by a generally north-trending fold and thrust belt Mesozoic
sedimentary rocks. The sediments include Jurassic, Cretaceous, and lesser lower
Tertiary units of marine and continental origin such as sandstones, siltstones,
limestones, and evaporites. These units host the numerous known skarn
occurrences in western Mendoza and are permissive for sediment-hosted epithermal
gold deposits.
The Mesozoic sediments overlie a basement of Paleozoic metasedimentary and
igneous rocks, and were intruded by Tertiary stocks, dykes, and sills that are
generally of dioritic composition. The sediments are locally overlain by
Tertiary volcanics that are mostly andesitic and constitute possible hosts for
epithermal gold, and some cover is formed by Quaternary basalts.
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4. Summary of Work Completed
Work to date has consisted of evaluation of lands held by MASA and
generative exploration efforts.
a. MASA Properties
Cateos held or controlled by MASA were selected on the basis of satellite
image anomalies, compilation of available geologic information, and/or the
presence of known alteration or mineralization. Evaluations conducted in 1995
and 1996 have led to the retention of two of six cateos previously held by MASA.
At the Palau Mahuida property, limited sampling to date in an area of silicified
and quartz-veined limestone identified an anomalous Au-As + Zn-Ag-Sb metal
association with up to 230 ppb Au. A colour anomaly near the Chilean border is
to be evaluated on the Paso Pehuenche property. Work in late 1996 identified a
large altered area and led to staking the Cerro de la Laguna cateo where sample
results to date show an extensive Hg anomaly that may represent the upper levels
of a gold-bearing epithermal system.
b. Generative Work.
Generative work was started in November 1996 in areas of the Mesozoic
sedimentary belt that have open land, and this work will continue in conjunction
with evaluation of property submittals. Other third-party properties have been
examined for possible acquisition, including San Ramon, where work to date has
shown stream sediments gold anomalies that will be followed up. Periodic review
of the land status in Cordilleran Mendoza will enable identification of
additional opportunities.
Through April 1, 1997, the Corporation has expended a total of $321,741 on
Mendoza. The Mendoza Province Project has met with some encouragement in the
limited work that has been completed on the project. The area has demonstrated
potential of hosting epithermal gold, skarn type deposits due to the widespread
occurrence of carbonate rocks, or structurally controlled mineralization in
sedimentary rocks. A detailed Phase I exploration program would include mapping
(1:1000) and grid sampling and continued generative work, utilizing enhanced
satellite imagery and the acquisition of geophysical data that is available for
the area planned.
5. Mendoza Project Ownership
The Mendoza project area properties are held as three applications for
cateos comprising 18,000 hectares owned by MASA. Land holding fees and
acquisition costs for 1997 are budgeted at $30,000.
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F. Santa Cruz Project Summary
1. Santa Cruz Project Location
MASA's cateos in the province of Santa Cruz are located along the eastern
margin of the Andean Cordillera, near the Chilean-Argentine border. Access to
the properties varies considerably, and ranges from road access to the periphery
of the Bella Vista cateo to mule or helicopter access at Cerro Iwan, Rio Late
and San Lorenzo. Topography in this part of the province is rugged with areas of
moderate to intense relief, from 500 m to 3,000 m in elevation; a glacier caps
the mountain at San Lorenzo. The climate is cool and minor precipitation occurs
throughout the year. Vegetation consists of small shrubs, brush and grasses.
Water runs throughout the year in the area's larger streams and rivers. There
are numerous large lakes in the area.
2. Santa Cruz Project Exploration
Until recently, the province of Santa Cruz was one of Argentina's
lesser-explored provinces. The area was included in the Argentine
government-United Nations' regional exploration Plan Patagonia-Comahue of the
1970's. In addition, FOMICRUZ, S.E., (Fomento Minero de Santa Cruz, Sociedad del
Estado), a government organization created in 1988 to develop and set guidelines
for mining and exploration in the province, also completed reconnaissance
surveys in the province to delineate areas of interest for mineral reserves.
The recent discovery of the Cerro Vanguardia epithermal gold deposit in
eastern Santa Cruz and the commencement of production at the Fachinal epithermal
gold deposit located immediately over the border in Chile, have instigated a
flurry of exploration activity in the province.
The Corporation has expended approximately $160,000 through April 1, 1997,
on the Santa Cruz Project. The potential of discovering epithermal or
mesothermal precious metal deposits in the province of Santa Cruz is high,
attested to by the recent discoveries at Cerro Vanguardia and Fachinal.
Preliminary evaluation of the Santa Cruz cateos is completed and the Corporation
is evaluating the results. Phase II programs, contingent upon the results of
this Phase I work, would include mechanical trenching and reverse circulation
drilling.
3. Santa Cruz Project Geology
The Rio Late cateo is underlain by quartz-mica schists of the Paleozoic Rio
Lacteo Formation, silicic pyroclastic rocks of the Jurassic El Quemado
formation, and granodiorite of the Creteceous-Tertiary San Lorenzo complex
(Granodiorita Penitentes). The El Pluma I, El Pluma II, and Cerro Saavedra
cateos are underlain by andesitic to rhyolitic pyroclastic rocks of the Jurassic
Bahia Laura Group. The Bahia Laura Group rocks host the Cerro
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Vanguardia epithermal gold deposit and are the target of MASA's generative
program in Santa Cruz province.
4. Santa Cruz Project Ownership
The Santa Cruz project area is made up of four applications for cateos
totaling 29,332 hectares. The cateos are located in the western half of the
province of Santa Cruz.
All of the cateos are presently controlled 100% by MASA subject to the
Degerstrom Agreement and may be subject to a provincial royalty. Holding costs
for 1997 are $8,000.
G. Chubut Project Property Summary
1. Chubut Project Location
A province-wide reconnaissance program is planned for the province of
Chubut. Currently, exploration in Chubut province is quite active. The base and
precious metal potential of the United Nations prospects are being reevaluated
by a number of major mining companies. Several hundred thousand acres of land
have been applied for in the province. The Corporation does not have any cateos
in Chubut province at the present time as it abandoned its recent landholdings
based on an exploration program completed in 1995 and the first quarter of 1996.
2. Chubut Project Exploration
Until recently, the province has received little exploration. The province
was included in the United Nations and Argentina government's Plan
Patagonia-Comahue in the 1960's and 1970's. Their work consisted of air photo
interpretation to outline areas of potential alteration, followed by regional
silt sampling and mapping programs. This campaign succeeded in delineating
several prospects that demonstrated weak to moderate base metal anomalies. The
samples collected during this period of exploration were not analyzed for their
precious metal content. The area remained dormant until the early 1990's, when
revisions to Argentina's mining regulations provided more favourable conditions
for exploration.
The Corporation has expended $37,115 through April 1, 1997, on the Chubut
Project. The Chubut province hosts potential for precious and base metal
mineralization in Jurassic to Cretaceous rocks located on the eastern margin of
the Andean Cordillera. The Corporation plans a program of regional
reconnaissance and geologic compilation of existing data to generate new
projects.
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3. Chubut Project Geology
Jurassic-Cretaceous volcanic terranes have been the focus of exploration in
the southern Chilean Cordillera over the past decade. These rocks are potential
hosts of epithermal gold and gold rich replacement deposits attested to by the
discoveries, in Chile, at Fachinal (epithermal Au-Ag) and El Toque (base metal,
strata bound replacement deposit with a minor precious metal credit). In
Argentina, rocks of the same age and type occur in both Andean and extra-Andean
Patagonia which are relatively unexplored.
Due to their genesis in both arc/subduction and extensional tectonic
environments and in their extrusion into both subaerial and submarine
depositional environments, the Jurassic-Cretaceous volcanic rocks of Argentine
Patagonia are prospective hosts of an array of mineral deposit types including
volcanogenic massive sulphides, volcanic and sediment hosted epithermal gold,
and mesothermal gold. In addition, potential exists for skarn-type
mineralization where subvolcanic intrusions occur in carbonate rocks.
Work to date consists in the following:
Cordilleran Region: Evaluation of the north-south-trending belt of
intrusion-related gold-copper occurrences. Regional reconnaissance for other
styles of gold deposits.
North Patagonian Massif: Exploration for epithermal gold deposits in
Jurassic volcanic terranes. Preliminary evaluation of the region's potential is
presently being undertaken.
4. Chubut Project Ownership
The Corporation currently neither owns nor controls land in the province of
Chubut.
H. Rio Negro Project Summary
1. Rio Negro Project Location
A province-wide reconnaissance program is planned for the province of Rio
Negro. Two geologic terranes will be explored: The Northern Patagonian Massif
and Cordilleran Region.
The Cordilleran Region encompasses the Andean mountain chain and its
eastern foothills and runs from approximately the city of Bariloche in Rio Negro
province southward to the border with Chubut. The western-most portions of this
mountainous area shared with Chile, consists of a rugged high relief terrain
(200-2,500 m) covered extensively by southern beech forests. Eastward, the
pre-cordilleran area consists of a basin and range type topography possessing an
extremely arid climate. Access to most of the region is excellent,
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with the exception of the area immediately adjacent to the Chilean border, which
is largely roadless and heavily vegetated. The working season generally runs
from November to April. A paved highway runs the length of the region and both
the Atlantic and Pacific oceans are within a half-day drive. Electric and
natural gas lines serve the area. The southern-most passenger train in the world
runs from Ingeniero Jacobacci in Rio Negro to Esquel.
The North Patagonia Massif is a vast region that encompasses a major
portion of the southern half of Rio Negro province, east of the Cordillera.
Geographically, the region is characterized by a relatively high base level (900
m) above which rise isolated subdued mountain ranges. The climate is dry and
cool; vegetation is sparse. The general working season runs from October to May
but can be year round in some locations. Vehicular access is generally good. The
region possesses an infrastructure of deep water Atlantic ocean ports on its
eastern border, a rail road on its northern border, and a system of paved roads
around its perimeter.
2. Rio Negro Project Exploration
Some of the areas have had small scale prospecting by individuals. At
present, exploration in the province is being done by Pegasus Gold, Rio Tinto
Zinc and others who have focused their attention on the area's epithermal gold
potential.
To date, work by the Corporation in the area has been restricted to
air-photo interpretation and compilation of geologic data and field evaluation
of the following cateos: Cisneros, Puesto Flores, La Horqueta, Paja Alta, La
Veranada, Estancia Rio Chico and Arroyo Salado. All were dropped due to negative
results. Through April 1, 1997, the Corporation has spent $58,319 on the Rio
Negro Project. Geologic potential for epithermal gold mineralization exists in
the province of Rio Negro. A regional, Phase I reconnaissance program will be
undertaken to generate targets in Rio Negro province. This program would include
prospecting, regional mapping and stream sediment sampling. If targets are
generated, a Phase II campaign, consisting of geologic studies, mechanical
trenching and reverse circulation drilling, would follow.
3. Rio Negro Project Geology
Three distinct, mostly Mesozoic, volcanic terranes are the target of nearly
all gold exploration in the region. These are 1) The Lonco Trapial Formation and
equivalents of southernmost central Rio Negro, 2) The Marifil Formation of
eastern Rio Negro, and 3) The Los Menucos Formation of south-central Rio Negro.
The Lonco Trapial Formation is comprised of Jurassic-age intermediate to
mafic-pyroclastic rocks with some intercalated sedimentary rocks. Gold is hosted
by epithermal quartz veins, stock works, and breccia fillings emplaced within
regionally extensive fault zones. Most mineralization is polymetalic, such as
that of Mina Angela, an underground mine near Gastre in northern-most central
Chubut once mined by Noranda.
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The Marifil Formation is also Jurassic in age, but is comprised almost
exclusively of rhyolitic ignimbrite flows and subvolcanic intrusions. Gold is
hosted in epithermal quartz veins and silicified zones that may be associated
with rhyolite domes and caldera structures. Recent exploration activity is
centered in historical flourite, barite, and manganese mining.
The Los Menucos Formation is older than the above formations, with
estimated ages being Permo-Triassic to Triassic-Jurassic. The formation is
comprised of extrusive and intrusive silicic quartz porphyries and is loosely
correlated with the Choiyoi group rocks that crop out extensively in the
cordillera of central Argentina.
The geology of the cordillera of southern-most Rio Negro provinces is
complex. Rocks range in age from Precambrian to Quaternary and consist of an
array of igneous, metamorphic, and sedimentary lithologies. Igneous rocks were
generated by several overlapping Mesozoic and Tertiary magmatic events. By far
the most important host to known gold mineralization is the predominately
silicic pyroclastic rocks of the Jurassic Lago La Plata Formation. Potential to
host a world class gold deposit is not limited to the Jurassic volcanics.
Indeed, Cretaceous volcanic, subvolcanic, and granitic rocks, along with
Mesozoic and Paleozoic sedimentary and metasedimentary rocks host known
occurrences and have good potential to host future discoveries. Age of
hydrothermal mineralization in this region is not well constrained but probably
spans the age of Mesozoic and Tertiary magmatic activity.
4. Rio Negro Project Ownership
The Corporation neither owns nor controls land in the province of Rio
Negro.
Generative work to date consists of the following:
a) Cordilleran Region: Regional reconnaissance exploration for porphyry
gold-copper deposits and volcanic-hosted epithermal gold deposits is presently
being conducted.
b) North Patagonian Massif: Exploration for epithermal gold deposits in
Jurassic volcanic terranes. Preliminary field evaluation of the Los Menucos,
Valcheta, and Sierra Grande districts was completed in September 1996. Further
reconnaissance of these districts was undertaken and is now being evaluated from
the 1996/1997 field season.
I. La Horqueta Project Summary
1. La Horqueta Project Location
The La Horqueta Project is located in central Mendoza province,
approximately 200 km south of the city of Mendoza, at latitude 34(degree)36'00"S
and longitude 68(degree)55'00"W. Access is provided to the project by paved road
from Mendoza to the city of San Rafael, and then by
41
<PAGE>
approximately 85 km of paved and gravel roads that pass the Rio Diamante dam.
Dirt roads and quebradas provide access to the cateo areas. Topography in the
project area is characterized by low relief plateaus that are sharply incised to
the river drainages; elevations range from 1,150 m to 1,600 m. Semi-arid type
grasses and small plants comprise the local vegetation. The climate consists of
hot, dry summers and mild winters, permitting year round exploration. Water
flows throughout the year in the major drainages. The city of San Rafael can
provide goods and services necessary for exploration.
2. La Horqueta Project Exploration
A number of very small adits and trench-like excavations are present on the
La Horqueta cateo which attest to the historical exploitation of narrow fluorite
veins. In the 1980's Anglo American visited the area and collected 8 rock
samples. Analytical results from these samples included one value of 1.35 g/t
Au. The current owner prospected and collected a number of samples at La
Horqueta in 1994, the results of which are not locatable. No previous
exploration work is known at Cerro Colorado or Los Alamos.
3. La Horqueta Project Geology
The project area is underlain by a Precambrian and Paleozoic sequence of
marine sediments and Carboniferous sedimentary and volcanic rocks and
pyroclastics in the San Rafael Block.
Geologic mapping completed by MASA on the La Horqueta cateo has determined
that the property straddles the contact between Precambrian La Horqueta
Formation metasediments (phyllites and schists) and Carboniferous Lower Imperial
Group sediments (feldspathic sandstones, argillites and quartzites), which have
a shallow northwesterly dip. A dacitic, quartz-feldspar phyric porphyry stock is
exposed in the central property area and has been assigned a Tertiary age,
although the stock may be as old as Permian.
A westerly trending zone of intense alteration and mineralization occurs in
the porphyry in the central property area, characterized by light tan to white
coloured low lying outcrops. Alteration is clearly evident on a satellite image
of the area. The zone measures approximately 400 m x 1,500 m in size and widens
to the southwest. The zone is open to the west, where it may continue under
talus and the overlying quartzites. Alteration consists of widespread argillic
alteration and local zones of (quartz) sericite-pyrite alteration or intense
silicification or stock working of quartz veins. Disseminated pyrite
mineralization occurs in variable amounts throughout the zone.
A number of distinct structural trends occur on the property, the most
prominent of which are two ring structures that occur in the central property
area. East-northeast and northwest trending structures are also prominent
features. The zone of alteration and mineralization is controlled by some of
these structures and localizes in the area of the ring structures. Anomalous
gold mineralization trends westerly along N70(degree)E and N70(degree)W
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<PAGE>
structures and occurs in zones of intense fracturing associated with phyllic
alteration and quartz-pyrite veins and stock works.
4. Summary of Work Completed
In 1995, the Corporation completed mapping and sampling programs to
evaluate the La Horqueta cateo property-wide and a detailed program that focused
on the central area. Over 300 rock chip and stream sediment samples were
collected property-wide. Detailed mapping was completed at 1:2500 scale in the
central cateo area and soil sampling was completed at 50 m stations on lines
spaced at 100 m intervals over a 2 km by 2 km grid. Results of soil samples
outline a zone of anomalous gold values (greater than 20 ppb Au) that coincides
with the altered porphyry intrusive. Rock chip sample results also returned many
anomalous gold values (greater than 500 ppb Au) in the same area. Elevated
silver and arsenic values occur in the central property area. The following
table details significant rock chip sample results.
In July 1996, a campaign of detailed structural mapping, induced
polarization and ground magnetic geophysical surveys and mechanical trenching
was completed. Ground magnetic and gradient array induced polarization surveys
were completed over 45 line kilometres of grid in the central area and
dipole-dipole induced polarization was conducted in areas of gradient array
anomalies. Preliminary field data indicates the presence of two chargeability
anomalies and two chargeability-resistivity anomalies, each of which is at least
1 km x 0.2 km in size. Two of the anomalies extend beyond the limits of the grid
surveyed. Three km of road access and 1.2 km of trenching were completed in the
central basin area between geophysical anomalies. A total of 557 five-metre
continuous chip samples were collected from the six trenches and road cuts. An
additional 137 rock chip samples were collected property-wide. Trench and road
cut samples returned anomalous gold values of 1.51 g/t Au over 25 m, 35 m of
0.40 g/t Au and 0.41 g/t Au over 20 m.
In late 1996, a 17-hole reverse-circulation reconnaissance drilling program
totalling 2,260 metres tested portions of the 1500 x 400 metre altered zone with
coincident geophysical and geochemical anomalies.
As of April 1, 1997 the Corporation had expended $984,494 on the property.
The Corporation continues to be optimistic about the potential for finding a
commercial ore deposit at La Horqueta. The Corporation's work plan for La
Horqueta includes a Phase I program of geophysical (dipole-dipole IP) and
geologic studies to further assess the porphyry copper potential at La Horqueta.
A Phase II program, contingent upon positive results from Phase I would consist
of additional geologic studies and a 2,500 m program of diamond drilling.
5. La Horqueta Project Ownership
The La Horqueta project comprises 23,296 Ha in three property packages as
follows.
43
<PAGE>
a) Three cateos and three manifestations of discovery ("MD"), which lie
within the La Horqueta cateo. MASA currently holds the La Horqueta cateo under
an option-to-purchase agreement with Carlos Giustozzi of Mendoza. MASA can earn
a 100% interest in the cateo by making cash payments totalling $1.8 million by
May 25, 1999. Payments totalling $314,500 must be made over the first four
years, $52,500 has been paid to date and a further $45,000 is due over the next
year. The property is subject to a 1% net smelter return royalty, payable to the
owner, and the Province of Mendoza has waived its right to a provincial royalty.
b) Two applications for cateos, Cerro Colorado and Los Alamos (15,880 Ha),
are owned by NADSA.
c) One cateo of 3,350 hectares is held by MASA under an agreement with Mr.
Izuel of San Rafael, Mendoza. The agreement calls for quarterly payments over
four years totalling $300,000 with a final purchase price of $1,500,000. The
$300,000 payments are to be deducted from the $1,500,000 price and $1,200,000 of
the price will be deducted from the royalties paid to the owner. The royalty
payable to the owner is 3.5% less any royalty payable to the province with a
maximum of 1% net smelter royalty to the owner.
J. Arroyo Nuevo Project Summary
1. Arroyo Nuevo Project Location
The Arroyo Nuevo Project is located 35 km west of the town of Chos Malal,
in northwest Neuquen Province at latitude 37(degree)17'00"S, longitude
70(degree)40'00"W. Good road access is provided to the property area by a
combination of paved highway and gravel road. Local topography is of moderate
relief with elevation ranges from 900 m to 2,100 m. A moderate, semi-arid
climate permits year round exploration. Water is abundant and runs throughout
the year in the Rio Neuquen. Vegetation is minimal.
2. Arroyo Nuevo Project Exploration
At the turn of the century, placer gold mining operations were working
drainages in the project area and numerous small trenches and old workings
attest to the historical exploitation of narrow, polymetallic veins. At Arroyo
Nuevo, a small barite mine has been in operation since the 1970's. Between 1993
and 1995, Placer Dome completed an exploration program over a large area of
reserve land leased from CORMINE S.E.P. that included the Arroyo Nuevo project
area.
3. Arroyo Nuevo Project Geology
The area is underlain by a sequence of gently dipping Jurassic
volcano-sedimentary rocks intruded by small stocks of Cretaceous-Tertiary
porphyritic dacite. Tertiary andesite and basalt flows cap the sequence.
Jurassic rocks include tuffaceous sandstone, pyroclastic
44
<PAGE>
tuff breccias, quartzite, shale and carbonate rocks. Steeply dipping, northeast
trending faults and structures predominate in the property area. In the mine
area, flat lying barite veins to 5 m in thickness occur along bedding-parallel
faults within a large zone of weakly silicified and pyritized sedimentary rocks.
Carbonate rocks are locally jasperoidal.
4. Summary of Work Completed
In 1994, MASA investigated the Arroyo Nuevo project area in a regional
reconnaissance program. Anomalous gold and silver values were returned from the
rock samples collected and an exploration program was initiated to follow up the
results. The program focused on the barite mine area and included 1:1250 scale
mapping, rock chip sampling and soil sampling over the carbonate-jasperoid unit.
A total of 27 rock chip and 67 soil samples were collected.
Results of the program outlined a zone of jasperoid in carbonate rocks over
1,000 m along strike, with a strong multi-element (Au, Ag, Zn, As) soil anomaly.
Gold values in soil samples range from 14 ppb to 485 ppb Au. Several jasperoid
rock samples returned significant gold assays, including values of 3.0 g/t and
9.0 g/t Au. A sample collected from Agua Mallin drainage returned a gold value
of 291.4 g/t.
In addition to the work completed by MASA, drainages in the Arroyo Nuevo
project area were sampled in a regional program conducted by previous operators
(Placer Dome), the data of which was published by CORMINE. A total of 54 stream
sediment and bulk extractable leached gold ("BLEG") samples were collected.
Results indicate the drainages influenced by the northwest and southeast
property area are highly anomalous in gold and returned values to 1,860 ppb Au
in stream sediment and 284 ppb Au in BLEG samples.
In 1996, 57 additional rock samples collected by the Corporation in the
barite mine area included jasperoid rocks along silicified, northeast-trending
structures. Anomalous gold values were between 60 and 249 ppb.
In Arroyo Agua Mallin, rock samples contained gold values between 414 and
748 ppb. One sample collected from a dump in this area assayed 2.3 oz/ton gold.
As of April 1, 1997 the Corporation has expended approximately $148,797 on
the property. The Arroyo Nuevo Project hosts a Carlin-type gold target.
Preliminary work at Arroyo Nuevo has demonstrated that gold mineralization
occurs on the property in a Carlin-type environment. Phase I exploration will
include data compilation, satellite image analysis and the establishment of a
grid over the entire property for mapping (1:2500, 1:1000), soil sampling and
geophysical surveys. The second phase of exploration will consist of mechanical
trenching, road building and reverse circulation drilling and is contingent upon
favourable results being returned in Phase I.
45
<PAGE>
5. Arroyo Nuevo Project Ownership
The Arroyo Nuevo project comprises a total of 4,958 Ha under two titles;
Cura Mallin, a provincial mineral reserve leased from CORMINE S.E.P.(Corporacion
Minera del Neuquen, Sociedad del Estado Provincial) and 13 minas held under a
option-to-purchase agreement with Sapag Hermanos S.A. of the city of Zapala.
Details pertinent to the project properties are outlined below. Neuquen Province
has waived its right to a net smelter return royalty.
a) Provincial Mining Reserve
The Cura Mallin reserve area comprises 4,700 Ha, acquired in 1997 under an
exploration contract, with a mining option, from CORMINE S.E.P. The contract
requires MASA to make monthly exploration payments of $0.40 per hectare, cash
payments of $205,000 and a total of $1,075,000 in work expenditures over four
years. A 2% net smelter return royalty is payable to CORMINE upon production.
Cash payments to CORMINE are considered advance royalty payments. Payments of
$37,560 are due over the next year.
b) Sapag Option
On September 30, 1996, MASA entered an option-to-purchase agreement
with Sapag Hnos S.A. on 13 minas that comprise 258 Ha within the Cura Mallin
Reserve Area. MASA can earn 100% interest in the minas by making quarterly
payments totalling $350,000 over four years with a final purchase price of
$2,000,000. These payments are considered advance royalty payments. The
agreement is subject to a 2% net smelter return royalty.
Annual holding costs for the minas total $2380.
K. Los Bueyes Project Summary
1. Los Bueyes Project Location
The Los Bueyes Project is located 250 km northwest of the city of Neuquen
in Norquin department at 70(degree)24'W and 37(degree)43'S. Elevations range
from 1,300 to 2,248 metres above sea level. The property can be accessed, by
mule, throughout the year. Vegetation consists of grass and desert scrub.
2. Los Bueyes Project Previous Exploration
Stream sediment, soil and rock chip geochemical sampling and geologic
mapping have been completed by MASA at Los Bueyes. Numerous stream sediment
samples from drainages at Los Bueyes are anomalous in gold (up to 1,036 ppb) and
soil samples range up to 145 ppb gold. Results of the soil surveys show a 200 m
by 200 m zone anomalous in copper at the 100 ppm level with values up to 14,240
ppm copper.
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<PAGE>
A Phase I program of geologic studies and dipole-dipole induced
polarization is planned for Los Bueyes in order to further assess the porphyry
copper potential of the property. A Phase II program, contingent upon positive
results of Phase I work, would consist of road building, reconnaissance reverse
circulation drilling (2,000 m) and geologic studies. The Los Bueyes project may
be offered for joint venture in the short term.
3. Los Bueyes Project Geology
The Los Bueyes Project area is underlain by a thick section of Mesozoic
sediments intruded by Tertiary porphyritic sill and dykes. Hydrothermal
alteration/mineralization occurs over 2.5 square kilometre zone of highly
fractured, pyritized, silicified, and argillized feldspathic sandstones. Barite
veins also occur in the region. Jasperoid bodies within altered sandstone are
some of the most strongly mineralized samples (Au up to 65 ppb, Cu up to 0.15%,
Zn up to 1,200 ppm, and As up to 9,000 ppm). Stream sediment sampling on a
portion of the property have anomalous concentrations of Cu, Zn, As, and Sb. The
main target on this project is an unexposed porphyry copper target.
4. Los Bueyes Project Ownership
The Los Bueyes project consists of two manifestations of discovery
controlled by MASA. Up to 1,000 Ha. can be claimed with a manifestation.
Maintenance costs are currently $160 per year.
L. Los Reyunos Project Summary
1. Los Reyunos Project Location
The Los Reyunos Project is located 50 km west of the city of San Rafael in
central Mendoza Province at latitude 34(degree)34'S, longitude 68(degree)45'W.
Road access is along well-maintained paved and gravel roads. The area is at a
moderate altitude between 900 m and 1,600 m and is dissected by deep canyons.
Favourable weather conditions allow year round work. Abundant water can be found
at Rio Diamante year round. Vegetation is minimal.
2. Los Reyunos Project Exploration
Known mining activity consists of arsenic and graphite prospects.
3. Los Reyunos Project Geology
The area consists of Cambrian metamorphosed sedimentary rocks which are
overlain by Carboniferous sedimentary rocks. These units are intruded by
porphyritic dacite stocks, domes, and dykes. Capping this sequence are Tertiary
or younger dacitic to rhyolitic air-fall tuffs.
47
<PAGE>
Near vertical, northwest trending shear zones cut the sedimentary rocks and
contain weakly silicified and pyritized zones. The metamorphosed sedimentary
rocks include iron-and copper-stained quartz veins.
4. Summary of Work Completed
In 1996, the Corporation conducted reconnaissance exploration in the Los
Reyunos area. A total of ninety-seven stream sediment samples and fifty-eight
rock samples were collected. In the northwest trending shear zones, pyrite is
associated with anomalous gold, silver, and arsenic values. A stream sediment
sample from this area reported 3,151 ppb Au. Rock samples from shear zones 1-2 m
wide contained anomalous values of gold (15 to 823 ppb), silver (1.0 to 8.05
ppm), and arsenic (60 to 3,169 ppm). In the metamorphosed sedimentary rocks, the
iron and copper stained quartz contained anomalous values as much as 118 ppb Au,
25.8 ppm Ag, and 53,690 ppm Cu.
The Los Reyunos Project is a Cu-Au porphyry target. Initial results
indicate significant gold, silver, and arsenic anomalies exist on the property
consistent with an upper-level porphyry Cu-Au environment. Phase I exploration
will consist of satellite image analysis, mapping and soil sampling. Contingent
upon the return of favourable results from Phase I, the second phase of
exploration will include mechanical trenching, road building, geophysical
surveys and reverse circulation drilling.
5. Los Reyunos Project Ownership
MASA holds the Los Reyunos properties through an option-to-purchase
contract (currently in preparation) between MASA and C.O. Giustozzi. The
contract calls for quarterly payments totalling $300,000 over three years with a
final purchase price of $2,000,000 (including previous payments). A net smelter
return royalty of 1.5% is payable to the owner.
M. Northwest Argentina Project Summary
1. Northwest Argentina Project Location
The Northwest Argentina Project includes the provinces of La Rioja,
Catamarca, Salta, Jujuy and Tucuman. Located in northwestern Argentina these
provinces cover a variety of physiographic and geologic terrains ranging from
the high desert of the Puna region of Jujuy and Salta to the principal
cordillera of La Rioja. The region has a moderately good road access in the east
and a poorly developed network of roads in the more mountainous west. Work can
be conducted all year except at extreme elevations.
48
<PAGE>
2. Northwest Argentina Project Exploration
Long a target for exploration, the region has received renewed interest in
recent years with the development of the Bajo de la Alumbrera copper-gold
deposit and the delineation of a significant copper-gold-molybdenum resource at
Agua Rica in Catamarca province, and the discovery of new porphyry copper
targets at Taca Taca and Cerro Samenta in Salta province. Additionally, the
frontier region of Catamarca and La Rioja provinces shares a similar geologic
and metallogenic environment with Chile's Maricunga gold belt which hosts over
10 million ounces of gold.
A two-phase program of generative exploration, property submittal
evaluation and land acquisition is proposed for the Northwest Argentina Project.
Phase II would be contingent upon positive results from Phase I exploration.
3. Northwest Argentina Project Geology
The westernmost geologic terrane, extending from northeastern Salta to
western La Rioja consists of the Andean Cordillera (up to 100 km wide), the
crest of which forms the physiographic divide with Chile. This mountain range,
formed by magmatism and uplift along a convergent plate margin since Jurassic
time, is product of subduction of the Nazca plate beneath the South American
continent. Igneous rocks of Permian to Triassic age form the basement of this
mountain chain. Average elevation of the Andean Cordillera is 4,600 m.
To the east of the Andean Cordillera is the Puna, the southern continuation
of the Bolivian Altiplano. The Puna is a coherent basement block studded with
active volcanoes. The plateau (average 4,000 m in elevation) is dissected by
young faults that form numerous closed basins and low mountain ranges with 300
to 400 m relief.
The Pre Cordillera flanks the Puna to the east and is a belt about 250 km
wide that underwent large-scale tectonic compression since the Jurassic, and was
subsequently modified by extension since mid-Miocene. Locally it is similar to
the Basin and Range extensional regime in the western United States.
Extension-related Cenozoic volcanism is manifested as numerous calc-alkaline to
alkaline volcanic centers, such as Cerro Galan and Cerro Bonete.
To the east of the Pre Cordillera in Tucuman are the Pampean and
Transpampean ranges. These ranges are almost entirely composed of Precambrian
and Paleozoic granitic and metamorphic rocks, sparsely covered by Paleozoic and
Triassic continental sedimentary rocks. Uplift along Laramide-style high angle
reverse faults formed these mountains. The terrane has been extended an
undetermined amount, and may contain metamorphic core complexes. The Pampean
ranges degrade topographically to the east and south into Argentine Pampa.
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<PAGE>
4. Northwest Argentina Project Ownership
The Corporation neither currently owns nor controls land in the project
area.
Planned Exploration and Development Program - Summary
The Corporation's exploration programs are divided into two stages for each
project: Phase I, and Phase II. Phase II exploration is dependant on the results
of prior Phase I exploration. Land and option payments are contingent on
continued interest in the properties, or, in the case of generative exploration,
on the availability of properties judged suitable for acquisition.
Reconnaissance and detailed exploration typically consist of geological mapping
and geochemical sampling programs that generally consist of rock, soil, and
stream sediment sampling. Geophysical surveys may be used to further define
targets when it appears that trenching and drilling are warranted. In the event
exploration projects do not warrant detailed exploration, excess funds remaining
may be allocated to other projects on a priority basis. In addition, no more
than approximately 50% of the Corporation's projects will reach the drilling
stage of exploration.
Factors outside the control of the Corporation which may affect the timing
of the work program are weather conditions, lack of adequately trained
personnel, unavailability of drill equipment and supplies, delays caused by
regulatory authorities regarding land ownership or environmental issues. In
addition, projects may be dropped before they reach the trenching and drilling
stage of exploration if they do not meet the Corporation's exploration criteria.
The planned expenditures on the Corporation's properties and projects,
phased as discussed above, are summarized as follows:
<TABLE>
<CAPTION>
PROJECT PHASE ONE PHASE TWO
Exploration Land Total Exploration Land Total
<S> <C> <C> <C> <C> <C> <C>
Santa Clara $137,500 $42,280 $179,780 $500,000 $125,000 $625,000
Pino 100,000 27,555 127,255 250,000 17,255 267,255
Andino
San Juan 275,000 50,000 325,000 350,000 50,000 400,000
Agua 500,000 180,000 680,000 1,000,000 240,000 1,240,000
Blanca
Mendoza 75,000 30,000 105,000 350,000 75,000 425,000
Santa Cruz 75,000 30,000 105,000 350,000 75,000 425,000
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
PROJECT PHASE ONE PHASE TWO
Exploration Land Total Exploration Land Total
<S> <C> <C> <C> <C> <C> <C>
Chubut 175,000 25,000 200,000 350,000 50,000 400,000
Rio Negro 175,000 25,000 200,000 350,000 50,000 400,000
La 100,000 45,000 145,000 500,000 87,500 587,500
Horqueta
A. Nuevo 130,000 11,280 141,280 300,000 73,560 373,560
Los Bueyes 100,000 20,000 120,000 250,000 0 250,000
Los 35,000 25,000 60,000 350,000 35,000 385,000
Reyunos
NW Arg 200,000 50,000 250,000 200,000 100,000 300,000
TOTAL $2,077,500 $560,815 $2,638,315 $5,100,000 $978,315 $6,783,315
</TABLE>
The Phase I work summarized above is planned to be completed by May 30,
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Plan of Operations."
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership, as of June 13, 1997 of the Common Shares by (i) each person known by
the Corporation to own beneficially more than 5% of the Common Shares, (ii) each
director of the Corporation, (iii) the Chief Executive Officer and each other
officer named in the Summary Compensation Table and (iv) all directors and
executive officers as a group. Except as otherwise noted, the Corporation
believes the persons listed below have sole investment and voting power with
respect to the Common Shares owned by them.
51
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially Percentage of
Name and Address Owned (1) Common Shares (1)
- ---------------- --------- -----------------
<S> <C> <C>
Named Executive Officers and Directors
Allen Ambrose 448,000 (2) 2.34%
3303 North Sullivan Road
Spokane, WA 99216
Armand Hansen 326,000 (3) 1.70
3303 North Sullivan Road
Spokane, WA 99216
John Johnson Crabb 150,000 (3) 0.78
3303 North Sullivan Road
Spokane, WA 99216
Brian Gavin 460,000 (2) 2.40
3303 North Sullivan Road
Spokane, WA 99216
A.D. (Darryl) Drummond 100,000 (4) 0.52
3303 North Sullivan Road
Spokane, WA 99216
Bonnie L. Kuhn 1,000 0.005
1600 Canada Place
407 - 2nd Street S.W.
Calgary, Alberta
T2P 2Y3
Allan J. Marter 100,000 (4) 0.52
4828 W. Fair Place
Littleton, CO 80123
5% or Greater Shareholders
N.A. Degerstrom, Inc. 5,000,000 (5) 26.12
3303 North Sullivan Road
Spokane, WA 99216
Cominco Ltd. 1,315,791 (6) 6.87
120 Adelaide St. W., Suite 2200
Toronto, Ontario
M5H 1T1
All directors and
executive officers
as a group (8 persons) 1,585,000 8.28
- -------------------
52
<PAGE>
Notes:
(1) Shares which the person or group has the right to acquire within 60 days
after May 8, 1997 are deemed to be outstanding in determining the
beneficial ownership of he person or group and in calculating the
percentage ownership of the person or group, but are not deemed to be
outstanding as to any other person or group.
(2) Includes stock options entitling the holder to acquire 50,000 shares upon
payment of Cdn $1.44, 110,000 shares upon payment of Cdn $2.18, or 80,000
shares upon payment of Cdn $2.00.
(3) Includes stock options entitling the holder to acquire 20,000 shares upon
payment of Cdn $1.44, 60,000 shares upon payment of Cdn $2.18, or 40,000
shares upon payment of Cdn $2.00.
(4) Includes stock options entitling the holder to acquire 60,000 shares upon
payment of Cdn $2.18, or 40,000 shares upon payment of Cdn $2.00.
(5) Does not include 1,213,409 Common Shares reserved for issuance to
Degerstrom upon the satisfaction of certain performance criteria. See
"Description of Properties - the Degerstrom Agreement."
(6) Includes 438,597 Common Shares reserved for issuance to Cominco upon the
exercise of the Cominco Warrants at a price of Cdn $3.98. See " Description
of Securities."
</TABLE>
53
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
Information with respect to the directors, executive officers and
significant employees of the Corporation is set forth below.
<TABLE>
<CAPTION>
Name Age Positions Held
---- --- --------------
<S> <C> <C>
Allen Ambrose 40 President and Director
Brian Gavin 43 Vice-President of Exploration and
Director of MASA
Allan J. Marter 49 Chief Financial Officer and Director
Jorge Vargas 55 Director and President of MASA &
NADSA
Armand Hansen 60 Director
John Johnson Crabb 70 Director
A.D. (Darryl) Drummond 59 Director
Bonnie L. Kuhn 31 Director
</TABLE>
Allen Ambrose has been President and a Director of the Corporation since
November 1995. Mr. Ambrose also serves as an Exploration Manager/Geologist for
Degerstrom. He has 17 years of experience in the mining industry including
extensive experience in all phases of exploration, project evaluation and
project management. He has worked as a geologist consultant in the U.S.,
Venezuela and most recently Argentina. He holds a B.Sc. degree in Geology from
Eastern Washington University. Mr. Ambrose also is a member of the board of
directors of Cadre Resources Ltd., a company with mining interests in Venezuela.
Brian Gavin has been the Vice President of Exploration and a director of
MASA since 1994. He has 17 years of experience in exploration geology, including
experience in all phases of exploration, project evaluation and project
management. Mr. Gavin has worked in the field as project manager and consultant
in the U.S., Mexico, Nigeria and most recently, in Argentina. He holds a B. Sc.
(Honours) degree in Geology from the University of London and an M.S. degree in
Geology and Geophysics from the University of Missouri. From 1991 to 1994, he
was a consultant with Ernst K. Lehman & Associates, which is a geological mining
consulting firm. Since 1994, he also has been employed by Degerstrom.
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<PAGE>
Allan J. Marter has been Chief Financial Officer and director of the
Corporation since June 1997. Mr. Marter has been a financial advisor in the
mining industry and Principal of Waiata Resources, from April 1996 to present
and has provided financial advisory services to the Corporation since April 30,
1996. Mr. Marter is a finance professional with 20 years of experience in the
mining industry. From 1992 through 1996 he was employed as a director of
Endeavor Financial Inc., a mining financial advisory firm. Mr. Marter also
serves as a Director of Addwest Minerals International, Ltd.
Jorge Vargas has been the President and a director of NADSA and MASA since
July 1994 and September 1994, respectively. Mr. Vargas received his law degree
in 1967 from the National University of Buenos Aires, Argentina, and has been in
private practice since 1967. Mr. Vargas also studied mining law at the Law
Faculty of the University of Mendoza and was on the organizing committee of the
First International Water Rights Conference in Mendoza in 1968. Mr. Vargas is a
registered attorney in the provinces of Mendoza and San Juan, and at the Federal
level in Argentina.
Armand Hansen has been a director of the Corporation since November 1995.
Mr Hansen has served as Vice-President of Operations for Mining Contracting for
Degerstrom for the past 15 years. His responsibilities include managing 350
employees at various job sites throughout the U.S. and Latin America. Mr. Hansen
has also served as Vice-President and a director of Aresco Inc., a manufacturing
company conducting speciality fabrication of mining equipment since 1989.
John Johnson Crabb has been a director of the Corporation since November
1995. From 1985 to November 1995 Mr. Crabb served as a mining executive and
geologist for and as a director of Inland Resources, Inc. From April 1995 to
March 1996 Mr. Crabb was a director of Cadre Resources Ltd. Mr Crabb was also a
director of Pegasus Gold Inc. from 1984 until 1991. Mr. Crabb graduated from the
University of British Columbia in 1951 with an M.Sc. in Geology.
A.D. (Darryl) Drummond has been a director of the Corporation since June
1996. Since 1981 Dr. Drummond has been a principal and President of D.D.H.
Geomanagement, a mineral exploration firm concentrating on all aspects of
mineral deposit evaluation covering precious metal, base metal and industrial
mineral types in such countries as Argentina, Canada, Chile, China, Costa Rica,
Ecuador, Guyana, Mexico, Philippines, the U.S. and Venezuela. Dr. Drummond has
also served as a director of The Quinto Mining Corporation since September 1996,
of International All-North Resources Ltd. since July 1996, of All- North
Resources Ltd. from May 1995 to July 1996, and of Cadre Resources Ltd. from
November 1994 to February 1995. Dr. Drummond graduated from the University of
British Columbia with a B.A.Sc. in Geological Engineering in 1959 and with an
M.A.Sc. in 1961. He obtained his Ph.D. in 1966 from the University of California
at Berkeley. He is a member of the Society of Economic Geology and a member of
the Geology Section of the Canadian Institute of Mining and Metallurgy.
Bonnie L. Kuhn has been a director of the Corporation since June 1997. She
has been a solicitor with the firm Ogilvie and Company, Barristers and
Solicitors, Calgary, Alberta, since January 1994. From August 1993 to December
1994 Ms. Kuhn was a Crown prosecutor with the Government of Alberta, Department
of Justice. From July 1990 to June 1993, Ms. Kuhn was an associate with Howard,
Mackie, Barristers and Solicitors. Ms. Kuhn is a member of the Law Society of
Alberta and the Canadian Bar Association. She obtained her LLB from the
University of Manitoba in 1989. Ms. Kuhn currently practices law in the areas of
national resources, corporate and commercial and securities laws.
55
<PAGE>
The Corporation has six directors, three of whom are executive officers.
Directors serve terms of one year or until their successors are elected or
appointed. No remuneration of any kind has been paid to any director, in his
capacity as such, and there is no intention that they will be remunerated in
that capacity in the immediate future. Expenses incurred by directors in
connection with their activities on behalf of the Corporation are reimbursed by
the Corporation.
ITEM 6. EXECUTIVE COMPENSATION
Summary of Executive Compensation. The following table sets forth
compensation paid by Minera Andes in each of the last two years to Allen
Ambrose, Chief Executive Officer, and to each other executive officer whose
compensation in the most recent fiscal year was $100,000 or more ("Named
Executives").
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
-------------------------- ---------------------
Other Annual
Fiscal Salary Compensation Securities Underlying
Year ($) ($) Options/SARs (#)
------ ------ ------------ ---------------------
<S> <C> <C> <C> <C>
Allen Ambrose 1996 70,503 9,464 (1)(2) 160,000
Brian Gavin 1996 129,553 13,625 (1)(3) 160,000
- --------------
Notes:
(1) Allen Ambrose and Brian Gavin, as employees of Degerstrom, provided
services under the Operating Agreement (See "Business of the Corporation")
which services were invoiced to the Corporation under the Operating
Agreement.
56
<PAGE>
(2) During the 1996 fiscal year, the following benefits were provided to Mr.
Ambrose by Degerstrom and invoiced to the Corporation:
401K Base 3,813
401K Match 1,271
Medical Insurance 4,380
(3) During the 1996 fiscal year, the following benefits were provided to Mr.
Gavin by Degerstrom and invoiced to the Corporation:
401K Base 6,934
401K Match 2,311
Medical Insurance 4,380
</TABLE>
57
<PAGE>
Stock Options Granted in 1996. The following table sets forth certain
information concerning individual stock options granted to the Named Executives
during the year ended December 31, 1996.
<TABLE>
<CAPTION>
Option Grants in the Last Fiscal Year (1)
Percentage of
Total Options
Number of Granted to Exercise
Securities Underlying Employees in Price Expiration
Options Granted (#) Fiscal Year (Cdn $/Sh) Date
--------------------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
Allen Ambrose....................... 50,000 5.6% $1.44 January 10, 1998
110,000 12.3% $2.18 August 16, 1999
Brian Gavin......................... 50,000 5.6% $1.44 January 10, 1998
110,000 12.3% $2.18 August 16, 1999
- --------------
Notes:
(1) The options granted to Mr. Ambrose and Mr. Gavin to purchase shares at Cdn
$1.44 per share vested as follows: a) 50% vested 60 days from the date of
the grant; and (b) 50% vested 120 days from the date of the grant. The
options granted to Mr. Ambrose and Mr. Gavin to purchase shares at Cdn
$2.18 per share vested immediately on grant.
</TABLE>
Aggregated Option Exercises. The following table sets forth certain
information concerning the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1996. Also reported are values of
"in-the-money" options that represent the positive spread between the respective
exercise prices of outstanding stock options and the fair market value of the
Corporation's Common Shares as of December 31, 1996.
58
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End (#) at Fiscal Year-End (Cdn $)(1)
-------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Allen Ambrose ..................... 160,000 0 $104,200.00 $0
Brian Gavin........................ 160,000 0 $104,200.00 $0
- --------------
Notes:
(1) The value of unexercised in-the-money options was calculated using the
closing price of common shares on The Alberta Stock Exchange on December
31, 1996, less the exercise price of in-the-money stock options. On
December 31, 1996 the closing price of the Common Shares on the Alberta
Stock Exchange was Cdn $2.60.
</TABLE>
Stock Option Plan
The Board of Directors has adopted a stock option plan (the "Plan") which
was approved with amendments by the shareholders of the Corporation at the
Annual and Special Meeting of Shareholders held on June 26, 1996. The purpose of
the Plan is to afford the persons who provide services to the Corporation or any
of its subsidiaries or affiliates, whether directors, officers or employees of
the Corporation or its subsidiaries or affiliates, an opportunity to obtain a
proprietary interest in the Corporation by permitting them to purchase Common
Shares of the Corporation and to aid in attracting, as well as retaining and
encouraging the continued involvement of such persons with the Corporation.
Under the terms of the Plan, the board of directors has full authority to
administer the Plan in accordance with the terms of the Plan and at any time
amend or revise the terms of the Plan provided, however, that no amendment or
revision shall alter the terms of options already granted. The aggregate number
of shares to be delivered upon exercise of all options granted under the Plan
shall not exceed 10% of the Corporation's issued and outstanding Common Shares
up to a maximum of 2,000,000 shares. No participant may be granted an option
under the Plan which exceeds the number of shares permitted to be granted
pursuant to rules or policies of any stock exchange on which the Common Shares
is then listed.
Under the Plan, the exercise price of the shares covered by each option
shall be determined by the directors and shall be not less than the closing
price of the Corporation's shares on the stock exchange or stock exchanges on
which the shares are listed on the last trading day immediately preceding the
day on which the stock exchange is notified of the proposed issuance of option,
less any discounts permitted by the policy or policies of such
59
<PAGE>
stock exchange or stock exchanges. If an option is granted within six months of
a public distribution of the Corporation's shares by way of prospectus, then the
minimum exercise price of such option shall, if the policy of such stock
exchange or stock exchanges requires, be the greater of the price determined
pursuant to the provisions of the Plan and the price per share paid by the
investing public for shares of the Corporation acquired by the public during
such public distribution, determined in accordance with the policy of such stock
exchange or stock exchanges. Options granted under the Plan will not be
transferable and, if they are not exercised, will expire one (1) year following
the date the optionee ceases to be director, officer, employee or consultant of
the Corporation by reason of death, or ninety (90) days after ceasing to be a
director, officer, employee or consultant of the Corporation for any reason
other than death.
As of May 8, 1997, an aggregate of 1,456,000 stock options had been granted
under the Plan. To date, no options granted under the Plan have been exercised.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation, MASA, NADSA and Degerstrom are party to an Operating
Agreement whereby Degerstrom operates and manages the exploration program
relating to the Corporation Claims in return for a management fee and certain
other consideration. See "Description of Properties - The Degerstrom Agreement."
Allen Ambrose and Brian Gavin both serve as employees of Degerstrom and
have received compensation from Degerstrom for services provided to the
Corporation under the Operating Agreement. Substantially all of the compensation
received has been invoiced back to the Corporation by Degerstrom. See
"Description of the Business - Operating Structure" and "Executive
Compensation."
In 1996 the Corporation entered into a Debt Restructuring Agreement with
Degerstrom in connection with the issuance of Common Shares to Degerstrom in a
private placement. From June 30, 1994 through March 31, 1995, Degerstrom had
spent approximately $1,505,000 on Argentinean exploration on the Corporation's
behalf. Under the terms of a Debt Restructuring Agreement dated January 11,
1996, as amended on May 13, 1996, the Corporation agreed to repay the sum plus
interest. On January 11, 1996, the Corporation and Degerstrom also entered into
a subscription agreement whereby Degerstrom subscribed for 500,000 units of the
Corporation at a price of Cdn $1.44 per unit. Each unit consisted of one share
of the Corporation's Common Shares and a warrant to purchase an additional share
at a price of Cdn $1.75. On July 8, 1996, Degerstrom received 500,000 units from
the Corporation and exercised the 500,000 warrants. The funds received from
Degerstrom pursuant to the subscription and the exercise of the warrants were
used to retire the debt outstanding under the Debt Restructuring Agreement.
60
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Corporation consists of an unlimited
number of Common Shares and an unlimited number of Preferred Shares. As of June
13, 1997, there were 19,141,050 Common Shares issued and outstanding. No
Preferred Shares are issued and outstanding.
Common Shares
The holders of Common Shares are entitled to receive notice of and to
attend any meeting of the shareholders of the Corporation and are entitled to
one vote for each share held (except at meetings at which only the holders of
another class of shares are entitled to vote). The directors may from time to
time declare a dividend and the Corporation shall pay the dividend out of the
money of the Corporation properly applicable to the payment of the dividend.
Such dividend payment is subject to the rights, privileges, restrictions and
conditions attached to any Preferred Shares of the Corporation. The holders of
the Common Shares are entitled to share equally in the distribution of the
assets of the Corporation in the event of liquidation, dissolution or winding-up
of the Corporation or upon any distribution of the assets of the Corporation
among its shareholders, subject to the rights, privileges, restrictions and
conditions attached to any Preferred Shares of the Corporation.
Preferred Shares
Preferred Shares may be issued from time to time in one or more series. The
designation, rights, privileges, restrictions and conditions including, but not
limited to, the voting rights, the rate or amount of dividends or the method of
calculating dividends, the dates of payment therefore, the terms and conditions
of redemptions, purchase and conversion if any, and any sinking funds or other
provisions shall be determined by the resolution of the directors in their sole
discretion, except as required by law. The Preferred Shares rank prior to the
Common Shares with respect to distribution in the event of liquidation,
dissolution or winding-up of the Corporation.
Warrants
Cominco Warrants
In connection with the 1996 Cominco Private Placement, the Corporation
issued to Cominco 877,194 Warrants to purchase Common Shares (the "Cominco
Warrants"). Two Cominco Warrants entitle Cominco to acquire one Common Share at
any time on or before May 10, 1997, at an exercise price of Cdn $3.98 per share.
The Corporation and Cominco subsequently agreed to extend the date for exercise
of the Cominco Warrants to May 10, 1998. The Cominco Warrants contain
anti-dilution provisions which provide that in the event of any subdivision,
consolidation, reclassification of the Common Shares or in the
61
<PAGE>
event of the amalgamation, merger or other business combination of the
Corporation with another company, a proportionate adjustment or change will be
made in the number and kind of securities issuable on the exercise of the
Cominco Warrants. The Cominco Warrants are non assignable and non transferable.
Placement Warrants
In connection with a 1996 special warrant placement, the Corporation issued
to investors and financial advisors 3,710,901 warrants to purchase Common Shares
("Placement Warrants"). Two Placement Warrants entitle the holder to acquire one
Common Share at an exercise price of Cdn $2.50 per share if exercised on or
before December 13, 1997, or at an exercise price of Cdn $2.88 per share if
exercised after December 13, 1977 but on or before December 13, 1998. In the
event of any subdivision, consolidation or reclassification of the Common Share
or in the event of the amalgamation, merger, capital reorganization, or other
business combination of the Corporation with another company, a proportionate
adjustment or change will be made in the number and kind of securities issuable
on the exercise of the Warrants.
Transfer Agent and Registrar
The Registrar and Transfer Agent for the Common Shares is the Montreal
Trust Company of Canada.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
The Corporation's Common Shares are traded on The Alberta Stock Exchange
("ASE") under the trading symbol MAI. The closing trading price for the Common
Shares on June 13, 1997, was Cdn $2.20. The high and low closing bid prices for
the Common Shares reported by The Alberta Stock Exchange for the period from the
date the stock was first listed on the ASE, December 20, 1995, and for the
quarters during 1996 and for the first quarter of the current fiscal year are
set forth in the table below.
62
<PAGE>
<TABLE>
<CAPTION>
Quarter High (Cdn $) Low (Cdn $)
<S> <C> <C>
December 20, 1995 - December 31, 1995 1.55 1.30
January - March 1996 3.15 1.35
April - June 1996 3.75 2.45
July - September 1996 2.90 1.90
October - December 1996 2.95 1.75
January - March 1997 3.40 2.06
</TABLE>
As of June 13, 1997 there were approximately 140 holders of Common Shares
of the Corporation. No dividends have ever been paid on the Common Shares of the
Corporation, and the Corporation intends to retain its earnings for use in the
business and does not expect to pay dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Corporation is not currently aware of any material legal proceeding,
actual, contemplated or threatened, to which the Corporation is party or of
which any of its property is the subject.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Corporation intends to replace its current auditors, MacKay & Partners,
Chartered Accountants, of Vancouver, British Columbia, with Coopers & Lybrand,
L.L.P., of Spokane, Washington, beginning with the audit for the fiscal year
ending December 31, 1997. There have been no disagreements, or unresolved issues
on any matter of accounting principles or practices, financial statements
disclosure or auditing scope or procedure during the period in which MacKay &
Partners have been auditing the financial statements of the Corporation. MacKay
& Partners were initially appointed auditors of the Corporation in November
1994.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
1. From June through October 1995, the Corporation issued 3,199,000 Common
Shares to individual investors at a price of Cdn $1.00 per share. In
September 1995, the Corporation also issued 345,094 Common Shares to
individual investors at a price of Cdn $0.40 per share.
63
<PAGE>
2. In November 1995, the Corporation issued 11,030,992 Common Shares at a
price of Cdn $1.00 per share in the amalgamation of the Corporation and
Scotia Prime Minerals, Inc.
3. In February 1996, the Corporation issued 1,523,733 warrants to purchase
Common Shares to institutional investors and financial advisors at a price
of Cdn $1.50 per warrant. In July 1996, the Corporation issued Common
Shares and warrants upon exercise of the February 1996 warrants.
4. In May 1996, the Corporation issued 877,194 Common Shares and 877,194
warrants to purchase Common Shares to Cominco Ltd. at a price of Cdn $3.42
per share.
5. In July 1996, the Corporation issued 500,000 Common Shares and 500,000
warrants to purchase Common Shares to Degerstrom at a price of Cdn $1.44
per share. Also in July 1996, the Corporation issued 500,000 additional
Common Shares to Degerstrom at a price of Cdn $1.75 upon exercise of the
earlier-issued warrants.
6. In December 1996 and in January and February 1997, the Corporation issued
200,000 Common Shares to institutional investors at a price of Cdn $1.80
per share upon exercise by the investors of previously issued warrants.
7. In December 1996, the Corporation issued warrants to purchase 3,710,901
Common Shares and warrants to institutional investors at a price of Cdn
$2.10 per share. In February and May 1997, the Corporation issued the
Common Shares and warrants to the investors upon exercise of the
previously-issued warrants.
The sale and issuance of the Common Shares and the warrants described in
paragraphs 1, 3, 4, 5, 6 and 7 were exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and Regulation D
thereunder in that they did not constitute a public offering and, in certain
cases, pursuant to Regulation S under the Securities Act. The sale and issuance
of Common Shares described in paragraph 2 was exempt from registration under the
Securities Act pursuant to Section 3(a)(10) thereof.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Corporation provide that no director or officer shall be
personally liable for acts or omissions in the exercise of the powers and
discharge of the duties of his or her office, excluding liability arising from
such director's or officer's wilful neglect. In addition, the Bylaws provide
that the Corporation shall indemnify a director or officer, former director or
officer, and persons acting as director or officer of another corporation in
which the Corporation is a shareholder at the request of the Corporation,
against all monetary liabilities arising with respect to any action or
proceeding to which such director or officer is a party, provided that the
director or officer acted honestly and in good faith with a view to the best
interests of the Corporation, and in the event of a criminal proceeding, that
64
<PAGE>
the director or officer had reasonable grounds for believing that his or her
conduct was lawful. The Bylaws also provide that the Corporation may purchase
and maintain insurance for the benefit of officers or directors against
liabilities arising as a result of the Corporation's indemnification
obligations. The limits on director and officer liability, the indemnification
of directors and officers, and the purchase of insurance against indemnification
liabilities provided for in the Bylaws of the Corporation are all subject to
restrictions under the Alberta Business Corporations Act, as amended.
65
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM PAGE NUMBER
- ---- -----------
AUDITORS' REPORT ..........................................................F-2
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1995 ..............F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD
JULY 1, 1994 (commencement) THROUGH DECEMBER 31, 1996 .....................F-4
CONSOLIDATED STATEMENTS OF MINERAL PROPERTIES AND DEFERRED
EXPLORATION COSTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND FOR THE PERIOD JULY 1, 1994 (commencement) THROUGH
DECEMBER 31, 1996 ................... .....................................F-5
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD
JULY 1, 1994 (commencement) THROUGH DECEMBER 31, 1996 .....................F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD JULY 1, 1994
(commencement) THROUGH DECEMBER 31, 1996 ..................................F-7
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997 AND
DECEMBER 31, 1996 (UNAUDITED) .............................................F-19
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
AND FOR THE PERIOD JULY 1, 1994 (commencement) THROUGH
MARCH 31, 1997 (UNAUDITED) ................................................F-20
CONSOLIDATED STATEMENTS OF MINERAL PROPERTIES AND DEFERRED
EXPLORATION COSTS FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND MARCH 31, 1996 AND FOR THE PERIOD JULY 1, 1994 (commencement)
THROUGH MARCH 31, 1997 (UNAUDITED) ........................................F-21
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996 AND
FOR THE PERIOD JULY 1, 1994 (commencement) THROUGH MARCH 31, 1997
(UNAUDITED) ...............................................................F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND MARCH 31, 1996 AND FOR THE PERIOD
JULY 1, 1994 (commencement) THROUGH MARCH 31, 1997 (UNAUDITED) ............F-23
F-1
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Minera Andes Inc.:
We have audited the consolidated balance sheets of Minera Andes Inc. (an
exploration stage corporation) as at December 31, 1996 and 1995 and the
consolidated statements of operations and accumulated deficit, mineral
properties and deferred exploration costs, and changes in financial position for
the years then ended and for the period from the date of commencement (July 1,
1994) through December 31, 1996. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
1996 and 1995 and the results of its consolidated operations and the changes in
its financial position for the years then ended and for the period from the date
of commencement (July 1, 1994) through December 31, 1996 in accordance with
generally accepted accounting principles.
MacKay & Partners
Vancouver, B.C. Chartered Accountants
February 20, 1997,
except for Note 13
which is as at
June 16, 1997
F-2
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars)
December 31, December 31,
1996 1995
------------- ------------
ASSETS
Current:
<S> <C> <C>
Cash $ 6,660,633 $ 528,020
Receivables 167,110 0
------------- ------------
6,827,743 528,020
Mineral properties and deferred exploration costs (Note 5) 3,440,879 2,534,970
Capital assets (Note 6) 48,575 0
------------- ------------
$ 10,317,197 $ 3,062,990
============= ============
LIABILITIES
Current:
Accounts payable and accruals $ 227,829 $ 30,318
Due to related party (Note 9) 0 1,278,181
------------- ------------
227,829 1,308,499
------------- ------------
SHAREHOLDERS' EQUITY
Share capital (Note 7) 13,365,014 3,552,517
Accumulated deficit (3,275,646) (1,798,026)
------------- ------------
10,089,368 1,754,491
------------- ------------
$10,317,197 $ 3,062,990
============= ============
Agreements, commitments and contingencies (Note 8)
Subsequent events (Note 12)
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(U.S. Dollars)
Period from
Years Ended July 1, 1994
------------------------------- (commencement)
December 31, December 31, through
1996 1995 December 31,1996
----------- ------------ ----------------
<S> <C> <C> <C>
Administration fees $ 27,205 $ 59,676 $ 86,881
Audit & accounting 37,629 9,751 47,380
Consulting fees 149,121 129,700 278,821
Equipment rental 1,192 1,735 2,927
Foreign exchange (gain) loss (62,736) 11,185 (51,551)
Legal 77,779 35,022 112,801
Materials & supplies 13,559 21,628 35,187
Office overhead 249,535 28,531 278,066
Telephone 54,158 73,479 127,637
Transfer agent 0 21,744 21,744
Travel 91,696 5,841 97,537
Wages & benefits 184,250 102,217 286,467
Write-off of deferred expenditures 494,492 1,034,155 1,528,647
----------- ------------ ----------
Total expenses 1,317,880 1,534,664 2,852,544
Interest income (69,204) (4,600) (73,804)
----------- ------------ ----------
Loss for the year 1,248,676 1,530,064 2,778,740
Accum. deficit, beginning of the period 1,798,026 21,702 0
Share issue costs 228,944 229,045 479,691
Deficiency on acquisition of subsidiary 0 17,215 17,215
----------- ------------ ----------
Accumulated deficit, end of the period $ 3,275,646 $ 1,798,026 $3,275,646
=========== ============ ==========
Loss per common share $ 0.10 $ 0.20 $ 0.27
=========== ============ ==========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF MINERAL PROPERTIES
AND DEFERRED EXPLORATION COSTS
(U.S. Dollars)
Period from
Years Ended July 1, 1994
----------------------------- (commencement)
December 31, December 31, through
1996 1995 December 31, 1996
------------ ----------- -----------
<S> <C> <C> <C>
Administration fees $ 61,760 $ 80,094 $ 256,876
Assays & analytical 127,511 179,592 336,378
Construction & trenching 254,349 154,626 408,975
Consulting fees 70,175 73,842 470,807
Depreciation 14,784 0 14,784
Drilling 205,900 19,345 225,245
Equipment rental 63,242 75,199 168,675
Geology 606,239 555,896 1,162,135
Geophysics 75,536 1,266 76,802
Insurance 38,327 35,912 74,239
Legal 64,129 108,813 268,633
Maintenance 37,347 22,702 60,049
Materials & supplies 89,692 118,236 242,068
Project overhead 38,811 13,164 162,113
Property & mineral rights 111,763 354,583 566,416
Telephone 6,452 3,787 24,957
Travel 120,773 120,769 270,285
Wages & benefits 113,611 178,232 303,950
------------ ----------- -----------
Costs incurred during the period 2,100,401 2,096,058 5,093,387
Deferred costs, beginning of the period 2,534,970 1,473,067 0
Deferred costs, acquired 0 0 576,139
Deferred costs written off (494,492) (1,034,155) (1,528,647)
Mineral property option proceeds (700,000) 0 (700,000)
------------ ----------- -----------
Deferred costs, end of the period $ 3,440,879 $ 2,534,970 $ 3,440,879
============ =========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(U.S. Dollars)
Period from
Years Ended July 1, 1994
----------------------------- (commencement)
December 31, December 31, through
1996 1995 December 31, 1996
------------ ----------- -----------
<S> <C> <C> <C>
Operating Activities
Loss for the period $(1,248,676) $(1,530,064) $(2,778,740)
Non-cash items:
Write-off of incorporation costs 0 665 665
Write-off of deferred expenditures 494,492 1,034,155 1,528,647
Depreciation 14,784 0 14,784
----------- ----------- -----------
(739,400) (495,244) (1,234,644)
Net changes in non-cash working capital items 30,401 (7,655) 60,721
items
----------- ----------- -----------
Cash used in operating activities (708,999) (502,899) (1,173,923)
----------- ----------- -----------
Financing Activities
Shares issued for cash 4,939,161 2,976,977 7,916,139
Share subscription received 4,873,336 (57,069) 4,873,336
Shares issued for subsidiaries 0 0 575,537
Advances from related parties (1,278,181) 396,345 0
Share issue costs (228,944) (229,045) (479,691)
----------- ----------- ----------
Cash provided by financing activities 8,305,372 3,087,208 12,885,321
----------- ----------- ----------
Investing Activities
Incorporation costs 0 0 (665)
Purchases of capital assets (63,359) 0 (63,359)
Mineral properties and deferred expl. (2,100,401) (2,096,058) (5,093,387)
exploratio
costs
Acquisition of subsidiaries 0 (17,215) (593,354)
Mineral property option proceeds 700,000 0 700,000
----------- ----------- ----------
Cash used in investing activities (1,463,760) (2,113,273) (5,050,765)
----------- ----------- ----------
Increase in cash 6,132,613 471,036 6,660,633
Cash, beginning of the period 528,020 56,984 0
----------- ----------- ----------
Cash, end of the period $6,660,633 $ 528,020 $6,660,633
=========== =========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-6
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
1. NATURE OF OPERATIONS
The Corporation is in the business of acquiring, exploring and evaluating
mineral properties, and either joint venturing or developing these properties
further or disposing of them when the evaluation is completed. At December 31,
1996, the Corporation was in the exploration stage and had interests in 35
properties in six provinces in the Republic of Argentina, including three
properties which were joint ventured.
The recoverability of amounts shown as mineral properties and deferred
exploration costs is dependent upon the existence of economically recoverable
reserves, the ability of the Corporation to obtain necessary financing to
complete their development, and future profitable production or disposition
thereof.
2. ORGANIZATION
The Corporation, Minera Andes Inc., was incorporated in Alberta on July 19,
1994, although operations are considered to have commenced on July 1, 1994, the
effective date of the acquisition of the Argentine properties (see Note 4a). On
November 6, 1995, the amalgamation of Minera Andes Inc. with Scotia Prime
Minerals, Incorporated (Scotia), a reporting issuer, pursuant to section 186 of
the Business Corporations Act (Alberta), became effective. The business
combination was accounted for using the purchase method of accounting. Under
this method of accounting, Minera Andes Inc. has been identified as the acquiror
and accordingly, the comparative figures are those of Minera Andes Inc.
3. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada. The statements are expressed
in United States dollars because the majority of the exploration activities are
incurred in U.S. dollars and the majority of the cash reserves are held in U.S.
dollars.
a) Consolidation/Reporting
These consolidated financial statements include the accounts of
Minera Andes Inc. and its wholly-owned subsidiaries (see Note 4a),
Minera Andes S.A. (MASA) and NAD S.A. (NADSA), both Argentine
corporations. All significant intercompany transactions and balances
have been eliminated from the consolidated financial statements.
b) Foreign Currency Translation
The Corporation's consolidated operations are integrated and balances
denominated in currencies other than U.S. dollars are translated into
U.S. dollars using the temporal method. This method translates
monetary balances at the rate of exchange at the balance date,
non-monetary balances at historic exchange rates and revenues and
expense items at average exchange rates. The resulting gains and
losses are included in the statement of operations in the reporting
period.
c) Mineral Properties and Deferred Exploration Costs
Mineral properties consist of exploration and mining concessions,
options and contracts. Acquisition and leasehold costs and
exploration costs are capitalized and deferred until such time as the
property is put into production or the properties are disposed of
either through sale or abandonment. If put into production, the costs
of acquisition and exploration will be written off over the life of
the property, based on estimated economic reserves. Proceeds
F-7
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
received from the sale of any interest in a property will first be
credited against the carrying value of the property, with any excess
included in operations for the period. If a property is abandoned,
the property and deferred exploration costs will be written off to
operations.
d) Capital Assets and Depreciation
Capital assets are recorded at cost, and depreciation is provided on
a declining balance basis over their estimated useful lives at an
annual rate of 40% up to a residual value of 10%.
e) Share Issue Costs
Commissions paid to underwriters on the issuance of the Corporation's
shares are charged directly to share capital. Other share issue
costs, such as legal, accounting, auditing and printing costs, are
charged to accumulated deficit.
f) Loss per Share
Loss per common share is computed based on the weighted average
number of common shares outstanding during each period. Due to the
net losses occurred during each of the periods presented, common
stock equivalents are anti-dilutive and have been excluded from the
computation.
4. ACQUISITION OF SUBSIDIARIES
a) Pursuant to an agreement dated March 8, 1995, the Corporation
acquired on March 15, 1995, 95% (19 of the 20 shares issued) of MASA
and 91.66% (11 of the 12 shares issued) of NADSA in exchange for the
issue of 4,000,000 shares, an additional bonus issue of shares
payable if any of the properties reach bankable feasibility (which
shall be 11% or 1,213,409 shares of the issued and outstanding common
shares of the Corporation after the amalgamation--see Note 2), a
royalty on all existing and future properties equal to the difference
between 3% and any underlying royalties subject to a maximum of 2%,
and reimbursement of all property costs incurred from July 1, 1994.
An additional $602 was paid in cash to certain minority shareholders
of MASA and NADSA. Concurrent with the agreement, the Corporation
also entered into option agreements, having an initial term of four
years each and renewable every four years to acquire the remaining
shares of MASA and of NADSA for an exercise price of $100 per share.
For accounting and reporting purposes, MASA and NADSA are considered
to be wholly-owned subsidiaries of the Corporation.
MASA and NADSA have no assets or liabilities other than mineral
property rights which had been purchased or directly staked. The
deemed value of the 4,000,000 shares issued was equal to the
accumulated property acquisition costs and exploration expenditures
acquired by MASA and NADSA effective July 1, 1994, which totaled
$575,537. The acquisition was accounted for using the purchase method
with an effective date of July 1, 1994, being the date from which the
Corporation agreed to reimburse the property costs incurred.
b) As disclosed in Note 2, the business combination of Minera Andes Inc.
and Scotia, which was made effective November 6, 1995, has been
accounted for using the purchase method whereby Minera Andes Inc.
acquired all of the issued and outstanding shares of Scotia. The
acquisition has been recorded as follows:
F-8
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
<TABLE>
<CAPTION>
<S> <C>
Assets acquired $ 1,986
Less: liabilities assumed 19,201
-----------
Net assets acquired (17,215)
Asset deficiency allocated to accumulated deficit 17,215
Purchase price $ 0
===========
Consideration given: 336,814 common shares $ 0
===========
</TABLE>
As a result of the acquisition (amalgamation), Minera Andes Inc.
became a reporting issuer. All fees paid with respect to the
amalgamation (legal, audit, accounting, printing) were considered
to be share issue costs. Scotia was an inactive company which from
December 31, 1994 to the date of acquisition had only the
following transactions: general and administrative expenses of
$6,248, forgiveness of indebtedness owed of $13,391 and the issue
of shares to settle debts of $20,000.
5. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS
At December 31, 1996, the Corporation, through its subsidiaries, held interests
in a total of 277,399 hectares of mineral rights and mining lands in six
Argentine provinces: San Juan, Mendoza, Neuquen, Rio Negro, Chubut and Santa
Cruz. Under its present acquisition and exploration programs, the Corporation is
continually acquiring additional mineral property interests and exploring and
evaluating its properties. If, after evaluation, a property does not meet the
Corporation's requirements, then the property and deferred exploration costs are
written off to operations. All properties are subject to a royalty agreement as
disclosed in Note 8b. Mineral property costs and deferred exploration costs are
as follows:
<TABLE>
<CAPTION>
Table 1 of 2
===========================================================================================
Exploration
Deferred Acquisition and Deferred
December Costs Overhead Write-Offs December
Province Property 31, 1994 1995 1995 1995 31, 1995
===========================================================================================
<S> <C> <C> <C> <C> <C> <C>
San Juan Agua Blanca $ 0 $ 111,591 $ 393,464 $ 0 $ 505,055
Cateos 468,713 17,061 168,477 (402,932) 251,319
Mendoza Santa Clara 348,444 37,479 173,683 0 559,606
La Horqueta 0 20,732 194,595 0 215,327
Cateos 425,996 101,382 181,262 (631,223) 77,417
Neuquen Pino Andino 227,427 48,514 428,276 0 704,217
Cateos 0 0 0 0 0
Santa Cruz Cateos 0 1,349 69,185 0 70,534
Rio Negro Cateos 0 2,915 15,475 0 18,390
Chubut Cateos 2,487 13,560 117,058 0 133,105
Northern Cateos 0 0 0 0 0
TOTAL $1,473,067 $ 354,583 $1,741,475 $(1,034,155) $2,534,970
===========================================================================================
</TABLE>
F-9
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
<TABLE>
<CAPTION>
Table 2 of 2
==========================================================================
Exploration Mineral
Acquisition and Option Deferred
Costs Overhead Write-Offs Proceeds December
Province 1996 1996 1996 1996 31, 1996
==========================================================================
<S> <C> <C> <C> <C> <C>
San Juan $ 4 $ 26,678 $ 0 $(100,000) $ 431,737
25,015 123,420 (164,647) 0 235,107
Mendoza 1,201 280,702 0 (250,000) 591,509
37,988 659,753 0 0 913,068
7,207 166,156 (16,693) 0 234,087
Neuquen 8,136 424,603 0 (350,000) 786,956
20,000 58,080 0 0 78,080
Santa Cruz 500 114,545 (97,012) 0 88,567
Rio Negro 4,414 42,726 (25,333) 0 40,197
Chubut 7,266 60,879 (190,807) 0 10,443
Northern 32 31,096 0 0 31,128
TOTAL $ 111,763 $ 1,988,638 $ (494,492) $(700,000) $3,440,879
==========================================================================
</TABLE>
a) Agua Blanca Project
The Agua Blanca project is located approximately 220km northwest of
the city of San Juan in San Juan Province. Agua Blanca is currently
held by the Corporation under a four year option-to-purchase
agreement, dated June 21, 1995, which calls for option payments
totaling $920,000 and a final buy-out payment of $1,080,000 to earn a
100% interest in the property claims.
The Corporation signed a letter agreement dated April 4, 1996 with
Newcrest Resources, Inc. with respect to a joint venture on the Agua
Blanca property. Newcrest may earn a 51% interest in the joint
venture through exploration expenditures over four years of
$3,800,000, paying all associated land and option payments, and
making cash payments totaling $350,000 during the first year.
Newcrest may earn an additional 14% interest by spending an
additional $6,500,000 by year six and completing a bankable
feasibility study. The Corporation will have a 49% participating
interest, or may reduce to a 35% participating interest and will be
required to contribute to exploration and development work on a pro
rata basis or dilute its interest. Should the Corporation's
participating interest dilute to 10%, it will convert to a 10%
deferred carried interest and the Corporation would have no further
obligation to contribute until a decision to mine is made.
F-10
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
b) Santa Clara and Pino Andino Projects
The Santa Clara project is located in northwest Mendoza Province,
approximately 63km west of the city of Tupungato. The bulk of the
property is held by the Corporation under an option-to-purchase
agreement, whereby the Corporation can earn a 100% interest in the
property by making option payments totaling $1,950,000 by October,
1998. During 1995, the Corporation negotiated and received a four
month extension of the option-to-purchase agreement to allow for
resolution of the provincial park boundary dispute. Approximately 70%
of the area of the optioned property lies within the disputed
boundary of the park. The provincial mining authorities confirmed the
validity of the mining rights at Santa Clara in January, 1996, and in
January, 1997 a provincial law was passed excluding existing mineral
properties from the provincial park.
The Pino Andino project consists of three contiguous properties
approximately 250km northwest of the city of Neuquen and 20km east of
the city of Loncopue in Neuquen Province. The individual properties
include: a reserve area acquired under an exploration contract with a
mining option from CORMINE S. E. P., a provincial corporation; a
four-year option-to-purchase contract; and a cateo and manifestation
of discovery owned by the Corporation.
In March, 1996, the Corporation signed a Memorandum of Understanding,
subject to due diligence, with Cominco Ltd. regarding a joint venture
on the Santa Clara and Pino Andino properties. Under this agreement,
Cominco may earn a 51% interest in each of the properties by making
cash payments and exploration expenditures of $5,000,000 at each
property over four years, in addition to paying all associated option
payments and land costs. The cash
F-11
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
payments made, after Cominco's due diligence and as evidence of their
election to proceed, were $250,000 in the case of the Santa Clara
property and $350,000 in the case of the Pino Andino property. Once
Cominco has earned a 51% interest in either of the properties, a
joint venture will be formed and, at the Corporation's option,
Cominco may earn up to a further 11% interest by completing a
feasibility study and spending up to an additional $22,000,000 (with
its interest increasing 1% for each $2,000,000 spent, up to a maximum
of the 11%). Consequently, the Corporation will have a 49%
participating interest or may elect to reduce to a 38% participating
interest and will be required to contribute to exploration and
development work on the property on a pro rata basis or dilute its
interest. Should the Corporation's participating interest dilute to
20%, it will convert to a 20% deferred carried interest and the
Corporation would be entitled to receive an advance royalty from net
production proceeds of 2% net smelter returns to a maximum of
$500,000 per year.
The Memorandum of Understanding included Cominco subscribing to a
private placement in the Corporation. The subscription totaled
877,194 units, each unit comprising a common share and a common share
purchase warrant, at Cdn$3.42 per unit for an aggregate subscription
of Cdn$3,000,003. Two warrants will entitle Cominco to purchase one
common share at a price per share of Cdn$3.98 prior to May 10, 1997.
c) La Horqueta Project
The La Horqueta project is located 200km south of the city of Mendoza
and 95km from the city of San Rafael in central Mendoza Province. The
property comprises cateos wholly-owned by the Corporation in addition
to two separate four-year options to purchase. The Corporation can
earn 100% of the individual properties under the options-to-purchase
by making cash payments totaling $1,800,000 and $1,500,000. To date,
the Corporation has paid all option payments and carried out and
funded all exploration costs on the La Horqueta project.
d) Write Down of Mineral Property and Exploration Costs
The Corporation has acquired exploration concessions, entered into
option agreements and contracts, and carried out exploration on
certain properties where it has determined that it would be unlikely
that additional work would result in the discovery of economic ore
reserves. Accordingly, any acquisition payments and the accumulated
cost of exploration on those properties, totaling $494,492 in 1996
and $1,034,155 in 1995 have been written off to operations.
6. CAPITAL ASSETS
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
------------------------------------------ -----------------
Accumulated
Cost Depreciation Net Net
------- ------------ ------- -----
<S> <C> <C> <C> <C>
Vehicles $63,359 $14,784 $48,575 $ Nil
======= ======= ======= =====
</TABLE>
F-12
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
7. SHARE CAPITAL
a) Authorized
The Corporation has authorized capital of an unlimited number of
common shares, with no par value, and an unlimited number of
preferred shares, with no par value.
b) Issued, Allotted and/or Subscribed:
<TABLE>
<CAPTION>
Number of
Shares Amount
---------- -----------
<S> <C> <C>
Common shares issued:
Issued for cash on incorporation 1 $ 1
Allotted for acquisition of subsidiaries
(Issued March 15, 1995-see Note 4) 4,000,000 575,537
Subscriptions received for private placement 0 57,069
---------- -----------
Balance, December 31, 1994 4,000,001 632,607
Issued for cash (Cdn$0.10 each) 1,000,000 70,850
Issued for cash (Cdn$0.40 each) 2,345,094 669,058
Issued for cash (Cdn$1.00 each) 3,031,000 2,237,071
Issued for finder's fee 150,000 0
Issued for services 168,000 0
Issued for subsidiary (see Note 4) 336,814 0
Subscriptions applied 0 57,069
---------- -----------
Balance, December 31, 1995 11,030,909 3,552,517
Issued for cash (Cdn$1.50 each) 1,433,333 1,535,553
Issued for broker special warrants 90,400 0
Issued for cash (Cdn$3.42 each) 877,194 2,174,388
Issued to N.A. Degerstrom, Inc.
For cash (Cdn$1.44 each) 500,000 514,608
For cash on exercise of warrants (Cdn$1.75 each) 500,000 625,392
Issued for cash on exercise of warrants (Cdn$1.80 each) 67,500 89,220
Subscriptions received for private placement 0 4,873,336
---------- -----------
Balance, December 31, 1996 14,499,336 $13,365,014
========== ===========
</TABLE>
i) In February, 1996, the Corporation concluded a private placement
of 1,433,333 special warrants at a price of Cdn$1.50 per special
warrant for total gross proceeds
F-13
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
of Cdn$2,150,000 (US$1,565,265). Each special warrant comprised
a unit consisting of one common share and one share purchase
warrant. Each warrant entitles the holder to purchase one
additional common share at any time over a twelve month period
at a price of Cdn$1.80 per share. The agents received 90,400
broker special warrants (each convertible into one common share
and one share purchase warrant), cash commission of Cdn$25,650,
Cdn$15,000 as a corporate finance fee and a finder's fee of
Cdn$16,500 was also paid.
ii) In May, 1996, the Corporation concluded the Cominco private
placement (see Note 5b) with the issuance of 877,194 common
shares and 877,194 Cominco warrants at a price of Cdn$3.42 for
gross proceeds of Cdn$3,000,003 (US$2,174,388). Two Cominco
warrants will entitle Cominco to acquire one additional common
share at any time on or before May 10, 1997 at a price of
Cdn$3.98 per share.
iii) Following regulatory and shareholder approval, in July, 1996 the
Corporation issued 500,000 units under the Degerstrom
Subscription Agreement (see Note 9b) at a price of Cdn$1.44 per
unit. Each unit was comprised of one common share and one share
purchase warrant. Each warrant entitled the holder, N. A.
Degerstrom, Inc. (NAD), to purchase one additional common share
for Cdn$1.75 at any time until January 11, 1998. The warrants
were also exercised in July, 1996.
iv) On December 13, 1996 and December 19, 1996, the Corporation
raised gross proceeds of Cdn$7,078,010 (US$5,197,540) in
aggregate by way of a private placement of special warrants at a
price of Cdn$2.10 per unit. Each unit comprised one common share
and one share purchase warrant. Two warrants will entitle the
holder to purchase one additional common share at a price of
Cdn$2.50 per share if exercised on or before December 13, 1997
or at a price of Cdn$2.88 if exercised before December 13, 1998.
In connection with the private placement, the Corporation
granted 140,420 broker special warrants for commission, 200,000
broker special warrants for a corporate finance fee (with each
broker special warrant convertible into a broker share purchase
warrant), and cash commissions totaling Cdn$441,501. The
Corporation intends to file a prospectus to qualify the shares
and warrants on the exercise of the special warrants and the
warrants on exercise of the broker special warrants by February
28, 1997. After receiving final approval of the prospectus and
upon the exercise of the special warrants the Corporation
expects to issue 3,370,481 common shares. If a final receipt for
the prospectus is not received by May 12, 1997, the Corporation
will issue 1.1 common shares and 1.1 warrants for each common
share and warrant comprising part of the special warrant unit.
c) Stock Options As at December 31, 1996, there were options held by
directors, officers and employees of the Corporation for the purchase
of common shares as follows:
F-14
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
Number of Shares Exercise Price Expiry Date
---------------- -------------- -----------
285,000 Cdn$1.44 January 10, 1998
610,000 Cdn$2.18 August 16, 1999
-------
895,000
d) Warrants
As at December 31, 1996, the following warrants were outstanding:
Number of Warrants Exercise Price Expiry Date
---------------- -------------- -----------
1,365,833 Cdn$1.80 February 28, 1997
90,400 Cdn$1.80 February 28, 1997
877,194 Cdn$3.98 May 10, 1997
---------
2,333,427
e) Escrow
As at December 31, 1996 there were 2,666,667 common shares held in
escrow. These common shares will be released from escrow upon
obtaining the consent of The Alberta Stock Exchange, at the earn-out
rate of Cdn$0.375 per share of deferred expenditures as defined in
the Escrow Agreement, with a maximum of one-third of the escrowed
securities to be released in any one year.
8. AGREEMENTS, COMMITMENTS AND CONTINGENCIES
a) Mineral rights in Argentina are owned by the federal government and
administered by the provinces. The provinces can levy a maximum 3%
"mouth of mine" (gross proceeds) royalty. The provinces of Mendoza
and Neuquen have waived their right to a royalty. The provinces of
Rio Negro, San Juan, Santa Clara and Chubut have not yet established
a policy regarding the royalty.
b) While the operating agreement between the Corporation and NAD is in
effect (see Note 9a), a net smelter royalty on all existing and
future properties is payable to NAD equal to the difference between
3% and any underlying royalties, subject to a maximum of 2% payable
to NAD. The Corporation may purchase up to one half of the royalty
upon payment of $1,500,000 per percent purchased.
c) Under the terms of the acquisition agreement disclosed in Note 4a,
the Corporation may be obligated to issue additional common shares as
consideration for the acquisition of its subsidiaries. The number of
shares to be issued to NAD upon a property reaching bankable
feasibility shall be 1,213,409 common shares of the Corporation.
F-15
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
9. RELATED PARTY TRANSACTIONS
a) Concurrent with the acquisition of the Corporation's wholly-owned
subsidiaries as disclosed in Note 4a, the Corporation also entered
into an operating agreement effective March 15, 1995 with the vendor,
NAD. As a result of the acquisition agreement, NAD is currently the
controlling shareholder of the Corporation. Under the terms of the
operating agreement, NAD will operate and manage the exploration
program on all properties and provide related off-site administrative
assistance, as required. Consideration will be 15% of the costs
incurred by NAD on behalf of the Corporation. Costs paid directly by
the Corporation are not subject to the fee. Included in the agreement
are fixed rental rates for equipment owned by NAD. If NAD elects to
terminate the agreement within two years, the Corporation may elect
to purchase the shares owned by NAD for $1,200,000. Expenditures
incurred prior to March 15, 1995 by NAD include a 15% administration
fee to cover NAD's internal overhead (accounting, legal and
secretarial service) costs.
During the year ended December 31, 1996 and 1995, administrative fees
were paid to NAD of $65,646 and$139,769, on total costs incurred by
the Corporation of $437,640 and $931,793, respectively. Equipment
rentals of $67,060 and $60,350 were included in the total costs for
1996 and 1995, respectively.
b) On November 6, 1995, the debt the Corporation had with NAD was
formalized into a promissory note. Terms of payment to NAD called for
$365,000 to be paid on November 15, 1995, and this payment was made
as specified. The remainder of the debt, $1,140,000, was carried as a
convertible interest bearing note. The Corporation and NAD entered
into a Debt Settlement Agreement on January 11, 1996 and an amendment
dated May 13, 1996, whereby a promissory note dated May 13, 1996
replaced the earlier note. Under the May 13, 1996 promissory note,
the Corporation agreed to make payments of Cdn$720,000 by July 15,
1996 and Cdn$875,000 by August 15, 1996. As per Note 7b(iii) above,
under the terms of the Degerstrom Subscription Agreement, in July
1996, the Corporation issued 500,000 units to NAD and NAD exercised
the 500,000 warrants it received. The funds received from NAD on the
Degerstrom Private Placement were used to repay the debt outstanding,
pursuant to the Debt Settlement Agreement, as amended.
10. INCOME TAXES
Due to the losses incurred by the Corporation, there is no income tax provision
or benefit recorded for all periods presented. The Corporation has Canadian
non-capital losses available to carry forward to apply against future taxable
income of approximately $2,386,000, expiring at various dates through the year
2003.
F-16
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars)
11. COMPARATIVE FIGURES
Certain financial statement line items from the prior years have been
reclassified to conform with the current year's presentation.
12. SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the following occurred:
a) Warrants were exercised to purchase 175,320 common shares for gross
proceeds of Cdn$315,576 (US$233,760).
b) The Corporation granted options, subject to regulatory approval,
whereby directors and employees can acquire up to 561,000 shares at
Cdn$2.00 per share, up to February 17, 2000.
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
As discussed in Significant Accounting Policies, these consolidated financial
statements are prepared in accordance with accounting principles generally
accepted in Canada.
Differences in accounting principles as they pertain to these consolidated
financial statements are as follows:
a) Accounting for Share Issue Costs
All costs related to the issuance of shares are offset against
proceeds under U.S. GAAP and the net amount is credited to share
capital.
b) Earnings Per Share
In February, 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No.128 (SFAS 128),
"Earnings per Share". For U.S. GAAP, SFAS 128 simplified the existing
standards and will require a basic and diluted earnings per share
(EPS), unless the effect of including common stock equivalents is
anti-dilutive. The application of this new standard will not have a
material effect on the presentation of EPS for U.S. GAAP purposes,
and the calculation of EPS under SFAS 128 will more closely
approximate EPS under Canadian GAAP.
c) Non-Cash Issuance of Common Shares Under U.S. GAAP, value is assigned
to issuances of common shares for non-cash consideration and the
basis for valuing the consideration is stated.
i) During 1995, the Corporation issued 150,000 common shares as a
finder's fee and 168,000 common for services, in connection with
a financing. Under U.S. GAAP, these issuances would be valued at
Cdn$1.00 per share or $110,710 and $123,995, respectively, being
the fair market value of the shares issued.
ii) During 1996, the Corporation issued 90,400 common shares for
broker special warrants, in connection with a financing. Under
U.S. GAAP, these shares would
F-17
<PAGE>
be valued at Cdn$1.50 per share or $96,847, being the fair
market value of the shares issued.
iii) These share issuance costs are offset against share proceeds
resulting in no net change to share capital.
d) Impact on Consolidated Financial Statements
The impact of the above on the consolidated financial statements is
as follows:
<TABLE>
<CAPTION>
Period from
Years Ended July 1, 1994
----------------------------- (commencement)
December 31, December 31, through
1996 1995 December 31,1996
---------- ---------- ----------
<S> <C> <C> <C>
Accumulated deficit, end of period
per Canadian GAAP $3,275,646 $1,798,026 $3,275,646
Adjustment for share issue costs (479,691) (250,747) 479,691
Accumulated deficit, end of period,
per U.S. GAAP $2,795,955 $1,547,279 $2,795,955
========== ========== ==========
December 31, December 31,
1996 1995
---------- ----------
<S> <C> <C>
Share capital, per Canadian GAAP $13,365,014 $3,552,517
Adjustments for share issue costs (479,691) (250,747)
----------- ----------
Share capital, per U.S. GAAP $12,885,323 $3,301,770
=========== ==========
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars)
March 31, December 31,
1997 1996
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current:
Cash $ 7,552,219 $ 6,660,633
Receivables 71,705 167,110
------------- -------------
7,623,924 6,827,743
Mineral properties and deferred exploration costs 4,022,257 3,440,879
Capital assets 49,646 48,575
------------- -------------
$ 11,695,827 $ 10,317,197
============= =============
LIABILITIES
Current:
Accounts payable and accruals $ 189,259 $ 227,829
------------- -------------
189,259 227,829
------------- -------------
SHAREHOLDERS' EQUITY
Share Capital 15,054,116 13,365,014
Accumulated deficit (3,547,548) (3,275,646)
------------- -------------
11,506,568 10,089,368
------------- -------------
$ 11,695,827 $10,317,197
============= =============
The accompanying notes are an integral part of these consolidated
financial statements
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(U.S. Dollars-Unaudited)
Period from
July 1, 1994
Three Months Three Months (commencement)
Ended Ended through
March 31, 1997 March 31, 1996 March 31, 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Administration fees $ 7,087 $ 5,925 $ 93,968
Audit & accounting 17,801 15,361 65,181
Consulting fees 43,840 18,069 322,661
Equipment rental 0 942 2,927
Foreign exchange (gain) loss 4,726 (8,720) (46,825)
Legal 30,034 8,884 142,835
Materials & supplies 0 10,723 35,187
Office overhead 81,607 39,360 359,573
Telephone 20,108 11,194 147,745
Transfer agent 0 0 21,744
Travel 8,396 14,939 105,933
Wages & benefits 48,817 40,756 335,284
Write-off of deferred expenditures 0 0 1,528,647
------------- ------------- -----------
Total expenses 262,316 157,433 3,114,860
Interest income (40,772) 0 (114,576)
Loss for the period 221,544 157,433 3,000,284
Accum. deficit, beginning of the period 3,275,646 1,798,026 0
Share issue costs 50,358 51,003 530,049
Deficiency on acquisition of subsidiary 0 0 17,215
------------- ------------- -----------
Accumulated deficit, end of the period $ 3,547,548 $ 2,006,462 $ 3,547,548
============= ============= ===========
Loss per common share $ 0.01 $ 0.01 $ 0.28
============= ============= ===========
The accompanying notes are an integral part of these consolidated
financial statements
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF MINERAL PROPERTIES
AND DEFERRED EXPLORATION COSTS
(U.S. Dollars-Unaudited)
Period from
Three Months Three Months July 1, 1994
Ended Ended (commencement)
March 31, March 31, through
1997 1996 March 31,1997
------------ ------------ --------------
<S> <C> <C> <C>
Administration fees $ 7,437 $ 9,532 $ 264,313
Assays & analytical 70,111 21,198 406,489
Construction & trenching 12,318 0 421,293
Consulting fees 16,877 16,158 487,684
Depreciation 4,858 0 19,642
Drilling 1,694 2,828 226,939
Equipment rental 20,779 13,780 189,454
Geology 241,978 85,519 1,404,113
Geophysics 0 0 76,802
Insurance 0 0 74,239
Legal 20,323 9,932 288,956
Maintenance 7,945 3,654 67,994
Materials & supplies 17,719 9,932 259,787
Project overhead 10,119 1,637 172,232
Property & mineral rights 82,583 70,906 648,999
Telephone 1,006 344 25,963
Travel 37,084 18,541 307,369
Wages & benefits 28,547 32,551 332,497
------------- ------------- -----------
Costs incurred during the period 581,378 296,512 5,674,765
Deferred costs, beginning of the period 3,440,879 2,534,970 0
Deferred costs acquired 0 0 576,139
Deferred costs written off 0 0 (1,528,647)
Mineral property option proceeds 0 0 (700,000)
------------- ------------- -----------
Deferred costs, end of the period $ 4,022,257 $ 2,831,482 $ 4,022,257
============= ============= ===========
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(U.S. Dollars-Unaudited)
Period from
July 1, 1994
Three Months Three Months (commencement)
Ended Ended through
March 31, 1997 March 31, 1996 March 31,1997
-------------- -------------- -------------
<S> <C> <C> <C>
Operating Activities
Loss for the period $ (221,544) $ (157,433) $ (3,000,284)
Non-cash items:
Write-off of incorporation costs 0 0 665
Write-off of deferred expenditures 0 0 1,528,647
Depreciation 4,858 0 19,642
----------- ----------- ------------
(216,686) (157,433) (1,451,330)
Net changes in non-cash working capital items 56,834 21,246 117,555
----------- ----------- ------------
Cash used in operating activities (159,852) (136,187) (1,333,775)
----------- ----------- ------------
Financing Activities
Shares issued for cash 1,689,102 0 9,605,241
Share subscription received 0 1,534,443 4,873,336
Shares issued for subsidiaries 0 0 575,537
Advances from related parties 0 26,527 0
Share issue costs (50,358) (51,003) (530,049)
----------- ----------- ------------
Cash provided by financing activities 1,638,744 1,509,967 14,524,065
----------- ----------- ------------
Investing Activities
Incorporation costs 0 0 (665)
Purchases of capital assets (5,928) 0 (69,287)
Mineral properties and deferred expl. (581,378) (296,512) (5,674,765)
Acquisition of subsidiaries 0 0 (593,354)
Mineral property option proceeds 0 0 700,000
----------- ----------- ------------
Cash used in investing activities (587,306) (296,512) (5,638,071)
----------- ----------- ------------
Increase in cash 891,586 1,077,268 7,552,219
Cash, beginning of the period 6,660,633 528,020 0
----------- ----------- ------------
Cash, end of the period $ 7,552,219 $ 1,605,288 $ 7,552,219
=========== =========== ============
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
F-22
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars-Unaudited)
1. ACCOUNTING POLICIES
The accompanying consolidated financial statements of Minera Andes Inc. (the
"Corporation") for the three months ended March 31, 1997 and 1996 and for the
period from the date of commencement (July 1, 1994) through March 31, 1997 are
unaudited but, in the opinion of management, include all adjustments, consisting
only of normal recurring items, necessary for a fair presentation. Interim
results are not necessarily indicative of results which may be achieved in the
future.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1996. The accounting policies set forth in the audited annual consolidated
financial statements are the same as the accounting policies utilized in the
preparation of these consolidated financial statements, except as modified for
appropriate interim presentation.
2. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS
a) Agua Blanca Project
The joint venture with Newcrest Resources, Inc. on the Agua Blanca
property was terminated by Newcrest on March 24, 1997, on the basis
that, although encouraging assays and mineralized intervals had been
encountered in the drilling program undertaken by Newcrest on the
property, the size and grade potential of the system was not sufficient
to be economic as determined by Newcrest.
b) Pino Andino Project
The Pino Andino property was subject to a joint venture with Cominco
Ltd., under the terms of a Memorandum of Understanding signed between
the Corporation and Cominco in March, 1996. Cominco terminated the
Memorandum of Understanding with respect to Pino Andino on February 27,
1997.
3. SHARE CAPITAL
During January and February, 1997, the Corporation received proceeds from the
exercise of 1,180,833 share purchase warrants and 90,400 broker share purchase
warrants, all exercised at a price of Cdn$1.80 per share, for total proceeds of
Cdn$2,288,219 (US$1,689,102).
4. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the following occurred:
a) The Corporation amended the terms of the 877,194 Cominco Warrants,
issued to Cominco Ltd. In May, 1996 under the terms of the Cominco
Private Placement, to extend the term from May 10, 1997 to May 10, 1998.
b) On May 9, 1997, the Corporation received receipts for a Final Prospectus
filed with the Alberta Securities Commission and the British Columbia
Securities Commission. The final prospectus qualified for distribution
3,370,481 common shares and 3,370,481 common share purchase warrants,
issuable upon the exercise of special warrants issued by the Corporation
on December 13 and December 19, 1996.
F-23
<PAGE>
PART III
Index to Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Asset and Share Acquisition Agreement between MASA, NADSA, the
Corporation Degerstrom, Brian Gavin, Jorge Vargas and Enrique Rufino
Marzari Elizalde, dated March 8, 1995, as amended on April 19, 1996.
2.2 Arrangement between the Corporation and Scotia Prime Minerals, Inc.
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Warrant Certificate describing the rights of Broker Special Warrants.
4.2 Warrant Certificate describing the rights of Cominco Warrants.
10.1 Conveyance Agreement between MASA and N.A. Degerstrom, Inc., dated
July 1, 1994.
10.2 Conveyance Agreement between NADSA and N.A. Degerstrom, Inc., dated
July 1, 1994.
10.3 Operating Agreement between the Corporation and N.A. Degerstrom, Inc.
dated March 15, 1995.
10.4 Share Option Agreement between the Corporation and Jorge Vargas, dated
March 15, 1995.
10.5 Share Option Agreement between the Corporation and Enrique Rufino
Marzari Elizalde, dated March 15, 1995.
10.6 Memorandum of Understanding between the Corporation and Cominco Ltd.
dated March 12, 1996, as amended March 19, 1996.
10.7 Option to Purchase (Santa Clara) between the N.A. Degerstrom, Inc. and
Martin Antonio Carotti and Carlos Giustozzi, dated May 12, 1994, as
amended on June 30, 1995 and again on December 13, 1995.
III-1
<PAGE>
10.8 Exploration and Prospecting Contract with Option to Purchase (Pino
Andino - Dos Guanacos) between MASA and Oscar Horacio Gonzalez et al.,
dated March 30, 1995.
10.9 Letter Agreement (Agua Blanca) between the Corporation and Newcrest
Minera Argentina S.A., dated April 4, 1996.
10.10 Option to Purchase (Agua Blanca) between MASA and Adonis Cantoni,
dated June 21, 1995.
10.11 Option to Purchase (La Horqueta) between MASA and Carlos Giustozzi,
dated June 23, 1995, as amended on June 30, 1995.
10.12 Exploration Contract with Option of Concession for Exploitation in the
"Andacollo" Area (Arroyo Nuevo - Cura Mallin Reserve Area) between
MASA and CORMINE S.E.P., dated February 25, 1997.
10.13 Contract of Exploration and Prospecting with Option to Purchase
(Arroyo Nuevo - Cura Mallin Reserve Area) between MASA and Sapag Hnos
S.A., dated September 30, 1996.
10.14 Contract of Exploration and Prospecting with Option to Purchase (Los
Reyunos) between MASA and Carlos Giustozzi, dated February 28, 1997.
10.15 Debt Restructuring Agreement between the Corporation and N.A.
Degerstrom, Inc., dated January 11, 1996, as amended May 13, 1996.
10.16 Escrow Agreement between the Corporation, N.A. Degerstrom, Inc. and
Montreal Trust Company of Canada, dated November 30, 1995.
10.17 Agency Agreement between the Corporation, C.M. Oliver & Company
Limited and Majendie Charlton Securities Ltd., dated November 22,
1996.
10.18 Special Warrant Indenture between the Corporation and Montreal Trust
Company of Canada, dated December 13, 1996.
10.19 Purchase Warrant Indenture between the Corporation and Montreal Trust
Company of Canada, dated December 13, 1996.
10.20 Agreement dated April 30, 1996 between the Corporation and Waiata
Resources for the provision of financial advisory services.
11.1 Statement regarding the computation of per share loss.
III-2
<PAGE>
21.1 Description of MASA and NADSA.
23.1 Consent of MacKay & Partners
27.1 Financial Data Schedule
III-3
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MINERA ANDES INC.
(Registrant)
By: /s/ ALLEN V. AMBROSE
-------------------------------------
Allen V. Ambrose, President
Dated: June 19, 1997
III-4
THIS ASSET AND SHARE ACQUISITION AGREEMENT made the 8th day of March,
1995.
AMONG:
N.A. DEGERSTROM, INC., a corporation having offices at the City of
Spokane in the State of Washington, and a branch office in the City of
Mendoza, in the Republic of Argentina
(hereinafter referred to as "Degerstrom")
OF THE FIRST PART
- AND -
BRIAN GAVIN, an individual residing in the City of Mendoza, in the
Republic of Argentina
(hereinafter referred to as "Gavin")
OF THE SECOND PART
- AND -
JORGE VARGAS, an individual residing in the City of Mendoza, in the
Republic of Argentina
(hereinafter referred to as "Vargas")
OF THE THIRD PART
- AND -
ENRIQUE RUFINO MARZARI ELIZALDE, an individual residing in the City of
Mendoza, in the Republic of Argentina
(hereinafter referred to as "Elizalde")
OF THE FOURTH PART
- AND -
MINERA ANDES S.A., a corporation having offices at the City of
Mendoza, in the Republic of Argentina.
<PAGE>
-2-
(hereinafter referred to as "MASA")
OF THE FIFTH PART
- AND -
MINERA ANDES INC., a corporation incorporated under the laws of the
Province of Alberta and having offices at the City of Spokane in the
State of Washington
(hereinafter referred to as "Minera")
OF THE SIXTH PART
- AND -
NAD (S.A.), a corporation having offices at the City of Mendoza, in
the Republic of Argentina ("NAD")
WHEREAS:
A. Degerstrom is a privately held Washington corporation with a branch office in
the City of Mendoza, in the Republic of Argentina;
B. Degerstrom holds a 100% interest in, and has made application to obtain,
certain mining claims in the northern region of Argentina, and has the right to
earn certain interests in other mining claims pursuant to certain option
agreements further described in Schedule A;
C. Degerstrom wishes to transfer certain of the above assets to MASA in exchange
for certain consideration, and MASA wishes to receive the above described assets
upon the terms and subject to the conditions set forth in this Agreement.
D. Degerstrom wishes to transfer certain of the above assets to NAD in exchange
for certain consideration, and NAD wishes to receive the above described assets
upon the terms and subject to the conditions set forth in this Agreement.
E. Degerstrom, Vargas and Elizalde each hold shares in NAD, a corporation
located in the City of Mendoza, in the Republic of Argentina, which corporation
holds a 100% interest in, and has made application to obtain, certain mining
claims in the northern region of Argentina, and has the right to earn certain
interests in other mining claims pursuant to certain option agreements further
described in Schedule "AA";
<PAGE>
-3-
F. Degerstrom and Vargas wish to transfer their shares in NAD to Minera, and
Minera wishes to receive the above shares upon the terms and subject to the
conditions set forth in this Agreement;
G. Elizalde holds a share in NAD and he wishes to grant an option to Minera to
purchase his share in NAD;
H. Degerstrom, Vargas and Gavin each hold shares in MASA a corporation located
in the City of Mendoza, in the Republic of Argentina, which corporation holds a
100% interest in, and has made application to obtain, certain mining claims in
the northern region of Argentina, and has the right to earn certain interests in
other mining claims pursuant to certain option agreements further described in
Schedule "AAA";
I. Degerstrom and Gavin wish to transfer the above described shares in MASA to
Minera, and Minera wishes to receive the above described shares upon the terms
and subject to the conditions set forth in this Agreement; and
J. Vargas holds a share in MASA and wishes to grant an option to Minera to
purchase such share.
NOW, THEREFORE, in consideration of the premises hereto and the
covenants, warranties, representations, agreements and payments herein set forth
and provided for, the parties hereto covenant and agree as follows:
ARTICLE 1.
INTERPRETATION
1.01 In this Agreement, including the premises hereto, this clause and each
Schedule, the words and phrases set forth below shall having the meaning
ascribed thereto, namely:
(a) "Agreement" means this Asset and Share Acquisition Agreement dated the
8th day of March, 1995, among Degerstrom, Gavin, Vargas, Elizalde,
MASA, Minera and NAD, and the expressions "above", "below", "herein",
"hereto", "hereof" and similar expressions refer to this Agreement;
(b) "Act" means the Business Corporations Act (Alberta) S.A. 1981, c.
B-15, as amended, together with all regulations promulgated pursuant
thereto;
(c) "Amalgamation" means the amalgamation of Minera and another
corporation as one corporation pursuant to a plan of arrangement under
the Act or in the alternative, the conversion of Minera to a publicly
traded company;
<PAGE>
-4-
(d) "Assets" means collectively all of the interests whatsoever of
Degerstrom in the Properties, as more particularly set forth and
described in Schedule "A" annexed hereto and a corresponding interest
in the Miscellaneous Interests;
(e) "Asset Closing" means the transfer of the Assets by Degerstrom to MASA
and NAD, and the payment by MASA and NAD to Degerstrom of the Purchase
Price therefor and the completion of all matters incidental thereto;
(f) "Bonus" means a one time payment of common shares issued from the
treasury of Minera to Degerstrom on the terms and conditions set forth
in Schedule "F";
(g) "Bankable Feasibility" means that point in time whenever a bank or
other lending institution will loan Minera, MASA or NAD funds for
production development on the Properties, NAD Properties, MASA
Properties or Future Properties;
(h) "Business Day" means a week day, excluding all statutory holidays in
the City of Calgary;
(i) "Business" means the business presently and heretofore carried on by
NAD and MASA as going concerns;
(j) "Cateos" means an exploration concession for mineral rights granted to
an individual or company in the Republic of Argentina, as defined by
the Republic of Argentina Mining Code, as amended. Cateos are measured
in units of 500 hectares (5 square kilometres) and can consist of a
maximum of 20 units (100 square Km). No owner can have contiguous
cateos or more then 10 cateos or 200 units (1000 square kilometres)
per province. A cateo allows for exploration but not exploitation of
the land. Private surface owners must be compensated for damages and
disturbance. Work plan and investment required. Area can be reduced at
any time.
(k) "Claims" means those certain Cateos, Manifestacion de Descubrimiento,
Mina, Estaca Mina, as defined by the Republic of Argentina Mining
Code, as amended, issued to Degerstrom by the government of Argentina
or any provincial government and all rights and privileges derived
therefrom including option agreements and any other agreements
whatsoever under and by virtue of which Degerstrom currently holds,
has acquired or is entitled to acquire the right to explore, drill
for, win, take, excavate, own or remove the minerals described
therein, the particulars of which are set forth in Schedule "A";
<PAGE>
-5-
(l) "Claim Locations" means the tract or tracts of land described within
the Claims, the NAD Claims, or the MASA Claims;
(m) "Closing" means the transfer of the NAD shares and MASA shares by the
Vendors to Minera and the payment by Minera of the Purchase Price
therefor and the completion of all matters incidental thereto;
(n) "Closing Date" means 10:00 a.m., Calgary time, on March 15, 1995;
(o) "Conveyance Agreement" means the form of agreement attached hereto as
Schedule "B";
(p) "Degerstrom" means N.A. Degerstrom, Inc., a corporation incorporated
under the laws of the State of Washington;
(q) "Effective Date" means 12:01 a.m., Calgary time, on the 1st day of
July, 1994 for the Asset Closing;
(r) "Elizalde" means Enrique Rufino Marzari Elizalde, an individual
residing in the City of Mendoza, in the Republic of Argentina;
(s) "Elizalde Option" means the sole, exclusive, irrevocable and
transferable option to purchase one (1) NAD Share, at a price of
$100.00 (US), granted by Elizalde to Minera in accordance with clause
2.07 of this Agreement.
(t) "Estaca Mina" means areas granted to extend the area covered by
existing Minas.
(u) "Future Properties" means any exploration properties in Argentina
acquired by Minera, MASA or NAD, or any affiliates thereof, while
Degerstrom is the manager of the Properties, NAD Properties and MASA
Properties pursuant to the Operating Agreement attached hereto as
Schedule "C";
(v) "Gavin" means Brian Gavin, an individual residing in the City of
Mendoza, in the Republic of Argentina;
(w) "Manifestacion de Descumbrimiento" means the intermediate stage
between the exploration phase and exploitation phase of development.
(An manifestacion de descubrimiento is a declaration that discovery
has been made and that a Mina (300 by 200 meters) or mina diseminada
(5 kilometre radius) is claimed. A work plan and investment is
required. This stage of development has a 15 month term.)
<PAGE>
-6-
(x) "MASA" means Minera Andes S.A., a corporation incorporated under the
laws of the Republic of Argentina;
(y) "MASA Assets" means collectively all of the interests whatsoever of
MASA in the MASA Properties as more particularly set forth and
described in Schedule "AAA" hereto annexed and Schedule "A" Part I,
after completion of the Asset Closing and a corresponding interest in
the MASA Miscellaneous Interests;
(z) "MASA Claims" means those certain Cateos, Manifestacion de
Descubrimiento, Mina, Estaca Mina, as defined by the Republic of
Argentina Mining Code, as amended, issued to MASA by the government of
Argentina or any provincial government, and all rights and privileges
derived therefrom, including option agreements and any other
agreements whatsoever under and by virtue of which MASA currently
holds, has acquired or is entitled to acquire the right to explore,
drill for, win, take, excavate, own or remove the minerals described
therein, the particulars of which are set forth in Schedule "AAA" and
Schedule "A" Part I, after completion of the Asset Closing;
(aa) "MASA Miscellaneous Interests" means all of MASA's entire right,
title, estate and interest in and to all property, assets and rights
pertaining to the MASA Claims to which MASA is entitled, including but
not in limitation of the generality of the foregoing, the said
interest of MASA in:
(i) all contracts, agreements, documents, books and records; all
geotechnical, seismic, geological, geophysical, drilling,
assaying, metallurgical mapping, production and engineering
information; and all other reports or studies relating to the
MASA Properties;
(ii) all subsisting rights to enter upon, use and occupy the surface
of any of the Claim Locations;
(iii) any other right, estate or interest in or any asset which
relates to but has not comprised part of the MASA Claims; and
(iv) all licenses, permits, easements, rights of way, certificates and
other approvals obtained by MASA, either before or after the date
of this Agreement, that are necessary for the exploration and
development of the MASA Properties or for the purpose of placing
the MASA Properties into production or continuing production
therefrom;
<PAGE>
-7-
(ab) "MASA Properties" means collectively the exploration properties in
Argentina listed, described or referred to in Schedule "AAA" and
Schedule "A" Part I, after completion of the Asset Closing, hereto
annexed, including without limitation, MASA Claims, mining leases,
mining rights and surface rights held by or in trust for MASA (whether
such rights are vested in MASA or only represent a right to acquire a
vested interest therein) in lands used or intended to be used for
mining purposes, including the right to acquire any such interest
pursuant to option agreements, together with all other property
interests in such properties, and all buildings, fixtures and
improvements and other assets located on such properties; provided
that such properties may be subject to Permitted Encumbrances and the
rights of third parties pursuant to contracts footnoted in said
Schedule "AAA" and Schedule "A" Part I, after completion of the Asset
Closing;
(ac) "MASA Shares" means common shares issued and outstanding in the
capital of MASA;
(ad) "Mina" means a exploitation grant based on Manifestacion de
Descubrimiento.
(ae) "Miscellaneous Interests" means all of Degerstrom's entire right,
title, estate and interest in and to all property, assets and rights
pertaining to the Claims to which Degerstrom is entitled, including
but not in limitation of the generality of the foregoing, the said
interest of Degerstrom in:
(i) all contracts, agreements, documents, books and records; all
geotechnical, seismic, geological, geophysical, drilling,
assaying, metallurgical testing, studies, mapping, production and
engineering information; and all other reports or studies
relating to the Properties;
(ii) all subsisting rights to enter upon, use and occupy the surface
of any of the Claim Locations;
(iii) any other right, estate or interest in or any asset which
relates to but has not comprised part of the Claims; and
(iv) all licenses, permits, easements, rights of way, certificates and
other approvals obtained by the Degerstrom, either before or
after the date of this Agreement, that are necessary for the
exploration and development of the Properties or for the purpose
of placing the Properties into production or continuing
production therefrom;
<PAGE>
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(af) "Minera" means Minera Andes Inc., a corporation incorporated under the
Act and any successors thereof including the corporation resulting
from the Amalgamation;
(ag) "Minera Shares" means 4,000,000 common shares of Minera issued to
Degerstrom from the treasury of Minera at a deemed price of $0.17
(Cdn.) per common share. (The deemed price per Minera Share is derived
from independent audit of Degerstrom's expenses and costs before the
Effective Date. The price per Minera Share is a fraction of the total
expenditures of Degerstrom of $575,537 to the Effective Date, as set
forth in Schedule "M" attached hereto);
(ah) "NAD" means NAD (S.A.), a corporation incorporated under the laws of
the Republic of Argentina;
(ai) "NAD Assets" means collectively all of the interests whatsoever of NAD
in the NAD Properties as more particularly set forth and described in
Schedule "AA" and Schedule "A" Part II, after completion of the Asset
Closing, hereto annexed and a corresponding interest in the NAD
Miscellaneous Interests;
(aj) "NAD Claims" means those certain Cateos, Manifestacion de
Descubrimiento, Mina, Estaca Mina, as defined by the Republic of
Argentina Mining Code, as amended, issued to NAD by the government of
Argentina or any provincial government, and all rights and privileges
derived therefrom, including option agreements and any other
agreements whatsoever under and by virtue of which NAD currently
holds, has acquired or is entitled to acquire the right to explore,
drill for, win, take, excavate, own or remove the minerals described
therein, the particulars of which are set forth in Schedule "AA" and
Schedule "A" Part II, after completion of the Asset Closing;
(ak) "NAD Miscellaneous Interests" means all of NAD's entire right, title,
estate and interest in and to all property, assets and rights
pertaining to the NAD Claims to which NAD is entitled, including but
not in limitation of the generality of the foregoing, the said
interest of the NAD in:
(i) all contracts, agreements, documents, books and records all
geotechnical data and all seismic, geological, geophysical,
drilling, assaying, metallurgical testing, studies, mapping,
production and engineering information; and all other reports or
studies relating to the NAD Properties;
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(ii) all subsisting rights to enter upon, use and occupy the surface
of any of the Claim Locations;
(iii) any other right, estate or interest in or any asset which
relates to but has not comprised part of the NAD Claims; and
(iv) all licenses, permits, easements, rights of way, certificates and
other approvals obtained by NAD, either before or after the date
of this Agreement, that are necessary for the exploration and
development of the NAD Properties or for the purpose of placing
the NAD Properties into production or continuing production
therefrom;
(al) "NAD Properties" means collectively the exploration properties in
Argentina listed, described or referred to in Schedule "AA" and
Schedule "A" Part II, after completion of the Asset Closing, hereto
annexed, including without limitation, NAD Claims, mining leases,
mining rights and surface rights held by or in trust for NAD (whether
such rights are vested in NAD or only represent a right to acquire a
vested interest therein) in lands used or intended to be used for
mining purposes, including the right to acquire any such interest
pursuant to option agreements, together with all other property
interests in such properties, and all buildings, fixtures and
improvements and other assets located on such properties; provided
that such properties may be subject to Permitted Encumbrances and the
rights of third parties pursuant to contracts footnoted in said
Schedule "AA" and Schedule "A" Part II, after completion of the Asset
Closing;
(am) "NAD Shares" means common shares issued and outstanding in the capital
of NAD;
(an) "Net Smelter Returns or NSR" has the definition outlined in Schedule
"D" hereto attached;
(ao) "Operating Agreement" means the form of exploration and operating
agreement attached hereto as Schedule "C";
(ap) "Permitted Encumbrances" means:
(i) easements, rights of way, servitudes or other similar rights in
land including, without limiting the generality of the foregoing,
rights of way and servitudes for railways, sewers, drains, gas
and oil pipelines, gas and water mains, electric light, power,
telephone, telegraph or cable television conduits, poles, wires
and cables;
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(ii) the right reserved to or vested in any government or other public
authority by the terms of any or by any statutory provision, to
terminate, revoke or forfeit any of the Claims, NAD Claims or
MASA Claims, or to require annual or other periodic payments as a
condition of the continuance thereof;
(iii) rights reserved to or vested in any governmental, statutory or
public authority to control or regulate any of the Assets, NAD
Assets or MASA Assets in any manner, and all applicable laws,
rules and orders of any governmental authority;
(iv) the reservations, limitations, provisos and conditions in any
original grants from the government of any of the Claims, NAD
Claims or MASA Claims, or interests therein and statutory
exceptions to title;
(v) the terms and conditions of the Claims, NAD Claims and MASA
Claims;
(vi) rights reserved to or vested in provincial or governmental,
statutory or public authority to levy taxes on minerals or the
income therefrom, or to limit, control or regulate any of the
Assets, NAD Assets or MASA Assets in any manner, and all
applicable laws, rules and orders of any governmental authority;
and
(vii) all royalty burdens (including lessor's royalties) liens,
adverse claims and encumbrances listed on Schedule "A" for
Properties, Schedule "AA" for NAD Properties, and Schedule "AAA"
for MASA Properties.
(viii) in certain instances there may be interior claims inside the
Properties, MASA Properties or NAD Properties that are unknown to
Degerstrom, NAD or MASA due to discrepancies and delays at the
Argentinean departments governing the registration of claims;
thus, in some instances, boundaries of the Properties, MASA
Properties and NAD Properties may change as the result of claims
filed by a third party that supersede Degerstrom's, NAD's or
MASA's filings.
(aq) "Place of Closing" means the offices of Ogilvie and Company located at
Suite 1600, 407 - 2nd Street S.W., Calgary, Alberta, T2P 2Y3;
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(ar) "Properties" means collectively the exploration properties in
Argentina listed, described or referred to in Schedule "A" hereto
annexed, including without limitation, the Claims, mining leases,
mining rights and surface rights held by or in trust for Degerstrom
(whether such rights are vested in Degerstrom or only represent a
right to acquire a vested interest therein) in lands used or intended
to be used for mining purposes, including the right to acquire any
such interest pursuant to option agreements, together with all other
property interests in such properties, and all buildings, fixtures and
improvements and other assets located on such properties; provided
that such properties may be subject to Permitted Encumbrances and the
rights of third parties pursuant to contracts footnoted in said
Schedule "A";
(as) "Purchase Price" shall have the meaning attributed to it in Article 3;
(at) "Regulatory Approvals" means the approvals for the transactions
contemplated herein, required from all regulatory bodies including any
stock exchange, the United States Securities and Exchange Commission
or any state or provincial authority have jurisdiction over securities
matters generally;
(au) "Royalty" shall have the meaning attributed to it in Article 4.
(av) "Underlying Royalties" means any royalties on the Properties, NAD
Properties, MASA Properties or Future Properties that are part of the
lease, purchase, or option of said property from the owner or any
royalties that may be imposed by provincial governments;
(aw) "Vargas" means Jorge Vargas, an individual residing in the City of
Mendoza, in the Republic of Argentina;
(ax) "Vargas Option" means the sole, exclusive, irrevocable and
transferable option to purchase one (1) MASA Share, as a price of
$100.00 (US), granted by Vargas to MASA in accordance with clause 2.04
of this Agreement;
(ay) "Vendors" means collectively Degerstrom, Gavin, Vargas and Elizalde:
1.02 Appended hereto are the following Schedules:
Schedule "A" - Description of Properties
Schedule "AA" - Description of NAD Properties
Schedule "AAA" - Description of MASA Properties
Schedule "B" - Conveyance Agreement
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Schedule "C" - Operating Agreement
Schedule "D" - Definition of Net Smelter Returns
Schedule "E" - Adjustment Procedure
Schedule "F" - Description of Bonus
Schedule "G" - Articles of Incorporation for NAD
Schedule "H" - Articles of Incorporation for MASA
Schedule "I" - Vargas Option Agreement
Schedule "J" - Elizalde Option Agreement
Schedule "K" - Cost and Expenses After Effective Date
Schedule "L" - Repayment Schedule
Schedule "M" - Costs and Expenses Before Effective Date
1.03 Wherever any provision of any Schedule to this Agreement conflicts with any
provision in the body of this Agreement, the provisions of the body of this
Agreement shall prevail. References herein to a Schedule shall mean a reference
to the applicable Schedule to this Agreement. References in any Schedule to the
"Agreement" shall mean a reference to this Agreement. References in any Schedule
to another Schedule shall mean a reference to a Schedule to this Agreement.
1.04 References herein to a clause shall mean a reference to a clause within the
body of this Agreement.
1.05 The headings of Articles, clauses and subclauses herein and in the
Schedules are inserted for convenience of reference only and shall not affect or
be considered to affect the construction of the provisions hereof.
1.06 In this Agreement, words importing persons include corporations and vice
versa, words importing the masculine gender include the feminine and neuter
genders and vice versa, and words importing the singular include the plural and
vice versa.
1.07 All amounts of money which are referred to in this Agreement are expressed
in lawful money of the United States unless otherwise specified.
1.08 Words and phrases used herein and defined in the Republic of Argentina
Mining Code, as amended, shall have the same meaning herein unless the context
otherwise requires.
ARTICLE 2.
SALE
2.01 Degerstrom agrees to sell and convey that portion of Assets set forth in
Schedule "A" Part I to MASA, and MASA agrees to purchase and receive that
portion of the Assets so described from Degerstrom, all in accordance with and
subject to the terms and conditions set forth in the Agreement and Degerstrom
agrees to sell or convey that portion of the Assets set
<PAGE>
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forth in Schedule "A" Part II to NAD, and NAD agrees to purchase and receive
that portion of the Assets so described from Degerstrom, all in accordance with
and subject to the terms and conditions set forth in the Agreement.
2.02 Degerstrom agrees to sell and convey the MASA Shares it holds and Minera
agrees to purchase and receive the MASA Shares held by Degerstrom, all in
accordance with and subject to the terms and conditions set forth in the
Agreement.
2.03 Gavin agrees to sell and convey the MASA Shares it holds and Minera agrees
to purchase and receive the MASA Shares held by Gavin, all in accordance with
and subject to the terms and conditions set forth in the Agreement.
2.04 Vargas hereby grants an option to Minera to purchase the one MASA Share
which he holds, all in accordance with and subject to the terms and conditions
set forth in the option agreement appended hereto as Schedule "I".
2.05 Degerstrom agrees to sell and convey the NAD Shares it holds to Minera, and
Minera agrees to purchase and receive the NAD Shares held by Degerstrom, all in
accordance with and subject to the terms and conditions set forth in the
Agreement.
2.06 Vargas agrees to sell and convey the NAD Shares it each holds to Minera and
Minera agrees to purchase and receive the NAD Shares from Vargas, all in
accordance with and subject to the terms and conditions set forth in the
Agreement.
2.07 Elizalde hereby agrees to grant an option to Minera to purchase the one NAD
Share which he holds, all in accordance with and subject to the terms and
conditions set forth in the Option Agreement appended hereto as Schedule "J".
2.08 From time to time after the Closing Date, Degerstrom shall execute and
deliver or cause to be executed and delivered to MASA and NAD, as the case may
be, such instruments of sale, transfer, conveyance, assignment and delivery,
consents, assurances, powers of attorney and other instruments as may be
reasonably requested by counsel for MASA and NAD, in addition to those the
delivery of which are required at the Asset Closing, in order to vest in MASA
and NAD, as the case may be, all right, title and interest of Degerstrom in and
to the Assets, in order to carry out the purpose and intent of this Agreement,
at no cost to Degerstrom.
2.09 From time to time after the Closing Date, the Vendors shall execute and
deliver or cause to be executed and delivered to Minera, such instruments of
sale, transfer, conveyance, assignment and delivery, consents, assurances,
powers of attorney and other instruments as may be reasonably requested by
counsel for Minera, in addition to those the delivery of which are required at
the Closing, in order to vest in Minera, all right, title and interest of the
Vendors in and to the MASA Shares, NAD Shares in order to carry out the purpose
and intent of this Agreement, at no cost to the Vendors.
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2.10 The Asset Closing shall take place immediately prior to the Closing at the
Place of Closing on the Closing Date or at such other place or at such other
time as the Vendors, Minera, NAD and MASA may agree.
ARTICLE 3.
PURCHASE PRICE
3.01 The purchase price to be paid by MASA for the Assets transferred to it from
Degerstrom is the Royalty.
3.02 The purchase price to be paid by NAD for the Assets transferred to it from
Degerstrom is the Royalty.
3.03 The purchase price to be paid by Minera to Degerstrom for the NAD Shares
and MASA Shares held by Degerstrom shall be the sum of the following:
(a) the Minera Shares payable on the Closing Date to Degerstrom;
(b) the Bonus;
(c) the Royalty; and
(d) the aggregate amount of costs and expenses incurred by Degerstrom on
behalf of Minera from the Effective Date until the Closing Date.
(These costs and expenses include operating costs, capital costs,
overhead, and all costs associated with the incorporation and the
administration and operation of Minera, paid by Degerstrom after the
Effective Date. These costs and expenses are set forth in Schedule "K"
will be reimbursed to Degerstrom after Closing pending an audit by an
independent accounting firm to confirm or adjust amounts listed in
Schedule "K". Reimbursement as defined in Schedule "L" hereto
attached.
3.04 Degerstrom acknowledges and agrees that:
(a) the Minera Shares are issued pursuant to exemptions contained in the
Securities Act (Alberta) and pursuant to an exemption from the
registration requirements of the United States Securities Act of 1933;
(b) the issuance of the Minera Shares are subject to the policies, rules
and by-laws of any regulatory body and the Minera Shares may be
subject to escrow provisions imposed by any regulatory body.
Degerstrom agrees to be bound by and comply with all of the policies,
rules and by-laws of any regulatory body in regard to the Minera
Shares, and to comply with
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all laws and securities regulations in respect of the trading of the
Minera Shares; and
(c) no portion of the Minera Shares held by Degerstrom or shares received
by Degerstrom pursuant to an Amalgamation shall be traded, as that
term is defined in the Securities Act (Alberta), for a period of 1.5
years without the prior written approval of Minera, such consent not
to be unreasonably withheld.
3.05 Minera shall cause to be delivered to Degerstrom a certificate or
certificates representing all the Minera Shares and will cause the Minera Shares
to be duly recorded on the books of Minera in the name of Degerstrom. All such
share certificates shall be fully transferable on the books of Minera and
endorsed in blank for transfer in a manner satisfactory to counsel for
Degerstrom. The delivery of such Minera Shares shall be against receipt of the
Minera Shares and NAD Shares from Degerstrom.
3.06 The purchase price to be paid by Minera to Gavin for the MASA Shares held
by Gavin shall be $400.00 (U.S.), payable by Minera to Gavin on the Closing
Date.
3.07 The purchase price to be paid by Minera to Vargas for the Vargas Option
shall be $1.00 payable by Minera to Vargas on the Closing Date.
3.08 The purchase price to be paid by Minera to Vargas for the NAD Shares held
by Vargas shall be $200.00 (U.S.) payable by Minera to Vargas on the Closing
Date.
3.09 The purchase price to be paid by Minera to Elizalde for the Elizalde Option
shall be $1.00 payable by Minera to Elizalde on the Closing Date.
ARTICLE 4.
NET SMELTER RETURN ROYALTY
4.01 Subject to Section 4.03 Degerstrom will levy and collect a Royalty equal to
a percentage determined in Section 4.02 of the Net Smelter Return earned on all
of the Properties, MASA Properties, NAD Properties and any Future Properties
acquired by Minera, MASA, NAD or their affiliates, as the case may be, located
in the Republic of Argentina. The Net Smelter Return will be calculated as set
forth in Schedule "D".
4.02 The Properties, MASA Properties, NAD Properties or Future Properties, are
subject to a Royalty equal to the difference between 3% and the Underlying
Royalty subject to a maximum Royalty of 2% and a minimum Royalty of 0% payable
to Degerstrom:
4.03 In the event Degerstrom allocates and levies a Royalty on the NSR earned on
any of the Properties, MASA Properties, NAD Properties or the Future Properties,
MASA, Minera,
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NAD or their affiliates, as the case may be, each shall at any time have the
option, upon giving notice to Degerstrom, to buy back up to one-half of the
Royalty on the NSR payable to Degerstrom on the property owned by it upon the
payment of $1,500,000 (U.S. Funds) for every 1% of the Royalty on the NSR
purchased. The notice shall be in writing and contain the details as to the
percentage of the Royalty to be purchased and the consideration to be paid. Each
of MASA, Minera, NAD or their affiliates, as the case may be, shall then have
the right for a period of twenty (20) days after receipt of the notice by
Degerstrom to purchase the Royalty and to provide the consideration to
Degerstrom. The option to purchase the Royalty payable on the NSR may be
exercised in whole or in part at any time by each of MASA, Minera, NAD or their
affiliates, as the case may be, until such time as the full amount of the
Royalty has been purchased pursuant to the conditions stated above.
ARTICLE 5.
TRANSFER OF ASSETS
5.01 The Properties shall be in the possession and remain at the risk of
Degerstrom until the Asset Closing. At such time and upon payment by MASA of the
purchase price to Degerstrom, title to that portion of the Assets set forth in
Schedule "A" Part I will pass to MASA. Thereafter, that portion of the Assets
set forth in Schedule "A" Part I shall be at the risk of MASA. At such time and
upon payment by NAD of the purchase price to Degerstrom, title to that portion
of the Assets set forth in Schedule "A" Part II will pass to NAD. Thereafter,
that portion of the Assets set forth in Schedule "A" Part II shall be at the
risk of NAD.
ARTICLE 6.
ADJUSTMENTS
6.01 General
All benefits, income and expenses, and all other obligations of every
kind and nature whatsoever accruing, payable or paid or received or receivable,
in respect to the Assets, and all benefits, income, expenses and all obligations
of every kind and nature whatsoever accruing payable or paid and received or
receivable in respect to all general exploration costs associated with the
Assets and, costs of exploration projects in Argentina that did not become part
of the Assets, including but not limited to maintenance, exploration,
development, overhead and operating costs shall be apportioned between
Degerstrom and MASA with respect to that portion of the Assets set forth in
Schedule "A" Part I and Degerstrom and NAD with respect to that portion of the
Assets set forth in Schedule "A" Part II as of the Effective Date on the
following basis:
(a) Degerstrom shall be responsible for costs and expenses, including
operating costs and capital costs, paid prior to the Effective Date;
and MASA shall be responsible for costs and expenses, including
exploration and development costs, operating costs, capital costs,
maintenance and overhead, with respect to that portion of the
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Assets set forth in Schedule "A" Part I, all general exploration costs
associated with that portion of the Assets set forth in Schedule "A"
Part I and costs of exploration projects that did not become part of
that portion of the Assets set forth in Schedule "A" Part I and all
costs associated with the incorporation and administration and
operation of MASA that are paid by Degerstrom after the Effective
Date;
(b) Degerstrom shall be responsible for costs and expenses, including
operating costs and capital costs, maintenance and overhead, with
respect to that portion of the Assets set forth in Schedule "A" Part
II and all general exploration costs associated with that portion of
the Assets set forth in Schedule "A" Part II and costs of exploration
projects that did not become part of that portion of the Assets set
forth in Schedule "A" Part II paid prior to the Effective Date and NAD
shall be responsible for costs and expenses, including exploration and
development that portion of costs, operating costs, capital costs,
maintenance and overhead, with respect to that portion of the Assets
set forth in Schedule "A" Part II and all general exploration and
exploration projects that did not become part of that portion of the
Assets set forth in Schedule "A" Part II and all costs associated with
the administration and operation of NAD, paid by Degerstrom after the
Effective Date;
(c) Rental and all similar payments made by Degerstrom to preserve that
portion of the Claims relating to the Assets set forth in Schedule "A"
Part I, if any, shall be paid by MASA from the Effective Date as set
forth in Schedule "E" section 5;
(d) Rental and all similar payments made by Degerstrom to preserve that
portion of the Claims relating to the Assets set forth in Schedule "A"
Part II, if any, shall be paid by NAD from the Effective Date as set
forth in Schedule "E" section 5;
(e) From the Effective Date to the Closing Date, Degerstrom has been
paying MASA's costs and expenses as identified in section 6.01(a) and
6.01(c) above and NAD's cost and expenses as identified in Section
6.01 (b) and 6.01 (d) above, which costs and expenses will be
reimbursed to Degerstrom based on the following:
(i) Costs and expenses attached hereto as Schedule "K" will be
audited by an independent accounting firm prior to reimbursement
to Degerstrom in accordance with the General Accepted Accounting
Principals (GAAP) of Canada; and,
(ii) Degerstrom will be reimbursed its audited costs and expenses as
set forth in Schedule "L" attached hereto.
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6.02 Adjustment Procedure
All benefits and obligations as set forth in clause 6.01 hereof shall
be subject to adjustment in accordance with the procedure as identified in
Schedule "E" hereof.
ARTICLE 7.
APPOINTMENT OF OPERATOR
7.01 Following the Closing Date, Degerstrom will become the operator of all
exploration projects on the Properties, the MASA Properties, NAD Properties and
Future Properties. The relationship of the parties will be governed in
accordance with the terms of the Operating Agreement attached hereto as Schedule
"C".
ARTICLE 8.
RIGHT OF FIRST REFUSAL
8.01 In the event MASA, Minera, or NAD elects to develop a Property, MASA
Property, NAD Property, or Future Property, as the case may be, and contract out
development and production, MASA, Minera, or NAD, as the case may be, shall give
notice thereof to Degerstrom. The notice shall contain the terms and conditions
of the proposed arrangement including the consideration to be received and if
applicable the name of the third-party to whom MASA, Minera or NAD are
contracting with. Degerstrom shall have the right for a period of thirty (30)
days after the receipt of the notice from MASA, Minera or NAD (in this article
called the "Notice Period") to elect in writing to meet the contract bid by a
third-party. If Degerstrom declines or fails to elect within the Notice Period,
to meet the contract bid MASA, Minera or NAD, as the case may be, shall be free
for a period of sixty (60) days next following the expiry of the Notice Period
to enter into a contract with the third-party on the terms and conditions and to
the third party, if applicable, stipulated in its offer but not after the said
sixty (60) day period nor otherwise than as so stipulated without again
complying with the provisions of this article.
ARTICLE 9.
INTERIM OPERATIONS
9.01 Degerstrom agrees to inform MASA, Minera and NAD of all proposed material
operations with respect to the Assets to take place between the execution of
this Agreement and the Closing Date. Between the date of execution of this
Agreement and the Closing Date, no contractual commitment shall be entered into
and no variation of existing commitments or transactions in respect of the
Assets shall be made or entered into by Degerstrom, without notification to
MASA, Minera and NAD.
9.02 Subject to Clause 9.01, until the Closing Date, to the extent that the
nature of Degerstrom's interests permit, and subject to all agreements
applicable to the Assets, Degerstrom shall use all reasonable efforts which
would normally be expected of Degerstrom in accordance
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with industry standards to cause the Properties to be maintained in a proper and
prudent manner in accordance with generally accepted mining industry practices,
and shall cause all covenants and conditions concerning the mining lands and all
other agreements relating to the Properties to be performed and complied with.
MASA, Minera or NAD shall reimburse Degerstrom for all costs and expenses
relating to the Properties incurred after the Effective Date to the Asset
Closing pursuant to the procedure set forth in Schedule "E" hereof.
9.03 Notwithstanding the foregoing, Degerstrom shall not, from the date hereof
and without the prior written consent of MASA, Minera or NAD, which consent
shall not be unreasonably withheld or delayed, surrender or abandon any of the
Properties or permit any of the Claims comprising the Properties to expire.
However, certain Properties may be abandoned or surrendered or Claims comprising
the Properties may be allowed to expire if they are deemed not worthy of
retention through the normal course of geologic investigation by Degerstrom
without written consent of MASA, NAD and Minera. Degerstrom covenants and agrees
to apply for the continuation of any Claim comprising the Properties which will
expire on or prior to the Closing Date, subject to the following.
9.04 Degerstrom, Gavin and Vargas, with respect to MASA, and Degerstrom, Vargas
and Elizalde, with respect to NAD, shall cause the Business of NAD and the
Business of MASA to be carried on in the ordinary course between the date of
execution and delivery of this Agreement and the Closing Date, and each
undertakes to notify Minera of any event or occurrence during such period which
might reasonably be considered to have a materially adverse effect on the
Business of the NAD or the Business of MASA, as the case may be.
9.05 Unless otherwise approved by Minera in writing, which approval may not be
unreasonably withheld, Degerstrom, Gavin and Vargas, with respect to MASA, and
Degerstrom, Vargas and Elizalde, with respect to NAD, covenant with Minera that
during the period from the date hereof until the earlier of the Closing Date or
termination of this Agreement, Degerstrom, Gavin and Vargas, with respect to
MASA, and Degerstrom, Vargas and Elizalde, with respect to NAD, shall not permit
NAD or MASA to:
(a) sell, transfer or dispose of or create any mortgage, pledge, waiver or
other encumbrance or a security interest on or in respect of the whole
or any part of the NAD Assets or MASA Assets, however certain MASA
Properties or NAD Properties may be abandoned or surrendered or MASA
Claims comprising the MASA Properties or the NAD Claims comprising the
NAD Properties may be allowed to expire if they are deemed not worthy
of retention through the normal course of geologic investigation by
Degerstrom without written consent of Minera;
(b) enter into any transaction not in the ordinary course of business;
(c) borrow money or incur any indebtedness for money borrowed;
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(d) make loans, advances or other payments, excluding routine advances to
employees of NAD or MASA for expenses incurred in the ordinary course
and such amounts as contemplated in this Agreement;
(e) make any capital expenditures;
(f) issue, sell or agree to issue or sell any shares, rights, options,
warrants or other securities;
(g) purchase, cancel, retire, redeem or otherwise acquire any of NAD or
MASA's outstanding shares, rights, options, warrants or other
securities other than as contemplated herein;
(h) change, amend or modify the charter documents or by-laws of NAD or
MASA;
(i) enter into or amend any contract or otherwise agree to any changes in
any contract to which NAD or MASA is a party;
(j) except for the specific purposes of complying with the terms hereof,
hold any meetings of the board of directors or shareholders of NAD or
MASA without prior notice and subsequent delivery of minutes thereof
to Minera; or
(k) declare, set aside, make or pay any dividend or other distribution of
any kind in respect of any securities issued by NAD or MASA.
9.06 Degerstrom shall continue to remain liable for, and agrees to indemnify and
save MASA harmless from and against, any costs, expenses or claims made in
respect of that portion of the Assets set forth in Schedule "A" Part I and
Degerstrom's interests in all agreements regarding that portion of the Assets
set forth in Schedule "A" Part I that are assigned to MASA arising any time
prior to the Effective Date, excepting, in each case, any liability, loss, cost,
claim or damage to the extent the same are reimbursed by insurance or caused by
the negligence of MASA. MASA agrees to assume liability for and indemnify and
save Degerstrom harmless from and against, any costs, expenses or other claims
made in respect of that portion of the Assets set forth in Schedule "A" Part I
that are assigned to MASA attributable to any time after the Effective Date,
excepting, in each case, any liability, loss, cost, claim or damage to the
extent that the same are reimbursed by insurance or caused by the negligence of
Degerstrom.
9.07 Degerstrom shall continue to remain liable for and agrees to indemnify and
save NAD harmless from and against, any cost, expense or claim made in respect
of that portion of the Assets set forth in Schedule "A" Part II and Degerstrom's
interests in all agreements regarding that portion of the Assets set forth in
Schedule "A" Part II that are assigned to NAD arising any time prior to the
Effective Date, excepting, in each case, any liability, loss, cost, claim or
damage to the extent the same are reimbursed by insurance or caused by the
negligence of NAD. NAD agrees to assume liability for and indemnify and save
Degerstrom harmless from
<PAGE>
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and against, any costs, expense or other claim made in respect of that portion
of the Assets set forth in Schedule "A" Part II that are assigned to NAD
attributable to any time after the Effective Date, excepting, in each case, any
liability, loss, cost, claim or damage to the extent that the same are
reimbursed by insurance or caused by the negligence of Degerstrom.
9.08 The indemnities contained in clause 9.06 shall survive the Asset Closing
until July 1, 1996, and shall be deemed to apply to all assignments, transfers,
conveyances, novations and other documents conveying that portion of the Assets
set forth in Schedule "A" Part I to MASA. Each party shall have full right of
substitution and subrogation in and to all covenants and warranties by others
heretofore given or made in respect of that portion of the Assets set forth in
Schedule "A" Part I or any part thereof to the extent permitted at law.
9.09 The indemnities contained in clause 9.07 shall survive the Asset Closing
until July 1, 1996, and shall be deemed to apply to all assignments, transfers,
conveyances, novations and other documents conveying that portion of the Assets
set forth in Schedule "A" Part II to NAD. Each party shall have full right of
substitution and subrogation in and to all covenants and warranties by others
heretofore given or made in respect of that portion of the Assets set forth in
Schedule "A" Part II, or any part thereof to the extent permitted at law.
9.10 The Vendors covenant and agree with Minera, each on their own behalf, and
Minera hereby covenants and agrees with the Vendors (the party or parties so
covenanting and agreeing to indemnify another party or parties hereinafter in
this Section referred to as the "Indemnifying Party" and the party or parties so
to be indemnified being hereinafter called the "Indemnified Party") to indemnify
and save harmless the Indemnified Party, effective as and from the Closing, from
and against any claims, demands, actions, causes of action, damages, loss,
costs, liability or expense (hereinafter in this Section called "Claims") which
may be made or brought against the Indemnified Party or which it may suffer or
incur as a result of, in respect of, or arising out of any nonfulfillment of any
covenant or agreement on the part of the Indemnifying Party under this Agreement
or any incorrectness in or breach of any representation or warranty of the
Indemnifying Party contained herein or in any certificate or other document
furnished by the Indemnifying Party pursuant hereto.
ARTICLE 10.
TECHNICAL, OPERATING AND FINANCIAL INFORMATION
10.01 Degerstrom shall, subject to any and all contractual restrictions on it,
make available to MASA, NAD and Minera and their authorized representatives for
inspection at a location in the City of Mendoza, Argentina any and all records
pertaining to operating revenues and expenses, all geo-technical data relating
to the Assets, NAD Assets and MASA Assets as are in the possession of Degerstrom
or to which Degerstrom is entitled and provide, if requested by MASA, NAD and
Minera, copies of same at MASA, NAD or Minera's expense.
<PAGE>
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10.02 Degerstrom shall, subject to any and all contractual restrictions on it,
make available to MASA, NAD and Minera and their authorized representatives for
inspection at a location in the City of Mendoza, Argentina any and all of its
books, accounts, records and other financial, operating, marketing and other
data and records relating to the Assets, NAD Assets and MASA Assets as MASA, NAD
and Minera reasonably requires in connection herewith.
10.03 Degerstrom shall upon Asset Closing deliver to MASA and NAD, in organized
form, original copies of such documents and information as contemplated in this
Article 10, at MASA and NAD's expense.
ARTICLE 11.
CONVEYANCES AND ELECTIONS
11.01 At the Asset Closing, Degerstrom shall prepare, execute and deliver (or
cause to be executed and delivered) to MASA and NAD, or solicitors of MASA and
NAD, all such deeds, bills of sale, assignments, transfers, conveyances,
novations, notices, discharges of security and other documents and assurances as
may be reasonably necessary to convey that portion of the Properties to MASA and
NAD, as the case may be, at no cost to Degerstrom. Degerstrom shall also deliver
all files, records, reports, data and other information relating to the
Miscellaneous Interests. Any such closing documents and assurances shall be in
such form and shall be of such content as are reasonably required by MASA and
NAD. Degerstrom shall cooperate with MASA and NAD to secure execution of such
deeds, documents and assurances by the parties thereto other than Degerstrom,
MASA and NAD. All such deeds, documents and assurances executed and delivered
pursuant to this Agreement are subordinate to the provisions of this Agreement
and the provisions of this Agreement shall govern and prevail in the event of
any conflict between the provisions of this Agreement and any such document or
assurance. There shall be no merger of any covenant, representation or warranty
herein contained in any such deeds, documents and assurances notwithstanding any
rule of law, equity or statute to the contrary.
11.02 At the Asset Closing, Degerstrom shall deliver, or cause to be delivered,
such transfers and assignments as MASA and NAD reasonably deems necessary to
convey legal title to that portion of the Properties being transferred to each
of MASA and NAD, as the case may be, and such other assignments, conveyances,
novations, notices and other documents as may reasonably be required by MASA and
NAD, at their respective expense.
11.03 Prior to and following the Asset Closing, Degerstrom shall use all
reasonable efforts to obtain and deliver to MASA and NAD all necessary consents,
permissions and approvals by shareholders, co-owners, third parties and
governmental and regulatory authorities necessary and applicable in connection
with the transaction herein provided for, at their respective expense.
<PAGE>
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ARTICLE 12.
DEGERSTROM'S REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO ASSETS
12.01 To induce MASA and NAD to enter into this Agreement and complete the
transactions contemplated herein, with respect to the transfer of the Assets,
Degerstrom hereby represents and warrants to and in favour of MASA and NAD now
as provided in this Article 12, which representations and warranties shall also
have been and will be true and correct as at the Effective Date, the date hereof
and the Closing Date;
12.02 Degerstrom is and at the Closing Date shall continue to be a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Washington;
12.03 Degerstrom is the beneficial, equitable and registered owner of the Assets
and has the ability to convey and transfer an interest in that portion of the
Assets set forth in Schedule "A" Part I to MASA and that portion of the Assets
set forth in Schedule "A" Part II to NAD;
12.04 Degerstrom has the corporate power to own the Assets and carry on business
with respect to the Assets;
12.05 Degerstrom has all requisite corporate power and authority to enter into
this Agreement and to perform each of Degerstrom's obligations under this
Agreement;
12.06 All necessary corporate action has been taken by Degerstrom to authorize
the execution and delivery by Degerstrom of this Agreement and all other
agreements and instruments contemplated by this Agreement;
12.07 The execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder and the consummation of
transactions contemplated herein will not violate nor be in conflict with any
provision of any material agreement or instrument to which Degerstrom is a party
or is bound, or any judgment, decree, order, statute, rule or regulation
applicable to Degerstrom or of the articles of incorporation or by-laws of
Degerstrom;
12.08 Except as specifically set forth in this Agreement, no person, firm or
corporation has any right, under preferential rights of purchase clauses or
otherwise which has not been waived prior to the Asset Closing, to acquire any
interest in the Assets;
12.09 This Agreement has been duly executed and delivered by Degerstrom and all
documents required hereunder to be executed and delivered by Degerstrom shall
have been duly executed and delivered, and this Agreement does and such
documents will, constitute legal, valid and binding obligations of Degerstrom
enforceable in accordance with their respective terms;
<PAGE>
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12.10 Degerstrom has not received notice of default under any agreement
affecting the Assets;
12.11 Degerstrom has not incurred any obligation or liability contingent or
otherwise, for brokers' or finders' fees in respect of this transaction for
which MASA or NAD shall have any obligation or liability, except as disclosed;
12.12 In respect of the Properties:
(a) all Claims comprising part of the Properties are in all respects valid
and subsisting;
(b) applications have been filed for certain Claims comprising part of the
Properties.
(c) all requirements and procedures to maintain the validity of each of
the Claims comprising part of the Properties have in all respects been
properly and timely observed and followed, and all conditions and
obligations necessary to keep them in full force and effect have in
all respects been fully satisfied and performed;
(d) Degerstrom has not received any notice of default or delinquency under
any of the Claims comprising part of the Properties which has not been
cured or which is outstanding and uncured as of the date hereof;
(e) Degerstrom has complied in all respects with all conditions required
of it necessary to keep the Claims comprising part of the Properties
in full force and effect;
(f) all rentals, production royalties, advance royalties and other
payments due under the Claims comprising part of the Properties have
in all respects been properly paid to the persons entitled to receive
such payment;
(g) all of the Properties have been operated and maintained in conformance
with all applicable laws, rules, regulations and orders of all
governmental authorities having jurisdiction and are in all respects
subject to no penalties on account of past operation and maintenance;
(h) none of the Properties or the occupancy or operation of any of such
Properties, is in violation of any foreign or municipal building or
zoning law, ordinance, code or regulation applicable to such
Properties or their owner;
(i) no notice from any governmental body or other authority has been
served upon Degerstrom or, to the best of Degerstrom's knowledge, upon
any other person or upon any real property used in the operations of
the Properties, claiming any violation of any such building or zoning
law, ordinance, code or regulation or
<PAGE>
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requiring or calling attention to the need for any work, repairs,
construction, alterations or installation on or in connection with
said Properties; and,
(j) no condemnation or eminent domain proceedings have been initiated
which relate to any of the Properties and no such proceedings are
threatened or have been filed by any government authority have
jurisdiction with respect thereto; and,
12.13 To the best of Degerstrom's knowledge, information and belief, there is no
circumstance, matter or thing which reasonably could be expected to lead
Degerstrom to believe that Degerstrom does not have good and marketable title to
its interests in the Assets as set out in Schedule "A" or a valid option to earn
interest in the Properties as set out in Schedule "A", and Degerstrom has done
no act or thing and is not aware of any act or thing having been done whereby
any of its interests in and to the Assets may be cancelled, nor has it
encumbered or alienated the Assets or any interest therein, and the Assets are
as of the Effective Date, and will be at the Closing Date, free and clear of all
liens, encumbrances, adverse claims, demands and royalties created by, through
or under it other than existing security for which registrable discharges and a
release will be provided at Closing and the Permitted Encumbrances and except as
set forth in Clause 4.01;
12.14 Subject to the rents, covenants, conditions and stipulations in the Claims
and any option agreements pertaining to the Assets and on the lessee's or
holder's part thereunder to be paid, performed and observed, MASA and NAD may
(upon the Asset Closing) enter into and upon, hold and enjoy the Assets for the
residue of their respective terms, and all renewals or extensions thereof for
MASA and NAD's own use and benefit without any lawful interruption of or by
Degerstrom or any other person whomsoever claiming or to claim by, through or
under Degerstrom and Degerstrom binds itself to warrant and defend all and
singular the Assets against all persons whosoever claiming or to claim the same
or any part hereof or any interest therein by, through or under Degerstrom;
12.15 There are no outstanding authorizations for expenditure pursuant to which
expenditures will or may be made in respect of the Assets, nor are there any
other financial commitments which are outstanding or due or which hereafter may
become due in respect of Assets or operations in respect thereof, excepting
authorizations for expenditure or commitments in respect of the Assets of which
Degerstrom has provided written notice to MASA and NAD, as the case may be,
prior to the date hereof;
12.16 Degerstrom is not a party to any action, suit or other legal,
administrative or arbitration proceeding or government investigation, actual or
threatened, which might reasonably be expected to result in a material
impairment or loss of Degerstrom's interest in the Assets or any part thereof,
and there is no particular circumstance, matter or thing known to Degerstrom
which could reasonably be anticipated to give rise to any such action, suit or
other legal, administrative or arbitration proceeding or government
investigation;
<PAGE>
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12.17 To the best of Degerstrom's knowledge, the Properties are in compliance,
and as of the closing will be in compliance, in all material respects with all
applicable laws, regulations, orders, judgments and decrees, including without
limitation, all applicable government and other environmental legislation or
regulations, and are in material compliance with and have obtained all necessary
environmental orders, permits, certificates, approvals, directions,
instructions, consents and other requirements applicable to the Properties by or
from any governmental authority. None of the Properties are subject to any
enforcement proceedings under any governmental law, regulation or ordinance.
12.18 To the best of Degerstrom's knowledge, the Properties have been operated
in substantial compliance with applicable environmental, health or safety laws,
regulations, orders, or approvals in all material respects. All material
environmental contaminants used on or in connection with the Properties have
been used, stored, treated, shipped and disposed of, in substantial compliance
with applicable environmental, health or safety laws, regulations, orders, or
approvals in all material respects. To the best of Degerstrom's knowledge, no
hazardous or toxic materials, substances, pollutants, contaminants or wastes
have been released in connection with the Properties into the environment in
breach of laws or regulations, nor has any relevant person deposited,
discharged, placed or disposed of any such contaminants in breach of laws or
regulations. To the best of Degerstrom's knowledge, each relevant person has
maintained all environmental and operating documents and records substantially
in the manner and for the time periods required by applicable governmental laws,
regulations or orders.
12.19 No statement, representation or warranty of Degerstrom under this
Agreement, and none of the written data and documentation, including accounting
statements and records, furnished or caused to be furnished by Degerstrom to
MASA and NAD, contains or will contain any untrue statement of a material fact.
12.20 None of the documents which have been supplied to MASA and NAD by or on
behalf of Degerstrom in connection with the transactions contemplated hereunder,
contains any untrue statement of a material fact (as defined in the Securities
Act (Alberta)) or omits any statement of a material fact necessary in order to
make the statements contained therein not misleading; provided, however, that
ore reserve calculations, projections and forecasts in relation to future events
concerning the Assets and the Properties, although based on reasonable
assumptions, are subject to different interpretations and actual results may
vary from such calculations, projections and forecasts. There is no fact known
to Degerstrom which materially and adversely affects, or which may materially
and adversely affect, the business, prospects or financial condition of the
Assets and the Properties that has not been disclosed to MASA and NAD.
<PAGE>
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ARTICLE 13.
MASA'S REPRESENTATIONS AND WARRANTIES
13.01 To induce Degerstrom to enter into this Agreement and complete the
transactions contemplated herein, MASA hereby represents and warrants to and in
favour to Degerstrom now as provided in this Article 13 which representations
and warranties shall also have been true and will be true and correct as at the
date hereof and as of the Closing Date.
13.02 MASA is and at the Closing Date shall continue to be a corporation duly
incorporated under its jurisdiction of incorporation, validly existing, and is
in good standing under the laws of Argentina and qualified under the mining laws
of the Republic of Argentina.
13.03 MASA has all requisite power and authority to enter into this Agreement
and to purchase and pay for that portion of the Assets set forth in Schedule "A"
Part I on the terms described herein and to perform the other obligations of
MASA under this Agreement.
13.04 All necessary corporate action will have been taken by MASA at the Closing
Date to authorize the execution and delivery by MASA of this Agreement and all
other agreements and instruments contemplated by this Agreement.
13.05 The execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder and the consummation of the
transactions contemplated herein will not violate, nor be in conflict with, any
provision of any material agreement or instrument to which MASA is a party or is
bound, or any judgment, decree, order, statute, rule or regulation applicable to
MASA or the constating documents or by-laws of MASA.
13.06 This Agreement has been duly executed and delivered by MASA and all
documents required hereunder to be executed and delivered by MASA shall have
been duly executed and delivered and this Agreement does, and such documents
will, constitute legal, valid and binding obligations of MASA enforceable in
accordance with their respective terms.
13.07 MASA has not incurred any liability, contingent or otherwise, for brokers'
or finders' fees in respect of this transaction for which Degerstrom shall have
any obligation or liability.
ARTICLE 14.
NAD'S REPRESENTATIONS AND WARRANTIES
14.01 To induce Degerstrom to enter into this Agreement and complete the
transactions contemplated herein, NAD hereby represents and warrants to and in
favour to Degerstrom now as provided in this Article 14 which representations
and warranties shall also have been true and will be true and correct as at the
date hereof and as of the Closing Date.
<PAGE>
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14.02 NAD is and at the Closing Date shall continue to be a corporation duly
incorporated under its jurisdiction of incorporation, validly existing, and is
in good standing under the laws of Argentina and qualified under the mining laws
of the Republic of Argentina.
14.03 NAD has all requisite power and authority to enter into this Agreement and
to purchase and pay for that portion of the Assets set forth in Schedule "A"
Part II on the terms described herein and to perform the other obligations of
NAD under this Agreement.
14.04 All necessary corporate action will have been taken by NAD at the Closing
Date to authorize the execution and delivery by NAD of this Agreement and all
other agreements and instruments contemplated by this Agreement.
14.05 The execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder and the consummation of the
transactions contemplated herein will not violate, nor be in conflict with, any
provision of any material agreement or instrument to which NAD is a party or is
bound, or any judgment, decree, order, statute, rule or regulation applicable to
NAD or the constating documents or by-laws of NAD.
14.06 This Agreement has been duly executed and delivered by NAD and all
documents required hereunder to be executed and delivered by NAD shall have been
duly executed and delivered and this Agreement does, and such documents will,
constitute legal, valid and binding obligations of NAD enforceable in accordance
with their respective terms.
14.07 NAD has not incurred any liability, contingent or otherwise, for brokers'
or finders' fees in respect of this transaction for which Degerstrom shall have
any obligation or liability.
ARTICLE 15.
DEGERSTROM, VARGAS, AND ELIZALDE'S REPRESENTATIONS
AND WARRANTIES
15.01 To induce Minera to enter into this Agreement and complete the
transactions contemplated herein, Degerstrom, Vargas and Elizalde, each on their
own behalf hereby represent and warrant to and in favor of Minera now as
provided in Article 15, which representations and warranties will be true and
correct as of the date hereof and as of the Closing Date.
15.02 The NAD Shares are free of all mortgages, charges, liens and other
encumbrances and no other person, firm or corporation has any agreement, option
or right capable of becoming an agreement for the purchase from Degerstrom,
Vargas and Elizalde of any of the NAD Shares except as provided herein, and
Degerstrom, Vargas and Elizalde are entitled to sell the NAD Shares as provided
in this Agreement.
<PAGE>
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15.03 Degerstrom has all requisite corporate power and authority to enter into
this Agreement and to perform each of Degerstrom's obligations under this
Agreement.
15.04 All necessary corporate action has been taken by Degerstrom to authorize
the execution and delivery by Degerstrom of this Agreement and all other
agreements and instruments contemplated by this Agreement;
15.05 The execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder and the consummation of
transactions contemplated herein will not violate nor be in conflict with any
provision of any material agreement or instrument to which Degerstrom, Vargas or
Elizalde is a party or is bound, or any judgment, decree, order, statute, rule
or regulation applicable to Degerstrom, Vargas and Elizalde or of the articles
of incorporation or by-laws of Degerstrom;
15.06 This Agreement has been duly executed and delivered by Degerstrom, Vargas
and Elizalde and all documents required hereunder to be executed and delivered
by Degerstrom, Vargas and Elizalde shall have been duly executed and delivered,
and this Agreement does and such documents will, constitute legal, valid and
binding obligations of Degerstrom, Vargas and Elizalde enforceable in accordance
with their respective terms;
15.07 NAD has not received notice of default under any agreement affecting the
NAD Assets;
15.08 Degerstrom, Vargas and Elizalde have not incurred any obligation or
liability contingent or otherwise, for brokers' or finders' fees in respect of
this transaction for which Minera shall have any obligation or liability except
as disclosed;
15.09 In respect of the NAD Properties:
(a) all NAD Claims comprising part of the NAD Properties are in all
respects valid and subsisting;
(b) applications have been filed for certain NAD Claims comprising part of
the NAD Properties.
(c) all requirements and procedures to maintain the validity of each of
the NAD Claims comprising part of the NAD Properties have in all
respects been properly and timely observed and followed, and all
conditions and obligations necessary to keep them in full force and
effect have in all respects been fully satisfied and performed;
(d) NAD has not received any notice of default or delinquency under any of
the NAD Claims comprising part of the NAD Properties which has not
been cured or which is outstanding and uncured as of the date hereof;
<PAGE>
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(e) NAD has complied in all respects with all conditions required of it
necessary to keep the NAD Claims comprising part of the NAD Properties
in full force and effect;
(f) all rentals, production royalties, advance royalties and other
payments due under the NAD Claims comprising part of the NAD
Properties have in all respects been properly paid to the persons
entitled to receive such payment;
(g) all of the NAD Properties have been operated and maintained in
conformance with all applicable laws, rules, regulations and orders of
all governmental authorities having jurisdiction and are in all
respects subject to no penalties on account of past operation and
maintenance;
(h) none of the NAD Properties or the occupancy or operation of any of
such NAD Properties, is in violation of any foreign or municipal
building or zoning law, ordinance, code or regulation applicable to
such NAD Properties or their owner;
(i) no notice from any governmental body or other authority has been
served upon NAD or, to the best of Degerstrom, Vargas and Elizalde's
knowledge, upon any other person or upon any real property used in the
operations of the NAD Properties, claiming any violation of any such
building or zoning law, ordinance, code or regulation or requiring or
calling attention to the need for any work, repairs, construction,
alterations or installation on or in connection with said NAD
Properties; and,
(j) no condemnation or eminent domain proceedings have been initiated
which relate to any of the NAD Properties and no such proceedings are
threatened or have been filed by any government authority have
jurisdiction with respect thereto;
15.10 (a) NAD has been duly organized and is validly existing under the laws of
the Republic of Argentina. The authorized capital of NAD is as
follows:
12 common shares (par value)
(b) The issued capital of NAD is 12 common shares, all of which are issued
as fully paid and non-assessable which are registered as follows:
9 common shares (par value) - Degerstrom 2 common shares (par value) -
Vargas 1 common share (par value) - Elizalde
(c) There are not any outstanding subscriptions, options, rights, warrants
or other agreements or commitments obligating NAD to sell or issue any
additional shares of any class or any securities convertible into any
shares of any class.
<PAGE>
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(d) Particulars of the charter documents and amendments thereto of NAD are
described in Schedule "G" hereto. NAD has not authorized delivery or
delivered to the appropriate government agency in the Republic of
Argentina any application for amendment to the constating documents of
NAD.
(e) NAD has no subsidiary companies and owns no shares or securities of
any other entity.
(f) The Business of NAD has been carried on in the ordinary course since
June 15, 1994.
(g) NAD has the corporate power to own its property, which include the NAD
Assets and to carry on the Business presently carried on by it.
(h) NAD is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the Business conducted by it or
the property owned or leased by it makes such qualification necessary.
(i) No payments have been made or authorized since incorporation by NAD to
its officers, directors, or shareholders.
15.11 To Degerstrom, Vargas and Elizalde's best information and belief, after
due inquiry:
(a) NAD has no outstanding contracts except as are disclosed in Schedule
"AA" hereto, and except as otherwise set out herein or in other
Schedules hereto; and
(b) NAD is in good standing under all contracts to which it is a party and
is entitled to all benefits thereunder.
15.12 NAD is not a party to any agreement of guarantee, indemnification or
assumption of the obligations of a third party, or other like commitment,
including endorsements or other contingent liabilities.
15.13 NAD has paid all taxes exigible from it or for the collection of which it
is responsible under the laws of the Republic of Argentina.
15.14 To the best of Degerstrom, Vargas and Elizalde's knowledge, information
and belief, there is no circumstance, matter or thing which reasonably could be
expected to lead any of them to believe that NAD does not have good and
marketable title to its interests in the NAD Assets or a valid option to earn
interest in the NAD Properties, and NAD has done no act or thing and is not
aware of any act or thing having been done whereby any of NAD's interests in and
to the NAD Assets may be cancelled, nor has NAD encumbered or alienated the NAD
Assets or any interest therein, and the NAD Assets are now and will be at the
Closing Date, free
<PAGE>
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and clear of all liens, encumbrances, adverse claims, demands and royalties
created by, through or under NAD other than existing security for which
registrable discharges and a release will be provided at Closing and the
Permitted Encumbrances and except as set forth in Clauses 4.01;
15.15 There are no outstanding authorizations for expenditure pursuant to which
expenditures will or may be made in respect of the NAD Assets, nor are there any
other financial commitments which are outstanding or due or which hereafter may
become due in respect of NAD Assets or operations in respect thereof, excepting
authorizations for expenditure or commitments in respect of the NAD Assets of
which Degerstrom, Vargas and Elizalde have provided written notice to Minera
prior to the date hereof;
15.16 NAD is not a party to any action, suit or other legal, administrative or
arbitration proceeding or government investigation, actual or threatened, which
might reasonably be expected to result in a material impairment or loss of NAD's
interest in the NAD Assets or any part thereof, and there is no particular
circumstance, matter or thing known to Degerstrom, Vargas and Elizalde which
could reasonably be anticipated to give rise to any such action, suit or other
legal, administrative or arbitration proceeding or government investigation;
15.17 To the best of Degerstrom, Vargas and Elizalde's knowledge, the NAD
Properties are in compliance, and as of the closing will be in compliance, in
all material respects with all applicable laws, regulations, orders, judgments
and decrees, including without limitation, all applicable government and other
environmental legislation or regulations, and are in material compliance with
and have obtained all necessary environmental orders, permits, certificates,
approvals, directions, instructions, consents and other requirements applicable
to the NAD Properties by or from any governmental authority. None of the NAD
Properties are subject to any enforcement proceedings under any governmental
law, regulation or ordinance.
15.18 To the best of Degerstrom, Vargas and Elizalde's knowledge, the NAD
Properties have been operated in substantial compliance with applicable
environmental, health or safety laws, regulations, orders, or approvals in all
material respects. All material environmental contaminants used on or in
connection with the NAD Properties have been used, stored, treated, shipped and
disposed of, in substantial compliance with applicable environmental, health or
safety laws, regulations, orders, or approvals in all material respects. To the
best of Degerstrom, Vargas and Elizalde's knowledge, no hazardous or toxic
materials, substances, pollutants, contaminants or wastes have been released in
connection with the NAD Properties into the environment in breach of laws or
regulations, nor has any relevant person deposited, discharged, placed or
disposed of any such contaminants in breach of laws or regulations. To the best
of Degerstrom, Vargas and Elizalde's knowledge, each relevant person has
maintained all environmental and operating documents and records substantially
in the manner and for the time periods required by applicable governmental laws,
regulations or orders.
15.19 No statement, representation and warranty of Degerstrom, Vargas or
Elizalde and none of the documents which have been supplied to Minera by or on
behalf of Degerstrom, Vargas or Elizalde in connection with the transactions
contemplated hereunder, contains any
<PAGE>
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untrue statement of a material fact (as defined in the Securities Act (Alberta))
or omits any statement of a material fact necessary in order to make the
statements contained therein not misleading; provided, however, that ore reserve
calculations, projections and forecasts in relation to future events concerning
the NAD Assets and the NAD Properties, although based on reasonable assumptions,
are subject to different interpretations and actual results may vary from such
calculations, projections and forecasts. There is no fact known to Degerstrom,
Vargas or Elizalde which materially and adversely affects, or which may
materially and adversely affect, the business, prospects or financial condition
of the NAD Assets and the NAD Properties that have not been disclosed to Minera.
ARTICLE 16.
DEGERSTROM, GAVIN AND VARGAS' REPRESENTATIONS
AND WARRANTIES
16.01 To induce Minera to enter into this Agreement and complete the
transactions contemplated herein, Degerstrom, Gavin and Vargas, each on their
own behalf hereby represent and warrant to and in favor of Minera now as
provided in Article 16, which representations and warranties will be true and
correct as at the date hereof and as of the Closing Date.
16.02 The MASA Shares are free of all mortgages, charges, liens and other
encumbrances, and no other person, firm or corporation has any agreement, option
or right capable of becoming an agreement for the purchase from Degerstrom,
Gavin and Vargas of any of the MASA Shares except as provided herein, and
Degerstrom, Gavin and Vargas are entitled to sell the MASA Shares as provided in
this Agreement.
16.03 Degerstrom has all requisite corporate power and authority to enter into
this Agreement and to perform each of Degerstrom's obligations under this
Agreement.
16.04 All necessary corporate action has been taken by Degerstrom to authorize
the execution and delivery by Degerstrom of this Agreement and all other
agreements and instruments contemplated by this Agreement;
16.05 The execution and delivery of this Agreement and each and every agreement
or document to be executed and delivered hereunder and the consummation of
transactions contemplated herein will not violate nor be in conflict with any
provision of any material agreement or instrument to which Degerstrom, Gavin or
Vargas are a party or is bound, or any judgment, decree, order, statute, rule or
regulation applicable to Degerstrom, Gavin and Vargas or of the articles of
incorporation or by-laws of Degerstrom;
16.06 This Agreement has been duly executed and delivered by Degerstrom, Gavin
and Vargas and all documents required hereunder to be executed and delivered by
Degerstrom, Gavin and Vargas shall have been duly executed and delivered, and
this Agreement does and
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such documents will, constitute legal, valid and binding obligations of
Degerstrom, Gavin and Vargas enforceable in accordance with their respective
terms;
16.07 MASA has not received notice of default under any agreement affecting the
MASA Assets;
16.08 Degerstrom, Gavin and Vargas have not incurred any obligation or liability
contingent or otherwise, for brokers' or finders' fees in respect of this
transaction for which Minera shall have any obligation or liability except as
disclosed;
16.09 In respect of the MASA Properties:
(a) all MASA Claims comprising part of the MASA Properties are in all
respects valid and subsisting;
(b) applications have been filed for certain MASA Claims comprising part
of the MASA Properties.
(c) all requirements and procedures to maintain the validity of each of
the MASA Claims comprising part of the MASA Properties have in all
respects been properly and timely observed and followed, and all
conditions and obligations necessary to keep them in full force and
effect have in all respects been fully satisfied and performed;
(d) MASA has not received any notice of default or delinquency under any
of the MASA Claims comprising part of the MASA Properties which has
not been cured or which is outstanding and uncured as of the date
hereof;
(e) MASA has complied in all respects with all conditions required of it
necessary to keep the MASA Claims comprising part of the MASA
Properties in full force and effect;
(f) all rentals, production royalties, advance royalties and other
payments due under the MASA Claims comprising part of the MASA
Properties have in all respects been properly paid to the persons
entitled to receive such payment;
(g) all of the MASA Properties have been operated and maintained in
conformance with all applicable laws, rules, regulations and orders of
all governmental authorities having jurisdiction and are in all
respects subject to no penalties on account of past operation and
maintenance;
(h) none of the MASA Properties or the occupancy or operation of any of
such MASA Properties, is in violation of any foreign or municipal
building or zoning
<PAGE>
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law, ordinance, code or regulation applicable to such MASA Properties
or their owner;
(i) no notice from any governmental body or other authority has been
served upon MASA or, to the best of Degerstrom, Gavin and Vargas's
knowledge, upon any other person or upon any real property used in the
operations of the MASA Properties, claiming any violation of any such
building or zoning law, ordinance, code or regulation or requiring or
calling attention to the need for any work, repairs, construction,
alterations or installation on or in connection with said MASA
Properties; and,
(j) no condemnation or eminent domain proceedings have been initiated
which relate to any of the MASA Properties and no such proceedings are
threatened or have been filed by any government authority have
jurisdiction with respect thereto;
16.10 (a) MASA has been duly organized and is validly existing under the laws
of the Republic of Argentina. The authorized capital of MASA is as
follows:
20 common shares (par value)
(b) The issued capital of MASA is 20 common shares, all of which are
issued as fully paid and non-assessable which are registered as
follows:
15 common shares (par value) - Degerstrom
4 common shares (par value) - Gavin
1 common share (par value) - Vargas
(c) There are not any outstanding subscriptions, options, rights, warrants
or other agreements or commitments obligating MASA to sell or issue
any additional shares of any class or any securities convertible into
any shares of any class.
(d) Particulars of the charter documents and amendments thereto, of MASA
are described in Schedule "H" hereto. MASA has not authorized delivery
or delivered to the appropriate government agency in the Republic of
Argentina any application for amendment to the constating documents of
MASA.
(e) MASA has no subsidiary companies and owns no shares or securities of
any other entity.
(f) The Business of MASA has been carried on in the ordinary course since
September 13, 1994.
(g) MASA has the corporate power to own its property, which include the
MASA Assets and to carry on the Business presently carried on by it.
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(h) MASA is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the Business conducted by it or
the property owned or leased by it makes such qualification necessary.
(i) No payments have been made or authorized since incorporation by MASA
to its officers, directors, or shareholders.
16.11 To Degerstrom, Gavin and Vargas' best information and belief, after due
inquiry:
(a) MASA has no outstanding contracts except as are disclosed in Schedule
"AAA" hereto, and except as otherwise set out herein or in other
Schedules hereto; and,
(b) MASA is in good standing under all contracts to which it is a party
and is entitled to all benefits thereunder.
16.12 MASA is not a party to any agreement of guarantee, indemnification or
assumption of the obligations of a third party, or other like commitment,
including endorsements or other contingent liabilities.
16.13 MASA has paid all taxes exigible from it or for the collection of which it
is responsible under the laws of the Republic of Argentina.
16.14 To the best of Degerstrom, Gavin and Vargas' knowledge, information and
belief, there is no circumstance, matter or thing which reasonably could be
expected to lead any of them to believe that MASA does not have good and
marketable title to its interests in the MASA Assets or a valid option to earn
interest in the MASA Properties and MASA has done no act or thing and is not
aware of any act or thing having been done whereby any of MASA's interests in
and to the MASA Assets may be cancelled nor has MASA encumbered or alienated the
MASA Assets or any interest therein, and the MASA Assets are now and will be at
the Closing Date free and clear of all liens, encumbrances, adverse claims,
demands and royalties created by, through or under MASA other than existing
security for which registrable discharges and a release will be provided at
Closing and the Permitted Encumbrances and except as set forth in Clauses 4.01;
16.15 There are no outstanding authorizations for expenditure pursuant to which
expenditures will or may be made in respect of the MASA Assets, nor are there
any other financial commitments which are outstanding or due or which hereafter
may become due in respect of MASA Assets or operations in respect thereof,
excepting authorizations for expenditure or commitments in respect of the MASA
Assets of which Degerstrom, Gavin and Vargas have provided written notice to
Minera prior to the date hereof;
16.16 MASA is not a party to any action, suit or other legal, administrative or
arbitration proceeding or government investigation, actual or threatened, which
might reasonably be expected to result in a material impairment or loss of
MASA's interest in the MASA Assets
<PAGE>
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or any part thereof, and there is no particular circumstance, matter or thing
known to Degerstrom, Gavin and Vargas which could reasonably be anticipated to
give rise to any such action, suit or other legal, administrative or arbitration
proceeding or government investigation;
16.17 To the best of Degerstrom, Gavin and Vargas' knowledge, the MASA
Properties are in compliance, and as of the closing will be in compliance, in
all material respects with all applicable laws, regulations, orders, judgments
and decrees, including without limitation, all applicable government and other
environmental legislation or regulations, and are in material compliance with
and have obtained all necessary environmental orders, permits, certificates,
approvals, directions, instructions, consents and other requirements applicable
to the MASA Properties by or from any governmental authority. None of the MASA
Properties are subject to any enforcement proceedings under any governmental
law, regulation or ordinance.
16.18 To the best of Degerstrom, Gavin and Vargas' knowledge, the MASA
Properties have been operated in substantial compliance with applicable
environmental, health or safety laws, regulations, orders, or approvals in all
material respects. All material environmental contaminants used on or in
connection with the MASA Properties have been used, stored, treated, shipped and
disposed of, in substantial compliance with applicable environmental, health or
safety laws, regulations, orders, or approvals in all material respects. To the
best of Degerstrom, Gavin and Vargas' knowledge, no hazardous or toxic
materials, substances, pollutants, contaminants or wastes have been released in
connection with the MASA Properties into the environment in breach of laws or
regulations, nor has any relevant person deposited, discharged, placed or
disposed of any such contaminants in breach of laws or regulations. To the best
of Degerstrom, Gavin and Vargas' knowledge, each relevant person has maintained
all environmental and operating documents and records substantially in the
manner and for the time periods required by applicable governmental laws,
regulations or orders.
16.19 No statement, representation and warranty of Degerstrom, Gavin or Vargas
and none of the documents which have been supplied to Minera by or on behalf of
Degerstrom, Gavin or Vargas in connection with the transactions contemplated
hereunder, contains any untrue statement of a material fact (as defined in the
Securities Act (Alberta)) or omits any statement of a material fact necessary in
order to make the statements contained therein not misleading; provided,
however, that ore reserve calculations, projections and forecasts in relation to
future events concerning the MASA Assets and the MASA Properties, although based
on reasonable assumptions, are subject to different interpretations and actual
results may vary from such calculations, projections and forecasts. There is no
fact known to Degerstrom, Gavin or Vargas which materially and adversely
affects, or which may materially and adversely affect, the business, prospects
or financial condition of the MASA Assets and the MASA Properties that have not
been disclosed to Minera.
<PAGE>
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ARTICLE 17.
MINERA'S REPRESENTATIONS
AND WARRANTIES
17.01 To induce the Vendors to enter into this Agreement and complete the
transactions contemplated herein, Minera hereby represents and warrants to and
in favour of the Vendors now as provided in Article 17 which representations and
warranties shall also have been true and will be true and correct as at the date
hereof and the Closing Date as the case may be.
17.02 It has been duly incorporated and validly exist as a corporation in good
standing under the laws of its jurisdiction of incorporation.
17.03 It has duly obtained all corporate authorizations for the execution of
this Agreement and for the performance of this Agreement by it, and the
consummation of the transaction herein contemplated by it will not conflict with
or result in any breach of any covenants or agreements contained in, or
constitute a default under, or result in the creation of any encumbrance under
the provisions of the Articles or the constating documents of it or any
shareholders' or directors' resolution, indenture, agreement or other instrument
whatsoever to which it is a party or by which it is bound.
17.04 The Minera Shares, as defined hereafter, to be issued to Degerstrom
pursuant to this Agreement shall be duly issued as fully paid and
non-assessable.
ARTICLE 18.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
18.01 Notwithstanding anything to the contrary herein expressed or implied, it
is expressly agreed and understood that the covenants, representations and
warranties set forth in Article 12 are true on the date hereof, at the Effective
Date, and at the Closing Date, and notwithstanding the Asset Closing or
deliveries of covenants, representations and warranties in any other agreements
at the Asset Closing, or prior or subsequent thereto, or investigations by the
parties hereto or their counsel, the covenants, representations and warranties
along with all rights of action in connection therewith, set forth in Article
12, shall survive the Asset Closing for the benefit of the parties hereto for a
period of one (1) year from the Closing Date and shall be deemed to apply to all
assignments, conveyances, transfers and documents conveying any of the Assets
from Degerstrom to MASA and NAD.
18.02 Notwithstanding anything to the contrary herein expressed or implied, it
is expressly agreed and understood that the covenants, representations and
warranties set forth in Articles 13 and 14 are true on the date hereof, and the
Closing Date, and notwithstanding the Asset Closing, or deliveries of covenants,
representations and warranties in any other agreements at the Asset Closing, or
prior or subsequent thereto, or investigations by the parties hereto or their
counsel, the covenants, representations and warranties along with all rights of
action in
<PAGE>
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connection therewith, set forth in Articles 13 and 14, shall survive the Asset
Closing for the benefit of the parties hereto for a period of one (1) year from
the Closing Date and shall be deemed to apply to all assignments, conveyances,
transfers and documents conveying any of the Assets from Degerstrom to MASA and
NAD.
18.03 Notwithstanding anything to the contrary herein expressed or implied, it
is expressly agreed and understood that the covenants, representations and
warranties set forth in Articles 15, 16 and 17 are true on the date hereof, and
the Closing Date, and notwithstanding the Closing, or deliveries of covenants,
representations and warranties in any other agreements at the Closing, or prior
or subsequent thereto, or investigations by the parties hereto or their counsel,
the covenants, representations and warranties along with all rights of action in
connection therewith, set forth in Articles 15, 16 and 17, shall survive the
Closing for the benefit of the parties hereto for a period of one (1) year from
the Closing Date and shall be deemed to apply to the transfer of the NAD Shares
from Degerstrom and Vargas and the granting of the NAD option by Elizalde to
Minera and the transfer of the MASA Shares from Degerstrom and Gavin and the
granting of the MASA Option by Vargas to Minera.
ARTICLE 19.
DEGERSTROM'S CLOSING CONDITIONS
19.01 The obligation of Degerstrom to complete the sale of that portion of the
Assets set forth in Schedule "A" Part I to MASA and the sale of that portion of
the Assets set forth in Schedule "A" Part II to NAD pursuant to this Agreement
is subject to the satisfaction, at or prior to the Closing Date, of the
following conditions precedent:
(a) all representations and warranties of MASA contained in this Agreement
shall be true and have been complied with in all material respects at
and as of the date hereof and the Closing Date, MASA shall have
tendered to Degerstrom a certificate from a senior officer of MASA to
such effect and MASA shall have performed and satisfied all covenants
required by this Agreement to be performed and satisfied by MASA at or
prior to the Closing Date, or will be caused to occur after the
Closing Date;
(b) all representations and warranties of NAD contained in this Agreement
shall be true and have been complied with in all material respects at
and as of the date hereof and the Closing Date, NAD shall have
tendered to Degerstrom a certificate from a senior officer of NAD to
such effect and NAD shall have performed and satisfied all covenants
required by this Agreement to be performed and satisfied by NAD at or
prior to the Closing Date, or will be caused to occur after the
Closing Date;
(c) MASA shall have tendered to Degerstrom the purchase price payable at
the Closing Date;
<PAGE>
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(d) NAD shall have tendered to Degerstrom the purchase price payable at
the Closing Date;
(e) at the Closing Date, no action or proceeding shall have been
instituted or threatened by any one before any court or governmental
agency to obtain damages in respect of this Agreement and no
litigation or proceeding shall be pending or threatened to restrain,
set aside or invalidate the transactions contemplated by this
Agreement; and
(f) the concurrent execution and delivery of the Operating Agreement.
19.02 The forgoing conditions contained in clauses 19.01 shall be for the
benefit of Degerstrom and may, without prejudice to any rights of Degerstrom
hereunder, be waived by Degerstrom in writing, in whole or in part, at any time.
In case any of the said conditions shall not be complied with through no act,
default or omission of Degerstrom or waived by Degerstrom, at or before the
Closing Date, Degerstrom may rescind and terminate this Agreement by written
notice to MASA or NAD, as the case may be.
ARTICLE 20.
DEGERSTROM, VARGAS AND ELIZALDE'S CLOSING CONDITIONS
20.01 The obligation of Degerstrom, Vargas and Elizalde to complete the sale of
the NAD Shares to Minera pursuant to this Agreement is subject to the
satisfaction at or prior to the Closing Date of the following conditions
precedent:
(a) all representations and warranties of Minera contained in this
Agreement shall be true and have been complied with in all material
respects at and as of the date hereof and the Closing Date, Minera
each shall have tendered to Degerstrom, Vargas and Elizalde a
certificate from a senior officer of Minera, respectively, to such
effect, and Minera shall have performed and satisfied all covenants
required by this Agreement to be performed and satisfied by Minera at
or prior to the Closing Date, or will be caused to occur after the
Closing Date;
(b) Minera shall have tendered to Degerstrom, Vargas and Elizalde that
portion of the purchase price payable at the Closing Date;
(c) at the Closing Date, no action or proceeding shall have been
instituted or threatened by any one before any court or governmental
agency to obtain damages in respect of this Agreement and no
litigation or proceeding shall be pending or threatened to restrain,
set aside or invalidate the transactions contemplated by this
Agreement; and,
(d) the concurrent execution and delivery of the Operating Agreement.
<PAGE>
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20.02 The forgoing conditions contained in clauses 20.01 shall be for the
benefit of Degerstrom, Vargas and Elizalde and may, without prejudice to any
rights of Degerstrom, Vargas and Elizalde hereunder, be waived by Degerstrom,
Vargas or Elizalde in writing, in whole or in part, at any time. In case any of
the said conditions shall not be complied with through no act, default or
omission of Degerstrom, Vargas or Elizalde or waived by Degerstrom, Vargas or
Elizalde at or before the Closing Date, Degerstrom, Vargas or Elizalde may
rescind and terminate this Agreement by written notice to Minera.
ARTICLE 21.
DEGERSTROM, GAVIN AND VARGAS' CLOSING CONDITIONS
21.01 The obligation of Degerstrom, Gavin and Vargas to complete the transfer of
the MASA Shares to Minera pursuant to this Agreement is subject to the
satisfaction at or prior to the Closing Date of the following conditions
precedent:
(a) all representations and warranties of the Minera contained in this
Agreement shall be true and have been complied with in all material
respects at and as of the date hereof and the Closing Date, Minera
shall have tendered to Degerstrom, Gavin and Vargas a certificate from
a senior officer of Minera to such effect, and Minera shall have
performed and satisfied all covenants required by this Agreement to be
performed and satisfied by Minera at or prior to, Closing Date, or
will be caused to occur after the Closing Date;
(b) Minera shall have tendered to Degerstrom, Gavin and Vargas that
portion of the purchase price payable at the Closing Date;
(c) at the Closing Date, no action or proceeding shall have been
instituted or threatened by any one before any court or governmental
agency to obtain damages in respect of this Agreement and no
litigation or proceeding shall be pending or threatened to restrain,
set aside or invalidate the transactions contemplated by this
Agreement; and,
(d) the concurrent execution and delivery of the Operating Agreement.
21.02 The forgoing conditions contained in clauses 21.01 shall be for the
benefit of Degerstrom, Gavin and Vargas and may, without prejudice to any rights
of Degerstrom, Gavin and Vargas hereunder, be waived by Degerstrom, Gavin or
Vargas in writing, in whole or in part, at any time. In case any of the said
conditions shall not be complied with through no act, default or omission of
Degerstrom, Gavin or Vargas or waived by Degerstrom, Gavin or Vargas at or
before the Closing Date, Degerstrom, Gavin or Vargas may rescind and terminate
this Agreement by written notice to Minera.
<PAGE>
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ARTICLE 22.
MASA'S CLOSING CONDITIONS
22.01 The obligation of MASA to complete the purchase of that portion of the
Assets as set forth in Schedule "A" Part I from Degerstrom pursuant to this
Agreement is subject to the satisfaction at or prior to the Closing Date of the
following conditions precedent:
(a) all covenants, representations and warranties of Degerstrom contained
in this Agreement shall be true and have been complied with in all
material respects at and as of the Effective Date, the date hereof and
the Closing Date, Degerstrom shall have tendered to MASA a certificate
of a senior officer of Degerstrom dated as of the Closing Date to such
effect, and Degerstrom shall have performed and satisfied all
covenants required by this Agreement to be performed and satisfied by
Degerstrom at or prior to the Closing Date;
(b) except as shall have been approved in writing by MASA, there shall not
have occurred between the date hereof and the Closing Date any damage
to or alteration in or to that portion of the Assets as set forth in
Schedule "A" Part I (including, without limitation, an amendment to
any agreement or instrument forming a part thereof) which, in MASA's
reasonable opinion, would materially adversely affect the value of the
that the portion of Assets as set forth in Schedule "A" Part I and
Degerstrom shall, on the Closing Date, has delivered to MASA a
certificate of a senior officer of Degerstrom, dated as of the Closing
Date, stating that, except as has been approved in writing by MASA, no
damage or alteration has occurred during such period;
(c) no action or proceeding shall have been instituted or threatened by
any one before any court or governmental agency to obtain damages in
respect of this Agreement or to restrain or prohibit the consummation
of the transactions contemplated herein;
(d) MASA shall have received the approval of its board of directors to the
execution and delivery of this Agreement and to the transactions
contemplated herein;
(e) as at the Closing Date, there shall have been obtained the written
consents and approvals, in form and substance satisfactory MASA,
acting reasonably, of any governmental or regulatory agency or person
whose consent to the transactions, contemplated herein is required;
(f) that portion of the Assets as set forth in Schedule "A" of Part I
shall be free of any and all encumbrances, liens, charges and demands
of whatsoever nature save and except Permitted Encumbrances.
<PAGE>
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(g) MASA shall have received, a favourable report in respect of
Degerstrom's title to and interest in that portion of the Assets as
set forth in Schedule "A" Part I and in respect of matters pertaining
to Degerstrom, which matters, in the sole opinion of MASA's counsel,
acting reasonably, are material to give effect to the transaction
herein contemplated or which affect the value of that portion of the
Assets as set forth in Schedule "A" Part I, or any part or portion
thereof; and,
(h) Degerstrom shall deliver to MASA, or make arrangements satisfactory to
MASA, to deliver in organized form, all records, files and documents
as described in Article 10.
22.02 The foregoing conditions contained in clause 22.01 shall be for the
benefit of MASA and may, without prejudice to any of the rights of MASA
hereunder, be waived by MASA in writing, in whole or in part, at any time,
provided MASA may not waive the existence and operation of any preferential
right to purchase any portion of the Assets as set forth in Schedule "A" Part I.
In case any of the said conditions shall not be complied with through no act,
default or omission of MASA or waived by MASA at or before the Closing Date,
MASA may rescind and terminate this Agreement by written notice to Degerstrom.
ARTICLE 23.
NAD'S CLOSING CONDITIONS
23.01 The obligation of NAD to complete the purchase of that portion of the
Assets as set forth in Schedule "A" Part II from Degerstrom pursuant to this
Agreement is subject to the satisfaction at or prior to the Closing Date of the
following conditions precedent:
(a) all covenants, representations and warranties of Degerstrom contained
in this Agreement shall be true and have been complied with in all
material respects at and as of the Effective Date, the date hereof and
the Closing Date, Degerstrom shall have tendered to NAD a certificate
of a senior officer of Degerstrom dated as of the Closing Date to such
effect, and Degerstrom shall have performed and satisfied all
covenants required by this Agreement to be performed and satisfied by
Degerstrom at or prior to the Closing Date;
(b) except as shall have been approved in writing by NAD, there shall not
have occurred between the date hereof and the Closing Date any damage
to or alteration in or to that portion of the Assets as set forth in
Schedule "A" Part II (including, without limitation, an amendment to
any agreement or instrument forming a part thereof) which, in NAD's
reasonable opinion, would materially adversely affect the value of
that portion of the Assets as set forth in Schedule "A" Part II and
Degerstrom shall, on the Closing Date, has delivered to NAD a
certificate of a senior officer of Degerstrom, dated as of the Closing
Date, stating
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that, except as has been approved in writing by NAD, no damage or
alteration has occurred during such period;
(c) no action or proceeding shall have been instituted or threatened by
any one before any court or governmental agency to obtain damages in
respect of this Agreement or to restrain or prohibit the consummation
of the transactions contemplated herein;
(d) NAD shall have received the approval of its board of directors to the
execution and delivery of this Agreement and to the transactions
contemplated herein;
(e) as at the Closing Date, there shall have been obtained the written
consents and approvals, in form and substance satisfactory NAD, acting
reasonably, of any governmental or regulatory agency or person whose
consent to the transactions, contemplated herein is required;
(f) That portion of the Assets as set forth in Schedule "A" Part II shall
be free of any and all encumbrances, liens, charges and demands of
whatsoever nature save and except Permitted Encumbrances.
(g) NAD shall have received, a favourable report in respect of
Degerstrom's title to and interest in that portion of the Assets as
set forth in Schedule "A" Part II and in respect of matters pertaining
to Degerstrom, which matters, in the sole opinion of NAD's counsel,
acting reasonably, are material to give effect to the transaction
herein contemplated or which affect the value of that portion of the
Assets as set forth in Schedule "A" Part II, or any part or portion
thereof; and,
(h) Degerstrom shall deliver to NAD, or make arrangements satisfactory to
NAD, to deliver in organized form, all records, files and documents as
described in Article 10.
23.02 The foregoing conditions contained in clause 23.01 shall be for the
benefit of NAD and may, without prejudice to any of the rights of NAD hereunder,
be waived by NAD in writing, in whole or in part, at any time, provided NAD may
not waive the existence and operation of any preferential right to purchase any
portion of the Assets as set forth in Schedule "A" Part II. In case any of the
said conditions shall not be complied with through no act, default or omission
of NAD or waived by NAD at or before the Closing Date, NAD may rescind and
terminate this Agreement by written notice to Degerstrom.
<PAGE>
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ARTICLE 24.
MINERA'S CLOSING CONDITIONS
24.01 The obligation of Minera to complete the transfer of the NAD Shares and
MASA Shares from the Vendors pursuant to this Agreement is subject to the
satisfaction at or prior to the Closing Date of the following conditions
precedent:
(a) all covenants, representations and warranties of the Vendors contained
in this Agreement shall be true and have been complied with in all
material respects at and as of the date hereof and the Closing Date
and each of the Vendors shall have tendered to Minera a certificate
(in the case of a corporation a certificate of a senior officer) of
the Vendors dated as of the Closing Date to such effect, and the
Vendors shall have performed and satisfied all covenants required by
this Agreement to be performed and satisfied by the Vendors at or
prior to the Closing Date;
(b) except as shall have been approved in writing by Minera, there shall
not have occurred between the date hereof and the Closing Date any
damage to or alteration in or to the NAD Assets and MASA Assets
(including, without limitation, an amendment to any agreement or
instrument forming a part thereof) which, in Minera's reasonable
opinion, would materially adversely affect the value of the NAD Assets
and MASA Assets and the Vendors shall, on the Closing Date, has
delivered to Minera a certificate of a senior officer of each of the
Vendors, where a corporation, or a certificate from any individuals,
dated as of the Closing Date, stating that, except as has been
approved in writing by Minera, no damage or alteration has occurred
during such period;
(c) no action or proceeding shall have been instituted or threatened by
any one before any court or governmental agency to obtain damages in
respect of this Agreement or to restrain or prohibit the consummation
of the transactions contemplated herein;
(d) Minera shall have received the approval of its board of directors to
the execution and delivery of this Agreement and to the transactions
contemplated herein;
(e) as at the Closing Date, there shall have been obtained the written
consents and approvals, in form and substance satisfactory Minera,
acting reasonably, of any governmental or regulatory agency or person
whose consent to the transactions, contemplated herein is required;
(f) the NAD Assets and MASA Assets shall be free of any and all
encumbrances, liens, charges and demands of whatsoever nature save and
except Permitted Encumbrances;
<PAGE>
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(g) the Asset Closing will have closed;
(h) Minera shall have received, a favourable report in respect of the
NAD's title to and interest in the NAD Assets including that portion
of the Assets transferred from Degerstrom, MASA's title and interest
in the MASA Assets including that portion of the Assets transferred
from Degerstrom and in respect of matters pertaining to the Vendors,
which matters, in the sole opinion of Minera's counsel, acting
reasonably, are material to give effect to the transaction herein
contemplated or which affect the value of the NAD Assets and MASA
Assets, or any part or portion thereof; and,
(i) the concurrent execution and delivery of the Operating Agreement.
24.02 The foregoing conditions contained in clause 24.01 shall be for the
benefit of Minera and may, without prejudice to any of the rights of Minera
hereunder, be waived by Minera in writing, in whole or in part, at any time,
provided Minera may not waive the existence and operation of any preferential
right to purchase any of the NAD Assets and MASA Assets. In case any of the said
conditions shall not be complied with through no act, default or omission of
Minera or waived by Minera at or before the Closing Date, Minera may rescind and
terminate this Agreement by written notice to the Vendors.
ARTICLE 25.
TERMINATION
25.01 In the event that this Agreement is terminated pursuant to any of clauses
19.02, 20.02, 21.02, 22.02, 23.02 or 24.02, each party hereto shall be released
from all obligations hereunder and each party hereto shall take all reasonable
action to return each of the other parties hereto to the position relative to
the Assets and NAD Shares and MASA Shares which such party occupied prior to the
execution hereof, it being understood that the Vendors, MASA, NAD and Minera
will each bear all costs incurred by it prior to such termination.
ARTICLE 26.
POST COMPLETION OBLIGATIONS
26.01 If the purchase and sale contemplated hereby is completed, and if, for any
reason, the parties hereto are unable on or before the Closing Date to cause
MASA or NAD, as the case may be, to become the registered holder of any of the
Assets in the place and stead of Degerstrom, then, until such time as MASA and
NAD, as the case may be, becomes the registered holder of such Assets,
Degerstrom shall:
(a) hold such Assets fully on behalf of MASA and NAD, as the case may be,
as trustee, and receive and hold all proceeds, benefits and advantages
accruing in
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respect of the Assets fully for the benefit, use and ownership of MASA
and NAD, as the case may be, without entitlement at any time to
commingle any of the same with its own or any other assets and keep
same in a separate trust account;
(b) within thirty Business Days of the date of receipt thereof, deliver to
MASA and NAD all revenues, proceeds and other benefits of any nature
received by it in respect of that portion of the Assets to be
transferred to MASA and NAD, as the case may be;
(c) in a timely manner, deliver to MASA and NAD, as the case may be, all
third party notices and communications received by it in respect of
such Assets;
(d) in a timely manner, deliver to third parties all such notices and
communications as MASA and NAD may reasonably request and all such
monies and other items as MASA and NAD may reasonably provide in
respect of such Assets; and
(e) as agent of MASA and NAD, as the case may be, do and perform all such
acts and things and execute and deliver all such agreements, notices
and other documents and instruments as MASA and NAD may reasonably
request in writing for purposes of facilitating the exercise of rights
incidental to the ownership of that portion of the Assets being
transferred to NAD and MASA.
26.02 Nothing contained in clause 26.01 shall be construed as restricting or
limiting in any manner any of the other covenants, warranties, representations
and other obligations of the parties hereto hereunder.
26.03 At the Asset Closing, the Closing and thereafter, as may be necessary or
desirable and without further consideration, the parties hereto shall execute,
acknowledge and deliver such other deeds, documents and assurances and shall
take or refrain from taking such other action as may be necessary to fully
assure the completion of the transactions contemplated herein in accordance with
the provisions of this Agreement and otherwise assure the carrying out of the
intent and purpose of this Agreement.
ARTICLE 27.
ATTORNMENT AND PROPER LAW
27.01 This Agreement shall be exclusively subject to and be interpreted,
construed and enforced in accordance with the laws in effect in the State of
Washington. Each party hereto irrevocably attorns to the exclusive jurisdiction
of the courts of the State of Washington and all courts of appeal therefrom.
<PAGE>
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ARTICLE 28.
COVENANTS OF MINERA
28.01 Minera covenants and agrees with Degerstrom, until the purchase and sale
of the NAD Shares and MASA Shares Degerstrom holds to Minera becomes effective,
and except with the prior written approval of Degerstrom;
(a) not to declare, pay or set aside in respect of its capital any
dividends or other distribution or payment by way of return of
capital, and not to pay any stock dividend or make any
reclassification in respect of its outstanding shares;
(b) not to purchase or otherwise acquire for any consideration any
outstanding shares of its capital stock;
(c) not to alter or amend, in any way, its articles as the same existed at
the date of this Agreement, and to maintain its corporate existence
under the laws of Alberta;
(d) to use its best efforts to obtain all necessary consents, assignments,
waivers or amendments or terminations to any instruments or take such
other measures as may be appropriate to fulfil its obligations under
and to carry out the transactions contemplated by this Agreement; and
(e) not to engage in any business, enterprise or other activity materially
different from that carried on by it at the date of this Agreement or
to enter into any transaction or incur any obligation not in the
ordinary course of business or any transaction with a party or parties
with whom Minera does not deal at arm's length.
ARTICLE 29.
NOTICES
29.01 Any notification, payment, consent or other writing (collectively, a
"Notice") required or permitted to be given by a party hereto to the other shall
be given in writing and addressed:
(a) if to Degerstrom at:
N.A. Degerstrom, Inc.
North 3303 Sullivan Road
Spokane, Washington
99216 U.S.A.
Attention: Allen Ambrose
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(b) if to Gavin at:
Minera Andes S.A.
Calle Moldes 837
5500 Mendoza
Republic of Argentina
Attention: Brian Gavin
(c) if to Vargas at:
Peru, 930 - 2nd Floor
5500 Mendoza
Republic of Argentina
Telephone: 5461 247 846
(d) if to Elizalde at:
Peru, 930 - 2nd Floor
5500 Mendoza
Republic of Argentina
Telephone: 5461 247 846
(e) if to MASA:
Minera Andes S.A.
Calle Moldes 837
5500 Mendoza
Republic of Argentina
Attention: Brian Gavin
(f) if to Minera:
Minera Andes Inc.
North 3303 Sullivan Road
Spokane, Washington
99216 U.S.A.
Attention: Allen Ambrose
<PAGE>
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(g) if to NAD:
Minera Andes S.A.
Calle Moldes 837
5500 Mendoza
Republic of Argentina
Attention: Brian Gavin
Any notice shall be delivered. Any notice delivered as aforesaid shall be deemed
to have been received by the party hereto which it is so delivered at the time
on the date of its being so delivered. Any party may change its address for
notice by giving notice to that effect.
ARTICLE 30.
CONFIDENTIAL
30.01 The parties to this Agreement shall keep confidential all books, records,
files and other information supplied by any party to one of the other parties or
to their employees, agents or representative in connection with this Agreement
or in respect of the activities carried out on the Property, NAD Property or
MASA Property by a party, or related to the sale of minerals, or other products
derived from the Property, NAD Property and MASA Property, including all
analyses, reports, studies or other documents prepared by a party or its
employees, agents or representatives, which contain information from, or
otherwise reflects such books, records, files or other information. The parties
shall not and shall ensure that their employees, agents or representatives do
not disclose, divulge, publish, transcribe, or transfer such information, all or
in part, without the prior written consent of the other parties, which may not
be arbitrarily withheld and which shall not apply to such information or any
part thereof to the extent that:
(a) prior to its receipt by a party such information was already in the
possession of such party or its employees, agents or representatives;
or
(b) in respect of such information required to be publicly disclosed
pursuant to applicable securities or corporate laws.
ARTICLE 31.
MISCELLANEOUS
31.01 This Agreement shall supersede and replace any and all prior agreements
between the parties hereto relating to the sale and purchase of the Assets, NAD
Shares and MASA Shares and may be amended only by written instrument signed by
all parties hereto.
<PAGE>
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31.02 This Agreement (including all Schedules hereto) comprises the entire
agreement between the parties hereto. There is no representation, warranty or
collateral agreement relating to the sale and purchase of the Assets, NAD Shares
and MASA Shares except as expressly set forth herein.
31.03 The Vendors, MASA, NAD and Minera, shall cooperate with each other in
releasing information concerning this Agreement and the transactions
contemplated herein, and shall furnish to and discuss with the other party
drafts of all press and other releases prior to publication. Nothing contained
herein shall prevent any party at any time from furnishing information to any
governmental agency or regulatory authority or to the public if required by
applicable law. Nothing herein contained shall prevent the Vendors from
furnishing information relating to the said transaction nor the identity of
MASA, NAD and Minera in connection with preferential rights of purchase, rights
of first refusal and similar restrictions.
31.04 Time shall, in all respects, be of the essence in this Agreement.
Notwithstanding that time is of the essence, should the parties fix new dates
for the performance of any of their respective obligations hereunder, time shall
again be of the essence of this Agreement.
31.05 This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective successors, receivers, receiver managers,
trustees and permitted assigns.
31.06 Until immediately after the Asset Closing and the Closing, as the case may
be, all documents and information received by MASA, NAD and Minera from the
Vendors, and their respective auditors and solicitors, shall be treated by MASA,
NAD and Minera as confidential information and will not be disclosed to others
by MASA, NAD and Minera except to its solicitors, auditors and bankers, and
except as required by applicable securities legislation.
31.07 No party may assign its rights or obligations under this Agreement without
the prior written consent of all other parties hereto, which consent will not be
unreasonably withheld.
31.08 Should any provision or condition of this Agreement become illegal or not
enforceable, it or they shall be considered separate and severable from the
Agreement and the remaining provisions and conditions of this Agreement shall
remain force and be binding upon the parties hereto as though the provisions or
conditions had never been included.
31.09 This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together shall
constitute one and the same instrument and, notwithstanding their date of
execution, shall be deemed to bear the date as of the date above written.
<PAGE>
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
N.A. DEGERSTROM, INC.
Per: /s/ NEAL A. DEGERSTROM
-----------------------------------
/s/ SUSANA LORENZO /s/ JORGE VARGAS
- ----------------------------------- ---------------------------------------
WITNESS JORGE VARGAS
/s/ SUSANA LORENZO /s/ BRIAN GAVIN
- ----------------------------------- ---------------------------------------
WITNESS BRIAN GAVIN
/s/ SUSANA LORENZO /s/ E.R. MARZARI
- ----------------------------------- ---------------------------------------
WITNESS ENRIQUE RUFINO MARZARI ELIZALDE
<PAGE>
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MINERA ANDES S.A.
Per: /s/ BRIAN GAVIN
-----------------------------------
MINERA ANDES INC.
Per: /s/ ALLEN AMBROSE
-----------------------------------
NAD (S.A.)
Per: /s/ JORGE VARGAS
-----------------------------------
<PAGE>
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SCHEDULE "D" TO ASSET AND SHARE ACQUISITION
AGREEMENT DATED MARCH 8, 1995, AMONG N.A.
DEGERSTROM, INC., BRIAN GAVIN, JORGE VARGAS,
ENRIQUE RUFINO MARZARI ELIZALDE, MINERA
ANDES S.A., MINERA ANDES INC. AND NAD (S.A.)
NET SMELTER RETURN ROYALTY
In this Schedule the terms which are defined in the Asset and Share
Acquisition Agreement referred to above and to which this Schedule "D" is
annexed and comprises an integral part thereof shall have the same meanings.
1. Net Smelter Return Royalty
1.01 If ores are mined from the Properties, NAD Properties, MASA Properties or
Future Properties, the party holding that particular property shall pay to
Degerstrom from the date of commencement of Commercial Production a Royalty as
set forth in Article 4 of the Agreement, as a percentage of the net smelter
returns realized, or deemed to be realized as hereinafter provided, from the
sale or other disposition of ores or concentrates produced from the Properties,
NAD Properties, MASA Properties or Future Properties. For purposes hereof
"Commercial Production" shall be deemed to have been achieved when the
concentrator processing ores from the Properties, NAD Properties, MASA
Properties or Future Properties for other than testing purposes has operated for
a period of thirty (30) consecutive production days at not less than sixty per
cent (60%) of design capacity or, in the event a concentrator is not erected on
the Properties, NAD Properties, MASA Properties or Future Properties, when ores
from the Properties, NAD Properties, MASA Properties or Future Properties have
been produced for a period of thirty (30) consecutive production days at not
less than sixty per cent (60%) of the mining rate specified in the feasibility
study recommending placing the Properties, NAD Properties, MASA Properties or
Future Properties in Commercial Production.
1.02 Net smelter returns shall mean any and all amounts received by each of NAD,
MASA, Minera or any affiliate thereof for product mined from the Properties, NAD
Properties, MASA Properties or Future Properties, as the case may be, deducting
therefrom:
(a) if the product is treated by an arm's length party at a smelter,
refinery or mint, all expenses relating thereto, including all costs
and charges for the treatment, tolling, smelting, refining or minting
of such product and all costs associated therewith such as
transporting, insuring, handling, weighing, sampling and assaying, as
well as all penalties, representation charges, referee's fees and
expenses, import taxes and export taxes, that is to say the net amount
received by each of NAD, MASA, Minera or any affiliate thereof from
the smelter, refinery or mint, as the case may be, less all costs
associated therewith; or,
<PAGE>
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(b) if the product is treated at a smelter, refinery or mint owned,
operated or controlled by each of NAD, MASA, Minera or any affiliate
thereof, all costs, charges and expense relating thereto or associated
therewith, excluding any capital costs incurred in the mining of the
product but including the expenses in above, such charges, costs and
expenses to be equivalent to the prevailing rates charged by similar
smelters, refineries or mints, as the case may be, in arm's length
transactions for the treatment of like quantities and quality of
product, that is to say the net smelter returns realized shall be
deemed to be equal to the fair market value of such ores or
concentrates F.O.B. the minehead or concentrator, as the case may be,
which shall be determined using the prices and terms quoted by
smelters, refineries or mints dealing at arm's length with NAD, MASA,
Minera or any affiliate thereof and making due allowances for the cost
of delivering such ores or concentrates from the minehead or
concentrator, as the case may be, to such melter, refinery or mint.
1.03 If ores or concentrates produced from the Properties, NAD Properties, MASA
Properties or Future Properties are processed in facilities owned by NAD, MASA,
Minera or any affiliate thereof which are also used for processing ores from
other lands, a fair and equitable allocation of the costs of operating,
constructing, renting or obtaining the use of such jointly used facilities shall
be made.
1.04 NAD, MASA, Minera or any affiliate thereof may remove reasonable quantities
of ore (any such bulk sample is not to exceed 10,000 tonnes) from any mineral
deposit on Properties, NAD Properties, MASA Properties or Future Properties for
the purposes of metallurgical testing, and there shall be no royalty payable to
Degerstrom in respect of such bulk sample except to the extent that the revenues
realized therefrom exceed the aggregate of the cost of extracting such bulk
sample and the cost of such metallurgical testing in respect thereof.
1.05 Each of NAD, MASA, Minera or any affiliate thereof shall have the right to
commingle ore mined from any orebody located on the Properties, NAD Properties,
MASA Properties or Future Properties, as the case may be, or concentrates
derived therefrom, with ores or concentrates produced from other lands provided
that NAD, MASA, Minera or any affiliate thereof shall:
(a) adopt and employ reasonable practices and procedures for weighing,
determination of moisture content, sampling and assaying such ores or
concentrates and recording such data; and,
(b) utilize reasonably accurate recovery factors in order to determine the
amount of economically recoverable minerals contained in such ores or
concentrates.
1.06 Each of NAD, MASA, Minera or any affiliate thereof shall keep separate
records consistent with accepted mining practice and relating to its operations
of the mining of ores from
<PAGE>
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the Properties, NAD Properties, MASA Properties or Future Properties, as the
case may be, and, to the extent possible, the processing of such ores through a
mill whether or not such mill is owned by NAD, MASA, Minera or any affiliate
thereof. Upon the prior written request of Degerstrom duly authorized
representatives of Degerstrom may have access to such records for the purpose of
confirming any information contained in any statement delivered to Degerstrom by
NAD, MASA, Minera or any affiliate thereof, provided always that such access
shall not interfere with the affairs or operations of NAD, MASA, Minera or any
affiliate thereof. Degerstrom shall have the right to make copies of or take
extracts from such records for its own use. The figures contained in such
records shall, in the absence of bad faith on the part of each of NAD, MASA,
Minera or any affiliate thereof, be conclusive evidence of the number of tonnes
of ores mined from the Properties, NAD Properties, MASA Properties or Future
Properties and processed as aforesaid.
1.07 Net smelter returns shall be calculated by each of NAD, MASA, Minera or any
affiliate thereof, as the case maybe, at the end of the calendar quarter in
which ores or concentrates mined from the Properties, NAD Properties, MASA
Properties or Future Properties, as the case may be, are sold or otherwise
deemed to be disposed of, and payments of net smelter returns royalty shall be
made quarterly within thirty (30) days after such calendar quarter. Each payment
shall be accompanied by reasonable details concerning the basis on which it was
computed. The amount of any quarterly royalty payment may be estimated; provided
that payment for the final quarter of the calendar year shall be reconciled to
the annual production figures for the mine, and the aggregate royalty payment
for the calendar year shall be subject to adjustment, further payments or
repayments of royalty as the case may be by the party affected. The statement of
net smelter returns royalty for the calendar year shall be audited at the
expense of NAD, MASA, Minera or any affiliate thereof, as the case maybe, within
one hundred and eighty (180) days of the calendar year end by a national firm of
chartered accountants, which may be a firm used otherwise by NAD, MASA, Minera
or any affiliate thereof. Degerstrom shall have ninety (90) days after the
receipt of the audited statement for the calendar year to object thereto and
failing such objection the audited statement shall be final and binding. In the
event any objection so raised by Degerstrom cannot be amicably resolved with
sixty (60) days Degerstrom shall have the right to conduct, at its expense, an
independent audit by another national firm of chartered accountants, and if any
objection remains after such audit has been conducted the matter in dispute
shall be submitted to arbitration as provided in Schedule "E" to the Agreement.
Any payments or repayments of royalty required by any final audit shall be made
immediately by the party affected.
1.08 Any dispute involving accounting matters or calculation of production
royalties shall be finally settled by arbitration. It shall be a condition
precedent to the right of Degerstrom to submit any matter to arbitration
pursuant to the provisions hereof that Degerstrom shall have given not less than
ten (10) days' prior written notice of its intention to do so to NAD, MASA or
Minera, as the case may be. On the expiration of such ten (10) days the Vendor
may proceed to refer the dispute to arbitration as herein provided in Schedule
"E".
<PAGE>
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1.09 Any payment of production royalties made by NAD, MASA, Minera or any
affiliate thereof to Degerstom shall be deemed to have been well and truly made
if a cheque payable to Degerstrom has been delivered to Degerstrom in accordance
with the provisions of Article 29 of the Agreement, the provisions of which
shall apply, mutatis mutandis, as if such cheque was a notice given thereunder.
<PAGE>
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SCHEDULE "E" TO ASSET AND SHARE ACQUISITION
AGREEMENT DATED MARCH 8, 1995, AMONG N.A.
DEGERSTROM, INC., BRIAN GAVIN, JORGE VARGAS,
ENRIQUE RUFINO MARZARI ELIZALDE, MINERA
ANDES S.A., MINERA ANDES INC. AND NAD (S.A.)
ADJUSTMENT PROCEDURE
1. FOR CLOSING
On or before the third (3rd) day prior to the Closing Date, or as
otherwise agreed between the parties, Degerstrom shall deliver to MASA, NAD and
Minera, as the case may be, a written interim statement of all adjustments and
payments to be made pursuant to the provisions of this Agreement and shall make
available to representatives of MASA, NAD and Minera, as the case may be, all
information necessary for such representatives to understand and confirm the
calculations in such statement. Degerstrom, MASA, NAD and Minera, as the case
may be, shall cooperate in settling and agreeing to the amounts of the
adjustments and payments to be made pursuant to the provisions hereof on an
interim basis and the amounts so agreed shall be employed for the purposes of
Closing and the Asset Closing.
2. POST CLOSING
On or before ninety (90) days following the Closing Date, Degerstrom,
MASA, NAD and Minera, shall cause their representatives to co-operate in
preparing on the basis of information available within such period a final
statement of all adjustments and payments to be made pursuant to the provisions
of the Agreement and upon agreement as to the amounts of all such adjustments
and payments to be made pursuant to the Agreement, the net amount thereof shall
be remitted by the party to the Agreement who in the net result is obliged to
make payment.
3. DELAYED MATTERS
The parties to the Agreement foresee that certain adjustments will be
necessary from time to time after the ninety (90) day period referred to in
Clause 1 of this Schedule and each of the parties hereto agrees to co-operate in
calculating and confirming the amount of any payment as may be necessary as a
result thereof and agrees to make payment in the event of becoming obliged
thereby to make payment.
4. LIMITATION
Notwithstanding the provisions of Clauses 1 and 2 of this Schedule, no
adjustments shall be made pursuant to the provisions of this Schedule with
respect to any matter with respect to which a party hereto has not given to the
other applicable party hereto a written notice requesting an adjustment within
two (2) years following the Closing Date.
<PAGE>
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5. PAYMENT
All payments determined to be payable pursuant hereto subsequent to
the Closing Date shall be paid within fifteen (15) days of such determination
and if not paid within such fifteen (15) day period each such payment shall
thereafter bear interest until paid at a rate which is the sum of two percent
(2%) plus the prime lending rate, from time to time, of HongKong Bank of Canada
for loans in Canada in Canadian funds to such bank's preferred commercial
borrowers.
6. CASH ADVANCES
Degerstrom will be reimbursed in cash for any cash and all advances,
on the assets which are transferred to MASA and NAD, as the case may be, on or
after the Asset Closing Date.
8. RIGHT TO AUDIT
Any party has the right, exercisable within one (1) year of the
Closing Date, to examine, copy and audit the records of the other party relative
to the Assets and the adjustments pursuant hereto. The costs of any such audit
shall be borne by the party initiating the audit.
9. ARBITRATION
Any controversy arising under or out of this Schedule may be submitted
to arbitration by either Degerstrom or any one or more of the following MASA,
NAD or Minera, as the case may be, by written notice to the other and the
following principles shall apply to any and each such arbitration:
(a) Appointment of Arbitrator(s)
Upon written demand of either Degerstrom or any one or more of the
following, MASA, NAD or Minera, as the case may be, representatives of
MASA, NAD or Minera, as the case may be, and Degerstrom shall meet and
attempt to appoint a single arbitrator. In the event that such
representatives are unable to agree on a single arbitrator then upon
written demand by either Degerstrom or any one or more of the
following MASA, NAD or Minera, as the case may be, each shall, within
ten (10) days of such demand, name an arbitrator and the two
arbitrators so named shall promptly thereafter choose a third. If
either Degerstrom or any one or more of the following MASA, NAD or
Minera, as the case may be, shall fail to name an arbitrator within
ten (10) days from such demand, then the second arbitrator shall be
appointed by any Justice of the Court of Queen's Bench of Alberta. If
the two arbitrators shall fail within ten (10) days from their
appointment to agree upon and appoint the third arbitrator, then such
third
<PAGE>
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arbitrator shall be appointed by any Justice of the Court of Queen's
Bench of Alberta.
(b) Qualification of Arbitrator(s)
The arbitrator or arbitrators selected to act hereunder shall be
qualified by education, experience and training to pass upon the
particular question in dispute.
(c) Proceedings
The arbitrator or arbitrators chosen as aforesaid shall proceed
immediately to hear and determine the question or questions in
dispute. The decision of the single arbitrator shall be made within
forty-five (45) days after his or her appointment, subject to any
reasonable delay due to unforeseen circumstances. Where there are
three arbitrators, the decision of the arbitrators, or a majority of
them, shall be made within forty-five (45) days after the appointment
of the third arbitrator, subject to any reasonable delay due to
unforeseen circumstances. In the event the single arbitrator or the
arbitrators, or a majority of them, fail to make a decision within the
period herein prescribed, then either party hereto may elect to have a
new single arbitrator or arbitrators chosen in the manner herein
prescribed, as if none had previously been selected.
(d) Decision
The decision of the single arbitrator or the decision of the
arbitrators, or a majority of them, shall be drawn up in writing and
signed by the single arbitrator or by the arbitrators, or a majority
of them, and shall be final and binding upon the parties hereto as to
any question or questions so submitted to arbitration, and the parties
hereto shall be bound by such decision and bound to perform the terms
and conditions thereof.
(e) Compensation
The compensation and expenses of the single arbitrator or the
arbitrators and the liability between the parties involved in such
arbitration for the payment thereof shall be determined by the
arbitrator or arbitrators, as the case may be.
(f) Governing Law
Arbitration pursuant hereto shall be governed in all respects not
addressed herein by the provisions of The Arbitration Act (Alberta)
and regulations thereunder.
<PAGE>
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SCHEDULE "F" TO ASSET AND SHARE ACQUISITION
AGREEMENT DATED MARCH 8, 1995, AMONG N.A.
DEGERSTROM, INC., BRIAN GAVIN, JORGE VARGAS,
ENRIQUE RUFINO MARZARI ELIZALDE, MINERA
ANDES S.A., MINERA ANDES INC. AND NAD (S.A.)
1.01 Subject to Section 1.03, should any of the Properties comprising part of
the Assets, any of the NAD Properties comprising part of the NAD Assets, any of
the MASA Properties comprising part of the MASA Assets or Future Properties
reach the Bankable Feasibility, Minera shall immediately thereafter pay to
Degerstrom a Bonus comprised of a number of common shares to be issued from the
treasury of Minera. The number of common shares to be issued by Minera is as set
forth in Section 1.02.
1.02 The number of common shares to be issued from the treasury of Minera is
equal to 11% of the number of issued and outstanding common shares of Minera
existing immediately after the Amalgamation.
1.03 Degerstrom acknowledges and agrees that:
(a) the issuance of any common shares by Minera may be subject to
obtaining the necessary regulatory approval from any applicable
regulatory body;
(b) that the common shares to be issued by Minera will be issued pursuant
to exemptions contained in the Securities Act (Alberta) and pursuant
to exemptions from the registration requirements of the United States
Securities Act of 1993; and
(c) the issuance of the Minera Shares may be subject to the policies,
rules and by-laws of any regulatory body and the common shares may be
subject to escrow provisions imposed by any regulatory body.
Degerstrom agrees to be bound by and comply with all of the policies,
rules and by-laws of any regulatory body in regard to common shares
issued and comply with all regulatory laws and securities regulations
in respect to the trading of such shares.
<PAGE>
-62-
SCHEDULE "L" TO ASSET AND SHARE ACQUISITION
AGREEMENT DATED MARCH 8, 1995, AMONG N.A.
DEGERSTROM, INC., BRIAN GAVIN, JORGE VARGAS,
ENRIQUE RUFINO MARZARI ELIZALDE, MINERA ANDES
S.A., MINERA ANDES INC. AND NAD (S.A.)
REPAYMENT SCHEDULE
MINERA
Minera costs and expenses as defined in clause 3.03(d) will be paid
within thirty (30) days of the completion of the independent audit for costs and
expenses to December 31, 1994. The post December 31, 1994 to Closing Date costs
and expenses incurred by Degerstrom will be reimbursed when all costs are in and
the audit is completed. Any post Closing Date costs Degerstrom will incur, will
be billed on the Operating Agreement attached hereto as Schedule "C".
MASA AND NAD
Degerstrom's costs and expenses as set forth in Schedule "K", will be
reimbursed to Degerstrom following completion of an independent audit of costs
and expenses incurred by Degerstrom on behalf of MASA and NAD. Degerstrom will
first be reimbursed its costs and expenses to December 31, 1994 and secondly its
January 1, 1995 to Closing Date costs and expenses, when all charges are in and
the independent audit completed. Degerstrom will be reimbursed for MASA and NAD
from Minera when Minera completes its next financing or Degerstrom will be
reimbursed by MASA and NAD directly if the accountants and auditors deem this is
best.
<PAGE>
THIS AMENDMENT TO THE ASSET AND SHARE ACQUISITION AGREEMENT made the
19th day of April, 1996.
AMONG:
N.A. DEGERSTROM, INC., a corporation having offices at the
City of Spokane in the State of Washington, and a branch
office in the City of Mendoza, in the Republic of Argentina
(hereinafter referred to as "Degerstrom")
OF THE FIRST PART
- AND -
BRIAN GAVIN, an individual residing in the City of Mendoza,
in the Republic of Argentina
(hereinafter referred to as "Gavin")
OF THE SECOND PART
- AND -
JORGE VARGAS, an individual residing in the City of Mendoza,
in the Republic of Argentina
(hereinafter referred to as "Vargas")
OF THE THIRD PART
- AND -
ENRIQUE RUFINO MARZARI ELIZALDE, an individual residing in
the City of Mendoza, in the Republic of Argentina
(hereinafter referred to as "Elizalde")
OF THE FOURTH PART
- AND -
MINERA ANDES S.A., a corporation having offices at the City of
Mendoza, in the Republic of Argentina.
(hereinafter referred to as "MASA")
OF THE FIFTH PART
- AND -
<PAGE>
2
MINERA ANDES INC., a corporation incorporated under the laws of the
Province of Alberta and having offices at the City of Spokane in the
State of Washington
(hereinafter referred to as "Minera")
OF THE SIXTH PART
- AND -
NAD (S.A.), a corporation having offices at the City of
Mendoza, in the Republic of Argentina ("NAD")
WHEREAS:
A. The parties hereto signed an Asset and Share Acquisition Agreement dated
March 8, 1995 ("the Agreement") and;
B. The parties hereto have determined that a certain amendment is necessary.
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby irrevocably acknowledged, the parties agree to
amend the Agreement as set forth below:
1. Interpretation: Unless otherwise stated, section numbers refer to section
numbers in the Agreement and all words in this Amending Agreement shall
bear the meanings ascribed in the Agreement.
2. Amendment: Section 4.02 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"4.02 The Properties, MASA Properties, NAD Properties or Future
Properties, are subject to a Royalty equal to the difference between
3% and the Underlying Royalty, if any, subject to a maximum Royalty of
2% and a minimum Royalty of 0% payable to Degerstrom. For the purposes
of calculating the Royalty payable to Degerstrom, the buying out of
any Underlying Royalty, or part thereof, by any party or entity shall
not increase or decrease the Royalty payable to Degerstrom."
3. Enurement: This Amending Agreement shall be binding upon and shall enure to
the benefit of the parties hereto and their respective successors,
receivers, receiver manager, trustees and permitted assigns.
4. Execution: This Amending Agreement may be executed in several counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts
<PAGE>
3
together shall constitute one and the same instrument and, notwithstanding
their date of execution, shall be deemed to bear the date as of the date
above written.
5. Other Matters: Save and except as amended herein all other terms,
conditions and provisions of the Agreement shall continue to be in full
force and effect.
IN WITNESS WHEREOF the parties hereto have executed this Amending
Agreement as of the date first above written.
N.A. DEGERSTROM, INC.
Per: /s/ NEAL A. DEGERSTROM
----------------------------------------
/s/ JORGE VARGAS
- ---------------------------------------- ----------------------------------
WITNESS JORGE VARGAS
/s/ BRIAN GAVIN
- ---------------------------------------- ----------------------------------
WITNESS BRIAN GAVIN
/s/ .E.R MARZARI
- ---------------------------------------- ----------------------------------
WITNESS ENRIQUE RUFINO MARZARI ELIZALDE
MINERA ANDES S.A.
Per: /s/ ALLEN V. AMBROSE
------------------------------
MINERA ANDES INC.
Per:
------------------------------
NAD (S.A.)
Per:
------------------------------
<PAGE>
SCHEDULE K
NAD S.A. AND MINERA ANDES S.A. EXPENSES
JULY 1, 1994 THROUGH DECEMBER 31, 1994
- ------------------------------------------------------------
PHASES TOTAL
========================== ===========
Analytical 26,952.83
Sample Shipment 2,322.08
Project Overhead 50,039.90
Phone & Mobile Radio 12,749.29
Banking 5,330.53
Accounting 17,981.43
Legal Services 67,454.80
Geological Services 249,483.29
Materials and Supplies 3,712.39
Payments 50.25
Property Acquisition 100,020.16
Travel Expenses 181.09
Travel Lodging 967.38
Travel Meals 1,200.63
Project Living Expenses 2,374.43
Project Lodging 7,826.46
Project Meals 10,000.85
Drill Rental -126.55
Drill Insurance 1,375.37
Imaging 26,436.71
Mapping 3,804.83
Map Supplies 12,964.39
Shipping 3,975.59
Local Labor 12,106.56
Fuel 9,172.82
Vehicle Rental 11,692.88
Vehicle Insurance 9,761.70
Vehicle Maintenance 6,184.26
Vehicle Tax and License 1,346.02
-----------
SUB-TOTAL 657,342.37
-----------
Administration Fee @ 15%* 98,601.36
-----------
GRAND TOTAL $755,943.73
- ------------------------------------------------------------
* Includes home office overhead (accounting, legal, clerical), interest on
monies, etc.
-1-
<PAGE>
SCHEDULE K
MINERA ANDES INC. EXPENSES (Job #9447)
JULY 1, 1994 THROUGH DECEMBER 31, 1994
- ------------------------------------------------------------
PHASES TOTAL
========================== ===========
Overhead 54,685.33
Telephone 1,968.27
Banking 82.69
Accounting 360.00
Legal Services 35,886.74
Geological Services 9,786.85
Travel Expenses 5,491.30
Project Lodging 700.82
Shipping 510.05
-----------
TOTAL $109,472.05
- ------------------------------------------------------------
-2-
<PAGE>
SCHEDULE K
NAD S.A. AND MINERA ANDES S.A. EXPENSES
POST DECEMBER 31, 1994
These expenses are not available, as they are not in our accounting system and
they will require auditing.
-3-
<PAGE>
SCHEDULE K
MINERA ANDES INC. EXPENSES (Job #9447)
POST DECEMBER 31, 1994
These expenses not available, as they are not in our accounting system and they
will require auditing.
-4-
THIS ARRANGEMENT AGREEMENT made the 21st day of July, 1995.
BETWEEN:
SCOTIA PRIME MINERALS, INCORPORATED, a body corporate, continued under
the laws of the Province of Nova Scotia
OF THE FIRST PART
- and -
MINERA ANDES INC., a body corporate, incorporated under the laws of
the Province of Alberta
OF THE SECOND PART.
WHEREAS the parties hereto desire to amalgamate and to continue as one
corporation and in order to effect same it is necessary for the parties hereto
to enter into an Arrangement in accordance with the terms and conditions hereof;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the mutual covenants hereinafter contained, the parties hereto
agree as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS
In this Agreement and in the recitals hereto, unless the context
otherwise requires, the following words and phrases shall have the meanings
hereinafter set forth:
"Act" means the Business Corporations Act (Alberta) S.A., 1981,
c.B-15, as amended, together with all regulations promulgated pursuant
thereto;
"Amalco" means the Corporation under the Act resulting from the
Amalgamation;
"Amalco Performance Right" means the right of N.A. Degerstrom, Inc. to
acquire common shares of Amalco, upon the satisfaction of certain
performance criteria;
"Amalco Common Shares" means common shares in the capital stock of
Amalco;
"Amalgamated Corporation" or "Amalco" means the corporation continuing
from the Amalgamation of the Amalgamating Companies;
"Amalgamating Companies" means Minera Andes and Scotia Prime;
"Amalgamating Company" means any one of Minera Andes or Scotia Prime;
"Amalgamating Company's securityholders" means the Minera Andes
securityholders and Scotia Prime securityholders;
<PAGE>
- 2 -
"Amalgamation" means the amalgamation of Minera Andes and Scotia Prime
as one corporation which is to occur on the Effective Date after the
Continuance has become effective;
"Arrangement" means the arrangement between the Amalgamating Companies
securityholders under section 186 of the Act as set forth in the Plan
of Arrangement attached hereto as Schedule A;
"Arrangement Agreement", "Agreement", "hereof", "herein", and
"hereunder" and similar expressions refer to this agreement and the
schedules attached hereto and not to any particular article, section
or other portion hereof and includes all amendments, if any, thereto;
"Articles of Amalgamation" means the articles of amalgamation as set
forth in Schedule C hereto to be filed by the parties hereto pursuant
to the Amalgamation;
"Articles of Arrangement" means the articles of arrangement as set
forth in Schedule B-1 and B-2 to be filed by the parties hereto
pursuant to the Arrangement;
"Articles of Continuance" means the articles of continuance of Scotia
Prime as set forth in Schedule D to be filed by Scotia Prime pursuant
to the Continuance;
"Business Day" means a day other than Saturdays and Sundays when banks
in Calgary are generally open for the transaction of banking business;
"Bylaws" means the bylaws of Minera Andes to be adopted upon the
Amalgamation;
"Certificate of Amalgamation" means the certificate of amalgamation to
be issued under the Act by the Registrar with respect to the
Amalgamation;
"Certificate of Continuance" means the certificate of continuance to
be issued under the Act by the Registrar with respect to the
Continuance;
"Consultation Fee" means the issuance of 168,000 Minera Common Shares
to certain individuals as payment for providing financial advice with
respect to the financing of Minera Andes;
"Continuance" means the continuance of Scotia Prime under the Act
which is to occur prior to the Amalgamation;
"Court" means the Court of Queen's Bench of Alberta, Judicial District
of Calgary;
"Effective Date" means the date set forth in the Certificate of
Amalgamation;
"Exchange" means The Alberta Stock Exchange or such other exchange
located in Canada or the Canadian Dealing Network Inc.;
"Final Order" means the Order of the Court approving the Arrangement
to be granted pursuant to the provisions of section 186 of the Act;
"Information Circular" means the joint information circular dated July
21, 1995 prepared by the managements of the Amalgamating Companies for
the joint solicitation of proxies for the Meetings;
"Interim Order" means the Order of the Court providing for, among
other things, the calling of the Meetings, a copy of which is set
forth as Appendix E to the Information Circular;
"Meetings" means, collectively, the Minera Andes Meeting and the
Scotia Prime Meeting;
"Merger" means the Continuance, Amalgamation and related transactions
contemplated by this Arrangement Agreement;
<PAGE>
- 3 -
"Minera Andes" means Minera Andes Inc., a corporation incorporated
under the Act;
"Minera Performance Right" means the right of N.A. Degerstrom, Inc. to
acquire common shares of Minera Andes Inc., upon the satisfaction of
certain performance criteria;
"Minera Common Shares" means the common shares in the capital of
Minera Andes and "Minera Andes Common Shareholders" means the holders
from time to time of Minera Andes Common Shares;
"Minera Andes Meeting" means the special meeting of Minera Andes
Common Shareholders called to vote upon the Minera Andes Resolution
and any adjournments thereof;
"Minera Andes Options" means the options to acquire Minera Andes
Common Shares and "Minera Andes Optionholders" means the holders from
time to time of Minera Andes Options;
"Minera Andes Resolution" means the special resolution in
substantially the form set forth as Appendix A-3 to the Information
Circular to be voted upon at the Minera Andes Meeting;
"Minera Andes securityholders" means collectively the Minera Andes
Common Shareholders, Minera Andes Optionholders and the holder of the
Minera Performance Right;
"Misrepresentation" means "misrepresentation" as defined in the
Securities Act, Alberta, S.A. 1981, c.S-6.1 as amended;
"Plan of Arrangement" means the plan of arrangement as set forth and
described in Schedule A attached hereto;
"Private Placement" means the private placement of up to and including
3,500,000 Minera Common Shares for $1.00 per Minera Common Share;
"Qualified Provinces" means the provinces of Alberta, British
Columbia, Ontario and Nova Scotia;
"Record Date" means July 28, 1995;
"Registrar" means the registrar appointed pursuant to the Act;
"Scotia Prime" means Scotia Prime Minerals, Incorporated, a company
continued under the Companies Act (Nova Scotia);
"Scotia Prime Common Shares" means the common shares in the capital of
Scotia Prime and "Scotia Prime Common Shareholders" means the holders
from time to time of Scotia Prime Common Shares;
"Scotia Prime Meeting" means the special meeting of Scotia Prime
Common Shareholders called to vote upon the Scotia Prime Resolution
and any adjournments thereof;
"Scotia Prime Resolution" means the special resolution in
substantially the form set forth as Appendix A-2 to the Information
Circular to be voted upon at the Scotia Prime Meeting; and
"Scotia Prime securityholders" means collectively the Scotia Prime
Common Shareholders;
1.2 CURRENCY
Unless otherwise stated, all sums of money which are referred to in
this Agreement and in the Arrangement are expressed in lawful money of Canada.
<PAGE>
- 4 -
1.3 INTERPRETATION NOT AFFECTED BY HEADINGS
The division of this Agreement and of the Arrangement into articles,
sections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement or of the Arrangement.
1.4 NUMBER
In this Agreement and in the Arrangement, words importing the singular
number only shall include the plural and vice versa, words importing the use of
any gender shall include all genders and words importing persons shall include
firms and corporations and vice versa, all as the context may require.
1.5 DATE FOR ANY ACTION
In the event that any date on which any action is required to be taken
hereunder or under the Arrangement by any of the parties is not a Business Day
in the place where the action is required to be taken, such action shall be
required to be taken on the next succeeding day which is a Business Day in such
place.
ARTICLE II
ARRANGEMENT
2.1 PURPOSE
The parties hereto have entered into this Agreement for the purpose of
effecting the Arrangement contemplated hereby on the Effective Date in the
following order: the Continuance and the Amalgamation.
The Continuance and the Amalgamation together constitute the Merger
which will effectively combine the Amalgamating Companies into a single
corporation under the laws of the Province of Alberta.
Scotia Prime will be continued under the Act pursuant to the
Continuance as if Scotia Prime had been originally incorporated under the laws
of Alberta, prior to the Amalgamation.
2.2 ORDER OF TRANSACTION
Subject to the terms hereof, upon receiving approval for the Scotia
Prime Resolution, Scotia Prime shall promptly file such documents as may be
required to effect the Continuance prior to the Amalgamation. Thereafter,
subject to the terms hereof, and after all parties hereto have acknowledged to
the others the satisfaction of all conditions hereof, the parties hereto shall
cause to be sent to the Registrar, pursuant to section 186 of the Act, the
Articles of Arrangement and the Articles of Amalgamation relating to the
Amalgamation with the request that a Certificate of Amalgamation be issued
effective as of the Effective Date, pursuant to the Act.
2.3 AMALCO
Subject to the terms and conditions of this Agreement, the parties
agree to amalgamate as of the Effective Date and continue as one corporation
under the Act, in accordance with the terms and conditions hereinafter set
forth:
(a) the name of Amalco shall be "Minera Andes Inc." or such other name as
the first directors may resolve, the Registrar may permit and the
Exchange may approve;
(b) the registered office of Amalco shall be located at the registered
office in Alberta of Minera Andes as at the Effective Date, until
changed in accordance with the Act;
(c) there shall be no restrictions on the business which Amalco may carry
on;
(d) the authorized share capital of Amalco shall be as set forth in the
Articles of Amalgamation attached hereto as Schedule "C";
<PAGE>
- 5 -
(e) the minimum number of directors of Amalco shall be one and the maximum
number of directors of Amalco shall be fifteen;
(f) the first directors of Amalco shall be as follows (whose current
addresses are as follows):
Name Address
---- -------
Allen Ambrose Spokane, Washington
Armand Hansen Spokane, Washington
Dennis Baxter West Vancouver, British Columbia
Jack Crabb Pender Harbour, British Columbia
(g) the said first directors shall hold office until the first annual
general meeting of Amalco or until their successors are elected or
appointed;
(h) the bylaws of Minera Andes in effect on the Effective Date shall be
the Bylaws of Amalco until repealed or changed;
(i) the board of directors of Amalco may from time to time, without
authorization of the shareholders:
(i) borrow money upon the credit of Amalco;
(ii) issue, re-issue, sell or pledge debt obligations of Amalco;
(iii) subject to section 42 of the Act, give a guarantee on behalf of
Amalco to secure performance of any obligation of any person;
(iv) mortgage, hypothecate, pledge or otherwise create a security
interest in all or any real or personal property, moveable or
immoveable property of Amalco, owned or subsequently acquired, to
secure any obligation of Amalco;
(j) the names and offices of the first officers of Amalco, until others
are appointed in their place in accordance with the provisions of the
Bylaws, shall be as follows:
Name Office
---- ------
Allen Ambrose President
Dennis Baxter Chief Financial Officer, Secretary
Brian Gavin Vice-President, Argentina Exploration
(k) the auditor of Amalco shall be Chambers, Phillips & Co.; Chartered
Accountants of Vancouver, British Columbia;
(l) legal counsel for Amalco shall be the legal counsel for Minera Andes
as at the Effective Date;
(m) The Montreal Trust Company of Canada, at its office in the City of
Calgary, in the Province of Alberta, shall be the registrar and
transfer agent of the Amalco Common Shares;
(n) the form of incentive share option plan attached hereto as Schedule
"E", shall be adopted by Amalco, its directors and shareholders.
<PAGE>
- 6 -
2.4 COVENANTS OF MINERA ANDES
Minera Andes covenants and agrees with the other Amalgamating Company
that it will:
(a) take all necessary action to give effect to the transactions
contemplated by this Agreement and the Arrangement and will not take
any action inconsistent with such transactions or the covenants set
forth herein;
(b) use all reasonable efforts to obtain all necessary consents,
assignments, waivers and amendments to or terminations of any
instruments and take such measures as may be appropriate to fulfil its
obligations hereunder and to carry out the transactions contemplated
hereby;
(c) proceed with an application to the Court under section 186 of the Act
for the Interim Order;
(d) convene the Minera Andes Meeting as ordered by the Interim Order,
solicit proxies to be voted at such meeting in favour of the Minera
Andes Resolution and conduct the Minera Andes Meeting in accordance
with the Interim Order, the bylaws of Minera Andes and as otherwise
may be required by law;
(e) give the other Amalgamating Company's representatives full access,
during normal business hours and upon reasonable notice, to all of
Minera Andes's assets, properties, books, records, agreements and
commitments and furnish such representatives during such period with
all such information concerning Minera Andes as the other Amalgamating
Company may reasonably request;
(f) until the Effective Date:
(i) carry on its business in the ordinary course, except as otherwise
contemplated in this Agreement or as otherwise agreed to in
writing by the other Amalgamating Company; and
(ii) without the prior written agreement of the other Amalgamating
Company, take no action which may result in a material adverse
change in the affairs of Minera Andes including, without limiting
the foregoing, a sale of assets, except in the ordinary course of
business; and
(iii) without the prior written agreement of the other Amalgamating
Company, not enter into any employment, consultory or severance
agreements or other similar arrangements with any director or
officer of Minera Andes or any other person, except in the
ordinary course of business;
(g) use all reasonable efforts to cause each of the conditions precedent
set forth in Article IV hereof to be complied with on or before the
Effective Date;
(h) subject to the approval of the Minera Andes Common Shareholders of the
Minera Andes Resolution and the provisions hereof, proceed to make the
appropriate application for the Final Order;
(i) subject to the provisions hereof, proceed, on the Effective Date, to
file the Articles of Arrangement, Articles of Amalgamation and the
Final Order with the Registrar in order for the Registrar to issue the
Certificate of Amalgamation;
(j) take all steps and complete all things in order to permit the
Amalgamation on the Effective Date after the Continuance;
(k) except as set forth herein, not declare or pay any dividends or make
any distribution of its properties or assets to its shareholders or to
others or retire or redeem any Minera Andes Common Shares or other of
its securities or issue any additional shares or other securities
except
<PAGE>
- 7 -
for the issuance of any Minera Andes Common Shares on the conversion
or exercise prior to the Effective Date of the Minera Andes Options,
Minera Performance Right or the Private Placement or the Consultation
Fee;
(l) prior to the Effective Date, not issue or enter into any agreement or
agreements to issue or grant options, warrants or rights to purchase
shares of its capital or other of its securities;
(m) prior to the Effective Date, not merge into or with, consolidate with,
or, except in the ordinary course of business, sell any of its assets
to any other corporation or person or perform any act or enter into
any transaction or negotiation which might interfere or be
inconsistent with the consummation of the transactions hereby
contemplated;
(n) except as specifically provided for hereunder, not alter or amend its
articles or bylaws as the same exist at the date of this Agreement;
(o) advise the other Amalgamating Company, immediately after the Minera
Andes Meeting, of the number of Minera Andes Common Shares for which
Minera Andes has received, pursuant to section 184 of the Act, written
objection to the Minera Andes Resolution;
(p) convene the Minera Andes Meeting and conduct such meeting in
accordance with the bylaws of Minera Andes and as otherwise may be
required by law;
(q) hold and require its respective officers, employees, agents and
representatives to hold, in strict confidence, all data and
information obtained from the other Amalgamating Company or from any
officer, employee, agent or representative thereof, whether pertaining
to the financial condition, assets, results of operations or method of
operation thereof or otherwise, except any of the same which:
(i) was or is in the public domain;
(ii) is required to be disclosed by any such persons in connection
with any court action or any proceedings before, or the
regulatory requirements of, any governmental, regulatory or
administrative body or in connection with securing any consent
required hereunder;
(iii) thereafter, other than through an act or failure to act on the
part of a party hereto, becomes information generally available
to the public;
provided that if the Arrangement shall not be consummated, such party
shall return or cause to be returned to the other Amalgamating Company
all data, information or other written material respecting such
parties obtained by any of the foregoing persons from the other
Amalgamating Company or from any officer, employee, agent or
representative of such parties in connection with the negotiation or
consummation of this Agreement or other matters contemplated by this
Agreement;
(r) ensure that the Information Circular and related documentation to be
distributed in connection with the solicitation of proxies by the
management of Minera Andes shall comply as to form and substance with
the requirements of the Qualifying Provinces and the information and
data contained therein shall, except as it relates to the other
Amalgamating Company, be true, correct and complete in all material
respects, shall not contain any untrue statement of any material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading in
light of the circumstances in which they were made.
2.5 COVENANTS OF SCOTIA PRIME
Scotia Prime covenants and agrees with the other Amalgamating Company
that it will:
<PAGE>
- 8 -
(a) take all necessary action to give effect to the transactions
contemplated by this Agreement and the Arrangement and will not take
any action inconsistent with such transactions or the covenants set
forth herein;
(b) use all reasonable efforts to obtain all necessary consents,
assignments, waivers and amendments to or terminations of any
instruments and take such measures as may be appropriate to fulfil its
obligations hereunder and to carry out the transactions contemplated
hereby;
(c) proceed with an application to the Court under section 186 of the Act
for the Interim Order;
(d) convene the Scotia Prime Meeting as ordered by the Interim Order,
solicit proxies to be voted at such meeting in favour of the Scotia
Prime Resolution and conduct the Scotia Prime Meeting in accordance
with the Interim Order, the bylaws of Scotia Prime and as otherwise
may be required by law;
(e) give the other Amalgamating Company's representatives full access,
during normal business hours and upon reasonable notice, to all of
Scotia Prime's assets, properties, books, records, agreements and
commitments and furnish such representatives during such period with
all such information concerning Scotia Prime as the other Amalgamating
Company may reasonably request;
(f) until the Effective Date:
(i) carry on its business in the ordinary course, except as otherwise
contemplated in this Agreement or as otherwise agreed to in
writing by the other Amalgamating Company;
(ii) without the prior written agreement of the other Amalgamating
Company, take no action which may result in a material adverse
change in the affairs of Scotia Prime including, without limiting
the foregoing, a sale of assets; and
(iii) without the prior written agreement of the other Amalgamating
Company, not enter into any employment, consultory or severance
agreements or other similar arrangements with any director or
officer of Scotia Prime or any other person;
(g) use all reasonable efforts to cause each of the conditions precedent
set forth in Article IV hereof to be complied with on or before the
Effective Date;
(h) subject to the approval of the Scotia Prime Common Shareholders of the
Scotia Prime Resolution and the provisions hereof, proceed to make the
appropriate application for the Final Order;
(i) subject to the provisions hereof, proceed, on the Effective Date, to
file the Articles of Arrangement, Articles of Amalgamation and the
Final Order with the Registrar in order for the Registrar to issue the
Certificate of Amalgamation;
(j) take all steps and complete all things in order to permit the
Amalgamation on the Effective Date after the Continuance;
(k) except as set forth herein, not declare or pay any dividends or make
any distribution of its properties or assets to its shareholders or to
others or retire or redeem any Scotia Prime Common Shares or other of
its securities or issue any additional shares or other securities;
(l) prior to the Effective Date, not issue or enter into any agreement or
agreements to issue or grant options, warrants or rights to purchase
shares of its capital or other of its securities;
(m) prior to the Effective Date, not merge into or with, consolidate with,
or, except in the ordinary course of business, sell any of its assets
to any other corporation or person or perform any act or enter into
any transaction or negotiation which might interfere or be
inconsistent with the consummation of the transactions hereby
contemplated;
<PAGE>
- 9 -
(n) except as specifically provided for hereunder, not alter or amend its
articles or bylaws as the same exist at the date of this Agreement;
(o) advise the other Amalgamating Company, immediately after the Scotia
Prime Meeting, of the number of Scotia Prime Common Shares for which
Scotia Prime has received, pursuant to section 184 of the Act, written
objection to the Scotia Prime Resolution;
(p) convene the Scotia Prime Meeting and conduct such meeting in
accordance with the bylaws of Scotia Prime and as otherwise may be
required by law;
(q) hold and require its respective officers, employees, agents and
representatives to hold, in strict confidence, all data and
information obtained from the other Amalgamating Company or from any
officer, employee, agent or representative thereof, whether pertaining
to the financial condition, assets, results of operations or method of
operation thereof or otherwise, except any of the same which:
(i) was or is in the public domain;
(ii) is required to be disclosed by any such persons in connection
with any court action or any proceedings before, or the
regulatory requirements of, any governmental, regulatory or
administrative body or in connection with securing any consent
required hereunder;
(iii) thereafter, other than through an act or failure to act on the
part of a party hereto, becomes information generally available
to the public;
provided that if the Arrangement shall not be consummated, such party
shall return or cause to be returned to the other Amalgamating Company
all data, information or other written material respecting such
parties obtained by any of the foregoing persons from the other
Amalgamating Company or from any officer, employee, agent or
representative of such parties in connection with the negotiation or
consummation of this Agreement or other matters contemplated by this
Agreement;
(r) ensure that the Information Circular and related documentation to be
distributed in connection with the solicitation of proxies by the
management of Scotia Prime shall comply as to form and substance with
the requirements of the Qualifying Provinces and the information and
data contained therein shall, except as it relates to the other
Amalgamating Company, be true, correct and complete in all material
respects, shall not contain any untrue statement of any material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading in
light of the circumstances in which they were made; and
(s) take all necessary action to give effect to the Continuance.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF MINERA ANDES
Minera Andes represents and warrants to and in favour of the other
Amalgamating Company as follows, and acknowledges that the other Amalgamating
Company is relying upon such representations and warranties:
(a) Minera Andes is duly organized and validly existing and has the
corporate power and authority to own or lease its property and assets
and to carry on its business as now conducted by it and has the
corporate power and capacity to enter into this Agreement and, subject
to obtaining the requisite approvals contemplated hereby, to perform
its obligations hereunder;
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(b) the authorized and issued capital of Minera Andes as at the date
hereof is as set forth in the Information Circular all of which issued
shares or securities have been duly and validly issued as fully paid
and non-assessable;
(c) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein:
(i) do not and will not result in the breach of, or violate any term
or provision of, the articles or by-laws of Minera Andes;
(ii) will not as of the Effective Date conflict with, result in the
breach of, constitute a default under, or accelerate or permit
the acceleration of the performance required by, any agreement,
instrument, licence, permit or authority to which Minera Andes is
a party or by which it is bound and which is material to Minera
Andes or to which any material property of Minera Andes is
subject or result in the creation of any lien, charge or
encumbrance upon any of the assets of Minera Andes under any such
agreement or instrument, or give to others any interest or right,
including rights of purchase, termination, cancellation or
acceleration, under any such agreement, instrument, licence,
permit or authority;
(iii) do not or will not violate any provision of law or
administrative regulation or any judicial or administrative
order, award, judgment or decree applicable to, and known to
(after due enquiry), Minera Andes, the breach of which would have
a material adverse effect on Minera Andes;
(d) except as disclosed in the Information Circular, including the
consolidated audited financial statements of Minera Andes and the
notes thereto for the fiscal year ended December 31, 1994 and the
interim unaudited financial statements for the period ended March 31,
1995 as set forth in the Information Circular, there are no actions,
suits, proceedings or investigations commenced, or to the knowledge of
Minera Andes (after due enquiry) contemplated or threatened, against
or affecting Minera Andes in law or in equity before or by any
government department, commission, board, bureau, court, agency,
arbitrator, or instrumentality, domestic or foreign, of any kind nor,
to the best of the knowledge of Minera Andes, are there any existing
facts or conditions which may reasonably be expected to be a proper
basis for any actions, suits, proceedings or investigations, other
than in connection with the exercise of rights of dissent referred to
in Section 4.1 of the Plan of Arrangement, which in any case would
prevent or hinder the consummation of the transactions contemplated by
this Agreement or which can reasonably be expected to have a material
adverse effect on the business, operations, properties, assets or
affairs, financial or otherwise, of Minera Andes;
(e) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein have been duly approved by the board
of directors of Minera Andes, and this Agreement constitutes a valid
and binding obligation of Minera Andes enforceable against it in
accordance with its terms;
(f) Minera Andes is under no obligation, contractual or otherwise, to
issue any further securities, other than the issue of Minera Andes
Common Shares pursuant to the Minera Performance Right and pursuant to
Minera Andes Options, the Private Placement and the Consultation Fee;
(g) the information set forth in the Information Circular regarding Minera
Andes is true, correct and complete in all material respects and does
not contain any Misrepresentation;
(h) Minera Andes has not received notice of any defaults under any of the
provisions of the Securities Act, Alberta or the Act or any other
security or regulatory authority;
(i) Minera Andes is not a reporting issuer as defined by the Securities
Act in any jurisdiction;
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(j) Minera Andes is not liable for any material federal, provincial or
municipal or local taxes, assessments or other imposts or penalties
due and unpaid at the date hereof in respect of its income, business
or property or for the payment of any tax instalment due in respect of
its income, business or property or for the payment of any tax
instalment due in respect of its current taxation year or any previous
taxation years, and no such taxes, assessments, imposts or penalties
are required to be reserved against it; and it is not in default in
filing any returns or reports covering any federal, provincial or
municipal or local taxes, assessments or other imposts in respect of
its income, business or property;
(k) Minera Andes has been conducting its business in compliance with all
applicable laws, rules and regulations in each jurisdiction in which
it carries on business; is not in breach of any such laws, rules and
regulations and is duly licensed, registered and qualified in each
jurisdiction in which it owns or leases property or carries on
business to enable its business to be kept on as now conducted and its
property and assets will be owned, leased and operated and such
licences, registrations and qualifications are valid, subsisting and
in good standing; and
(l) Minera Andes is not aware of any information or knowledge of any facts
not previously disclosed to the other Amalgamating Company relating to
it, its business or the securities of Minera Andes which are
materially adverse and which, if known to the other Amalgamating
Company, might reasonably be expected to deter the other Amalgamating
Company from completing the transactions herein contemplated.
3.2 REPRESENTATIONS AND WARRANTIES OF SCOTIA PRIME
Scotia Prime represents and warrants to and in favour of the other
Amalgamating Company as follows, and acknowledges that the other Amalgamating
Company is relying upon such representations and warranties:
(a) Scotia Prime is duly organized and validly existing and has the
corporate power and authority to own or lease its property and assets
and to carry on its business as now conducted by it and has the
corporate power and capacity to enter into this Agreement and, subject
to obtaining the requisite approvals contemplated hereby, to perform
its obligations hereunder;
(b) the authorized and issued capital of Scotia Prime as at the date
hereof is as set forth in the Information Circular all of which issued
shares or securities have been duly and validly issued as fully paid
and non-assessable;
(c) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein:
(i) do not and will not result in the breach of, or violate any term
or provision of, the articles or by-laws of Scotia Prime;
(ii) will not as of the Effective Date conflict with, result in the
breach of, constitute a default under, or accelerate or permit
the acceleration of the performance required by, any agreement,
instrument, licence, permit or authority to which Scotia Prime is
a party or by which it is bound and which is material to Scotia
Prime or to which any material property of Scotia Prime is
subject or result in the creation of any lien, charge or
encumbrance upon any of the assets of Scotia Prime under any such
agreement or instrument, or give to others any interest or right,
including rights of purchase, termination, cancellation or
acceleration, under any such agreement, instrument, licence,
permit or authority; and
(iii) do not or will not violate any provision of law or
administrative regulation or any judicial or administrative
order, award, judgment or decree applicable to, and known to
(after due enquiry), Scotia Prime, the breach of which would have
a material adverse effect on Scotia Prime;
<PAGE>
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(d) except as disclosed in the Information Circular, including the
consolidated audited financial statements of Scotia Prime and the
notes thereto for the fiscal year ended December 31, 1994 and the
interim financial statements for the period ended March 31, 1995 as
set forth in the Information Circular, there are no actions, suits,
proceedings or investigations commenced, or to the knowledge of Scotia
Prime (after due enquiry) contemplated or threatened, against or
affecting Scotia Prime in law or in equity before or by any government
department, commission, board, bureau, court, agency, arbitrator, or
instrumentality, domestic or foreign, of any kind nor, to the best of
the knowledge of Scotia Prime, are there any existing facts or
conditions which may reasonably be expected to be a proper basis for
any actions, suits, proceedings or investigations, other than in
connection with the exercise of rights of dissent referred to in
Section 4.1 of the Plan of Arrangement, which in any case would
prevent or hinder the consummation of the transactions contemplated by
this Agreement or which can reasonably be expected to have a material
adverse effect on the business, operations, properties, assets or
affairs, financial or otherwise, of Scotia Prime;
(e) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein have been duly approved by the board
of directors of Scotia Prime, and this Agreement constitutes a valid
and binding obligation of Scotia Prime enforceable against it in
accordance with its terms;
(f) Scotia Prime is under no obligation, contractual or otherwise, to
issue any further securities;
(g) the information set forth in the Information Circular regarding Scotia
Prime is true, correct and complete in all material respects and does
not contain any Misrepresentation;
(h) Scotia Prime has not received notice of any defaults under any of the
provisions of the Securities Act, Alberta, the Securities Act, British
Columbia, the Securities Act Ontario, the Securities Act Nova Scotia
or the Act or any other security or regulatory authority;
(i) Scotia Prime is a reporting issuer as defined by the Securities Act in
the following jurisdictions: Alberta, Ontario, British Columbia and
Nova Scotia;
(j) Scotia Prime is not liable for any material federal, provincial or
municipal or local taxes, assessments or other imposts or penalties
due and unpaid at the date hereof in respect of its income, business
or property or for the payment of any tax instalment due in respect of
its income, business or property or for the payment of any tax
instalment due in respect of its current taxation year or any previous
taxation years, and no such taxes, assessments, imposts or penalties
are required to be reserved against it; and it is not in default in
filing any returns or reports covering any federal, provincial or
municipal or local taxes, assessments or other imposts in respect of
its income, business or property;
(k) Scotia Prime has been conducting its business in compliance with all
applicable laws, rules and regulations in each jurisdiction in which
it carries on business; is not in breach of any such laws, rules and
regulations and is duly licensed, registered and qualified in each
jurisdiction in which it owns or leases property or carries on
business to enable its business to be kept on as now conducted and its
property and assets will be owned, leased and operated and such
licences, registrations and qualifications are valid, subsisting and
in good standing; and
(l) Scotia Prime is not aware of any information or knowledge of any facts
not previously disclosed to the other Amalgamating Company relating to
it, its business or the securities of Scotia Prime which are
materially adverse and which, if known to the other Amalgamating
Company, might reasonably be expected to deter the other Amalgamating
Company from completing the transactions herein contemplated.
<PAGE>
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ARTICLE IV
CONDITIONS PRECEDENT
4.1 MUTUAL CONDITIONS PRECEDENT
The respective obligations of the Amalgamating Companies hereunder to
complete the transactions contemplated by this Agreement shall be subject to the
fulfilment or satisfaction, on or before the Effective Date, of each of the
following conditions, any of which (except for conditions (a) to (e), inclusive)
may be waived, as to it, by either of the Amalgamating Companies without
prejudice to the right of such party to rely on any other or others of them:
(a) the shareholders of Scotia Prime shall have approved the Continuance
of Scotia Prime to Alberta and Scotia Prime shall have effected the
Continuance;
(b) the Minera Andes Resolution and the Scotia Prime Resolution shall have
been approved by the votes of the requisite number of respective
shareholders, as the case may be, at the Meetings in accordance with
the provisions of the Act, the Interim Order, as applicable, and any
applicable regulatory requirements;
(c) the Final Order shall have been granted by the Court, which order
shall be reflective of the intent of the parties hereto as expressed
by this Agreement and shall be in form and substance satisfactory to
all parties hereto acting reasonably and having regard to this
Agreement;
(d) Articles of Arrangement, the Final Order and Articles of Amalgamation
shall have been accepted for filing by the Registrar and the
Certificate of Amalgamation shall have been issued with respect
thereto in accordance with Section 186 of the Act;
(e) there shall not be in force any order or decree of a Court of
competent jurisdiction, any federal, provincial, municipal or other
governmental department, commission, board, agency or regulatory body
restraining, interfering with or enjoining the consummation of the
transactions contemplated by this Agreement, including without
limitation, the Arrangement;
(f) there shall not be in force any cease trade orders by any regulatory
bodies or any other impediment (other than "control block"
restrictions) to the general free trading in the Qualified Provinces
of the securities of either of the Amalgamating Companies;
(g) all necessary regulatory and similar approvals with respect to the
transactions contemplated hereby, including, in particular, the
Arrangement and the qualification for trading in the Qualified
Provinces of the Amalco Common Shares, shall have been obtained,
subject only to any residency and "control block" restrictions imposed
under provincial securities legislation;
(h) all necessary approvals shall have been obtained to list and/or post
for trading the Amalco Common Shares issuable upon the Arrangement on
the Exchange, subject only to fulfilling the requirements of such
exchange;
(i) all necessary approvals shall have been received to effect the
Amalgamation on the Effective Date;
(j) the Exchange shall have approved the Arrangement and the other
transactions contemplated by this Agreement to the extent applicable;
(k) any time prior to the Effective Date, either of the Amalgamating
Companies alter or attempt to alter its share capital without the
prior written consent of the other Amalgamating Company;
(l) there shall have been no material adverse change in the affairs,
assets, liabilities, financial condition or prospects of either of
Amalgamating Companies prior to the Effective Date; and
(m) there shall have been no material suit, action, litigation,
arbitration proceeding or governmental proceeding, including appeals
and applications for a review, in progress, pending or, as far as a
<PAGE>
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party hereto is aware, threatened against or relating to a party
hereto or affecting its properties or business which if determined
adversely to such party might materially and adversely affect the
properties, business, future prospects or the financial condition of
such party, or the right of such party to use, reproduce or sell its
property and assets, or part thereof.
4.2 CONDITIONS TO OBLIGATIONS OF MINERA ANDES
The obligations of Minera Andes to consummate the transactions
contemplated hereby and, in particular, the Arrangement, is subject to the
satisfaction, on or before the Effective Date, of the following conditions, any
of which may be waived by it without prejudice to its right to rely on any other
or others of them:
(a) each of the covenants, acts and undertakings of the other Amalgamating
Company to be performed on or before the Effective Date pursuant to
the terms of this Agreement shall have been duly performed;
(b) Scotia Prime shall have furnished Minera Andes with:
(i) certified copies of the resolution or resolutions duly passed by
the board of directors of Scotia Prime approving this Agreement
and the consummation of the transactions pursuant hereto;
(ii) certified copies of the special resolutions of Scotia Prime, duly
passed at its Meeting;
(iii) evidence of the approval of the Exchange to the listing of the
Amalco Common Shares issuable upon the Arrangement subject only
to the filing of required documents;
(c) except as affected by the transactions contemplated by this Agreement,
the representations and warranties of the other Amalgamating Company
contained in Article III shall be true in all material respects
immediately prior to the issuance of the Certificate of Amalgamation
with the same effect as though made at and as of such time and Minera
Andes shall have received a certificate of a senior officer of the
other Amalgamating Company to that effect, dated the Effective Date;
(d) there is no action prior to the Effective Date by any person or
company, including a governmental or regulatory authority, that
results in a material change in the affairs of the other Amalgamating
Company;
(e) Minera Andes shall have received an opinion of counsel to Scotia
Prime, dated the Effective Date, satisfactory in form and substance in
all material respects to Minera Andes and its counsel and addressed to
Minera Andes, its directors and its shareholders to the effect that:
(i) such party is duly incorporated and validly existing under the
laws of its jurisdiction of incorporation and has the corporate
power to own or lease its property and assets and to carry on its
business as now conducted by it;
(ii) such party has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
(iii) such party has taken all necessary corporate actions to
authorize the execution and delivery of this Agreement and the
performance of all its obligations hereunder;
(iv) this Agreement has been duly executed and delivered by such party
and constitutes a legal, valid and binding obligation of such
party, enforceable in accordance with its terms, subject to
bankruptcy and similar laws affecting creditors generally and to
equitable remedies being in the discretion of a court;
(v) the execution, delivery and performance of this Agreement does
not, and the Amalgamation will not, and the Continuance will not:
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(A) result in a breach of or violate any terms or provisions of
the articles or by-laws of such party; or
(B) violate any provisions of Canadian law or administrative
regulations, any judicial or administrative order, award,
judgment or decree or any agreement, in each case known to
such counsel, to which such party is a party or by which it
is bound;
(vi) all necessary regulatory consents and approvals to the
Continuance have been obtained, including the consent of the Nova
Scotia Registrar of Joint Stock Companies, and upon issuance of
the Certificate of Continuance, Scotia will have been duly
continued under the Act;
(vii) such other matters as Minera Andes and its counsel may
reasonably request.
4.3 CONDITIONS TO OBLIGATIONS OF SCOTIA PRIME
The obligations of Scotia Prime to consummate the transactions
contemplated hereby and, in particular, the Arrangement, is subject to the
satisfaction, on or before the Effective Date, of the following conditions, any
of which may be waived by it without prejudice to its right to rely on any other
or others of them:
(a) each of the covenants, acts and undertakings of the other Amalgamating
Company to be performed on or before the Effective Date pursuant to
the terms of this Agreement shall have been duly performed;
(b) Minera Andes shall have furnished Scotia Prime with:
(i) certified copies of the resolution or resolutions duly passed by
the board of directors of Minera Andes approving this Agreement
and the consummation of the transactions pursuant hereto;
(ii) certified copies of the Minera Andes Resolution duly passed at
the Minera Andes Meeting.
(c) except as affected by the transactions contemplated by this Agreement,
the representations and warranties of the other Amalgamating Company
contained in Article III shall be true in all material respects
immediately prior to the issuance of the Certificate of Amalgamation
with the same effect as though made at and as of such time and Scotia
Prime shall have received a certificate of a senior officer of the
other Amalgamating Company to that effect, dated the Effective Date;
(d) there is no action prior to the Effective Date by any person or
company, including a governmental or regulatory authority, that
results in a material change in the affairs of the other Amalgamating
Company;
(e) Scotia Prime shall have received an opinion of counsel to the other
Amalgamating Company, dated the Effective Date, satisfactory in form
and substance in all material respects to Scotia Prime and its counsel
and addressed to Scotia Prime, its directors and its shareholders to
the effect that:
(i) such party is duly incorporated and validly existing under the
laws of its jurisdiction of incorporation and has the corporate
power to own or lease its property and assets and to carry on its
business as now conducted by it;
(ii) such party has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
<PAGE>
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(iii) such party has taken all necessary corporate actions to
authorize the execution and delivery of this Agreement and the
performance of all its obligations hereunder;
(iv) this Agreement has been duly executed and delivered by such party
and constitutes a legal, valid and binding obligation of such
party, enforceable in accordance with its terms, subject to
bankruptcy and similar laws affecting creditors generally and to
equitable remedies being in the discretion of a court;
(v) the execution, delivery and performance of this Agreement does
not, and the Amalgamation will not:
(A) result in a breach of or violate any terms or provisions of
the articles or by-laws of such party; or
(B) violate any provisions of Canadian law or administrative
regulations, any judicial or administrative order, award,
judgment or decree or any agreement, in each case known to
such counsel, to which such party is a party or by which it
is bound;
(vi) such other matters as Scotia Prime and its counsel may reasonably
request.
ARTICLE V
NOTICES
5.1 NOTICES
All notices which may or are required to be given pursuant to any
provision of this Agreement shall be given or made in writing and shall be
served personally, and in the case of:
Minera Andes, addressed to:
Minera Andes Inc.
North 3303 Sullivan Road
Spokane, Washington 99216
U.S.A.
Attention: Allen Ambrose, President
Scotia Prime, addressed to:
Scotia Prime Minerals, Incorporated
95 Wellington Street West
Suite 906
Toronto, Ontario
M5J 2N7
Attention: James I. Golla, President
ARTICLE VI
AMENDMENT AND TERMINATION OF AGREEMENT
6.1 AMENDMENTS
This Agreement may, at any time and from time to time before or after
the holding of the Meetings, be amended in any fashion whatsoever by written
agreement of all of the parties hereto without further notice to or
authorization on the part of their respective securityholders.
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6.2 TERMINATION
This Agreement may, prior to the Effective Date, be terminated by
written agreement of all of the parties hereto notwithstanding anything
contained herein, including the approval of any one of the shareholders of the
Amalgamating Companies or the granting by the Court of the Final Order. Unless
otherwise agreed by each of the parties hereto, the Agreement shall also
terminate upon the earliest of:
(a) the Minera Andes Common Shareholders failing to approve the Minera
Andes Resolution at the Minera Andes Meeting;
(b) the Scotia Prime Common Shareholders failing to approve the Scotia
Prime Resolution at the Scotia Prime Meeting;
(c) a final determination from the Court or a Court of Appeal which denies
the granting of the Final Order; and
(d) the failure to conclude the transactions contemplated hereby by
December 31, 1995, unless such date is extended by each of the parties
hereto.
6.3 TERMINATION REGARDING MINERA ANDES DISSENTS
This Agreement shall terminate, notwithstanding anything herein
contained, including the granting by the Court of the Final Order, if Minera
Andes Common Shareholders holding more than ten percent (10%) in number of
Minera Andes Common Shares have sent to Minera Andes (and not withdrawn or not
deemed by the Act to have withdrawn) written objection to the Minera Andes
Resolution pursuant to the provisions of section 184 of the Act, as modified by
the Interim Order, and Minera Andes elects to so terminate this Agreement on
advice to the other Amalgamating Company.
6.4 TERMINATION REGARDING SCOTIA PRIME DISSENTS
This Agreement shall terminate, notwithstanding anything herein
contained, including the granting by the Court of the Final Order, if Scotia
Prime Common Shareholders holding more than ten percent (10%) in number of
Scotia Prime Common Shares have sent to Scotia Prime (and not withdrawn or not
deemed by the Act to have withdrawn) written objection to the Scotia Prime
Resolution pursuant to the provisions of section 184 of the Act, as modified by
the Interim Order, and Scotia Prime elects to so terminate this Agreement on
advice to the other Amalgamating Company.
6.5 TERMINATION REGARDING CONDITIONS PRECEDENT
This Agreement shall terminate if the conditions precedent set forth
in sections 4.1, 4.2 and 4.3 are not satisfied or waived by the appropriate
party, as contemplated by those sections on or before the Effective Date.
6.6 TERMINATION IF MATERIAL ADVERSE CHANGE
Any party hereto may, at the discretion of their respective board of
directors, terminate their respective obligations hereunder if between the date
hereof and the issuance of the Certificate of Amalgamation there shall occur any
material adverse change, as determined by the respective board of directors, in
or with respect to the assets, liabilities (actual or contingent), capital,
operations, business or undertaking of the other parties.
6.7 SURVIVAL
Sections 8.2, 8.5 and 8.9 shall survive any termination of this
Agreement.
<PAGE>
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ARTICLE VII
IMPLEMENTATION OF TRANSACTIONS
7.1 CLOSING
Not later than ten Business Days after the Final order is granted, the
parties hereto shall meet at the office of Ogilvie and Company, in the City of
Calgary, or such other date and/or place as the parties hereto may agree, and
deliver to the others: (a) documents and other instruments referred to in this
Agreement to the extent the same may be given; and (b) instruments confirming
whether all of the conditions in their respective favour outlined herein have
been satisfied or waived.
7.2 CONTINUANCE
Scotia Prime shall promptly file such documents as may be required to
effect the Continuance prior to the Amalgamation.
7.3 ARTICLES OF ARRANGEMENT
After the Amalgamating Companies hereto have acknowledged to each
other the satisfaction of all conditions in their favour, Minera Andes and
Scotia Prime shall cause to be sent to the Registrar pursuant to subsection 186
of the Act the Articles of Arrangement relating to the Arrangement with the
request that the Certificates of Arrangement be issued to Minera Andes and
Scotia Prime.
7.4 AMALGAMATION
Thereafter, subject to the terms hereof and after the parties hereto
have acknowledged to the others the satisfaction of all conditions in their
favour, the parties hereto shall promptly file such documents as may be required
to effect the Amalgamation after the Continuance has been completed with the
request that the Certificate of Amalgamation be issued to Amalco.
ARTICLE VIII
GENERAL
8.1 BINDING EFFECT
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and permitted assigns.
8.2 EXPENSES
In the event the Arrangement is consummated in accordance with the
terms hereof, Amalco shall pay all respective legal, accounting and similar
costs and expenses incurred by the parties hereto in connection with this
transaction and the preparation, execution and delivery of this Agreement and
all documents and instruments executed pursuant hereto and any other reasonable
costs and expenses whatsoever and howsoever incurred, provided however, that in
the event the Arrangement is not consummated in accordance with the provisions
hereof, each party shall pay their respective legal, accounting and similar
costs and expenses incurred by such party in connection with this transaction
and the preparation, execution and delivery of this Agreement and all documents
and instruments executed pursuant hereto and any other reasonable costs and
expenses whatsoever and howsoever incurred by such party.
8.3 ASSIGNMENT
No party may assign its rights or obligations under this Agreement
without the prior written consent of all other parties hereto.
<PAGE>
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8.4 EQUITABLE REMEDIES
All covenants herein and opinions to be given hereunder as to
enforceability in accordance with the terms of any covenant, agreement or
document shall be qualified as to applicable bankruptcy and other laws affecting
the enforcement of creditors' rights generally and to the effect that specific
performance, being an equitable remedy, may not be ordered.
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties herein shall survive the
performance of the parties' respective obligations hereunder and the termination
of this Agreement, but shall expire on the date two years from the date hereof.
8.6 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws in force in the Province of Alberta.
8.7 ENTIRE AGREEMENT
This Agreement constitutes the whole of the agreement between the
parties hereto with respect to the transactions and matters herein contemplated
and supersedes all prior agreements whether written or oral in connection
herewith.
8.8 TIME OF ESSENCE
Time shall be of the essence.
8.9 INDEMNITIES
(a) Each of the respective parties hereto (each an "Indemnifying Party")
covenants and agrees to indemnify and save the other, and its
directors, officers, employees and agents harmless against and from
all liabilities, claims, demands, losses, costs, damages and expenses
to which such other, or any of its directors, officers, employees and
agents (collectively called "Indemnified Persons"), may be subject to
or may suffer, whether under the provisions of any statute or
otherwise, in any way caused by, or arising directly or indirectly
from, or in consequence of:
(i) any Misrepresentation or alleged Misrepresentation contained in
the portions of the Information Circular particular to the
Indemnifying Party or from information supplied by such
Indemnifying Party or in any other material filed in compliance
or intended compliance with any applicable statute (such
Information Circular and other material being herein called the
"Filing Documents"); or
(ii) any order made or inquiry, investigation or proceeding commenced
or threatened by any securities commission, stock exchange or
other competent authority based upon any untrue statement or
omission or alleged untrue statement or omission or
Misrepresentation or alleged Misrepresentation in any of the
Filing Documents which prevents, restricts or adversely affects
the transactions contemplated by this Agreement;
provided that such indemnity shall not apply to any liabilities ,
claims, demands, losses, cost, damages and expenses which any
Indemnified Person may be subject or may suffer arising out of any act
or action taken or committed solely by an Indemnified Person.
(b) If any matter or thing contemplated by section 8.9(a) shall be
asserted against any Indemnified Person, such Indemnified Person will
notify the appropriate Indemnifying Party as soon as possible of the
nature of such claim and the Indemnifying Party shall be entitled (but
not required) to assume the defence of any suit brought to enforce
such claim; provided, however, that the defence shall be through legal
counsel acceptable to the Indemnified Person and that no settlement
<PAGE>
- 20 -
may be made by the Indemnifying Party or by the Indemnified Person
without the prior written consent of the other. If the Indemnifying
Party assumes the defence of any such suit, each of the Indemnified
Persons shall continue to have the right to employ their own counsel,
who shall be acceptable to the Indemnifying Party in any proceeding
relating to a claim contemplated by section 8.9(a), and the fees and
expenses of a reasonable number of such counsel shall be recoverable
by the Indemnified Persons from the Indemnifying Party to the extent
that the same shall be covered by the indemnity in section 8.9(a), if
(a) the Indemnified Persons have been advised by such counsel that
there may be legal defence available to them which are different from
or additional to defences available to the Indemnifying Party (in
which case the Indemnifying Party shall not have the right to assume
the defence of such proceedings on their behalf; (b) the Indemnifying
Party shall not have undertaken the defence of such proceedings and
employed counsel within fifteen (15) days after notice of commencement
of such proceeding; or (c) the employment of such counsel has been
authorized by the Indemnifying Party in connection with the defense of
such proceedings.
8.10 COUNTERPARTS
This Agreement may be executed by the parties hereto in separate
counterparts each of which so executed and delivered shall be an original but
all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the day and year first above written.
MINERA ANDES INC.
Per: /s/ ALLEN V. AMBROSE
---------------------------------------
Per: /s/ ARMAND S. HANSEN
---------------------------------------
SCOTIA PRIME MINERALS, INCORPORATED
Per: /s/ JAMES GOLLA
---------------------------------------
Per: /s/ ILLEGIBLE
---------------------------------------
<PAGE>
SCHEDULE A to the Arrangement Agreement made the 21st day of July, 1995 between
Minera Andes Inc. and Scotia Prime Minerals, Incorporated
- -------------------------------------------------------------------------------
PLAN OF ARRANGEMENT
IN THE MATTER OF AN ARRANGEMENT between Minera Andes Inc.
and Scotia Prime Minerals, Incorporated pursuant to Section
186 of the Business Corporations Act (Alberta) S.A. 1981, c.
B-15, as amended.
ARTICLE I
INTERPRETATION
1.1 In this Arrangement, unless the context otherwise requires, capitalized
words and phrases shall have the meanings ascribed thereto in the Arrangement
Agreement to which this Arrangement is annexed as Schedule A.
ARTICLE II
ARRANGEMENT AGREEMENT
2.1 This Arrangement is made pursuant to and subject to the provisions of the
Arrangement Agreement, and is the Arrangement as described in the Arrangement
Agreement.
2.2 This Plan of Arrangement shall be binding upon Minera Andes and Scotia.
ARTICLE III
ARRANGEMENT
3.1 Following the filing of Articles of Arrangement in respect of this
Arrangement, Minera Andes and Scotia will be amalgamated and will continue as a
separate corporation.
3.2 Upon the issuance of the Certificate of Amalgamation on the Amalgamation
Effective Date, each of the events set out below shall occur and be deemed to
occur in the sequence set out therein without further action or formality,
(a) with respect to each Minera Andes Common Shareholder:
(i) such holder shall cease to be a holder of Minera Andes Common
Shares and his name shall be removed from the register of Minera
Andes Common Shares;
(ii) the issued and outstanding Minera Andes Common Shares shall be
converted into Amalco Common Shares on the basis of one Amalco
Common Share for each one Minera Andes Common Share held and the
holder's name shall be added to the common share register of
Amalco as the registered holder of such Amalco Common Shares;
(iii) all of the authorized but unissued shares of Minera Andes shall
be cancelled.
(b) with respect to the holder of the Minera Performance Right:
(i) such holder shall cease to be the holder of the Minera
Performance Right;
(ii) the Minera Performance Right shall be converted into the Amalco
Performance Right.
<PAGE>
- 2 -
3.3 Upon the issuance of the Certificate of Amalgamation on the Amalgamation
Effective Date, each of the events set out below shall occur and be deemed to
occur in the sequence set out therein without further action or formality,
(a) with respect to each Scotia Common Shareholder:
(i) such holder shall cease to be a holder of Scotia Common Shares
and his name shall be removed from the register of Scotia Common
Shares;
(ii) the issued and outstanding Scotia Common Shares shall be
converted into Amalco Common Shares on the basis of one Amalco
Common Share for each fifteen Scotia Common Shares held and the
holder's name shall be added to the common share register of
Amalco as the registered holder of such Amalco Common Shares;
(iii) all of the authorized but unissued shares of Scotia shall be
cancelled.
3.4 Amalco shall not be obligated to issue fractional shares. In the event that
a fractional share results from the application of Article III hereof, then: in
the case of a fraction of a share for Amalco of less than one-half of a share,
the number of shares to be received by the holder thereof shall be rounded down
to the next whole number of shares without further contemplation or claim
against Amalco nor its respective directors, officers or agents; or, in the case
of a fraction of a share for Amalco of one-half or more of a share, the number
of shares to be received by the holder thereof shall be rounded up to the next
higher whole number of shares of Amalco, provided that no shareholder will be
required to compensate Amalco in respect thereof.
3.5 The stated capital of Amalco shall be the aggregate of the stated capital
account of both of the Amalgamating Companies immediately before the
Amalgamation becomes effective.
3.6 Each of the Amalgamating Companies shall contribute to Amalco all of its
assets, subject to its liabilities, as such exist, immediately before the
Amalgamation Effective Date.
3.7 Amalco shall possess all of the property, rights, privileges and franchises
and shall be subject to all of the liabilities, as such exist, immediately
before the Amalgamation Effective Date.
3.8 All rights of creditors against the property, rights and assets of each of
the Amalgamating Companies and all liens upon their property, rights and assets
shall be unimpaired by the Arrangement, the Continuance or the Amalgamation and
all debts, contracts, liabilities and duties of each of the Amalgamating
Companies shall thenceforth attach to Amalco and shall be enforceable against
it.
3.9 No action or proceeding by or against any of the parties hereto shall abate
or be affected by the Arrangement, the Continuance or the Amalgamation.
3.10 Certificates representing the securities of Amalco into which securities of
the Amalgamating Companies have been converted will be held by The Montreal
Trust Company of Canada, at its Calgary office, for those holders entitled
thereto against deposit of the certificate or certificates representing the
securities of the Amalgamating Companies so converted.
3.11 As soon as practicable after the Amalgamation Effective Date, Amalco shall
forward to each holder of securities of the Amalgamating Companies at the
address of such holder as it appeared in the relevant share register of the
Amalgamating Companies at the Amalgamation Effective Date, a letter of
transmittal containing, among other things, instructions for obtaining delivery
of certificates representing such securities of the respective Amalgamating
Companies. Such holder of securities shall be entitled to receive certificates
representing Amalco securities which such holder is entitled to receive pursuant
to the terms hereof upon delivering the certificate formerly representing such
holder's securities to The Montreal Trust Company of Canada, or as The Montreal
Trust Company of Canada may otherwise direct, in accordance with the
instructions contained in the letter of transmittal. Such certificate formerly
representing such holder's securities in the respective Amalgamating Companies
shall be accompanied by the letter of transmittal, duly completed and such other
documents as The Montreal Trust Company of Canada may reasonably require. The
Montreal Trust Company of Canada shall register such securities in such name,
and shall deliver by first class mail, postage prepaid, or in the case of postal
disruption, by such other means
<PAGE>
- 3 -
as The Montreal Trust Company of Canada deems prudent, such certificates to such
address as such holder may direct in such letter of transmittal, as soon as
practicable after receipt by The Montreal Trust Company of Canada of such
documents.
3.12 All dividends paid and distributions made with respect to any Amalgamating
Companies' Common Shares, allotted and issued pursuant to this Arrangement but
for which a certificate has not been issued shall be paid or delivered to Amalco
in trust for the registered holder thereof. All monies received by Amalco shall
be invested by it in interest-bearing trust accounts upon such terms as Amalco
may reasonably deem appropriate. Amalco shall pay and deliver to any such
registered holder as soon as reasonably practicable after application therefor
is made by the registered holder to Amalco in such form as Amalco may reasonably
require, such dividends, distributions and any interest thereof to which such
holder is entitled, net of applicable withholding and other taxes.
3.13 Any certificate formerly representing any securities of the Amalgamating
Companies to which Article III hereof applies and not deposited with all other
documents as provided in section 3.12 on or prior to the 6th anniversary of the
Amalgamation Effective Date shall cease to represent a right or claim of any
kind or nature and the right of such holder to receive Amalco Common Shares
shall be deemed to be surrendered to Amalco together with all dividends or
distributions thereon held by such holder.
ARTICLE IV
SHAREHOLDER DISSENTING RIGHTS
4.1 Holders of Minera Andes Common Shares and/or Scotia Common Shares, who have
given a written objection to the respective Minera Andes Resolution and/or
Scotia Resolution approving the Arrangement, which remains outstanding on the
Amalgamation Effective Date in accordance with the rights of dissent in respect
of the Plan of Arrangement granted by the Interim Order and who:
(a) are ultimately entitled to be paid fair value for the Minera Andes
Common Shares and/or Scotia Common Shares, in respect of which they
dissent in accordance with the provisions of such Interim Order,
whereby by Order of a Court (as defined in the Act) or by acceptance
of an offer made pursuant to such Interim Order, shall be deemed to
have transferred such Minera Andes Common Shares and/or Scotia Common
Shares to Amalco for cancellation on the Amalgamation Effective Date;
or
(b) are ultimately not so entitled to be paid fair value for the Minera
Andes Common Shares and/or Scotia Common Shares in respect of which
they dissent, shall not be, or be reinstated as, shareholders of
Amalco but for purposes of receipt of consideration shall be treated
as if they had participated in the Plan of Arrangement on the same
basis as a non-dissenting holder of Minera Andes Common Shares and/or
Scotia Common Shares and accordingly shall be entitled to receive such
Amalco Common Shares as non-dissenting holders are entitled to receive
on the basis set forth in Article III of this Plan of Arrangement and
shall be deemed to have transferred such shares to Amalco,
but in no case shall Amalco or Minera Andes or Scotia be required to recognize
such holders of Minera Andes Common Shares and/or Scotia Common Shares, as the
case may be, as securityholders thereof after the Amalgamation Effective Date.
<PAGE>
SCHEDULE B-1 to the Arrangement Agreement made the 21st day of July, 1995
between Scotia Prime Minerals, Incorporated and Minera Andes Inc.
- -------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 14.1
(SECTION 186)
ALBERTA
CONSUMER AND CORPORATE AFFAIRS ARTICLES OF ARRANGEMENT
- -------------------------------------------------------------------------------
(c) NAME OF CORPORATION: (d) CORPORATE ACCESS NUMBER:
SCOTIA PRIME MINERALS, INCORPORATED
- -------------------------------------------------------------------------------
(e) IN ACCORDANCE WITH THE ORDER APPROVING THE ARRANGEMENT, THE ARTICLES OF THE
CORPORATION ARE AMENDED AS FOLLOWS:
The Corporation has received a Final Order of the Court of Queen's Bench of
Alberta approving an arrangement Scotia Prime Minerals, Incorporated and
Minera Andes Inc. A copy of such order and the Plan of Arrangement are
attached hereto.
- -------------------------------------------------------------------------------
DATE SIGNATURE TITLE
____________________, 1995
- -------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
SCHEDULE B-2 to the Arrangement Agreement made the 21st day of July, 1995
between Scotia Prime Minerals, Incorporated and Minera Andes Inc.
BUSINESS CORPORATIONS ACT FORM 14.1
(SECTION 186)
ALBERTA
CONSUMER AND CORPORATE AFFAIRS ARTICLES OF ARRANGEMENT
- -------------------------------------------------------------------------------
(f) NAME OF CORPORATION: (g) CORPORATE ACCESS NUMBER:
MINERA ANDES INC. 20618792
- -------------------------------------------------------------------------------
(h) IN ACCORDANCE WITH THE ORDER APPROVING THE ARRANGEMENT, THE ARTICLES OF THE
CORPORATION ARE AMENDED AS FOLLOWS:
The Corporation has received a Final Order of the Court of Queen's Bench of
Alberta approving an arrangement Scotia Prime Minerals, Incorporated and
Minera Andes Inc. A copy of such order and the Plan of Arrangement are
attached hereto.
- -------------------------------------------------------------------------------
DATE SIGNATURE TITLE
____________________, 1995
- -------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
SCHEDULE C to the Arrangement Agreement made the 21st day of July, 1995 between
Scotia Prime Minerals, Incorporated and Minera Andes Inc.
- -------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 9
(SECTION 179)
ALBERTA
CONSUMER AND CORPORATE AFFAIRS ARTICLES OF AMALGAMATION
- -------------------------------------------------------------------------------
(i) NAME OF AMALGAMATED CORPORATION: (j) CORPORATE ACCESS NO.:
MINERA ANDES INC.
- -------------------------------------------------------------------------------
(k) THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE:
The attached Schedule 1 is incorporated into and forms part of this form.
- -------------------------------------------------------------------------------
(l) RESTRICTIONS IF ANY ON SHARE TRANSFERS:
None
- -------------------------------------------------------------------------------
(m) NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS:
Minimum 1, Maximum 15
- -------------------------------------------------------------------------------
(n) RESTRICTIONS IF ANY ON BUSINESS THE CORPORATION MAY CARRY ON:
None
- -------------------------------------------------------------------------------
(o) OTHER PROVISIONS, IF ANY:
The Board of Directors of the Corporation may, between annual meetings
appoint one or more additional directors of the Corporation to serve until
the next annual meeting, but the number of additional directors shall not
at any time exceed one-third (1/3) of the number of directors who held
office at the expiration of the last annual meeting of the Corporation.
- -------------------------------------------------------------------------------
(p) NAME OF AMALGAMATING CORPORATIONS: CORPORATE ACCESS NO.:
Minera Andes Inc. 20618792
Scotia Prime Minerals, Incorporated
- -------------------------------------------------------------------------------
(q) DATE SIGNATURE TITLE
____________________, 1995
- -------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
SCHEDULE "1"
The shares which the Corporation is authorized to issue are:
(a) an unlimited number of common shares without nominal or par value with the
following rights, privileges, restrictions and conditions:
(i) to vote at meetings of shareholders, except meetings at which only
holders of a specified class of shares are entitled to vote;
(ii) subject to the rights, privileges, restrictions and conditions
attaching to any other class of shares of the Corporation, to share
equally in the remaining property of the Corporation upon liquidation,
dissolution or winding-up of the Corporation; and
(iii) subject to the rights of the preferred shares, the common shares
shall be entitled to receive dividends if, as and when declared by the
directors of the Corporation; and
(b) an unlimited number of preferred shares without nominal or par value
("Preferred Shares") which, as a class, have attached thereto the
following:
(i) the Preferred Shares may from time to time be issued in one or more
series and, subject to the following provisions, to the sending of
articles of amendment in prescribed form and the issuance of a
certificate of amendment in respect thereof, the directors may fix
from time to time before such issue the number of shares which is to
comprise each series and the designation, rights, privileges,
restrictions and conditions attaching to each series of preferred
shares including, without limiting the generality of the foregoing,
the rate or amount of dividends or the method of calculating
dividends, the dates of payment thereof, the redemption, purchase
and/or conversion prices and terms and conditions of redemption,
purchase and/or conversion, and any sinking fund or other provisions;
(ii) the Preferred Shares of each series shall, with respect to the payment
of dividends and the distribution of assets or return of capital in
the event of liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other return of
capital or distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, rank on a
parity with the preferred shares of every other series and be entitled
to preference over the common shares and over any other shares of the
Corporation ranking junior to the preferred shares. The Preferred
Shares of any series may also be given such other preferences, not
inconsistent with these articles, over the common shares and any other
shares of the Corporation ranking junior to such preferred shares as
may be fixed in accordance with clause (b) (i);
(iii) if any cumulative dividends or amounts payable on the return of
capital in respect of a series of Preferred Shares are not paid in
full, all series of Preferred Shares shall participate rateably in
respect of accumulated dividends and return of capital; and
(iv) unless the directors otherwise determine in the articles of amendment
designating a series, the holder of each share of a series of
Preferred Shares shall not, except as otherwise specifically provided
in the Business Corporations Act (Alberta), be entitled to receive
notice of or vote at any meeting of shareholders.
<PAGE>
SCHEDULE D to the Arrangement Agreement made the 21st day of July, 1995 between
Scotia Prime Minerals, Incorporated and Minera Andes Inc.
- -------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 11
(SECTIONS 181, 261 AND 262)
ALBERTA
CONSUMER AND CORPORATE AFFAIRS ARTICLES OF CONTINUANCE
- -------------------------------------------------------------------------------
1. NAME OF CORPORATION 2. CORPORATE ACCESS NO.:
SCOTIA PRIME MINERALS, INCORPORATED
- -------------------------------------------------------------------------------
3. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE:
The attached Schedule "1" is incorporated into and forms part of this form.
- -------------------------------------------------------------------------------
4. RESTRICTIONS IF ANY ON SHARE TRANSFERS:
None
- -------------------------------------------------------------------------------
5. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS:
Minimum 1, Maximum 15
- -------------------------------------------------------------------------------
6. RESTRICTIONS IF ANY ON BUSINESSES THE CORPORATION MAY CARRY ON:
None
- -------------------------------------------------------------------------------
7. IF CHANGE OF NAME EFFECTED, PREVIOUS NAME:
Not applicable.
- -------------------------------------------------------------------------------
8. DETAILS OF INCORPORATION:
As a result of a merger of Petroco of Texas, Inc. into Petroco of Wyoming,
Inc., the corporation became incorporated under the laws of the State of
Wyoming on February 25, 1988, under the name Scotia Prime Minerals,
Incorporated. Continued under the laws of the Province of Nova Scotia on
September 19, 1988.
- -------------------------------------------------------------------------------
9. OTHER PROVISIONS, IF ANY:
(a) The directors may, between annual general meetings, appoint 1 or more
additional directors of the Corporation to serve until the next annual
general meeting, but the number of additional directors shall not at any
time exceed 1/3 of the number of directors who held office at the
expiration of the last annual meeting of the Corporation.
(b) Meetings of shareholders of the Corporation may be held in Toronto,
Ontario, Canada.
- -------------------------------------------------------------------------------
10. DATE SIGNATURE TITLE
Director
- -------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
<PAGE>
SCHEDULE "1"
The shares which the Corporation is authorized to issue are:
(a) an unlimited number of common shares without nominal or par value with the
following rights, privileges, restrictions and conditions:
(i) to vote at meetings of shareholders, except meetings at which only
holders of a specified class of shares are entitled to vote;
(ii) subject to the rights, privileges, restrictions and conditions
attaching to any other class of shares of the Corporation, to share
equally in the remaining property of the Corporation upon liquidation,
dissolution or winding-up of the Corporation; and
(iii) subject to the rights of the preferred shares, the common shares
shall be entitled to receive dividends if, as and when declared by the
directors of the Corporation; and
(b) an unlimited number of preferred shares without nominal or par value
("Preferred Shares") which, as a class, have attached thereto the
following:
(i) the Preferred Shares may from time to time be issued in one or more
series and, subject to the following provisions, to the sending of
articles of amendment in prescribed form and the issuance of a
certificate of amendment in respect thereof, the directors may fix
from time to time before such issue the number of shares which is to
comprise each series and the designation, rights, privileges,
restrictions and conditions attaching to each series of preferred
shares including, without limiting the generality of the foregoing,
the rate or amount of dividends or the method of calculating
dividends, the dates of payment thereof, the redemption, purchase
and/or conversion prices and terms and conditions of redemption,
purchase and/or conversion, and any sinking fund or other provisions;
(ii) the Preferred Shares of each series shall, with respect to the payment
of dividends and the distribution of assets or return of capital in
the event of liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other return of
capital or distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, rank on a
parity with the preferred shares of every other series and be entitled
to preference over the common shares and over any other shares of the
Corporation ranking junior to the preferred shares. The Preferred
Shares of any series may also be given such other preferences, not
inconsistent with these articles, over the common shares and any other
shares of the Corporation ranking junior to such preferred shares as
may be fixed in accordance with clause (b) (i);
(iii) if any cumulative dividends or amounts payable on the return of
capital in respect of a series of Preferred Shares are not paid in
full, all series of Preferred Shares shall participate rateably in
respect of accumulated dividends and return of capital; and
(iv) unless the directors otherwise determine in the articles of amendment
designating a series, the holder of each share of a series of
Preferred Shares shall not, except as otherwise specifically provided
in the Business Corporations Act (Alberta), be entitled to receive
notice of or vote at any meeting of shareholders.
<PAGE>
SCHEDULE E to the Arrangement Agreement made the 21st day of July, 1995 between
Scotia Prime Minerals, Incorporated and Minera Andes Inc.
- -------------------------------------------------------------------------------
MINERA ANDES INC.
STOCK OPTION PLAN
1. Purpose
The purpose of the Stock Option Plan (the "Plan") of Minera Andes
Inc., a body corporate incorporated under the Business Corporations Act
(Alberta) (the "Corporation"), is to advance the interests of the Corporation or
any of its subsidiaries or affiliates by encouraging the directors, officers,
employees and consultants of the Corporation or any of its subsidiaries or
affiliates to acquire shares in the Corporation, thereby increasing their
proprietary interest in the Corporation, encouraging them to remain associated
with the Corporation or any of its subsidiaries or affiliates and furnishing
them with additional incentive in their efforts on behalf of the Corporation or
any of its subsidiaries or affiliates in the conduct of their affairs.
2. Administration and Granting of Options
The Plan shall be administered by the board of directors of the
Corporation. A majority of the board of directors shall constitute a quorum, and
the acts of a majority of the directors present at any meeting at which a quorum
is present, or acts unanimously approved in writing, shall be the acts of the
directors.
Subject to the provisions of the Plan, the board of directors shall
have authority to construe and interpret the Plan and all option agreements
entered into thereunder, to define the terms used in the Plan and in all option
agreements entered into thereunder, to prescribe, amend and rescind rules and
regulations relating to the Plan and to make all other determinations necessary
or advisable for the administration of the Plan. All determinations and
interpretations made by the board of directors shall be binding and conclusive
on all participants in the Plan and on their legal personal representatives and
beneficiaries.
Each option granted hereunder shall be evidenced by an agreement,
signed on behalf of the Corporation and by the optionee, in such form as the
directors shall approve. Each such agreement shall recite that it is subject to
the provisions of this Plan.
3. Shares Subject to Plan
Subject to adjustment as provided in Section 15 hereof, the shares to
be offered under the Plan shall consist of shares of the Corporation's
authorized but unissued common shares. The aggregate number of shares to be
delivered upon the exercise of all options granted under the Plan (the
"Options") shall not exceed 900,000 shares. If any Option granted hereunder
shall expire or terminate for any reason without having been exercised in full,
the unpurchased shares subject thereto shall again be available for the purpose
of this Plan.
4. Number of Optioned Shares
The number of shares subject to an Option to a Participant shall be
determined by the Board of Directors, but no Participant, upon the Corporation
becoming listed on any stock exchange, shall be granted an Option which exceeds
the maximum number of shares permitted by any stock exchange on which the common
shares are then listed or other regulatory body having jurisdiction.
5. Vesting
The Committee may, in its sole discretion, determine the time during
which Options shall vest and the method of vesting, or that no vesting
restriction shall exist.
<PAGE>
- 2 -
6. Maintenance of Sufficient Capital
The Corporation shall at all times during the term of the Plan reserve
and keep available such numbers of shares as will be sufficient to satisfy the
requirements of the Plan.
7. Participation
Directors, officers, management, consultants and employees of the
Corporation shall be eligible for selection to participate in the Plan (such
persons hereinafter collectively referred to as "Participants"). The board of
directors shall determine to whom options shall be granted, the terms and
provisions of the respective option agreements, the time or times at which such
options shall be granted, and the number of shares to be subject to each option.
An individual who has been granted an option may, if he is otherwise eligible,
and if permitted under the policies of the stock exchange or stock exchanges on
which the shares of the Corporation are to be listed, be granted an additional
option or options if the directors shall so determine.
8. Exercise Price
(a) The exercise price of the shares covered by each option shall be
determined by the directors. Subject to the provisions of Section
8(b), the exercise price shall be not less than the closing price of
the Corporation's shares on the stock exchange or stock exchanges on
which the shares of the Corporation are listed on the last trading day
immediately preceding the day on which the stock exchange is notified
of the proposed issuance of option, less any discounts permitted by
the policy or policies of such stock exchange or stock exchanges;
(b) If an option is granted within six months of a public distribution of
the Corporation's shares by way of prospectus, then the minimum
exercise price of such option shall, if the policy of such stock
exchange or stock exchanges requires, be the greater of the price
determined pursuant to Section 8(a) and the price per share paid by
the investing public for shares of the Corporation acquired by the
public during such public distribution, determined in accordance with
the policy of such stock exchange or stock exchanges.
9. Duration of Option
Each Option and all rights thereunder shall be expressed to expire on
the date set out in the Option agreements and shall be subject to earlier
termination as provided in paragraphs 11 and 12.
10. Option Period, Consideration and Payment
(a) The Option period shall be a period of time fixed by the Committee, not
to exceed the maximum period permitted by any stock exchange on which the common
shares are then listed or other regulatory body having jurisdiction, provided
that the Option period shall be reduced with respect to any Option as provided
in Sections 11 and 12 covering cessation as a director, officer, employee or
consultant of the Corporation or any of its subsidiaries or affiliates or death
of the Participant.
(b) Except as set forth in Sections 10(c), 11 and 12, no Option may be
exercised unless the Participant is at the time of such exercise a director,
officer, employee or consultant of the Corporation or any of its subsidiaries or
affiliates.
(c) Notwithstanding any other provision to the contrary, an Option granted
to a consultant in connection with specific services provided or to be provided
by that consultant shall be exercised only after the date of completion of such
service and prior to 30 days following the date of completion of such service.
(d) The exercise of any Option will be contingent upon receipt by the
Corporation at its head office of a written notice of exercise, specifying the
number of shares with respect to which the Option is being exercised,
accompanied by cash payment, certified cheque or bank draft for the full
purchase price of such shares with respect to which the Option is exercised. No
Participant or his legal representatives, legatees or distributees will be, or
will be deemed to be, a holder of any shares subject to an Option under this
Plan, unless and until the certificates for such shares are issued to such
persons under the terms of the Plan.
<PAGE>
- 3 -
11. Ceasing To Be a Director, Officer, Employee or Consultant
If a Participant shall cease to be a director, officer, employee or
consultant of the Corporation or any of its subsidiaries or affiliates for any
reason (other than death), the Participant may but only within 90 days next
succeeding the Participant's ceasing to be a director, officer, employee or
consultant, exercise the Participant's Option to the extent that the Participant
was entitled to exercise it at the date of such cessation.
Nothing contained in the Plan nor in any Option granted pursuant to
the Plan shall confer upon any Participant any right with respect to Continuance
as a director, officer, employee or consultant of the Corporation or any of its
subsidiaries or affiliates.
12. Death of Participant
In the event of the death of a Participant, the Option previously
granted to him shall be exercisable only within the twelve months next
succeeding such death and then only:
(a) by the person or persons to whom the Participant's rights under the
Option shall pass by the Participant's will or the laws of descent and
distribution; and
(b) if and to the extent that the Participant was entitled to exercise the
Option at the date of the Participant's death.
13. Rights of Optionee
No person entitled to exercise an Option shall have any of the rights
or privileges of a shareholder of the Corporation in respect of any shares
issuable upon exercise of such Option until certificates representing such
shares shall have been issued and delivered.
14. Proceeds from Sale of Shares
The proceeds from sale of shares issued upon the exercise of Options
shall be added to the general funds of the Corporation and shall thereafter be
used from time to time for such corporate purposes as the Committee may
determine and direct.
15. Adjustments
If the outstanding shares of the Corporation are increased, decreased,
changed into or exchanged for a different number or kind of shares of securities
of the Corporation through re-organization, merger, recapitalization,
re-classification, stock dividend, subdivision or consolidation, an appropriate
and proportionate adjustment shall be made in the maximum number or kind of
shares as to which options may be granted under the Plan. A corresponding
adjustment changing the number or kind of shares allocated to unexercised
options or portions thereof, which shall have been granted prior to any such
change, shall likewise be made. Any such adjustment in the outstanding options
shall be made without change in the aggregate purchase price applicable to the
unexercised portion of the option but with a corresponding adjustment in the
price for each share or other unit of any security covered by the option.
Upon the liquidation or dissolution of the Corporation or upon a
re-organization, merger or consolidation of the Corporation with one or more
corporations as a result of which the Corporation is not the surviving
corporation, or upon the sale of substantially all of the property or more than
eighty (80%) percent of the then outstanding shares of the Corporation to
another corporation, the Plan shall terminate, and any options theretofore
granted hereunder shall terminate unless provision is made in writing in
connection with such transaction for the Continuance of the Plan and for the
assumption of options theretofore granted, or the substitution for such options
of new options covering the shares of a successor employer corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to number and kind
of shares and prices, in which event the Plan and options theretofore granted
shall continue in the manner and upon the terms so provided. If the Plan and
unexercised options shall terminate pursuant to the foregoing sentence all
persons then entitled to exercise an unexercised portion of options then
outstanding shall have the right at such time immediately prior to consummation
of the event which
<PAGE>
- 4 -
results in the termination of the Plan as the Corporation shall designate, to
exercise their options to the full extent not theretofore exercised.
Adjustments under this Section shall be made by the board of directors
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional share shall be
issued under the Plan on any such adjustment.
16. Transferability
All benefits, rights and Options accruing to any Participant in
accordance with the terms and conditions of the Plan shall not be transferrable
or assignable unless specifically provided herein. During the lifetime of a
Participant any benefits, rights and Options may only be exercised by the
Participant.
17. Amendment and Termination of Plan
The Committee may, at any time, suspend or terminate the Plan. The
board may also at any time amend or revise the terms of the Plan, PROVIDED that
no such amendment or revision shall alter the terms of any Options theretofore
granted under the Plan.
18. Necessary Approvals
The ability of the Options to be exercised and the obligation of the
Corporation to issue and deliver shares in accordance with the Plan is subject
to any approvals which may be required from the shareholders of the Corporation,
any regulatory authority or stock exchange having jurisdiction over the
securities of the Corporation. If any shares cannot be issued to any Participant
for whatever reason, the obligation of the Corporation to issue such shares
shall terminate and any Option exercise price paid to the Corporation will be
returned to the Participant.
Options issued to residents of the United States may only be issued
and subsequently exercised in conformity with the registration provisions of the
Securities Act of 1933, as amended the rules and regulations thereto and the
applicable state securities laws.
19. Prior Plans
The Plan shall entirely replace and supersede prior share options
plans, if any, enacted by the Board of Directors of the Corporation or its
predecessor corporations.
20. Stock Exchange Rules
The rules of any stock exchange upon which the Corporation's Shares
are listed shall be applicable relative to options granted to Participants.
21. Effective Date of Plan
The Plan has been adopted by the Committee subject to the approval of
any stock exchange on which the shares of the Corporation are to be listed or
other regulatory body having jurisdiction and, if so approved, the Plan shall
become effective upon such approvals being obtained.
<PAGE>
- 5 -
IN WITNESS WHEREOF the Corporation has caused its corporate seal to be
affixed hereto in the presence of its officers duly authorized in that behalf as
of the _____ day of _____________________, 1995.
MINERA ANDES INC.
Per: (c/s)
----------------------------------
Per:
---------------------------------------
CORPORATE ACCESS NUMBER
20673250
ALBERTA
Government of Alberta
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
AMALGAMATION
MINERA ANDES INC.
IS THE RESULT OF AN AMALGAMATION FILED ON NOVEMBER 6, 1995.
-------------------------
Registrar of Corporations
[seal of Registries, Government of Alberta]
-1-
<PAGE>
BUSINESS CORPORATIONS ACT FORM 9
(SECTION 179)
ALBERTA
CONSUMER AND CORPORATION AFFAIRS ARTICLES OF AMALGAMATION
- -------------------------------------------------------------------------------
1. NAME OF AMALGAMATED CORPORATION: 2. CORPORATE ACCESS NO.:
MINERA ANDES INC. 20673250
3. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE
CORPORATION IS AUTHORIZED TO ISSUE:
The attached Schedule 1 is incorporated into and forms part of this form.
4. RESTRICTIONS IF ANY ON SHARE TRANSFERS:
None
5. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS:
Minimum 1, Maximum 15
6. RESTRICTIONS IF ANY ON BUSINESS THE CORPORATION MAY CARRY ON:
None
7. OTHER PROVISIONS, IF ANY:
The Board of Directors of the Corporation, may, between annual meetings
appoint one or more additional directors of the Corporation to serve until
the next annual meeting, but the number of additional directors shall not
at any time exceed one-third (1/3) of the number of directors who held
office at the expiration of the last annual meeting of the Corporation.
8. NAME OF AMALGAMATING CORPORATIONS: CORPORATE ACCESS NO.:
Minera Andes Inc. 20618792
Scotia Prime Minerals, Incorporated 20666879
9. DATE SIGNATURE TITLE
November 1, 1995 _______________________ Director
FOR DEPARTMENT USE ONLY FILED
-2-
<PAGE>
SCHEDULE 1
The shares which the Corporation is authorized to issue are:
(a) an unlimited number of common shares without nominal or par value with the
following rights, privileges, restrictions and conditions:
(i) to vote at meetings of shareholders, except meetings at which only
holders of a specified class of shares are entitled to vote;
(ii) subject to the rights, privileges, restrictions and conditions
attaching to any other class of shares of the Corporation, to share
equally in the remaining property of the Corporation upon liquidation,
dissolution or winding-up of the Corporation; and
(iii) subject to the rights of the preferred shares, the common shares
shall be entitled to receive dividends if, as and when declared by the
directors of the Corporation; and
(b) an unlimited number of preferred shares without nominal or par value
("Preferred Shares") which, as a class, have attached thereto the
following:
(i) the Preferred Shares may from time to time be issued in one or more
series and, subject to the following provisions, to the sending of
articles of amendment in prescribed form and the issuance of a
certificate of amendment in respect thereof, the directors may fix
from time to time before such issue the number of shares which is to
comprise each series and the designation, rights, privileges,
restrictions and conditions attaching to each series of preferred
shares including, without limiting the generality of the foregoing,
the rate or amount of dividends or the method of calculating
dividends, the dates of payment thereof, the redemption, purchase
and/or conversion prices and terms and conditions of redemption,
purchase and/or conversion, and any sinking fund or other provisions;
(ii) the Preferred Shares of each series shall, with respect to the payment
of dividends and the distribution of assets or return of capital in
the event of liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other return of
capital or distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, rank on a
parity with the preferred shares of every other series and be entitled
to preference over the common shares and over any other shares of the
Corporation ranking junior to the preferred shares. The Preferred
Shares of
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<PAGE>
any series may also be given such other preferences, not inconsistent
with these articles, over the common shares and any other shares of
the Corporation ranking junior to such preferred shares as may be
fixed in accordance with clause (b) (i);
(iii) if any cumulative dividends or amounts payable on the return of
capital in respect of a series of Preferred Shares are not paid in
full, all series of Preferred Shares shall participate rateably in
respect of accumulated dividends and return of capital; and
(iv) unless the directors otherwise determine in the articles of amendment
designating a series, the holder of each share of a series of
Preferred Shares shall not, except as otherwise specifically provided
in the Business Corporations Act (Alberta), be entitled to receive
notice of or vote at any meeting of shareholders.
-4-
<PAGE>
CORPORATE ACCESS NUMBER
20673250
ALBERTA
Government of Alberta
BUSINESS CORPORATIONS ACT
CERTIFICATE
OF
AMENDMENT
MINERA ANDES INC.
AMENDED ITS ARTICLES ON AUGUST 1, 1996.
-------------------------
Registrar of Corporations
[seal of Registries, Government of Alberta]
<PAGE>
BUSINESS CORPORATIONS ACT FORM 4
(SECTION 179)
ALBERTA
CONSUMER AND CORPORATION AFFAIRS ARTICLES OF AMENDMENT
- -------------------------------------------------------------------------------
1. NAME OF CORPORATION: 2. CORPORATE ACCESS NO.:
MINERA ANDES INC. 20673250
3. Pursuant to subsection 167(1)(m) of the Business Corporations Act
(Alberta), item 7 of the Articles of Amalgamation is amended by the
addition of the following paragraph:
"In compliance with section 126 of the Business Corporations Act (Alberta),
meetings of shareholders of the Corporation shall be held at the place
within Alberta that the directors determine, or in Vancouver, British
Columbia."
- -------------------------------------------------------------------------------
4. DATE SIGNATURE TITLE
July 10, 1996 _______________________ Director
- -------------------------------------------------------------------------------
FOR DEPARTMENT USE ONLY FILED
-2-
BY-LAW NUMBER 1
A BY-LAW RELATING GENERALLY
TO THE TRANSACTION OF THE
BUSINESS AND AFFAIRS OF
MINERA ANDES INC.
<PAGE>
CONTENTS
Page
----
SECTION 1. DEFINITIONS AND INTERPRETATION ....................................1
SECTION 2. BUSINESS OF THE CORPORATION .......................................3
SECTION 3. BORROWING .........................................................4
SECTION 4. DIRECTORS .........................................................5
SECTION 5. MEETINGS OF DIRECTORS .............................................9
SECTION 6. OFFICERS AND APPOINTEES OF THE BOARD .............................11
SECTION 7. CONFLICT OF INTEREST .............................................13
SECTION 8. LIABILITY AND INDEMNIFICATION ....................................14
SECTION 9. SECURITIES .......................................................16
SECTION 10. MEETINGS OF SHAREHOLDERS ........................................19
SECTION 11. NOTICES .........................................................26
<PAGE>
SECTION 1.
DEFINITIONS AND INTERPRETATION
(1) Definitions
In the By-laws, unless the context otherwise requires:
(a) "ABCA" means the Business Corporations Act (Alberta), as amended;
(b) "appoint" includes elect and vice versa;
(c) "Articles" includes the original or restated articles of incorporation,
articles of amendment, articles of amalgamation, articles of continuance,
articles of reorganization, articles of arrangement, articles of
dissolution and articles of revival of the Corporation, and any amendment
to any of them;
(d) "Board" means the board of directors of the Corporation;
(e) "By-laws" means this by-law and all other by-laws of the Corporation from
time to time in force;
(f) "Corporation" means Minera Andes Inc.;
(g) "Director" means an individual who is elected or appointed as a director of
the Corporation;
(h) "Indemnified Party" has the meaning set out in section 8 for purposes of
that section;
(i) "Officer" means an officer of the Corporation appointed by the Board;
(j) "Record Date" means, for the purpose of determining Shareholders entitled
to receive notice of a meeting of Shareholders:
i) the date fixed in advance by the Board for that determination which
precedes the date on which the meeting is to be held by not more than
50 days and not less than 21 days,
ii) if no date is fixed by the Board, at the close of business on the last
business day which precedes the day on which the notice is sent, or
iii) if no notice is sent, the day on which the meeting is held;
-1-
<PAGE>
(k) "Recorded Address" means:
i) in the case of a Shareholder, the Shareholder's latest address as
shown in the Corporation's records or those of its transfer agent,
ii) in the case of joint Shareholders, the latest address as shown in the
Corporation's records or those of its transfer agent in respect of
those joint holders, or the first address appearing if there is more
than one address,
iii) in the case of a Director, the Director's latest address as shown in
the Corporation's records or in the last notice of directors filed
with the Registrar, and
iv) in the case of an Officer or auditor of the Corporation, that person's
latest address as shown in the Corporation's records;
(l) "Registrar" means the Registrar of Corporations or a Deputy Registrar of
Corporations appointed under the ABCA;
(m) "Regulations" means the Regulations, as amended, in force from time to time
under the ABCA; and
(n) "Shareholder" means a shareholder of the Corporation.
(2) Interpretation
In the By-laws, except if defined in this section or the context does not
permit:
(a) words and expressions defined or used in the ABCA have the meaning or use
given to them in the ABCA;
(b) words importing the singular include the plural and vice versa;
(c) words importing gender include masculine, feminine and neuter genders; and
(d) words importing persons include bodies corporate.
(3) Headings
The headings used in the By-laws are inserted for convenience of reference only.
The headings are not to be considered or taken into account in construing the
terms of the By-laws nor are they to be deemed in any way to clarify, modify or
explain the effect of any term of the Bylaws.
-2-
<PAGE>
(4) By-laws Subject to the ABCA
The By-laws are subject to the ABCA and the Regulations, to any unanimous
shareholder agreement and to the Articles, in that order.
SECTION 2.
BUSINESS OF THE CORPORATION
(1) Execution of Documents
Documents may be executed on behalf of the Corporation in the manner and by the
persons the Board may designate by resolution.
(2) Cheques, Drafts and Notes
Cheques, drafts or orders for the payment of money, notes, acceptances and bills
of exchange must be signed in the manner and by the persons the Board may
designate by resolution.
(3) Corporate Seal
The Board may, by resolution, adopt a corporate seal containing the name of the
Corporation as the corporate seal. A document issued by or executed on behalf of
the Corporation is not invalid only because the corporate seal is not affixed to
that document. A document requiring authentication by the Corporation does not
need to be under seal.
(4) Banking Arrangements
The Board may open any bank accounts the Corporation may require at a financial
institution designated by resolution of the Board. The Board may adopt,
authorize, execute or deposit any document furnished or required by the
financial institution and may do any other thing as may be necessarily
incidental to the banking and financial arrangements of the Corporation.
(5) Voting Rights in Other Bodies Corporate
The persons designated by the Board to execute documents on behalf of the
Corporation may execute and deliver instruments of proxy and arrange for the
issue of voting certificates or other evidence of the right to exercise voting
rights attached to any securities held by the Corporation in another body
corporate. The instruments, certificates or other evidence shall be in favor of
the person that is designated by the persons executing the instruments of proxy
or arranging for the issue of voting certificates or other evidence of the right
to exercise voting rights. In addition, the Board may direct the manner in which
and the person by whom any particular voting right or class of voting rights may
be exercised.
-3-
<PAGE>
(6) Withholding Information from Shareholders
No Shareholder is entitled to obtain any information respecting any detail or
conduct of the Corporation's business which, in the opinion of the Board, would
not be in the best interests of the Shareholders or the Corporation to
communicate to the public.
The Board may determine whether and under what conditions the accounts, records
and documents of the Corporation are open to inspection by the Shareholders. No
Shareholder has a right to inspect any account, record or document of the
Corporation except as conferred by the ABCA or authorized by resolution of the
Board or by resolution passed at a meeting of Shareholders.
(7) Divisions
The Board may cause any part of the business and operations of the Corporation
to be segregated or consolidated into one or more divisions upon the basis the
Board considers appropriate. Any division may be designated by the name the
Board determines and may transact business under that name. The name of the
Corporation must be set out in legible characters in and on all contracts,
invoices, negotiable instruments and orders for goods or services issued or made
by or on behalf of any division of the Corporation.
SECTION 3.
BORROWING
(1) Borrowing Power
Without limiting the borrowing power of the Corporation provided by the ABCA,
the Board may, without authorization of the Shareholders,
(a) borrow money on the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the Corporation;
(c) subject to section 42 of the ABCA, give a guarantee on behalf of the
Corporation to secure performance of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security interest in
all or any property of the Corporation, owned or subsequently acquired, to
secure any obligation of the Corporation.
The Directors may, by resolution, delegate to a Director, a committee of
Directors or an Officer all or any of the powers conferred on them by this
section.
-4-
<PAGE>
SECTION 4.
DIRECTORS
(1) Management of Business
The Board shall manage the business and affairs of the Corporation. Every
Director must comply with the ABCA, the Regulations, the Articles and the
By-laws.
(2) Qualification
A person is disqualified for election as a Director if that person:
(a) is less than 18 years of age;
(b) is
i) a dependent adult as defined in the Dependent Adults Act (Alberta) or
the subject of a certificate of incapacity under that Act,
ii) a formal patient as defined in the Mental Health Act (Alberta),
iii) the subject of an order under The Mentally Incapacitated Persons Act
(Alberta) appointing a committee of his or her person, estate or both,
or
iv) a person who has been found to be of unsound mind by a court elsewhere
than in Alberta;
(c) is not an individual; or
(d) has the status of bankrupt.
A Director is not required to hold shares issued by the Corporation.
(3) Number of Directors
The Board is to consist of that number of Directors permitted by the Articles.
In the event the Articles permit a minimum and maximum number of Directors, the
Board is to consist of the number of Directors the Shareholders determine by
ordinary resolution. The number of Directors at any one time may not be less
than the minimum or more than the maximum number permitted by the Articles.
(4) Increase Number
-5-
<PAGE>
The Shareholders may amend the Articles to increase the number, or the minimum
or maximum number, of Directors. Upon the adoption of an amendment increasing
the number or minimum number of Directors, the Shareholders may, at the meeting
at which they adopt the amendment, elect the additional number of Directors
authorized by the amendment. Upon the issue of a certificate of amendment, the
Articles are deemed to be amended as of the date the Shareholders adopted the
amendment.
(5) Decrease Number
The Shareholders may amend the Articles to decrease the number, or the minimum
or maximum number, of Directors. No decrease shortens the term of an incumbent
Director.
(6) Election and Term
Each Director named in the notice of directors filed at the time of
incorporation holds office from the issue of the certificate of incorporation
until the first meeting of Shareholders. The Shareholders are to elect Directors
by ordinary resolution at the first meeting of Shareholders and at each
succeeding annual meeting at which an election of Directors is required. The
elected Directors are to hold office for a term expiring not later than the
close of the next annual meeting of Shareholders following the election. A
Director not elected for an expressly stated term ceases to hold office at the
close of the first annual meeting of Shareholders following the Director's
election. If Directors are not elected at a meeting of Shareholders, the
incumbent Directors continue in office until their respective successors are
elected.
(7) Removal of Directors
The Shareholders may by ordinary resolution passed at a special meeting of
Shareholders remove a Director from office. Any vacancy created by the removal
of a Director may be filled at the meeting at which the Director was removed,
failing which the vacancy may be filled by a quorum of Directors.
(8) Consent
No election or appointment of an individual as a Director is effective unless:
(a) the individual was present at the meeting when elected or appointed and did
not refuse to act as Director; or
(b) if the individual was not present at the meeting when elected or appointed
as a Director, the individual
-6-
<PAGE>
i) consented in writing to act as a Director before the individual's
election or appointment or within 10 days after it, or
ii) has acted as a Director pursuant to the election or appointment.
(9) Ceasing to Hold Office
A Director ceases to hold office when:
(a) the Director dies or resigns;
(b) the Director is removed from office by the Shareholders who elected the
Director; or
(c) the Director ceases to be qualified for election as a Director under
subsection (2).
A Director's resignation is effective at the time a written resignation is sent
to the Corporation, or at the time specified in the resignation, whichever is
later.
(10) Filling Vacancies
A quorum of Directors may fill a vacancy in the Board, except a vacancy
resulting from an increase in the number or minimum number of Directors or from
a failure to elect the number or minimum number of Directors required by the
Articles. If there is not a quorum of Directors, or if there has been a failure
to elect the number or minimum number of Directors required by the Articles, the
Directors then in office must immediately call a special meeting of Shareholders
to fill the vacancy. If the Directors fail to call a meeting, or if there are no
Directors then in office, the meeting may be called by any Shareholder.
(11) Delegation to a Managing Director or Committee
The Directors may appoint from their number a Managing Director or a committee
of Directors. At least half of the members of a committee of Directors must be
resident Canadians. A Managing Director must be a resident Canadian. The
Directors may delegate to a Managing Director or a committee of Directors any of
the powers of the Directors. However, no Managing Director and no committee of
Directors has authority to:
(a) submit to the Shareholders any question or matter requiring the approval of
the Shareholders;
(b) fill a vacancy among the Directors or in the office of auditor;
-7-
<PAGE>
(c) issue securities, except in the manner and on the terms authorized by the
Directors;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the Corporation,
except in the manner and on the terms authorized by the Directors;
(f) pay a commission in connection with the sale of shares of the Corporation;
(g) approve a management proxy circular;
(h) approve any financial statements; or
(i) adopt, amend or repeal By-laws.
(12) Remuneration and Expenses
The Directors are entitled to receive remuneration for their services in the
amount the Board determines. Subject to the Board's approval, the Directors are
also entitled to be reimbursed for traveling and other expenses incurred by them
in attending meetings of the Board or any committee of Directors or in the
performance of their duties as Directors.
Nothing contained in the By-laws precludes a Director from serving the
Corporation in another capacity and receiving remuneration for acting in that
other capacity.
The Directors must disclose to the Shareholders the aggregate remuneration paid
to the Directors. The disclosure must be in a written document to be placed
before the Shareholders at every annual meeting of Shareholders and must relate
to the same time period as the financial statements required to be presented at
the meeting relate to.
(13) Annual Financial Statements
The Board must place before the Shareholders at every annual meeting of
Shareholders financial statements which have been approved by the Board as
evidenced by the signature of one or more of the Directors, the report of the
auditor and any further information respecting the financial position of the
Corporation and the results of its operations that is required by the ABCA, the
Regulations, the Articles, the By-laws or any unanimous shareholder agreement.
-8-
<PAGE>
SECTION 5.
MEETINGS OF DIRECTORS
(1) Calling Meetings
The Chairperson of the Board, the Managing Director or any Director may call a
meeting of Directors. A meeting of Directors or of a committee of Directors may
be held within or outside of Alberta at the time and place indicated in the
notice referred to in subsection (2).
(2) Notice
Notice of the time and place of a meeting of Directors or any committee of
Directors must be given to each Director or each Director who is a member of a
committee not less than 48 hours before the time fixed for that meeting. Notice
must be given in the manner prescribed in section 11. A notice of a meeting of
Directors need not specify the purpose of the business to be transacted at the
meeting except when the business to be transacted deals with a proposal to:
(a) submit to the Shareholders any question or matter requiring the approval of
the Shareholders;
(b) fill a vacancy among the Directors or in the office of auditor;
(c) issue securities;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the Corporation;
(f) pay a commission in connection with the sale of shares of the Corporation;
(g) approve a management proxy circular;
(h) approve any financial statements; or
(i) adopt, amend or repeal By-laws.
(3) Notice of Adjourned Meeting
Notice of an adjourned meeting of Directors is not required if a quorum is
present at the original meeting and if the time and place of the adjourned
meeting is announced at the original meeting. If a meeting is adjourned because
a quorum is not present, notice of the time and place of the adjourned meeting
must be given as for the original meeting. The adjourned meeting may proceed
with the business to have been transacted at the original meeting, even though a
quorum is not present at the adjourned meeting.
-9-
<PAGE>
(4) Meetings Without Notice
No notice of a meeting of Directors or of a committee of Directors needs to be
given:
(a) to a newly elected Board following its election at an annual or special
meeting of Shareholders; or
(b) for a meeting of Directors at which a Director is appointed to fill a
vacancy in the Board,
if a quorum is present.
(5) Waiver of Notice
A Director may waive, in any manner, notice of a meeting of Directors or of a
committee of Directors. Attendance of a Director at a meeting of Directors or of
a committee of Directors is a waiver of notice of the meeting, except when the
Director attends the meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
called.
(6) Quorum
The Directors may fix the quorum for meetings of Directors or of a committee of
Directors, but unless so fixed, a majority of the Directors or of a committee of
Directors constitutes a quorum. No business may be transacted unless at least
half of the Directors present are resident Canadians.
(7) Regular Meetings
The Board may by resolution establish one or more days in a month for regular
meetings of the Board at a time and place to be named in the resolution. No
notice is required for a regular meeting.
(8) Chairperson of Meetings
The chairperson of any meeting of Directors is the first mentioned of the
following Officers (if appointed) who is a Director and is present at the
meeting: Chairperson of the Board, Managing Director, or President. If none of
the foregoing Officers are present, the Directors present may choose one of
their number to be chairperson of the meeting.
(9) Decision on Questions
Every resolution submitted to a meeting of Directors or of a committee of
Directors must be
-10-
<PAGE>
decided by a majority of votes cast at the meeting. In the case of an equality
of votes, the chairperson does not have a casting vote.
(10) Meeting by Telephone
If all the Directors consent, a Director may participate in a meeting of
Directors or of a committee of Directors by means of telephone or other
communication facilities that permit all persons participating in the meeting to
hear each other. A Director participating in a meeting by means of telephone or
other communication facilities is deemed to be present at the meeting.
(11) Resolution in Lieu of Meeting
A resolution in writing signed by all the Directors entitled to vote on that
resolution at a meeting of Directors or committee of Directors is as valid as if
it had been passed at a meeting of Directors or committee of Directors. A
resolution in writing takes effect on the date it is expressed to be effective.
A resolution in writing may be signed in one or more counterparts, all of which
together constitute the same resolution. A counterpart signed by a Director and
transmitted by facsimile or other device capable of transmitting a printed
message is as valid as an originally signed counterpart.
SECTION 6.
OFFICERS AND APPOINTEES OF THE BOARD
(1) Appointment of Officers
The Directors may designate the offices of the Corporation, appoint as officers
individuals of full capacity, specify their duties and delegate to them powers
to manage the business and affairs of the Corporation, except those powers
referred to in section 4 which may not be delegated to a Managing Director or to
a committee of Directors. Unless required by the By-laws, an Officer does not
have to be a Director. The same individual may hold two or more offices of the
Corporation.
(2) Term of Office
An Officer holds office from the date of the Officer's appointment until a
successor is appointed or until the Officer's resignation or removal. An officer
may resign by giving written notice to the Board. All Officers are subject to
removal by the Board, with or without cause.
(3) Duties of Officers
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An Officer has all the powers and authority and must perform all the duties
usually incident to, or specified in the By-laws or by the Board for, the office
held.
(4) Remuneration
The Officers are entitled to receive remuneration for their services in the
amount the Board determines. The Directors must disclose to the Shareholders the
aggregate remuneration paid to the five highest Officers. The disclosure must be
in a written document to be placed before the Shareholders at every annual
meeting of Shareholders and must relate to the same time period as the financial
statements required to be presented at the meeting relate to.
(5) Chairperson of the Board
If appointed and present at the meeting, the Chairperson of the Board presides
at all meetings of Directors, committees of Directors and, in the absence of the
President, at all meetings of Shareholders. The Chairperson of the Board must be
a Director.
(6) Managing Director
If appointed, the Managing Director is responsible for the general supervision
of the affairs of the Corporation. During the absence or disability of the
Chairperson of the Board, or if no Chairperson of the Board has been appointed,
the Managing Director exercises the functions of that office. Subject to section
4, the Board may delegate to the Managing Director any of the powers of the
Board.
(7) President
If appointed, the President is the chief executive officer of the Corporation
responsible for the management of the business and affairs of the Corporation.
During the absence or disability of the Managing Director, or if no Managing
Director has been appointed, the President also exercises the functions of that
office. The President may not preside as chairperson at any meeting of the
Directors or of any committee of Directors unless the President is a Director.
(8) Vice-President
During the absence or disability of the President, or if no President has been
appointed, the Vice-President or if there is more than one, the Vice-President
designated by the Board, exercises the functions of the office of the President.
(9) Secretary
If appointed, the Secretary must call meetings of the Directors or of a
committee of Directors
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at the request of a Director. The Secretary must attend all meetings of
Directors, of committees of Directors and of Shareholders and prepare and
maintain a record of the minutes of the proceedings. The Secretary is the
custodian of the corporate seal, the minute book and all records, documents and
instruments belonging to the Corporation.
(10) Treasurer
If appointed, the Treasurer is responsible for the preparation and maintenance
of proper accounting records, the deposit of money, the safe-keeping of
securities and the disbursement of funds of the Corporation. The Treasurer must
render to the Board an account of all financial transactions of the Corporation
upon request.
(11) Agents and Attorneys
The Board has the power to appoint agents or attorneys for the Corporation in or
outside of Canada with any power the Board considers advisable.
SECTION 7.
CONFLICT OF INTEREST
(1) Disclosure of Interest
A Director or Officer who:
(a) is a party to a material contract or proposed material contract with the
Corporation; or
(b) is a director or an officer of or has a material interest in any person who
is a party to a material contract or proposed material contract with the
Corporation,
must disclose in writing to the Corporation or request to have entered in the
minutes of meetings of the Directors the nature and extent of the Director's or
Officer's interest.
(2) Approval and Voting
A Director or Officer must disclose in writing to the Corporation, or request to
have entered in the minutes of meetings of Directors, the nature and extent of
the Director's or Officer's interest in a material contract or proposed material
contract if the contract is one that in the ordinary course of the Corporation's
business would not require approval by the Board or the Shareholders. The
disclosure must be made immediately after the Director or Officer becomes aware
of the contract or proposed contract. A Director who is required to disclose an
interest in a material contract or proposed material contract may not vote on
any resolution to approve the contract unless the contract is:
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(a) an arrangement by way of security for money tent to or obligations
undertaken by the Director, or by a body corporate in which the Director
has an interest, for the benefit of the Corporation or an affiliate;
(b) a contract relating primarily to the Director's remuneration as a Director
or Officer, employee or agent of the Corporation or as a director, officer,
employee or agent of an affiliate;
(c) a contract for indemnity or insurance under the ABCA; or
(d) a contract with an affiliate.
(3) Effect of Conflict of Interest
If a material contract is made between the Corporation and a Director or
Officer, or between the Corporation and another person of which a Director or
Officer is a director or officer or in which the Director or Officer has a
material interest:
(a) the contract is neither void nor voidable by reason only of that
relationship, or by reason only that a Director with an interest in the
contract is present at or is counted to determine the presence of a quorum
at a meeting of Directors or committee of Directors that authorized the
contract; and
(b) a Director or Officer or former Director or Officer to whom a profit
accrues as a result of the making of the contract is not liable to account
to the Corporation for that profit by reason only of holding office as a
Director or Officer,
if the Director or Officer disclosed the Director's or Officer's interest in the
contract in the manner prescribed by the ABCA and the contract was approved by
the Board or the Shareholders and was reasonable and fair to the Corporation at
the time it was approved.
SECTION 8.
LIABILITY AND INDEMNIFICATION
(1) Limitation of Liability
Every Director and Officer in exercising the powers and discharging the duties
of office must act honestly and in good faith with a view to the best interests
of the Corporation and must exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances. No
Director or Officer is liable for:
(a) the acts, omissions or defaults of any other Director or Officer or an
employee of the
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Corporation;
(b) any loss, damage or expense incurred by the Corporation through the
insufficiency or deficiency of title to any property acquired for or on
behalf of the Corporation;
(c) the insufficiency or deficiency of any security in or upon which any of the
money of the Corporation is invested;
(d) any loss or damage arising from the bankruptcy, insolvency or tortious or
criminal acts of any person with whom any of the Corporation's money is, or
securities or other property are, deposited;
(e) any loss occasioned by any error of judgment or oversight; or
(f) any other loss, damage or misfortune which occurs in the execution of the
duties of office or in relation to it,
unless occasioned by the wilful neglect or default of that Director or Officer.
Nothing in this By-law relieves any Director or Officer of any liability imposed
by the ABCA or otherwise by law.
(2) Indemnity
The Corporation shall indemnify a Director or Officer, a former Director or
Officer and a person who acts or acted at the Corporation's request as a
director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor (the "Indemnified Parties") and the heirs and legal
representatives of each of them, against all costs, charges and expenses, which
includes, without limiting the generality of the foregoing, the fees, charges
and disbursements of legal counsel on an
as-between-a-solicitor-and-the-solicitor's-own-client basis and an amount paid
to settle an action or satisfy a judgment, reasonably incurred by an Indemnified
Party, or the heirs or legal representatives of an Indemnified Party, or both,
in respect of any action or proceeding to which any of them is made a party by
reason of an Indemnified Party being or having been a Director or Officer or a
director or officer of that body corporate, if:
(a) the Indemnified Party acted honestly and in good faith with a view to the
best interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the Indemnified Party had reasonable
grounds for believing that the Indemnified Party's conduct was lawful.
The Corporation shall indemnify an Indemnified Party and the heirs and legal
representatives
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of an Indemnified Party in any other circumstances that the ABCA permits or
requires. Nothing in this By-law limits the right of a person entitled to
indemnity to claim indemnity apart from the provisions of this By-law.
(3) ]Insurance
The Corporation may purchase and maintain insurance for the benefit of a person
referred to in subsection (2) against the liabilities and in the amounts the
ABCA permits and the Board approves.
SECTION 9.
SECURITIES
(1) Shares
Shares of the Corporation may be issued at the times, to the persons and for the
consideration the Board determines. No share may be issued until the
consideration for the share is fully paid in money or in property or past
service that is not less in value than the fair equivalent of the money that the
Corporation would have received if the share had been issued for money.
(2) Options and Other Rights to Acquire Securities
The Corporation may issue certificates, warrants or other evidences of
conversion privileges, options or rights to acquire securities of the
Corporation. The conditions attached to the conversion privileges, options and
rights must be set out in the certificates, warrants or other evidences or in
certificates evidencing the securities to which the conversion privileges,
options or rights are attached.
(3) Commissions
The Board may authorize the Corporation to pay a reasonable commission to any
person in consideration of that person purchasing or agreeing to purchase shares
of the Corporation from the Corporation or from any other person, or procuring
or agreeing to procure purchasers for shares of the Corporation.
(4) Securities Register
The Corporation shall maintain at its records office a securities register in
which it records the securities issued by it in registered form, showing with
respect to each class or series of securities:
(a) the names, alphabetically arranged and the latest known address of each
person who is
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or has been a security holder;
(b) the number of securities held by each security holder; and
(c) the date and particulars of the issue and transfer of each security.
The Corporation shall keep information relating to a security holder that is
entered in the securities register for at least seven years after the security
holder ceases to be a security holder.
(5) Transfer Agents and Registrars
The Corporation may appoint one or more trust corporations as its agent to
maintain a central securities register and one or more agents to maintain a
branch securities register. An agent may be designated as a transfer agent or a
branch transfer agent, and a registrar, according to the agent's function. An
agent's appointment may be terminated at any time. The Board may provide for the
registration or transfer of securities by a transfer agent, branch transfer
agent or registrar.
(6) Dealings with Registered Holders
The Corporation may treat the registered owner of a security as the person
exclusively entitled to vote, to receive notices, to receive any interest,
dividend or other payments in respect of the security, and otherwise to exercise
all the rights and powers of an owner of the security.
(7) Transfers of Securities
Securities of the Corporation may be transferred in the form of a transfer
endorsement on the security certificates issued in respect of the securities of
the Corporation, or in any form of transfer endorsement which may be approved by
resolution of the Board.
(8) Registration of Transfers
If a security in registered form is presented for registration of transfer, the
Corporation must register the transfer if:
(a) the security is endorsed by the person specified by the security or by
special endorsement to be entitled to the security or by the person's
successor, fiduciary, survivor, attorney or authorized agent, as the case
may be;
(b) reasonable assurance is given that the endorsement is genuine and
effective;
(c) the Corporation has no duty to inquire into adverse claims, or has
discharged its duty
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to do so;
(d) any applicable law relating to the collection of taxes has been complied
with;
(e) the transfer is rightful or is to a bona fide purchaser; and
(f) the fee prescribed by the Board for a security certificate issued in
respect of a transfer has been paid.
(9) Lien
If the Articles provide that the Corporation has a lien on a share registered in
the name of a Shareholder or the Shareholder's legal representative for a debt
of the Shareholder to the Corporation, and the Shareholder is indebted to the
Corporation, the Corporation may refuse to register any transfer of the holder's
shares pending enforcement of the lien.
(10) Security Certificates
Security certificates and acknowledgments of a security holder's right to obtain
a security certificate must be in a form the Board approves by resolution. A
security certificate must be signed by at least one Director or Officer. Unless
the Board otherwise determines, security certificates representing securities in
respect of which a transfer agent or registrar has been appointed are not valid
unless countersigned by or on behalf of the transfer agent or registrar. Any
signature may be printed or otherwise mechanically reproduced on a security
certificate. If a security certificate contains a printed or mechanically
reproduced signature of a person, the Corporation may issue the security
certificate, notwithstanding that the person has ceased to be a Director or
Officer, and the security certificate is as valid as if the person were a
Director or Officer at the date of issue.
(11) Entitlement to a Security Certificate
A security holder is entitled at the holder's option to a security certificate
or to a non transferable written acknowledgment of the holder's right to obtain
a security certificate from the Corporation in respect of the securities of the
Corporation held by that holder.
(12) Securities Held Jointly
The Corporation is not required to issue more than one security certificate in
respect of securities held jointly by several persons. Delivery of a certificate
to one of the joint holders is sufficient delivery to all of them. Any one of
the joint holders may give effectual receipts for the certificate issued in
respect of the securities or for any dividend, bonus, return of capital or other
money payable or warrant issuable in respect of the security.
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(13) Replacement of Security Certificates
The Board or an Officer or agent designated by the Board may in its or the
Officer's or agent's discretion direct the issue of a new security certificate
in place of a certificate that has been lost, destroyed or wrongfully taken. A
new security certificate may be issued only on payment of a reasonable fee and
on any terms as to indemnity, reimbursement of expenses and evidence of loss of
title as the Board may prescribe.
(14) Fractional Shares
The Corporation may issue a certificate for a fractional share or may issue in
its place scrip certificates in a form that entitles the holder to receive a
certificate for a full share by exchanging scrip certificates aggregating a full
share. The Directors may attach conditions to any scrip certificates issued by
the Corporation, including conditions that:
(a) the scrip certificates become void if they are not exchanged for a share
certificate representing a full share before a specified date; and
(b) any shares for which those scrip certificates are exchangeable may,
notwithstanding any pre-emptive right, be issued by the Corporation to any
person and the proceeds of those shares distributed rateably to the holders
of the scrip certificates.
SECTION 10.
MEETINGS OF SHAREHOLDERS
(1) Annual Meeting of Shareholders
The Board must call an annual meeting of Shareholders to be held not later than
18 months after the date of incorporation and subsequently, not later than 15
months after holding the last preceding annual meeting. An annual meeting is to
be held for the purposes of considering the financial statements and auditor's
report, fixing the number of Directors for the following year, electing
Directors, appointing an auditor and transacting any other business that may
properly be brought before the meeting.
(2) Special Meetings of Shareholders
The Board may at any time call a special meeting of Shareholders.
(3) Special Business
All business transacted at a special meeting of Shareholders and all business
transacted at an annual meeting of Shareholders, except consideration of the
financial statements and auditor's
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report, fixing the number of Directors for the following year, election of
Directors and reappointment of the incumbent auditor, is deemed to be special
business.
(4) Place and Time of Meetings
Meetings of Shareholders may be held at the place within Alberta and at the time
the Board determines. A meeting of Shareholders may be held outside Alberta if
all the Shareholders entitled to vote at that meeting agree to holding the
meeting outside Alberta. A Shareholder who attends a meeting of Shareholders
held outside Alberta is deemed to have agreed to holding the meeting outside
Alberta, except when the Shareholder attends the meeting for the express purpose
of objecting to the transaction of any business on the grounds that the meeting
is not lawfully held.
(5) Notice of Meetings
Notice of the time and place of a meeting of Shareholders must be sent not less
than 21 days and not more than 50 days before the meeting to:
(a) each Shareholder entitled to vote at the meeting;
(b) each Director; and
(c) the auditor of the Corporation.
Notice of a meeting of Shareholders called for the purpose of transacting any
business other than consideration of the financial statements and auditor's
report, fixing the number of Directors for the following year, election of
Directors and reappointment of the incumbent auditor must state the nature of
the business to be transacted in sufficient detail to permit a Shareholder to
form a reasoned judgment on that business and must state the text of any special
resolution to be submitted to the meeting.
(6) Notice of Adjourned Meetings
With the consent of the Shareholders present at a meeting of Shareholders, the
chairperson may adjourn that meeting to another fixed time and place. If a
meeting of Shareholders is adjourned by one or more adjournments for an
aggregate of less than 30 days, it is not necessary to give notice of the
adjourned meeting, other than by verbal announcement at the time of the
adjournment. If a meeting of Shareholders is adjourned by one or more
adjournments for an aggregate of 30 days or more, notice of the adjourned
meeting must be given as for the original meeting. The adjourned meeting may
proceed with the business to have been transacted at the original meeting, even
though a quorum is not present at the adjourned meeting.
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(7) Waiver of Notice
A Shareholder and any other person entitled to attend a meeting of Shareholders
may waive in any manner notice of a meeting of Shareholders. Attendance of a
Shareholder or other person at a meeting of Shareholders is a waiver of notice
of the meeting, except when the Shareholder or other person attends the meeting
for the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called.
(8) Shareholder List
If the Corporation has more than 15 Shareholders entitled to vote at a meeting
of Shareholders, the Corporation must prepare a list of Shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each Shareholder,
(a) if a Record Date is fixed, not later than 10 days after that date; or
(b) if no Record Date is fixed,
i) at the close of business on the last business day preceding the day on
which the notice is given, or
ii) if no notice is given, on the day on which the meeting is held.
A Shareholder may examine the list of Shareholders:
(c) during usual business hours at the Corporation's records office or at the
place where its central securities register is maintained; and
(d) at the meeting of Shareholders for which the list was prepared.
(9) Persons Entitled to Vote
A person named in a list of Shareholders is entitled to vote the shares shown
opposite the person's name at the meeting to which the list relates, except to
the extent that:
(a) i) if a Record Date is fixed, the person transfers ownership of any of the
person's shares after the Record Date, or
ii) if no Record Date is fixed, the person transfers ownership of any of the
person's shares after the date on which the list of Shareholders is
prepared; and
(b) the transferee of those shares
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i) produces properly endorsed share certificates, or
ii) otherwise establishes ownership of the shares,
and demands, not later than 10 days before the meeting, that the
transferee's name be included in the list before the meeting,
in which case the transferee is entitled to vote the shares.
(10) Chairperson of Meetings
The chairperson of any meeting of Shareholders is the first mentioned of the
following Officers (if appointed) who is present at the meeting: President,
Chairperson of the Board or Managing Director. If none of the foregoing Officers
are present, the Shareholders present and entitled to vote at the meeting may
choose a chairperson from among those individuals present.
(11) Scrutineer
If desired, one or more scrutineers, who need not be Shareholders, may be
appointed by resolution or by the chairperson of the meeting with the consent of
the meeting.
(12) Procedure at Meetings
The chairperson of any meeting of Shareholders shall conduct the proceedings at
the meeting in all respects. The chairperson's decision on any matter or thing
relating to procedure, including, without limiting the generality of the
foregoing, any question regarding the validity of any instrument of proxy or
other evidence of authority to vote, is conclusive and binding upon the
Shareholders.
(13) Persons Entitled to be Present
The only persons entitled to be present at a meeting of Shareholders are:
(a) the Shareholders entitled to vote at the meeting;
(b) the Directors;
(c) the auditor of the Corporation; and
(d) any others who, although not entitled to vote, are entitled or required
under any provision of the ABCA, any unanimous shareholder agreement, the
Articles or the Bylaws to be
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present at the meeting.
Any other person may be admitted only on the invitation of the chairperson of
the meeting or with the consent of the meeting.
(14) Quorum
A quorum of Shareholders is present at a meeting of Shareholders if at least two
individuals are present, each of whom is entitled to vote at the meeting, and
who hold or represent by proxy in the aggregate not less than 10% of the total
number of shares entitled to be voted at the meeting. If any share entitled to
be voted at a meeting of Shareholders is held by two or more persons jointly,
the persons or those of them who attend the meeting of Shareholders constitute
only one Shareholder for the purpose of determining whether a quorum of
Shareholders is present.
(15) Loss of Quorum
If a quorum is present at the opening of a meeting of Shareholders, the
Shareholders present or represented by proxy may proceed with the business of
the meeting, even if a quorum is not present throughout the meeting. If a quorum
is not present at the opening of a meeting of Shareholders, the Shareholders
present or represented by proxy may adjourn the meeting to a fixed time and
place but may not transact any other business.
(16) Proxy Holders and Representatives
A Shareholder entitled to vote at a meeting of Shareholders may by means of a
proxy appoint a proxy holder and one or more alternate proxy holders, who are
not required to be Shareholders, to attend and act at the meeting in the manner
and to the extent authorized by the proxy and with the authority conferred by
the proxy. A proxy must be executed by the Shareholder or by the Shareholder's
attorney authorized in writing and be in the form prescribed by the Regulations.
A proxy is valid only at the meeting in respect of which it is given or any
adjournment of that meeting.
A Shareholder that is a body corporate or association may, by resolution of its
directors or governing body, authorize an individual to represent it at a
meeting of Shareholders. That individual's authority may be established by
depositing with the Corporation prior to the commencement of the meeting a
certified copy of the resolution passed by the Shareholder's directors or
governing body or other evidence of the individual's authority to vote. A
resolution or other evidence of authority to vote is valid only at the meeting
in respect of which it is given or any adjournment of that meeting.
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(17) Time for Deposit of Proxies
The Board may specify in a notice calling a meeting of Shareholders a time not
exceeding 48 hours, excluding Saturdays and holidays, preceding the meeting or
an adjournment of the meeting before which proxies to be used at the meeting
must be deposited with the Corporation or its agent. If no time for the deposit
of proxies has been specified in a notice calling a meeting of Shareholders, a
proxy to be used at the meeting must be deposited with the Secretary of the
Corporation or the chairperson of the meeting prior to the commencement of the
meeting.
(18) Revocation of Proxies
A Shareholder may revoke a proxy:
(a) by depositing an instrument in writing executed by the Shareholder or by
the Shareholder's attorney authorized in writing:
i) at the registered office of the Corporation at any time up to and
including the last business day preceding the day of the meeting, or
an adjournment of that meeting, at which the proxy is to be used, or
ii) with the chairperson of the meeting on the day of the meeting or an
adjournment of the meeting; or
(b) in any other manner permitted by law.
(19) Joint Shareholders
If two or more persons hold shares jointly, one of those holders present at a
meeting of Shareholders may, in the absence of the others, vote the shares. If
two or more of those persons are present in person or by proxy, they must vote
as one on the shares jointly held by them.
(20) Decision on Questions
At every meeting of Shareholders all questions proposed for the consideration of
Shareholders must be decided by the majority of votes, unless otherwise required
by the ABCA or the Articles. In the case of an equality of votes, the
chairperson of the meeting does not, either on a show of hands or verbal poll or
on a ballot, have a casting vote in addition to the vote or votes to which the
chairperson may be entitled as a Shareholder or proxy holder.
(21) Voting by Show of Hands
Subject to subsection (22), voting at a meeting of Shareholders must be by a
show of hands of
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those present in person or represented by proxy or by a verbal poll of those
present by telephone or other communication facilities. When a vote by show of
hands has been taken upon a question, a declaration by the chairperson of the
meeting that the vote has been carried, carried by a particular majority or not
carried, an entry to that effect in the minutes of the meeting is conclusive
evidence of the fact without proof of the number of votes recorded in favor of
or against any resolution or other proceeding in respect of the question.
(22) Voting by Ballot
If a ballot is required by the chairperson of the meeting or is demanded by a
Shareholder or proxy holder entitled to vote at the meeting, either before or on
the declaration of the result of a vote by a show of hands or verbal poll,
voting must be by ballot. A demand for a ballot may be withdrawn at any time
before the ballot is taken. If a ballot is taken on a question, a prior vote on
that question by show of hands or verbal poll has no effect.
(23) Number of Votes
At every meeting a Shareholder present in person or represented by proxy or
present by telephone or other communication facilities and entitled to vote has
one vote for each share held.
(24) Meeting by Telephone
Any person described in subsection (13) may participate in a meeting of
Shareholders by means of telephone or other communication facilities that permit
all persons participating in the meeting to hear each other. A Shareholder
participating in a meeting by means of telephone or other communication
facilities is deemed to be present at the meeting.
(25) Resolution in Lieu of Meeting
A resolution in writing signed by all the Shareholders entitled to vote on that
resolution at a meeting of Shareholders is as valid as if it had been passed at
a meeting of Shareholders. A resolution in writing takes effect on the date it
is expressed to be effective.
A resolution in writing may be signed in one or more counterparts, all of which
together constitute the same resolution. A counterpart signed by a Shareholder
and transmitted by facsimile or other device capable of transmitting a printed
message is as valid as an originally signed counterpart.
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SECTION 11.
NOTICES
(1) Method of Notice
A notice or document required to be sent to a Shareholder, Director, Officer or
auditor of the Corporation may be given by personal delivery, prepaid
transmitted or recorded communication or prepaid mail addressed to the recipient
at the recipient's Recorded Address. A notice or document sent by personal
delivery is deemed to be given when it is actually delivered. A notice or
document sent by means of prepaid transmitted or recorded communication is
deemed to be given when dispatched or delivered to the appropriate communication
company or agency or its representative for dispatch. A notice or document sent
by mail is deemed to be given when deposited at a post office or in a public
letter box.
(2) Notice to Joint Shareholders
If two or more persons are registered as joint holders of any share, a notice or
document may be sent or delivered to all of them, but notice given to any one
joint Shareholder is sufficient notice to the others.
(3) Notice to Successors
Every person who, by operation of law, transfer, death of a Shareholder or any
other means becomes entitled to any share, is bound by every notice in respect
of the share which is sent or delivered to the Shareholder prior to the person's
name and address being entered in the Corporation's securities register and
prior to the person furnishing proof of authority or evidence of entitlement as
prescribed by the ABCA. This subsection applies whether the notice was given
before or after the event which resulted in the person becoming entitled to the
share.
(4) Non-Receipt of Notices
If a notice or document is sent to a Shareholder, Director, Officer or auditor
of the Corporation in accordance with subsection (1) and the notice or document
is returned on three consecutive occasions, the Corporation is not required to
give any further notice or documents to the person until that person informs the
Corporation in writing of the person's new address.
(5) Failure to Give Notice
The accidental failure to give a notice to a Shareholder, Director, Officer or
auditor of the Corporation, the non-receipt of a notice by the intended
recipient or any error in a notice not affecting its substance does not
invalidate any action taken at the meeting to which the notice relates.
(6) Execution of Notices
Unless otherwise provided, the signature of any person designated by resolution
of the Board to
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sign a notice or document on behalf of the Corporation may be written, stamped,
typewritten or printed.
MADE by the Directors as evidenced by the signature of the following Director
effective November 17, 1994.
/s/ ALLEN VERNON AMBROSE
-------------------------------------
ALLEN VERNON AMBROSE
CONFIRMED by the Shareholders as evidenced by the signature of the following
Shareholder effective November 17, 1994.
/s/ DENNIS BAXTER
-------------------------------------
DENNIS BAXTER
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"THE BROKER SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE
ARE NOT TRANSFERABLE."
MINERA ANDES INC.
(the "Corporation")
THE BROKER SPECIAL WARRANTS EVIDENCED HEREBY ARE EXERCISABLE UNTIL 4:30 P.M.
(CALGARY TIME) (THE "EXPIRY TIME") ON THE EARLIER OF: (I) FIVE (5) BUSINESS DAYS
AFTER THE DAY UPON WHICH A RECEIPT FOR THE FINAL PROSPECTUS TO BE FILED BY THE
CORPORATION WITH RESPECT TO THE DISTRIBUTION OF THE BROKER WARRANTS ISSUABLE
UPON EXERCISE OF THE BROKER SPECIAL WARRANTS (THE "PROSPECTUS") OR,
ALTERNATIVELY, AN APPROPRIATE ORDER THAT PERMITS THE BROKER WARRANTS ISSUABLE
UPON EXERCISE OF THE BROKER SPECIAL WARRANTS TO BE FREELY TRADEABLE (THE
"ORDER"), HAS BEEN OBTAINED FROM THE SECURITIES COMMISSIONS OR SIMILAR
REGULATORY AUTHORITIES IN THE PROVINCES OF ALBERTA AND BRITISH COLUMBIA (THE
"FILING PROVINCES"); AND (II) DECEMBER 13, 1997, (SUCH EARLIER DATE BEING
REFERRED TO AS THE "EXPIRY DATE"). ANY BROKER SPECIAL WARRANTS NOT EXERCISED
PRIOR TO THE EXPIRY TIME SHALL BE DEEMED TO BE EXERCISED, WITHOUT ANY FURTHER
ACTION ON THE PART OF THE HOLDER, IMMEDIATELY PRIOR TO THE EXPIRY TIME.
BROKER SPECIAL WARRANT CERTIFICATE
===============================================================================
Broker Special Warrant Certificate Representing
No. Broker Special Warrants, each Broker
Special Warrant entitling the holder to
acquire, at no additional cost, one Broker
Warrant
===============================================================================
THIS CERTIFIES that, for value received, ___________________________________,
____________________________________________________________, the registered
holder hereof (the "holder" or "Special Warrantholder") is entitled at any time
until 4:30 p.m. (Calgary time) (the "Expiry Time"), on the earlier of: (i) five
(5) business days after the day upon which a receipt for the final prospectus
(the "Prospectus") to be filed by the Corporation with respect to the
distribution of the Broker Warrants, as hereinafter defined, issuable upon
exercise of the broker special warrants represented by this special warrant
certificate (the "Broker Special Warrants") or, alternatively, an appropriate
order that permits the Broker Warrants, as hereinafter defined, issuable upon
exercise of the Broker Special Warrants to be freely tradeable (the "order"),
has been obtained from the securities commissions or similar regulatory
authorities in the Provinces of Alberta and British Columbia (the "Filing
Provinces"); and (ii) December 13, 1997 (such earlier date being referred to as
the "Expiry Date") to acquire one common share purchase warrant exercisable to
purchase one common share in the capital of the Corporation, at $2.50 per share
until Decemer 13, 1997, and $2.88 per share until December 13, 1998, (a "Broker
Warrant") for each Broker Special Warrant evidenced hereby, without further
payment (other than taxes payable in certain circumstances), by surrendering to
the Corporation c/o Montreal Trust Company of Canada the special warrant
certificate ("Special Warrant Certificate"), with the attached Exercise Form
duly completed and executed (at the address therein specified); provided that
unless the holder has so surrendered the Special Warrant Certificate for
exercise pursuant to the provisions hereof prior to the Expiry Time, all Broker
Special Warrants represented hereby shall be deemed to have been exercised by
the Special Warrantholder immediately prior to the Expiry Time; provided that
the Special Warrantholder shall only be entitled to receive the certificates
representing the Broker Warrants to which such Special Warrantholder is entitled
upon delivery to the Corporation c/o Montreal Trust Company of Canada, Suite
710, 530 - 8th Avenue S.W., Calgary, Alberta, T2P 3S8, of the Special Warrant
Certificate representing the Broker Special Warrants held, together with the
Exercise Form attached thereto duly completed.
<PAGE>
The Broker Warrants will be issued pursuant to a Warrant Indenture dated
December 13, 1996, between the Corporation and Montreal Trust Company of Canada.
The Broker Warrants acquired upon exercise of the Broker Special Warrants are
sometimes referred to herein as the "Underlying Security".
This Special Warrant Certificate shall be deemed to be so surrendered only upon
personal delivery thereof to or, if sent by post or other means of transmission,
upon receipt thereof by the Corporation at the office specified in the Exercise
Form annexed hereto.
Upon due exercise of the Broker Special Warrants represented hereby, the
Corporation shall cause to be issued to each person in whose name Broker
Warrants so subscribed for are to be issued (provided that if the Broker
Warrants are to be issued to a person other than a holder of this Broker Special
Warrant, the Special Warrantholder's signature on the Exercise Form herein shall
be guaranteed by a Canadian chartered bank, by a Canadian trust company, or by a
member firm of any Canadian stock exchange and the Special Warrantholder shall
pay to the Corporation, all applicable transfer or similar taxes and the
Corporation shall not be required to issue or deliver Broker Warrants unless or
until such Special Warrantholder shall have paid to the Corporation the amount
of such tax or shall have established to the satisfaction of the Corporation
that such tax has been paid or that no tax is due) the Broker Warrants, to be
issued to such person and such person shall become a holder of such Broker
Warrants with effect from the date of such exercise; and upon due surrender of
this Special Warrant Certificate the Corporation will cause certificates
evidencing such Broker Warrants to be mailed to such person at the address
specified in such Exercise Form, or in the case of the deemed exercise of this
Broker Special Warrant, to be mailed to the address of the Special Warrantholder
appearing in the register of Broker Special Warrants maintained by Corporation,
within five business days after receipt of notice from the holder by the
Corporation of the exercise or deemed exercise of this Broker Special Warrant.
Upon presentation to the Corporation, c/o Montreal Trust Company of Canada,
certificates representing Broker Special Warrants may be exchanged for
certificates representing in the aggregate an equal number of Broker Special
Warrants. The Corporation may treat the registered holder of this Special
Warrant Certificate for all purposes as the absolute owner of the Broker Special
Warrants represented hereby. The holding of the Broker Special Warrants
evidenced hereby shall not constitute the holder hereof a holder of any of the
Broker Warrants, nor entitle such holder to any right or interest in respect
thereof except as herein expressly provided.
The Broker Special Warrants evidenced by this Special Warrant Certificate and
all rights granted hereunder, are not transferrable or assignable to any party
by the holder thereof.
After the Expiry Time, holders of Broker Special Warrants which have not been
exercised or deemed to have been exercised have no rights under the Broker
Special Warrants represented by this Special Warrant Certificate and the Broker
Special Warrants shall thereafter be void and of no value or effect. All Broker
Special Warrants exercised or deemed exercised shall be cancelled.
To the extent that the Special Warrantholder is entitled on the exercise or
partial exercise thereof to a fraction of an Underlying Security, such right may
only be exercised in respect of such fraction in combination with other Broker
Special Warrants which in the aggregate entitle the holder to receive a whole
number of the Underlying Security. If the holder is not able or elects not to
combine Broker Special Warrants so as to be entitled to acquire a whole number
of the Underlying Security the Corporation shall make an appropriate cash
adjustment. The amount of cash adjustment shall be equal to the fraction of the
Underlying Security to which the holder will be entitled multiplied by the
market price of the Underlying Security on the date of exercise.
The Special Warrantholder shall be deemed to have become the holder of record of
the Underlying Security on the date on which it exercises, or is deemed,
pursuant to this Special Warrant Certificate, to have exercised its Broker
Special Warrants, unless the transfer books of the Corporation shall be closed
by law on said date of such exercise, in which case the Underlying Security will
be deemed to have been issued and such Broker Special Warrantholder shall be
deemed to have become holder of record of such Underlying Security on the date
on which such transfer books are next reopened.
-2-
<PAGE>
The Corporation shall not be required to deliver certificates representing the
Underlying Security during the period when the transfer books of the Corporation
are closed by law, and in the event of a surrender of a Special Warrant for the
acquisition of Underlying Security during such period, the delivery of
certificates may be postponed for a period not exceeding ten days after the date
of the reopening of the transfer books.
If and whenever at any time prior to the Expiry Time, there is a
reclassification of the common shares of the Corporation or a capital
reorganization of the Corporation or a subdivision or consolidation of the
common shares of the Corporation or an amalgamation, merger or other form of
business combination of the Corporation with or into any other body corporate,
trust, partnership or other entity, or a sale or conveyance of the property and
assets of the Corporation as an entirety or substantially as an entirety to any
other body corporate, trust, partnership or other entity or the payment of a
stock dividend, the Special Warrantholder, whose right of acquisition has not
been exercised prior to the effective date of such reclassification,
reorganization, subdivision, consolidation, amalgamation, merger, sale,
conveyance or payment, upon the exercise of such right thereafter, shall be
entitled to receive and shall accept, in lieu of the number of the Underlying
Security then sought to be acquired by him, a warrant to acquire the number of
shares or other securities or property of the Corporation or of the body
corporate, trust, partnership or other entity resulting from such merger,
amalgamation, or business combination, or to which such sale or conveyance may
be made, as the case may be, that the Special Warrantholder would have been
entitled to receive on such reclassification, capital reorganization,
subdivision, consolidation, amalgamation, merger, other business combination,
sale, conveyance or payment, if, on the record date or the effective date
thereof, as the case may be, the Special Warrantholder had been the registered
holder of the number of the Underlying Security sought to be acquired. If
determined appropriate by the Corporation to give effect to or to evidence the
provisions of this paragraph, the Corporation, its successor, or such purchasing
body corporate, partnership, trust or other entity, as the case may be, shall,
prior to or contemporaneously with any such reclassification, reorganization,
subdivision, consolidation, amalgamation, merger, sale, conveyance or payment
enter into an agreement which shall provide, to the extent possible, for the
application of the provisions set forth in this Special Warrant Certificate with
respect to the rights and interests thereafter of the Special Warrantholder to
the end that the provisions set forth herein shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, with respect to any shares,
other securities or property to which the Special Warrantholder is entitled on
the exercise of his acquisition rights thereafter.
As a condition precedent to the taking of any action described in the foregoing
paragraph, the Corporation shall take any corporate action which may, in the
opinion of counsel to the Corporation, be necessary in order that the holders of
such Broker Special Warrants are entitled to receive on the full exercise
thereof in accordance with the provisions hereof, and upon the exercise of
Broker Warrants in accordance with the provisions thereof, the number of shares
or other securities or property of the Corporation or of the body corporate,
trust, partnership or other entity resulting from such merger, amalgamation, or
business combination, or to which such sale or conveyance may be made, as the
case may be, that the Special Warrantholder would have been entitled to receive
on such reclassification, capital reorganization, subdivision, consolidation,
amalgamation, merger, other business combination, sale, conveyance or payment,
if, on the record date or the effective date thereof, as the case may be, the
Special Warrantholder had been the registered holder of the number of the
Underlying Security sought to be acquired.
The adjustments provided for herein in the number and classes of securities
which are to be received on the exercise of Broker Special Warrants, are
cumulative. After any adjustment pursuant hereto, the term "Underlying Security"
where used herein shall be interpreted to mean securities of any class or
classes which, as a result of all prior adjustments pursuant to this provision,
the Special Warrantholder is entitled to receive upon the exercise of the Broker
Special Warrant, and the number of the Underlying Security indicated in an
Exercise Form shall be interpreted to mean the number of securities which, as a
result of all prior adjustments pursuant hereto, a Special Warrantholder is
entitled to receive upon the exercise of a Broker Special Warrant.
In the event of any question arising with respect to the adjustments provided
for herein, such question shall be conclusively determined by the Corporation's
auditors (or, if they are unwilling to act, another firm of auditors
satisfactory to the Corporation) who shall have access to all necessary records
of the Corporation, and such determination shall be binding upon the
Corporation, the Special Warrantholder and all other interested persons.
-3-
<PAGE>
The Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided herein, deliver a
certificate of the Corporation to each Special Warrantholder, at the address of
each Special Warrantholder appearing on the register of Broker Special Warrants
maintained at the head office of the Corporation or at such other address as the
Special Warrantholder may have notified the Corporation, specifying the nature
of the event requiring the same and the adjustment necessitated thereby and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
The holding of the Broker Special Warrants evidenced by this Special Warrant
Certificate shall not constitute the holder hereof a shareholder of the
Corporation nor entitle such holder to any right or interest in respect thereof
except as herein expressly provided.
This Special Warrant Certificate shall not be valid for any purpose whatsoever
unless and until it has been signed by or on behalf of the Corporation. Time
shall be of the essence hereof.
The Broker Special Warrants shall be governed by and performed, construed and
enforced in accordance with the laws of the Province of Alberta and shall be
treated in all respects as Alberta contracts.
IN WITNESS WHEREOF the Corporation has caused this Special Warrant Certificate
to be signed by its duly authorized officer as of the 13th day of December,
1996.
MINERA ANDES INC.
Per:
----------------------------------------
ALLEN AMBROSE, PRESIDENT
-4-
<PAGE>
EXERCISE FORM
TO: Minera Andes Inc.
c/o Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
The undersigned hereby exercises the right to acquire Broker Warrants of Minera
Andes Inc. as constituted on December 13, 1996 (or such number of other
securities or property which such Broker Special Warrants entitle the
undersigned to acquire in lieu thereof or in addition thereto under the
provisions of the accompanying Special Warrant Certificate) in accordance with
and subject to the provisions of such Special Warrant Certificate.
The Broker Warrants (or other securities or property) are to be issued as
follows:
Name:
---------------------------------------------------------------------
(print clearly)
Address in full:
----------------------------------------------------------
--------------------------------------------------------------------------
Social Insurance Number:
--------------------------------------------------
Number of Broker Warrants:
------------------------------------------------
Note: If further nominees intended, please attach (and initial) schedule
giving these particulars.
Such securities (please check one):
(a) should be sent by first class mail to the following address:
----------
----------------------------------------------------------------
----------------------------------------------------------------
OR
(b) should be held for pick up at the office of Montreal Trust
----------- Company of Canada.
If the number of Broker Special Warrants exercised are less than the number of
Broker Special Warrants represented hereby, the undersigned requests that the
new Special Warrant Certificate representing the balance of the Broker Special
Warrants be registered in the name of
------------------------------------------
whose address is
---------------------------------------------------------------
Such securities (please check one):
(a) should be sent by first class mail to the following address:
----------
----------------------------------------------------------------
----------------------------------------------------------------
-5-
<PAGE>
OR
(b) should be held for pick up at the office of Montreal Trust
----------- Company of Canada.
In the absence of instructions to the contrary, the securities or other property
will be issued in the name of or to the holder hereof and will be sent by first
class mail to the last address of the holder appearing on the register
maintained for the Broker Special Warrants.
DATED the day of , 19 .
------- ------------------- -----
- ----------------------------------- ---------------------------------------
Signature Guaranteed (Signature of Special Warrantholder)
---------------------------------------
Print full name
---------------------------------------
Print full address
Instructions:
1. The registered holder may exercise its right to receive Broker Warrants by
completing this Exercise Form and surrendering this form and the Special
Warrant Certificate representing the Broker Special Warrants being
exercised to Minera Andes Inc. c/o Montreal Trust Company of Canada, Suite
710, 530 - 8th Avenue S.W., Calgary, Alberta, T2P 3S8. Certificates for
Broker Warrants will be delivered or mailed within five business days after
the exercise of the Broker Special Warrants.
2. If the Exercise Form indicates that Broker Warrants are to be issued to a
person or persons other than the registered holder of the Certificate, the
signature of such holder of this Exercise Form must be guaranteed by an
authorized officer of a chartered bank, trust company or an investment
dealer who is a member of a recognized stock exchange.
3. If the Exercise Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to Minera Andes
Inc.
4. If the registered holder exercises its right to receive Broker Warrants
prior to a receipt for a prospectus being issued by the applicable
securities commission the Broker Warrants will be subject to a hold period
and may be issued with a legend reflecting such hold period.
Minera Andes Inc.
c/o Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
Telephone: (403) 267-6891
-6-
THE WARRANT CERTIFICATE AND THE COMMON SHARES ISSUABLE ON EXERCISE THEREOF ARE
NOT TRANSFERRABLE OTHERWISE THAN IN ACCORDANCE WITH THE TERMS HEREIN AND UNTIL
THE EARLIER OF TWELVE (12) MONTHS FROM THE DATE HEREOF EXCEPT PURSUANT TO AN
EXEMPTION FROM THE PROSPECTUS REQUIREMENTS OF THE APPLICABLE SECURITIES
LEGISLATION.
MINERA ANDES INC.
(the "Corporation")
THE COMMON SHARE PURCHASE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE
NOT TRANSFERABLE AND WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR
BEFORE MAY 10, 1997.
WARRANT CERTIFICATE
Warrant Certificate No: CW001 Representing 877,194 non-transferable
1/2 common share purchase warrants, two
of such warrants entitling the holder to
purchase one common share in the capital
of the Corporation at a price of $3.98
per common share on or before May 10,
1997.
THIS CERTIFIES that, for value received, COMINCO LTD., 500 - 200 BURRARD STREET,
VANCOUVER, BRITISH COLUMBIA, V6C 3L7 (the "holder or Warrantholder") is the
registered holder of 877,194 non-transferable 1/2-common share purchase warrants
("Warrants"), two of such Warrants entitling the holder to subscribe for and
purchase one fully paid and non-assessable common share in the capital of the
Corporation ("Common Share").
The Warrants may be exercised at any time on or before 4:30 p.m., Calgary,
(Calgary time), on or before May 10, 1997 (the "Expiry Date") at a price of
$3.98 (Canadian) per Common Share payable in lawful money of Canada (the
"Exercise Price"), after which all rights evidenced hereby shall be void and of
no further value.
The Warrants may be exercised, in whole or in part, at any time prior to 4:30
p.m. on the Expiry Date by the holder completing the Exercise Form attached
hereto and delivering same to the Secretary of the Corporation, in care of the
head office of the Corporation from time to time, together with this certificate
and a certified cheque or bank draft payable in Canadian funds to the order of
the Corporation, at par in the amount of the purchase price for the Common
Shares subscribed for, which may not exceed the number shown on the face hereof.
The Corporation shall notify the holder in writing of any change of address of
its head office.
Common Shares subscribed for must be paid in full at the time of subscription.
Upon compliance with the conditions as aforesaid, the Corporation will cause to
be issued to the person or persons in whose name or names the Common Shares so
subscribed for are to be issued the number of Common Shares subscribed for and
such person or persons shall be deemed upon presentation and payment as
aforesaid to be the holder or holders of record of such number of Common Shares.
Within five (5) business days of compliance with the conditions aforesaid, the
Corporation will cause to be
<PAGE>
-2-
mailed or delivered to the holder at the address or addresses specified in the
Exercise Form, a certificate or certificates evidencing the number of Common
Shares subscribed for.
The Warrants may be exercised in whole or in part and, if exercised in part, the
Corporation shall issue another certificate, in this form, evidencing the
remaining rights to purchase Common Shares, provided that any such right shall
terminate on the Expiry Date.
The holder shall have no rights whatsoever hereunder as a shareholder (including
any right to receive dividends or other distribution to shareholders or to vote
at a general meeting of the shareholders of the Corporation), other than in
respect of Common Shares which the holder shall have exercised his right to
purchase hereunder in compliance herewith.
The holder may at any time prior to the Expiry Date, upon surrender hereof to
the Corporation at its head office and upon payment of the reasonable charges of
the Corporation, exchange this Warrant Certificate for other Warrant
Certificates evidencing Warrants entitling the registered holder thereof to
acquire in the aggregate the same number of Common Shares as may be acquired
under the Warrants represented by this Certificate. Any Common Shares issued
upon exercise of the Warrants prior to May 10, 1997, will be subject to a hold
period and other restrictions on resale.
No fractional Common Shares will be issued upon exercise of the Warrants, nor
shall any compensation be made for such fractional Common Shares, if any. To the
extent that the holder would otherwise be entitled to purchase a fraction of a
Common Share, such right may be exercised in combination with other rights
which, in the aggregate, entitles the holder hereof to purchase a whole number
of Common Shares.
If and whenever at any time on or prior to the Expiry Time, there is a
reclassification of the Common Shares or a capital reorganization of the
Corporation or a subdivision or consolidation of the Common Shares or an
amalgamation, merger or other business combination of the Corporation with or
into any other body corporate, trust, partnership or other entity, or a sale or
conveyance of the property and assets of the Corporation as an entirety or
substantially as an entirety to any other body corporate, trust, partnership or
other entity or the payment of a stock dividend, the Warrantholder whose right
of acquisition has not been exercised prior to the effective date of such
reclassification, reorganization, subdivision, consolidation, amalgamation,
merger, sale, conveyance or payment, upon the exercise of such right thereafter,
shall be entitled to receive and shall accept, in lieu of the number of Common
Shares then sought to be acquired by him, the number of shares or other
securities or property of the Corporation or of the body corporate, trust,
partnership or other entity resulting from such merger, amalgamation or other
business combination, or to which such sale or conveyance may be made, as the
case may be, that the Warrantholder would have been entitled to receive on such
reclassification, reorganization, subdivision, consolidation, amalgamation,
merger, other business combination, sale, conveyance or payment, if, on the
record date or the effective date thereof, as the case may be, the Warrantholder
had been the registered holder of the number of Common Shares sought to be
acquired. If determined appropriate by the Corporation to give effect to or to
evidence the provisions of this paragraph, the Corporation, its successor, or
such purchasing body corporate, partnership, trust or other entity, as the case
may be, shall, prior to or contemporaneously with any such reclassification,
reorganization, subdivision, consolidation, amalgamation, merger, sale,
conveyance or payment enter into an agreement which shall provide, to the extent
possible, for the application of the provisions set forth in this Warrant
Certificate with respect to the rights and interests thereafter of the
Warrantholder to the end that the provisions set forth herein shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, with respect
to any shares, other securities or property to which the Warrantholder is
entitled on the exercise of his acquisition rights thereafter.
The adjustments provided for herein in the number and classes of securities
which are to be received on
<PAGE>
-3-
the exercise of Warrants, are cumulative. After any adjustment pursuant hereto,
the term "Common Shares" where used herein shall be interpreted to mean
securities of any class or classes which, as a result of all prior adjustments
pursuant to this section, the Warrantholder is entitled to receive upon the
exercise of the Warrant, and the number of Common Shares indicated in any
Exercise Form shall be interpreted to mean the number of securities which, as a
result of all prior adjustments pursuant hereto, a Warrantholder is entitled to
receive upon the full exercise of a Warrant.
In the event of any question arising with respect to the adjustments provided
for herein, such question shall be conclusively determined by the Corporation's
independent external auditors or, if they are unwilling to act, another firm of
auditors satisfactory to the Corporation who shall have access to all necessary
records of the Corporation, and such determination shall be binding upon the
Corporation, the Warrantholder and all other interested persons.
As a condition precedent to the taking of any action which would require an
adjustment in the number or classes of securities which may be acquired on
exercise of the Warrants, the Corporation shall take any corporate action which
may, in the opinion of counsel to the Corporation, be necessary in order that
the Corporation has unissued and reserved in its authorized capital and may
validly and legally issue as fully paid and non-assessable all the securities
which the holders of such Warrants are entitled to receive on the full exercise
thereof in accordance with the provisions hereof.
The Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided herein, deliver a
certificate of the Corporation to each Warrantholder, at the address of each
Warrantholder appearing on the register of Warrants maintained at the head
office of the Corporation or at such other address, as the Warrantholder may
have notified the Corporation, specifying the nature of the event requiring the
same and the adjustment necessitated thereby and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
The holding of the Warrants evidenced by this Certificate shall not constitute
the holder hereof a shareholder of the Corporation nor entitle such holder to
any right or interest in respect thereof except as herein expressly provided.
The Warrants and all rights granted hereunder are not assignable nor
transferrable to any party by the holder thereof.
If any Warrant Certificate is lost mutilated, destroyed or stolen, the
Corporation may, on such reasonable terms as to cost and indemnity or otherwise
as they may impose, respectively issue a replacement Warrant Certificate similar
as to denomination, tenor and date as the Warrant Certificate so lost,
mutilated, destroyed or stolen.
This Warrant Certificate shall not be valid for any purpose whatsoever unless
and until it has been signed and certified by or on behalf of the Corporation.
Time shall be of the essence hereof.
The Warrants shall be governed by and performed, construed and enforced in
accordance with the laws of the Province of Alberta and shall be treated in all
respects as Alberta contracts.
IN WITNESS WHEREOF the Corporation has caused its corporate seal to be affixed
hereto and this certificate to be signed by the signature of its duly authorized
officer effective the 10th day of May, 1996.
MINERA ANDES INC.
Per:
---------------------------------------
ALLEN V. AMBROSE, PRESIDENT
<PAGE>
-4-
EXERCISE FORM
-------------
TO: Minera Andes Inc.
c/o Ogilvie and Company
Suite 1600, 407 - 2nd Street S.W.
Calgary, Alberta
T2P 2Y3
The undersigned hereby exercises its right to acquire Common Shares of Minera
Andes Inc. as constituted on May 10, 1996 in accordance with and subject to the
provisions of the Warrant Certificate dated May 10, 1996.
The Common Shares (or other securities or property) are to be issued as follows:
Name:
-----------------------------------------------------------------
(print clearly)
Address in full:
-----------------------------------------------------
---------------------------------------------------------------------
Social Insurance Number:
---------------------------------------------
Number of Common Shares:
---------------------------------------------
Note: If further nominees intended, please attach (and initial) schedule
giving these particulars.
Such securities (please check one):
(a) ___________ should be sent by first class mail to the following address:
-----------------------------------------------------------
-----------------------------------------------------------
OR
(b) ___________ should be held for pick up at the office of Ogilvie and
Company
If the number of Warrants exercised are less than the number of Warrants
represented hereby, the undersigned requests that the new Warrant Certificate
representing the balance of the Warrants be registered in the name of COMINCO
LTD. at the following address:
- -------------------------------------------------------------------------------
<PAGE>
-5-
Such securities (please check one):
(a) ___________ should be sent by first class mail to the following address:
-----------------------------------------------------------
-----------------------------------------------------------
OR
(b) ___________ should be held for pick up at the office of Ogilvie and
Company
In the absence of instructions to the contrary, the securities or other property
will be issued in the name of or to the holder hereof and will be sent by first
class mail to the last address of the holder appearing on the register
maintained for the Warrants.
DATED this day of , 199 .
--------- -------------------------- -----
- ------------------------------ --------------------------------------------
Signature Guaranteed (Signature of Warrantholder)
--------------------------------------------
Print full name
--------------------------------------------
Print full address
Instructions:
1. The registered holder may exercise its right to receive Common Shares by
completing this form and surrendering this form and the Warrant Certificate
representing the Warrants being exercised to Minera Andes Inc., c/o Ogilvie
and Company at its office at Suite 1600, 407 - 2nd Street S.W., Calgary,
Alberta, T2P 2Y3. Certificates for Common Shares will be delivered or
mailed within five business days after the exercise of the Warrants.
2. If the Exercise Form indicates that Common Shares are to be issued to a
person or persons other than the registered holder of the Certificate, the
signature of such holder of the Exercise Form must be guaranteed by an
authorized officer of a chartered bank, trust company or an investment
dealer who is a member of a recognized stock exchange.
3. If the Exercise Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to Minera Andes
Inc. c/o Ogilvie and Company.
4. If the registered holder exercises its right to receive Common Shares prior
to May 10, 1997, the Common Shares will be subject to a hold period and
will be issued with a legend reflecting such hold period.
Minera Andes Inc.
c/o Ogilvie and Company
Suite 1600, 407 - 2nd Street S.W.
Calgary, Alberta
T2P 2Y3
Telephone: (403) 237-9050
CONVEYANCE AGREEMENT
THIS AGREEMENT dated the 1st day of July, 1994.
BETWEEN:
N.A. DEGERSTROM, INC., a corporation having offices at the
City of Spokane in the State of Washington, and a branch
office in the City of Mendoza, in the Republic of Argentina
(hereinafter referred to as the "Vendor")
OF THE FIRST PART
- AND -
MINERA ANDES S.A., a corporation having offices at the City
of Mendoza, in the Republic of Argentina
(hereinafter referred to as "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Vendor has agreed to sell and convey that portion of the Assets set forth
in Schedule "A" attached hereto (as defined in the Agreement) to the Purchaser
and the Purchaser has agreed to purchase and receive that portion of the Assets
set forth in Schedule "A" attached hereto from the Vendor;
NOW THEREFORE for the consideration provided in the Agreement and in
consideration of the premises hereto and the covenants and agreements
hereinafter set forth and contained, the parties hereto covenant and agree as
follows:
<PAGE>
1. Definitions
(a) "Agreement" means the agreement entitled "Asset and Share Acquisition
Agreement" made March 8, 1995 among N.A. Degerstrom, Inc., Brian
Gavin, Jorge Vargas, Enrique Rufino Marzari Elizalde, Minera Andes
S.A., Minera Andes Inc. and NAD (S.A.).
In addition, the definitions provided for in the Agreement are
incorporated herein by this reference.
2. Conveyance
The Vendor, pursuant to and for the consideration provided for in the
Agreement, the receipt and sufficiency of such consideration being hereby
acknowledged by the Vendor, hereby sells, assigns, transfers, conveys and sets
over to the Purchaser the entire right, title, estate and interest of the Vendor
in and to that portion of the Assets set forth in Schedule "A" attached hereto,
to have and to hold the same absolutely, together with all benefit and advantage
to be derived therefrom.
3. Subordinate Document
This agreement is executed and delivered by the parties hereto
pursuant to and for the purposes of the provisions of the Agreement and the
provisions of the Agreement shall prevail and govern in the event of a conflict
between the provisions of the Agreement and this agreement.
4. Enurement
This agreement shall be binding upon and shall enure to the benefit of
each of the parties hereto and their respective trustees, receivers,
receiver-managers, successors and assigns.
5. Further Assurances
Each party hereto will, from time to time and at all times hereafter,
at the request of the other party but without further consideration, do all such
further acts and execute and deliver all such further documents as shall be
reasonably required in order to fully perform and carry out the terms hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this agreement
effective as of the date first above written.
N.A. DEGERSTROM, INC.
Per: /s/ NEAL A. DEGERSTROM
----------------------------------
MINERA ANDES S.A.
Per: /s/ JORGE VARGAS
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CONVEYANCE AGREEMENT
THIS AGREEMENT dated the 1st day of July, 1994.
BETWEEN:
N.A. DEGERSTROM, INC., a corporation having offices at the City of
Spokane in the State of Washington, and a branch office in the City of
Mendoza, in the Republic of Argentina
(hereinafter referred to as the "Vendor")
OF THE FIRST PART
- AND -
NAD (S.A.),, a corporation having offices at the City of Mendoza, in
the Republic of Argentina
(hereinafter referred to as "Purchaser")
OF THE SECOND PART
WHEREAS:
A. The Vendor has agreed to sell and convey that portion of the Assets set forth
in Schedule "A" attached hereto (as defined in the Agreement) to the Purchaser
and the Purchaser has agreed to purchase and receive that portion of the Assets
set forth in Schedule "A" attached hereto from the Vendor;
NOW THEREFORE for the consideration provided in the Agreement and in
consideration of the premises hereto and the covenants and agreements
hereinafter set forth and contained, the parties hereto covenant and agree as
follows:
<PAGE>
1. Definitions
(a) "Agreement" means the agreement entitled "Asset and Share Acquisition
Agreement" made March 8, 1995 among N.A. Degerstrom, Inc., Brian
Gavin, Jorge Vargas, Enrique Rufino Marzari Elizalde, Minera Andes
S.A., Minera Andes Inc. and NAD (S.A.).
In addition, the definitions provided for in the Agreement are
incorporated herein by this reference.
2. Conveyance
The Vendor, pursuant to and for the consideration provided for in the
Agreement, the receipt and sufficiency of such consideration being hereby
acknowledged by the Vendor, hereby sells, assigns, transfers, conveys and sets
over to the Purchaser the entire right, title, estate and interest of the Vendor
in and to that portion of the Assets set forth in Schedule "A" attached hereto,
to have and to hold the same absolutely, together with all benefit and advantage
to be derived therefrom.
3. Subordinate Document
This agreement is executed and delivered by the parties hereto
pursuant to and for the purposes of the provisions of the Agreement and the
provisions of the Agreement shall prevail and govern in the event of a conflict
between the provisions of the Agreement and this agreement.
4. Enurement
This agreement shall be binding upon and shall enure to the benefit of
each of the parties hereto and their respective trustees, receivers,
receiver-managers, successors and assigns.
5. Further Assurances
Each party hereto will, from time to time and at all times hereafter,
at the request of the other party but without further consideration, do all such
further acts and execute and deliver all such further documents as shall be
reasonably required in order to fully perform and carry out the terms hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this agreement
effective as of the date first above written.
N.A. DEGERSTROM, INC.
Per: /s/ NEAL A. DEGERSTROM
----------------------------------------
NAD (S.A.)
Per: /s/ JORGE VARGAS
----------------------------------------
OPERATING AGREEMENT
THIS AGREEMENT is entered into between MINERA ANDES INC. and its affiliates
in Argentina, NAD S.A. and MINERA ANDES S.A. (hereinafter referred to as
"OWNER"), and N.A. DEGERSTROM, INC., the operating party (hereinafter referred
to as "OPERATOR").
ARTICLE 1.
GENERAL AGREEMENT
1.1 This Agreement is dated effective March 15, 1995.
1.2 N.A. DEGERSTROM, INC. is a qualified contracting and engineering firm
headquartered in Spokane, Washington and qualified to do business in Argentina
and the United States.
1.3 MINERA ANDES INC., an Alberta, Canada corporation, is qualified to do
business in Argentina.
1.4 MINERA ANDES S.A., a Mendoza, Argentina corporation, is qualified to do
business in Argentina.
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1.5 NAD S.A., a Mendoza, Argentina corporation, is qualified to do business
in Argentina.
OWNER and OPERATOR, in consideration of the mutual covenants hereinafter
set forth, agree as follows:
ARTICLE 2.
DEFINITIONS
2.1 Wherever used in this Agreement, the following terms have the meanings
indicated which are applicable to both the singular and plural thereof.
Agreement. The written Agreement between OWNER and OPERATOR covers the work
to be performed on projects in the Area of Interest. In addition, the OPERATOR
will provide management input and clerical services to MINERA ANDES INC. at the
direction of MINERA ANDES INC. from the OPERATOR's corporate headquarters in
Spokane, Washington.
Application for Payments. The form accepted by OWNER which is to be used by
OPERATOR in requesting monthly payments and which is to include such supporting
docu mentation as is required by the Agreement.
Area of Interest. The area within the borders of the Republic of Argentina.
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Bankable Feasibility. Bankable Feasibility means that point in time
whenever a bank or other lending institution will loan MINERA ANDES INC., MINERA
ANDES S.A. or NAD S.A. funds for production development on a project in the Area
of Interest.
Generative Programs. Work on exploration programs in which new properties
are acquired by the OWNER in the Area of Interest.
Manager. OPERATOR's representatives in Argentina and in North America.
Modifications. A written amendment of the Contract Documents signed by both
parties.
Program and Budget. A work plan and budget approved by the Board of
Directors of the OWNER.
Owner's Representative. The authorized representative of the OWNER who is
assigned to the Area of Interest or any part thereof.
Subcontractor. An individual, firm or corporation having a direct contract
with OPERATOR for the performance of a part of the work related to the Area of
Interest.
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Work. The exploration or development work or the various separately
identifiable parts thereof required to be furnished under the Agreement. Work is
the result of performing services, furnishing labor, materials and equipment for
the performance of this Agreement.
ARTICLE 3.
INTENT OF AGREEMENT
3.1 Intent-Argentina. It is the intent of this Agreement that the OPERATOR
will provide management services necessary for the exploration and development
of OWNER's properties and all acquisitions hereafter made in the Area of
Interest up to the time that OWNER determines that a feasibility study is
desirable. OPERATOR will manage all types of exploration including generative
programs in the Area of Interest. This Agreement will also apply to the OWNER's
affiliates in Argentina, NAD S.A. and Minera Andes S.A. and other affiliates as
they may occur.
3.2 Intent-North American Management and Personnel. It is the intent of
this Agreement that the OPERATOR will provide selected management input and
clerical services to MINERA ANDES INC. at the direction of MINERA ANDES INC. in
North America from the OPERATOR's headquarters in Spokane, Washington. In
addition, geological related services including satellite imaging,
metallurgical, engineering, secretarial and bookkeeping services will be
provided from the OPERATOR's headquarters for the OWNER in the Area of Interest.
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3.3 Intent-Tax Considerations. Due to the fact that the OWNER is acquiring
the OPERATOR'S interest in properties in Argentina as per the Asset Acquisition
Agreement dated March 8, 1995, the OPERATOR will work to the best of its ability
to transfer program costs directly to the OWNER by transferring employment
contracts with Subcontractors and other expenses into the Owner's name. This
will allow the OPERATOR to bill only for management and equipment supplied
thereby reducing the tax burden (VAT of 18%) the OPERATOR otherwise would be
required to bill on services rendered in Argentina. Costs incurred for managing
and conducting the daily business operations of MINERA ANDES INC. in North
America will be billed through the corporate headquarters of the OPERATOR in
Spokane, Washington along with the OPERATOR's costs for work in the Area of
Interest.
ARTICLE 4.
PROGRAMS AND BUDGETS
4.1 Presentation of Programs and Budgets. Proposed Programs and Budgets
shall be prepared by the OWNER for a period of one year. Each adopted Program
and Budget, regardless of length shall be reviewed at least once a year at the
annual meeting of the Board of Directors of the OWNER. During the period
encompassed by any Program and Budget, and at least two (2) months prior to its
expiration, a proposed Program and Budget for the succeeding period shall be
prepared by the OWNER. Each such proposed Program and Budget shall be in a form
and degree of detail as determined by the guidelines established by the relevant
public stock exchange and approved by the Board of Directors of the OWNER. The
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OPERATOR is required to work within the Program and Budget constraints to
conduct the work on the Generative Programs and lands provided by the OWNER in
the Area of Interest.
4.2 Monthly Cash Calls. Each month MINERA ANDES S.A. and NAD S.A. will
submit a cash call request for funds to cover the projected operating expenses
to be incurred by the OWNER for the following month. Upon approval by OWNER,
funds will be wire transferred to the OWNER's bank account in Argentina where
OWNER's Manager will make payments to run programs in Argentina. The monthly
cash calls will only be for the OWNER's monthly operating expenses in Argentina.
4.3 Monthly Billing. Operating expenses incurred by the OPERATOR for
management and equipment services as provided in Article 9 "Scope of Work" will
be billed separately by OPERATOR's office in Spokane, Washington as per Article
14, "Payment."
4.4 Emergency or Unexpected Expenditures. In case of emergency, the
OPERATOR may take any reasonable action it deems necessary to protect life, limb
or property, to protect the Assets or to comply with law or government
regulation. The OPERATOR may also make reasonable expenditures for unexpected
events which are beyond its reasonable control and which do not result from a
breach by it of its standard of care. The OPERATOR shall promptly notify the
OWNER of the emergency or unexpected expenditure, and the OPERATOR shall be
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reimbursed for all resulting costs by the OWNER at the time the emergency or
unexpected expenditures are incurred.
ARTICLE 5.
OPERATOR'S REPRESENTATIONS AND RESPONSIBILITIES
In order to induce OWNER to enter into this Agreement, OPERATOR makes the
following representation:
5.1 OPERATOR has familiarized itself with the nature and extent of this
Agreement, the work to be performed, the locality within which the work is to be
performed, all local conditions and national, provincial and local laws,
ordinances, rules and regulations that in any manner may affect cost, progress
or performance of the work.
5.2 Management and Supervision. OPERATOR shall supervise and direct the
work competently and efficiently. OPERATOR shall be solely responsible for the
means, methods, techniques, sequences and procedures of the work and for
coordinating all aspects of the work to meet the OWNER's objectives of
exploration and development of potential mining properties in Argentina.
5.2.1 OPERATOR shall have a competent resident Manager in Argentina to
supervise the work. The Manager will be OPERATOR's representative in the Area of
Interest
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and shall have authority to act on behalf of OPERATOR. All communications given
to the Manager shall be binding upon OPERATOR.
5.3 Labor, Materials and Equipment. OPERATOR shall furnish all materials,
equipment, labor, importation, exploration equipment and machinery, tools,
appliances, utilities and all other facilities and incidentals necessary for the
execution, testing and completion of the work, except for those furnished by
OWNER. Fees for equipment is attached hereto in Exhibit "A."
OPERATOR shall be fully responsible for all acts and omissions of his
Subcontractors.
5.4 Laws and Regulations. OPERATOR shall give all notices and comply with
all laws, ordinances, rules and regulations applicable to his work.
5.5 Taxes. OPERATOR shall pay all sales, consumer, property, use and other
similar taxes required to be paid by it in accordance with the law of the
Republic of Argentina and the local provinces.
5.6 Completion. At the completion of the work, OPERATOR shall remove all
waste materials, rubbish and debris from and about the premises, as well as all
tools, appliances,
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construction equipment and machinery, and surplus materials, and shall leave the
site clean. All environmental requirements shall be met.
5.7 Continuing the Work. OPERATOR shall carry on the work and maintain the
progress schedule during all disputes or disagreements with OWNER, except
disputes arising from a substantial breach of the Agreement by OWNER. No work
shall be delayed or postponed pending resolution of any disputes or
disagreements, unless OWNER refuses to pay for the work performed.
5.8 Non-Compete Covenants. During the duration of this Agreement the
OPERATOR shall not directly or indirectly acquire any interest in property
within the Area of Interest without the prior written approval of the OWNER. If
the Agreement terminates pursuant to Article 16 then OPERATOR shall have no
restrictions for property acquisitions in the Area of Interest. OPERATOR shall
not directly or indirectly acquire any 'interest in property within the Area of
Interest of thirty (30) days after the effective date of termination. If the
OPERATOR breaches this Section 5.8, OPERATOR shall be obligated to offer to
convey to the OWNER, without cost, any such property or interest so acquired.
Such offer shall be made in writing and can be accepted by the OWNER at any time
within thirty (30) days after it is received by OWNER.
5.9 Confidentiality. The OPERATOR agrees that all information obtained in
connection with the performance of this Agreement shall be the exclusive
property of the
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OWNER, and shall not be discussed to any third party or the public without the
prior written consent of the OWNER.
ARTICLE 6.
OWNER'S RESPONSIBILITIES
OWNER shall furnish the data required of OWNER under the terms of this
Agreement promptly and shall make payments to OPERATOR promptly after they are
due as provided.
6.1 Availability of Land. OWNER shall furnish the lands upon which the work
is to be performed.
ARTICLE 7.
INSURANCE
7.1 Minimum OPERATOR Liability Insurance Requirement. The OPERATOR will
provide liability insurance for its employees in Argentina.
ARTICLE 8.
OWNER's REPRESENTATIVE
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8.1 Authority. The duties and responsibilities and the limitation of
authority of OWNER's representative during exploration are set forth in the
Agreement and shall not be extended without written consent of OWNER.
8.2 Decisions on Disagreements. OWNER's representative will be the initial
interpreter of the extent of the work to be performed by the OPERATOR and judge
of the acceptability of the work thereunder.
OWNER's representative will not be responsible for OPERATOR's means,
methods, techniques, sequences, procedures, or the safety precautions and
programs incident thereto, and will not be responsible for OPERATOR's failure to
perform the work in accordance with the Agreement.
OWNER's representative will not be responsible for the acts or omissions of
OPERATOR or of any Subcontractors, or of the agents or employees of any OPERATOR
or Subcontractor or of any other persons at the site or otherwise performing any
of the work.
ARTICLE 9.
SCOPE OF WORK
9.1 Management. The OPERATOR will provide selected management input and
clerical services to MINERA ANDES INC. at the direction of MINERA ANDES INC.
from
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the OPERATOR's corporate headquarters in Spokane, Washington. In addition,
geological related services including satellite imaging, metallurgical,
engineering, secretarial and bookkeeping services will be provided from the
OPERATOR's headquarters.
9.2 Pre-Production Exploration and Development in the Area of Interest.
Without restricting the generality of the foregoing, exploration and
development, for the purposes of this contract includes:
9.2.1 Management of exploration and development programs;
9.2.2 Mobilization of equipment;
9.2.3 Drilling and sampling, blasting, trenching and other methods of
gathering geological data;
9.2.4 Construction and maintenance of access roads;
9.2.5 Demobilization of equipment;
9.2.6 Metallurgical work;
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9.2.7 Any other work necessary to accomplish tasks assigned by the
OWNER.
9.3 The point a project has reached a Bankable Feasibility, said project is
no longer subject to this OPERATOR Agreement.
9.4 OPERATOR shall provide the personnel equipment and supplies needed to
manage and perform all exploration and development work, other than those
supplied the OWNER.
9.5 Other Work. From time to time during the Contract, the OWNER may have
other miscellaneous work requirements for which it will request the services of
the OPERATOR. All such requests shall be in written form.
9.5.1 The work will be conducted at the direction of the OWNER, as
appropriate for the requirement, and agreed by OWNER and OPERATOR, and will be
paid for in the same manner as set forth in this Agreement.
ARTICLE 10.
WARRANTY AND GUARANTEE
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10.1 Warrants and Guarantee. OPERATOR warrants and guarantees to OWNER that
all work will be in accordance with this Agreement.
10.2 Access to Work. OWNER's representative, OWNER's agents, other
representatives of OWNER, testing agencies and governmental agencies with
jurisdictional interests will have access to the work at reasonable times for
their observation, inspection and testing. OPERATOR shall provide proper and
safe conditions for such access.
ARTICLE 11.
WORK BY OTHERS
11.1 OWNER may perform additional work related to the project or have
additional work performed by utility service companies, or let other direct
contracts. OPERATOR shall afford the utility service companies and the other
contractors who are parties to such direct contracts (or OWNER, if OWNER is
performing the additional work with OWNER's employees) reasonable opportunity
for the introduction and storage of materials and equipment and shall properly
coordinate its work with theirs. OWNER may request the OPERATOR to manage
certain contractors hired by the OWNER.
ARTICLE 12.
CONTRACT TIME
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The contract is effective for a period from the date of execution to
completion of the various projects and generative exploration programs.
ARTICLE 13.
CONTRACT PRICE
13.1 This is a Cost Reimbursable Contract and includes a fee for the
OPERATOR's off-site overhead as defined in Exhibit A.
13.2 OWNER shall pay OPERATOR for performance of the work in U.S. funds as
follows:
13.2.1 All labor, equipment rental, materials and supply costs as
needed to accomplish the items listed in Article 9, "Scope of Work," including
other costs for work incurred by OPERATOR in the Area of Interest and for
management and operation functions performed in North America for MINERA ANDES
INC.
13.2.2 Materials and supply costs will be recorded by vendor invoices
and presented for payment on a monthly basis.
13.2.3 OPERATOR's fee: To the total of the above costs, the OWNER will
pay the OPERATOR a fee of 15 percent to cover off-site administration. Costs for
labor,
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equipment, materials and supplies paid directly by the OWNER are not subject to
the 15 percent fee.
13.3 General Accounting Records. The OPERATOR shall maintain detailed and
comprehensive cost accounting records including general ledgers, supporting
journals, invoices, checks and other customary documentation, sufficient to
provide a record and the results of operations for Operatorial, tax, regulatory
or other financial reporting purposes.
ARTICLE 14.
PAYMENT
14.1 Application for Progress Payment. For each progress payment (but not
more often than once a month), OPERATOR shall submit to OWNER for review, an
Application for Payment filled out and signed by OPERATOR covering the work
completed as of the date of the Application and accompanied by such supporting
documentation and affidavits as are required.
14.1.1 Review of Applications for Progress Payment. OWNER's
representative will, after receipt of each Application for Payment, either
indicate a recommendation of payment or portion thereof, and present the
Application to OWNER, or return the Application to OPERATOR indicating in
writing the reasons for refusing to
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recommend full payment. In the latter case, OPERATOR may make the necessary
corrections and resubmit the Application.
14.2 Progress Payment. If the application and accompanying documentation
are appropriate as to form and substance, OWNER shall within ten (10) days pay
OPERATOR the amount requested.
14.3 OPERATOR's Warranty of Title. OPERATOR warrants and guarantees that
title to all work, materials and equipment covered by any Application for
Payment, whether incorporated in the project or not, will pass to OWNER at the
time of payment, free and clear of all liens, claims, security interested and
encumbrances (referred to as "Liens" ).
14.4 Partial Utilization. OWNER at any time may request OPERATOR to permit
OWNER to use any part of the work which OWNER believes to be substantially
complete and which may be so used without significant interference with
construction of the other parts of the work. If OPERATOR agrees, OWNER may use
those portions of the work.
14.5 Final Application for Payment. OPERATOR may make application for final
payment following the same procedure for progress payments. The final
Application for Payment shall be accompanied by all documentation called for in
the Agreement and such other data and schedules as OWNER may reasonably require.
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14.6 Final Payment and Acceptance. OWNER's representative will, after
receipt of the final Application for Payment, either indicate a recommendation
of payment and present the application to OWNER or return the Application to
OPERATOR, indicating in writing the reasons for refusing to recommend final
payment, in which case OPERATOR shall make the necessary corrections and
resubmit the application. If the application and accompanying documentation are
appropriate as to form and substance, OWNER shall, within ten (10) days after
receipt thereof, pay OPERATOR the amount requested.
ARTICLE 15.
CHANGE IN WORK
15.1 Without invalidating the Agreement, OWNER may, at any time or from
time to time, order additions, deletions or revisions in the work; these will be
authorized by the OWNER. Upon receipt of a change, OPERATOR shall proceed with
the work involved. All such work shall be executed under the applicable
conditions of the Agreement.
15.2 OWNER's representative may authorize minor changes in the work not
involving an adjustment in the Contract Price which are consistent with the
overall intent of the Agreement. These may be accomplished by a written request
and shall be binding on OWNER, and on OPERATOR who shall perform the change
promptly.
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ARTICLE 16.
TERMINATION
16.1 OWNER May Terminate. OWNER may immediately terminate the OPERATOR for
any cause upon the occurrence of any one or more of the following events:
16.1.1 If OPERATOR is adjudged bankrupt or insolvent;
16.1.2 If OPERATOR makes a general assignment for the benefit of
creditors;
16.1.3 If a trustee or receiver is appointed for OPERATOR or for any
of OPERATOR's property;
16.1.4 If OPERATOR files a petition to take advantage of any debtor's
act, or to reorganize under the bankruptcy or similar laws;
16.1.5 If OPERATOR fails to supply sufficient skilled workmen or
suitable materials or equipment after thirty (30) days' notice from OWNER to
correct deficiencies;
16.1.6 If OPERATOR disregards laws, ordinances, rules, regulations or
orders of any public body having jurisdiction;
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16.1.7 If OPERATOR disregards the authority of OWNER's representative.
16.2 OPERATOR May Terminate. The OPERATOR may terminate from the Agreement
upon the occurrence of any one or more of the following events:
16.2.1 If OWNER is adjudged bankrupt or insolvent,
16.2.2 If the OWNER does not have a Program and Budget in excess of
CDN $300,000 in planned expenditures per year in the Area of Interest.
16.2.3 If the OPERATOR elects to terminate from the Agreement prior to
two years from the date of the Agreement then the OWNER may elect to purchase
the OPERATOR's shares owned in MINERA ANDES INC. for U.S.$1,200,000. From the
date the OPERATOR notifies the OWNER in writing the OWNER will have One Hundred
and Twenty (120) days to purchase the MINERA ANDES INC. stock in the OPERATOR's
possession at the date of notification.
ARTICLE 17.
DISPUTES AND ARBITRATION
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17.1 All claims, disputes and other matters in question between OWNER and
OPERATOR shall be decided by:
17.1.1 Negotiation between the OWNER's representative and the
OPERATOR's representative. The respective representatives are as follows:
OWNER: Dennis Baxter
OPERATOR: James A. Fish
17.1.2 If an agreement cannot be reached through negotiation between
the representative of OWNER and the representative of OPERATOR, then the dispute
shall be settled by arbitration in accordance with the Rules for Commercial
Arbitration of the American Arbitration Association.
17.1.3 If agreement cannot be reached through the above means, then
the dispute shall be settled by arbitration under the procedures then prevailing
of the American Arbitration Association. The venue of any such arbitration shall
be Spokane, Washington. Costs and expenses of any such arbitration shall be
borne by the losing party.
ARTICLE 18.
MISCELLANEOUS
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18.1 Giving Notice. Whenever any provision of the Agreement requires the
giving of written notice, it shall be deemed to have been validly given if
delivered in person to the individual or to a member of the firm or to an
officer of the Corporation for whom it is intended, or if delivered by
registered or certified mail, postage prepaid, to the last business address
known to the giver of the notice.
Address for giving notice to OWNERS:
Minera Andes Inc. Minera Andes S.A. NAD S.A.
c/o Bonnie Kuhn c/o Brian Gavin c/o Brian Gavin
Ogilvie and Company Cnel. Moldes 837 Cnel. Moldes 837
1600, 407 2nd Street S.W. (5500) Mendoza (5500) Mendoza
Calgary, Alberta Argentina Argentina
Canada T2P 2Y3
Address for giving notice to OPERATOR:
James A. Fish
N.A. Degerstrom, Inc.
N.A. 3303 Sullivan Road
Spokane, Washington 99216
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18.2 Assignment. No assignment by a party hereto of any rights under or
interest in the Agreement will be binding on the other party hereto without the
written consent of that other party.
OWNER and OPERATOR each binds himself, his partners, successors, assigns
and legal representatives to the other party hereto, to all covenants,
agreements and obligations contained in the Agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement, by and through
their respective authorized officers on the date first above written.
MINERA ANDES INC. MINERA ANDES S.A.
By: /s/ DENNIS BAXTER By: /s/ JORGE VARGAS
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N.A. DEGERSTROM, INC. NAD S.A.
By: /s/ NEAL A. DEGERSTROM By: /s/ JORGE VARGAS
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EXHIBIT A
OPERATOR Employees The OPERATOR employees used this Agreement will be expensed
at OPERATOR's direct cost which includes payroll burden (social security,
unemployment, workmen's compensation, pension and health insurance) and any
other expenses of employment. Initially, three personnel have been assigned to
work full time for the OPERATOR under this Agreement.
Equipment Rental Rates: For equipment residing in Argentina (rates in U.S.
dollars)
Trucks
1) Three Ford F-150 4x4 trucks: $560/month each
2) One Ford F-100 2x4 truck: $470/month
3) Two new Rover Discovery 4X4's: $1,100 month each
4) Insurance premiums, taxes and licensing costs are to be paid
directly by the OWNER.
5) All fuel and maintenance costs for the OPERATOR's equipment will
be paid directly by the OWNER.
Drill Equipment
1) OPERATOR will provide an employee driller at direct cost.
-24-
<PAGE>
2) The drill, a Drill Systems MPD-1000, and support trucks and
equipment, will be rented to the OWNER at the OPERATOR's
direct cost on a per meter price.
Existing Office Equipment
1) Two computers and office equipment/drafting equipment: $400 month.
Equipment Rental Rates: For equipment residing in North America.
1) Landsat Imaging work station. Processing time will be charged at
the rate of $40 per hour for computing time.
Off-Site Administration (items covered by the 15% fee)
1) Accounting and in-house legal counsel
2) Office supply items less than U.S. $50.00 each
3) Office space
-25-
SHARE OPTION AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 8th day of March, 1995.
BETWEEN:
JORGE VARGAS, an individual residing in the City of Mendoza
in the Republic of Argentina
("Vargas")
- and -
MINERA ANDES INC., a corporation incorporated under the laws
of the Province of Alberta, with an office in the City of
Spokane, in the State of Washington
(the "Minera")
WHEREAS Vargas has agreed, pursuant to an Asset and Share Acquisition
Agreement dated the 8th day of March, 1995 among N.A. Degerstrom, Inc., Brian
Gavin, Jorge Vargas, Enrique Rufino Marzari Elizalde, Minera Andes S.A., Minera
Andes Inc. and NAD (S.A.)., to grant to Minera an option to purchase the 1
common share he holds in the capital stock of Minera Andes, S.A. in
consideration for $1.00
NOW THEREFORE in consideration of the premises, mutual covenants and
agreements herein contained, this agreement witnesses and it is understood and
agreed by and between the parties hereto as follows:
1. Definitions
"Agreement" means the agreement entitled "Asset and Share Acquisition
Agreement" made March 8, 1995 among N.A. Degerstrom, Inc., Brian Gavin, Jorge
Vargas, Enrique Rufino Marzari Elizalde, Minera Andes S.A., Minera Andes Inc.
and NAD (S.A.).
In addition, the definitions provided for in the Agreement are
incorporated herein by this reference.
<PAGE>
2. Grant of Option
Subject to the provisions hereinafter contained, Vargas hereby grants
to Minera an irrevocable transferable option (the "Option") to purchase the
1 common share (the "Optioned Share") he holds in the capital stock of Minera,
at a price of one-hundred $100.00 dollars.
3. Term of Option
Minera may exercise the Option on or before 4:30 p.m. (Calgary time)
on the date four (4) years from the Closing Date. If the Option is not exercised
within the initial term, Minera may upon providing written notice to Vargas, no
later than thirty (30) days prior to the expiration of the said term and the
payment of $1.00, extend the term of the agreement for a further four (4) years
from the end of the initial term herby created. Minera will continue to have the
option to renew this agreement for additional four (4) year terms until such
time as the Option is exercised by Minera.
4. Manner of Exercise
Minera may exercise the Option in whole or in part, at any time and
from time to time, by notice in writing given by Minera to Vargas at his address
for notice set out in the Agreement, specifying that Minera wishes to exercise
the Option for the Optioned Share and the payment in cash or certified cheque of
the purchase price of the Optioned Share.
5. Share Certificates
Vargas will deliver to Minera a share certificate representing the
Optioned Share duly endorsed in Minera's names for transfer.
6. Subordinate Document
This agreement is executed and delivered by the parties hereto
pursuant to and for the purposes of the provisions of the Agreement and the
provisions of the Agreement shall prevail and govern in the event of a conflict
between the provisions of the Agreement and this agreement.
7. Assignment
No party may assign its rights or obligations under this Agreement
without the prior written consent of all other parties hereto, which consent
will not be unreasonably withheld.
8. Enurement
Except as otherwise set forth herein, this Agreement shall be binding
upon and enure to the benefit of the respective successors and assigns of Minera
and of Vargas.
9. Further Assurances
Each party hereto will, from time to time and at all times hereafter,
at the request of the other party but without further consideration, do all such
further acts and execute and deliver all such further documents as shall be
reasonably required in order to fully perform and carry out the terms hereof.
<PAGE>
10. Time
Time shall be of the essence of this Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto executed and
delivered this Agreement as of the day and year first above written.
/s/ SUSANA LORENZO /s/ JORGE VARGAS
- ------------------------------ --------------------------------------------
Witness JORGE VARGAS
MINERA ANDES INC.
Per: /s/ ALLEN V. AMBROSE
---------------------------------------
Per: /s/ DENNIS BAXTER
---------------------------------------
SHARE OPTION AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 15th day of March, 1995.
BETWEEN:
ENRIQUE RUFINO MARZARI ELIZALDE, an individual residing in
the City of Mendoza in the Republic of Argentina
("Elizalde")
- and -
MINERA ANDES INC., a corporation incorporated under the laws
of the Province of Alberta, with an office in the City of
Spokane, in the State of Washington
(the "Minera")
WHEREAS Elizalde has agreed, pursuant to an Asset and Share
Acquisition Agreement dated the 8th day of March, 1995 among N.A. Degerstrom,
Inc., Brian Gavin, Jorge Vargas, Enrique Rufino Marzari Elizalde, Minera Andes
S.A., Minera Andes Inc. and NAD (S.A.)., to grant to Minera an option to
purchase the 1 common share he holds in the capital stock of Minera Andes, S.A.
in consideration for $1.00
NOW THEREFORE in consideration of the premises, mutual covenants and
agreements herein contained, this agreement witnesses and it is understood and
agreed by and between the parties hereto as follows:
<PAGE>
1. Definitions
"Agreement" means the agreement entitled "Asset and Share Acquisition
Agreement" made March 8, 1995 among N.A. Degerstrom, Inc., Brian Gavin, Jorge
Vargas, Enrique Rufino Marzari Elizalde, Minera Andes S.A., Minera Andes Inc.
and NAD (S.A.).
In addition, the definitions provided for in the Agreement are
incorporated herein by this reference.
2. Grant of Option
Subject to the provisions hereinafter contained, Elizalde hereby
grants to Minera an irrevocable transferable option (the "Option") to purchase
the 1 common share (the "Optioned Share") he holds in the capital stock of
Minera, at a price of one-hundred ($100.00) dollars.
3. Term of Option
Minera may exercise the Option on or before 4:30 p.m. (Calgary time)
on the date four (4) years from the Closing Date. If the Option is not exercised
within the initial term, Minera may upon providing written notice to Elizalde,
no later than thirty (30) days prior to the expiration of the said term and the
payment of $1.00, extend the term of the agreement for a further four (4) years
from the end of the initial term herby created. Minera will continue to have the
option to renew this agreement for additional four (4) year terms until such
time as the Option is exercised by Minera.
4. Manner of Exercise
Minera may exercise the Option in whole, at any time and from time to
time, by notice in writing given by Minera to Elizalde at his address for notice
set out in the Agreement, specifying that Minera wishes to exercise the Option
for the Optioned Share and the payment in cash or certified cheque of the
purchase price of the Optioned Share.
5. Share Certificates
Elizalde will deliver to Minera a share certificate representing the
Optioned Share duly endorsed in Minera's names for transfer.
<PAGE>
6. Subordinate Document
This agreement is executed and delivered by the parties hereto
pursuant to and for the purposes of the provisions of the Agreement and the
provisions of the Agreement shall prevail and govern in the event of a conflict
between the provisions of the Agreement and this agreement.
7. Assignment
No party may assign its rights or obligations under this Agreement
without the prior written consent of all other parties hereto, which consent
will not be unreasonably withheld.
8. Enurement
Except as otherwise set forth herein, this Agreement shall be binding
upon and enure to the benefit of the respective successors and assigns of Minera
and of Elizalde.
9. Further Assurances
Each party hereto will, from time to time and at all times hereafter,
at the request of the other party but without further consideration, do all such
further acts and execute and deliver all such further documents as shall be
reasonably required in order to fully perform and carry out the terms hereof.
10. Time
Time shall be of the essence of this Agreement.
IN WITNESS WHEREOF the parties hereto have hereunto executed and
delivered this Agreement as of the day and year first above written.
/s/ SUSANA LORENZO /s/ E.R. MARZARI
- ------------------------------ --------------------------------------------
Witness ENRIQUE RUFINO MARZARI ELIZALDE
MINERA ANDES INC.
Per: /s/ ALLEN V. AMBROSE
---------------------------------------
Per: /s/ DENNIS BAXTER
---------------------------------------
March 12, 1996
Minera Andes Inc.
North Sullivan Rd.
Spokane, Washington
Attention: President
Dear Sirs:
Re: Memorandum of Understanding - Santa Clara and Pino Andino Properties
Minera Andes Inc., for itself and its Argentinian subsidiary (collectively
"Minera Andes"), has the sole option to acquire a 100% interest in the two
separate properties located in Argentina which are called Santa Clara and Pino
Andino (individually, a "Property" and collectively, the "Properties"), each of
which is more particularly described in Schedule A. Minera Andes has provided a
copy of an official translation of the option agreement on the Santa Clara
Property to Cominco and will promptly provide copies of the option agreements on
the Pino Andino Property. These option agreements are hereinafter called the
Option Agreements. Cominco is interested in acquiring a joint venture interest
in the Properties, on the following terms:
1. Representations and Warranties
Minera Andes has the sole and exclusive option to acquire the sole and
exclusive right to mine or sole legal and beneficial ownership of the
Properties described in Schedule A. The Option Agreements are unamended and
are legally binding, enforceable and in good standing. To Minera Andes'
knowledge, the optionors under the Option Agreements hold good title to the
Properties. Minera Andes has the sole and exclusive right to explore, mine
and market minerals from the Properties; it has the right to enter this
Agreement and to dispose of its interest in the Properties; the Properties
are clear of encumbrances and it has not done anything whereby the
Properties may be encumbered; and there is not currently pending any legal
proceedings, claim or dispute affecting the Properties and, to its
knowledge, there are no grounds for any to be commenced. Subsequent to the
cateos for the Santa Clara Property being issued a large portion of the
Property was placed under park designation. If by January 1997, the
designation is not removed or modified so as to permit mining activities on
the area so designated, the parties shall negotiate in good faith to adjust
the vesting terms set out in paragraph 4 so that the expenditure
commitments for Cominco to exercise the option on the Santa Clara Property
is
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<PAGE>
commensurate with the portion of the Property on which mining activities
are permitted.
2. Due Diligence
Cominco has until April 4, 1996 to perform due diligence and notify Minera
Andes if Cominco will proceed with the option and private placement on the
terms set out below for the Properties. If Cominco does not have notice by
that date or elects not to proceed, this Agreement will be of no further
force or effect.
3. Private Placement
If Cominco elects to proceed as contemplated in paragraph 2, Cominco will
subscribe for a private placement of 877,194 units, each unit comprising
Minera Andes treasury common shares and one-half common share purchase
warrant, at 3.42 per unit for an aggregate subscription price of
CDN$3,000,003.40. One full warrant will entitle Cominco to purchase one
Minera Andes' treasury common share at a price per share of $3.98 prior to
April 30, 1997.
Minera Andes shall use or provide 25% of the private placement proceeds for
exploration of the Properties in satisfaction of the first Expenditures to
be incurred by Cominco under paragraphs 5(b) and (c), allocated as between
the Properties in the manner determined by Cominco. As the private
placement is in Canadian funds and some of those proceeds will be used to
satisfy expenditures which are listed in paragraphs 5(b) and (c) in US
dollars, Minera Andes shall be deemed to have converted 25% of the private
placement proceeds to US dollars using the noon fixing price on the date
Cominco closes the private placement. As it incurs expenditures on the
Properties, Cominco shall be entitled to draw down those monies by notice
to Minera Andes, which amount will be paid within 15 days.
As a result of the above and other recent private placements exceeding the
limit of 25% of its outstanding securities during this last six-month
period, the above private placement may, be subject to Minera Andes'
shareholder approval. Minera Andes will endeavor to obtain, by March 22,
1996, the consents of shareholders who, in the aggregate, hold at least 51%
of its outstanding securities and forthwith thereafter request the Alberta
Stock Exchange to approve the private placement without the necessity of a
shareholder meeting. If a shareholder meeting is required, such meeting
shall be held by May 24, 1996.
-2-
<PAGE>
4. Additional Properties
Cominco and Minera Andes have discussed opportunities under which they
might work together on other Minera Andes properties without reaching firm
agreement as to how those opportunities may be realized. However, Minera
Andes has agreed to give Cominco the right to review Minera Andes' other
projects for one year, extendable by mutual consent. In this regard, Minera
Andes will keep Cominco regularly informed as to its work on the other
mineral properties and will meet with Cominco in formal session at least
twice per year to review its property holdings and work results. Cominco
will be permitted to do site visits of those other mineral properties from
time to time.
5. Cominco Option
If Cominco elects to proceed as contemplated in paragraph 2, Cominco will
have the option to earn a 51% interest in each of the Properties, which
option shall be separate and independent of the private placement
contemplated in paragraph 3, except that if the private placement is made,
some of the proceeds shall be used to explore the Properties as
contemplated in paragraph 3. Cominco may exercise the option as to either
or both of the Properties as follows:
(a) making a cash payment to Minera Andes within 15 days of its notice to
proceed as in paragraph 2, in the case of Santa Clara, US$250,000, and
in the case of Pino Andino, US$350,000;
(b) subject to paragraph 3, as to the Santa Clara Property, incurring the
following cumulative expenditures, on or before the following dates:
On or before Cumulative
October 31, 1996 US$50,000 (firm)
October 31, 1997 US$500,000 (firm)
October 31, 1998 US$1,300,000 (optional)
October 31, 1999 US$2,750,000 (optional)
October 31, 2000 US$4,750,000 (optional)
if Cominco fails to incur the firm expenditures listed above prior to
their due dates it may nevertheless maintain the option on the
Property if it incurs the shortfall on the Pino Andino Property;
(c) subject to paragraph 3, as to the Pino Andino Property, incurring the
following cumulative expenditures, on or before the following dates:
-3-
<PAGE>
On or before Cumulative Expenditures
March 31, 1997 US$400,000 (firm)
March 31, 1998 US$1,200,000 (optional)
March 31, 1999 US$2,650,000 (optional)
March 31, 2000 US$4,650,000 (optional)
(d) reimbursing Minera Andes for, or paying, all option, lease and other
land costs to be made after the date of this Agreement to exercise the
Option Agreements or to maintain title to the Properties in good
standing under the mining laws of Argentina.
6. Exercise of Option
Upon Cominco completing the cash payments and expenditures contemplated in
paragraph 5, Cominco will have exercised the option and earned a 5I%
beneficial interest in each of the Properties on which it elected to
proceed. Cominco will give Minera Andes notice forthwith after having
incurred the expenditures set out in paragraph 5 and that, as a result, it
has exercised the option. Within 30 days of Cominco's notice, Minera Andes
shall elect whether:
(a) to form the joint venture and contribute its 49% of subsequent costs,
in which case paragraphs 7 to 23 shall apply; or
(b) to decline participation and allow Cominco to increase its interest up
to 62%.
Minera Andes elected paragraph 6(b), Cominco will earn up to 11 percentage
points of interest by completing a bankable feasibility study for the Property
with Cominco undertaking work as results warrant; provided that if Cominco
completes a bankable feasibility study prior to having incurred an additional
US$22,000,000, it will have earned one percentage point of interest for each
US$2,000,000 in expenditures which it incurs, to a maximum of 11 percentage
points. In the case of Minera Andes' election under paragraph 6(b), paragraphs 7
and 9 and 12 to 23 shall apply.
For purposes of this Agreement, "bankable feasibility study" means a written
report on work performed on the Property, which report shall include but is not
necessarily limited to an analysis of the economic and commercial viability of
removing mineral products from the Property, transforming such products into
marketable products and marketing such products. The report shall examine the
following matters in such form and to such detail as Cominco, acting reasonably,
considers suitable to present to third party lending institutions if it decided
to seek debt financing for a mine:
-4-
<PAGE>
(c) the estimated indicated and inferred mineral reserves contained within
a mineral deposit on the Property, including the tonnage, quality and
description of the manner in which such reserves were calculated and
estimated;
(d) a description of the procedures to be followed for developing and
mining the deposit and a detailed timetable for the construction,
start-up and production on a commercial basis of the project;
(e) a metallurgical report based upon, at a minimum, laboratory tests of
ore samples which report sets forth and demonstrates the metallurgical
facility of producing a saleable product;
(f) detailed estimates of the costs of pre-production development and
construction of production facilities;
(g) the estimated annual capital and operating budgets (in constant
currency amounts) covering the anticipated expenditures to perform the
construction, start-up and production on a commercial basis of the
project;
(h) projected discounted cash flow based rates of return on the investment
for the entire project estimated to be earned from the commercial
production contemplated by the report; and
(i) the estimated total investment which, in addition to the costs
described in d) above, shall also include the funds required for
start-up costs and working capital, and the return shall be based on
the receipt of operating cash flow before the payment of taxes on
income or any allowances for such taxes.
7. Management Committee
Following execution of this agreement, a Management Committee will be
established comprised of one voting representative from each of Cominco and
Minera Andes. It is intended that the Management Committee shall meet in
formal session at least once in each year on call by the Operator, though
the non-operator shall be entitled to request a meeting, in which case the
Operator shall call one promptly.
Management Committee decisions shall be made by simple majority vote based,
during the term of the option, on Cominco and Minera Andes having 51 and 49
votes respectively, and following the date the option is exercised, on each
party being entitled to a number of votes which is prorata its interest
percentage.
-5-
<PAGE>
8. Joint Venture
Upon Cominco having exercised the first option and earned a 51% interest,
the relationship of Cominco and Minera Andes on each Property shall be
governed by a separate joint venture, structured as permitted by the laws
of Argentina. Though an unincorporated joint venture is preferred, the laws
of Argentina may require corporate form of joint venture in which case the
following joint venture terms will be embodied in a shareholders'
agreement. Each joint venture shall have the terms which are set out in the
balance of this Agreement.
Following the date Cominco exercised the first option, the parties shall
bear the costs of further work on the Property, and the risks associated
therewith, in proportion to their respective interests in the Property as
those interests may be adjusted from time to time under paragraph 10. For
purposes of calculating any adjustment to the parties' interests under
paragraph 10, at the date Cominco exercises the option the parties will be
deemed to have incurred the following costs:
(a) Cominco: its actual payments made and expenditures incurred under
paragraph 5;
(b) Minera Andes: 49/51 of Cominco's costs in paragraph 8(a).
9. Project Management
Cominco will be the initial Operator, managing the 1996 exploration program
on the Properties. For the 1996 program and such other programs as the
parties may agree, Minera Andes will enter into a consulting services
agreement with the Operator under which it will provide such equipment,
field personnel, field logistics and office and administrative support and
upon such terms as the parties may agree.
The Operator will be responsible for the daily direction of exploration,
development and mining activities approved by the Management Committee. The
Operator shall have the exclusive right to manage all work on the Property
and to incur the costs required for that purpose. In so doing the Operator
shall, unless it obtains the approval of the Management Committee:
(a) comply with all instruments of title under which mineral properties in
the Property are held; provided that during the term of the Option,
Minera Andes will administer government tenure and the option payments
and, in connection therewith, shall give notice to Cominco at least 21
days prior to a tenure or option due date that the obligation has been
satisfied and Cominco shall forthwith reimburse Minera Andes for
payments made to maintain title in good standing;
-6-
<PAGE>
(b) pay all costs properly incurred promptly as and when due;
(c) keep the property and assets relating to the Property free of all
liens and encumbrances;
(d) do all such other things as may be necessary to maintain the Property
in good standing;
(e) maintain accounts in accordance with accounting principles generally
accepted in the mining industry;
(f) perform its duties and obligations in a sound and workmanlike manner,
in accordance with sound mining and engineering practices, and in
compliance with all applicable laws and this Agreement;
(g) permit authorized representatives of each party, at its and their sole
risk and expense and at reasonable times, to have access to the
Property and to all technical records and other factual engineering
data relating to the Property which is in the possession of the
Operator, and
(h) furnish each of the parties with regular progress reports during
periods of active exploration and with an annual summary of the work
performed and the results obtained.
10. Exploration Programs
Programs of exploration will be approved by the Management Committee and
carried out by the Operator. Each party may elect to contribute its
proportionate share of the costs required to conduct an approved
exploration program. If a party elects not to contribute its share of costs
(and the other party elects to contribute to the shortfall which has been
created thereby), the interests of the parties will be adjusted so that
each party holds an interest which is proportionate to its actual and
deemed contribution to the total actual and deemed costs. However, if
Cominco has exercised the first option and Minera Andes has elected under
paragraph 6(a), then twice prior to the approval of a program to commence a
feasibility study, if Minera Andes elected not to contribute to a program,
Minera Andes may avoid the dilution it would have suffered to its interest
on account of that program. To do so, Minera Andes may, within 30 days of
receiving Cominco's report on the program and statement of expenditures,
pay Cominco an amount which is two times the amount which would have been
Minera Andes' share of program costs if Minera Andes had elected to
contribute in the first instance. If Minera Andes' interest is reduced to
less than 20% as a result of adjustment pursuant to this paragraph, it
shall be deemed to have
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<PAGE>
surrendered its interest to Cominco and withdrawn from the joint venture
and in consideration for that surrender it will receive a 20% deferred
carried interest as contemplated in paragraph 18.
11. Feasibility Study
When the Management Committee determines that the preparation of a
feasibility study on a Property is justified, it may approve a program
which contemplates the preparation of the study. The Operator will carry
out that program and upon completion of the feasibility study, shall
deliver a copy to the non-operator.
12. Production Decision - Project Financing
Any decision to place the Property into commercial production shall be
based on the feasibility study approved by the Management Committee,
updated, where and if required, to account for any change in circumstances
between the date of delivery and the date a production decision is made. If
the Management Committee makes a production decision, the parties shall
elect within 90 days to arrange their respective financing to bring the
deposit into commercial production and provide their share of the
appropriate guarantees. If Minera Andes elects not to contribute, it shall
be deemed to have surrendered its interest to Cominco and withdrawn from
the joint venture and in consideration for that surrender it will receive a
20% deferred carried interest as contemplated in paragraph 18.
13. Mine Construction
The Operator shall proceed with mine construction with all reasonable
dispatch following the production decision. Construction shall be
substantially in accordance with the production notice subject to the right
of the Operator to cause such reasonable variations in construction to be
made as the Operator in its discretion deems advisable. During the
construction period the Operator shall provide monthly progress reports,
which reports shall include information on any changes or developments
affecting the construction program that the Operator considers material.
14. Operating Plans
A mine shall be operated on the basis of annual operating plans approved by
the Management Committee; provided that the Management Committee may
temporarily suspend or permanently terminate operations pursuant to a
suspension or closure plan approved by it.
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<PAGE>
15. Costs Defined
For purposes of this Agreement, "costs' include:
(a) all costs, expenses, charges and outlays, direct and indirect, made or
incurred by the Operator on or in respect of a Property from the date
of this agreement; and
(b) an Operator's fee for administrative services, head office overhead,
use of the corporate infrastructure, and other general services
provided by the Operator and its affiliated corporations not recovered
directly in (a) above, which charge shall be a percentage of the costs
set out in (a) above, as follows:
(i) 10% of costs incurred during the period between the date of this
agreement and the date a production decision is made, except for
third party contracts in excess of US$IOO,000 in which case the
fee for the amount in excess shall be 5%, it being agreed that
Cominco shall not be entitled to an Operator's fee on the
consulting services agreement with Minera Andes referred to in
paragraph 9; and
(ii) 3% of costs incurred during the period after the date a
production decision is made.
16. Payment of Construction and Operating Costs
Following the date a production decision is made, the Operator shall be
entitled to invoice each party for its share of mine construction and
operating costs. If a party does not pay the amount invoiced within 30
days, the amount will then commence to accrue interest at prime plus two
percent. The Operator may, at any time thereafter, then demand payment and
if payment of the amount due together with accrued interest is not made
within 30 days of demand, the Operator may sell the defaulting party's
interest and, following application of the sales proceeds to the amount in
default plus accrued interest and the reasonable costs of sale, pay the net
sales proceeds to the defaulting party.
17. Marketing of Production
Each party that has contributed to the costs of implementing the production
decision shall be entitled to take in kind and separately market the
minerals produced from the mine in proportion to its interest.
-9-
<PAGE>
18. Deferred Carried Interest
If Minera Andes becomes entitled to a deferred carried interest under
paragraphs 10 or 12, the initial cash flows from sales of product from the
mine will be used to pay operating, marketing and distribution costs; taxes
(other than income taxes) and royalties. The resulting net proceeds will be
applied to settle any debt financing which had been arranged for mine
construction and any advances the Operator has made to cover sustaining
capital requirements or operating losses during this "cost recovery"
period. During this "cost recovery" period, Minera Andes will be entitled
to an advance royalty of 2% net smelter returns, to a maximum of US$500,000
per calendar year, which advance royalty shall be recoverable out of net
proceeds as if it was an advance made by the Operator.
After debt recovery, 90% of net proceeds shall be paid to the participating
party so that it may recover any equity financing which it has provided for
mine construction and its prior costs and expenditures and 10% of net
proceeds will be paid to Minera Andes.
After recovery of the equity contributions as aforesaid, the net proceeds
will be divided between the parties, 80% to the participating party and 20%
to Minera Andes.
19. Area of Interest
The outermost boundary of each Property shall comprise the Area of Interest
for that Property. Any additional properties acquired by Cominco or Minera
Andes within the Areas of Interest would be covered by this Agreement.
Cominco would agree to maintain all existing and new properties. If the
Management Committee should decide to drop any property, in whole or in
part, the Management Committee will give Minera Andes 60 days notice of its
untention to drop, in which event these lands will no longer be subject to
this Agreement.
20. Right of First Refusal
A party (the "vending party") shall be entitled to sell, transfer or
dispose of all or part of its interest in a Property; provided, however,
that the other parties, in proportion to their respective interests, shall
have the right of first refusal to acquire the disposing party's interest
at the same price and on the same terms as a third party has offered, which
right is exercisable within 60 days of receipt by that other party of a
copy of the offer to purchase which the vending party has received and is
willing to accept. The right of first refusal shall not apply to sales,
transfers or dispositions to affiliates. For this purpose, Teck Corporation
and its affiliates shall be deemed to be affiliates of Cominco.
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<PAGE>
21. Termination
Prior to exercising the option on either Property, Cominco may, on 60 days
notice, terminate this Agreement with regard to a Property, at any time
after having incurred the firm expenditures set out for that Property in
paragraph 5(b) or (c). Any obligations accruing after the notice of
termination and before the termination date (i.e., lease and option
payments) shall be paid by Cominco.
22. Force Majeure
The Operator shall be entitled to claim force majeure if it is delayed or
prevented from performing any obligation by reason of any cause, excluding
lack of its own finances, beyond its reasonable control.
23. Sale of Minera Andes Shares
If Cominco wishes to sell any shares in Minera Andes (the "Offered
Shares'), Cominco shall first make an offer (the "Share Offer") in writing
to Minera Andes to sell the Offered Shares to Minera Andes or a party
nominated by Minera Andes. The Share Offer shall state the price and the
other terms and conditions of the Share Offer, as applicable and, in the
case of a Share Offer other than an Open Market Disposition the name of any
proposed purchaser from Cominco. If Cominco wishes to make an Open Market
Disposition of Offered Shares, the price under the Share Offer shall be the
Market Price.
At any time during the period of:
(a) two business days immediately following the date on which the Share
Offer is received by Minera Andes (the "Notice Date") if the Share
Offer notice relates to an Open Market Disposition; and
(b) 10 business days immediately following the Notice Date for any other
proposed sale Minera Andes may accept the Share Offer with respect to
all of the Offered Shares.
Minera Andes' failure to give notice within the time provided shall be
construed as a decision not to accept the Share Offer.
If a person, other than Cominco, makes a Take-over Bid, Cominco's proposal
or wish to tender into that bid shall be and be deemed to be an Open Market
Disposition, and governed by and subject to the terms of paragraph 23(a),
excluding price.
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For purposes of this paragraph, the following terms shall have the
following meanings:
(c) "Market Price" means the aggregate sale price of Minera Andes' shares
sold during the three consecutive trading days immediately preceding
the day of delivery of a Share Offer divided by the total number of
Minera Andes' shares so sold during that three day period; and
(d) "Open Market Disposition" means a disposition through the facilities
of the Alberta Stock Exchange which is carried out through and in
accordance with the usual or customary rules for trading on the floor
of that exchange.
The purchase and sale of the Interest and of the Offered Shares shall be
completed at the Vancouver head office of Cominco at 11:00 a.m. on the 10th
business day after the date on which the Share Offer if received by Minera
Andes or such other time and place as may be agreed upon by the parties. At
the closing the purchase price shall be paid by certified check, banker's
draft or money order against delivery of certificates, duly endorsed in
blank for transfer, representing the Offered Shares, as the case may be.
24. Governing Law
The agreement shall be governed by the laws of British Columbia.
25. Conditions Precedent
This Agreement is subject to approval by Minera Andes' Board of Directors.
The private placement contemplated in paragraph 3 is also subject to
approval by the Alberta Stock Exchange. Both approvals are to be obtained
by March 22, 1996, Minera Andes will promptly take all reasonable steps to
obtain the approvals. If Board approval has been given to this Agreement
but the Exchange has not approved the private placement this Agreement
shall proceed with the private placement provisions being deemed to have
been deleted.
Upon execution, this letter agreement shall become a binding and legally
enforceable agreement which will continue in effect until such time as it is
replaced by a more definitive agreement. Please indicate your acceptance of our
proposal by signing and returning the enclosed duplicate copy of this letter. We
will then have our counsel prepare a draft of a definitive agreement embodying
the above terms and work with you to try to complete that agreement within 90
days.
Yours truly,
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COMINCO LTD.
By: /s/ GEORGE D. TIKKANEN
------------------------------
George D. Tikkanen
Vice-President, Exploration Agreed
MINERA ANDES INC.
By: /s/ ALLEN V. AMBROSE
---------------------------------
(Title: President )
(Date: March 12, 1996 )
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SCHEDULE A
<TABLE>
<CAPTION>
SANTA CLARA
Cateo
Name Cateo # Size (HA) Owner Province
- ---- ------- --------- ----- --------
<S> <C> <C> <C> <C>
Cateo 26-G-93 2,500 Giustozzi Mendoza
Cateo 88-C.93 1,000 Carotti Mendoza
Cateo 92-R-93 6,070 Rubenstein Mendoza
Cateo 96-B-93 1,520 Baros Mendoza
Cateo 99-T-93 900 Testa Mendoza
Cateo 101-G-93 3,370 Giustozzi Mendoza
Cateo 383-I-93 4,900 Izuel Mendoza
Mina Calisto 343-G-93 makes up part of 26-G-93 Giustozzi Mendoza
Mina Titam 344-G-93 makes up part of 101-G-93 Giustozzi Mendoza
Mina Almada 345-C-93 makes up part of 22-C-91 Giustozzi Mendoza
Geotec 11 137-C-94 makes up part of 381-I-93 Izuel Mendoza
Geotec 12 138-C-94 makes up part of 381-I-93 Izuel Mendoza
Geotec 13 138-C-94 makes up part of 381-I-93 Izuel Mendoza
Gonzalo 1 148-N-95 makes up part of 92-B-93 Izuel Mendoza
Gonzalo 2 149-N-95 makes up part of 98-B-93 Izuel Mendoza
Gonzalo 3 150-N-94 makes up part of 383-I-91 Izuel Mendoza
</TABLE>
<TABLE>
<CAPTION>
PINO ANDINO
Mina Name Expidente # Size Owner Province
(HA)
- --------- ----------- ---- ----- --------
<S> <C> <C> <C> <C>
Provincial Reserve Area 10.163 CORMINE S.H.P. Neuquen
Pedrito Lucas 6.513/77 250 Gonzalez Neuquen
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Mina Name Expidente # Size Owner Province
(HA)
- --------- ----------- ---- ----- --------
<S> <C> <C> <C> <C>
Sin Rival 4.062/67 18 Gonzalez Neuquen
La Raubalcas 139.153/49 18 Gonzalez Neuquen
Dos Guanacos 11.057/81 27 Gonzalez Neuquen
Maipu 104.473/50 24 Gonzalez Neuquen
Lican 4.867/69 18 Gonzalez Neuquen
Carolina 10.404/80 50 Neuquen
Manzano Silvestre 10.316/79 27 Neuquen
El Lio 11.519.84 27 Gonzalez Neuquen
</TABLE>
TRANSLATION
EXPLORATION AND PROSPECTION CONTRACT AND OPTION TO PURCHASE
In the city of Mendoza, province of Mendoza, on the twelfth day of the
month of May of the year one thousand nine hundred and ninety four, it is agreed
between N.A. DEGERSTROM INC., represented by this act by its representative Mr
Brian Gavin, whose legal capacity was accredited by a general power of attorney,
registered in No. 22637, folio 230, volume 262L of the Public Book of General
Mandates, on April 7th, 1994, with legal residence at 837 Coronel Moldes St,
province of Mendoza, as one party, and as the other party MR. CARLOS OSVALDO
GIUSTOZZI, Military Registration Document No. 6,865,305, married, geologist,
with domicile of choice at 6140 Saenz Pena St., Villa Nueva, Guaymallen,
Mendoza, and special domicile at 275 Jose V. Zapata St., Floor 1, Flat "A", city
of Mendoza; together with Mrs. MARIA RIERA DE GIUSTOZZI, Registration Document
No. 4,115,161, married, housewife, domiciled at the same place than Mr Giustozzi
and that she appears with the only aim of rendering the corresponding conjugal
consent required by, Section 1277 from the Civil Code; and MR MARTIN ANTONIO
CAROTTI, National Registration Document No. 14,188,132, married, geologist, with
domicile at 549 San Juan St., Building "A3", Floor 7,. Flat 55, city of Mendoza,
together with MS CLAUDIA VIVIANA RUBINSTEIN, geologist, National Registration
Document No. 13,265,280, married, with the same domicile than the previous one;
who appear on their own, and at same time, render the corresponding conjugal
consent required by section 1277 from the Civil Code; the appearers last
mentioned, are represented unified
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hereinafter in the person of Mr Carlos O. Giustozzi and Mr Martin A. Carotti;
and all the mentioned parties agree upon this Exploration and Prospection
Contract and Option to Purchase which will be ruled pursuant to the following
articles:
FIRST: Mr. Carlos Osvaldo Giustozzi, Mr. Martin Antonio Carotti and Ms
Claudia Viviana Rubinstein as holders of the applications for cateos under
application: a) Pursuant to expediente No. 86-G-93; No. 88-C-93; No. 92-R-93;
No. 98-B-93; No. 99-T-93; No. 101-G-93 and No. 383-I-93; and the manifestaciones
de descrubrimiento which handle pursuant to expediente No. 343-G-93 called
"Caliato"; No. 344-G-93 called "Titan" and No. 345-C-93 called "Almatea" and
putting on record that the total area is called "Santa Clara"; all these
expedientes belong to the Provincial Department of Mining in the city of
Mendoza, stating Mr Giustozzi and Mr Carotti that their licenses or rights are
fully valid and are in force pursuant to the Mining Code and that there are no
legal or conventional inhibitions, attachments or encumbrances whatsoever on the
mines, giving N.A. Degerstrom INC, or the person that N.A. Degerstrom appoints
in due time, an irrevocable option to bay these mines or cateos or partial or
total rights at any stage of the contracts. Attached to the present agreement,
there will be the corresponding Title Certificates of the General Department of
Mining, on the already mentioned mining rights. At the same time, the
assignments of rights corresponding to the expedientes No. 98-B-93, No. 99-T-93,
No. 101-G-93 and No. 383-I-93 on behalf of Mr Carlos O. Giustozzi; which were
legalized by deed No. 23 (General Official Record) dated April 29, 1994,
Registry No. 266, Mendoza, on the responsibility of Mr Carlos Alberto Vidart.
Meanwhile, certified xerox-copies of the already mentioned expedientes are
added. Their legal conditions are derived
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from them and the parties sign these expedientes as well as their corresponding
location and surface sketches. It is hereby stated that in none of these areas
there is either mining work or improvements whatsoever.
It is included within the present section all and any manifestacion of
mining rights, specially manifestaciones de descubrimientos which had been done
by the contracting parties (on their behalf or on behalf of third parties) in
the areas mentioned before, since January 1st, 1994 (01/01/94).
SECOND: The option may be taken by N.A. Degerstrom INC. at any moment
within the four years as of May 12, 1994 and Mr Giustozzi and Mr Carotti commit
themselves to do on their own all the things necessary to formally convey N.A.
Degerstrom INC. or whoever this company appoints, the mining properties detailed
in Section l. In order to make this conveyance easier, Mr Giustozzi and Mr
Carotti grant irrevocable rights in the name of N.A. Degerstrom INC. and/or the
person this company appoints to expedite the legal proceeding of the already
mentioned expedientes, to denounce the minerals they may find and to directly
require from the General Department of Mining the corresponding title deeds and
their emerging rights, during the period the present contract is in force. The
proceedings undertaken before the General Department of Mining and/or any other
related section, will be in charge of N.A. Degerstrom INC. with the cooperation
and help of Mr Giustozzi and Mr Carotti.
During the term this contract is in force, both parties commit themselves,
in their own name and in the name of third parties, not to require and register
as alien to the mentioned contract in the surfaces included, any cateo,
manifestaciones de descubrimientos, minas or
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estacas minas, or any other right that may change the spirit of this contract.
At the same time, if N.A. Degerstrom INC. defines an ore body in external areas
which limits with the areas referred to in Section 1 and began its commercial
exploitation, it should acknowledge Mr Giustozzi and Mr. Carotti a Net Smelter
Return royalty of 2.5% of the mineral to be extracted in the areas invading the
ones described in the first section; royalty to be payable annually, after
ninety days as of the date of closing the balance sheet of N.A. Degerstrom INC.
Nevertheless, as payment term, the amount of U$S 100,000.00 will be given in
advance at the beginning of the exploitation and as partial payment of the
royalty that may result at the end of the financial statement; these last
mentioned payments are cumulative to compensate for their proportions with the
royalties. Summarizing, the maximum dollar value of 2.5% of the annual royalty
on the output agreed upon cannot be cumulatively surpassed. In a word this
royalty is thus limited, by a maximum, without any limit of time, of U$S
1,950,000 - the total area price.
N.A. Degerstrom INC commits itself to supply Mr Giustozzi and Mr Carotti
all the technical information necessary for controlling the appropriate
clearance of the royalties. In the event that the ore bodies partially invade an
original contracted area, N.A. Degerstrom INC. will postpone and always keep for
an unlimited period of time, the option of buying the area for a total price of
U$S 1,950,000.00, and the total of the related royalties payed in that area,
under any concept, will be considered as on account of this agreed upon total
maximum price; with the exception of the additional royalty of 0.5% (zero point
five percent) annually on the net smelter return, agreed upon as the additional
price, to the U$S 1,950,000.00 as total price.
Mr Giustozzi and Mr Carotti, in their own name and in the name of third
parties, cannot
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ask for any cateos, registering of a claim to a mine or manifestacion creadora
of mining rights in the area hereby committed; under warning of being restricted
in the terms and options of the present contract.
THIRD: During the effective term of the present contract, Mr Giustozzi and
Mr Carotti award N.A. Degerstrom INC. the possession of the cateos and rights
already identified in the first section, but this last mentioned company cannot
commercially exploit the ore bodies. N.A. Degerstrom INC. can do research work
and can do the following works: geological, mining and topographical research,
drillings of any kind, can take surface and underground samples, can do surface
diggings and underground works, mineralogical and metallurgical research works,
can build pilot plants for studying and can do any other useful investigations
to achieve the pursued aim, which is the discovery and blocking out of an
economically viable ore body; except if it practices the option to purchase.
FOURTH: In the case that N.A. Degerstrom INC. uses its right to option
mentioned in the first section of the present contract, the selling price of the
properties mentioned in the first section is equivalent to the sum of one
million nine hundred and fifty thousand of US dollars (U$S 1,950,000.00) for all
the areas and ore bodies included in this contract, payable with US dollars or
Argentine pesos, according to the seller exchange-rate of US dollars at the
Banco de la Nacion Argentina the day before the payment is accomplished. The
stated payment terms of U$S 1,950,000 for all the areas and ore bodies
mentioned, will be the following ones:
(1st) as payments on account of the total price, during the period of four
years of the option to purchase:
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(a) First year: when the contract is signed U$S 20,000.00.
on January 5, 1995 U$S 30,000.00.
(b) Second year: on July 5, 1995 U$S 35,000.00.
on January 5, 1996 U$S 40,000.00.
(c) Third year: on July 5, 1996 U$S 50,000.00.
on January 5, 1997 U$S 75,000.00.
(d) Fourth year: on July 5, 1997 U$S100,000.00.
on January 5, 1998 U$S100,000.00.
TOTAL: U$S450,000.00.
In case N.A. Degerstrom INC. decides in favor of the option to purchase before
the fourth year, the difference up to U$S 450,000.00 will be included to the
final price and will be divided into the same terms, always remaining five equal
shares for the payment of this final price.
(2nd) Terms and conditions of payment of the balance of payment, for U$S
1,500,000.00 in case the option to purchase is chosen.
At the moment of giving, Mr Giustozzi and Mr Carotti, the title
transferring deed, the amount of U$S 300,000.00 must be payed and the term for
paying the balance of the payment will began to run, at the rate of four equal
and consecutive biannual shares, of U$S 300,000.00 each; which will expire on
the fifth day of the first day of each biannual period; on occasion, these
shares must include the proportional share for the difference on U$S 450,000.00
for having chosen the option to purchase before completing this amount. For this
last balance of price, subsequent to the deed, a payment bond, enough and
reasonable for the parties, must be given.
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(3) Additional to the amounts previously stated, in case of choosing the
option to purchase, after the last share, the following royalty or "regalia"
must be payed.
When the title transferring deed or the independent public instrument is
done, N.A. Degerstrom INC. will fix for the account of Mr Giustozzi and Mr
Carotti a royalty or "regalia" of 0.5% (zero point five percent) on the "net
smelter return" of the total production of the ore body. This royalty will be
payed annually after ninety days as of the closing date of the balance sheet of
N.A. Degerstrom INC.; nevertheless, as a way of payment, the amount of U$S
100,000.00 will be given in advance at the beginning of the production on
account of the royalty that may result at the end of it. These payments will be
cumulative till compensating its proportions with the royalty; i.e. it cannot
cumulatively surpass the maximum of the annual 0.5% (zero point five percent) of
the production, agreed upon as royalty N.A. Degerstrom INC. commits itself to
give Mr Giustozzi and Mr Carotti the necessary technical information to control
the appropriate settlement of the royalty.
All the amount, for any item, hereby stated in payment; will be payable in
the opportunities respectively mentioned, at the domicile of N.A. Degerstrom
INC. in the city of Mendoza; or by depositing in the banking account Mr
Giustozzi and Mr Carotti require; notified, within the limits of the
reasonability.
FIFTH: N.A. Degerstrom INC. will be able to terminate the present agreement
at any moment during the term of the option to purchase, by means of a notice
sent with fifteen days of previous notice, to the contractual domicile of Mr
Giustozzi and Mr Carotti; without compensation whatsoever for them. Mr Giustozzi
and Mr Carotti are not authorized to
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<PAGE>
unilaterally rescind the contract except in the cases foreseen in Section 11th.
The contract will terminate for both parties in the effective termination date
specified in the notice, or the last effective date of the option to purchase if
the last one was not used. With such termination N.A. Degerstrom INC. will give
back the tenancy of the mining concessions to Mr Giustozzi and Mr Carotti in
their present conditions, with the concession charges updated and without
equipment or obligation to give back the already achieved improvements; except
in the case when it is necessary to demolish them in order to take them away and
the one who demolishes them cannot use them any more. In case N.A. Degerstrom
INC. terminates the contract, the amounts payed up to that moment will be for
the benefit of Mr Giustozzi and Mr Carotti, as compensation for the
unavailability of the ore bodies.
SIXTH: In guarantee of the option to purchase referred to in the first
section of the present contract, Mr Giustozzi and Mr Carotti commit themselves
to simultaneously register before the Mining Authority of the Province of
Mendoza a voluntary inhibition to transfer, sell, rent, or levy a tax on the
mining leases identified in the 1st Section, and as regards this topic, they
have already requested it. The inhibition already mentioned will be in force for
a period equal to the period of duration of the present contract, and a copy of
this contract will be submitted as a causal reference of the mentioned
inhibition, which will request its registration as a marginal note in the
registry of each mine, as well as in each expediente.
SEVENTH: Mr Giustozzi and Mr Carotti will give the mining concessions
object of the present contract, together with the mining license fees already
payed on the date of the signing of the contract. During the effective date of
this contract, N.A. Degerstrom INC. will:----------
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(a) Undertake all the expenses derived from the maintenance in legal
effectiveness of the rights mentioned in the FIRST section, understanding by
that the payment of: the mining licence fees of the cateos and the concessions,
the measurement of cateos and mines, estacas minas and manifestaciones de
descubrimiento, the replacement of boundaries and any other expense or
Provincial or Municipal expenditure which may affect the already mentioned
mining rights; not being deductible from the payments to Mr Giustozzi and Mr
Carotti, except in the case the last mentioned people had undertaken such
obligation.
(b) N.A. Degerstrom will be in charge of any administrative improvement
necessary to introduce. Mr Giustozzi and Mr Carotti will not be responsible for
the tools, machines, equipments, installations or improvements located in the
mining property;
(c) Take on all responsibilities related to physical injury or death of any
person or damages to property deriving from negligence or guilt chargeable to
N.A. Degerstrom, its employees or subordinates arising from their activities;
(d) Pay all the manual labor and work related, in all its aspects, and all
the material used in relation to the objection of the present contract;
releasing Mr. Giustozzi and Mr Carotti from any responsibility;
(e) All the compensations that may correspond to the superficiary or to
third parties, including the Estate, due to environmental damages, without
limitation in time, are exclusively on N.A. Degerstrom INC.'s account, provided
that they are chargeable to the procedures of the company.
EIGHTH: N.A. Degerstrom INC. may, at any moment during the effective date
of this
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contract, install and take away from the mining concession any tool, machinery,
equipment and supplies belonging to the same. It is specifically agreed upon
that in case of total or partial termination of the present contract for any
reason whatsoever, N.A. Degerstrom INC. can take away from its property all the
goods, tools, machinery, equipment or supplies, and the cost of the already
mentioned withdrawal will be in charge of N.A. Degerstrom INC., who will remove
the above mentioned equipment within ninety (90) days as of the termination of
the contract; N.A. Degerstrom INC. cannot take away any underground beam, or
timbering, nor any other supports already installed by it, and cannot alter or
restore excavations or any other works on the surface, unless it is so required
by a suitable law, regulation or administrative policy. N.A. Degerstrom cannot
either remove or disassemble any masonry constructions only built to be
demolished, without the subsequent responsibility of the company. N.A.
Degerstrom INC. may have during the mentioned period of time, a watchman or the
necessary guard.
NINTH: After the total or partial termination of the present contract for
any reason whatsoever, excluding the payment of N.A. Degerstrom INC. to Mr
Giustozzi and Mr Carotti of the purchase price in the way and amounts already
stated in the fourth section, and provided that Mr Giustozzi and Mr Carotti have
not incurred in any nonfulfillment whatsoever; N.A. Degerstrom INC. must supply
to them a free written copy of all the factual data related to the studies
specified in section three, done up to the moment, with its signature; likewise,
N.A. Degerstrom INC. will provide the necessary drill core or material useful
for the investigation, within the term of ninety days after the termination. Mr
Giustozzi and Mr Carotti will have the right to examine the mining concession at
any reasonable moment, without interrupting any
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work; previously giving notice to N.A. Degerstrom INC. of their intention to do
such inspection with an advance period of time of no less than ten days.
TENTH: Mr Giustozzi and Mr Carotti state and guarantee to be the only
concessionaires of the mining concessions or application of cateos included in
Section 1; that they are in undisturbed possession and with a right on them,
that they have not ceded or encumbered them; that they are free and exempt from
any claim on the part of third parties or people acting in their name. Without
limiting or restricting any other right of N.A. Degerstrom INC. against Mr
Giustozzi and Mr Carotti, it is agreed upon that if at any moment during the
effective date of the present contract N.A. Degerstrom INC. or the Mining
Authority or third parties happen to find out or expressly state any kind of
defect or restriction in the deed of any of the concessions or application for
cateos identified in Section First, Mr Giustozzi and Mr Carotti will remedy the
mentioned defects. If Mr Giustozzi and Mr Carotti do not do it in the term of
thirty days from the date they are notified to do it so N.A. Degerstrom INC.,
except in the case of force majeure; those defects, delays or restrictions can
be corrected by N.A. Degerstrom INC., to which effect they give N.A. Degerstrom
INC. or to whom the company appoints, an irrevocable right or power to try to
correct them. In the event that N.A. Degerstrom INC. pays the total purchase
price in the terms and with the amounts stated in the fourth section of the
present contract, acquiring in so doing the right assigned by the entitlement of
the mining concessions, and the actual and material possession of the mines, was
given to the company, Mr Giustozzi and Mr Carotti will immediately give the
instruments and will do all the necessary proceedings to improve the
transference of the concession in the name of N.A. Degerstrom INC. The
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expenses and fees that require the granting and registration of the instruments
and the registration of the voluntary inhibition will be charged to N.A.
Degerstrom INC. Subsidiarily, it is emphasized that Mr Giustozzi and Mr Carotti
give irrevocable right or power to N.A. Degerstrom INC. or to whom they appoint
in order to do all the necessary acts or to extend the instruments that
terminate the transference of the control of the minas or applications for
cateos subject to this contract, when giving notice of the option to purchase.
ELEVENTH: The only ground for termination in the name of Mr Giustozzi and
Mr Carotti will be the lack of due payment of the amounts of money agreed upon
in section four and what is agreed upon by N.A. Degerstrom INC. in section
seventh. The right to terminate the contract due to lack of payment will be in
force after thirty days of delinquency in the fulfillment of the same. The
delinquency will work by law and without need of injunction or out-of-court
demand, for the only reason of the expiration of the term. During the period of
the effective delinquency, the amount of it will accrue an interest equivalent
to the rate of Banco de la Nacion Argentina for the discount of commercial
papers or promissory notes; which must be payed together with the money owed.
After the delinquency term of thirty days, Mr Giustozzi and Mr Carotti can
unilaterally terminate the contract by means of an authentic notification at the
domicile of N.A. Degerstrom INC., keeping in their favor the amounts collected
up to that moment; without detriment of their right to demand the owed amounts
of money; except in the case the option to purchase had been exercised and more
than one third of the price had been payed, in which case, they must previously
demand the payment of the price balance with its guarantee.
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TWELFTH: All the rights of N.A. Degerstrom INC. derived from the present
contract may be freely transferred by them, having to notify that act to Mr
Giustozzi and Mr Carotti. At the same time, the Cessionaires shall have to
confirm their acceptance of all the conditions of the present contract, before
Mr Giustozzi and Mr Carotti; from then onwards they shall be substituted in all
the rights and duties which originally belonged to N.A. Degerstrom INC. The
rights of Mr Giustozzi and Mr Carotti pursuant to this contract, may be
transferred only with previous permission of N.A. Degerstrom INC. The above
mentioned agreement cannot be unreasonably denied.
THIRTEEN: This contract will oblige the parties and their corresponding
heirs, executors, trustees, successors, beneficiaries, and related third
parties. All knowledge or information which Mr Giustozzi and Mr Carotti acquire
related to the works mentioned in the third section will be kept confidential
and will be considered as such except in the case that N.A. Degerstrom INC.
releases, in writing, the holders from this duty. This article of
confidentiality will be in force during the whole period of the contract, and a
year after the date of termination or the purchase of the property and of the
mining rights were in effect. Likewise, N.A. Degerstrom INC. commits itself to
keep confidentiality up to one year after the date the contract is terminated,
with the exception that the holders, in writing, release N.A. Degerstrom INC.
from this duty.
FOURTEENTH: Mr Giustozzi and Mr Carotti state again that they appoint as
their agent before N.A. Degerstrom INC., with the purpose of practicing their
rights and fulfilling the duties that emerge from this contract, Mr Carlos
Osvaldo Giustozzi, who will jointly,
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alternately or separately act, with Mr Martin Antonio Carotti, binding their
notices, stipulations, payment receipts and determinations to all and each of
the grantors as if they had personally or jointly done them; with the exception
that they imply modifications of the present contract, in which case they will
have to come to an agreement.
Mr Giustozzi and Mr Carotti will explicitly give notice at the contractual
domicile of N.A. Degerstrom INC. in the case the present group of
representatives is modified. The actual address for all notices to Mr Giustozzi
and Mr Carotti is: Jose Vicente Zapata 275, First Floor, Apartment "A", Mendoza
and the one of N.A. Degerstrom INC., Coronel Moldes 837, Mendoza. These
addresses may be modified, in the area comprised by the city of Mendoza and the
area called Gran Mendoza, with previous reliable notice.
FIFTEENTH: This contract will be officially recorded in a Registry Notary
Public Office and before the Mining Authority; the expenses will be in the
charge of N.A. Degerstrom INC., to the effects of the stamps taxes of the
Province, the parties hereby state that the present contract is included in the
exemptions foreseen by the modification of Section 240, paragraph 31 of Tax Law
6104.
SIXTEENTH: The parties agree that in case of controversy they submit to the
jurisdiction of the Lower Courts of the city of Mendoza, with the exclusion of
any other court or Jurisdiction.
With the signature of the present contract, N.A. Degerstrom INC. pays in
this act the amount of U$S 20,000 (US Dollars twenty thousand) to its
contracting party, in payment for the amount of the first installment stated by
the Fourth Section. Upon receipt of this payment Mr
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Giustozzi and Mr Carotti shall return a sufficient receipt and the full covering
and total acquittance for this matter.
In witness whereof it is signed the present contract in four copies of the
same kind, one per each of the parties, one to be registered in the Mining
Authority of the province of Mendoza, and the other to be officially recorded at
a local Registry Public Notary Office.
Simultaneously, two copies of the same contract are signed, translated into
English and certified by Public Translator.
Brian Gavin Carlos Osvaldo Giustozzi
in the name of N.A. Degerstrom Mil. Reg. Doc. 6,865,305
Martin Antonio Carotti Maria Riera de Giustozzi
Nat. Reg. Doc. 14,188,132 Reg. Doc. 4,115, 161
Claudia Viviana Rubinstein
Nat. Reg. Doc. 13,265,280
EXPLANATORY CLAUSE: Related to NET SMELTER RETURN: In the case royalties must be
payed, it is understood as "net smelter return" all the metallic minerals,
concentrates, or products of the same minerals which contain minerals or
derivative minerals sold by the Company. If the crude minerals which contain
minerals or derivative minerals, sold by the
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Company, the "net smelter return" of them will be considered as the actual
amount received by the mentioned Company, in the sale of them, less the
deduction of all the expenses corresponding to the transport (including freight,
insurance and delivery and shipping charges) from the property up to the
stockpile of the purchaser or any other unloading place.
When the concentrates or products containing derivative minerals are sold
by the Company, the "net smelter return" must be considered as the actual amount
received by the Company for such sale, except when it is applicable the
deduction for any and all costs of smelting, refining, weighing, sampling,
assay, handling, transportation (including freight, insurances, handling and
shipping expenses), penalties for impurities and other charges levied by the
purchaser, so long as the Company does not deduct any other charge for initial
processing. By "initial processing" it is understood the initial grinding or
concentration or any other crude mineral treatment during which one or more
mineral products are recovered from the mentioned crude mineral to be sold; or
its later processing, during which the first tails and the tailings of the crude
mineral are discarded or deposited.
The already mentioned deductions will be limited to amounts commercially
reasonable in the light of the current industry norms and practices accepted
good at that moment, corresponding to smelting or any other similar actions of
metal treatment.
The "Net smelter return" for, the crude mineral, concentrates or products
treated in a smelting or other similar operations of metal treatment which were
owned, operated or controlled by the Company, or treated under the base of a
processing fee for the Company, will be taken into account pursuant to what has
already been mentioned, with the deductions already
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stated. For crude minerals, concentrates or products sold to companies
associated or sold by the Company, but in some other way used by the Company,
the gross price of the sales will be stated in a similar way; so long as the
total deductions made by the Company pursuant to the present paragraph, do not
exceed the total deductions other smelters or treatment facilities for similar
materials might have done in case the mentioned materials were smelted or
treated in those installations according to a reasonable commercial agreement.
INFORMATION CLAUSE: Mr Carlos Osvaldo Giustozzi, Mr Martin Antonio Carotti
and Ms Claudia Viviana Rubinstein expressly place on record that their share as
the other parties of N.A. Degerstrom INC. in the different mining rights hereby
committed in exploration and prospection and option to purchase, as well as in
all the rights and liabilities deriving from this contract, is of 70% (seventy
percent) of the shares for the account of Mr Carlos Osvaldo Giustozzi, and 30%
(thirty percent) of the shares for the account of Mr Martin A. Carotti, with the
express consent of Ms Claudia Viviana Rubinstein to the present record.
Brian Gavin Carlos Osvaldo Giustozzi
in the name of N.A. Degerstrom Mil. Reg. Doc. 6,865,305
Martin Antonio Carotti Maria Riera de Giustozzi
Nat. Reg. Doc. 14,188,132 Reg. Doc. 4,115,161
Claudia Viviana Rubinstein
Nat. Reg. Doc. 13,265,280
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The present contract of Exploration and Prospection and Option to Purchase
has five folios. Attached to them, there are different public instruments
described below, which are numbered from folio 6 to 14. Then there follow three
pages which are not numbered and correspond to the certification of signatures,
the resolution for the inscription No. 221 and the inscription in the Mining
Notary's Office.
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Folio 6
(Letter to the Director of the General Department of Mining, requesting a
certificate of mining rights).
Mendoza, April 5th, 1994.
Director of the General Department of Mining: Lic. Oscar H. Ponce.
Ref: Request for a Certificate of Concession of Mining Rights.
The undersigning, Carlos Osvaldo Giustozzi, submits to the Director of the
General Department of Mining and says that:
(1) He has come to ask the Notary's Office of the mentioned Department for
a Certificate of the Mining Rights herein detailed:
# of Expediente Name: Mining Dis.: Rights:
343-G-93 "Calisto" #17 Salamanca Manif. Descub.
344-G-93 "Titan" " " Manif. Descub.
345-C-93 "Almatea" " " Manif. Descub.
86-G-93 Cateo " " Cateo
88-C-93 Cateo " " Cateo
92-R-93 Cateo " " Cateo
98-B-93 Cateo " " Cateo
99-T-93 Cateo " " Cateo
101-G-93 Cateo " " Cateo
383-I-93 Cateo " " Cateo
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(2) He asks for a certificate of concession of the mentioned rights to be
presented to the people, interested in the exploration of them.
Sincerely yours,
There follows the seal and signature of Carlos O. Giustozzi, Geologist.
Register No.: 445, Reg. No. A-922, Professional Council, Mendoza.
There follows a seal which reads: "Submitted to me, the Notary of Mines, in
two copies, without any signature from lawyer, on the fifth day of the month of
April of the year one thousand nine hundred and ninety four, at 8:30. There
follows the seal and signature of Lia Elizabeth de la Rosa, Notary Public,
General Department of Mining.
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Folio 7
(Report from the Notary Public of the General Department of Mining to the
Director of the same office on the Mining Rights requested by Carlos 0.
Giustozzi)
Ref: Identification 231-M-94 "Giustozzi, Carlos O." requests
Certificate of the Mining Rights herein mentioned."
Dear Sir,
We report according to what is stated on folio 1:
1. Expediente 343-G-93. "Giustozzi, Carlos O. M/Ore body of COPPER, named
"CALISTO", located in the mining district No. 17, Department of Tupungato". The
report on the sample states: "ROCK WITH SCATTERINGS OF COPPER OXIDATES". It is
authorized for SIGHT.
2. Expediente 344-G-93. "Giustozzi, Carlos O. M/Ore body of COPPER, named
"TITAN", located in the mining district No. 17, Department of Tupungato". The
report on the sample states: "ROCK WITH SCATTERINGS OF COPPER MINERALS AND
STRINGERS WITH MINERALIZATIONS OF COPPER AND IRON." It is authorized for SIGHT.
3. Expediente 345-C-93. "Carotti, Martin A. M/Ore body of COPPER, named
"ALMATEA", located in the mining district No. 17, Department of Tupungato". The
report on the sample states: "MINERALIZATION OF IRON - pyrite - AND OF COPPER
OXIDATES". It is authorized for SIGHT.
4. Expediente 86-G-93. "Giustozzi, Carlos Osvaldo S/ Cateo, located in the
mining district No. 17, Department of Tupungato". As of 10/14/93 it is given
notice to the interested
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party domiciled at 275 Jose Vicente Zapata St.- lst Floor - Flat "A" of the city
of Mendoza, in view of the report of the Graphic Register and summoning within a
term of 10 days to comply with the provisions of Section 23- Law 22.259, as
regards the minimum program of work to be done, elements, equipment and
machinery to be used. Likewise he should declare he is not comprised in the
prohibitions stated either by Section 27, final paragraph, or by Section 28,
fifth paragraph of the Mining Code. All this, under warning of LAPSING of the
right to comply with it in the future. The lapsing shall come to effect as a
matter of law by the mere expiration of the term: Section 30, Mining Procedure
Code). Give official notice for superficiaries to be determined. In folios 5/6
it is showed a Program of Works and an Affidavit. In folio 7: an official notice
by the Official Land Register. In folio 9: The Official Land Register reports
that the real estate is part of the real estate of Mr. NICOLAS ANIBAL VILAS,
with legal address at P.O. Box No. 5- Tupungato and of LUCILA B. DE BOMBAL. To
be authorized.
5. Expediente 88-C-93. "Carotti, Martin Antonio" S/Cateo. In mining
district No. 17, Department of Tupungato". Graphic Register shows that it
overlaps with file No. 79-M-92 "Moglia, Sergio A., s/Cateo, Mining District No.
17, Department of Tupungato" and Expedients No. 86-G-93, "Giustozzi, Carlos
Osvaldo". It is to be presented the Authorization to the Official Land Register,
with the forms filled in and folio 4, s/Graphic Register the report of that
department does not differ.
6. Expediente 92-R-93. "Rubinstein, Claudia Viviana s/Cateo. In mining
district No. 17, Department of Tupungato". In folio 2, back, Graphic Register
shows that it overlaps with expediente No. 79-M-92 "Moglia, Sergio, s/Cateo; and
File No. 86-C-93, "Giustozzi,
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Carlos Osvaldo" s/Cateo and 88-C-93 Carotti, Martin S/Cateo". It is given order
to give sight to the interested party. Give it authorization for the
superficiary/ies to be determined. In folio 7 the interested party is given
notice. In folio 8 a new sketch attached. It is for judgement to be passed by
the Department of Graphic Register.
7. Expediente 98-B-93. "Barros, Clelia Beatriz, S/Cateo. In mining district
No. 17, Department of Tupungato". Graphic Register shows, in folio 2 (back
side), that it overlaps with expediente No. 92-R-93, "Rubinstein, Claudia
Viviana, s/Cateo, Mining District No. 17". In folio 5 it shows the Program for
Works and it states not to be comprised either in Section 27 or in Section 28 of
the Mining Code. In folio 8 the Official Land Register states that the real
estate is part of the estate of Mr. Nicolas Anibal Vila, with legal domicile at
P.O. Box No. 5, Tupungato. It is given order to authorize the superficiary
stated by the Official Land Register. Once done, it should pass to the
Department of Geology.
8. Expediente 99-T-93. "Testa, Luis Aldo, S/Cateo in mining district No.
17, Department of Tupungato". In folio 2, back side, the Graphic Register shows
that it overlaps with files No. 79-M-92, 86-G-93, 88-C-93 and 92-R-93, already
defined herein. In folio 4, it is given notice. In folio 5 it shows the Program
for Works and it states not to be comprised either within Section 27 or Section
28 of the Mining Code. In folio 9 the Official Land Register states that the
real estate is part of the estate of Mr. Domingo Bombal, with legal domicile at
122 Catamarca St of the city of Mendoza. It is given order to authorize the
superficiary stated by the Official Land Register. Once done, it should pass to
the Department of Geology. Once terminated, it should pass to the Office of
Legal Advice. (Section 26, Clause d, Law 3790).
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9. Expediente 101-G-93. "Giustozzi, Carlos Daniel, S/Cateo. In mining
district No. 17, Department of Tupungato". In folio 2, back side, the Graphic
Register shows that it overlaps with expediente No. 78-R-92, Roman, Carlos,
S/Cateo, in Mining District No. 17, Tupungato". In folio 4, the interested party
is given notice. In folio 5 it shows the Program for Works and the affidavit,
stating not to be comprised either within Section 27 or Section 28 of the Mining
Code. In folio 6 it is ordered to summon the Holder within 5 days for him to
give back the authorization to the Official Land Register. It is to be given
notice.
10. Expediente-383-I-93 "Irusta, Gabriel Alejandro, S/Cateo, in Mining
District No. 17, Tupungato". It is to be given the official document according
to what the Direction of Mining states, in order to comply with what is stated
by Section 23 of the Amendment to the Mining Code, Law 22.259, as regards the
Minimum Program of Works to be done, elements, equipment and machinery to be
used. Authorize it for the superficiaries to be determined. Give it course in
accordance with Section 43 of the Mining Procedure Code.
Mining Notary's Office, April 12th, 1994
There follows the seal and signature of Lia Elizabeth de la Rosa, Notary
Public, General Department of Mining.
On the face of the page there appear four stamps crossed by the seal of Lia
Elizabeth de la Rosa, Notary Public, General Department of Mining.
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Folio 8
List of the different "expedientes", with registration dates and other data.
SANTA CLARA (Rio del Plomo, 3369-20 and 19)
86-G-93:
343-G-93 presented 08/30/93 notified
Mine CALISTO not min to be known
118-C-94 presented 04/11/94 overlap
Mine GEOTEC4 to be corrected not min
drawing to be done to be known
126-C-94 presented 04/13/94 overlap
Mine GEOTEC5 to be corrected not min
drawing to be done to be known
88-C-93:
345-C-93 presented 08/30/93 notified
Mine ALMATEA to be corrected to be known
128-R-94 presented 04/13/94 overlap
Mine GEOTEC10 to be corrected not min
drawing to be done to be known
92-R-93:
116-C-94 presented 04/11/94 overlap
Mine GEOTEC1 to be corrected not min
drawing to be done to be known
119-C-94 presented 04/11/94 overlap
Mine GEOTEC7 to be corrected not min
drawing to be done to be known
125-C-94 presented 04/13/94 overlap
Mine to be corrected not min
drawing to be done to be known
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127-C-94 presented 04/13/94 overlap
Mine GEOTEC8 to be corrected not min
drawing to be done to be known
98-B-93:
120-C-94 presented 04/11/94 overlap
Mine GEOTEC9 to be corrected not min
drawing to be done to be known
123-C-94 presented 04/13/94 overlap
Mine GEOTEC6 to be corrected no min
drawing to be done to be known
99-T-93
117-C-94 presented 04/11/94 overlap
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Folio 9
Mine GEOTEC2 to be corrected not min
drawing to be done to be known
101-G-93:
344-G-93 presented 08/30/93 notified
Mine TITAN not min to be known
383-I-93:
137-C-94 in presented 04/19/94 overlap
Mine GEOTEC11 to be corrected not min
notified to be known
138-C-94 in presented 04/19/94 overlap
Mine GEOTEC12 to be corrected not min
notified to be known
139-C-94 in presented 04/19/94 overlap
Mine GEOTEC13 to be corrected not min
notified to be known
There appears an illegible signature.
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Folios 10 and 11
(Maps of the Polimetallic Project of Santa Clara).
On the right lower corner of folio 10 there is the title of the map which
reads: Polimetallic Project of Santa Clara. Tupungato. Mendoza. Location of
Exploration Permits and "Manifestaciones de Descubrimiento". Page 3369-26, Mt.
Tupungato. C. Giustozzi - M. Carotti. Scale: 1:100,000. (There appears the same
illegible signature as in folio 9)
On the right upper corner of folio 11 there is the title of the map, which
reads: Polimetallic Project of Santa Clara. Tupungato. Mendoza. Location of
Exploration Permits and "Manifestaciones de Descubrimiento". Page 3369-20 and
19, Plomo River. C. Giustozzi - M. Carotti. Scale: 1:100,000. (There appears the
same illegible signature as in folios 9 and 10)
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Folio 12
(Notarial Proceedings for the Transfer of Rights and Free Mining Shares)
Notarial Proceedings. Original Record of Deed. Law 4735.
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Transfer of Free Mining Rights and Shares. GABRIEL ALEJANDRO TRUSTA, CARLOS
DANIEL GIUSTOZZI, CLELIA BEATRIZ BARROS AND LUIS ALDO TESTA in favor of CARLOS
OSVALDO GIUSTOZZI.
Deed No. twenty three (General Record of Deed)
In the city of Mendoza, Argentine Republic, on April the twenty-ninth of
the year one thousand nine hundred and ninety-four, before me, CARLOS ALBERTO
VIDART, National Notary Public with Register No. two hundred and sixty-six of
this capital city, there appear: As one party, GABRIEL ALEJANDRO TRUSTA, married
for the first time to Elsa Cecilia Castro, who appears in this procedure to give
consent as per Section 1277 of the Civil Code, with legal domicile at 288 Clark
St., of the City of Mendoza, National Registration Document No. 14,858,091;
CARLOS DANIEL GIUSTOZZI, married for the first time to Rocio Mosquera, who
appears in this procedure to give consent as per Section 1277 of the Civil Code,
with legal domicile at 275 Jose Vicente Zapata St., First Floor, Flat "A", of
the City of Mendoza, National Registration Document No. 14,858,093; CLELIA
BEATRIZ BARROS, single, with legal domiciled at 275 Jose Vicente Zapat St.,
First Floor, Flat "A" of the City of Mendoza, National Registration Document No.
11,809,356; and LUIS ALDO TESTA, married for the first time to Maria Lourdes
Giustozzi, who has come to this procedure to give her consent as per Section
1277 of the Civil Code, with legal domicile at 275 Jose Vincent Zapata St.,
First Floor, Flat "A", of the City of Mendoza, National Registration Document
No. 17,124,963;
and as the other party MR. CARLOS OSVALDO GIUSTOZZI, married for the first
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time to Maria Rivera, who takes part in this procedure to give her consent
pursuant to Section 1277 of the Civil Code, his Military Registration Document
being No. 6,865,305, with domicile at 275 Jose Vicente Zapata St., first floor,
Flat "A", of this City, all the appearing parties being Argentine, of age,
capable to the best of my knowledge and belief, I attest. And Mr. GABRIEL
ALEJANDRO TRUSTA, CARLOS DANIEL GIUSTOZZI, CLELIA BEATRIZ BARROS AND LUIS ALDO
TESTA, all of them by their own rights, STATE: that they ASSIGN AND TRANSFER
WITH NO CHARGE, the rights shares and liabilities which they have, belonging and
corresponding to them on the Mining "Cateos" which will be detailed, in favor of
Mr. CARLOS OSVALDO GIUSTOZZI and he explicitly accepts:
FIRST: Mr. Gabriel Alejandro Trusta, on a cateo located in the Mining
District No. 17 of the Department of Tupungato, processed in Expediente No.
383-I-93;
SECOND: Mr. Carlos Daniel Giustozzi, on a Cateo located in the mining
district number 17, of the Department of Tupungato, of this Province; in
Expediente No. 101-G-93;
THIRD: Mrs. Clelia Beatriz Barros, on a Cateo located in the mining
district number 17 of the Department of Tupungato of this province, in
Expediente No. 98-B-93; and
FOUR: Mr. Luis Aldo Testa, on a Cateo located in the mining district number
17 of the Department of Tupungato of this province, in Expediente No. 99-T-93;
all the mentioned Cateos correspond to the General Department of Mining,
Argentine Republic. The grantors state that the rights and shares they transfer
by this public instrument have not been transferred, encumbered or bound in any
way and that they transfer them as they are at the
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moment, Mr. Carlos Osvaldo Giustozzi taking the rest of the liabilities at his
own charge:
Consequently, each of the grantors, in their position as holder make
delivery, relinquish and withdraw from all and each of the rights and mining
shares which they have on the Cateos, object of this cession which they transfer
in favor o the assignee, who substitutes for them in their same place and grade,
being authorized to make use of them in the form and conditions which he deems
convenient to his own interests.
In this position, Mr. Carlos Osvaldo Giustozzi accepts all and each of the
terms of this Deed of Cession of Ming Rights, Shares and Liabilities, freely
granted in his favor. The authorizing Notary Public hereby states the following:
(a) with the certificate No. 6,723 issued by the Department of Public
Registry and General File of the Province of Mendoza, dated April 29th, of the
current year, which is before us and is filed in this Notary's Office, it is
attested that the grantors are not inhibited to make use of their property;
(b) with the report by the General Department of Mining, it is attested
that the Cateos object of this cession are in the name of the grantors as
detailed and that there are no liens whatsoever up to the present, being in
force;
(c) that the grantor declares to have a tax identity, i.e., his Unique
Identity Number for Tax Contribution, (C.U.I.T) 20-6865305-4 and that he has
been paying the National Retirement Fund for Autonomous Workers, and that at
present a new number is being processed in order to be able to work again. Once
read and confirmed by me, it is signed before me, I attest.
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There follow different illegible signatures and the seal and signature of
Carlos Alberto Vidart, Notary Public, Register N. (illegible), Mendoza. His seal
and signature appears twice on this page.
On the top corner of the two pages of this deed there appear the Numbers
000704135 and 000704136, series C, respectively.
On the opposite corner there appears the seal of the Notarial Office of the
Province of Mendoza.
On the first page of the deed there appears the seal and signature of Lia
Elizabeth de Rosas, Notary Public, General Department of Mining.
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Folio 14
(Notarial Proceeding, Certification of the xerox-copy by Notary public).
F, No. 173241.
It coincides with its original copy which I have had before me, pursuant to
public instrument number twenty-three, folio twenty-five, dated April 29th,
1994, I attest. I hereby issue this first evidence for the interests party in
the place and date above mentioned.
There follows the seal and signature of Carlos Alberto Vidart, Notary
Public, Reg. No. 266, Mendoza.
There follows a seal which certifies that the present xerox-copy, is true
to its original. It is signed and sealed by Lia Elizabeth de la Rosa, Notary
Public, General Department of Mining. Date: May 10th, 1994.
All the previous folios bear five illegible signatures, the seal and
signature of Gilberto Suarez Lago, Lawyer and Notary Public, Register No. 355,
Mendoza, and a seal that reads: "Certified on the folio of the Notarial
Proceeding No. 204387, with the stamps of the certification attached No.
894806/805/804/803/802. Mendoza, May 13th, 1994.
(Notarial Proceeding certifying the signatures of the holders).
Notarial Proceeding. Folio No. 204387.
In my capacity as Notary Public, Notarial register number three hundred and
fifty five of this Capital City, I hereby certify that the signatures in the
previous file, which appear on fourteen folios bearing my signature and seal and
evidence of the certification made on the
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present folio of the Notarial Proceeding, and bearing the seal for the numbering
of folios of my Notary's Office, belong to Mr Brian Gavin, passport issued by
the United Kingdom of Great Britain and Northern Ireland, No. C 969.194 D, Mr
Carlos Osvaldo Giustozzi, Military Registration Document No. 6.865.305, Ms Maria
Riera de Giustozzi, Registration Document no. 4.115.161, Mr Martin Antonio
Carotti, National Registration Document No. 14.188.132, and Ms Claudia Viviana
Rubinstein, National Registration Document No. 13.265.280, which have been
signed before me; as well as that Mr Brian Gavin is representative of the entity
"N.A. Degerstrom Inc.", what is demonstrated by a deed of General Power of
Attorney, registered in the Public Register of General Mandates of this province
with number 22.627, folio 230, book 262, "L". The corresponding requirement are
legalized simultaneously on pages 71, 75, 73, 74 and 72 respectively, of the
book No. "One" of Requirements of the Authorizing Party, I attest.
Mendoza, on the thirteenth day of the month of May of the year one thousand
nine hundred and ninety four.
There follows the seal and signature of Gilberto Suarez Lago, Lawyer-Notary
Public, Register No. 355, Mendoza.
On the back of the notarial proceeding there appear the stamps from the
Notarial Office of Mendoza, with a seal of the Retirement Office of Notaries
Public and the name of Gilberto Suarez Lago, Notary Public.
At the bottom of the face page of the notarial proceeding, there appears
the seal and signature of Gilberto F. Suarez Lago, Lawyer-Notary Public,
Register no. 355, Mendoza.
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(Resolution No. 221 by the Honorable Council of the General Department of
Mining)
Government of Mendoza.
Mendoza, June 15th, 1994.
Resolution No. 221.
Whereas:
Expediente No. 227-N-94, under the name of: "N.A. Degerstrom Inc.,
Giustozzi Carlos y Carotti Martin A." - S/ Registering, and
Whereas:
the documents evidenced in court records is legal in form pursuant to
Sections 11, 123 and 124 of the Mining Code Procedure according to evidences in
court records, to the favorable report by the Legal Consultant's Office and to
the power vested by Section 19, Law 3790.
Thus:
the Honorable Council of the General Department of Mining determines:
First Section: To be registered by the Mining Notary Public Office in the
Register of Mining Business and Mortgages, with evidence in marginal note to the
Entries of the other Registers which may correspond, the Exploration and
Prospection Contract and Option to Purchase, on folios 1/5, undersigned by the
contracting parties "N.A. Degerstrom, Inc." and Mr Carlos Osvaldo Giustozzi and
Mr Martin Antonio Carotti", corresponding to the Applications of Cateos on
Expedientes N. 86-G-93, N. 88-C-93, N. 92-R-93, N. 98-B-93, N. 99-T-93, N.
101-G-93 and N. 383-I-93, and the Manifestaciones de Descubrimientos in
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Expedientes N. 343-G-93, named "Calisto", N. 344-G-93, named "Titan" and N.
345-C-93, named "Almatea", of which court records were processed before the
General Department of Mining, naming the total area constituted by the above
mentioned "Santa Clara", Mining District N. 17, Department of Tupungato of this
Province, duly certified the signatures registered before the Notary Public Dr.
Gilberto F. Suarez Lago, pursuant to Sections 11, 123 and 124 of the Mining
Procedure Code.
Section 2: Be it known through Graphic Register to all other Attachments
and Inhibitions.
Mining Notary's Office, July 11th, 1994.
There follows the seal and signature of Lia Elizabeth de la Rosa, Notary
Public, General Department of Mining.
To the left, there appears the seal of the Ministry of Economy, Mendoza.
I HEREBY CERTIFY THAT THE FOREGOING IS A TRUE AND FAITHFUL TRANSLATION OF
THE ORIGINAL DOCUMENT WRITTEN IN SPANISH WHICH I HAVE HAD BEFORE ME IN THE CITY
OF MENDOZA, ARGENTINE REPUBLIC, ON THE SECOND DAY OF THE MONTH OF AUGUST OF THE
YEAR ONE THOUSAND NINE HUNDRED AND NINETY FOUR.
-----------------------------------
MARIA ELENA MONTECINO
Traductora Publica de ____ Mat.___
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COMPLEMENTARY AGREEMENT
In the city of Mendoza Province, June 30th, 1994, it is agreed between N.A.
Degerstrom Inc., represented in this act by Mr. Brian Gavin, on one hand; and on
the other by CARLOS OSVALDO GIUSTOZZI, MARTIN ANTONIO CAROTTI AND CLAUDIA
VIVIANA RUBINSTEIN, represented by Mrs. Gladys E. Molina guaranteeing this
representation by submitting General Power of Attorney. The said parties agree
to the current "complementary agreement".
FIRST: The parties have an Exploration and Prospecting Contract with Option to
Buy, regarding the area called "Santa Clara" located in Tupungato, Mendoza; this
contract comprehends the mining rights that arise from the different files which
have been registered at Direccion Provincial de Mineria under file number
227-N-94 s/ inscripcion contrato, Tomo N(degree) 18, Asiento A-72, Fs. 309/326,
Registro de Negocios de Minas e Hipotecas.-
SECOND: According to the fourth article part b) in the original contract N.A.
Degerstrom Inc. should have paid US$35,000, on July 5, 1995. The parties have
agreed in this complementary agreement that on July 5, 1995, N.A. Degerstrom pay
US$5,000 (five thousand dollars); and that tile remaining US$30,000 be paid on
December 15, 1995. Should N.A. Degerstrom Inc. not pay the remaining US$30,000
on December 15, 1995, the original contract will be automatically resumed.-
THIRD: The rest of the clauses and conditions stated in the main contract,
including other payment terms and dates remain current. Both parties ratify that
the main contract of Exploration and Prospecting with Option to Buy in all its
extent.
Six copies are signed in Mendoza on June 30, 1995.
Signatures include Brian Gavin for N.A. Degerstrom Inc.; Carlos Giustozzi; and
Gladys E. Molina on behalf of Mr. Carotti and Mrs. Rubinstein.
There is a seal that states: This document is certified by notary public paper
N(degree) 241867/69; Mendoza, June 30, 1995. A signature below stating the name
of the Notary Public, Mr. Gilberto F. Suarez Lago.
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EXPLORATION CONTRACT WITH OPTION TO BUY
COMPLEMENTARY AGREEMENT
in the city of Mendoza Province, December 13th, 1995, it is agreed between N.A.
Degerstrom Inc., represented in this act by Mr. Brian Gavin, on one hand; and on
the other by CARLOS OSVALDO GIUSTOZZI, MARTIN ANTONIO CAROTTI AND CLAUDIA
VIVIANA RUBINSTEIN, represented by Mrs. Gladys E. Molina guaranteeing this
representation by Submitting General Power of Attorney. The said parties agree
to the current "complementary agreement".
FIRST: The parties have an Exploration and Prospecting Contract with Option to
Buy, regarding the area called "Santa Clara" located in Tupungato, Mendoza; this
contract comprehends the mining rights that arise from the different files which
have been registered at Direccion Provincial de Mineria under file number
227-N-94 s/ inscripcion contrato, Tomo N(degree) 18, Asiento A-72, Fs. 30-9/326,
Registro de Negocios de Minas e Hipotecas. A previous complementary agreement
had been done on June 30th, 1995, between the parties, and registered by the
same Notary Public in the city of Mendoza; where it stated that US$5,000 (five
thousand dollars) were to be paid on July 5th, 1995 and US$30,000 (thirty
thousand dollars) were to be paid on December 15, 1995.
SECOND: According to the fourth article part b) in the original contract and to
the second clause of the first Complementary Agreement; the parties agree to a
new Complementary Agreement whereas N.A. Degerstrom Inc. will pay the US$30,000,
that should have been paid on December 15, 1995; on April 15th, 1996.
THIRD: The parties agree in this act that the rest of the payments will be
extended four months starting April 15th, 1996; resulting in the following
payment dates:
April 15th, 1996 US$ 30,000
October 10th, 1996 US$ 40,000
April 15th, 1996 US$ 50,000
October 15th, 1997 US$ 75,000
April 4th, 1998 US$ 100,000
October 10, 1998 US$ 100,000
Total of the above dates: US$ 395,000
FOURTH: The rest of the clauses and conditions stated in the main contract,
including other payment terms and dates are extended four months starting on
April 15th, 1996. The parties ratify that other sums and percentages stated in
the main contract are to be kept current. Both parties stated that these
modifications have been necessary due to legal dispositions (Law 6116).
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Both parties ratify the main contract of Exploration with Option to Buy in all
its extent.
Six copies are signed in Mendoza on December 13th, 1995.
Signatures include Brian Gavin for N.A. Degerstrom Inc.; Carlos Giustozzi; and
Gladys E. Molina on behalf of Mr. Carotti and Mrs. Rubinstein.
There is a seal that states: This document is certified by notary public paper
N(degree) 375306/08; Mendoza, December 13th, 1995. A signature to the right
stating the name of the Notary Public, Mr. Gilberto F. Suarez Lago.
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
Document Documento: "Translation of Exploration and Prospecting Contract with
the Option to buy."
NOTARY PUBLIC PROCEEDING
RECORDING OF PRIVATE CONTRACT: In the capital of Mendoza Province, Republica
Argentina, on March 30th, 1995; between Minera Andes S.A., represented in this
act by Mr. Brian Gavin guaranteeing this representation by submitting General
Power for Lawsuits and Administrative Procedures, dated 7/4/94, which has been
given by Minera Andes S.A., declaring that it was registered In "Registro
Publico de Mandatos General de esta Provincia" (Public Register for Power of
Attorney of this Province) under N(degree)22627, Fs 230, Tomo 262. And Mr. Brian
Gavin shows a copy of a contract of "Exploration and Prospecting with option to
buy" dated March 30th, 1995, that says: CONTRACT OF EXPLORATION AND PROSPECTING
WITH OPTION TO BUY. in the city of Mendoza, Province, on March 30th, 1995, It is
agreed between MINERA ANDES S.A., represented herein by Mr. Brian Gavin, taking
up legal residence at Calle Coronel Moldes 837, Mendoza on one hand, and on the
other Mr. Oscar Horacio Gonzalez, L.E. (document) No. 8.377.728, single, taking
up residence at Calle Olascoaga s/n Las Lajas, Neuquen, (8347), and legal
residence at Luis Monti 758 Zapala, Neuquen, (8340) and Miss Dioly Nancy
Manassero, D.N.I. (document) No. 10.043.279, single, taking up residence at 191
Barrio Plan 25 de Mayo, Zapala, Neuquen, (8340) and legal residence at Calle
Luis Monti 758, Zapala, Neuquen, (8340); we must mention that Mr. Oscar Horacio
Gonzalez will represent Miss Dioly Nancy Manassero, having all faculties which
include receiving payments, receipts, finalizations in total or partial manner
of this contract, modifications and notices and all other consequences that may
arise from this contract. This representation will not be revoked, limited or
modified without prior notice from Minera Andes S.A. The notice must be sent to
the mentioned address and will be in force 48 hours after having received this
notice. Both parties agree to the following:
FIRST: Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero as holders of
the claim arising from the cateo's allowances in process under files
(expedientes): a) Mr. Oscar Horacio Gonzalez: 1) "La Resvaloa", mine file number
139.153/49, registered and surveyed; 2) "Dos Guanacos", file number 11057/81,
registered and surveyed; 3) "Sin Rival", mine file number 4.062/67, file number
11620/84 registration is pending; 4) "Maipu" mine, file number 104.473/50, and
file number 102/91, prescription application is in process; 5) "El Lalo", mine,
file number 11.549/84, registered and with application for petenenclas; 6)
"Pedrito Lucas", mine, file number 6.513177, registered, survey is pending; 7)
"Lican", mine, file number 4.867/69, expired, registered, survey is pending; 8)
Estaca mina at "Carolina" mine, file number 13.892/90; 9) Enlargement in "La
Resvalosa', mine, file number 13.893/90, registered; 10) File number 009/91
Right of way, in process; b) Miss Dioly Nancy Manassero: 1) "Manzano Silvestre",
mine, file number 10.316/79, registered and surveyed; 2) "Carolina", mine, file
number 10.404/80, registered and surveyed; 3) Estaca mina at "La Resvalosa",
mine, file number 193/92 register is pending; file number 13.926/90, application
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for right of way. Mr. Oscar Horacio Gonzalez and Miss Dioly Manassero stated
that their rights and claims are completely valid and they are in force
according to Mining Code; there are no legal or conventional inhibitions,
seizures or burdens affecting them and they are all completely available. An
approximate sketch showing the location of the area is enclosed. It is stated
that there are no studies and/or enhancements regarding these areas that would
make them economically exploitable.
SECOND: the option to buy could be exercised by Minera Andes S.A. at any moment
within the four year term, starting January lst, 1995 and ending on December
31st, 1998. In the event that the option was taken, Mr. Oscar Horacio Gonzalez
and Miss Dioly Nancy Manassero, agree to carry on all the proceedings necessary
to formally transfer the ownership to Minera Andes S.A., or to whom it may
designate, regarding the mining properties hereby detailed under Article 1st, In
order to make the transfer easy, Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy
Manassero, give irrevocable power in favor of Minera Andes S.A. and/or the
person designated by that company, in order to drive the process related to any
of the files hereabove mentioned, declare the minerals that could be discovered
and require directly from the Provincial Mining Direction, the titles for the
corresponding properties and arising rights, during the term of this contract,
and without meaning that by this irrevocable authorization that Mr. Oscar
Horacio Gonzalez and Miss Dioly Nancy Manassero are free from their original
obligation to execute all the said proceedings. During the term of this
contract, the parties agree, by themselves or by third parties, not to apply for
or register as devoid in the areas comprising, cateos, manifestaciones de
descubrimiento, minas (mines) or estacas minas, or any other claim that could
spoil the soul of this agreement. If there had been other manifestaciones and/or
any manifestacion was made, creating rights in the areas hereby comprised, this
rights would be considered under the conditions of the current contract.
THIRD: During the term of this contract, Mr. Oscar Horacio Gonzalez and Mss
Dioly Nancy Manassero give Minera Andes S.A. the holding of the cateos and
claims hereby identified under Article 1, but the latter could not exploit the
ore deposits, that could appear; but will be able to carry on exploration and
investigation tasks such as: geologic, mining and topographic investigations,
surveys, drilling, sampling of the surface and underground, mineralogy and
metallurgic surveys, build test plants for the sake of study and any other tasks
that could be useful for accomplishing the goal, which is the discovery of ore
that could be considered economically exploitable. It is also stated that Mr.
Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero will be able to exploit
other minerals that are not considered first category, as long as this does not
interfere or create difficulties with tasks undertaken by Minera Andes S.A. in
the search for first category minerals.
FOURTH: In the event that Minera Andes S.A. took the right for the option to buy
under article first hereby, the sales price for the belongings Identified under
Article 1st, included all the manifestaciones creating mining claims that could
be incorporated, is fixed at two hundred
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thousand dollars (200,000) to be paid in dollar bills or in pesos at the
corresponding exchange rate for the dollar bill at the Banco de la Nacion
Argentina, the day before payment date. Payment schedule is established in the
following way US$ 200,000 cash. A payment to the seller has been agreed to be
1%. This 1% royalty will be from the ore price over the "Net Smelter Return"
during the production period of the deposit, in the case Minera Andes S.A.
exercised the option to buy. The payment term for this royalty will be in force
when the eventual commercial exploitation of a field starts and will be settled
semiannually. A payment to the owners will be paid, this value is comprehended
as right of way, this payment will be in force during the term of the option,
this value has been settled at twenty four thousand (US$24,000) to be paid in a
quarterly manner of six thousand dollars (US$6,000) at each corresponding month.
FIFTH. Minera Andes S.A. at any moment during the term of this contract, could
resign it, as a whole or in part without obligation to indemnify, through
appropriate notice sent fifteen days In advance to Mr. Oscar Horacio Gonzalez
and Miss Dioly Nancy Manassero at the address hereby stated. Mr. Oscar Horacio
Gonzalez and Miss Dioly Nancy Manassero, are not able to resign to the contract
on their own, except for the cases considered under article 11. The contract
will be finished at the specific end date mentioned in the resigning notice that
Minera Andes S.A. could send. At the moment of resigning Minera Andes will
transfer the holding of the mining belongings to Mr. Oscar Horacio Gonzalez and
Miss Dioly Nancy Manassero as they are, with concession charges all canceled and
without equipment or obligation to transfer the enhancements incorporated,
except for the case where It was not possible to detach them. In the event that
Minera Andes S.A. did not decide to purchase the deposits or the area, the
amounts paid up to that moment will remain in favor of Mr. Oscar Horacio
Gonzalez and Miss Dioly Nancy Manassero, as compensation for not being able to
use their rights during the exploration term.
SIXTEENTH: The parties agree, that in case of dispute they will accept the
jurisdiction of the common courts of Mendoza, excluding any other code or
jurisdiction. Approving this document six copies are sighned by the parties, in
order to be registered with the Mining Authority of Mendoza and to be recorded
with the Notary Public; and another to be translated to English. At the moment
of signing this contract, Minera Andes S.A. pays the amount of twelve thousand
dollars (US$12,000) to its co-contractors, canceling the amount of the first
payment scheduled corresponding to January 1st, 1995 up to March 31st, 1995 and
the payment scheduled for April 1st, 1995 up to June 30th, 1995 under article
fourth; leaving clear that the difference has already been received by Mr. Oscar
Horacio Gonzalez and Miss Dioly Nancy Manassero, who after collecting this
amount will furnish adequate receipt and a broad and total payment document.
INTERPRETATIVE CLAUSE: Over NET SMELTER RETURN: In the event that the
royalties had to be paid, it is understood as all minerals "net smelter return",
concentrated, or their products containing ore produced and sold by the Holder.
When the ore containing minerals with commercial value, are sold by the Holder,
its "net smelter return" will be considered as the actual amount received by the
said Holder for the sale of them, minus the
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deduction of any expense corresponding to transport (including freight,
insurance, and delivery and mailing costs) from the exploitation to the
facilities of the purchaser and any other unloading place. When the concentrates
or products containing minerals with commercial value are sold by the holder;
their net smelter return should be considered as the actual amount received by
the holder for the sale, minus deduction for any and all the expenses related to
smelting, refining, weighing, sampling, assay, handling, transport (including
freight, insurance, handling and mailing expenditures), penalties for impurities
and other charges deduced by a purchaser, provided that the Holder does not
deduce any charge for initial processing. By initial processing it is understood
the initial grinding or concentration or other ore treatment during which one or
more mineral products are recovered from that sold ore and a subsequent
processing, and during which the first tails and mineral waste are discarded or
deposited. Such deductions will be limited to commercially reasonable amounts
from the point of view of mineral industrial practices and levels, currently
accepted as good, such as smelting or other similar operations for the treatment
of metals, The "net smelter return" for the ore, concentrates or products
treated in smeltery and other similar metal operations, owned, operated or
controlled by the Holder, or dealt with based on a toll paid by the Holder, will
be computed as already mentioned, with the deductions previously established.
For the ore, concentrates or products sold to associate companies or sold by the
Holder, but in some way used by him, the gross price for the sale will be
determined in a similar way; provided that the total deductions done by the
Holder according to this paragraph, do not exceed the total deductions that
could have been made by other smeltery operators or treatment facilities for
similar materials in the case that those materials were smelted or treated in
those facilities based on a reasonable commercial agreement . There is an
illegible signature and the explanatory legend says: Brian Gavin on behalf of
Minera Andes S..A..- There is an illegible signature and the explanatory legend
says: Oscar Horacio Gonzalez, L.E. (document) 8377728. There is an illegible
signature and a legend saying Dioly Nancy Manassero D.N.I.. (document) 10043279.
There is a certification in Notary Public proceeding number 466902, that says:
"As Notary Public, Holder of Registry number thirty-seven from Capital, I
CERTIFY: that the signatures at the bottom of each of the FIVE pages of the
Contract of Exploration and Prospecting with Option to buy herepreceding, and
which also have my signature, Professional seal and formal statement for the
certification that is done in the current sheet for the Notary Public
proceeding; belong to Mr. BRIAN GAVIN, Passport issued by United Kingdom of
Great Britain and Northern Ireland number C969194D, Mr. HORACIO OSCAR GONZALEZ,
L.E. (document) number 8377728 and to Miss. DIOLY NANCY MANASSERO, D.N.I.
(document) 10043279; all of which have been done in my presence; Mr. Brian Gavin
is acting as representative for "Minera Andes S.A.", guaranteeing that with
General Administration Power of Attorney, registered in the Public Registry for
General Powers (Registro Publico de Mandatos Generales) from this province,
under number 30432, Fs. 27, book 290 "L"; and Mr. Oscar Horacio Gonzalez is
acting on behalf of Miss Dioly Nancy Manassero, guaranteeing this with a Special
Power for 'Venta de Minas Irrevocables'. The corresponding requirement has been
formalized at pages 205, 206 respectively from Book Number "One" of requirements
of the legalized, witnessed. Mendoza, MARCH 30th, 1995". In each of the five
pages containing the Contract of Exploration and Prospecting with option to buy
that has been textually transcribed, they bear at the bottom
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three illegible signatures, with a seal saying: Certification at Notary Public
Proceeding sheet N(degree) 468902 with Certification Stamps N(degree) 186409,.
SIXTH. As warranty for the option to buy mentioned under article first hereby,
Mr. Oscar Horacio Gonzalez and Miss Dioly Manassero agree to register with the
mining authority of Neuquen province, a voluntary inhibition to transfer, sell,
rent or burden the mining claims identified under article 1st, and regarding
this, they are actually applying for it; in favor of Minera Andes S.A.. The said
inhibition will be determined for a period equivalent to the term of this
contract, and a copy of the latter will be submitted as reference for that
inhibition, which will be asked to be recorded as a quote to each area and
mines' registry; as well as in each file (expedients).
SEVENTH: Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero, will
transfer the mining claims, cateos and minas with all the canons paid up to the
signing of this contract. During the term of this contract Minera Andes S.A.
will: a) Pay all the expenses related to the legal standing of the claims
mentioned under article FIRST, meaning the payment of: the canons for the cateos
and pertenenclas, the surveys of cateos and minas, estacas minas and
manifestaciones de descubdmiento, repaying of borders and any other expense or
Provincial or Municipality distribution that could affect the minining claims
hereabove mentioned; not being possible to deduct from payments to Mr. Oscar
Horacio Gonzalez and Miss Dioly Nancy Manassero, except for the case that they
accept this obligation. b) Minera Andes S.A. will pay for any enhancement
necessary to be done. Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero
will not be responsible for tools, machinery, equipments, facilities or
enhancements located within the mining properly; c) Take on all the
responsibility for corporal injuries or death of any person or damage to assets
resulting from negligence by Minera Andes S.A. or its employees or agents,
resulting from exploration activities or any other work related to the activity
of Minera Andes S.A.; d) Pay for all labor and related issues, in all its
aspects, and materials used in relation to the aim of this contract. e) Assume
the responsibility for indemnity corresponding to surface owners or third
parties, including the government, environmental damage, without limit of time,
provided that it arose from the fault of Minera Andes S.A.'s activities.
EIGHTH: Minera Andes S.A. could install and take away from the properties,
during the term of this contract, any tool machinery, equipment or supplies
owned by the company. It is agreed and established that in the case of total or
partial resignation of this contract due to any reason, Minera Andes S.A. could
take away all its belongings, tools, machinery, equipment or supplies and the
cost of that transport will be paid by it, within the term of a ninety days (90)
from the end of the contract; Minera Andes S.A. will not take away any
underground beam or any other supports installed by it and could not alter or
restore excavations or any other works on the surface, unless that it is
required by law; rules or administrative requirements to be applied. Minera
Andes S.A. could keep a night watchman or necessary security during the said
term.
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NINTH: After the total or partial end of this contract due to any reason, but
not to the payment of the purchase price by Minera Andes S.A., in the way and in
the amounts scheduled under article fourth, and provided that Mr. Oscar Horacio
Gonzalez and Miss Dioly Nancy Manassero have fulfilled all the conditions;
Minera Andes S.A. should furnish at no charge a copy of all the feasibility
studies detailed under article third, done up to the said date, in written and
signed; as well as it should make available witnesses or any other material
useful for the investigation, within the term of a ninety days after the
relationship is ended. Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero
will have the right to inspect all the belongings at any adequate moment,
without obstructing the works; and with prior notice to Minera Andes S.A. of the
inspection, no less than 10 days in advance.
TENTH: Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero, declare and
guarantee that they are the only licensees for the mining claims or cateos'
applications included under article 1st; that their ownership is in good
standing with all the corresponding rights, that he has not transferred or
burden them, that they are free and exempt for any claim by third parties or
people acting on behalf of others. Without limiting or restricting in any way,
any other right of Minera Andes S.A. against Mr. Oscar Horacio Gonzalez and Miss
Dioly Manassero, it is agreed that if during the term of this contract Minera
Andes S.A., or the mining authority, or third parties discovered or declared any
kind of corruption or limitation in the title of any of the claims or
applications for cateos, or mines identified under article lst, Mr. Oscar
Horacio Gonzalez and Miss Dioly Nancy Manassero would prevent that corruption or
claims. If Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Gonzalez, did not
accomplish so within the term of thirty straight days from the date they are
summoned by Minera Andes S.A., except for cases of force majeur; these cases of
corruption, obstructions or restrictions could be repaired by Minera Andes S.A.,
thus Minera Andes S.A. or whoever may be designated, is given irrevocable broad
power to repair them. In the event that Minera Andes S.A. paid the total
purchase price according to and in the way it is scheduled under article fourth
hereby, thus having the right already transferred, the title for the mining
claims and turn that holding in true and material ownership of the mines and
claims, Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero will furnish
all the official documents and will carry out all the proceedings necessary to
improve the ownership transfer for the said concessions in favor of Minera Andes
S.A.; or whoever may be designated. Expenses and fees resulting from the issuing
and registering of official documents, will be paid by Minera Andes S.A. It is
also restated that Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero
give irrevocable power to Minera Andes S.A. or to whoever may be designated, to
carry on all the necessary proceedings to issue the official documents
expressing the ownership transfer for the mines and cateos' applications
included in this contract.
ELEVENTH: The only articles in favor of and for which Mr. Oscar Horacio Gonzalez
and Miss Dioly Nancy Manassero could resign, would be the lack of payment in
time of the agreed amounts under article 4th and the unfulfillment of Minera
Andes S.A.'s commitments under article 7th, item a). The power to resign the
contract due to lack of payment will proceed after thirty days of delay for the
scheduled dates. The delay will proceed by legal right without any need for
legal requirements, through the summoning resulting from the
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expiration of the term. During the period of actual delay, the amount will earn
an interest equivalent to the rate charged by Banco de la Nacion Argentina for
the discount of letters or promissory notes; which will be paid together with
the amount owed. Once the term of thirty days delay is over, Mr. Oscar Horacio
Gonzalez and Miss Dioly Nancy Manassero, will be able to resign the contract on
their own by means of appropriate notice at the address of Minera Andes S.A.,
keeping all the amounts collected up to the moment in their favor; without
having the to require the amounts owed.
TWELFTH: All Minera Andes S.A.' rights resulting hereby could be transferred,
prior notice to Mr. Oscar Horacio Gonzalez and Miss Dioly Nancy Manassero. At
the same time, the transferees should ratify their acceptance to Mr. Oscar
Horacio Gonzalez and Miss Dioly Nancy Manassero and offer an adequate
reliability warranty or the possibility to accomplish these contract
obligations; from that moment onwards, all the rights and obligations originally
corresponding to Minera Andes S.A. are automatically substituted. Mr. Oscar
Horacio Gonzalez and Miss Dioly Nancy Manassero's rights, according to this
contract, could be transferred only with prior acceptance by Minera Andes S.A.;
not being possible for this acceptance to be denied without reason.
THIRTEENTH. This contract will oblige the parties and their corresponding
inheritors, executors, administrators, successors with rights and related third
parties. All knowledge and information that Mr. Oscar Horacio Gonzalez and Miss
Dioly Nancy Manassero acquire, related to the works mentioned under article 3rd,
will be kept with discretion and considered as confidential, except for the
event that Minera Andes S.A. releases the holders from this obligation, in
written. This confidentiality condition, will be in force during the whole term
of this contract and up a year after the end date of this contract or the
purchase of the property and mining claims. Minera Andes S.A. also agrees to
keep confidentiality for a year after the contract has been resigned.
FOURTEENTH: All notices to Minera Andes S.A. and to Mr. Oscar Gonzalez and Miss
Dioly Nancy Manassero will be done in written in a reliable way at the addresses
hereby stated. The parties can change their addresses but must notify, not being
away from the scope of the city of Mendoza and or Zapala.
FIFTEENTH : The parties agree, that in case of dispute they will accept the
jurisdiction of the common courts of the province of Mendoza, excluding any
other code or jurisdiction. It is stated that this contract is exempt from seals
due to an amendment to article 240 Inc. 31, Fiscal Law N(degree) 6164. In order
to be registered with the Mining Authority of Mendoza Province; and, to be
recorded with a local Notary Public; all costs will be supported by Minera Andes
S.A.
Mendoza, March 30th 1995. There is an illegible signature and a seal saying
Gilberto Suarez Lago, Notary Public, Reg. N(degree) 37. Mendoza. IN ACCORDANCE
WITH; what has been transcribed from the Contract that I see, which bears the
statement that it is exempt from fiscal repaying, enclosed hereby, with the
corresponding notary public's quote. ON
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RECORD. READ this deed by the appearing parties, with their corresponding
functions, accepting the whole of this, ratifying its content and the signature,
Witnessed, Overwritten:
March 30th, it's valid.
(There are two illegible signatures and a seal saying: Gilberto Suarez Lago,
Notary Public, Holder Reg. N(degree) 37, Mendoza)
It corresponds to Sheet number 466986, from Notary Public Proceeding, Series A.
ALL IN AGREEMENT with the original deed read by me, under from the general
record of Notary Public Registry (Registro Notarial) number thirty seven from
Capital, witnessed. For "MINERA ANDES S.A.", this first testimony with nine
photocopied pages and the current sheet of notary public proceeding number F
468902 that I sign and seal at the place and date of issue.
(There is an illegible signature and a seal saying: Gilberto Suarez Lago, Notary
Public, Holder Reg. N(degree) 37, Mendoza)
Witnessed, this is a true translation for the original in Spanish. Mendoza,
August 28th, 1995 Doy fe que es traduccion fiel del original en Castellano ante
mi. Mendoza, 28 de Agosto de 1995.-
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
LETTER AGREEMENT
Agua Blanca Property
San Juan Province, Argentina
April 4, 1996
The purpose of this letter is to outline the terms upon which Newcrest
Minera Argentina S.A. ("NEWCREST") is willing to enter into a joint venture with
Minera Andes Inc. ("MAINC") with respect to the Agua Blanca area in San Juan
Province, Argentina. If a copy of this letter is signed by MAINC and returned to
William M. Danley, at Minera Newcrest Chile Ltda., Isidora Goyenechea 3600, Piso
10, Las Condes, Santiago, Chile, or Robert W. Barker, at Newcrest Resources,
Inc., 1536 Cole Blvd., Golden, Colorado, U.S.A., by 5:00 p.m. on April 15, 1996,
this letter shall constitute a valid and binding contract between NEWCREST and
MAINC (the "Letter Agreement ). If a fully executed copy of this letter is not
returned to William M. Danley by the deadline mentioned above, this offer shall
expire and shall be of no further force or effect.
1. Definitions
1.1. "Agua Blanca Property" means all land and mineral interests owned or
controlled by Minera Andes S.A. ("MASA") in San Juan Province,
Argentina, as of the Commencement Date. The Agua Blanca Property is
described in detail in Exhibit A to this Letter Agreement.
1.2. "Appraised Value" means the fair market value calculated in the
following manner: the parties each shall select one independent
appraiser, and those two independent appraisers shall agree on a
third independent appraiser. Each of the three appraisers shall
calculate the fair market value on his or her own, and then the three
appraisers shall meet and attempt to agree on a consensus fair market
value, which shall constitute the Appraised Value. If all three
appraisers cannot agree on a consensus fair market value, then the
Appraised Value shall be the consensus fair market value agreed upon
by any two of the three appraisers.
1.3. "Area of Interest has the meaning ascribed to it in paragraph 4.1.
1.4. "Commencement Date" means the date that this Letter Agreement has
been executed by both parties, which also shall be the Commencement
Date for the Venture Agreement.
1.5. "Cumulative Allowable Expenditures" means the aggregate and total
amount at any given time of all costs and expenses paid or incurred
by NEWCREST for or
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in connection with exploration or development of the Venture Property
or for other operations for the benefit of the Venture Property,
beginning on February 20, 1996, and including all amounts paid or
incurred through the date of the calculation. All property payments,
option fees, and rents, fees and other statutory sums required under
the Mining Code to keep the Venture Property in good standing shall
be included in Cumulative Allowable Expenditures. Funds advanced by
NEWCREST to MASA to cover its reasonable cost of managing the Venture
Property pursuant to paragraph 5.4 shall be included in Cumulative
Allowable Expenditures.
1.6. "Decision to Mine" means a decision by the Operating Committee, based
on a positive feasibility study, to proceed with the development and
construction of a mine on the Venture Property.
1.7. "Development Costs" means all development, construction, and start-up
costs associated with the Mine through the date of commencement of
production from the Mine.
1.8. "Feasibility Study" means a study of the feasibility of developing
and operating a mine on the Venture Property, including an analysis
of economic, engineering, environmental, regulatory and other
considerations, and containing the level of detail customary in the
industry for a feasibility study presented to financial institutions
for the purpose of seeking financing for the development of a mine.
1.9. "MASA" means Minera Andes S.A., an Argentina company which is 100%
owned by MAINC.
1.10. "Manager" means the Manager of the Venture.
1.11. "Mine" means the mine to be constructed on the Venture Property
following a Decision to Mine.
1.12. "NEWCREST's Borrowing Cost" means the rate of interest paid by
NEWCREST on funds borrowed for the construction of the Mine or, if
NEWCREST does not obtain such a loan, the lowest rate of interest at
which NEWCREST could have borrowed funds for the construction of the
Mine.
1.13. "Operating Committee" means the Operating Committee of the Venture.
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1.14. "Option Completion Date" means the date that NEWCREST completes all
of the requirements contained in paragraph 5.9, if NEWCREST elects
the option described in that paragraph.
1.15. "Related Company" with respect to a party means any corporation or
other business entity which is more than 50% owned or controlled by
that party, or which is more than 50% owned or controlled by a
corporation or other business entity which also owns or controls more
than 50% of that party.
1.16. "$" means United States dollars.
1.17. "Venture" means the Venture between NEWCREST and MAINC with respect
to the Venture Property under this Letter Agreement and the Venture
Agreement.
1.18. "Venture Agreement" means the final and formal Venture Agreement
between NEWCREST and MAINC which, once it is drafted and executed,
will replace this Letter Agreement.
1.19. "Venture Property" has the meaning ascribed to it in paragraph 4.2.
1.20. "Vesting Date" has the meaning ascribed to it in paragraph 5.5.
2. Operation under Letter Agreement
2.1. The respective rights and obligations of the parties shall be
governed by this Letter Agreement until execution of the Venture
Agreement. The Venture Agreement shall be drafted in accordance with
the general understandings and agreements set forth in this Letter
Agreement. The date that this Letter Agreement has been executed by
both parties shall be the Commencement Date for both this Letter
Agreement and the Venture Agreement. MAINC and NEWCREST shall
diligently pursue negotiation of the Venture Agreement and, upon
agreement as to final form and content, shall execute the Venture
Agreement.
2.2. This Letter Agreement constitute's the entire agreement between the
parties with respect to the subject matter hereof, and terminates and
replaces all prior agreements, either written, oral or implied,
between NEWCREST and MAINC with respect to the subject matter hereof.
This Letter Agreement shall not be
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amended, modified, extended, supplemented or otherwise altered except
by written instrument executed by both parties.
3. Formation of Venture
The parties shall form a Venture for exploration and, if approved by the
Operating Committee, mining, of the Venture Property. The initial participating
interests of the parties in the Venture as of the Commencement Date shall be as
follows:
NEWCREST 51.00%
MAINC 49.00%
4. Venture Property and Area of Interest
4.1. The Area of Interest of the Venture shall be all lands and all
mineral interests, any portion of which lies within the boundaries
shown in Exhibit B to this Letter Agreement. The Area of Interest can
be increased or decreased in size only with the agreement of both
parties.
4.2. As of the Commencement Date, the Venture Property shall consist of
the Agua Blanca Property. All lands and all mineral interests within
the Area of Interest which are acquired after the Commencement Date
by the Venture shall be added to the Venture Property. All lands and
all mineral interests within the Area of Interest which are acquired
after the Commencement Date by either of the parties or any of their
respective subsidiaries shall be offered to the Venture at the
acquisition price.
5. Initial Contributions to the Venture
5.1. MAINC, as its initial contribution to the Venture, shall contribute
the Agua Blanca Property. MAINC represents and warrants to NEWCREST
that:
(a) MASA holds an option to purchase the Agua Blanca Property, as
stated in Exhibit A, free and clear of all liens, security
interests, encumbrances, royalties, and adverse claims, except
as specified in Exhibit A;
(b) the agreements described in Exhibit A by which MASA holds an
option to purchase the Agua Blanca Property are valid and
binding agreements
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which have not been amended, modified, supplemented or
terminated, in whole or in part, and are in good standing as of
the Commencement Date;
(c) through the Commencement Date, MASA has fully performed each and
every term, condition and covenant which it is required to
perform under the agreements described in Exhibit A, and MASA
has not received any notice of default or termination with
respect to such agreements;
(d) to the best of MASA's knowledge and understanding, the mining
concessions listed in Exhibit A were obtained by the proper
procedures, and any defects, if any are present, can be
corrected to provide adequate coverage of the mineralized
targets of interest;
(e) MASA knows of no other conflicting agreements with the owners of
the Agua Blanca Property as described in Exhibit;
(f) all corporate action on the part of MASA necessary to authorize
MAINC to enter into this Letter Agreement has been duly taken;
and
(g) MAINC has provided to NEWCREST copies of all data and
information regarding the existence of minerals within the Agua
Blanca Property and all information concerning record,
possessory, legal or equitable title to the Agua Blanca Property
which is within MAINC's and MASA's knowledge, possession or
control.
5.2. NEWCREST, as its initial contribution to the Venture, shall satisfy
the following requirements:
(a) NEWCREST shall incur Cumulative Allowable Expenditures of not
less than $350,000 on or before the first anniversary of the
Commencement Date. In addition, NEWCREST shall complete not less
than 2,000 meters of total drilling on the Venture Property on
or before the first anniversary of the Commencement Date, the
cost of which shall be included in Cumulative Allowable
Expenditures.
(b) NEWCREST shall reimburse MAINC for the property payment to
maintain the Agua Blanca Property in the amount of $40,000 made
by MAINC on March 2, 1996, and shall make property payments to
maintain
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the Agua Blanca Property in the amount of $50,000 on June 2,
1996, and $50,000 on September 2, 1996.
(c) If NEWCREST does not withdraw from the Venture before the
six-month anniversary of the Commencement Date, then NEWCREST
shall make the property payment to maintain the Agua Blanca
Property in the amount of $50,000 on December 2, 1996.
(d) If NEWCREST does not withdraw from the Venture before the second
anniversary of the Commencement Date, then NEWCREST shall incur
Cumulative Allowable Expenditures of not less than $1,000,000 on
or before the second anniversary of the Commencement Date. In
addition, if NEWCREST does not withdraw from the Venture before
the second anniversary of the Commencement Date, then NEWCREST
shall complete not less than 5,000 meters of total drilling on
the Venture Property on or before the second anniversary of the
Commencement Date, the cost of which shall be included in
Cumulative Allowable Expenditures.
(e) If NEWCREST does not withdraw from the Venture before the third
anniversary of the Commencement Date, then NEWCREST shall incur
Cumulative Allowable Expenditures of not less than $2,200,000 on
or before the third anniversary of the Commencement Date.
(f) If NEWCREST does not withdraw from the Venture before the fourth
anniversary of the Commencement Date, then NEWCREST shall incur
Cumulative Allowable Expenditures of not less than $3,800,000 on
or before the fourth anniversary of the Commencement Date.
5.3. As additional consideration to MAINC for entering into the Venture,
NEWCREST shall make the following cash payments to MAINC, which shall
not be included in Cumulative Allowable Expenditures:
(a) NEWCREST shall make a cash payment of $50,000 to MAINC on the
Commencement Date.
(b) If NEWCREST does not withdraw from the Venture before the
six-month
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anniversary of the Commencement Date, then NEWCREST shall make a
cash payment of $50,000 to MAINC on the six-month anniversary of
the Commencement Date.
(c) If NEWCREST does not withdraw from the Venture before the first
anniversary of the Commencement Date, then NEWCREST shall make a
cash payment of $250,000 to MAINC on the first anniversary of
the Commencement Date.
5.4. Until the earlier of the Vesting Date or NEWCREST's withdrawal from
the Venture (subject to paragraphs 5.2(b) and 5.2(c)), NEWCREST shall
pay all option fees and all rents, fees and other statutory sums
required under the Mining Code to keep the Venture Property in good
standing. All Venture Property shall be held and managed by MASA
until the Vesting Date. NEWCREST shall advance funds to MASA to cover
option, lease and other land costs, plus reasonable costs of MASA in
administering the Venture Property.
5.5. On the date that NEWCREST completes all of the requirements contained
in paragraphs 5.2 and 5.3 and is not in material breach of any other
obligations under the Venture Agreement (the "Vesting Date"),
NEWCREST shall be fully vested in its 51% initial participating
interest in the Venture and the Venture Property. On the Vesting
Date, NEWCREST shall be registered as the legal owner of a 51%
undivided interest in the Venture Property. Prior to becoming fully
vested, NEWCREST's initial participating interest of 51 percent is
for the purposes of management only. There is no partial vesting by
NEWCREST until the Vesting Date.
5.6. All amounts of Cumulative Allowable Expenditures paid or incurred by
NEWCREST during any of the time periods described in paragraphs
5.2(a), 5.2(d), 5.2(e), and 5.2(f) shall be fully credited towards
the required Cumulative Allowable Expenditures for later time
periods. Any shortfall in Cumulative Allowable Expenditures paid or
incurred by NEWCREST during any of the time periods described in
paragraphs 5.2(a), 5.2(d), 5.2(e), and 5.2(f) may be made up by a
cash payment from NEWCREST to MAINC so that the Cumulative Allowable
Expenditures plus such cash payment shall equal the required
Cumulative Allowable Expenditures for that time period.
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5.7. If at any time prior to the Vesting Date, NEWCREST fails to meet the
requirements contained in paragraphs 5.2, 5.3 and 5.4, MAINC shall
give written notice to NEWCREST of such default. If NEWCREST fails to
cure such default within 30 days after its receipt of the notice of
default from MAINC, then NEWCREST shall be deemed to have withdrawn
from the Venture and to have relinquished to MAINC all of NEWCREST's
right, title and interest in and to the Venture and the Venture
Property.
5.8. After the Vesting Date, except as provided in paragraph 5.9, all
costs and expenses paid or incurred by or on behalf of the Venture
shall be Venture expenses, to be borne by the parties in proportion
to their respecting participating interests in the Venture,
including, without limitation, the following:
(a) all option fees and rents, fees and other statutory sums
required under the Mining Code to keep the Venture Property in
good standing; and
(b) all consideration paid for any Venture Property, whether in the
form of cash payments, royalties, a share of production, or any
combination of these.
5.9. After the Vesting Date, NEWCREST shall have a 90 day period to give
MAINC written notice that it will exercise the option (in its sole
discretion) of earning an additional 14% participating interest (for
a total of 65%) in the Venture by completing the following
requirements:
(a) NEWCREST shall incur Cumulative Allowable Expenditures of not
less than $10,300,000 on or before the sixth anniversary of the
Commencement Date.
(b) NEWCREST shall prepare a Feasibility Study at its expense with
respect to mining of the Venture Property, the cost of which
shall be included in Cumulative Allowable Expenditures.
(c) NEWCREST shall arrange a loan from a third party to MAINC for
the purpose of funding all or a part of MAINC's required
contributions to the Development Costs of the Mine. The total
amount of the loan shall be equal to 20% of the Development
Costs of the Mine. The loan shall be advanced directly to the
Venture as needed to cover MAINC's required
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contributions to the Venture. If NEWCREST is unable to or does
not desire to obtain such a loan from a third party, then
NEWCREST itself shall make such a loan to MAINC at a rate of
interest equal to NEWCREST's Borrowing Cost. A portion of
MAINC's share of net cash flow from the Mine, equal to 80% of
the net cash flow that would be received from a 20% interest in
the Mine as a whole, shall be dedicated exclusively to repayment
of any loan under this paragraph 5.9(c). Any loan under this
paragraph 5.9(c) shall be a full recourse loan and shall be
secured by MAINC's entire participating interest in the Venture
and the Mine and all of MAINC's right, title and interest in the
Venture Property.
(d) NEWCREST shall pay all option fees and all rents, fees and other
statutory sums required under the Mining Code to keep the
Venture Property in good standing until the requirements in
paragraphs 5.9(a), 5.9(b) and 5.9(c) have been met.
(e) If NEWCREST elects the option described in this paragraph 5.9
but for any reason fails to meet the requirements set forth in
paragraphs 5.9(a), 5.9(b), 5.9(c) and 5.9(d), then from the date
that NEWCREST abandons the option forward, the parties shall
proceed as if NEWCREST had not elected the option, with NEWCREST
having a 51% participating interest and having a 49%
participating interest.
6. Withdrawal from the Venture
6.1. NEWCREST shall have the right to withdraw from the Venture at any
time after it has satisfied the requirements of paragraphs 5.2(a),
5.2(b) and 5.3(a), upon 10 days' prior written notice to MAINC. If
NEWCREST withdraws prior to the Vesting Date, NEWCREST shall have
paid all rents, fees and other required statutory sums under the
Mining Code necessary to keep the Venture Property in good standing
through the effective date of its withdrawal, and shall have
satisfied any obligations it has under paragraphs 5.2 and 5.3 through
the effective date of its withdrawal.
6.2. Notwithstanding paragraph 6.1, NEWCREST shall have the right to
withdraw from the Venture on the six-month anniversary of the
Commencement Date or thereafter upon 30 days' prior written notice to
MAINC if there are material defects in title affecting the mineral
interests in 20% or more of the land area of
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the Agua Blanca Property as described in Exhibit A, or affecting the
mineral interests in any part of the Agua Blanca Property as
described in Exhibit A where one of NEWCREST's primary exploration
targets is located, and if such title defects cannot be cured by
reasonable curative measures in a reasonable time period. The
determination referred to in the immediately preceding sentence shall
be made in the sole judgment of NEWCREST, but NEWCREST shall act in
good faith and shall cooperate fully with MAINC in the resolution of
such title defects. If NEWCREST withdraws from the Venture pursuant
to this paragraph 6.2, NEWCREST shall have no other obligation under
this Letter Agreement, except that NEWCREST shall have paid all
rents, fees and other required statutory sums under the Mining Code
necessary to keep the Venture Property in good standing through the
effective date of its withdrawal, and MAINC shall have the right to
retain all payments made by NEWCREST to MAINC prior to the date of
NEWCREST's withdrawal.
6.3. MAINC shall have the right to withdraw from the Venture at any time
after the Vesting Date, upon 30 days' prior written notice to
NEWCREST.
6.4. Upon withdrawal by either party, the Venture shall terminate, and the
withdrawing party shall convey to the nonwithdrawing party all of its
right, title and interest in and to the Venture Property, and shall
deliver to the nonwithdrawing party all mineral data and samples in
its possession related to the Venture Property.
7. Venture Programs and Budgets
7.1. Prior to the Vesting Date (or the Option Completion Date, if
applicable), all exploration programs and budgets shall be prepared
by NEWCREST. NEWCREST shall provide copies of such programs and
budgets to MAINC. After the Vesting Date (or the Option Completion
Date, if applicable), all exploration programs and budgets until a
Decision to Mine shall be prepared on an annual basis by the Manager
for approval by the Operating Committee.
7.2. Except as provided in paragraph 5.9, after the Vesting Date, the
parties shall contribute to all exploration programs and budgets in
proportion to their respective participating interests in the
Venture.
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8. Dilution and Future Equity Calculations
8.1. Subject to paragraph 5.9, if at any time after the Vesting Date (or
the Option Completion Date, if applicable) a party elects not to
contribute, or fails to contribute, to an approved program and
budget, the respective participating interests of the parties shall
be recalculated in accordance with tile following formula:
1a = (Da + Aa)/(Da + Aa + Db + Ab)
where
Ia is the new participating interest of party A
Da is the deemed value of the initial contribution of
party A
Aa is the actual cumulative contribution of party A from
the Vesting Date (or the Option Completion Date, if
applicable) through the date of calculation
Db is the deemed value of the initial contribution of
party B
Ab is the actual cumulative contribution of party B from
the Vesting Date (or the Option Completion Date, if
applicable) through the date of calculation
If NEWCREST does not exercise the option described in paragraph 5.9, then
for purposes of the above formula, the deemed value of NEWCREST's initial
contribution shall be the total cost incurred by NEWCREST pursuant to paragraphs
5.2, 5.3 and 5.4, and the deemed value of MAINC's initial contribution shall be
49/51 of the deemed value of NEWCREST's initial contribution. If NEWCREST does
exercise the option described in paragraph 5.9, then for purposes of the above
formula, the deemed value of NEWCREST's initial contribution shall be the total
cost incurred by NEWCREST pursuant to paragraphs 5.2, 5.3, 5.4 and 5.9, and the
deemed value of MAINC's initial contribution shall be 35/65 of the deemed value
of NEWCREST's initial contribution.
8.2. If, prior to a Decision to Mine, MAINC's participating interest is
reduced to 10.00% by operation of paragraph 8. 1, then:
(a) MAINC shall have no further obligation to make cash
contributions to the Venture until a Decision to Mine, and
MAINC's participating interest shall not be reduced below 10.00%
until the Decision to Mine.
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(b) If MAINC elects under paragraph 9.2 to contribute to the
Development Costs of the Mine, then MAINC shall use its best
efforts to obtain financing for its 10% share of the Development
Costs.
(c) If MAINC is unable to obtain financing or otherwise fund its 10%
share of the Development Costs of the Mine, then NEWCREST shall
lend the necessary funds to MAINC at a rate of interest equal to
NEWCREST's Borrowing Cost, to be advanced directly to the
Venture as needed to cover MAINC's required contributions to the
Venture. The loan shall be a full recourse loan and shall be
secured by MAINC's entire participating interest in the Venture
and the Mine and all of MAINC's right, title and interest in the
Venture Property.
(d) If NEWCREST lends money to MAINC pursuant to paragraph 8.2(c),
80% of MAINC's net cash flow from its 10.00% participating
interest in the Mine shall be dedicated exclusively to repayment
of the loan from NEWCREST.
8.3. Each party agrees to pledge its entire participating interest in the
Venture and the Mine, and its entire right, title and interest in and
to the Venture Property, if necessary or desirable in order for the
Venture to obtaining financing for the Development Costs of the Mine,
and that any such financing obtained by the Venture shall have a
first lien on such assets.
9. Decision to Mine
9.1. Either party may request the Operating Committee to direct the
Manager to undertake a feasibility study. If the Operating Committee
declines to do so, that party may undertake its own feasibility study
at its own cost. If that party's feasibility study later forms the
basis of a Decision to Mine by the Operating Committee, then the
Venture shall reimburse that party for all costs of the feasibility
study.
9.2. After a Decision to Mine, each party shall choose one of the
following two options: (1) to contribute in proportion to its
participating interest to the Development Costs of the Mine; or (2)
to decline to participate in the Mine. If a party chooses the second
option, the following shall occur:
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(a) The party choosing the second option (the "selling party") shall
be required to offer to sell its entire participating interest
in the Venture to the non-selling party, and the non-selling
party shall be required to make a good faith offer to purchase
such participating interest. The selling party shall have a
period of not less than 120 days after its receipt of the offer
from the non-selling party within which to accept such offer.
The parties then shall attempt in good faith to negotiate the
terms and conditions of a sale of the selling party's
participating interest to the non- selling party.
(b) If the terms and conditions of a sale of the selling party's
participating interest to the non-selling party cannot be agreed
upon within 60 days after the commencement of negotiations, the
selling party shall have the right to offer its participating
interest to third parties, and the non-selling party shall be
deemed to have waived its right of first refusal with respect to
such participating interest.
(c) In the event the selling party does not accept the offer of the
non-selling party and does not sell its participating interest
to a third party, the selling party's participating interest
shall be subject to dilution in accordance with paragraph 8.1.
9.3. If after a Decision to Mine either party, having elected under
paragraph 9.2 to contribute to the development costs of the mining
project, fails to contribute to an approved program and budget in
proportion to its participating interest, then the nondefaulting
party, in addition to any other remedies it might have, shall have
the right to acquire the defaulting party's entire participating
interest for 90% of its Appraised Value.
10. Management
10.1. NEWCREST shall have the right to be the Manager of the Venture from
the Commencement Date through the Vesting Date, and until such time
as it ceases to hold a majority participating interest (or if there
are more than two parties to the Venture, until such time as it
ceases to hold the single largest participating interest).
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10.2. The parties shall form an Operating Committee composed of two
representatives of each party. Voting on all issues will be by simple
majority vote (except for a Decision to Mine or the purchase, sale or
surrender of any material property, all of which shall require a
unanimous vote) with the parties' votes being weighted in proportion
to their respective participating interests. If a Feasibility Study,
duly completed and subsequently audited by a reputable outside
engineering firm, agreeable to NEWCREST and MAINC, is positive and
recommends development, a unanimous vote shall not be required for a
Decision to Mine, and a simple majority vote shall be sufficient for
a Decision to Mine.
11. Manager's Duties
11.1 The Manager shall:
(a) prepare and implement exploration programs and budgets;
(b) maintain the Venture Property in good standing by the timely
payment of all rents, fees and other sums required;
(c) provide any statutory, technical or other reports required by
any governmental authority;
(d) provide copies of all such reports to the parties;
(e) secure any approvals, consents and/or statutory authorizations
required in order to conduct exploration of the Venture
Property; and
(f) report to the parties on a quarterly basis with respect to
exploration activities, exploration results and any other
matters relating to the Venture Property.
11.2. From the Commencement Date through the Vesting Date (or the Option
Completion Date, if applicable), all costs and expenses properly
incurred by the Manager in the performance of its shall be paid by
NEWCREST and shall be included in Cumulative Allowable Expenditures.
After the Vesting Date (or the Option Completion Date, if
applicable), the Venture shall reimburse the Manager for all costs
and expenses properly incurred by the Manager in the
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performance of its duties. In lieu of general and administrative
expenses, after the Vesting Date (or the Option Completion Date, if
applicable) the Venture shall pay the Manager an overhead charge
equal to 1% of capital expenditures of $10,000 or more, plus 2% of
all other expenditures (excluding royalties, option fees, rents and
fees due under the Mining Code, royalties, and taxes). Such overhead
rates may be amended from time to time by agreement of the parties
if, in practice, such rates are found to be insufficient or
excessive.
12. Formal Venture Agreement
12.1. This Letter Agreement, once signed by both parties, shall constitute
a legally binding contract between NEWCREST and MAINC NEWCREST shall
prepare at its own cost a formal Venture Agreement to provide in more
detail for the above matters, together with such other provisions as
are normally found in this type of arrangement.
12.2. NEWCREST shall be responsible for all costs and expenses incurred in
connection with this Letter Agreement and the Venture Agreement,
including registration, notarial, stamp duty and/or property transfer
fees. However, each party shall be responsible for its own legal
costs incurred in connection with this Letter Agreement and the
Venture Agreement.
13. Assignment
Each party shall have the right to convey, assign or transfer all or part of its
participating interest to any other person or entity. However, if the
conveyance, assignment or offer is to any person or entity other than a Related
Company of the assigning party, then the nonassigning party shall have a right
of first refusal with respect to such conveyance, assignment or transfer.
14. Confidentiality
14.1. The terms of this Letter Agreement and the Venture Agreement and all
information obtained in connection with the performance of this
Letter Agreement and the Venture Agreement shall be the exclusive
property of the parties and, except as provided in paragraph 14.2,
shall not be disclosed to any person or entity or to the public
without the prior written consent of the other party, which consent
shall not be unreasonably withheld. The confidentiality
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restrictions contained in this paragraph 14.1 shall be binding during
the term of this Letter Agreement, and shall continue to be binding
upon any party who withdraws from the Venture for two years following
the date of withdrawal.
14.2. The consent required by paragraph 14.1 shall not apply to a
disclosure: (a) to a Related Company, consultant, or contractor of a
party that has a bona fide need for the information; (b) to any
person or entity which is considering purchasing of a party's
participating interest or extending financing to a party; (c) to a
government agency, stock exchange, securities commission or to the
public which a party believes in good faith is required by applicable
laws or regulations; or (d) of information that has become generally
available to the public other than as a result of any breach by such
party of its obligations hereunder. A party shall give written notice
to the other party prior to any disclosure under this paragraph
14.2(a) and 14.2(b), and in the case of disclosures under said
paragraphs, the disclosing party shall require the recipient of the
confidential information to agree in writing to protect the
information from further disclosure in accordance with paragraphs
14.1, 14.2(a) and 14.2(b). Except as required by law or regulatory
authority, neither party shall make any public announcements or
statements concerning this Letter Agreement, the Venture Agreement,
or any activities conducted thereunder without the prior written
approval of the other party, which approval shall not be unreasonably
withheld. A party shall provide to the other party advance copies of
all routine public announcements or press releases of information
made under paragraphs 14.2(c) and 14.2(d), but not necessarily
routine business filings under paragraph 14.2(c), to allow the other
party to consent on matters of fact.
15. Other Provisions
15.1. This Letter Agreement and the Venture Agreement shall be governed by
the laws of the State of Colorado in the United States.
15.2. In the event of any dispute between the parties relating to or
arising out of either the Letter Agreement or the Venture Agreement,
the parties shall first attempt to resolve the dispute by negotiating
in good faith. If the dispute is not resolved within 90 days after
the commencement of negotiations in accordance with the immediately
preceding sentence, then either party shall have the right (unless
prohibited by Argentinean law) to submit the dispute to
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binding arbitration in Denver, Colorado, administered by the American
Arbitration Association under its Commercial Arbitration Rules then
in effect. The arbitration shall be decided by a panel of three
arbitrators, who shall be selected in accordance with the following
procedure: the parties each shall select one independent arbitrator,
and those two arbitrators shall agree on the third independent
arbitrator. If either party fails to select an arbitrator, or if the
two arbitrators selected by the parties cannot agree on a third
arbitrator, then such arbitrator shall be selected by the American
Arbitration Association. The arbitrators shall be required to follow
Colorado law and precedent, and shall be required to issue detailed
findings of fact and conclusions of law. Judgment on the arbitration
award rendered by the arbitration panel may be entered in any court
having jurisdiction thereof. If the arbitration award is challenged
in a court of law, the court shall apply the same standard of review
that a Colorado appellate court applies to the review of a decision
by a trial court.
15.3. The obligations of the parties under this Letter Agreement and under
the Venture Agreement shall be suspended to the extent and for the
period that performance is prevented by any condition of force
majeure. Force majeure shall mean any cause, whether foreseeable or
unforeseeable, beyond a party's reasonable control, including,
without limitation, Acts of God; labor disputes; laws, regulations,
or orders of any governmental entity; judgments or orders of any
court; inability to obtain on reasonably acceptable terms any public
or private license, permit or authorization; acts of war or
conditions attributable to war; riot, civil strife, terrorism,
insurrection or rebellion; fire, explosion, earthquake, storm, flood,
drought, or adverse weather conditions; accidents; inability to
obtain labor, transportation, materials, equipment, or services; or
breakdown of equipment.
15.4. NEWCREST and MAINC agree to make whatever changes are required in
this Letter Agreement and to take whatever actions are required in
the drafting of the Venture Agreement to ensure that the agreement is
legal and binding under Argentinean laws and to maximize the tax
benefits to the Venture.
If the terms set forth above are acceptable to MAINC, please indicate
MAINC's agreement by signing a copy of this letter in the space provided below
on behalf of MAINC and returning the signed copy to William M. Danley or Robert
W. Barker by 5:00 p.m. on April 15,1996. We look forward to working with you on
this project.
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Sincerely,
NEWCREST RESOURCES, INC.
By: /s/ ROGER W. BARKER
-------------------------------------------
Roger W. Barker
President
(Acting on behalf of a yet to be named affiliate.)
ACCEPTED AND AGREED TO:
MINERA ANDES INC.
By: /s/ ALLEN V. AMBROSE
-----------------------------------
Allen V. Ambrose
President
(Acting additionally as a representative of Minera Andes S.A.)
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No. 0009119881
SERIES C
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a hundred and thirty-one
NOTARY PUBLIC PROCEEDING
RECORD BOOK LAW 4735
- --------------------------------------------------------------------------------
RECORDING OF A PRIVATE CONTRACT: DEED NUMBER TWENTY-THREE - In the capital of
Mendoza Province, Republica Argentina, on June 28th, 1995; in front of me
GILBERTO F. SUAREZ LAGO, lawyer acting as notary public, registered under No.
37; APPEARING: Mr. JORGE ALFREDO VARGAS, L.E. (document) No. 6895317, argentine,
married, taking up his legal residence in Peru 930, Ciudad, capital of this
province, of age, capable, I witness. And Mr. JORGE ALFREDO VARGAS SAYS: That he
comes as representative for the entity "Minera Andes S.A.," guaranteeing this
representation by submitting General Power for Lawsuits and Administrative
Procedures, dated February 14, 1995, which has been given by Minera Andes S.A.
through deed number 355, declaring that it was registered in "Registro Publico
de Mandatos General de esta Provincia" (Public Register for Powers of Attorney
of this Province), under number 31349, Fs. 153, Tomo 299 "L." And Mr. Jorge
Alfredo Vargas shows a copy of a contract of "Exploration and Prospecting with
option to buy" dated June 21st, 1995, in order to be registered in this Notary
Registry under my direction, which is truly and immediately copied and it
states: There is a seal which says: FREE OF SEALS' TAX. By Art. 240 Inc. 31 (Law
6104) Place and date Mendoza 06/27/95. Verified. There is an illegible signature
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with a legend that says: Assessor. There is an illegible signature. - CONTRACT
OF EXPLORATION AND PROSPECTING WITH OPTION TO BUY. - In the city of Mendoza,
Province named the same, on June 21st, 1995, it is agreed between MINERA ANDES
S.A., represented hereon by its Director President Mr. JORGE ALFREDO VARGAS,
(C.I. 219206 Mendoza (document)), guaranteeing that it is a legal entity by
means of its Corporate Statutes; and also appearing as representative, its
attorney Mr. BRIAN GAVIN, (Passport UK c969194D), taking up residence in Coronel
Diaz 837, Mendoza, on one hand; and on the other, Mr. ADONIS CANTONI, L.E.
(document) No. 6748992, on his own, single, businessman, taking up residence in
Avda. Jose Ignacio de la Rosa 369 (oeste), 6to. Piso, Dpto. "B," San Juan, city;
and the said parties agree for the current Contract of Exploration and
Prospecting with Option to buy, as a consequence of the "Letter of
Intent-Holding of Offer," submitted by Mr. Adonis Cantoni on November 23, 1994,
the corresponding signatures were certified by the notary public Mrs. Mariana
Rojas Claria, registered in Provincial Mining Direction under file number
(expediente) 546638-M-94, with its subsequent extensions; and which was accepted
by Minera Andes S.A. on May 26th, 1995 and corresponding certification; and
which will be ruled under the following conditions. FIRST: Mr. Adonis Cantoni as
holder of the claim arising from the cateo's allowances in process in Provincial
Mining Direction in San Juan under files (expedientes): Cateos: a) Nbr.
242.224-C-87; 296.550-C-90; 338.196-C-93; 339.170-C-93; 338.482-C-93;
338.567-C-93; 545.678-C-94; 338.760-C-93; 338.844-R-93; and b) mines for which
the rights are in process under Nbr. 258-952-C-85;
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953/954/955/956/957/958/959/960 and 961-C-85; files number 270.338-C-86;
339/340/341/364/365/366/796/800/801/802/803/804/805/806/807/808/809/810 and
811-C-86; files number 296.206-C-89; 207/208/209/210/211/212/213/843/844/845 and
846-C-89; files number 295.141-C-90; 142/143/144/145/146/147 and 150-C-90; all
of them comprise the area called "Agua Blanca and Mondaca." The so called "gold
placer" is not included in this contract. Mr. Adonis Cantoni states that his
rights and claims are completely valid and they are in force according to Mining
Code; that there are no legal or conventional inhibitions, seizures or burdens
affecting them and they are all completely available. A Certificate issued by
Notary of Mines from Provincial Mining Direction of San Juan, showing the good
standing of the titles, is enclosed. Mr. Adonis Cantoni also agrees to indemnify
for all the expenses arising from this certificate, with the aid of Minera Andes
S.A., and the ones pending for the mining claims will be paid by Mr. Adonis
Cantoni up to 12/31/94; and those generated from that date onwards will be paid
by Minera Andes S.A.. The latter agrees to give in advance the amounts to be
paid by Mr. Cantoni up to that date, and which will be deduced from the
subsequent payments according to article 4th; these discounts, could not exceed
the 25% for the amount for each payment. At the same time, Mr. Adonis Cantoni
states that it will be ruled under this contract, any other mining claim that he
could have or get in the declared cateos (manifestados), by himself or by third
parties, declared mines (minas denunciadas); agreeing with Minera Andes S.A. to
give the "Right to Exploration with irrevocable option to buy", to explore
and/or acquire these cateos and mining claims, as a whole or in part, at any
stage of this contract. An approximate sketch showing the location
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of the area is incorporated. It is stated that there are no studies, neither
enhancements ready for exploitation or certainty of mineralization, economically
exploitable, in none of these areas. SECOND: the option to buy could be
exercised by Minera Andes S.A. at any moment within the four years term, since
June 21st, 1995 and ending on June 21st, 1999. In the event that the option was
taken, Mr. Adonis Cantoni, agrees to carry on by his own all the proceedings
necessary to formally transfer the ownership to Minera Andes S.A., or to whom it
may designate, of the mining properties hereby detailed under Article 1st. In
order to make the transfer easy, Mr. Adonis Cantoni, gives irrevocable power in
favor of Minera Andes S.A. and/or the person designated by that company, in
order to drive the process related to any of the files hereabove mentioned,
declare ore that could be discovered and require directly from the Provincial
Mining Direction, the titles for the corresponding properties and arising
rights, during the term of this contract, and without meaning that by this
irrevocable authorization Mr. Adonis Cantoni is free from his original
obligation to execute all the said proceedings. During the term of this
contract, the parties agree, by themselves or by third parties, not to apply for
or register as devoid in the areas composed, cateos, manifestaciones de
descubrimiento (discovery declaration), minas (mines) or estacas minas, or any
other claim that could spoil the soul of this agreement. If there had been other
manifestaciones and/or any manifestacion was made, creating rights in the areas
hereby composed, this rights would be considered under the conditions of the
current contract. Any damage to assets suffered by any of the parties as a
consequence of the behavior of its contractor, will be indemnified. THIRD:
During the term of this contract, Mr. Adonis
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Cantoni gives Minera Andes S.A. the holding of the cateos and claims hereby
identified under Article 1st, but the latter could not exploit the ore deposits,
that could appear; having the ability to carry on exploration and investigation
tasks and the following works: geologic, mining, topographic surveys, drilling,
take samples of the surface and underground, mineralogy and metallurgic surveys,
build test plants for the sake of study and any other task that could be useful
for accomplishing the goal, which is the discovery and cubic measuring of ore
that could be considered economically exploitable. FOURTH: In the event that
Minera Andes S.A. took the right for the option to buy under article first
hereby, the sales price for the belongings identified under Article 1st,
included all the manifestaciones creating mining claims that could be
incorporated, is fixed in two million dollars (U$S 2,000,000) to be paid in
dollar bills or in pesos at the corresponding exchange rate for the dollar bill
at sales price in Banco de la Nacion Argentina, the day before payment date.
Payment schedule is established in the following way: 1st) as counterpart and
execution start of the contract with option to buy, as a whole or in part,
stated under article first, Minera Andes S.A. will pay to Mr. Adonis Cantoni,
the amounts herebelow mentioned: a) First year: 1) First quarter: U$S 40,000 2)
Second quarter: U$S 40,000 3) Third quarter: U$S 40,000 4) Fourth quarter: U$S
40,000 - b) Second year: 1) First quarter: U$S 50,000 2) Second quarter: U$S
50,000 3) Third quarter: 50,000 4) Fourth quarter: U$S 50,000. - c) Third year:
1) First quarter U$S 60,000 2) Second quarter: U$S 60,000 3) Third quarter: U$S
60,000 4) Fourth quarter: U$S 60,000. - d) Fourth year: 1) First quarter: U$S
80,000 2) Second quarter: U$S 80,000 3) Third quarter: U$S 80,000 4) Fourth
quarter: U$S 80,000.
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Total U$S 920,000. These amounts will be paid by Minera Andes S.A. from the 1st
to the 5th of the first month of each quarter, starting at the signature of this
contract, and the second payment, will be from the 1st to 5th of September and
then, subsequently in the way hereby indicated. The address for payments will be
at Coronel Moldes 837, Mendoza city; making a deposit in a banking account that
could be established. 2nd) The balance for the total price of U$S 1,080,000 in
case of exercising the option to buy when the option term expires; or
eventually, if this option was taken before ending the term of four years, the
balance for the price necessary to complete the difference with the total price
of U$S 2,000,000; will be paid in six equal semiannual payments; canceling the
first of them together with the deed transferring the ownership, and the second,
six months after it; at that moment, it will be agreed the appropriate way to
give a payment guarantee, in favor of the seller. This receipt includes the
whole of the areas contracted. The term for giving this transferring deed, is
agreed in sixty straight days from actual notice exercising the option to buy as
a whole or in part, by Minera Andes S.A., in case of delay in the deed
proceeding, a fine is stated consisting in a monthly 3% over the price balance,
which should be paid by the party responsible for the delay; eventually Minera
Andes S.A. could withhold this amount, over the price balance, if the delay was
not imputable. The price submitted o signed by Mr. Adonis Cantoni, is considered
as sufficient payment receipt. The delay in the payment of any of these amounts,
will proceed automatically; and then if Minera Andes S.A. was summoned and did
not fulfill the payment in the term of five working days, this contract would be
considered as resigned without obligation to Indemnify from any of the parties
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involved. 3rd)This price is also made up of a 3% royalty from the ore price over
the "Net Smelter Return," in the case Minera Andes S.A. exercised the option to
buy. This royalty could be paid in USA dollars or in ore, as desired by Minera
Andes S.A. The payment term for this royalty will be in force when the eventual
commercial exploitation of a field starts and will be settled semiannually. In
the case that the exploitation beginning was delayed, Minera Andes S.A. would
start paying four years after the transferring deed, the amount of U$S 100,000
per year as advanced payment for future royalties and they will be withhold from
the said royalties, when they start. The delay in the payment of this royalty,
will proceed immediately and it will earn an interest equivalent to the "libor"
rate plus one point, in favor of the seller; who will have legal right to claim
it. 4th) In the event that the province of San Juan, or the Government through
any of its agencies, demanded the payment of a royalty or share (whatever name
it is given, Minera Andes S.A. will pay by way of this a total of 4.5% and what
it is collected by the province of San Juan or the Government through any of its
agencies. Finally, in total and by way of whatsoever, no matter who could
determine the royalty or share, and never minding the name that could be given,
it could never exceed the top of 4.5% of the "Net Smelter Return," which will be
paid by Minera Andes S.A.; neither could it exceed the 3% of Net Smelter Return
to be received by Mr. Adonis Cantoni. - 5th) As regards the price, the
additional condition for the "Letter of Intent" is hereby transcribed: "The
parties hereby clarify that in the event the right for any of the nine cateos
hereby included was lost, due to reasons prior to December 1st, 1994, the price
would suffer a penalty in the same proportion; i.e. that each cateo is
equivalent to
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eleven with eleven percent (11.11%) of the price, during the first four (4)
years. In the case the option to buy was exercised, the final price will not be
modified and will always be the difference between what was agreed and the two
million dollars (U$S 2,000,000), without modifying the payment schedule." FIFTH:
Minera Andes S.A. at any moment during the term of this contract, could resign
it, as a whole or in part without obligation to indemnify, through appropriate
notice to Mr. Adonis Cantoni at the address hereby stated. Mr. Adonis Cantoni,
is not able to resign to the contract on his own, except for the cases
considered under article 11. The contract will be finished at the specific end
date mentioned in the resigning notice that Minera Andes S.A. could send. At the
moment of resigning Minera Andes will transfer the holding of the mining
belongings to Mr. Adonis Cantoni as they are, with concession charges all
canceled and without equipment or obligation to transfer the enhancements
incorporated, except for the case it was not possible to detach them. In the
event that Minera Andes S.A. did not decide to purchase the deposits or the
area, the amounts paid up to that moment will remain in favor of Mr. Adonis
Cantoni, as compensation for not being able to use his rights during the
exploration term. SIXTH: As warranty for the option to buy mentioned under
article first hereby, Mr. Adonis Cantoni agrees to register with the mining
authority of San Juan province, a voluntary inhibition to transfer, sell, rent
or burden the mining claims identified under article 1st, and regarding that, he
is actually applying for that. The said inhibition will be determined for a
period equivalent to the term of this contract, and a copy of the latter will be
submitted as reference for that inhibition, which will be asked to be recorded
as a quote to each area and mines'
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registry; as well as in each file (expediente). SEVENTH: Mr. Adonis Cantoni,
will transfer the mining claims, cateos and minas with all the canons paid up to
December 31st, 1994. During the term of this contract Minera Andes S.A. should:
a) Pay on behalf of the owners of the mining canons and all the burden charges
for the property and all the charges required by mining legal rules, from the
date already mentioned onwards; b) Pay by its own any enhancement necessary to
be done. Mr. Adonis Cantoni will not be responsible for tools, machinery,
equipments, facilities or enhancements located within the mining property; c)
Take on all the responsibility for corporal injuries or death of any person or
damage to assets resulting from negligence or through the fault of it, its
employees or agents, resulting from exploration activities or any other work
related to the activity of Minera Andes S.A.; d) Pay for all labor, in all its
aspects, and materials used in relation to the aim of this contract. EIGHTH:
Minera Andes S.A. could install and take away from the properties, during the
term of this contract, any tool, machinery, equipment or supplies owned by the
company. It is agreed and established that in the case of total or partial
resignation of this contract due to any reason, Minera Andes S.A. could take
away all its belongings, tools, machinery, equipment or supplies and the cost of
that transport will be paid by it, within the term of a hundred and eighty days
(180) from the end of the contract; Minera Andes S.A. could not take away any
underground beam or any other supports installed by it and could not alter or
restore excavations or any other works on the surface, unless that it is
required by law; rules or administrative requirements to be applied. Minera
Andes S.A. could keep a night watchman or necessary security during the said
term. NINTH: After the total or partial end
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of this contract due to any reason, but not the payment of the purchase price to
Mr. Adonis Cantoni by Minera Andes S.A., in the way and in the amounts scheduled
under article four, and provided that Mr. Adonis Cantoni has fulfilled all the
conditions; Minera Andes S.A. should furnish at no charge a copy of all the
feasibility studies detailed under article third, done up to the said date, in
written and signed; as well as it should make available witnesses or any other
material useful for the investigation, within the term of a hundred and eighty
days after the relationship is ended. Mr. Adonis Cantoni will have the right to
inspect all the belongings at any adequate moment, without obstructing the
works; and with prior notice to Minera Andes S.A. of the inspection, no less
than 10 days in advance. TENTH: Mr. Adonis Cantoni, declares and guarantees that
he is the only licensee for the mining claims or cateos' applications included
under article 1st; that his ownership is in good standing with all the
corresponding rights, that he has not transferred or burden them, that they are
free and exempt for any claim by third parties or people acting on behalf of
others. Without limiting or restricting in any way, any other right of Minera
Andes S.A. against Mr. Adonis Cantoni, it is agreed that if during the term of
this contract Minera Andes S.A., or the mining authority, or third parties
discovered or declared any kind of corruption or limitation in the title of any
of the claims or applications for cateos, or mines identified under article 1st,
Mr. Adonis Cantoni would prevent that corruption or claims. If Mr. Adonis
Cantoni, did not accomplish so within the term of fifteen straight days from the
date he is summoned by Minera Andes S.A., except because of Act of God; that
corruption, obstructions or restrictions could be repaired by Minera Andes S.A.,
thus Minera Andes S.A. or whoever
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may be designated, is given irrevocable broad power to repair them. In the event
that Minera Andes S.A. paid the total purchase price according to and in the way
it is scheduled under article fourth hereby, thus having the right already
transferred, the title for the mining claims and turn that holding in true and
material ownership of the mines and claims, Mr. Adonis Cantoni will furnish all
the official documents in the term of sixty days and will carry out all the
proceedings necessary to improve the ownership transfer for the said concessions
in favor of Minera Andes S.A.; or whoever may be designated. Expenses and fees
resulting from the issuing and registering of official documents, will be paid
by Minera Andes S.A..-It is also restated that Mr. Adonis Cantoni gives
irrevocable power to Minera Andes S.A. or to whoever may be designated, to carry
on all the necessary proceedings to issue the official documents expressing the
ownership transfer for the mines and cateos' applications included in this
contract. ELEVENTH: The only reason for which Mr. Adonis Cantoni could resign,
would be the lack of payment in time of the agreed amounts under article 4th and
the unfulfillment of Minera Andes S.A.'s commitments under article 7th, item a).
The power to resign the contract due to lack of payment will proceed after
thirty days of delay for the scheduled dates. The delay will proceed by legal
right without any need for legal requirements, through the summoning resulting
from the expiration of the term. During the period of actual delay, the amount
will earn an interest equivalent to the rate charged by Banco de la Nacion
Argentina for the discount of letters or promissory notes; which will be paid
together with the amount owed. Once the term of thirty days delay is over, Mr.
Adonis Cantoni, will be able to resign the contract on his own by means of
appropriate notice at the
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address of Minera Andes S.A., keeping all the amounts collected up to the moment
in favor of him; despite the power to require the amounts earned; except for the
case in which the option to buy was exercised and one third of the price had
already been paid, in which event, he should demand the total payment of the
price balance, with corresponding guaranties. TWELFTH: All Minera Andes S.A.'
rights resulting hereby could be transferred, prior notice to Mr. Adonis
Cantoni. At the same time, the transferees should ratify their acceptance to Mr.
Adonis Cantoni and offer an adequate reliability warranty or the possibility to
accomplish these contract obligations; from that moment onwards, all the rights
and obligations originally corresponding to Minera Andes S.A. are automatically
substituted. Mr. Adonis Cantoni's rights, according to this contract, could be
transferred only with prior acceptance by Minera Andes S.A.; not being possible
for this acceptance to be denied without reason. THIRTEENTH: This contract will
oblige the parties and their corresponding inheritors, executors,
administrators, successors with rights and related third parties. All knowledge
and information that Mr. Adonis Cantoni acquires, related to the works mentioned
under article 3rd, will be kept with discretion and considered as confidential,
except for the event that Minera Andes S.A. releases the holders from this
obligation, in written. This confidentiality condition, will be in force during
the whole term of this contract and up to a hundred and eighty days after the
end date of this contract or the purchase of the property and mining claims.
Minera Andes S.A. also agrees to keep confidentiality for a similar period after
the contract has been resigned, or some area excluded, regarding the latter,
except the holders release Minera Andes S.A. by written
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notice of this obligation; except for the case Minera Andes S.A. is negotiating
the transfer or joint venture in this contract with third parties concerned.
FOURTEENTH: All the notices to Minera Andes S.A. and to Mr. Adonis Cantoni will
be done in written and in a reliable way at the addresses hereby stated. The
parties could change their address and they should be available to be notified
in a reliable way, not being away from the scope of Mendoza city and/or the so
called Gran Mendoza; or in the city of San Juan and/or surrounding areas. This
contract is to be registered at Notary Public and Mining Authority; expenses
will be paid by Minera Andes S.A. FIFTEENTH: The parties agree, that in case of
dispute they will accept the jurisdiction of the common courts of the province
of Mendoza, excluding any other code or jurisdiction. It is stated that this
contract is exempt from seals due to an amendment to article 240 inc. 31, Fiscal
Law N(0)6104. Approving this document, six copies are signed by the parties, in
order to be registered with the Mining Authority of San Juan Province; other, to
be recorded with a local Notary Public; and other to be translated into English.
At the signature of this contract, Minera Andes S.A. pays the amount of U$S
6,000 (six thousand dollars) to its co-contractor, as way of canceling the
amount of the first payment scheduled under article fourth; leaving clear that
the difference has already been received by Mr. Adonis Cantoni. After collecting
this amount, the co-contractor will furnish adequate receipt and a broad and
total payment document. INTERPRETATIVE CLAUSE: Over NET SMELTER RETURN: In the
event that the royalties had to be paid, it is understood as "net smelter
return" all the metallic minerals, concentrated, or their products containing
ore produced and sold by the Holder. When the ore containing minerals with
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commercial value, are sold by the Holder, its "net smelter return" will be
considered as the actual amount received by the said Holder for the sale of
them, minus the deduction of any expense corresponding to transport (including
freight, insurance, and delivery and mailing costs) from the exploitation to the
facilities of the purchaser and any other unloading place. When the concentrates
or products containing minerals with commercial value are sold by the holder;
their net smelter return should be considered as the actual amount received by
the holder for the sale, minus deduction for any and all the expenses related to
smelting, refining, weighing, sampling, assay, handling, transport (including
freight, insurance, handling and mailing expenditures), penalties for impurities
and other charges deduced by a purchaser, provided that the Holder does not
deduce any charge for initial processing. By initial processing it is understood
the initial grinding or concentration or other ore treatment during which one or
more mineral products are recovered from that sold ore and a subsequent
processing, and during which the first tails and mineral waste are discarded or
deposited. Such deductions will be limited to commercially reasonable amounts
from the point of view of mineral industrial practices and levels, currently
accepted as good, such as smelting or other similar operations for the treatment
of metals. The "net smelter return" for the ore, concentrates or products
treated in smeltery and other similar metal operations, owned, operated or
controlled by the Holder, or dealt with based on a toll paid by the Holder, will
be computed as already mentioned, with the deductions previously established.
For the ore, concentrates or products sold to associate companies or sold by the
Holder, but in some way used by him, the gross price for the sale will be
determined in a similar way;
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provided that the total deductions done by the Holder according to this
paragraph, do not exceed the total deductions that could have been made by other
smeltery operators or treatment facilities for similar materials in the case
that those materials were smelted or treated in those facilities based on a
reasonable commercial agreement .- There is an illegible signature and the
explanatory legend says: Brian Gavin on behalf of Minera Andes S.A. There is an
illegible signature and the explanatory legend says: Jorge A. Vargas on behalf
of Minera Andes S.A.. There is an illegible signature and the explanatory legend
says: Adonis Cantoni, L.E. (document) 6748992. There is a certification in
Notary Public proceeding number 532508, that says: 'As Notary Public, Holder of
Registry number thirty-seven from Capital, I CERTIFY: that the signatures at the
bottom of each of the FIVE pages of the Contract of Exploration and Prospecting
with Option to buy herepreceding, and which also have my signature, Professional
seal and formal statement for the certification that is done in the current
sheet for the Notary Public proceeding; belong to Mr. BRIAN GAVIN, Passport
issued by United Kingdom of Great Britain and Northern Ireland number C969194D,
to Mr. JORGE ALFREDO VARGAS, C.I. (document) number 219206 issued by Mendoza
Police, and Mr. ADONIS CANTONI, L.E. (document) number 6748992; all of which
have been done in my presence; as well as Dr. Jorge Alfredo Vargas is acting as
President of the Board of Directors of MINERA ANDES S.A., guaranteed by
Incorporation Deed dated September 9th, 1994, issued by Notary Public lnes Mabel
Cumaodo, Fs. 322, from the records at Registro Notarial number 72, and
registered in the Public Registry for Limited Liability Companies (Registro
Publico de Sociedades Anonimas) from this province under
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file number 2892, Fs. 1; Mr. Brian Gavin is acting as attorney for "Minera Andes
S.A.," guaranteeing that with General Administration Power of Attorney,
registered in the Public Registry for General Powers (Registro Publico de
Mandatos Generales) from this province, under number 30432, Fs. 27, book 290
"L"; and Mr. Adonis Cantoni is acting on his own. The corresponding requirement
has been formalized at pages 245 and 246 respectively from Book Number "One" of
requirements of the legalized, witnessed. Mendoza, JUNE 21st, 1995." In each of
the five pages containing the Contract of Exploration and Prospecting with
option to buy that has been textually transcribed, they bear at the bottom three
illegible signatures, with a seal saying: Certification at Notary Public
Proceeding sheet N(0)532508 with Certification Stamps No. 241.857-58-59.
Mendoza, June 21st 1995. There is an illegible signature and a seal saying
Gilberto Suarez Lago, Notary Public, Reg. N(0)37. Mendoza. IN ACCORDANCE WITH;
what has been transcribed from the Contract that I see, which bears the
statement that it is exempt from fiscal repaying, enclosed hereby, with the
corresponding notary public's quote. ON RECORD. READ this deed by the appearing
parties, with their corresponding functions, accepting the whole of this,
ratifying its content and the signature. Witnessed.
(There are two illegible signatures and a seal saying: Gilberto Suarez Lago,
Notary Public, Holder Reg. N(0)37, Mendoza)
It corresponds to Sheet number 533625, from Notary Public Proceeding, Series F.
ALL IN
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AGREEMENT with the original deed read by me, under Fs. 131 from the general
record of Notary Public Registry (Registro Notarial) number thirty seven from
Capital, witnessed. For "MINERA ANDES S.A.", this first testimony with eleven
photocopied pages and the current sheet of notary public proceeding number F
533625 that I sign and seal at the place and date of issue.
(There is an illegible signature and a seal saying: Gilberto Suarez Lago, Notary
Public, Holder Reg. N(0)37, Mendoza)
- --------------------------------------------------------------------------------
Witnessed, this is a true translation for the original in Spanish. Mendoza,
August 28th, 1995
Doy fe que es traduccion fiel del original en castellano ante mi. Mendoza, 28 de
Agosto de 1995.
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
TRANSLATION / TRADUCCION
Document / Documento: "Actuacion Notarial - Protocolo Ley 4735"
- --------------------------------------------------------------------------------
N(degree) 000919870
SERIE C
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a hundred and twenty
NOTARY PUBLIC PROCEEDING
RECORD BOOK LAW 4735
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RECORDING OF A PRIVATE CONTRACT: DEED NUMBER TWENTY-TWO.- In the capital of
Mendoza Province, Republica Argentina, on June 23rd, 1995; in front of me
GILBERTO F. SUAREZ LAGO, lawyer acting as notary public, registered under
N(degree) 37; APPEARING: Mr. JORGE ALFREDO VARGAS, L.E. (document) N(degree)
6895317, argentine, married, taking up his legal residence in Peru 930, Ciudad,
capital of this province, of age, capable, I witness. And Mr. JORGE ALFREDO
VARGAS SAYS: That he comes as representative for the entity "Minera Andes S.A.",
guaranteeing this representation by submitting General Power for Lawsuits and
Administrative Procedures, which has been given by Minera Andes S.A. through
deed number 355, declaring that it was registered in "Registro Publico de
Mandatos General de esta Provincia" (Public Register for Powers of Attorney of
this Province), under number 31349, Fs. 153, Tomo 299 "L" dated February 14th,
1995. And Mr. Jorge Alfredo Vargas shows a copy of a contract of "Exploration
and Prospecting with option to buy" dated June 15th, 1995, in order to be
registered in this Notary Registry under my direction, which is truly and
immediately copied and it states: There is a seal which says: FREE OF
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SEALS' TAX. By Art. 240 Inc. 31 (Law 6104) Place and date Mendoza 06/27/95.
Verified. There is an illegible signature with a legend that says: Assessor.
There is an illegible signature.- CONTRACT OF EXPLORATION AND PROSPECTING WITH
OPTION TO BUY. - In the city of Mendoza, Province named the same, on June 15th,
1995, it is agreed between MINERA ANDES S.A., represented hereon by its Director
President Mr. JORGE ALFREDO VARGAS, (C.I. 219206 Mendoza (document)),
guaranteeing that it is a legal entity by means of its Corporate Statutes; and
also appearing as representative, its attorney Mr. BRIAN GAVIN, (Passport
C969194D), taking up residence in Coronel Moldes 837, Mendoza, on one hand; and
on the other, Mr. CARLOS OSVALDO GIUSTOZZI, L.E. (document) No. 6865305, on his
own, married, Geologist, living in Saenz Pena 6140, Villa Nueva, Guaymallen,
Mendoza; also appearing Mrs. MARIA RIERA DE GIUSTOZZI, L.C. (document) 4115161,
married, housewife, same address as the latter; both of them taking up legal
residence for the purposes of this contract, at Olascoaga 1574, Planta Baja,
"F", Mendoza; appearing on her own and giving conjugal approval as required by
Art. 1277 from Civil Code; and the said parties agree for the current Contract
of Exploration and Prospecting with Option to buy, as a consequence of the
"Letter of Intent-Holding of Offer", submitted by Mr. Carlos Osvaldo Giustozzi
on April 10th, 1995 and which was accepted by Minera Andes S.A. on May 23rd,
1995; and which will be ruled under the following conditions. FIRST: Mr. Carlos
Osvaldo Giustozzi as holder of the claim arising from the cateo's allowances in
process under files (expedientes): 1) N* 73-G-94 (4125 has), and 2) N* 184-T-94
(3600 Has), which are composed by the area called "La Horqueta"; registered at
Direccion Provincial de Mineria de Mendoza
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(General Mining Administration). Whereas, it is on record that the cateo under
file number (expediente) 184-T-94 had been applied for, by Mr. Luis Aldo Testa
and all the rights and proceedings resulting from that cateo have been
transferred to Mr. Carlos Osvaldo Giustozzi, by Public Deed Number 45 dated June
14th, 1995, submitted to Notary Public Don Dario Cesar Carrieri, holder of
registry N(degree) 258 from Mendoza capital. Mr. Carlos Osvaldo Glustozzi states
that his rights and claims are completely valid and they are in force according
to Mining Code; that there are no legal or conventional inhibitions, seizures or
burdens affecting them and they are all completely available. A Certificate
issued by Notary of Mines from Provincial Mining Direction of Mendoza, showing
the good standing of the titles, is enclosed. Mr. Carlos Osvaldo Giustozzi also
states that they are also included under the terms of this contract, any other
mining claim that by any mean he had or got in the declared cateos, by himself
or third parties, declared mines or to be declared; making clear that at present
they already have declared mines in process, that are comprised in this
contract; and agreeing with Minera Andes S.A. that he gives the "Right to
exploration and prospecting with irrevocable option to buy", in order to explore
and/or buy those cateos and mining claims, as a whole or in part, at any stage
of this contract. An approximate sketch showing the location of the area is
incorporated. It is stated that there are no studies, neither enhancements ready
for exploitation or certainty of mineralization, economically exploitable, in
none of these areas. SECOND: the option to buy could be exercised by Minera
Andes S.A. at any moment within the four years term, since May 25th, 1995 and
ending on May 25th, 1999. In the event that the option was taken, Mr. Carlos
Osvaldo Giustozzi, agrees to carry on by his own all the proceedings necessary
to formally
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transfer the ownership to Minera Andes S.A., or to whom it may designate, of the
mining properties hereby detailed under Article 1st. In order to make the
transfer easy, Mr. Carlos Osvaldo Giustozzi, gives irrevocable power in favor of
Minera Andes S.A. and/or the person designated by that company, in order to
drive the process related to any of the files hereabove mentioned, declare ore
that could be discovered and require directly from the Provincial Mining
Direction, the titles for the corresponding properties and arising rights,
during the term of this contract, and without meaning that by this irrevocable
authorization Mr. Carlos Osvaldo Giustozzi is free from his original obligation
to execute all the said proceedings. During the term of this contract, the
parties agree, by themselves or by third parties, not to apply for or register
as devoid in the areas comprised, cateos, manifestaciones de descubrimiento
(discovery declaration), minas (mines) or estacas minas, or any other claim that
could spoil the soul of this agreement. If there had been other manifestaciones
and/or any manifestacion was made, creating rights in the areas hereby
comprised, this rights would be considered under the conditions of the current
contract. Any damage to assets suffered by any of the parties as a consequence
of misbehavior between them, will be indemnified. THIRD: During the term of this
contract, Mr. Carlos Osvaldo Giustozzi and his wife gives Minera Andes S.A. the
holding of the cateos and claims hereby identified under Article 1st, but the
latter could not exploit the ore deposits, that could appear; having the ability
to carry on exploration and investigation tasks and the following works:
geologic, mining, topographic surveys, drilling, take samples of the surface and
underground, mineralogy and metallurgic surveys, build test plants for the sake
of study and any other task that could be useful for accomplishing the goal,
which is the discovery
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and cubic measuring of ore that could be considered economically exploitable.
FOURTH: In the event that Minera Andes S.A. took the right for the option to buy
under article first hereby, the sales price for the belongings identified under
Article lst, included all the manifestaciones creating mining claims that could
be incorporated, is fixed in a million and eight hundred dollars (U$S 1,800,000)
to be paid in dollar bills or in pesos at the corresponding exchange rate for
the dollar bill at sales price in Banco de la Naci6n Argentina, the day before
payment date. Payment schedule is established in the following way: lst) as
counterpart and execution start of the contract with option to buy, as a whole
or in part, stated under article first, Minera Andes S.A. will pay to Mr. Carlos
Osvaldo Giustozzi, the amounts herebelow mentioned: a) First year: 1) First
quarter: U$S 15,000 2) Second quarter: U$S 7,500 3) Third quarter: U$S 7,500 4)
Fourth quarter: U$S 7,500.- b) Second year: 1) First quarter: U$S 10,000 2)
Second quarter: U$S 10,000 3) Third quarter: 50,000 4) Fourth quarter: U$S 1
0,000.- c) Third year: 1) First quarter: U$S 15,000 2) Second quarter: U$S
15,000 3) Third quarter: U$S 22,500 4) Fourth quarter U$S 22,500.- d) Fourth
year: 1) First quarter: U$S 22,500 2) Second quarter: U$S 22,500 3) Third
quarter: U$S 25,000 4) Fourth quarter: U$S 25,000. Total U$S 247,500. These
amounts will be paid by Minera Andes S.A. from the lst to the 5th of the first
month of each quarter, starting at the signature of this contract, and the
second payment, will be from the lst to 5th of September and then, subsequently
in the way hereby indicated. The address for payments will be at Coronel Moldes
837, Mendoza city; making a deposit in a banking account that could be
established. 2nd) The balance for the total price of U$S 1,552,500 in case of
exercising the option to buy when the option term expires; or eventually, if
this option was taken
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before ending the term of four years, the balance for the price necessary to
complete the difference with the total price of U$S 1,800,000; will be paid in
two equal semiannual payments; canceling the first of them together with the
deed transferring the ownership, and the second, six months after it; at that
moment, it will be agreed the appropriate way to give a payment guarantee, in
favor of the seller. The term for giving this transferring deed, is agreed in
sixty straight days from actual notice exercising the option to buy as a whole
or in part, by Minera Andes S.A., in case of delay in the deed proceeding, a
fine is stated consisting in a monthly 3% over the price balance, which should
be paid by the party responsible for the delay; eventually Minera Andes S.A.
could withhold this amount, over the price balance. The price submitted o signed
by Mr. Carlos Osvaldo Glustozzi, is considered as sufficient payment receipt.
The delay in the payment of any of these amounts, will proceed automatically;
and then if Minera Andes S.A. was summoned and did not fulfill the payment in
the term of five working days, this contract would be considered as resigned
without obligation to indemnify. 3rd)This price is also made up of a 1% royalty
from the ore price over the "Net Smelter Return" during the production period of
the deposit, in the case Minera Andes S.A. exercised the option to buy. This
royalty could be paid in USA dollars, if it is not legally possible it will be
paid in Pesos at the exchange rate for dollar purchaser established by Banco de
la Nacion Argentina..- The payment term for this royalty will be in force when
the eventual commercial exploitation of a field starts and will be settled
semiannually. Minera Andes S.A. commits itself to furnish Mr. Carlos Osvaldo
Giustozzi or whoever he may designate with all the technical information
necessary to control the proper settlement of the royalty; without obstructing
the administrative
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tasks of Minera Andes S.A.. The amounts resulting from the royalty will be paid
by Minera Andes S.A. at its address in Moldes 837, Mendoza; or by the banking
account determined by Mr. Carlos Osvaldo Giustozzi. The delay in the payment of
this royalty, will proceed immediately and it will earn an interest equivalent
to the rate fixed by Banco de la Nacion Argentina for the discount of payment
documents and promissory notes, in favor of the seller, who will legally claim
if necessary. FIFTH: Minera Andes S.A. at any moment during the term of this
contract, could resign it, as a whole or in part without obligation to
indemnify, through appropriate notice sent forty-eight hours in advance to Mr.
Carlos Osvaldo Giustozzi at the address hereby stated. During the first six
months this prior notice should be made fifteen days in advance. Mr. Carlos
Osvaldo Giustozzi and his wife, are not able to resign to the contract on their
own, except for the cases considered under article 11. The contract will be
finished at the specific end date mentioned in the resigning notice that Minera
Andes S.A. could send. At the moment of resigning Minera Andes will transfer the
holding of the mining belongings to Mr. Carlos Osvaldo Giustozzi as they are,
with concession charges all canceled and without equipment or obligation to
transfer the enhancements incorporated, except for the case it was not possible
to detach them. In the event that Minera Andes S.A. did not decide to purchase
the deposits or the area, the amounts paid up to that moment will remain in
favor of Mr. Carlos Osvaldo Giustozzi, as compensation for not being able to use
his rights during the exploration term. SIXTH: As warranty for the option to buy
mentioned under article first hereby, Mr. Carlos Osvaldo Giustozzi agrees to
register with the mining authority of Mendoza province, a voluntary inhibition
to transfer, sell, rent or burden the mining claims identified under article
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lst, and regarding that, he is actually applying for that. The said inhibition
will be determined for a period equivalent to the term of this contract, and a
copy of the latter will be submitted as reference for that inhibition, which
will be asked to be recorded as a quote to each area and mines' registry; as
well as in each file (expediente). SEVENTH: Mr. Carlos Osvaldo Giustozzi, will
transfer the mining claims, cateos and minas with all the canons paid up to June
15th, 1995. During the term of this contract Minera Andes S.A. should: a) Pay
all the expenses related to the legal standing of the claims mentioned under
article FIRST, meaning the payment of: the canons for the cateos and
pertenencias, the surveys of cateos and minas, estacas minas and manifestaciones
de descubrimiento, repaying of borders and any other expense or Provincial or
Municipality distribution that could affect the mining claims hereabove
mentioned; not being possible to deduce from payments to Mr. Carlos Osvaldo
Giustozzi, except for the case that he had accepted that obligation; as well as
all the taxes and national and Provincial burdens that could affect this
contract. b) Pay by its own any enhancement necessary to be done. Mr. Carlos
Osvaldo Giustozzi will not be responsible for tools, machinery, equipments,
facilities or enhancements located within the mining property; c) Take on all
the responsibility for corporal injuries or death of any person or damage to
assets resulting from negligence or through the fault of it, its employees or
agents, resulting from exploration activities or any other work related to the
activity of Minera Andes S.A.; d) Pay for all labor and related issues, in all
its aspects, and materials used in relation to the aim of this contract. e)
Assume the responsibility for indemnity corresponding to surface owners or third
parties, including the government, environmental damage, without limit of time,
provided that it arose from the fault of Minera Andes S.A.'s
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activities. EIGHTH: Minera Andes S.A. could install and take away from the
properties, during the term of this contract, any tool, machinery, equipment or
supplies owned by the company. It is agreed and established that in the case of
total or partial resignation of this contract due to any reason, Minera Andes
S.A. could take away all its belongings, tools, machinery, equipment or supplies
and the cost of that transport will be paid by it, within the term of a ninety
days (90) from the end of the contract; Minera Andes S.A. could not take away
any underground beam or any other supports installed by it and could not alter
or restore excavations or any other works on the surface, unless that it is
required by law; rules or administrative requirements to be applied. Minera
Andes S.A. could keep a night watchman or necessary security during the said
term. NINTH: After the total or partial end of this contract due to any reason,
but not the payment of the purchase price to Mr. Carlos Osvaldo Giustozzi by
Minera Andes S.A., in the way and in the amounts scheduled under article fourth,
and provided that Mr. Carlos Osvaldo Giustozzi has fulfilled all the conditions;
Minera Andes S.A. should furnish at no charge a copy of all the feasibility
studies detailed under article third, done up to the said date, in written and
signed; as well as it should make available witnesses or any other material
useful for the investigation, within the term of a ninety days after the
relationship is ended. Mr. Carlos Osvaldo Giustozzi will have the right to
inspect all the belongings at any adequate moment, without obstructing the
works; and with prior notice to Minera Andes S.A. of the inspection, no less
than 10 days in advance. TENTH: Mr. Carlos Osvaldo Giustozzi, declares and
guarantees that he is the only licensee for the mining claims or cateos'
applications included under article 1st; that his ownership is in good standing
with all the corresponding
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rights, that he has not transferred or burden them, that they are free and
exempt for any claim by third parties or people acting on behalf of others.
Without limiting or restricting in any way, any other right of Minera Andes S.A.
against Mr. Carlos Osvaldo Giustozzi, it is agreed that if during the term of
this contract Minera Andes S.A., or the mining authority, or third parties
discovered or declared any kind of corruption or limitation in the title of any
of the claims or applications for cateos, or mines identified under article lst,
Mr. Carlos Osvaldo Giustozzi would prevent that corruption or claims. If Mr.
Carlos Osvaldo Giustozzi, did not accomplish so within the term of thirty
straight days from the date he is summoned by Minera Andes S.A., except because
of Act of God; that corruption, obstructions or restrictions could be repaired
by Minera Andes S.A., thus Minera Andes S.A. or whoever may be designated, is
given irrevocable broad power to repair them. In the event that Minera Andes
S.A. paid the total purchase price according to and in the way it is scheduled
under article fourth hereby, thus having the right already transferred, the
title for the mining claims and turn that holding in true and material ownership
of the mines and claims, Mr. Carlos Osvaldo Giustozzi and his wife will furnish
all the official documents in the term of sixty days and will carry out all the
proceedings necessary to improve the ownership transfer for the said concessions
in favor of Minera Andes S.A.; or whoever may be designated. Expenses and fees
resulting from the issuing and registering of official documents, will be paid
by Minera Andes S.A..- It is also restated that Mr. Carlos Osvaldo Giustozzi and
his wife give irrevocable power to Minera Andes S.A. or to whoever may be
designated, to carry on all the necessary proceedings to issue the official
documents expressing the ownership transfer for the mines and cateos'
applications included in
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this contract. ELEVENTH: The only reason for which Mr. Carlos Osvaldo Giustozzi
and his wife could resign, would be the lack of payment in time of the agreed
amounts under article 4th and the unfulfillment of Minera Andes S.A.'s
commitments under article 7th, item a). The power to resign the contract due to
lack of payment will proceed after thirty days of delay for the scheduled dates.
The delay will proceed by legal right without any need for legal requirements,
through the summoning resulting from the expiration of the term. During the
period of actual delay, the amount will earn an interest equivalent to the rate
charged by Banco de la Nacion Argentina for the discount of letters or
promissory notes; which will be paid together with the amount owed. Once the
term of thirty days delay is over, Mr. Carlos Osvaldo Giustozzi and his wife,
will be able to resign the contract on their own by means of appropriate notice
at the address of Minera Andes S.A., keeping all the amounts collected up to the
moment in favor of them; despite the power to require the amounts earned; except
for the case in which the option to buy was exercised and one third of the price
had already been paid, in which event, he should demand the total payment of the
price balance, with corresponding guaranties. TWELFTH: All Minera Andes S.A.'
rights resulting hereby could be transferred, prior notice to Mr. Carlos Osvaldo
Giustozzi. At the same time, the transferees should ratify their acceptance to
Mr. Carlos Osvaldo Giustozzi and offer an adequate reliability warranty or the
possibility to accomplish these contract obligations; from that moment onwards,
all the rights and obligations originally corresponding to Minera Andes S.A. are
automatically substituted. Mr. Carlos Osvaldo Giustozzi's rights, according to
this contract, could be transferred only with prior acceptance by Minera Andes
S.A.; not being possible for this acceptance to be denied
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without reason. THIRTEENTH: This contract will oblige the parties and their
corresponding inheritors, executors, administrators, successors with rights and
related third parties. All knowledge and information that Mr. Carlos Osvaldo
Giustozzi acquires, related to the works mentioned under article 3rd, will be
kept with discretion and considered as confidential, except for the event that
Minera Andes S.A. releases the holders from this obligation, in written. This
confidentiality condition, will be in force during the whole term of this
contract and up to ninety days after the end date of this contract or the
purchase of the property and mining claims. Minera Andes S.A. also agrees to
keep confidentiality for ninety days after the contract has been resigned, or
some area excluded, regarding the latter, except the holders release Minera
Andes S.A. by written notice of this obligation; except for the case Minera
Andes S.A. is negotiating the transfer or joint venture in this contract with
third parties concerned. FOURTEENTH: All the notices to Minera Andes S.A. and to
Mr. Carlos Osvaldo Giustozzi and his wife will be done in written and in a
reliable way at the addresses hereby stated. The parties could change their
address and they should be available to be notified in a reliable way, not being
away from the scope of Mendoza city and/or the so called Gran Mendoza. It is
agreed that for the sake of this contract, Mrs. Maria Riera de Giustozzi, giver
her conjugal approval, authorizes and gives power by this single mean to Mr.
Carlos Osvaldo Glustozzi as to represent her with Minera Andes S.A. and/or
Mining Authority, in any required circumstance. This contract is to be
registered at Notary Public and Mining Authority; expenses will be paid by
Minera Andes S.A. FIFTEENTH: The parties agree, that in case of dispute they
will accept the jurisdiction of the common courts of the province of Mendoza,
excluding any other code or jurisdiction. It is
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stated that this contract is exempt from seals due to an amendment to article
240 inc. 31, Fiscal Law N(degree) 6104. Approving this document, six copies are
signed by the parties, in order to be registered with the Mining Authority of
Mendoza Province; other, to be recorded with a local Notary Public; and other to
be translated into English. At the signature of this contract, Minera Andes S.A.
pays the amount of U$S 15,000 (fifteen thousand dollars) to its co-contractor,
as way of canceling the amount of the first payment scheduled under article
fourth. After collecting this amount, the co-contractor will furnish adequate
receipt and a broad and total payment document. INTERPRETATIVE CLAUSE: Over NET
SMELTER RETURN: In the event that the royalties had to be paid, it is understood
as "net smelter return" all the metallic minerals, concentrated, or their
products containing ore produced and sold by the Holder. When the ore containing
minerals with commercial value, are sold by the Holder, its "net smelter return"
will be considered as the actual amount received by the said Holder for the sale
of them, minus the deduction of any expense corresponding to transport
(including freight, insurance, and delivery and mailing costs) from the
exploitation to the facilities of the purchaser and any other unloading place.
When the concentrates or products containing minerals with commercial value are
sold by the holder; their net smelter return should be considered as the actual
amount received by the holder for the sale, minus deduction for any and all the
expenses related to smelting, refining, weighing, sampling, assay, handling,
transport (including freight, insurance, handling and mailing expenditures),
penalties for impurities and other charges deduced by a purchaser, provided that
the Holder does not deduce any charge for initial processing. By initial
processing it is understood the initial grinding or concentration or other ore
treatment during
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which one or more mineral products are recovered from that sold ore and a
subsequent processing, and during which the first tails and mineral waste are
discarded or deposited. Such deductions will be limited to commercially
reasonable amounts from the point of view of mineral industrial practices and
levels, currently accepted as good, such as smelting or other similar operations
for the treatment of metals. The "net smelter return" for the ore, concentrates
or products treated in smeltery and other similar metal operations, owned,
operated or controlled by the Holder, or dealt with based on a toll paid by the
Holder, will be computed as already mentioned, with the deductions previously
established. For the ore, concentrates or products sold to associate companies
or sold by the Holder, but in some way used by him, the gross price for the sale
will be determined in a similar way; provided that the total deductions done by
the Holder according to this paragraph, do not exceed the total deductions that
could have been made by other smeltery operators or treatment facilities for
similar materials in the case that those materials were smelted or treated in
those facilities based on a reasonable commercial agreement .- There is an
illegible signature and the explanatory legend says: Brian Gavin on behalf of
Minera Andes S..A..- There is an illegible signature and the explanatory legend
says: Jorge A. Vargas on behalf of Minera Andes S.A.. There is an illegible
signature and the explanatory legend says: Carlos Osvaldo Giustozzi, L.E.
(document) 6865305. There is an illegible signature and a legend saying Maria
Riera de Giustozzi L.C. (document) 4115161. There is a certification in Notary
Public proceeding number 524137, that says: "As Notary Public, Holder of
Registry number thirty-seven from Capital, I CERTIFY: that the signatures at the
bottom of each of the FIVE pages of the Contract of Exploration and Prospecting
with
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Option to buy herepreceding, and which also have my signature, Professional seal
and formal statement for the certification that is done in the current sheet for
the Notary Public proceeding; belong to Mr. BRIAN GAVIN, Passport issued by
United Kingdom of Great Britain and Northern Ireland number C969194D, to Mr.
JORGE ALFREDO VARGAS, C.I. (document) number 219206 issued by Mendoza Police,
and Mr. CARLOS OSVALDO GIUSTOZZI, L.E. (document) number 6865305 and to Mrs.
MARIA RIERA DE GIUSTOZZI, L.C. (document) 4115161; all of which have been done
in my presence; as well as Dr. Jorge Alfredo Vargas is acting as President of
the Board of Directors of MINERA ANDES S.A., guaranteed by Incorporation Deed
dated September 9th, 1994, issued by Notary Public lnes Mabel Cumaodo, Fs. 322,
from the records at Registro Notarial number 72, and registered in the Public
Registry for Limited Liability Companies (Registro Publico de Sociedades
Anonimas) from this province under file number 2892, Fs. 1; Mr. Brian Gavin is
acting as attorney for "Minera Andes S.A.", guaranteeing that with General
Administration Power of Attorney, registered in the Public Registry for General
Powers (Registro Publico de Mandatos Generales) from this province, under number
30432, Fs. 27, book 290 "L"; and Mr. Carlos Osvaldo Giustozzi and Mrs. Maria
Riera de Giustozzi are acting each of them on their own. The corresponding
requirement has been formalized at pages 241, 242 and 243 respectively from Book
Number "One" of requirements of the legalized, witnessed. Mendoza, JUNE 15th,
1995".- In each of the five pages containing the Contract of Exploration and
Prospecting with option to buy that has been textually transcribed, they bear at
the bottom four illegible signatures, with a seal saying: Certification at
Notary Public Proceeding sheet N(degree) 524137 with Certification Stamps
N(degree)
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239003-04-05-06. Mendoza, June 15th 1995. There is an illegible signature and a
seal saying Gilberto Suarez Lago, Notary Public, Reg. N(degree) 37. Mendoza. IN
ACCORDANCE WITH; what has been transcribed from the Contract that I see, which
bears the statement that it is exempt from fiscal repaying, enclosed hereby,
with the corresponding notary public's quote. ON RECORD. READ this deed by the
appealing parties, with their corresponding functions, accepting the whole of
this, ratifying its content and the signature. Witnessed. Overwritten: June
15th, it's valid.-
(There are two illegible signatures and a seal saying: Gilberto Suarez Lago,
Notary Public, Holder Reg. N(degree) 37, Mendoza)
It corresponds to Sheet number 524146, from Notary Public Proceeding, Series F.
ALL IN AGREEMENT with the original deed read by me, under Fs. 120 from the
general record of Notary Public Registry (Registro Notarial) number thirty seven
from Capital, witnessed. For "MINERA ANDES S.A.", this first testimony with
eleven photocopied pages and the current sheet of notary public proceeding
number F 524146 that I sign and seal at the place and date of issue.-
(There is an illegible signature and a seal saying: Giberto Suarez Lago, Notary
Public, Holder Reg. N(degree) 37, Mendoza)
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Witnessed, this is a true translation for the original in Spanish. Mendoza,
August 28th, 1995 Doy fe que es traduccion fiel del original en castellano ante
mi. Mendoza, 28 de Agosto de 1995.-
/s/
MARGARITA SUSANA LORENZO
TRADUCTORA-INTERPRETE de INGLES
Cult 23-16997610-4
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
EXPLORATION CONTRACT WITH OPTION OF CONCESSION
FOR EXPLOITATION IN THE "ANDACOLLO" AREA
BETWEEN CORMINE S.E.P. AND MINERA ANDES S.A.
This contract is entered into the city of Neuquen, on the 25th day of February
1997, between:
CORMINE S.E.P., represented by its President, Mr. Miguel Angel Bruna,
guaranteeing this by submitting certified copies of the general assembly stock
holders book N(degree)40 and directors minutes book N(degree)8, which are
included in this contract in Appendix "D". The legal address for CORMINE S.E.P.
is Luis Monti 339 in the city of Zapala, Neuquen Province, Republic of
Argentina.
and
MINERA ANDES S.A., represented by its President Mr. Jorge Alfredo Vargas and
General Manager, Brian Gavin, guaranteeing this by submitting the Corporate
Statutes directors minutes book No. 1, which are both duly certified and form
part of APPENDIX D. The legal residence is at Moldes 837, in the city of
Mendoza, Mendoza Province, Argentina.
and
CONSIDERING THAT:
(a) The Andacollo Reserve Area has been established according to file number
1.626/95, at the Direccion Provincial de Mineria of the Province of Neuquen. A
copy of this file is included in Appendix C.
and that
(b) The parties have carried out the necessary negotiations in order to sign
this exploration contract with option of concession for exploitation, taking
into account the following clauses:
CHAPTER I
INTERPRETATION AND DEFINITIONS
1.1. In order to understand the contract, the following words and phrases will
have the meanings established in the clauses below:
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(a) "Area Andacollo" means the Provincial Reserve Area created according to
file number 1.626/95 described in the "CONSIDERING THAT" paragraph section
(a) above.
(b) "Area of Contract" means the 4,700 hectares identified by the coordinates
described and the location map attached in Appendix C.
(c) "Direccion Provincial de Mineria" means the Provincial Mining Department of
the Province of Neuquen.
(d) "Dollar", "Dollars" and/or "US$" means the currency used in the United
States of America.
(e) "Right to Access' means what is explained in section 3.1.
(f) "Provincial State" means the Province of Neuquen.
(g) "Option" means what is explained in section 4.1.
(h) "Party" means Minera Andes S.A. or CORMINE S.E.P.
(i) "Parties" means Minera Andes and CORMINE S.E.P.
(j) "Annual Period" means the period between March lst of each year and
February 28 (29) of every other year.
(k) "Peso" or "Pesos" means the legal currency used in the Republic of
Argentina.
(l) "Work plan and Investment" means what is described in section 3.5.
(m) "Net Smelter Return" means what is described in Appendix B.
1.2 Attached are the following Appendixes, that form part of this contract:
(a) Appendix "A": (i) Map of Andacollo area (which includes the mining rights),
(ii) Description of the area, and (iii) list of mining properties which
includes property status.
(b) Appendix "B": Net Smelter Return
(c) Appendix "C": (i) Location map of the area taken into account by this
contract and (ii) Certified copies of file number 1.626/95.
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(d) Appendix "D": Copies of Corporate documentation submitted by company
representatives.
(e) Appendix "E": Warranty letter submitted by Minera Andes Inc.
1.3 The contract will abide by the following: 1) The main text of this Contract;
2) The National Mining Code; 3) National laws related to the Mining Regime in
its different aspects; 4) The Mining Procedures Code according to Neuquen's law
No. 902.
In the event of disagreement in the applicable dispositions established in the
above paragraph, the disposition occurring first in order above shall govern.
In the event of disagreement regarding the regulations or norms above attempt
should be made to reconcile the meaning of both. If this is impossible, the most
favorable to exploration and eventually exploitation of the area mentioned in
the contract will prevail.
(At the bottom of the page there are three illegible signatures.)
1.4 If a clause is declared inapplicable or invalid this will not affect the
rest of the clauses within the contract nor will it affect the contract from
being current and in force; without detriment to the right of resolution that
could be generated by having taken in an excessive onerous manner the
obligations of any of the parties.
1.5 The modifications of the contract will only be considered valid when they
are submitted in writing and are signed by the parties.
CHAPTER II
OBJECT
2.1 CORMINE grants Minera Andes S.A. the exclusive right to explore the Area
mentioned in this contract, activity which Minera Andes will carry out on its
own without having any financial or economical assistance from CORMINE S.E.P.
The exclusive right to explore, granted along with the exclusive right of the
exploitation option regarding the ore bodies discovered and registered according
to the Mining Code.
2.2 Minera Andes S.A. will have the right, upon the contract being current and
in force; to explore the area mentioned herein during a period of four years.
This is an exclusive right given to Minera Andes S.A.
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2.3. Minera Andes S.A. will proceed to convert the area mentioned herein into
exclusive exploration permits and/or manifestaciones de descubrimiento, which
will in turn be affected by the present contract without alterating the
obligations within it.
The mining rights will be filed in favor of CORMINE S.E.P., and will continue to
be done in this manner up until the opportunity mentioned in section 4.1,
regarding the rights comprehended within the exploitation option.
CHAPTER III
RIGHTS AND OBLIGATIONS IN THE EXPLORATION PHASE
3.1 Minera Andes S.A. will pay CORMINE S.E.P. upon signing the contract the
amount of US$15,000 (U.S. dollars), obtaining the right to exploitation during
the first period of the year; this is subject to the fulfillment of the
obligations that are mentioned below. This payment will be in conjunction with
another payment regarding the Right to Access and is US$0.40 per hectare and per
month payable semi annually taking into account the amount of hectares
maintained during a 48 month term.
3.2 Minera Andes S.A. will pay CORMINE S.E.P.: a) Starting the second year
US$30,000; b) Starting the third year US$60,000; and c) Starting the fourth year
US$100,000. Once the exploration period is over and/or the exploitation option
taken, Minera Andes S.A., will pay US$5,000 per month and per project until the
exploitation stage.
(There are three illegible signatures at the bottom of the page.)
3.3 All of the payments mentioned in sections 3.1 and 3.2 will be done by means
of depositing the money in CORMINE S.E.P.'s account in the Provincial Bank of
Neuquen, Zapala branch N(degree)7382/1 and/or where CORMINE S.E.P. requests that
the money to be deposited prior thirty days notice starting from the expiring
date in which the obligation that CORMINE S.E.P.'s notice makes reference to. If
the date for a payment turns out to be a non-working day then Minera Andes S.A.
can pay the following working day available without being considered delayed.
3.4 While this contract is in force Minera Andes S.A. will carry out its
exploration program using state of the art techniques in order to achieve the
most complete evaluation of mining possibilities in the area, particularly those
related to first category minerals in order to determine the feasibility of
eventual commercial exploitation. Minera Andes S.A. should also adopt the
necessary measures in order to prevent, reduce and/or avoid damages regarding
surface activities or mining, as well as protect the environment and natural
resources according to national, provincial and international regulations.
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3.5 Minera Andes S.A. will invest the amount of one million and seventy five
thousand U.S. dollars (US$ 1,075,000.00), in a four year exploration term, if
the contract is still in force. This amount is distributed in the following
manner:
First Year:
First Semester: US$ 50,000
Second Semester: US$ 75,000
-----------
Total: US$ 125,000
Second Year: US$ 250,000
Third Year: US$ 350,000
Fourth Year: US$ 350,000
Minera Andes S.A. assumes the obligation to invest the amount of US$125,000
during the first year. The rest of the investment program is subject to Minera
Andes's decision of continuing with the exploration effort. The total amount for
the first year will be spent in the following way:
Geological data compilation. A satellite image will be used for compiling a
geological 1:50.000 reconnaissance map. Stream sediments will be collected in
the region, one sample every square kilometer (collecting approximately 100
samples). The -80 mesh samples will be analyzed for Au, Ag, Cu, Pb, Zn, As, Sb,
Mo, Hg, Bi, W. Regional geologic mapping will be done in order to verify the
satellite image; rock chip samples will be collected (approximately 200 samples)
which will be analyzed for Au, Ag, Cu, Pb, Zn, As, Sb, Mo, Hg, Bi, W. Assay
results and detailed geologic mapping will be done in the selected areas. Soil
samples will be collected every 100 to 50 meters. The samples will be analyzed
as mentioned above.
If it is necessary, some geophysical surveys will be conducted (magnometric and
SP). If possible exploration holes and trenches will be done.
3.6 If Minera Andes S.A. does not invest the amount agreed upon during the first
year, Minera Andes S.A. will pay CORMINE S.E.P. the amount not invested. It is
established that during the other periods with the exception of the first year,
if Minera Andes S.A. proves that the total investment is not appropriate or not
necessary and CORMINE S.E.P. is satisfied with the decision the investment can
be less than the amounts agreed upon. All of the expenses that Minera Andes S.A.
incurs and exceed the amounts agreed upon for each year will be credited to the
next year and or/years.
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3.7 After the first year is over and Minera Andes S.A. has paid the expenses,
Minera Andes S.A. will be able to terminate the contract prior thirty (30) days
notice to CORMINE S.E.P. If Minera Andes S.A. terminates the contract it will
have the right to not continue with the exploration program. Once CORMINE S.E.P.
receives notice of the termination of the contract, Minera Andes S.A. will not
be obliged to continue investing in the area, but Minera Andes S.A. should make
its best effort to demobilize machinery and personnel within a term of 60 days.
The payments that are made according to clause 3.1 and 3.2 will remain in favor
of CORMINE S.E.P. The parties will not have to indemnify each other as a
consequence of the exercise of the option to terminate the contract taken by
Minera Andes S.A.
3.8 Minera Andes S.A. will have the right to decide at any given moment of each
year whether or not to terminate the contract, the completion of its exploration
work and termination of the contract should be communicated to CORMINE S.E.P.,
in writing indicating the motives of such decision. In this event the contract
will be terminated 30 days after CORMINE S.E.P. has been notified, and Minera
Andes S.A. at the time of terminating the contract should have invested in
exploration a sum equivalent to the result of the following operation:
X.Y = A
- ---
360
whereas:
"X" means the sum agreed to for the Annual Year according to clause 3.5.
"Y" means the amount of days that have gone by since the commencing year up
until the termination of the Contract according to clause 3.8.
"A" means what has been produced in US$.
In the event that Minera Andes S.A. has not invested the total sum resulting
from the operation above mentioned "A", Minera Andes S.A. will pay CORMINE
S.E.P. a sum equal to the difference between A and the sum invested, CORMINE
S.E.P. will not have the right to claim any additional compensation or
indemnity.
3.9 Exploration expenses is comprehended as al I those expenses incurred by
Minera Andes S.A., according to market conditions, related directly to
exploration tasks including acquiring, renting, and leasing equipment and
machinery used in the area; importation and transportation of the machinery
and/or equipment; maps; geophysical surveys; geochemistry and geology;
metallurgic studies; environmental studies; drilling, and analysis of samples;
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employee salaries; consultant fees; insurance payments; and payments to CORMINE
S.E.P., according to clause 3.1 and 3.2 previously mentioned.
In the event that Manifestaciones de Descubrimiento are claimed, the work done
related to reconnaissance in the area mentioned in the last paragraph of Art.
113 of the Mining Code is considered to be included as part of the expenses
assumed by Minera Andes S.A.
3.10 At the end of each year Minera Andes S.A., will inform in writing and in a
detailed manner about the work carried out and the results obtained, Minera
Andes S.A. will also submit any other information if it is requested by CORMINE
S.E.P.
3.11 During the exploration stage Minera Andes S.A. will facilitate CORMINE
S.E.P., and its personnel, direct access to the area and work conducted, also to
the exploration documents related to the area. CORMINE S.E.P. will have the
possibility of taking control samples regarding those that were collected by
Minera Andes S.A. and have the right to compare documents related to accounting.
This comparison can be done once a year prior 15 days notice to Minera Andes
S.A.
3.12 The term for executing the exploration work is four years. Minera Andes
S.A. will commence its exploration work during the first three months of the
first year. Written notice on behalf of Minera Andes S.A. to CORMINE S.E.P. will
be sufficient proof of the work being carried out.
3.13 At the end of the exploration term Minera Andes S.A. will submit to CORMINE
S.E.P. a final report with the results obtained, which will be attached to the
pertinent information, and sample location maps and/or drill holes with their
respective coordinates. In this report the location of the deposit will be
shown. This report will be submitted even though the contract is terminated.
CHAPTER IV
RIGHTS AND OBLIGATIONS IN THE EXPLORATION STAGE
4.1 At any moment during the exploration stage and up until the four years,
Minera Andes S.A. will be able to exercise its option for exploitation of the
ore body discovered in the area. To the effects of notifying CORMINE S.E.P. of
such an option (the "Option"), Minera Andes S.A. will notify and manifest its
exercise of the option for exploitation.
4.2 In the event that Minera Andes S.A. chooses the option for exploitation,
Minera Andes S.A. should notify CORMINE S.E.P. regarding the characteristics to
which it must adjust in order to rationally maximize the ore body to be
exploited.
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4.3 Minera Andes S.A. will exploit utilizing the most rational, modem and
efficient methods and techniques, according to Art. 282 of the Mining Code.
4.4 Minera Andes S.A. will be able to commercialize its products freely,
according to the current laws.
4.5 Minera Andes S.A. will pay CORMINE S.E.P. a royalty during the exploitation
of the ore bodies which would be 2% of the Net Smelter Return. The manner in
which the Net Smelter Return has been determined is shown in Appendix B of the
present contract. In the event that the National, Provincial or Municipal state,
imposes a payment of royalties, CORMINE S.E.P.'s will be limited in a manner
that the total royalties regarding any project exploited will not be greater
than 3% over the Net Smelter Return.
4.6 Minera Andes S.A. will maintain its files up to date and complete with
respect to the production and sales, including accounts, and statements
regarding to the treatment and smelting dispositions. CORMINE S.E.P. will have a
nonrestricted and irrevocable right to inspect in a quarterly manner that
documentation and/or files as well as any other information necessary in order
to determine the Net Smelter Return.
4.7 In the event that the exploitation of any of the projects in the contract
was exercised, Minera Andes S. A. will pay the amount of US$100,000.00 at the
end of each year which will in turn be credited to the royalty until the
eventual ore body turns into production. This should be produced during the two
years of having taken the option. This period will be extended under
circumstances such as force majeure or market conditions that could affect the
economic equation. The amounts of money received by CORMINE S.E.P. will be held
in their benefit, in the event that the exploitation does not commence or the
contract is terminated.
4.8 In the event of force majeure, market demands, or agreement of the parties,
advising the temporary interruption of the exploitation, the terms herein agreed
upon will be suspended in the same conditions.
(There are three illegible signatures at the bottom of the page)
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CHAPTER V
MINERA ANDES'S ADDITIONAL RIGHTS AND OBLIGATIONS
5.1 All of the expenses derived from the inscription of this contract with
Direccion Provincial de Mineria will be paid by Minera Andes S.A. To these
effects Minera Andes S.A. states that it takes up legal address in the Province
of Mendoza, where it is free from Tax Seals according to Art. 240 inc. 31 of the
Fiscal Law No. 6104 in Mendoza, and CORMINE S.E.P. states that it takes up legal
residence in the Province of Neuquen where the same law as in Mendoza is current
and in force.
5.2 Minera Andes S.A. will pay the payments, surveys and any other legal
procedure of mines registered; and also eventual mines that CORMINE S.E.P. could
request. All of the mines registered as a consequence of this contract are
inscribed in the name of CORMINE S.E.P.
5.3 It will be Minera Andes S.A.'s exclusive obligation to fulfill the
conditions regarding the mining concessions, therefore, it should fulfill in a
timely manner the payments of such concessions and submit a report regarding the
capital flow of investment referred to in Art. 237 in the Mining Code complying
with the procedures pursuant to this regulation, trying not to produce the
concessions to expire according to Art. 273 bis of the Mining Code. Minera Andes
S.A. is obliged to submit and comply with the eventual activation and
reactivation of the projects indicated by the Mining Authority in accordance to
Art. 281. In the event that Minera Andes S.A. omits any of the previously
mentioned obligations, CORMINE S.E.P. will by able to act directly in the vent
that the concessions are not able to be maintained.
5.4 Minera Andes S.A. will abide all of the regulations of the National Law No.
24.585, related to environmental protection for the mining activity, not
interfering with the cooperation that CORMINE S.E.P. is providing.
5.5 Minera Andes S.A. will contract and maintain current the insurance necessary
to cover the risks that the job implies as well as the insurance imposed by the
legal regulations.
5.6 Minera Andes S.A. will assume the obligations related to the payment of
salaries and social security charges to the personnel employed or hired on its
account, as well as those related to the payment of taxes, fees and
contributions which might burden its activities in the Argentine Republic, as
well as penalties due to be paid for defaults, and the expenses for power and
fuel consumption, communication and/or any other type of service to be used in
the areas during the fulfillment of the contract.
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5.7 Minera Andes S.A. is obliged to keep CORMINE S.E.P. unaffected regarding its
obligations assumed towards its personnel and social security during the term of
this contract and after it is terminated; with the exception to those related to
CORMINE'S personnel.
5.8 Minera Andes S.A. will hire duly qualified personnel such as professionals,
and technicians residing in the province of Neuquen or in the area of interest
in order to perform the required tasks.
5.9 Minera Andes S.A. will make arrangements with CORMINE S.E.P. for the
training of technical personnel within the confines of this contract. The
personnel proposed by CORMINE S.E.P. and accepted by Minera Andes S.A. will
receive this training free of charge, adapting the training to the levels and
specialties of each one of these people. Minera Andes S.A. can request that the
personnel be substituted.
5.10 Minera Andes S.A. assumes the exclusive responsibility foreseen under Art.
58 of the Mining Code in the event that third parties are affected by acts
conducted by Minera Andes S.A. while fulfilling this contract; Minera Andes S.A.
will keep CORMINE S.E.P. unaffected to such acts and will assume responsibility
with the exception to those acts originated to contracting o related directly to
a decision made by CORMINE S.E.P. If this were the case CORMINE S.E.P. will be
obliged to notify Minera Andes S.A.
5.11 Minera Andes S.A. will furnish within 15 working days after the contract
has been registered a performance bond for the amount of two hundred and fifty
thousand U.S. dollars (US$250,000) which will be maintained during the currency
of the contract. This performance bond will be executed in Argentina and for
CORMINE S.E.P.'s satisfaction will be granted by an Argentine insurance company
or bank. The nonfulfillment of this performance bond will terminate the contract
automatically prior fifteen days notice to assume the responsibility.
CHAPTER VI
CORMINE S.E.P.'S RIGHTS AND OBLIGATIONS
6.1 In connection with the vacant mines located within the area, included in
Appendix C, CORMINE S.E.P. will make the necessary efforts, for these to be
incorporated within the contract.
6.2 CORMINE S.E.P. will submit this contract at the Provincial Mining Department
within ten days upon having signed the contract and will proceed then to
inscribe the contract.
6.3 CORMINE S.E.P. is obliged to maintain the area available during the contract
and proceed with the concession of mines that Minera Andes S.A. discovers within
the area, as
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well as the concession of any other mining right necessary for Minera Andes S.A.
to explore within the area, and eventually exploit the ore body/ies discovered
in order to fulfill this contract.
6.4 CORMINE S.E.P. is obliged to request the right of way, obtaining the
dispossessions allowed by the Mining Code. All of the aforementioned will be
charged to Minera Andes S.A., this does not imply however that the sums or
amount will be accepted.
CHAPTER VII
STATE IN WHICH THE AREA IS RECEIVED
7.1 Minera Andes S.A. receives the area free of burdens, litigations,
controversies, and free of debts. From this date on all of the expenses that
arise regarding legal procedures will be paid by Minera Andes S.A. In the event
that burdens, litigations, and/or controversies or debts exist before having
signed this contract, CORMINE S.E.P. will be responsible for such controversies.
CHAPTER VIII
GENERAL DISPOSITIONS
8.1 The contract will be current and in force starting from the date indicated
in the first paragraph and will be terminated:
(i) When Minera Andes S.A. notifies CORMINE S.E.P. of its decision to not
continue with the exploration according to clauses 3.7 and 3.8;
(ii) When Minera Andes S.A. advises CORMINE S.E.P. of its decision to not
continue with the exploitation, or in the event that it did not exercise its
option, according to clause 4.1;
(iii) When the termination of the contract arises at the given date;
(iv) When 40 years have passed from the production stage, without taking into
account the extensions that might have been granted.
8.2 The delay on behalf of any of the parties in connection with their
obligations described herein will be produced if any of the parties does not
fulfill its obligations, having to resolve the delay within a term of no less
than 30 days.
8.3 The nonfulfillment of any obligation by any of the parties in connection to
the ones that arise from this contract will allow the party that is not at fault
to terminate the contract
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prior 30 days notice. The termination of the contract will not allow any of the
parties to request compensation for loss of profits or earnings.
In the event that this contract is terminated; Minera Andes S.A. will not have
any obligation with CORMINE S.E.P., with exception to the claims or credits that
are originated or derived from the currency of the contract and which are
pending between the parties or with third parties. This criteria is applicable
in the event that the contract is terminated, and CORMINE S.E.P. will have the
same obligation with Minera Andes S.A. or its concessionaire in the event that
the credits that are originated or derived over the obligations agreed to for
the exploration stage.
In the event that the contract is terminated, Minera Andes S.A. can retrieve all
of its equipment, instruments, components and/or any other belonging that is not
fixed at the property in a permanent manner.
8.4 This contract will abide by the laws in the Republic of Argentina and by
those in the Province of Neuquen.
8.5 CORMINE S.E.P. and Minera Andes S.A. will do everything possible to solve in
a prompt manner and in good faith any controversy that might arise from the
contract. In the event that the parties cannot solve the controversy, said
controversy shall be submitted to the Federal Court in the city of Zapala in the
Province of Neuquen and the successive Federal Courts of Appeal, relinquishing
the parties to file any claim for incompetence or lack of jurisdiction.
8.6 As long as a circumstance beyond control such as force majeure prevents or
delays the fulfillment of any of the obligations pursuant to this contract, the
term specified for the affected party to fulfill its obligations shall be
suspended. The affected party shall notify the other party within the 30 days of
having knowledge of the circumstance that created the unforeseeable cause or
force majeure, enclosing every document which according to its judgment will
provide evidence of such situation, and informing about the term of suspension.
If at the time of the occurrence of an unforeseeable situation there is a
payment or accrued credit in favor of a party, the force majeure shall not
exempt the other party from its payment in the time and manner agreed upon.
8.7 During the force of this contract the parties cannot reveal without prior
written manifest consent any information related to this contract, unless this
were requested by a public authority or the information be revealed abiding
current laws imposed by international or national markets.
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During the force of this contract, and including the period after the option has
been exercised, the parties shall not reveal to third parties any information
related to the contract, or information that may have been obtained through the
fulfillment of this contract prior written consent by Minera Andes S.A.
This prohibition of not revealing any information shall be extensive to internal
techniques and methods used by Minera Andes S.A.; information related to the
area or discoveries; reports submitted by Minera Andes S.A., as well as
extensive to CORMINE'S official staff and Minera Andes S.A.'s staff.
8.8 Minera Andes S.A. can transfer the rights given in this contract to third
parties, under the following conditions:
(a) Prior CORMINE S.E.P.'s written consent authorizing Minera Andes S.A. to
transfer all of the rights obtained in the contract.
(b) Prior CORMINE S.E.P.'s written consent authorizing Minera Andes S.A. to
transfer part of the rights obtained with the contract. In this event Minera
Andes S.A. cannot be held responsible for the nonfulfillment of obligations
incurred by the third party.
(c) Prior to Minera Andes S.A.'s written consent to CORMINE S.E.P. Minera Andes
S.A. could assume the responsibility of obligations on behalf of a third party,
in the event of a partial transfer of rights.
Minera Andes S.A. will be able to contract third parties in order to do specific
tasks without having CORMINE S.E.P.'s consent.
8.9 All of the communications and documentation that both parties send to each
other will be in writing and will be considered effective once they are
received. All of the communications, notices and documentation sent by fax
should then have the original version be sent by mail in order to be effective
upon reception.
All mail sent to CORMINE S.E.P. should be mailed to the following address:
Corporacion Minera del Neuquen S.E.P.:
Luis Monti 339
(8340) Zapala
Provincia del Neuquen
Republica Argentina
Tel.: (0942) 30063
Fax: (0942)30064
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All mail sent to Minera Andes S.A. should be mailed to the following address:
Minera Andes S.A.
Moldes 837
(5500) Mendoza
Provincia de Mendoza
Republica Argentina
Tel: (061) 23-2030
Fax: (061) 20-1338
The parties through notice given pursuant to this section, can establish a new
address for mailing provided that the new address is within the Argentine
territory (excluding diplomatic and consulates in foreign countries).
The authorized representatives for both parties have signed this contract at the
date indicated in the first paragraph herein.
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APPENDIX A
(i) Map of Andacollo Area [which includes the mining rights of the area]
(ii) Description of the Andacollo Area.
(iii) List of mineral properties included and information regarding the status.
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APPENDIX B
NET SMELTER RETURN
The Net Smelter Return is understood as the gross sales price of the Mineral
Products, less: (i) charges for treatment of the same in the smelting and
refining processes, including processing and liquidation fees, sampling costs,
assays and penalties for impurities; (ii) actual transport costs of the
corresponding concentrates, dore, or other products from the properties to the
place of sale, including freight, insurance, transaction taxes if any, and port
fees, storage, delays and expediting costs that may be incurred during or in
relation to the transport that are not imputable to Minera Andes S.A.; (iii)
sales commissions and brokerage fees for the minerals and products in accordance
with the normal market practices and within the legal framework of the
purchasers country; (iv) any sales tax, customs charges, or fees or royalties on
production or on mine net profits or of any other nature levied on the
production or export of minerals.
The expression "Mining Products" means the mineral extracted from the properties
that Minera Andes S.A. exploits, and any other concentrate or other material or
product derived from it. However, if any of these minerals or products are
treated additionally as part of the mining exploitation; these minerals,
concentrates and other materials or products will not be considered "Mining
Products" until after being treated.
In reference to gold, the Net Smelter Return is payable according to The London
PM Fix, which is quoted in U.S. dollars in the London Bullion Market. The Net
Smelter Return will be payable according to these quotes at the date indicated
in the certificate received from the refinery, if any adjustments were to be
made, these will be done according to the monthly quotes, pursuant to when the
adjustments are requested. If the previously mentioned quotes are not available
during these months then the average Comex price "spot" will be utilized,
according to its daily price during those months.
In reference to silver, the average price will be determined by Handy and Harman
which is published in the "Metal Week" magazine under "Plata -Handy and Harman
cents TR Oz"; this will be payable according to the date indicated on the
certificate received from the refinery, if any adjustments were to be made,
these will be done pursuant to when these adjustments are requested.
CORMINE S.E.P.'s payment schedule for participating, will commence six months
after the actual commercial exploitation begins, and will follow in a semiannual
manner until the exploitation is terminated. With regards to these payments,
Minera Andes S.A. will liquidate the payments the last day of the previous month
of having received the payment.
(There are three illegible signatures at the bottom of the page)
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APPENDIX C
(i) Map of Contract Area and;
(ii) Certified copies of file No. 1.626/95.
(There are three illegible signatures at the bottom of the page).
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APPENDIX D
Copies of documentation that certify who the representatives are, according to
the first paragraph of this contract; (CORMINE S.E.P., submits General Assembly
Book No. 40 and Director Minute Book No. 8 and Minera Andes S.A., submits the
Corporate Statutes and Director Minute Book No. 1). CORMINE S.E.P.'s Director
Minute Book No. 296 and Minera Andes S.A., Director Minute Book No. 18, where
both parties approve this contract.
(There are three illegible signatures at the bottom of the page).
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APPENDIX E
Binding Letter of Guarantee granted by Minera Andes Inc., and Complementary
letter from Minera Andes Inc. dated February 13, 1997.
(There are three illegible signatures at the bottom of the page).
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TABLE OF CONTENTS
CONSIDERATIONS 3
CHAPTER I 3
CHAPTER II 5
CHAPTER III 5
CHAPTER IV 8
CHAPTER V 10
CHAPTER VI 11
CHAPTER VII 12
CHAPTER VIII 12
APPENDIX "A"
APPENDIX "B"
APPENDIX "C"
APPENDIX "D"
APPENDIX "E"
At the bottom of the page there are three illegible signatures.
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
TRANSLATION / TRADUCCION
Document / Documento: "Translation of Exploration and Prospecting Contract
with the Option to buy."
- --------------------------------------------------------------------------------
NOTARY PUBLIC PROCEEDING
- --------------------------------------------------------------------------------
RECORDING OF A PRIVATE CONTRACT: In the capital of Mendoza Province, Republica
Argentina, on September 30th, 1996; between Minera Andes S.A., represented in
this act by Dr. Jorge Alfredo Vargas (C.I. No. 219.206) and Mr. Brian Gavin
(Passport No. C969194D), taking up legal residence at Coronel Moldes 837, in the
province of Mendoza and guaranteeing this representation by submitting General
Power for Lawsuits and Administrative Procedures, dated 7/4/94, which has been
given by Minera Andes S.A., declaring that it was registered in "Registro
Publico de Mandatos General de esta Provincia" (Public Register for Power of
Attorney of this Province) under N(degree)22627, Fs 230, Tomo 262. Mr. Brian
Gavin shows a copy of a contract of "Exploration and Prospecting with option to
buy" dated September 30th, 1996, that says: -CONTRACT OF EXPLORATION AND
PROSPECTING WITH OPTION TO BUY.- In the city of Mendoza, Province, on September
30th, 1996, it is agreed between MINERA ANDES S.A., represented herein by its
Director and President Dr. Jorge Alfredo Vargas (C.I. No. 219.206) and by Mr.
Brian Gavin (passport No. C-969.194-D), taking up legal residence at "Calle
Coronel Moldes 837, Mendoza" on one hand, and on the other SAPAG HNOS.
represented by Mr. Amado Sapag, (document) No. 2.658.605, taking up residence at
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"Ruta 22 Km. 1401, in Zapala, Neuquen province." Both parties agree to the
following clauses:
FIRST: SAPAG HNOS. as holders of the claims arising from the cateo and mine
allowances regarding the "Cura Mallin Area," in the province of Neuquen, under
file numbers and/or (expedientes): 1) 10.617/80 "Est. Fijo"; 2) 82.470/52 "Cura
Mallin mine"; 3) 4.359/67 "Don Natalio mine"; 4) 4.726/68 "Santiaguito"; 5)
4716/68 "Maria Eivira Mine"; 6) 774/60 "Silvia mine"; 7) 11.152/82 "La Vieja 1
mine"; 8) 4.354/67 "Don Elias Alberto mine"; 9) 4.355/67 "Don Santiago mine";
10) 82.471/52 "Arroyo Nuevo mine"; 11) 13.187 "Raza Fuerte mine"; 12) 4.358/67
"Don Jorge mine"; 13) 4.357/67 "Don Carlos mine"; 14) 4.356/67 "Don Rodolfo
mine".- SAPAG HNOS., stated that the rights and claims are completely valid and
they are in force according to Mining Code; there are no legal or conventional
inhibitions, seizures or burdens affecting them and they are all completely
available. SAPAG HNOS. also stated that any other mining right obtained by them
or a third party now or in the future forms part of this contract; giving Minera
Andes an irrevocable and exclusive option to buy in order to explore and/or
acquire these cateos, mines, and mining rights in a total or partial manner at
any stage of this contract. An approximate sketch showing the location of the
area is enclosed. It is stated that there are no studies and/or enhancements
regarding these areas that would make them economically exploitable. It has been
agreed that file number 82471/52 "Arroyo Nuevo mine" is not included in this
option to buy.
SECOND: the option to buy could be exercised by Minera Andes S.A. at any moment
within
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the four year term, starting October lst, 1996 and ending on September 30th,
2000. In the event that the option was taken, SAPAG HNOS., agrees to carry on
all the proceedings necessary to formally transfer the ownership to Minera Andes
SA., or to whom it may designate, regarding the mining properties hereby
detailed under Article lst. In order to facilitate the transfer, SAPAG HNOS.,
gives irrevocable power in favor of Minera Andes S.A. and/or the person
designated by that company, in order to drive the process related to any of the
files hereabove mentioned, declare the minerals that could be discovered and
require directly from the Provincial Mining Direction, the titles for the
corresponding properties and arising rights, during the term of this contract,
and without meaning that by this irrevocable authorization SAPAG HNOS. is free
from his original obligation to execute all the said proceedings. During the
term of this contract, the parties agree, by themselves or by third parties, not
to apply for or register as devoid in the areas comprising, cateos,
manifestaciones de descubrimiento, minas (mines) or estacas minas, or any other
claim that could spoil the soul of this agreement. If there had been other
manifestaciones and/or any manifestacion was made, creating rights in the areas
hereby comprised, this rights would be considered under the conditions of the
current contract
THIRD: During the term of this contract, SAPAG HNOS. gives Minera Andes S.A. the
holding of the cateos and claims hereby identified under Article 1, but the
latter will not be able to exploit the ore deposits, that could appear, but will
be able to carry on exploration and investigation tasks such as: geologic,
mining and topographic investigations, surveys, drilling, sampling of the
surface and underground, mineralogy and metallurgic surveys, build test plants
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for the sake of study and any other tasks that could be useful for accomplishing
the goal, which is the discovery of ore that could be considered economically
exploitable.
FOURTH: In the event that Minera Andes S.A. exercised the right for the option
to buy under article first hereby, the sales price for the belongings identified
under Article 1st, including all the manifestaciones that create mining claims
that could be incorporated, is fixed at two million dollars ($2,000,000) to be
paid in dollar bills. Payment schedule is established in the following way:
Upon signing the contract US$ 20,000
at the end of six months US$ 20,000
at the end of twelve months US$ 30,000
at the end of eighteen months US$ 30,000
at the end of twenty four months US$ 50,000
at the end of thirty months US$ 50,000
at the end of thirty six months US$ 75,000
at the end of forty eight months US$ 75,000
------------------
Subtotal US$ 350,000
Exercising the option:
At the end of forty eight months US$ 825,000
At the end of fifty four months US$ 825,000
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Subtotal US$ 1,650,000
TOTAL US$ 2,000,000
If the option to buy is exercised, the final price will be US$2,000,000, this
includes the sums that had been payed during the option period. To this price a
2% Net Smelter Return royalty will be added. In the event that the Province
already has a current royalty percentage, those paid by Minera Andes SA will not
be greater than (4%); i.e. that SAPAG HNOS. will receive the difference. In the
event that the option is exercised before the four year term is up, Minera Andes
S.A. will pay the difference resulting from the payments already made and the
US$2,000,000. This payment will be cancelled in two semiannual payments and will
be considered as part of the before mentioned royalty. If the exploitation does
not commence after a year of having exercised the option to buy, Minera Andes
S.A. will pay the sum of US$150,000 per year , also to be considered as part of
the royalty payment. In the event of force majeur, where the contract cannot be
fulfilled or it is altered in a partial or total manner, it will be suspended
temporarily.
FIFTH: Minera Andes S.A. at any moment during the first semester of this
contract, could resign it, as a whole or in part without having any obligation
to indemnify, through appropriate notice sent fifteen days in advance to SAPAG
HNOS. at the address hereby stated. SAPAG HNOS., does not have the faculty to
resign the contract, except for the cases established under article 11. The
contract will be terminated at the specific end date
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mentioned in the resigning notice that Minera Andes S.A. could send. At
the moment of resigning Minera Andes will transfer the holding of the mining
belongings to SAPAG HNOS. as they are, with all concession charges cancelled and
without equipment or obligation to transfer the enhancements incorporated,
except for the case where it was not possible to detach them. In the event that
Minera Andes S.A. did not decide to purchase the deposits or the area, the
amounts paid up to that moment will remain in favor of SAPAG HNOS., as
compensation for not being able to use the rights during the exploration term.
SIXTH: As warranty for the option to buy mentioned under article first hereby,
SAPAG HNOS. agrees to register with the mining authority of Neuquen province, a
voluntary inhibition to transfer, sell, rent or burden the mining claims
identified under article lst, and regarding this, they are actually applying for
it; in favor of Minera Andes S.A.. The said inhibition will be determined for a
period equivalent to the term of this contract, and a copy of the latter will be
submitted as reference for that inhibition, which will be asked to be recorded
as a quote to each area and mines' registry; as well as in each file
(expediente).
SEVENTH: SAPAG HNOS., will transfer the mining claims, cateos and minas with all
the canons paid up to the signing of this contract. During the term of this
contract Minera Andes S.A. will: a) Pay all the expenses related to the legal
standing of the claims mentioned under article FIRST. b) Minera Andes S.A. will
pay for any enhancement necessary to be done. SAPAG HNOS. will not be
responsible for tools, machinery,
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equipments, facilities or enhancements located within the mining property; c)
Minera Andes S.A. takes sole responsibility for corporal injuries or death of
any person or damage to assets resulting from negligence by Minera Andes S.A. or
its employees or agents, resulting from exploration activities or any other work
related activity.; d) Pay for labor, materials and related issues, in all its
aspects, used in relation to the object of this contract.
EIGHTH: During the term of this contract Minera Andes S.A. can install and take
away from the properties, any tool, machinery, equipment or supplies owned by
the company. It is agreed and established that in the case of total or partial
termination of this contract due to any reason, Minera Andes S.A. could take all
of its belongings, tools, machinery, equipment or supplies and the cost of that
transport will be paid by it, within the term of a one hundred and eighty days
(180) from the termination of the contract; Minera Andes S.A. will not take any
underground beam or any supports installed and can not alter or restore
excavations or any other works on the surface, unless that it is required by
law; rules or administrative requirements to be applied. Minera Andes S.A. can
keep a security guard during this term.
NINTH: After the total or partial termination of this contract due to any
reason, other than the payment of the purchase price by Minera Andes S.A., in
the way and in the amounts scheduled under article fourth, and provided that
SAPAG HNOS. has fulfilled all the conditions; Minera Andes S.A. should furnish
at no charge a copy of all the feasibility studies detailed under article third,
done up to the said date, in written and signed; as well as
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it should make available witnesses or any other material useful for the
investigation, within the term of a ninety days after the relationship is ended.
SAPAG HNOS., will have the right to inspect all the belongings at any adequate
moment, without obstructing the works; and with prior notice to Minera Andes
S.A. of the inspection, no less than 10 days in advance.
TENTH: SAPAG HNOS., declares and guarantees that he is the only licensee for the
mining claims or cateos' applications included under article lst; that his
ownership is in good standing with all the corresponding rights, that he has not
transferred or burden them, that they are free and exempt for any claim by third
parties or people acting on behalf of others. Without limiting or restricting in
any way, any other right of Minera Andes S.A. against SAPAG HNOS., it is agreed
that if during the term of this contract Minera Andes S.A., or the mining
authority, or third parties discovered or declared any kind of corruption or
limitation in the due of any of the claims or applications for cateos, or mines
identified under article 1st, Mr. Martin Antonio Carotti would prevent that
corruption or claims. If SAPAG HNOS., did not accomplish so within the term of
fifteen straight days from the date he is summoned by Minera Andes S.A., except
for cases of force majeur, these cases of corruption, obstructions or
restrictions could be repaired by Minera Andes S.A., or whoever may be
designated, is given irrevocable broad power to repair them. In the event that
Minera Andes S.A. paid the total purchase price according to and in the way it
is scheduled under article fourth hereby, thus having the right already
transferred, the title for the mining claims and turn that holding in true and
material ownership of the mines and claims, SAPAG
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HNOS. will furnish all the official documents and will carry out all the
proceedings necessary to improve the ownership transfer for the said concessions
in favor of Minera Andes S.A.; or whoever may be designated. Expenses and fees
resulting from the issuing and registering of official documents, will be paid
by Minera Andes S.A. It is also restated that SAPAG HNOS. gives irrevocable
power to Minera Andes S.A. or to whoever may be designated, to carry on all the
necessary proceedings to issue the official documents expressing the ownership
transfer for the mines and cateos' applications included in this contract.
ELEVENTH: The only articles in favor of and for which SAPAG HNOS. could resign,
would be the lack of payment in time of the agreed amounts under article 4th and
the unfulfillment of Minera Andes S.A.'s commitments under article 7th, item a).
The power to resign the contract due to lack of payment will proceed after
thirty days of delay for the scheduled dates. The delay will proceed by legal
right without any need for legal requirements, through the summoning resulting
from the expiration of the term. During the period of actual delay, the amount
will earn an interest equivalent to the rate charged by Banco de la Nacion
Argentina for the discount of letters or promissory notes; which will be paid
together with the amount owed. Once the term of thirty days delay is over, SAPAG
HNOS., will be able to resign the contract by means of appropriate notice at
Minera Andes S.A's address, keeping all the amounts collected up to the moment
in its favor without having to require the amounts owed, except in the event
that the option to buy has been
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exercised and more than a third of the price were paid, if this were the case he
should demand the rest of the payment along with the warranty.
TWELFTH: All Minera Andes S.A.' rights resulting hereby could be transferred,
prior notice to SAPAG HNOS. At the same time, the transferees should ratify
their acceptance to SAPAG HNOS. and offer an adequate reliability warranty or
the possibility to accomplish these contract obligations; from that moment
onwards, all the rights and obligations originally corresponding to Minera Andes
S.A. are automatically substituted. SAPAG HNOS.'s rights, according to this
contract, could be transferred only with prior acceptance by Minera Andes S.A.;
not being possible for this acceptance to be denied without reason.
THIRTEENTH: This contract will oblige the parties and their corresponding
inheritors, executors, administrators, successors with rights and related third
parties. All knowledge and information that SAPAG HNOS. acquires, related to the
works mentioned under article 3rd, will be kept and considered as confidential,
except for the event that Minera Andes S.A. releases the holders from this
obligation, in written. This confidentiality condition, will be in force during
the whole term of this contract and up to a year after the termination date of
this contract or the purchase of the property and mining claims. Minera Andes
S.A. also agrees to keep confidentiality for a year after the contract has been
resigned. Except in the event that Minera Andes S.A. negotiates with a third
party.
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FOURTEENTH: All of the written notices to Minera Andes S.A. and addressed to
SAPAG HNOS. should be sent to the addressed mentioned herein. The parties can
change their addresses prior notice. The contract registering with the Mining
Authorities and Notary Public will be paid by Minera Andes S.A.
FIFTEENTH: The parties agree, that in case of dispute they will accept the
jurisdiction of the common courts of the province of Mendoza, excluding any
other code or jurisdiction. It is stated that this contract is exempt from seals
due to an amendment to article 240 inc. 31, Fiscal Law N(degree)6104.
Approving this document six copies are signed by the parties, in order to be
registered with the Mining Authority of Mendoza and to be recorded with the
Notary Public; and another to be translated to English. Mendoza, September 30,
1996.
Upon signing this contract Minera Andes S.A. extends a check payable for the sum
of US$20,000, as agreed to in Article No. 4. SAPAG HNOS. extends a receipt
accepting this amount.
INTERPRETATIVE CLAUSE: Over NET SMELTER RETURN: In the event that the royalties
had to be paid, "net smelter return" is comprehended as all the metallic
minerals, concentrated, or their products containing ore produced and sold by
the Holder. When the
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ore containing minerals with commercial value, are sold by the Holder, its "net
smelter return" will be considered as the actual amount received by the said
Holder for the sale of them, minus the deduction of any expense corresponding to
transport (including freight, insurance, and delivery and mailing costs) from
the exploitation to the facilities of the purchaser and any other unloading
place. When the concentrates or products containing minerals with commercial
value are sold by the holder; their net smelter return should be considered as
the actual amount received by the holder for the sale, minus deduction for any
and all the expenses related to smelting, refining, weighing, sampling, assay,
handling, transport (including freight, insurance, handling and mailing
expenditures), penalties for impurities and other charges deduced by a
purchaser, provided that the Holder does not deduce any charge for initial
processing. By initial processing it is understood the initial grinding or
concentration or other ore treatment during which one or more mineral products
are recovered from that sold ore and a subsequent processing, and during which
the first tails and mineral waste are discarded or deposited. Such deductions
will be limited to commercially reasonable amounts from the point of view of
mineral industrial practices and levels, currently accepted as good, such as
smelting or other similar operations for the treatment of metals. The "net
smelter return" for the ore, concentrates or products treated in smeltery and
other similar metal operations, owned, operated or controlled by the Holder, or
dealt with based on a toll paid by the Holder, will be computed as already
mentioned, with the deductions previously established. For the ore, concentrates
or products sold to associate companies or sold by the Holder, but in some way
used by him, the gross price for the sale
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will be determined in a similar way; provided that the total deductions done by
the Holder according to this paragraph, do not exceed the total deductions that
could have been made by other smeltery operators or treatment facilities for
similar materials in the case that those materials were smelted or treated in
those facilities based on a reasonable commercial agreement. There is an
illegible signature and the explanatory legend says: Brian Gavin on behalf of
Minera Andes S.A. There is an illegible signature and the explanatory legend
says: Jorge A. Vargas on behalf of Minera Andes S.A. There is an illegible
signature and the explanatory legend says: Amado Sapag on behalf of Sapag Hnos.
S.A. There is a certification in Notary Public proceeding number 924023, that
says: "As Notary Public, Holder of Registry number thirty-seven in Mendoza, I
CERTIFY: that the signatures at the bottom of each of the THREE pages of the
Contract of Exploration and Prospecting with Option to buy herepreceding, and
which also have my signature, Professional seal and formal statement for the
certification that is done in the current sheet for the Notary Public
proceeding; belong to Mr. BRIAN GAVIN, Passport issued by United Kingdom and
Northern Ireland number C969194D, to Mr. JORGE ALFREDO VARGAS, C.I. (document)
number 219206 issued by Mendoza Police, and Mr. AMADO SAPAG, L.E. (document)
number 2.658.605; all of which have been done in my presence; as well as Dr.
Jorge Alfredo Vargas is acting as President of the Board of Directors of MINERA
ANDES S.A., guaranteed by Incorporation Deed dated September 9th, 1994, issued
by Notary Public Ines Mabel Cumaodo, Fs. 322, from the records at Registro
Notarial number 72, and registered in the Public Registry for Limited Liability
Companies (Registro Publico de Sociedades
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Anonimas) of this province under file number 2892, Fs. 1; Mr. Brian Gavin is
acting as General Manager for "Minera Andes S.A.", guaranteeing that with
General Administration Power of Attorney, registered in the Public Registry for
General Powers (Registro Publico de Mandatos Generales) from this province,
under number 30432, Fs. 27, book 290 "L"; and Mr. Amado Sapag is acting as
President on behalf of Sapag Hnos. S.A., guaranteed by Incorporation Deed dated
September 3, 1996, of the Board of Directors book; taking up legal domicile at
Ruta 22, kilometro 1401, Zapala, Neuquen. The corresponding requirement has been
formalized on pages 60 respectively in Book Number "Two" of legalized
requirements, witnessed. Mendoza, SEPTEMBER 30th, 1996". In each of the THREE
pages containing the Contract of Exploration and Prospecting with option to buy
that has been textually transcribed, they bear at the bottom four illegible
signatures, with a seal saying: Certification at Notary Public Proceeding sheet
N(degree)924023 with Certification Stamps N(degree)201887. Mendoza, September
30th, 1996. There is an illegible signature and a seal saying Gilberto Suarez
Lago, Notary Public, Reg. N(degree)37. Mendoza. IN ACCORDANCE WITH; what has
been transcribed from the Contract that I see, which bears the statement that it
is exempt from fiscal repaying, enclosed hereby, with the corresponding notary
public's quote. ON RECORD. READ this deed by the appearing parties, with their
corresponding functions, accepting and ratifying its content and the signature.
Witnessed. Overwritten:
September 30th, 1996.
-14-
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
TRANSLATION / TRADUCCION
Document / Documento: "Contrato de Exploracion y Prospeccion con Opcion de
Compra, fecha 28/2/97 con Sr. Giustozzi"
CONTRACT OF EXPLORATION AND PROSPECTING WITH OPTION TO BUY. In the city of
Mendoza Province on February 28, 1997, it is agreed between MINERA ANDES S.A.,
represented herein by its Director President, Dr. JORGE ALFREDO VARGAS,
(document No.) C.I. 219206, guaranteeing this by means of submitting the
Corporate Statutes; also appearing as representative, is Mr. BRIAN GAVIN,
(Passport C969194D), both taking up residence in Coronel Moldes 837, Mendoza, on
one hand; and on the other, Mr. CARLOS OSVALDO GIUSTOZZI, L.E. (document) No.
6865305, a married Geologist, taking up residence in Saenz Pena 6140, Villa
Nueva, Guaymallen, Mendoza; also appearing is Mrs. MARIA RIERA DE GIUSTOZZI,
L.C. (document) 4115161, married, having the same address as the latter, and
giving conjugal approval as required by Art. 1277 from the Civil Code; the said
parties agree to the current Contract of Exploration and Prospecting with Option
to buy, according to the following conditions:
FIRST: Mr. Carlos Osvaldo Giustozzi as holder of the claim arising from the
cateo's allowances in process under files (expedientes): 495-G-94 and
Manifestaciones de Descubrimiento No. 382-G-96; 409-G-96 and 410-G-96, which
comprise the area called "Los Reyunos" in San Rafael, Mendoza; states that his
rights and claims are completely valid and in force according to the Mining
Code; that there are no legal or conventional inhibitions, seizures or burdens
affecting them and that they are all completely available. A Certificate issued
by
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Notary of Mines from the Provincial Mining Direction of Mendoza, showing the
good standing of the titles, is enclosed. Mr. Carlos Osvaldo Giustozzi also
states that included under the terms of this contract, is any other mining claim
that by any mean he has or gets in the declared cateos, or that are obtained by
third parties, such as declared mines; stating clearly that at present they
already have declared mines in process, that are comprised in this contract; and
agreeing with Minera Andes S.A. that he gives the "Right to exploration and
prospecting with irrevocable option to buy", in order to explore and/or buy
those cateos and mining claims, in a total or partial manner, at any stage of
this contract. An approximate sketch showing the location of the area is
incorporated. It is stated that there are no studies, nor enhancements prepared
for exploitation; nor certainty of economically exploitable mineralization, in
these areas. This contract makes reference to the Exploration and Option to Buy,
related to metallic minerals and not to the non metallic minerals.
SECOND: The option to buy could be exercised by Minera Andes S.A. at any moment
within the three year term, starting January 1, 1997 and ending on January 1,
2000. In the event that the Option is exercised, Mr. Carlos Osvaldo Giustozzi,
and Mrs. Maria Riera de Giustozzi, agree to carry on all the necessary
procedures to formally transfer the ownership of the mining properties hereby
detailed under clause number one to Minera Andes S.A., or to whom Minera Andes
S.A. may designate. In order to make this procedure easier, Mr. Carlos Osvaldo
Giustozzi and Mrs. Riera de Giustozzi, give irrevocable power in favor of Minera
Andes S.A. and/or the person designated by the company, in order to drive the
process related to any of the files hereabove mentioned, declare minerals that
could be discovered and require directly from
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the Provincial Mining Direction, the titles for the corresponding properties and
arising rights, during the term of this contract. The management of the
procedures and requirements related to the Direccion de Mineria will be
conducted by Minera Andes S.A., with Mr. Giustozzi's cooperation when requested.
To the extent that Minera Andes S.A. will give its official address in order to
receive notices related to the claims mentioned in this contract. Once this
contract is registered, Minera Andes S.A. will be responsible for maintaining
all of the claims that form part of this contract current and in force. In the
event that modifications to the mining claims and/or termination of the contract
is necessary, such acts will be done agreed to by both parties. As a consequence
of Mr. Giustozzi having given Minera Andes the exclusive right to follow-up and
maintain the mining claims, Mr. Giustozzi will not be responsible for any loss
of rights that Minera Andes S.A. is responsible for. It has been agreed that Mr.
Giustozzi has the right to examine the files related to the claims herein held
by Minera Andes. During the term of this contract, the parties agree not to
apply for or register as devoid the areas comprising the contract such as,
cateos, manifestaciones de descubrimiento (discovery declaration), minas (mines)
or estacas minas, or any other claim that could spoil the soul of this
agreement. If there had been other manifestaciones and/or any manifestacion was
made, creating rights in the areas hereby comprised, these rights would be
considered under the conditions of the current contract. Any damage to assets
suffered by any of the parties as a consequence of the conduct of the
contractors, will be indemnified.
THIRD: During the term of this contract, Mr. Carlos Osvaldo Giustozzi and his
wife give Minera Andes S.A. the holding of the cateos and claims hereby
mentioned in Clause No. 1, but
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the latter cannot exploit the ore deposits, that could be discovered; having the
ability, to only carry on exploration and investigation tasks and the following
works: geologic studies, topographic surveys, drilling, take samples of the
surface and underground, mineralogy and metallurgic surveys, build test plants
for the sake of study and any other tasks that could be useful for accomplishing
the goal, which is the discovery and cubic measuring of ore that could be
considered economically exploitable.
FOURTH: In the event that Minera Andes S.A. exercised its option to buy under
clause number one herein, the sales price for the claims mentioned in clause 1,
include all the manifestaciones creating mining claims that could be
incorporated, and is fixed in two million dollars (US$ 2,000,000) to be paid in
U.S. dollars or in pesos at the corresponding exchange rate for the U.S. dollar
at sales price in Banco de la Nacion Argentina, the day before payment date.
Payment schedule is established in the following way:
1st) As counterpart and execution start of the contract with option to buy, as a
whole or in part, stated under clause number one, Minera Andes S.A. will pay Mr.
Carlos Osvaldo Giustozzi, the amounts herebelow mentioned:
First year:
1) Upon signing: US$l0,000;
2) Second quarter (April 1, 1997): US$15,000;
3) Third quarter (July 1, 1997): US$17,500;
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4) Fourth quarter (October 1, 1997): US$17,500;
Second year:
1) First quarter (January 1, 1998): US$25,000;
2) Second quarter (April 1, 1998): US$25,000;
3) Third quarter (July 1, 1998): US$25,000;
4) Fourth quarter (October 1, 1998): US$25,000;
Third year:
1) First quarter (January 1, 1999): US$35,000;
2) Second quarter (April 1, 1999): US$35,000;
3) Third quarter (July 1, 1999): US$35,000;
4) Fourth quarter (October 1, 1999): US$35,000;
TOTAL US$300,000
These amounts will be paid by Minera Andes S.A. during the first five days of
each quarter, starting upon signature of this contract then subsequently in the
way hereby indicated. The address for payments will be at Coronel Moldes 837,
Mendoza city; or by depositing in a bank account established by the parties.
2nd) The remaining balance which is US$ 1,700,000 in the event of exercising the
option to buy when the option term expires; or if this option was taken before
the end of the three year term,
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in order to complete the total option price which is US$2,000,000; is payable in
two equal semiannual payments; canceling the first payment together with the
deed transferring the ownership, and the second payment, six months after it; at
that point, the appropriate way to give a payment guarantee, in favor of the
seller will be agreed. The term for giving this transferring deed, is agreed in
sixty straight days from receiving notice of exercising the option to buy in a
total or partial manner, by Minera Andes S.A., in the event of a delay in the
deed proceeding, a fine is stated consisting of a monthly 3% over the price
balance, which should be paid by the party responsible for the delay; eventually
Minera Andes S.A. can withhold this amount, over the price balance. The receipt
submitted or signed by Mr. Carlos Osvaldo Giustozzi and/or Mrs. Riera de
Giustozzi, is considered sufficient as payment receipt. The delay in the payment
of any of these amounts, will proceed automatically; and if Minera Andes S.A.
after being summoned does not fulfill the payment in the term of five working
days, this contract would be considered as terminated without obligation to
indemnify.
3rd) In the event Minera Andes S.A. exercised the option to buy; a 1.5% royalty
from the ore price received from the "Net Smelter Return" during the production
period of the deposit also makes up the price. This royalty will be paid in US$
dollars. The payment term for this royalty will be in force when the eventual
commercial exploitation starts and will be paid semiannually. A delay regarding
the royalty payments will automatically produce interests equivalent to the
"Tasa Libor" in favor of Mr. Giustozzi. Mr. Giustozzi has the faculty to audit
the production and sales price of the minerals without obstructing the
administrative tasks of Minera Andes S.A.
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FIFTH: Minera Andes S.A. can terminate the contract at any moment, in a partial
or total manner without having any obligation to indemnify, through appropriate
notice sent to Mr. Carlos Osvaldo Giustozzi at the address hereby stated. After
the first six months this prior notice should be sent fifteen days in advance.
Mr. Carlos Osvaldo Giustozzi and Mrs. Riera de Giustozzi, do not have the
faculties to terminate the contract on their own, except for the events
mentioned under clause number eleven. The contract will be terminated at the
specific date mentioned in the termination notice that Minera Andes S.A. can
send. At the moment of terminating the contract Minera Andes will transfer the
holding of the mining claims to Mr. Carlos Osvaldo Giustozzi as they are, with
all the concession charges up to date and without equipment or obligation to
transfer the enhancements incorporated, except for the event where it was not
possible to detach them. In the event that Minera Andes S.A. did not decide to
purchase the deposits or the area, the amounts paid up to that moment will
remain in favor of Mr. Carlos Osvaldo Giustozzi, as compensation for not being
able to use his rights during the exploration term.
SIXTH: As warranty for the option to buy mentioned under clause number one
herein, Mr. Carlos Osvaldo Giustozzi and Mrs. Maria Riera agree to register with
the mining authority of Mendoza province, a voluntary inhibition to transfer,
sell, rent or burden the mining claims identified under clause number one. The
said inhibition will be determined for a period equivalent to the term of this
contract, and a copy of it will be submitted as reference and will be recorded
as a quote to each area and mines' registry; as well as in each file
(expediente).
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SEVENTH: Mr. Carlos Osvaldo Giustozzi, will transfer the mining claims, cateos
and minas with all the canons paid up to January 1, 1997. During the term of
this contract Minera Andes S.A. should:
a) Pay all the expenses related to the legal standing of the claims mentioned
under clause number one, meaning the payment of: the canons for the cateos and
pertenencias, the surveys of cateos and minas, estacas minas and manifestaciones
de descubrimiento, repaying of borders and any other expense including
Provincial or Municipality expenses that could affect the mining claims
hereabove mentioned, as well as all the taxes and national and Provincial
burdens that could affect this contract; not being possible to deduct this from
the payments to Mr. Carlos Osvaldo Giustozzi, except in the event that he had
accepted these obligations;
b) Mr. Carlos Osvaldo Giustozzi will not be responsible for tools, machinery,
equipments, facilities or enhancements located within the mining property;
c) Take on all the responsibility for corporal injuries or death of any person
or damage to assets resulting from negligence of its employees or agents,
resulting from exploration activities or any other work related Minera Andes
S.A.'s activities;
d) Pay for all labor and materials in connection with this contract and/or
related issues in all its aspects.
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e) Assume the responsibility for indemnity corresponding to surface owners or
third parties, including government and environmental damage, provided that it
arose from Minera Andes S.A.'s activities.
EIGHTH: Minera Andes S.A., during the term of this contract, can install and
take any tool, machinery, equipment or supplies owned by the company. It is
agreed and established that in the event of total or partial termination of this
contract due to any reason, Minera Andes S.A. can take away all its belongings,
tools, machinery, equipment or supplies and the cost of that transportation will
be paid by Minera Andes S.A., within the term of a ninety days (90) from
terminating the contract; Minera Andes S.A. cannot take away any underground
beam or any other support installed and cannot alter or restore excavations or
any other works on the surface, unless that it is required by law; rules or
administrative requirements to be applied. Minera Andes S.A. can have security
during this term.
NINTH: After the total or partial termination of this contract due to any reason
but the payment of the purchase price to Mr. Carlos Osvaldo Giustozzi and Mrs.
Riera de Giustozzi, in the manner and in the amounts scheduled under clause
number four, and provided that Mr. Carlos Osvaldo Giustozzi and his wife have
fulfilled all the conditions. Minera Andes S.A. will provide them at no charge a
copy of all the feasibility studies detailed under clause number three, and any
other material useful for the investigation, within the term of ninety days
after terminating the contract. Mr. Carlos Osvaldo Giustozzi and Mrs. Riera de
Giustozzi prior 10 days notice to Minera Andes S.A., have the right to inspect
all the claims at any adequate
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moment, without obstructing the work conducted by Minera Andes S.A.
TENTH: Mr. Carlos Osvaldo Giustozzi and Mrs. Riera de Giustozzi, declare and
guarantee that they are the only holders of the mining claims or cateo
applications included under clause number one; and that their ownership is in
good standing with all the corresponding rights, and that they have not
transferred or burdened them, that they are free and exempt of any claim by
third parties. Without limiting or restricting in any way Minera Andes S.A.'s
rights over Mr. Carlos Osvaldo Giustozzi and Mrs. Riera de Giustozzi, it is
agreed that if during the term of this contract Minera Andes S.A., the mining
authority, or third parties discovered or declared any kind of corruption or
limitation in the title of any of the claims or applications for cateos, or
mines mentioned under clause number one, Mr. Carlos Osvaldo Giustozzi and Mrs.
Riera de Giustozzi would amend them. If Mr. Carlos Osvaldo Giustozzi, did not
accomplish so within the term of thirty straight days from the date he is
summoned by Minera Andes S.A., except in the event of force majeur; vices such
as obstructions or restrictions could be amended by Minera Andes S.A., thus
Minera Andes S.A. or whoever may be designated by the company, is given
irrevocable broad power to amend such vices. In the event that Minera Andes S.A.
paid the total purchase price according to the schedule under clause number four
herein, acquiring the right already transferred, the title for the mining claims
and turning those claims into its true and material ownership, Mr. Carlos
Osvaldo Giustozzi and his wife will furnish in the term of sixty days all of the
official documents and carry out all the proceedings necessary to improve the
ownership transfer of the concessions in favor of Minera Andes S.A.; or whoever
may be designated by Minera Andes S.A. The expenses and fees resulting from the
issuing and
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registering of official documents, will be paid by Minera Andes S.A. It is also
restated that Mr. Carlos Osvaldo Giustozzi and Mrs. Riera de Giustozzi, give
irrevocable power to Minera Andes S.A. or to whoever may be designated by the
company, to carry on all the necessary proceedings and issue the official
documents expressing the ownership transfer for the mines and cateos'
applications included in this contract.
ELEVENTH: The only reason in favor of Mr. Carlos Osvaldo Giustozzi and his wife
allowing them to terminate the contract, would be the lack of payment according
to what was agreed under clause number four and the unfulfillment of Minera
Andes S.A.'s commitments under clause number 7a). The faculty to terminate the
contract due to lack of payment will proceed after thirty days of delay for the
scheduled dates. The delay will proceed by legal right without any need for
legal requirements, through summoning resulting from the expiration of the
payment date. During the delay period, the amount will earn an interest
equivalent to the rate charged by Banco de la Nacion Argentina for the discount
of letters or promissory notes; which will be paid together with the amount
owed. Once the thirty day delay term is over, Mr. Carlos Osvaldo Giustozzi and
his wife, will be able to terminate the contract by means of appropriate notice
Minera Andes S.A.'s address, keeping all the payments collected up to that
moment in their favor; except for the event in which the option to buy was
exercised and one third of the price had already been paid, in this event, Mr.
Giustozzi, should demand the total payment of the price balance and guaranties.
TWELFTH: All Minera Andes S.A.'s rights resulting herein could be transferred,
prior notice
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to Mr. Carlos Osvaldo Giustozzi and Mrs. Riera de Giustozzi. At this time, the
transferees should ratify their acceptance to Mr. Carlos Osvaldo Giustozzi and
offer an adequate reliability warranty or the possibility to accomplish these
contract obligations; from this moment on, all the rights and obligations
originally corresponding to Minera Andes S.A. are automatically substituted. Mr.
Carlos Osvaldo Giustozzi's and Mrs. Riera de Giustozzi's rights, according to
this contract, can only be transferred with prior acceptance by Minera Andes
S.A.; not being possible for this acceptance to be denied without reason.
THIRTEENTH: This contract will oblige the parties herein and their corresponding
inheritors, executors, administrators, successors and related third parties. All
of the knowledge and information that Mr. Carlos Osvaldo Giustozzi acquires,
related to the work mentioned under clause number three, will be kept with
discretion and considered as confidential, except for the event that Minera
Andes S.A. releases the holders from this obligation, in writing. This
confidentiality condition, will be in force during the whole term of this
contract and up to ninety days after the termination date of this contract or
the purchase of the property and mining claims. Minera Andes S.A. also agrees to
keep confidentiality for ninety days after the contract has been terminated even
in the event that Minera Andes S.A. excludes an area. Except for the event that
Minera Andes S.A. is negotiating the transfer or joint venture in this contract
with third parties concerned.
FOURTEENTH: All the notices to Minera Andes S.A. and to Mr. Carlos Osvaldo
Giustozzi and Mrs. Riera de Giustozzi will be done in written and in a reliable
way mailed to the
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addresses hereby stated. The parties can change their address prior notice. It
is agreed that for the sake of this contract, Mrs. Maria Riera de Giustozzi,
give her conjugal approval, authorizes and gives power to Mr. Carlos Osvaldo
Giustozzi in order to represent her with Minera Andes S.A. and/or Mining
Authority, in any required circumstance. This contract is to be registered with
the Notary Public and Mining Authority; expenses will be paid by Minera Andes
S.A.
FIFTEENTH: The parties agree, that in event of dispute they accept the
jurisdiction of the common courts of the province of Mendoza, excluding any
other code or jurisdiction. It is stated that this contract is exempt from seals
due to an amendment to article 240 inc. 31, Fiscal Law N(degree) 6104. Approving
this document, six copies are signed by the parties, in order to be registered
with the Mining Authority of Mendoza Province; one to be recorded with a local
Notary Public; and another to be translated to English. Upon signing the
contract, Minera Andes S.A. pays the amount of US$ 10,000 (ten thousand dollars)
to its co-contractor, according to payment schedule under clause number four.
After receiving this amount, the co-contractor will furnish adequate receipt and
a broad and total payment document.
INTERPRETATIVE CLAUSE: Regarding NET SMELTER RETURN: In the event that the
royalties had to be paid, the "net smelter return" concept comprehends all of
the metallic minerals, concentrates, or their products containing ore produced
and sold by the Holder. When the ore containing minerals with commercial value,
are sold by the Holder, its "net smelter return" will be considered as the
actual amount received by the said Holder, minus the deduction of any expense
related to transport (including freight, insurance, shipping and delivery costs)
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from the exploitation to the facilities of the purchaser and/or any other
unloading location. When the concentrates or products containing minerals with
commercial value are sold by the holder, their net smelter return should be
considered as the actual amount received by the holder for the sale, minus
deduction for any and all the expenses related to smelting, refining, weighing,
sampling, assays, handling, transport (including freight, insurance, handling
and mailing expenditures), penalties for impurities and other charges deduced by
a purchaser, provided that the Holder does not deduct any charge for initial
processing. Initial processing is the initial grinding or concentration or other
ore treatment during which one or more mineral products are recovered from the
sold ore and a subsequent processing, and during which the first tails and
mineral waste are discarded or deposited. Such deductions will be limited to
commercially reasonable amounts from the point of view of mineral industrial
practices and levels, currently accepted as good, such as smelting or other
similar operations for the treatment of metals. The "net smelter return" for the
ore, concentrates or products treated in smeltery and other similar metal
operations, owned, operated or controlled by the Holder, or dealt with based on
a toll paid by the Holder, will be computed as already mentioned, with the
deductions previously established. For the ore, concentrates or products sold to
associate companies or sold by the Holder, but in some way used by him, the
gross price for the sale will be determined in a similar way; provided that the
total deductions done by the Holder according to this paragraph, do not exceed
the total deductions that could have been made by other smeltery operators or
treatment facilities for similar materials in the case that those materials were
smelted or treated in those facilities based on a reasonable commercial
agreement. There is an illegible signature and the explanatory legend says:
Brian Gavin on behalf of Minera Andes S.A. There is an
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illegible signature and the explanatory legend says: Jorge A. Vargas on behalf
of Minera Andes S.A. There is an illegible signature and the explanatory legend
says: Carlos Osvaldo Giustozzi, L.E. (document) 6865305. There is an illegible
signature and a legend saying Maria Riera de Giustozzi L.C. (document) 4115161.
There is a certification in Notary Public proceeding number 080738, that says:
"As Notary Public, Holder of Registry number thirty-seven from Capital, I
CERTIFY: that the signatures at the bottom of each of the FIVE pages of the
Contract of Exploration and Prospecting with Option to buy herein, which also
have my signature, Professional seal and formal statement for the certification
that is done in the current sheet for the Notary Public proceeding; belong to
Mr. BRIAN GAVIN, Passport issued by the United Kingdom of Great Britain and
Northern Ireland number C969194D, to Mr. JORGE ALFREDO VARGAS, C.I. (document)
number 219206 issued by the Mendoza Police, and Mr. CARLOS OSVALDO GIUSTOZZI,
L.E. (document) number 6865305 and to Mrs. MARIA RIERA DE GIUSTOZZI, L.C.
(document) 4115161; all of which have been done in my presence; as well as Dr.
Jorge Alfredo Vargas is acting as President of the Board of Directors of MINERA
ANDES S.A., guaranteed by Incorporation Deed dated September 9th, 1994, issued
by Notary Public lnes Mabel Cumaodo, Fs. 322, from the records at Registro
Notarial number 72, and registered in the Public Registry for Limited Liability
Companies (Registro Publico de Sociedades Anonimas) from this province under
file number 2892, Fs. 1; Mr. Brian Gavin is acting as general manager for
"Minera Andes S.A.", guaranteeing this with General Administration Power of
Attorney, registered in the Public Registry for General Powers (Registro Publico
de Mandatos Generales) from this province, under number 30432, Fs. 27, book 290
"L". The corresponding requirement has been formalized at pages 132 and 133
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respectively from Book Number "Two" of requirements of the legalized, witnessed.
Mendoza, February 28th, 1997". In each of the five pages containing the Contract
of Exploration and Prospecting with option to buy that has been textually
transcribed, there are four illegible signatures, with a seal saying:
Certification at Notary Public Proceeding sheet N(degree) 080738 with
Certification Stamps N(0) 778915/18. Mendoza, February 28th, 1997. There is an
illegible signature and a seal saying Gilberto Suarez Lago, Notary Public, Reg.
N(degree) 37. Mendoza. IN ACCORDANCE WITH; what has been transcribed from the
Contract that I see, which bears the statement that it is exempt from fiscal
repaying, enclosed hereby, with the corresponding notary public's quote. ON
RECORD. READ this deed by the appearing parties, with their corresponding
functions, accepting the whole of this, ratifying its content and the signature.
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REPRESENTATION OF ACCURACY
The foregoing is a fair and accurate English translation of the document
from which it is made.
Dated this 19th day of June, 1997.
/s/ BRIAN GAVIN
----------------------------------------
Brian Gavin
Vice President
DEBT RESTRUCTURING AGREEMENT
This debt restructuring agreement ("Agreement") is made and entered into
effective as of January 11, 1996 by and between Minera Andes, Inc., an Alberta
corporation, whose principal offices are located at North 3303 Sullivan Road,
P.O. Box 425, Spokane, Washington 99210-0425 ("Minera") and N. A. Degerstrom,
Inc., a Washington corporation, whose principal offices are located at North
3303 Sullivan Road, P.O. Box 425, Spokane, Washington 99210-0425 ("Degerstrom").
RECITALS
A. Minera has issued Degerstrom its promissory note dated November 6, 1995 in
the principal amount of $1,505,000, evidencing Minera's obligations to
Degerstrom for amounts advanced by Degerstrom on Minera's behalf in
connection with Minera's exploration program on its Argentinean properties.
$365,000 of such principal amount has been paid by Minera pursuant to the
terms of the promissory note as of the date of this Agreement.
B. Minera and Degerstrom have determined to restructure payment of the
remaining principal and interest owed under the promissory note as
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Minera and Degerstrom agree as follows.
1. Cancellation of Promissory Note. The promissory note dated November 6, 1995
is hereby canceled and of no further force or effect.
2. Issuance of New Promissory Note. Contemporaneously with the execution of
this Agreement, Minera agrees to execute and deliver to Degerstrom a new
promissory note, substantially in the form of note annexed to this
Agreement as Exhibit A, which new note shall be in the principal amount of
$1,140,000 and, among other things, shall provide for the payment of
principal of and interest thereon through the issuance to Degerstrom,
subject to necessary regulatory and shareholder approvals, of 500,000 units
of Minera's securities, each unit consisting of one common share of Minera
and one common share purchase warrant substantially in the form of warrant
annexed to this Agreement as Exhibit B.
3. Representations and Warranties of Degerstrom. Degerstrom represents and
warrants to the Minera as follows:
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(a) Degerstrom meets one or more of the definitions of an "accredited
investor" under Rule 501(a) of the Securities Act of 1933, as amended (the
"Securities Act").
(b) Degerstrom recognizes that this investment involves special risks,
including the risks that Minera may need additional capital to achieve its
business goals.
(c) Degerstrom understands that the units issuable pursuant to the
promissory note have not been registered under the Securities Act or under
certain state securities laws, in reliance upon certain exemptions for
transactions not involving a public offering, and that the units (and the
securities comprising the units) must be held indefinitely unless sold
pursuant to an offering registered under the Securities Act and under
certain state securities laws, or unless an exemption from registration is
available.
(d) The units have not been brought to Degerstrom's attention through, nor
were they accompanied by, any advertisement or other form of general
solicitation.
(e) Degerstrom or its representatives have been given the opportunity to
examine all relevant documents and information concerning Minera and its
business, the units to be acquired pursuant to the promissory note and any
other matters deemed by Degerstrom to be material to its investment in
Minera.
(f) Degerstrom is authorized and otherwise duly qualified to purchase and
hold the units, has its principal place of business as set forth above, and
has not been formed for the specific purpose of acquiring the units.
(g) Degerstrom acknowledges that the certificates representing the units
(and the securities comprising the units) may be endorsed with restrictive
legends which are required by applicable securities laws and regulations.
(h) Degerstrom is either experienced or knowledgeable with regard to the
business of the Company, or either alone or with its professional advisers
is capable, by reason of knowledge and experience in financial and business
matters in general, and investments in particular, of evaluating the merits
and risks of an investment in the units, and is able to bear the economic
risk of an investment in the units and can otherwise be reasonably assumed
to have the capacity to protect its own interests in connection with such
investment.
(i) Degerstrom has not received, nor has it requested, nor does it have any
need to receive, any offering memorandum or other document (other than
financial statements, interim financial statements or any other document,
the content of which is prescribed by statute or regulation) describing the
business and affairs of the
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Company which has been prepared for delivery to, and reviewed by,
prospective purchasers in order to assist it in making an investment
decision in respect of the units and it has not become aware of any
advertisement in printed media of general and paid regular circulation or
on radio or television with respect to the distribution of the units or any
other advertisement; and
(A) Degerstrom is a corporation organized and existing under the laws
of the State of Washington of the United States of America, having its
principal executive offices in such state; and
(B) Degerstrom is purchasing the units as principal for its own
account, not for the benefit of any other person, and not with a view
to the resale or distribution of all or any of the units or the
underlying securities issuable pursuant thereto; and
(C) Degerstrom would have an aggregate acquisition cost of purchasing
the units of not less than $97,000; and
(D) Degerstrom is a corporation which pre-existed the offering of the
units and has a bona fide purpose other than investment in the units,
or, if created to permit such investment, the individual share of the
aggregate acquisition cost for each participant is not less than
$97,000; and
(E) Degerstrom represents, warrants and acknowledges to, and covenants
and agrees with, the Company as follows:
(aa) it is not a resident of Canada and, if it is purchasing as
agent or trustee, no beneficial purchaser for whom it is acting
is a resident of Canada; and
(bb) the units and the underlying securities issuable upon
exercise thereof are not qualified for sale in any jurisdiction
in Canada; and
(cc) the units purchased by it hereunder (and any underlying
securities issuable upon exercise thereof) may not be sold in any
province of Canada for a period of one year: and
(dd) the certificate evidencing the units purchased by it
hereunder (and any underlying securities issuable upon the
exercise thereof) will bear a legend referring to the
restrictions on resale described in subparagraph 3(i)(E)(cc)
above, and the registrar and transfer agent for the units and the
underlying securities will be required to not register any
transfer of
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the units purchased by Degerstrom hereunder (and any underlying
securities issuable upon the exercise thereof) for the period
referred to in subparagraph 3(i)(E)(cc) above; and
(ee) it complies with the provisions of all applicable securities
legislation in the jurisdiction of its residence and will provide
such evidence of compliance therewith as the Company may request.
4. Waiver of Rights under Alberta Act. Degerstrom expressly waives and
releases the Company from all rights of withdrawal to which it might
otherwise be entitled pursuant to section 106(l) of the Securities Act
(Alberta) or otherwise at law.
5. All Material Facts Disclosed. Degerstrom is not purchasing the units with
knowledge of any material fact about the Company that has not been
generally disclosed. The Company represents and warrants that the units are
not being sold with the knowledge of any material fact about the Company
that has not been generally disclosed.
6. Required Regulatory and Shareholder Approvals. The performance by Minera
and Degerstrom of the matters set forth in this Agreement is expressly
contingent on approval of this Agreement and the transactions contemplated
thereby by the Alberta Stock Exchange and by the shareholders of Minera.
Dated as of the date first above written.
Minera Andes Incorporated, N. A. Degerstrom, Inc.,
an Alberta corporation a Washington corporation
By: /s/ ALLEN V. AMBROSE (Pres.) By: /s/ JAMES A. FISH Vice Pres.
----------------------------------- --------------------------------
Its duly authorized officer Its duly authorized officer
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Exhibit A to Debt Restructuring Agreement
Form of Promissory Note
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THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
REOFFERED, SOLD, PLEDGED OR TRANSFERRED EXCEPT (A) IN A
TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144
PROMULGATED UNDER THE ACT, (B) PURSUANT TO AN EXEMPTION FROM,
OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT OR (C) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT.
PROMISSORY NOTE
$ 1,140,000 January 11, 1996
Spokane, Washington
Minera Andes, Inc., an Alberta corporation, whose principal offices are
located at North 3303 Sullivan Road, P.O. Box 425, Spokane, Washington
99210-0425 ("Maker") promises to pay to N. A. Degerstrom, Inc., a Washington
corporation, whose principal offices are located at North 3303 Sullivan Road,
P.O. Box 425, Spokane, Washington 99210- 0425 ("Holder"), the principal sum of
One Million One Hundred Forty Thousand Dollars (U.S.$1,140,000), together with
interest on that amount, upon the agreements, terms and conditions provided in
this Promissory Note ("Note"):
1. Definitions.
(a) Cure Period. The term "Cure Period" means a period of sixty (60)
days from the time the Maker receives notice of a Default.
(b) Default. The term "Default" means any of the following events:
(i) Maker at any time fails to pay, when due, any sum owing on
this Note; or
(ii) Maker breaches or fails to perform any obligation under this
Note or any other agreement between Maker and Holder; or
(iii) Maker files or is served with any petition for relief under
the 11 U.S.C. ss. 101 et seq. or any similar federal, state or provincial
statute, or a proceeding is instituted against Maker seeing a readjustment of
Maker's indebtedness, and such petition or proceeding is not withdrawn or
dismissed within thirty (30) days from the date Holder
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received notice of the petition or was served with process in connection with
the proceeding; or
(iv) Maker assigns any of its assets for the benefit of its
creditors; or
(v) Maker consents to the appointment of a receiver or trustee,
for all or any part of Maker's property; or
(vi) Maker admits, in writing, its inability to pay its debts as
they become due; or
(vii) a court of competent jurisdiction enters an order approving
a petition seeking a reorganization of Maker or appointing a receiver, trustee,
or other similar official of substantially all of Maker's assets.
(c) Default Rate. The term "Default Rate" means the rate of interest
otherwise payable on this Note plus three percent (3%).
2. Interest. Sums owing on this Note shall bear no interest from the date
of this Note until stockholder approval is obtained with respect to the
conversion of amounts evidenced by this Note for shares of the common stock of
Maker, as provided in paragraph 3 hereof. Thereafter, sums then owing on this
Note shall bear interest at the rate of eight percent (8%) per annum. Should
Maker default on any of the obligations specified in this Note, all sums owing
on the Note shall bear interest at the Default Rate.
3. Payment. Maker shall pay Holder the principal of and interest on this
Note as follows:
(a) The amount of Cdn $720,000, which shall constitute a portion of
the principal owed under this Note, shall be deemed paid by the delivery to
Holder, within fifteen (15) days of the date approval for the issuance thereof
is obtained from the Alberta Stock Exchange, and from the stockholders of Maker,
if required, of a certificate or certificates for 500,000 units ("Units"), each
Unit consisting of one share of common stock and one share purchase warrant of
Maker exercisable by Holder at the price of Cdn $1.75 per share, which Units
(and the underlying common stock, warrant and common stock issuable upon
exercise of the warrant) shall by their terms be restricted securities within
the meaning of applicable United States securities laws and shall be limited as
to transfer in accordance with applicable resale restrictions of such laws.
(b) An amount determined by multiplying the number of share purchase
warrants exercised by Holder by the exercise price of Cdn $1.75, which shall
constitute a portion of the principal owed under this Note, shall be deemed paid
by the delivery to
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Holder of a share certificate or certificates for the number of shares of common
stock of Maker issuable upon Holder's exercise of the share purchase warrants
comprising a portion of the Units, it being understood that Holder shall not be
required to tender the exercise price of such share purchase warrants to Maker
but shall instead be credited with such exercise price in return for a
corresponding reduction in the principal amount owed under this Note. The
determination whether to exercise such share purchase warrants shall be solely
within the discretion of Holder.
(c) Remaining amounts, if any, owed under this Note following the
expiration of the exercise period of the share purchase warrants comprising a
portion of the Units, together with any accrued and unpaid interest shall be
payable as and when Maker obtains any equity financing from or through Haywood
Securities or Yorkton Securities from and after the date approval is obtained
from the Alberta Stock Exchange and, if required, the stockholders of Maker, for
the issuance of the 500,000 Units, and in any event on or before one year from
the date of this Note.
(d) In case Maker, at any time or from time to time after the date of
this Note, shall effect a subdivision of the outstanding shares of its common
stock into a greater number of shares of common stock (by reclassification or
otherwise than by payment of a dividend in common stock), then, and in each such
case, the number of shares issuable pursuant to the share purchase warrants
comprising a portion of the Units immediately prior to such subdivision shall,
concurrently with the effectiveness of such subdivision, be adjusted to reflect
such subdivision, as determined by the board of directors of Maker.
(e) In case the outstanding shares of the common stock of Maker shall
be combined or consolidated, by reclassification or otherwise, into a lessor
number of shares of common stock, the number of shares issuable pursuant to the
exercise of the share purchase warrants comprising a portion of the Units in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased to reflect such transaction, as determined by the
board of directors of Maker.
(f) In case Maker (i) shall consolidate with or merge into any other
person and shall not be the continuing or surviving corporation in such
consolidation or merger, or (ii) shall permit any other person to consolidate
with or merge into Maker and Maker shall be the continuing or surviving person
but, in connection with such consolidation or merger, the common stock shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) shall effect a capital reorganization or
reclassification of its common stock, then, and in each such case, proper
provision shall be made so that upon the exercise of the share purchase warrants
comprising a portion of the Units at any time after the consummation of such
consolidation, merger, transfer, reorganization or reclassification, Holder
shall be entitled to receive, in lieu of the common
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stock issuable by Maker upon such exercise, the stock and other securities, cash
and property to which the Holder would have been entitled upon such consummation
if the Holder had exercised the share purchase warrants immediately prior
thereto, subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments as provided for in subparagraphs 3(d)
and (e).
(g) Maker will not, by amendment of its charter or other constating
documents, or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
paragraph 3, but will at all times in good faith carry out all such terms and
take all such actions as may be necessary or appropriate in order to protect the
rights of Holder against dilution or other impairment.
All payments shall be made in the lawful currency of the United States of
America. All payments shall be made to the Holder at the address set forth
above, or at such other place as the Holder may specify in writing. Amounts
deemed paid in Canadian dollars pursuant to subparagraphs 3(a) and (b), above,
shall be converted to United States dollars at the exchange rate in effect as of
the date such payments are deemed made.
4. Prepayment. Maker may prepay any amount owing on this Note without
incurring any additional charge, provided that Maker gives Holder written notice
of the amount to be prepaid at least three (3) days before the date of
prepayment and Holder consents to such prepayment. Notwithstanding any
prepayment, Maker shall continue to make all succeeding installments or other
payments as they become due, until this Note is completely paid.
5. Security. The payment of all sums owing on this Note shall be secured
by a lien and security interest in and to the equipment, furniture, fixtures,
inventory, accounts, chattels, papers, documents, instruments and general
intangibles of Maker, as defined in the Washington Uniform Commercial Code, and
the proceeds received from any sale or other disposition of such items and any
replacements, renewals or additions thereto.
6. Notice of Default; Cure. Upon a Default, Holder shall deliver
written notice of the Default to Maker. Maker shall have the right to cure,
within the Cure Period, any Default described in Section l(b)(i) or (ii) of this
Note. Maker may not cure a Default described in Section l(b)(iii) through (vii)
of this Note. If Maker fails to cure a Default within the Cure Period, or is
prohibited from curing the Default, Holder may accelerate all amounts owing on
the Note. Such accelerated amounts shall become immediately due and payable. If
Holder accelerates the amounts due under this Note, Holder shall have the right
to pursue any or all of the remedies provided in this Note, including, but not
limited to, the right to bring suit on the Note.
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<PAGE>
7. Remedies. Upon a Default and expiration of any applicable Cure
Period, Holder shall have all rights available to it at law or in equity,
including all rights available under the Washington Uniform Commercial Code. Any
unpaid balance outstanding at the time of a Default, and any costs or other
expenses incurred by Holder in realizing on this Note, shall bear interest at
the Default Rate. All rights and remedies granted under this Note shall be
deemed cumulative and not exclusive of any other right or remedy available to
Holder. Maker waives all rights to presentment, notice of dishonor and protest
of this Note.
8. Attorneys' Fees. Costs. and Other Expenses. Maker agrees to pay all
costs and expenses which Holder may incur by reason of any Default, including,
but not limited to, reasonable attorneys' fees, expenses, and costs incurred in
any action undertaken with respect to this Note, or the appeal of any such
action. Any judgment recovered by Holder shall bear interest at the Default
Rate.
9. Transfer; Obligations Binding on Successors. Maker may not transfer
any of its rights, duties or obligations under this Note without the prior
written consent of Holder. This Note, and the duties set forth in the Note,
shall bind Maker and its successors and assigns. All rights and powers
established in this Note shall benefit Holder and its successors and assigns.
10. Notices. Any notice, consent or other communication required or
permitted under this Note shall be in writing and shall be deemed to have been
duty given or made either (1) when delivered personally to the party to whom it
is directed (or any officer or agent of such party) or (2) three days after
being deposited in the United States' certified or registered mail, postage
prepaid, return receipt requested, and properly addressed, if sent to Maker, at
North 3303 Sullivan Road, P.O. Box 425, Spokane, Washington 99210-0425,
Attention: Allen Ambrose, or if sent to Holder, at North 3303 Sullivan Road,
P.O. Box 425, Spokane, Washington 99210-0425, Attention: James Fish, or at such
other address as Holder shall have provided to Maker in writing.
11. Governing Law. This Note will be construed and the rights, duties, and
obligations of the parties will be determined in accordance with the laws of the
State of Washington and the federal laws of the United States of America.
12. Headings. Headings used in this Note have been included for
convenience and ease of reference only, and will not in any manner influence the
construction or interpretation of any provision of this Note.
13. Waiver. No right or obligation under this Note will be deemed to have
been waived unless evidenced by a writing signed by the party against whom the
waiver is asserted, or by its duly authorized representative. Any waiver will be
effective only with respect to the specific instance involved, and will not
impair or limit the fight of the waiving
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<PAGE>
party to insist upon strict performance of the right or obligation on any other
instance, in any other respect, or at any other time. No failure on the part of
Holder to exercise, and no delay in exercising, any right or obligation under
this Note shall operate as a waiver thereof.
14. Severability. The parties intend that this Note be enforced to the
greatest extent permitted by applicable law. Therefore, if any provision of this
Note, on its face or as applied to any person or circumstances, is or becomes
unenforceable to any extent, the remainder of this Note and the application of
that provision to other persons, circumstances or extent, will not be impaired.
15. References. Except as otherwise specifically indicated, all
references in this Note to numbered or lettered sections or subsections refer to
sections or subsections of this Note. All references to this Note include any
subsequent amendments to the Note.
16. Venue. Maker agrees that any action on this Note must be brought in
a court of appropriate jurisdiction in Spokane County, Washington.
17. Maximum Interest. Notwithstanding any other provisions of this Note,
any interest, fees, or charges payable by reason of the indebtedness evidenced
by this Note shall not exceed the maximum permitted by law.
18. Supersedes Prior Note. This Note supersedes and replaces in its
entirety the terms of that certain promissory note dated as of October 17, 1995
between Maker and Holder.
MAKER: MINERA ANDES INC.
By:______________________________
______________________________
its duly authorized officer
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Exhibit B to Debt Restructuring Agreement
Form of Share Purchase Warrant
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THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT MAY
NOT BE TRANSFERRED EXCEPT (A) IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF
REGULATIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), (B)
PURSUANT TO AN EXEMPTION FROM, OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THEE ACT OR (C) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT.
January 11, 1996
CERTIFICATE
OF
WARRANT TO PURCHASE COMMON SHARES
MINERA ANDES INC.
MINERA ANDES INC., an Alberta corporation (the "Company"), for value
received, hereby certifies that N. A. Degerstrom, Inc. ("Degerstrom" or the
"Holder"), or registered assigns, is entitled to purchase from the Company
500,000 duly authorized, validly issued, fully paid and non-assessable shares of
the Company ("Common Shares"), at the purchase price per share of Cdn $1.75, at
any time or from time to time prior to 4:00 p.m., Spokane, Washington time, on
January 11, 1998, all subject to the terms, conditions and adjustments set forth
below in this certificate of warrant (the "Warrant Certificate"), and is
entitled to exercise the other rights, powers and privileges hereinafter
specified.
This Warrant Certificate is issued pursuant to that certain Debt
Restructuring Agreement dated January I 1, 1996 between the Company and the
Holder.
Certain terms used in this Warrant Certificate are defined in Section 12.
1. EXERCISE OF WARRANT.
1.1 Manner of Exercise. The warrant evidenced by this Warrant
Certificate may be exercised by the holder hereof, either in whole or in part
from time, to time, during normal business hours on any Business Day by
surrender of this Warrant Certificate, with the form of subscription at the end
hereof (or a reasonable facsimile thereof) duly exercised by such holder, to the
Company at the office or agency maintained by the Company pursuant to Section 8,
accompanied by payment, which shall take the form of a reduction of the
indebtedness owed Holder by the Company pursuant to that certain promissory note
dated January 11, 1996 issued by Holder, in the amount obtained by
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multiplying (a) the number of Common Shares (without giving effect to any
adjustment therein) designated in such form of subscription (or such reasonable
facsimile), by (b) Cdn $1.75, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
non-accessible Common Shares determined as provided in Section 2.
1.2 When Exercise Effective. Each exercise of this Warrant Certificate
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant Certificate shall have been
surrendered as provided in Section 1.1, and immediately prior to the close of
business on such Business Day the Person or Persons in whose name or names any
certificate or certificates for Common Shares shall be issuable upon such
exercise as provided in Section 1.3 shall be deemed to have become the Holder or
Holders of record thereof.
1.3 Delivery of Share Certificates, etc. As soon as practicable after
the exercise of this Warrant Certificate in whole or in part, and in any event
within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct.
(a) A certificate or certificates for the number of fully paid and
non-assessable Common Shares to which such Holder shall be entitled upon
such exercise, plus, in lieu of any fractional share to which such Holder
would otherwise be entitled, cash in an amount equal to the same fraction
(calculated to the nearest 1/100th of a share) of the Market Price of one
full share on the Business Day next preceding the date of such exercise,
and
(b) in case such exercise is in part only, a new Warrant Certificate
of like tenor, calling in the aggregate on the face or faces thereof for
the number of Common Shares equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of this
Warrant Certificate minus the number of such shares designated by the
Holder upon such exercise as provided in Section 1.1.
2. ADJUSTMENT OF COMMON SHARES ISSUABLE UPON EXERCISE OF WARRANT
CERTIFICATE.
2.1 General Warrant Price. The number of Common Shares which the
Holder of this Warrant Certificate shall be entitled to receive upon the
exercise hereof shall be determined by multiplying the number of Common Shares
which would otherwise (but for the provisions of this Section 2) be issuable
upon such exercise, as designated by the Holder hereof pursuant to Section 1.1,
by a fraction of which (a) the numerator is Cdn $1.75 and (b) the denominator is
the Warrant Price (as defined below in this Section 2.1) in effect on the date
of
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such exercise. The "Warrant Price" per Common Share shall initially be Cdn
$1.75, and shall be adjusted and readjusted from time to time as provided in the
is Section 2 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 2.
2.2 Stock Splits, etc. In case the Company, at any time or from time
to time after the Closing Date, shall effect a subdivision of the outstanding
Common Shares into a greater number of Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares), then, and in each
such case, the Warrant Price in effect immediately prior to such subdivision
shall, concurrently with the effectiveness of such subdivision, be adjusted to
reflect such subdivision, as determined by the Board of Directors of the
Company.
2.3 Adjustments for Combinations, etc. In case the outstanding Common
Shares shall be combined or consolidated, by reclassification or otherwise, into
a lessor number of Common Shares, the Warrant Price in effect immediately prior
to such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased to reflect
such transaction, as determined by the Board of Directors of the Company.
2.4 Other Adjustments. Adjustments shall also be made at the times and
under the circumstances specified in Section 3.
2.5 Determinations by the Board of Directors. All determinations by
the Board of Directors of the Company under the provisions of this Warrant
Certificate shall be made in good faith with due regard to the interests of the
holder of this Warrant Certificate, and in accordance with good financial
practice.
3. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION,
ETC. In case the Company (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving corporation in such
consolidation or merger, or (b) shall permit any other Person to consolidate
with or merge into the Company and the Company shall be the continuing or
surviving Person but, in connection with such consolidation or merger, the
Common Shares shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (c) shall effect a capital
reorganization or reclassification of the Common Shares, then, and in each such
case, proper provision shall be made so that, upon the basis and the terms and
in the manner provided in this Section 3, the holder of this Warrant
Certificate, upon the exercise hereof at any time after the consummation of such
consolidation, merger, transfer, reorganization or reclassification, shall be
entitled to receive (at the aggregate Warrant Price in effect at the time of
such consummation for all Common Shares issuable upon such exercise immediately
prior to such consummation), in lieu of the Common Shares issuable upon such
exercise prior to such consummation, the stock
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and other securities, cash and property to which such holder would have been
entitled upon such consummation if such holder had exercised this Warrant
Certificate immediately prior thereto, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments as
provided for in Section 2 and this Section 3.
4. NO IMPAIRMENT OF HOLDER'S RIGHTS. The Company will not, by amendment
of its articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant Certificate, but will at all times in good
faith carry out all such terms and take all such actions as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant
Certificate against dilution or other impairment.
5. REPORTS AS TO ADJUSTMENTS. In the case of any adjustment or
readjustment in the Common Shares issuable upon the exercise of this Warrant
Certificate the Company at its expense will promptly compute such adjustment or
readjustment in accordance with the terms of this Warrant Certificate and
prepare a report setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Company will forthwith mail a copy of each such report to each holder of a
Warrant Certificate, and will, upon the written request at any time of any
holder of a Warrant Certificate furnish to such holder a like report setting
forth the Warrant Price at the time in effect and showing how it was calculated.
6. NOTICES OF CORPORATE ACTION. In the event of a proposal by the Company
(or of which the Company shall have knowledge) for:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation,
merger or exchange of shares involving the Company and any other Person or any
transfer of all or substantially all of the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the Company will mail to each holder of a Warrant
Certificate a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
and (ii) the date or expected date on which any such reorganization,
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reclassification, recapitalization, consolidation, merger, exchange of shares,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Shares shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, exchange of shares, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 20
days prior to the date therein specified.
7. RESERVATIONS OF SHARES, ETC. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of this
Warrant Certificate and free from pre-emptive rights, all Common Shares from
time to time issuable upon the exercise of the Warrant Certificate at the time
outstanding. All such shares shall be duly authorized and, when issued upon such
exercise, shall be validly issued, fully paid and non-assessable with no
liability on the part of the holders thereof.
8. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain an office
or agency in the United States of America where books for the registration and
registration of transfer of the Warrant Certificate will be kept and where the
Warrant Certificate may be presented for exercise, registration or transfer,
exchange and replacement pursuant to the provisions hereof. Such office is
presently located at North 3303 Sullivan Road, Spokane, Washington 99216.
9. OWNERSHIP, REGISTRATION OF TRANSFER, EXCHANGE AND SUBSTITUTION OF
WARRANT CERTIFICATE.
9.1 Ownership of Warrants. Until due presentment for registration of
transfer, the Company may treat the Person in whose name a Warrant Certificate
is registered on the register kept at the office or agency of the Company
maintained pursuant to Section 8 as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and when
any Warrant Certificate is properly assigned to another Person, the Company may
(but shall not be obligated to) treat such Person as the owner of such Warrant
Certificate for all purposes, notwithstanding any notice to thee contrary.
Subject to the foregoing provisions a Warrant Certificate, if properly assigned,
may be exercised by the assignee without first having a new Warrant Certificate
issued.
9.2 Transfer and Exchange of Warrants. (a) The Holder acknowledges
that this Warrant Certificate and any securities acquired upon the exercise of
this Warrant Certificate have not been registered under the Act and may not be
resold except pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Act. The Holder agrees that it will not
re-offer, resell, pledge, hypothecate or otherwise dispose of this Warrant
Certificate or any of the securities acquired upon the exercise of this Warrant
Certificate except (i) in a transaction that meets the requirements of
Regulation S under the Act; (ii) pursuant to
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<PAGE>
an exemption from, or otherwise in a transaction not subject to, the
registration requirements of the Act; or (iii) pursuant to an effective
registration statement under the Act.
(b) Upon the surrender of any Warrant Certificate, properly endorsed,
for registration of transfer or for exchange (for the purpose of combination of
warrants, split-up of warrants or any other purpose) at the office or agency
maintained by the Company pursuant to Section 8, the Company at its expense will
promptly execute and deliver to or upon the order of the holder thereof a new
Warrant Certificate of like tenor, in the name of such holder or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of Common
Shares called for on the face or faces of the Warrant Certificate so
surrendered, and thereupon the old Warrant Certificate shall be canceled.
9.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant Certificate and upon delivery of indemnity reasonably satisfactory to
the Company in form and amount, or, in the case of any such mutilation, upon
surrender of such Warrant Certificate for cancellation at the office or agency
maintained by the Company pursuant to Section 8, the Company at its expense will
promptly execute and deliver, in lieu thereof, a new Warrant Certificate of like
tenor.
9.4 Expenses. The Company will pay all expenses, taxes (other than
transfer taxes) and other charges payable in connection with the preparation,
issuance and delivery from time to time of Warrant Certificates.
10. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings (the definitions to
be applicable to both the singular and the plural forms of the terms defined
where either such form is used in this Warrant Certificate):
the Act: the Securities Act of 1933, as amended.
Business Day: any day other than a Saturday, Sunday or a day upon
which banking institutions are authorized or required by law or executive order
to be closed in Spokane, Washington.
Closing Date: the date of original issuance and delivery of this
Warrant Certificate.
Company: includes any corporation which shall succeed to or assume the
obligations of the Company hereunder in compliance with Section 3.
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<PAGE>
including: including, without limitation.
Persons: individuals, corporations, partnerships (including "joint
ventures"), trusts, estates, unincorporated organizations and governments
(including political subdivisions), authorities and agencies.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any liabilities on such holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
12. NOTICES. Any notice required or permitted hereunder to be given shall
be given by personal delivery, prepaid registered mail or facsimile
communication, to the respective parties at the addresses set forth below or at
such other addresses as the parties may designate in writing from time to time:
Holder: N. A. Degerstrom, Inc.
North 3303 Sullivan Road
P.O. Box 425
Spokane, Washington 99210-0425
the Company: Minera Andes Inc.
North 3303 Sullivan Road
Spokane, Washington 99216
Any notice, direction or other instrument aforesaid if delivered shall be
deemed to have been given or made on the date on which it was delivered; if
mailed, shall be deemed to have been given or made on the fifth Business Day
following the date on which it was mailed; and if sent by facsimile, shall be
deemed to have been given or made on the next Business Day following the date on
which it was sent; provided, however, that the exercise or any warrant shall be
effective if effected in the manner provided in Section 1. Either party hereto
may change its address for service from time to time by written notice given in
accordance with the foregoing. Notice by mail shall not be effective during any
postal strike or slowdown.
13. MISCELLANEOUS. This Warrant Certificate and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This warrant certificate shall be governed by the laws
of the State of Washington. The headings in this Warrant Certificate are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
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<PAGE>
14. EXPIRATION. The right to exercise this Warrant shall expire at 4:00
p.m., Spokane, Washington time, on January 11, 1998 (or, if such date shall not
be a Business Day, on the next day that is a Business Day).
Attest: MINERA ANDES INC.
______________________________ By:___________________________
Name: Name: Allen Ambrose
Title: Title: President
[Corporate Seal]
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<PAGE>
SUBSCRIPTION NOTICE
MINERA ANDES INC.
The undersigned, the holder of the foregoing Warrant Certificate hereby
elects to exercise purchase rights represented by said Warrant Certificate for,
and to purchase thereunder, Common Shares covered by said Warrant Certificate
and herewith makes payment in full therefor of $____________________ by
forgiveness of $______________________ of indebtedness owed by Minera Andes Inc.
to N. A. Degerstrom, Inc., and requests that (a) certificates for such shares be
issued in the name of and delivered to:_________________, whose address is
____________________________ and (b) if such shares shall not include all of the
shares issuable as provided in said Warrant Certificate, then a new Warrant
Certificate of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
______________________________________
Signature guaranteed:
Dated: ______________________________________
-21-
<PAGE>
AMENDMENT TO THE DEBT RESTRUCTURING AGREEMENT
THIS Amendment dated the 13th day of May, 1996.
BETWEEN:
MINERA ANDES INC., a body corporate, pursuant to the laws of
the Province of Alberta
(hereinafter referred to as "Minera")
- and -
N.A. DEGERSTROM, INC., a body corporate, pursuant to the
laws of the State of Washington
(hereinafter referred to as "Degerstrom")
(collectively called the "Parties")
RECITALS
A. Minera had issued to Degerstrom a promissory note dated November 6, 1995 in
the principal amount of $1,505,000 evidencing Minera's obligations to
Degerstrom for amounts advanced by Degerstrom on Minera's behalf in
connection with Minera's exploration program on its Argentinean properties.
$365,000 of such principal amount has been paid by Minera pursuant to the
terms of the above promissory note.
B. Minera and Degerstrom entered into a Debt Restructuring Agreement dated
January 11, 1996 to restructure payment of the remaining principal and
interest owed under the promissory note dated November 6, 1995.
C. The promissory note dated November 6, 1995 was cancelled.
D. Minera and Degerstrom entered into a new promissory note dated January 11,
1996 in the principal amount of $1,140,000 evidencing Minera's obligations
to Degerstrom.
<PAGE>
- 2 -
E. Minera and Degerstrom wish to further restructure payment of the remaining
principal and interest owed to Degerstrom.
F. The Parties hereto wish to declare, confirm, consent and agree to certain
amendments to the Agreement.
NOW THEREFORE THIS AMENDING AGREEMENT WITNESSETH that in consideration
of the sum of One ($1.00) Dollar paid by the Parties to each other, receipt of
the sum being acknowledged by each of the Parties, the Parties hereto covenant
and agree as follows:
1. INTERPRETATION
1.1 Definitions
In this Amending Agreement, including the recitals hereto, unless
there is something in the subject matter or context inconsistent therewith, the
following words and terms shall have the following meanings:
a. "Agreement" or "agreement" means the Debt Restructuring Agreement
dated January 11, 1996, between Minera Andes Inc. and N.A. Degerstrom,
Inc.;
b. "Amending Agreement" or "amending agreement" means the Amendment to
the Agreement dated May 13, 1996, between Minera Andes Inc. and N.A.
Degerstrom, Inc.
2. AMENDMENTS
The Parties hereto declare, confirm, consent and agree that the
Agreement shall be and is hereby amended as follows:
<PAGE>
- 3 -
a. The promissory note attached as Exhibit "A" to the Agreement is
replaced with the form of note attached to the Amending Agreement as
Exhibit "A";
b. The promissory note dated January 11, 1996 is hereby cancelled and of
no further force or effect;
c. Clause 2 of the Agreement is hereby amended by deleting same in its
entirety and substituting in place and stead thereof the following:
"2. Issuance of New Promissory Note. Contemporaneously with
the execution of this Agreement, Minera agrees to execute
and deliver to Degerstrom a new promissory note,
substantially in the form of note annexed to this Agreement
as Exhibit "A", which new note shall be in the principal
amount of $1,140,000 and, among other things, shall provide
for the payment of principal and interest."
d. Clause 3 of the Agreement is deleted in its entirety.
e. Clause 4 of the Agreement is deleted in its entirety.
f. Clause 5 of the Agreement is deleted in its entirety.
g. Clause 6 of the Agreement is deleted in its entirety.
3. GENERAL
3.1 It is declared and agreed that except as provided in this Amending
Agreement, all covenants, agreements, provisions, stipulations, conditions,
powers and matters and things whatsoever contained in the Agreement shall
continue in all respects in full force and effect.
<PAGE>
- 4 -
3.2 This Amending Agreement shall enure to the benefit of and be binding upon
the successors and assigns of the parties hereto.
3.3 This Amending Agreement shall be executed in several counterparts, each of
which so executed shall be deemed to be an original and such counterparts
together shall constitute one and the same agreement notwithstanding the
foregoing, the date of execution shall be deemed to be so executed from the date
hereof.
3.4 This Amending Agreement shall be effective as of January 11, 1996.
IN WITNESS WHEREOF the Parties hereto have executed this Amending
Agreement as of the date first above written.
MINERA ANDES INC.
Per:
----------------------------------------
N.A. DEGERSTROM, INC.
Per:
----------------------------------------
<PAGE>
Exhibit A to the Amending Agreement
Form of Promissory Note
<PAGE>
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
REOFFERED, SOLD, PLEDGED OR TRANSFERRED EXCEPT (A) IN A
TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144
PROMULGATED UNDER THE ACT, (B) PURSUANT TO AN EXEMPTION FROM,
OR OTHERWISE IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT OR (C) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT.
PROMISSORY NOTE
$1,140,000 May 13, 1996
Spokane, Washington
Minera Andes, Inc., an Alberta corporation, whose principal offices are
located at North 3303 Sullivan Road, P. O. Box 425, Spokane, Washington
99210-0425 ("Maker") promises to pay to N.A. Degerstrom, Inc., a Washington
corporation, whose principal offices are located at North 3303 Sullivan Road, P.
O. Box 425, Spokane, Washington 99210-0425 ("Holder"), the principal sum of One
Million One Hundred Forty Thousand (U.S.$1,140,000) Dollars, together with
interest on that amount, upon the agreements, terms and conditions provided in
this Promissory Note ("Note"):
1. Definitions:
a. Cure Period. The term "Cure Period" means a period of sixty (60) days
from the time the Maker receives notice of a Default.
b. Default. The term "Default" means any of the following events:
i. Maker at any time fails to pay, when due, any sum owing on this
Note; or
ii. Maker breaches or fails to perform any obligation under this Note
or any other agreement between Maker and Holder; or
iii. Maker files or is served with any petition for relief under the
11 U.S.C. Section 101 et seq. or any similar federal, state or
provincial statute, or a proceeding is instituted against Maker
seeing a readjustment of Maker's indebtedness, and such petition
or proceeding is not withdrawn or dismissed within thirty (30)
days from the date Holder received notice of the petition or was
served with process in connection with the proceeding; or
iv. Maker assigns any of its assets for the benefit of its creditors;
or
<PAGE>
- 2 -
v. Maker consents to the appointment of a receiver or trustee, for
all or any part of Maker's property; or
vi. Maker admits, in writing, its inability to pay its debts as they
become due; or
vii. a court of competent jurisdiction enters an order approving a
petition seeking a reorganization of Maker or appointing a
receiver, trustee, or other similar official of substantially all
of Maker's assets.
c. Default Rate. The term "Default Rate" means the rate of interest
otherwise payable on this Note plus three percent (3%).
2. Interest:
Sums owing on this Note shall bear no interest from the date of this Note
until July 15, 1996. Thereafter, sums then owing on this Note shall bear
interest at the rate of eight percent (8%) per annum. Should Maker default on
any of the obligations specified in this Note, all sums owing on the Note shall
bear interest at the Default Rate.
3. Payment
Maker shall pay Holder the principal of and interest on this Note as
follows:
a. the amount of Cdn. $720,000, which shall constitute a portion of the
principal owned under this Note, shall be paid on or before July 15,
1996;
b. the amount of Cdn. $875,000, which shall constitute a portion of the
principal owed under this Note, shall be paid on or before August 15,
1996;
c. remaining amounts, if any, owed under this Note, together with any
accrued and unpaid interest shall be payable as and when Maker obtains
any equity financing from or through Haywood Securities Inc. or
Yorkton Securities Inc. from and after July 15, 1996 and in any event
on or before one year from the date of this Note.
All payments shall be made in the lawful currency of the United States of
America. All payments shall be made to the Holder at the address set forth
above, or at such other place as the Holder may specify in writing. Amounts
deemed paid in Canadian dollars pursuant to subparagraphs 3(a) and (b), above,
shall be converted to United States dollars at the exchange rate in effect as of
the date such payments are deemed made.
4. Prepayment
Maker may prepay any amount owing on this Note without incurring any
additional charge, provided that Maker gives Holder written notice of the amount
to be prepaid at least three (3) days before the date of prepayment and Holder
consents to such prepayment.
<PAGE>
- 3 -
Notwithstanding any prepayment, Maker shall continue to make all succeeding
instalments or other payments as they become due, until this Note is completely
paid.
5. Security
The payment of all sums owing on this Note shall be secured by a lien and
security interest in and to the equipment, furniture, fixtures, inventory,
accounts, chattels, papers, documents, instruments and general intangibles of
Maker, as defined in the Washington Uniform Commercial Code, and the proceeds
received from any sale or other disposition of such items and any replacements,
renewals or additions thereto.
6. Notice of Default; Cure
Upon a Default, Holder shall deliver written notice of the Default to
Maker. Maker shall have the right to cure, within the Cure Period, any Default
described in Section 1(b)(i) or (ii) of this Note. Maker may not cure a Default
described in Section 1(b)(iii) through (vii) of this Note. If Maker fails to
cure a Default within the Cure Period, or is prohibited from curing the Default,
Holder may accelerate all amounts owing on the Note. Such accelerated amounts
shall become immediately due and payable. If Holder accelerates the amounts due
under this Note, Holder shall have the right to pursue any or all of the
remedies provided in this Note, including, but not limited to, the right to
bring suit on the Note.
7. Remedies
Upon a Default and expiration of any applicable Cure Period, Holder shall
have all rights available to it at law or in equity, including all rights
available under the Washington Uniform Commercial Code. Any unpaid balance
outstanding at the time of a Default, and any costs or other expenses incurred
by Holder in realizing on this Note, shall bear interest at the Default Rate.
All rights and remedies granted under this Note shall be deemed cumulative and
not exclusive of any other right or remedy available to Holder. Maker waives all
rights to presentment, notice of dishonour and protest of this Note.
8. Attorneys' Fees, Costs, and Other Expenses
Maker agrees to pay all costs and expenses which Holder may incur by reason
of any Default, including, but not limited to, reasonable attorneys' fees,
expenses, and costs incurred in any action undertaken with respect to this Note,
or the appeal of any such action. Any judgment recovered by Holder shall bear
interest at the Default Rate.
9. Transfer; Obligations Binding on Successors
Maker may not transfer any of its rights, duties or obligations under this
Note without the prior written consent of Holder. This Note, and the duties set
forth in the Note, shall bind Maker and its successors and assigns. All rights
and powers established in this Note shall benefit Holder and its successors and
assigns.
<PAGE>
- 4 -
10. Notices
Any Notice, consent or other communication required or permitted under this
Note shall be in writing and shall be deemed to have been duly given or made
either (1) when delivered personally to the party to whom it is directed (or any
officer or agent of such party) or (2) three days after being deposited in the
United States' certified or registered mail, postage prepaid, return receipt
requested, and properly addressed, if sent to Maker, at North 3303 Sullivan
Road, P.O. Box 425, Spokane, Washington 99210-0425, Attention: Allen Ambrose, or
if sent to Holder, at North 3303 Sullivan Road, P.O. Box 425, Spokane,
Washington 99210-0425, Attention: James Fish, or at such other address as Holder
shall have provided to Maker in writing.
11. Governing Law
This Note will be construed and the rights, duties, and obligations of the
parties will be determined in accordance with the laws of the State of
Washington and the federal laws of the United States of America.
12. Headings
Headings used in this Note have been included for convenience and ease of
reference only, and will not in any manner influence the construction or
interpretation of any provision of this Note.
13. Waiver
No right or obligation under this Note will be deemed to have been waived
unless evidenced by a writing signed by the party against whom the waiver is
asserted, or by its duly authorized representative. Any waiver will be effective
only with respect to the specific instance involved, and will not impair or
limit the right of the waiving party to insist upon strict performance of the
right or obligation on any other instance, in any other respect, or at any other
time. No failure on the part of Holder to exercise, and no delay in exercising,
any right or obligation under this Note shall operate as a waiver thereof.
14. Severability
The parties intend that this Note be enforced to the greatest extent
permitted by applicable law. Therefore, if any provision of this Note, on its
face or as applied to any person or circumstances, is or becomes unenforceable
to any extent, the remainder of this Note and the application of that provision
to other persons, circumstances or extent, will not be impaired.
15. References
Except as otherwise specifically indicated, all references in this Note to
numbered or lettered sections or subsections refer to sections or subsections of
this Note. All references to this Note include any subsequent amendments to the
Note.
<PAGE>
- 5 -
16. Venue
Maker agrees that any action on this Note must be brought in a court of
appropriate jurisdiction in Spokane County, Washington.
17. Maximum Interest
Notwithstanding any other provisions of this Note, any interest, fees, or
charges payable by reason of the indebtedness evidenced by this Note shall not
exceed the maximum permitted by law.
18. Supersedes Prior Note
This Note supersedes and replaces in its entirety the terms of that certain
promissory note dated as of November 6, 1995, between Maker and Holder.
19. Supersedes Prior Note
This Note supersedes and replaces in its entirety the terms of that certain
promissory note dated as of January 11, 1996, between Maker and Holder.
MAKER: MINERA ANDES INC.
By:
-----------------------------------------
Allen Ambrose
Its duly authorized officer
FORM C
ESCROW AGREEMENT
(Performance Escrow Agreement)
THIS AGREEMENT made in triplicate this 30th day of November, 1995.
MINERA ANDES INC.
a corporation with an office
in Vancouver, British Columbia
(herein called the "Issuer")
OF THE FIRST PART
- and -
MONTREAL TRUST COMPANY OF CANADA, being a trust company
with an office located in Calgary, Alberta
(herein called the "Trustee")
OF THE SECOND PART
- and -
N.A. DEGERSTROM, INC.
a company having an office
Spokane, Washington
(herein called the "Security Holder")
OF THE THIRD PART
WHEREAS the Security Holder and the Issuer entered into an agreement
dated the 8th day of March, 1995 whereby the Security Holder agreed to sell
shares it held in NAD (S.A.) and Minera Andes S.A. (the "Subsidiaries") to the
Issuer, the consideration for such property being at least in part the allotment
of securities in the Issuer to the Security Holder
WHEREAS the Subsidiaries became subsidiaries of the Issuer.
<PAGE>
2
WHEREAS the Subsidiaries and the Issuer have interests in a number of
mining claims in the Republic of Argentina (such business constituting the
"Property").
AND WHEREAS in order to comply with the requirements of The Alberta
Stock Exchange, the Security Holder is desirous of depositing in escrow certain
of the Issuer Shares owned or to be received by them (the "Escrowed Shares"),
the number of Escrowed Shares more particularly described in Schedule "A"
attached to and forming part of this agreement;
AND WHEREAS the Trustee has agreed to undertake and perform its duties
according to the terms and conditions thereof;
NOW THEREFORE this agreement witnesses that, in consideration of the
sum of One ($1.00) Dollar paid by the parties to each other, receipt of this sum
being irrevocably acknowledged by each of the parties, the Security Holder
covenants and agrees with the Issuer and with the Trustee, and the Issuer and
the Trustee covenant and agree each with the other and with the Security Holder
jointly and severally, as set forth below.
1. Where used in this agreement, or in any amendment or supplement hereto,
unless the context otherwise requires, the following words and phrases shall
have the following ascribed to them below:
(a) "Deferred Expenditures" means expenditures which have been verified by
the Issuer's auditors and incurred in exploring, developing or
maintaining in good standing the aforesaid Property from March 15,
1995 onward.
(b) "Related Party" means promoters, officers, directors, other insiders
of the Issuer and any associates or affiliates of the foregoing.
2. The Security Holder hereby places and deposits in escrow with the Trustee
those of its securities in the Issuer which are represented by the certificates
described in Schedule "A"
<PAGE>
3
and the Trustee hereby acknowledges receipt of those certificates. The Security
Holder agrees to deposit in escrow any further certificates representing
securities in the Issuer which he may receive as a stock dividend on securities
hereby escrowed, and to deliver to the Trustee immediately on receipt thereof
the certificates for any such further securities and any replacement
certificates which may at any time be issued for any Escrowed Shares.
3. The Parties hereby agree that, subject to the provisions of paragraph 6
herein, the securities and the beneficial ownership of or any interest in them
and the certificates representing them (including any replacement securities or
certificates) shall not be sold, assigned, hypothecated, alienated, released
from escrow, transferred within escrow, or otherwise in any manner dealt with,
without the prior written consent of The Alberta Stock Exchange (hereinafter
referred to as the "Exchange") given to the Trustee or except as may be required
by reason of the death or bankruptcy of the Security Holder, in which cases the
Trustee shall hold the said certificates subject to this agreement, for whatever
person, or company shall be legally entitled to become the registered owner
thereof.
4. The Security Holder directs the Trustee to retain his securities and the
certificates (including any replacement securities or certificates) representing
them and not to do or cause anything to be done to release them from escrow or
to allow any transfer, hypothecation or alienation thereof, without the written
consent of the Exchange. The Trustee accepts the responsibilities placed on it
by the agreement and agrees to perform them in accordance with the terms of this
agreement and the written consents, orders or directions of the Exchange.
5. The Security Holder when applying to the Exchange for a consent for a
transfer within escrow shall, before applying, give reasonable notice in writing
of his intention to the Issuer and the Trustee.
6. (a) The Exchange will consent to the release from escrow of one Escrowed
Share for each $0.375 cents of Deferred Expenditures incurred on
the Property.
<PAGE>
4
(b) Any release from escrow under this paragraph 6 shall be made pursuant
to a written application on behalf of the Issuer or the Security
Holder, which in respect of applications made pursuant to paragraph
6(a) hereof shall be accompanied by evidence of the Deferred
Expenditures incurred in a form satisfactory to the Exchange.
Application for release pursuant to paragraph 6(a) may only be made
once per year and may only relate to Deferred Expenditures incurred in
the preceding fiscal year or the fiscal years of the Issuer since the
last release from escrow pursuant to this agreement, whichever is
greater.
(c) Notwithstanding paragraph (b) above, the maximum number of shares to
be released from escrow in any year to the Security Holder shall be
one-third of the original number of shares held in escrow on behalf of
such Security Holder.
7. A release from escrow of all or part of the Escrowed Shares shall terminate
this agreement only in respect to those securities so released. For greater
certainty this paragraph does not apply to securities transferred within escrow.
8. The Security Holder shall, if a dividend is declared while the Escrowed
Shares or any of them continue to be held in escrow under this agreement,
renounce and release any right to receive payment of the dividend on the shares
then held in escrow.
9. If the Issuer is wound up and any securities remain in escrow under this
agreement at the time when a distribution of assets to holders of securities is
made by the liquidator, the Security Holder shall assign its right to receive
that part of the distribution which is attributable to the Escrowed Shares to
the Trustee, for the benefit of, and in trust for the persons and companies who
are then holders of free securities in the Issuer rateably in proportion to
their holdings.
10. (a) In the event that the Issuer has lost, alienated or has not obtained
a good or marketable title to, or has abandoned or discontinued
development of,
<PAGE>
5
substantially all of the aforesaid Property, or that substantially all
of the said Property has become of little or no value, the Issuer
shall declare the occurrence of that event, with full particulars
thereof, to the Exchange by a resolution of its directors.
(b) The Security Holder agrees with the Issuer and the Trustee that in the
event of any such loss, alienation, failure to acquire title, or of
such abandonment or discontinuance of development or diminution of
value, the securities held in escrow shall not be cancelled or
released from escrow, in whole or in part, except with the consent of
the Exchange.
(c) The Exchange may, in its sole discretion, having regard to the number
and value of the securities issued for the Property, the value of the
Property as ultimately established and such other circumstances as it
may consider relevant, determine the number of securities to be
cancelled or released and shall communicate its decision in writing to
the Trustee. If the Exchange determines that less than all the
securities then held in escrow shall be cancelled or released, the
securities to be cancelled or released shall be taken rateably from
the escrowed security holding of the Security Holder, unless the
Exchange otherwise directs or the Security Holder, with the consent of
the Exchange, otherwise agrees in writing.
(d) On receipt by the Trustee of a determination to cancel, the Security
Holder shall tender the required number of Escrowed Shares to the
Issuer by way of gift for cancellation and, the Issuer shall thereupon
take the necessary action, by way of reduction of capital or
otherwise, to cancel them, and the certificates for these securities
shall be delivered up for cancellation by the Issuer's transfer agent.
(e) The Security Holder undertakes and agrees to vote and cause to be
voted its securities in a manner consistent with the terms, conditions
and intent of this agreement in relation to the aforesaid gifting back
of securities for cancellation.
<PAGE>
6
11. Notwithstanding paragraphs 6 and 10, any shares remaining in escrow on the
fifth anniversary of the date of this agreement, unless otherwise exempted in
writing by the Exchange, shall be cancelled by the Trustee within six months of
the said fifth anniversary. It being acknowledged that the Exchange has advised
that they would be willing to consider an application in the fourth year of this
agreement for an extension of the five year period, and may grant such an
application where the Property has achieved significant growth in revenues, is
financially solvent, and will be able to generate positive cash flow in the
first year of the extended period of this agreement.
12. All voting rights attached to the Escrowed Shares shall at all times be
exercised by the Security Holder.
13. The Security Holder and the Issuer hereby agree to and do hereby release and
indemnify and save harmless the Trustee from and against all claims, suits,
demands, costs, damages and expenses which may be occasioned by reason of the
Trustee's compliance in good faith with the terms hereof.
14. The Issuer hereby acknowledges the terms and conditions of this agreement
and agrees to take all reasonable steps to facilitate its performance and to pay
the Trustee's proper charges for its services as trustee of this escrow.
15. If the Trustee should wish to resign, it shall give at least three months'
notice to the Issuer which may, with the written consent of the Exchange, by
writing appoint another Trustee in its place and such appointment shall be
binding on the Security Holder, and the new Trustee shall assume and be bound by
the obligations of the Trustee hereunder.
16. The covenants of the Security Holder with the Issuer in this agreement are
made with the Issuer both in its own right and as trustee for the holders from
time to time of free securities in the Issuer, and may be enforced not only by
the Issuer but also by any holder of free securities.
<PAGE>
7
17. This agreement may be executed in several parts of the same form, including
facsimile counterpart and the parts as so executed shall together constitute one
original agreement, and the parts, if more than one, shall be read together and
construed as if all the signing parties hereto had executed one copy of this
agreement.
18. Wherever the singular or masculine is used, the same shall be construed to
include the plural or feminine or neuter where the context so requires.
19. This agreement shall enure to the benefit of and be binding on the parties
to this agreement and each of their heirs, executors, administrators, successors
and assigns.
<PAGE>
8
IN WITNESS WHEREOF the Issuer and the Trustee have caused their
respective corporate seals to be hereto affixed and the Security Holder has
hereto set its respective hand and seal.
MINERA ANDES INC.
Per: /s/ ALLEN V. AMBROSE
----------------------------------------
Per: /s/ ARMAND S. HANSEN (c/s)
-----------------------------------
MONTREAL TRUST COMPANY OF
CANADA
Per: /s/ ILLEGIBLE
----------------------------------------
Per: /s/ ILLEGIBLE (c/s)
-----------------------------------
SIGNED, SEALED AND DELIVERED by the Security Holder whose name is subscribed in
the right-hand column below.
N.A. DEGERSTROM, INC.
Per: /s/ JAMES A. FISH
----------------------------------------
Vice President
Per: /s/ MICHAEL D. CANNON (c/s)
-----------------------------------
Secretary-Treasurer
<PAGE>
9
SCHEDULE "A"
to the escrow agreement dated the 30th day of November, 1995, and made among,
Minera Andes Inc., therein called the "Issuer", Montreal Trust Company of
Canada, therein called the "Trustee", and the security holder of the Issuer,
therein called the "Security Holder" as set forth below.
<TABLE>
<CAPTION>
===============================================================================
Certificate
Number of Numbers of
Type of Issuer Securities Securities
Name of Security Holder (1) Security Escrowed Escrowed
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
N.A. Degerstrom Inc.
Spokane, Washington Common Share 4,000,000 C-23
- -------------------------------------------------------------------------------
TOTAL 4,000,000
===============================================================================
</TABLE>
Agency Agreement -- Private Placement
- -------------------------------------------------------------------------------
THIS AGREEMENT dated for reference November 22, 1996, is made
BETWEEN
MINERA ANDES INC., 1600, 407 - 2nd Street S.W., Calgary,
Alberta, T2P 2Y3
(the "Issuer");
AND
C.M. OLIVER & COMPANY LIMITED, Suite 1600, 1750 West Pender
Street, Vancouver, British Columbia, V6C 2T8
AND
MAJENDIE CHARLTON SECURITIES LTD, 2710, 140 - 4th Avenue
S.W., Calgary, Alberta, T2P 3N3
(individually an "Agent" and collectively the "Agents")
WHEREAS:
A. The Issuer wishes to privately place with investors up to 3,809,524 Special
Warrants at a price of $2.10 per Special Warrant;
B. The Issuer wishes to appoint the Agents to distribute the Special Warrants,
and the Agents are willing to accept such appointment on the terms and
conditions of this Agreement;
THE PARTIES to this Agreement therefore agree:
1. DEFINITIONS
1.1 In this Agreement and the Recitals hereto:
(a) "1933 Act" means the Securities Act of 1933 (United States of
America), as amended;
(b) "Act" means the Securities Act (British Columbia), S.B.C. 1985, as
amended;
(c) "Acts" means the Act and the Alberta Act;
(d) "Agents' Fee" means the compensation provided for in Section 5 hereof;
<PAGE>
- 2 -
(e) "Agents' Special Warrants" means up to 340,420 special warrants of the
Issuer having the terms provided in Section 3 hereof and in the
certificates representing the Agents' Special Warrants.
(f) "Alberta Act" means the Securities Act (Alberta), S.A. 1981, c. S-6.1,
as amended;
(g) "Alberta Commission" means the Alberta Securities Commission;
(h) "Applicable Legislation" means the Acts, the regulations and rules
made thereunder, and all policy Statements, blanket orders and
rulings, notices and interpretation Notes and other administrative
policies and directions issued by the Commissions;
(i) "Closing" means a day the sale of some or all of the Special Warrants
to the Purchasers is completed;
(j) "Commissions" means the British Columbia Securities Commission and the
Alberta Commission;
(k) "Degerstrom Agreement" means the agreement between the Issuer and N.A.
Degerstrom Inc. dated July 1, 1994 concerning the acquisition by the
Issuer of certain Subsidiaries;
(l) "Distribution" means the proposed issuance of Shares and Warrants to
the holders of the Special Warrants on the deemed exercise of the
Special Warrants, and the proposed issuance of Warrants to the Agents
upon deemed exercise of the Agents' Special Warrants, free of any
resale restrictions in British Columbia and Alberta other than those
imposed on "control persons", as that term is defined in the Acts;
(m) "Exchange" means The Alberta Stock Exchange;
(n) "Exemptions" means the exemptions from the prospectus requirements of
the Acts at Section 55(2)(4) of the Act, and Sections 107(1)(d) and
(z) of the Alberta Act, and Alberta Securities Commission Notice 7;
(o) "Filing Deadline" means the date the subscription forms and other
documentation concerning the Private Placement are required to be
filed with the Exchange, or any extension thereof;
(p) "Final Closing" means the final closing of the Private Placement;
(q) "First Closing" means the first closing of the Private Placement;
<PAGE>
- 3 -
(r) "Material Change" has the meaning defined in the Acts;
(s) "Material Fact" has the meaning defined in the Acts;
(t) "Private Placement" means the offering of the Special Warrants on the
terms and conditions of this Agreement;
(u) "Prospectus" means a preliminary and final prospectus which, upon
issuance of a receipt therefore by each of the Commissions, will
qualify the Distribution;
(v) "Purchasers" means the purchasers of Special Warrants;
(w) "Qualification Date" means the date on which a receipt for the final
Prospectus has been issued by each of the Commissions;
(x) "Regulation S" means Regulation S promulgated under the 1933 Act;
(y) "Regulatory Authorities" means the Commissions and the Exchange;
(z) "Securities" means the Special Warrants, the Agents' Special Warrants,
the Shares, the Warrants and the Warrant Shares;
(aa) "Shares" means previously unissued Common Shares in the capital of the
Issuer as presently constituted which may be issued on exercise or
deemed exercise of the Special Warrants;
(ab) "Special Warrant Indenture" means an indenture providing for the
issuance of the Special Warrants to be made between the Issuer and
Montreal Trust Company of Canada, in form and substance satisfactory
to the Agents
(ac) "Special Warrants" means special warrants of the Issuer having the
terms provided in Section 3 hereof and in the Special Warrant
Indenture;
(ad) "Subsidiary" has the meaning defined in the Securities Act (British
Columbia);
(ae) "Warrant Indenture" means an indenture providing for the issuance of
the Warrants to be made between the Issuer and Montreal Trust Company
of Canada, in form and substance satisfactory to the Agents;
(af) "Warrants" means Common Share purchase warrants of the Issuer having
the terms provided in Section 4 hereof and the Warrant Indenture
<PAGE>
- 4 -
which may be issued on exercise or deemed exercise of the Special
Warrants and the Agents' Special Warrants; and
(ag) "Warrant Shares" means previously unissued Common Shares in the
capital of the Issuer as presently constituted which may be issued on
exercise of the Warrants.
1.2 In this Agreement, the following terms shall have the meanings defined in
Regulation "S": "Directed Selling Efforts", "Foreign Issuer", "Substantial U.S.
Market Interest", "U.S. Person" and "United States".
2. APPOINTMENT OF AGENTS
2.1 The Issuer appoints the Agents as its exclusive agents and the Agents accept
the appointment and agree to act as the exclusive agents of the Issuer to use
commercially reasonable efforts to find and introduce to the Issuer, on an
agency basis, potential investors to purchase the Special Warrants, at a price
of $2.10 per Special Warrant, by way of private placement under the Exemptions.
2.2 The Issuer will not enter into discussions concerning financings other than
the Private Placement with any other investment dealer or person until after the
Final Closing without first obtaining the written consent of the Agents.
2.3 The rights and obligations of the Agents under this Agreement, including but
not limited to the right and obligation to offer the Special Warrants and the
entitlement to the Agent's Fee, will be several (as distinguished from joint)
rights and obligations for each Agent. For greater certainty, no Agent shall
become liable for or held to account for any costs, expenses, claims or damages
suffered by any person caused by the fault of the other Agent.
2.4 Except as otherwise specifically provided in this Agreement, the rights and
obligations of the Agents will be divided in the proportions in which the Agents
participate in the Private Placement.
2.5 The Agents will participate in the Private Placement in such percentages as
they may agree between themselves.
2.6 This Agreement will be construed in relation to each Agent as if separate
agreements had been made between the Issuer and each Agent.
2.7 Each Agent may act independently of the others and is not bound by any act
or omission of the other Agents.
<PAGE>
- 5 -
3. SPECIAL WARRANTS AND AGENTS' SPECIAL WARRANTS
Special Warrants
3.1 The Special Warrants will have the terms provided herein and in the Special
Warrant Indenture, and will be registered in the names of the Purchasers or
their nominees.
3.2 Each Special Warrant will entitle the holder to acquire one Share and one
Warrant, without payment of further consideration, on the exercise or deemed
exercise of the Special Warrant.
3.3 If the Qualification Date has not occurred by that day which falls 150 days
from the date of the First Closing, then each Special Warrant will entitle the
holder to acquire 1.1 Shares and 1.1 Warrants, without payment of further
consideration, upon the exercise or deemed exercise of the Special Warrants.
3.4 Each Special Warrant may be exercised by the holder in whole or in part at
any time after the Closing on which it was issued. All unexercised Special
Warrants will be deemed to be exercised on that day which is the earlier of:
(a) 12 months from the date of the First Closing; and
(b) the fifth business day after the Qualification Date.
3.5 Upon exercise or deemed exercise, the Special Warrants will be automatically
cancelled and will have no further force or effect.
3.6 The Special Warrant Indenture will contain, among other things, provisions
for the appropriate adjustment in the class and number of Shares and Warrants
issued upon exercise or deemed exercise of the Special Warrants upon the
occurrence of certain events, including any subdivision, consolidation or
reclassification of the Issuer's common shares, the payment of stock dividends
and the amalgamation of the Issuer.
Agents' Special Warrants
3.7 The Agent's Special Warrants will:
(a) be non-transferrable;
<PAGE>
- 6 -
(b) have the terms provided herein and in the certificates representing
the Agents' Special Warrants (which will be satisfactory in form and
substance to the Agent); and
(c) will be registered in the names of the Agents, or members of their
selling group.
3.8 Each Agent's Special Warrant will entitle the holder to acquire one Warrant,
without payment of further consideration, on the exercise or deemed exercise of
the Agent's Special Warrant.
3.9 Each Agent's Special Warrant may be exercised by the holder in whole or in
part at any time after the Closing. All unexercised Agent's Special Warrants
will be deemed to be exercised on that day which is the earlier of:
(a) 12 months from the date of the First Closing; and
(b) the fifth business day after the Qualification Date.
3.10 Upon exercise or deemed exercise, the Agents' Special Warrants will be
automatically cancelled and will have no further force or effect.
3.11 The certificates representing the Agents' Special Warrants will contain,
among other things, provisions for the appropriate adjustment in the number and
exercise price of Warrants issued upon exercise or deemed exercise of the
Agents' Special Warrants upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of the Issuer's common shares,
the payment of stock dividends and the amalgamation of the Issuer.
4. WARRANTS
4.1 The Warrants will be registered in the name of the Purchasers or their
nominees.
4.2 The right to purchase Warrant Shares under the Warrants may be exercised at
any time until the close of business on that day which falls two years from the
date of the First Closing.
<PAGE>
- 7 -
4.3 Two Warrants will entitle the holder, on exercise, to purchase one Warrant
Share, at $2.50 per Warrant Share until that day which falls one year from the
First Closing ("the First Term") and at $2.88 from the First Term until that day
which falls two years from the date of the First Closing.
4.4 The Warrant Indenture will, among other things, include provisions for the
appropriate adjustment in the class, number and price of the Warrant Shares
issuable upon exercise of the Warrants upon the occurrence of certain events,
including any subdivision, consolidation or reclassification of the Issuer's
Common Shares, the payment of stock dividends and the amalgamation of the
Issuer.
5. AGENTS' FEE
5.1 In consideration of sales of Special Warrants made by the Agents under this
Agreement, the Issuer agrees:
(a) to pay to the Agents on each Closing a commission of 7% of the gross
proceeds received by the Issuer from the sale of the Special Warrants
on such Closing (except for proceeds received from the sale of Special
Warrants on a Closing to Isaac Arnold Jr., The 1993 Miller Family
Investment Partnership, Meridian Advisors Ltd. or Arnold Corporation,
in respect of which a commission of 2% will be payable); and
(b) to issue to the Agents on each Closing a number of Agents' Special
Warrants equal to 10% of the number of Special Warrants sold to
Non-U.S. Purchasers on such Closing.
5.2 In respect of corporate finance services rendered by the Agents, including
marketing, consultation and research support, the Issuer agrees to issue to the
Agents on First Closing 150,000 Agents' Special Warrants and on the Final
Closing 50,000 Agents' Special Warrants.
5.3 The Agents acknowledge receipt of written notice from the Issuer that each
Agent must file a report in the form attached to British Columbia Securities
Commission blanket order and ruling number 95-17 (the "Initial Trade Report"),
or the report required under the laws of Alberta, provided that the report
requires substantially the same information as is required in the initial trade
report (the "Purchaser's Report"), within 10 days of the initial trade of the
Agent's Special Warrants by the Agents; and, where the Agents have filed an
Initial Trade Report or the Purchasers Report with respect to the Agent's
Special Warrants, the Agents will not be required to file a further report in
respect of additional trades in the Agent's Special Warrants.
<PAGE>
- 8 -
6. OFFERING RESTRICTIONS
6.1 The Agents will only sell the Special Warrants to investors purchasing as
principal who represent themselves as being:
(a) qualified to purchase the Special Warrants under the Exemptions;
(b) persons who are U.S. Persons, or in the United States, and represent
themselves as being qualified to purchase Special Warrants in
transactions exempt from the registration requirement of the 1933 Act
and applicable state securities laws; and
(c) persons who are residents of British Columbia or Alberta.
6.2 The Private Placement has not been and will not be advertised in any way.
6.3 No selling or promotional expenses will be paid or incurred in connection
with the Private Placement, except for professional services or for services
performed by a registered dealer.
6.4 No Directed Selling Efforts in connection with the Private Placement shall
be made in the United States by the Issuer, the Agents, any of their respective
affiliates, or any person acting on behalf of the foregoing.
7. SUBSCRIPTIONS
The Agents will use their best efforts to obtain from each Canadian or non-U.S.
Purchaser introduced by the Agent duly completed and signed subscriptions in the
form attached as Schedule "A" and each U.S. Purchaser introduced by the Agents,
duly completed and signed subscriptions in the form attached as Schedule "B",
and deliver such subscriptions to the Issuer, on or before the Filing Deadline
or in such other form as may be agreed by the Issuer and the Agents.
8. FILINGS WITH THE REGULATORY AUTHORITIES
8.1 The Issuer will forthwith provide to the Exchange written notice of the
terms of this Agreement, an application for listing on the Exchange of the
Shares and the Warrant Shares, and all other information concerning the Private
Placement required by the rules and policies of the Exchange (the "Notice").
<PAGE>
- 9 -
8.2 The Issuer will forthwith provide the Agent and its solicitors with a copy
of the Notice, and, forthwith on receipt, a copy of the preliminary letter of
acceptance of the Notice from the Exchange.
8.3 The Issuer will file all required documents, pay all required fees and
undertake any other actions required by the rules and policies of the Exchange
in order to obtain the approval of the Exchange for the listing of the Shares
and the Warrant Shares, and the Private Placement.
8.4 Within 10 days of the Closing, the Issuer will:
(a) file with the Commission and the Alberta Commission any report
required to be filed by the Act and the Alberta Act in connection with
the Private Placement, in the required form; and
(b) provide the Agents' solicitors with copies of the report or reports.
9. CLOSINGS
9.1 In this Section:
(a) "Certificates" means the certificates representing the Special
Warrants to be sold, and the Agents' Special Warrants to be issued, on
a Closing, in the names and denominations reasonably requested by the
Agents or the Purchasers;
(b) "Proceeds" means the gross proceeds of the sale of Special Warrants,
less the cash portion of the Agents' Fee, the Agents' expenses which
have not been repaid by the Issuer, and any amount which has been
attached by garnishing order or other form of attachment.
9.2 On each Closing, the Issuer will deliver the Certificates to the Agents or,
at the Agents' request, to the Purchasers, against payment of the Proceeds by
certified cheque or bank draft and delivery of completed subscription agreements
with attachments.
9.3 If the Issuer has satisfied all of its obligations under this Agreement, the
Agents will, on each Closing, pay the Proceeds to the Issuer.
<PAGE>
- 10 -
9.4 The Issuer will endorse the Certificates representing Special Warrants sold
to residents of British Columbia and Alberta with a statement that:
(a) the securities represented by the certificate are subject to a hold
period and may not be traded in British Columbia or Alberta until the
expiry of the applicable hold period except as permitted by the Acts;
and
(b) specifies the date the hold period expires, being:
(i) in British Columbia, 12 months from the date of issue of the
Special Warrants; and
(ii) in Alberta, 18 months from the date of issue of the Special
Warrants.
9.5 Within 10 days of delivery of the Certificates to the Agents, the Issuer
will:
(a) file with the Commissions any reports required to be filed by the Acts
in connection with the sale of the Special Warrants to the Purchasers,
and the issuance of the Agents' Special Warrants to the Agents, in the
required form; and
(b) provide the Agents' solicitors with copies of the reports.
10. CONDITIONS OF CLOSING
10.1 The Agents' obligations on each Closing shall be conditional upon the
following:
(a) the Issuer shall have delivered to the Agents and their solicitors
favourable opinions of the Issuer's Canadian and U.S. solicitors dated
as of the date of the Closing as to all legal matters in connection
with the creation, issuance and sale of the Special Warrants as may be
reasonably requested by the Agents, in form and substance acceptable
to the Agents;
(b) the Issuer shall have delivered to the Agents and their solicitors
such other certificates, comfort letters or opinions of its auditors
or other experts relating to the Private Placement or the affairs of
the Issuer as the Agents or their solicitors may reasonably request,
including a certificate of the President of the Issuer that (among
other things) each of the representations and warranties of the Issuer
herein continue to be true and correct; and
<PAGE>
- 11 -
(c) each of the representations and warranties of the Issuer herein shall
continue to be true, and the Issuer shall have performed or complied
with all of its covenants, agreements and obligations hereunder.
10.2 Each Closing and the obligations of the Issuer and the Agents to complete
the issue and sale of the Securities are subject to:
(a) receipt of all required regulatory approval for or acceptance of the
Private Placement; and
(b) the removal or partial revocation of any cease trading order or
trading suspension made by either of the Commissions to the extent
necessary to complete the Private Placement.
11. POST CLOSING COVENANTS OF THE ISSUER
11.1 The Issuer will not issue or announce the issuance of any common shares or
other securities for six months following the date of the Final Closing without
first obtaining the written consent of the Agents, such consent not to be
unreasonably withheld. Notwithstanding the provisions of this Subsection 11.1,
the Issuer may during such time issue a number of its common shares equal to or
less than 10% of its common shares as are issued and outstanding at the date
hereof in respect of the acquisition of mining or exploration properties without
first obtaining the written consent of the Agents.
11.2 The Issuer will not announce the issuance of any common share purchase
warrants, options to purchase common shares or other securities of the Issuer
convertible or exercisable, directly or indirectly, to obtain common shares for
six months following the date of the Final Closing without first obtaining the
written consent of the Agents, such consent not to be unreasonably withheld. The
issue, strike or conversion price of all such securities issued with the consent
of the Agent shall not be less than the price per Special Warrant hereunder.
Notwithstanding the provisions of this Subsection 11.2, the Issuer may during
such time issue to its directors and officers incentive options to purchase such
number of common shares at such prices as may be permitted under the rules and
policies of the Exchange without first obtaining the written consent of the
Agents.
11.3 The Issuer will not enter into any amalgamation, merger, other form of
business combination, and will not undertake the acquisition of any material
assets, or enter into any agreement for the foregoing for six months following
the date of the Final Closing, without first obtaining the written consent of
the Agents, such consent not to be unreasonably withheld.
<PAGE>
- 12 -
12. MATERIAL CHANGES
The Issuer agrees that if, between the reference date of this Agreement and the
Qualification Date, a Material Change, or a change in a Material Fact occurs,
the Issuer will:
(a) notify the Agents in writing, setting forth the particulars of such
change;
(b) as soon as practicable, issue and file with the Exchange and the
Commissions a press release that is authorized by a senior officer
disclosing the nature and substance of the change;
(c) file with the Commissions the report required by the Acts as soon as
practicable, and in any event no later than 10 days after the date on
which the change occurs;
(d) provide copies of that press release, when issued, and that report,
when filed, to the Agents and their solicitors;
(e) if such change is adverse, and the preliminary Prospectus has been
filed, provided the Agents have first approved the form and substance
of the amendment, amend the Prospectus to reflect the change; and
(f) if an amendment is prepared to the Prospectus, file such amendment
with the Commissions within the time limited by the Acts, and provide
the Agents without charge with as many commercial copies of such
amendment as it may reasonably require.
13. PROSPECTUS
13.1 The Issuer will use its best efforts to obtain a receipt for the final
Prospectus from each of the Commissions by that day which falls 150 days from
the date of the Closing.
13.2 If the Issuer has not obtained a receipt for the Prospectus from each of
the Commissions by that day which falls 150 days from the date of Closing, it
will nevertheless continue to use such efforts to obtain such receipts until
that day which falls one year from the date of Closing.
13.3 The Prospectus will be in form and substance satisfactory to the Agents and
their solicitors.
13.4 The Issuer will permit the Agents and their solicitors to participate in
the preparation of the Prospectus, to discuss the Issuer's business with its
corporate
<PAGE>
- 13 -
officials and auditors and to conduct such full and comprehensive
review and investigation of the Issuer's business, affairs, capital and
operations as the Agents and their solicitors reasonably consider to be
necessary to establish a "due diligence" defence under the Acts to an action for
rescission or damages thereunder, and to enable the Agents to responsibly
execute the Underwriter's Certificate in the Prospectus.
13.5 The Prospectus will contain a contractual right of rescission of the
purchase of Special Warrants granted by the Issuer to the Purchasers in the form
required by Applicable Legislation, and exercisable as provided therein in the
event the Prospectus contains a misrepresentation, within the meaning of the
Acts.
13.6 Provided the Agents and their solicitors are satisfied that the Prospectus
contains full, true and plain disclosure of all Material Facts relating to the
Issuer and the Securities, and provided the Issuer has delivered to the Agents
the documents described in Subsection 13.7, the Agents will execute the
Underwriter's Certificate in the Prospectus.
13.7 On the date of the final Prospectus, the Issuer will deliver the following
documents to the Agents and their solicitors, each of which shall be in form and
substance satisfactory to the Agents and their solicitors:
(a) an opinion of the auditors of the Issuer, dated as of the date of the
final Prospectus and addressed to the Agents and their solicitors,
relating to the accuracy of the financial statements included in the
Prospectus and verification of the accuracy of the financial,
numerical and certain other information disclosed in the Prospectus;
(b) a certificate of the Issuer issued to the Agents and their solicitors,
dated as of the date of the final Prospectus and executed by the
President of the Issuer or by another officer approved by the Agents,
certifying certain facts relating to the Issuer and its affairs; and
(c) any other certificates, comfort letters or opinions in connection with
any matter related to the Prospectus which are reasonably requested by
the Agents or their solicitors.
<PAGE>
- 14 -
13.8 On the Qualification Date, the Issuer will deliver the following documents
to the Agents and their solicitors, each of which shall be in form and substance
satisfactory to the Agents and their solicitors:
(a) an opinion of counsel of the Issuer, dated as of the Qualification
Date and addressed to the Agents and their solicitors, relating to any
legal matters in connection with the Issuer, the Prospectus and the
Distribution for which the Agents may reasonably request an opinion;
and
(b) any other certificates, comfort letters or opinions in connection with
any matter related to the Issuer, the Prospectus or the Distribution
which are reasonably requested by the Agents or their solicitors.
13.9 The Issuer will furnish to the Agents such number of commercial copies of
the Prospectus and each amendment and supplement thereto and such other relevant
documents as the Agents may reasonably request.
13.10 When each of the Commissions has issued receipts for the final Prospectus,
and the Issuer has delivered to the Agents copies of such receipts and all
documents required to be delivered to the Agents on the date of the final
Prospectus and the Qualification Date, the Agents shall deliver, or cause to be
delivered, one copy of the Prospectus to each Special Warrant holder.
14. TERMINATION
14.1 The Agents may terminate their obligations under this Agreement, and the
obligations of the Purchasers under the subscription agreements, by notice in
writing to the Issuer at any time before the date of the Final Closing if:
(a) an adverse Material Change, or an adverse change in a Material Fact
relating to any of the Securities, occurs or is announced by the
Issuer;
(b) there is an event, accident, action, state, condition, financial
occurrence or catastrophe of national or international consequence, or
any governmental law or regulation or other occurrence of any nature
which, in the opinion of the Agents, seriously affects or will
seriously affect the financial markets, or the business of the Issuer
or any Subsidiary of the Issuer, or the ability of the Agents to
perform their obligations under this Agreement, or an investor's
decision to purchase the Special Warrants;
(c) following a consideration of the history, business, products, property
or affairs of the Issuer or its principals and promoters, or of the
state of the financial markets in general, or the state of the market
for the Issuer's
<PAGE>
- 15 -
securities in particular, the Agents determine, in their sole
discretion, that it is not in the interest of the Purchasers to
complete the purchase and sale of the Special Warrants;
(d) an enquiry or investigation (whether formal or informal) in relation
to the Issuer, or the Issuer's directors, officers or promoters, is
announced, commenced or threatened by an officer or official of any
competent authority, which in the opinion of the Agents materially and
adversely affects the trading or distribution of the Special Warrants;
(e) any order to cease or suspend trading (including an order prohibiting
communications with persons in order to obtain expressions of
interest) in any of the securities of the Issuer or prohibiting or
restricting the Private Placement or the Distribution is made by a
competent regulatory authority and that order is still in effect
except as disclosed herein;
(f) the Issuer is in breach of any term of this Agreement; or
(g) the Agents determine that any of the representations or warranties
made by the Issuer in this Agreement is false or has become false.
14.2 The Agents' obligations hereunder will terminate if the Exchange does not
issue its letter of acceptance regarding listing of the Common Shares and
Warrant Shares, subject only to usual post-Closing filings with the Exchange, of
the Private Placement within 90 days of the reference date of this Agreement,
unless otherwise agreed in writing by the Agents.
14.3 The Agents may terminate their obligations under Section 13 hereof at any
time before the Qualification Date if:
(a) any order to cease trading (including communicating with persons in
order to obtain expressions of interest) in the securities of the
Issuer, or prohibiting or restricting the Distribution is made by a
competent regulatory authority and that order is still in effect
except as disclosed herein; or
(b) the Agents determine that any of the representations or warranties
made by the Issuer in this Agreement is false or has become false,
unless the Issuer has previously notified the Agents and the Agents
have accepted the change in circumstances which renders the
representation and warranty false.
<PAGE>
-16-
15. WARRANTIES, REPRESENTATIONS AND COVENANTS
15.1 The Issuer warrants, represents and covenants to and with the Agents that:
(a) the Issuer is duly amalgamated and a valid and subsisting corporation,
is a "reporting issuer" under the Acts, and
(i) is in good standing with respect to the filing of annual returns
under the Alberta Business Corporations Act;
(ii) has the corporate power and capacity to enter into this Agreement
and to carry out the transactions herein contemplated;
(b) the Issuer carries on business in the Provinces of Alberta and British
Columbia, and the State of Washington and does not carry on business
in any other province or territory of Canada, any other State of the
United States or in any other country, except through its
Subsidiaries;
(c) it has no Subsidiaries other than Minera Andes S.A. ("MASA") and NAD
S.A. ("NAD");
(d) each of MASA and NAD are valid and subsisting corporations duly
incorporated and in good standing under the laws of Argentina;
(e) MASA and NAD each carry on business in Argentina. and do not carry on
business in any other country;
(f) the Issuer is duly registered and licensed to carry on business in
Alberta, British Columbia and Washington;
(g) MASA and NAD are duly registered and licensed to carry on business in
Argentina;
(h) the authorized and issued capital of the Issuer consists of an
unlimited number of Common Shares and an unlimited number of preferred
shares, of which as at the date hereof 14,431,836 Common Shares are
issued and outstanding, and the outstanding Common Shares are fully
paid and non-assessable;
(i) the authorized capital of MASA and NAD consists of 20 shares and 12
shares, respectively;
(j) the issued and outstanding capital of MASA is 20 shares, of which the
Issuer is the recorded and beneficial owner of 19 shares;
<PAGE>
-17-
(k) the issued and outstanding capital of NAD is 12 shares, of which the
Issuer is the recorded and beneficial owner of 11 shares;
(l) except as disclosed in the financial statements of the Company most
recently provided to the Agents (the "Financial Statements"), no
person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming such a right,
agreement or option, to purchase any of the outstanding shares, or for
the issue or allotment of any shares in the capital of MASA or NAD
from treasury, or any other security convertible or exchangeable for
any such shares;
(m) the Shares and the Warrant Shares will be duly and validly issued as
fully-paid and non-assessable;
(n) the Issuer will reserve or set aside sufficient Common Shares in the
treasury of the Issuer to issue the Shares on exercise or deemed
exercise of the Special Warrants, and to issue Warrant Shares on
exercise of the Warrants;
(o) since its date of amalgamation:
(i) the business of the Issuer and its Subsidiaries has been carried
on in the usual and ordinary course and the Issuer has not
entered into any transaction out of the usual and ordinary course
of business; and
(ii) there has not been any material adverse change in the position
(financial, business or otherwise) or condition of the Issuer;
(p) neither the Issuer nor any of its Subsidiaries is subject to any
material mortgage, lien, lease, agreement, instrument or any other
restriction of any kind or character which would prevent the
consummation of the transactions contemplated herein;
(q) the Issuer or its Subsidiaries are the beneficial owner of the
properties, business and assets or the interests in the properties,
business or assets referred to in the Financial Statements, all
agreements by which the Issuer or any of its Subsidiaries holds an
interest in a property, business or assets (and, in particular, the
Degerstrom Agreement) are in good standing according to their terms,
and the properties are in good standing under the laws of the
jurisdictions in which they are situated;
(r) neither the Issuer nor any of its Subsidiaries is party to any
agreement, option, understanding or commitment, or any right or
privilege capable of becoming an agreement, option, understanding or
commitment, for
<PAGE>
-18-
the purchase of any of the businesses, properties or assets or
interests in the businesses properties or assets referred to in the
Financial Statements, except as may be disclosed in writing to the
Agents;
(s) neither the Issuer nor any of its Subsidiaries is party to any
agreement for an amalgamation, merger, other form of business
combination, or for the acquisition of any material assets, except as
disclosed in writing to the Agents.
(t) the Financial Statements, subscription form and all other written or
oral representations made by the Issuer to an investor or potential
investor in connection with the Private Placement will be accurate in
all material respects and will omit no fact, the omission of which
will make such written or oral representation misleading or incorrect;
(u) the Financial Statements have been prepared in accordance with
Canadian generally accepted accounting principles, accurately reflect
the financial position of the Issuer as at the date thereof,
accurately reflect all material liabilities (accrued, absolute,
contingent or otherwise), and no adverse material changes in the
financial position of the Issuer have taken place since the date
thereof, save in the ordinary course of the Issuer's business;
(v) the Issuer has complied and will comply fully with the requirements of
all applicable corporate and securities laws and administrative
policies and directions, including, without limitation, Applicable
Legislation, the Securities Act (Nova Scotia), and the Alberta
Business Corporations Act in relation to the issue and trading of its
securities and in all matters relating to the Private Placement, the
Distribution and the Prospectus;
(w) the issue and sale of the Special Warrants by the Issuer and the Agent
does not and will not conflict with, and does not and will not result
in a breach of, any of the terms of its incorporating documents or any
agreement or instrument to which the Issuer is a party;
(x) there is not presently, and will not be until the closing of the
Distribution, any Material Change relating to the Issuer or change in
any Material Fact relating to any of the Securities which has not been
or will not be fully disclosed to the Agents;
(y) neither the Issuer nor any of its Subsidiaries is party to any
actions, suits or proceedings which could materially affect their
respective business or financial conditions, and to the best of the
Issuer's knowledge no such actions, suits or proceedings are
contemplated or have been threatened;
<PAGE>
-19-
(z) there are no judgments against the Issuer or any of its Subsidiaries
which are unsatisfied, nor are there any consent decrees or
injunctions to which the Issuer or any of its Subsidiaries is subject;
(aa) the Issuer has full corporate power and authority to undertake the
Private Placement, qualify the Prospectus and undertake the
Distribution;
(ab) this Agreement has been or will be by the First Closing, duly
authorized by all necessary corporate action on the part of the Issuer
and will constitute a valid obligation of the Issuer, legally binding
upon it and enforceable in accordance with its terms;
(ac) the Issuer is not in default of any of the requirements of the Acts,
the Securities Act (Nova Scotia), the 1933 Act, any U.S. State "Blue
Sky" laws or the Exchange;
(ad) the Issuer is not in breach of its Listing Agreement with the
Exchange;
(ae) the Issuer is a Foreign Issuer that reasonably believes that there is
no Substantial U.S. Market Interest in the Securities;
(af) no order ceasing or suspending trading in securities of the Issuer nor
prohibiting the sale of any of such securities has been issued to and
remains outstanding against the Issuer or its directors, officers or
promoters or against any other companies that have common directors,
officers or promoters, and no investigations or proceedings for such
purposes are pending or threatened;
(ag) neither the Issuer nor any if its Subsidiaries is in breach of any
law, rule, statute, regulation or by-law applicable to its operations,
properties or assets, the breach of which would result in an adverse
Material Change in the business or affairs of the Issuer (on a
consolidated basis), or would affect the rights of the Issuer or its
Subsidiaries;
(ah) except as disclosed in the Financial Statements, or otherwise in
writing to the Agents, no person has any right, agreement or option,
present or future, contingent or absolute, or any right capable of
becoming such a right, agreement or option, for the issue or allotment
of any unissued shares in the capital of the Issuer or any other
security convertible into or exchangeable for any such shares, or to
require the Issuer to purchase, redeem or otherwise acquire any of the
issued and outstanding shares in its capital;
(ai) the Issuer and its Subsidiaries have filed all federal, provincial,
local and foreign tax returns which are required to be filed, or have
requested
<PAGE>
-20-
extensions thereof, and have paid all taxes required to be paid and
any other assessment, fine or penalty levied against any of them, to
the extent that any of the foregoing is due and payable, except for
such assessments, fines and penalties which are currently being
contested in good faith;
(aj) the Issuer has established on its books and records reserves which are
adequate for the payment of all taxes not yet due and payable and
there are no liens for taxes on the assets of the Issuer, except for
taxes not yet due, and there are no audits of any of the tax returns
of the Issuer which are known by the Issuer's management to be
pending, and there are no claims which have been or may be asserted
relating to any such tax returns which, if determined adversely, would
result in the assertion by any governmental agency of any deficiency
which would have a material adverse effect on the properties, business
or assets of the Issuer;
(ak) apart from the Agents, no person, firm or corporation acting or
purporting to act at the request of the Issuer is entitled to any
brokerage, agency or finder's fee in connection with the transactions
described herein;
(al) the Issuer has not previously issued during the preceding 12-month
period and is not concurrently issuing any security or Special
Warrants to more than 49 purchasers, including the investors who will
purchase in this Private Placement, under the exemption in Section
107(1)(z) of the Alberta Act;
(am) no promoter of the Issuer, other than a registered dealer, has acted
as a promoter of any other issuer (within the meaning of the Alberta
Act) where:
(i) that other issuer has traded securities of its own issue pursuant
to Section 107(1)(z) of the Alberta Act within the 12 months from
the reference date hereof; and
(ii) any of the proceeds obtained by the Issuer from the Private
Placement are used or intended to be used in respect of the same
property, project or program as are the proceeds obtained by that
other issuer in the trade referred to in (i) above; and
(an) the warranties and representations in this Section are true and
correct and will remain so as of the Final Closing and the
Qualification Date; and
<PAGE>
-21-
(ao) upon the request of any Purchaser that has acquired Special Warrants
in the Private Placement pursuant to an exemption from 1933 Act
registration (including the exemptions in Section 4(2) of the 1933 Act
and Rule 506 of Regulation D thereunder, but not including Regulation
S), the Issuer shall promptly deliver all of the information specified
by Rule 144A(d)(4) under the 1933 Act to such Purchaser or to any
person or entity designated by such Purchaser as a prospective
purchaser under Rule 144A of any of the Special Warrants, Shares,
Warrants or Warrant Shares held by such Purchaser.
15.2 Each Agent severally and not jointly warrants and represents to the Issuer
that:
(a) it is a valid and subsisting corporation under the law of the
jurisdiction in which it was incorporated;
(b) it is registered as a dealer and classified as a broker under the
Acts;
(c) it is a member in good standing of the Exchange; and
(d) it will sell the Special Warrants in compliance with the Acts, the
1933 Act and the rules promulgated thereunder, the Securities Exchange
Act of 1934, and the rules promulgated thereunder and all applicable
state securities and blue sky laws and the rules and policies of the
Exchange.
16. EXPENSES OF AGENTS
16.1 The Issuer will pay all of the expenses of the Private Placement, the
Prospectus and the Distribution and all the expenses reasonably incurred by the
Agents in connection with the Private Placement, the Prospectus and the
Distribution including, without limitation, the fees and expenses of the
solicitors for the Agents.
16.2 The Issuer will pay the expenses referred to in the previous Subsection
even if approval of the Private Placement or the Prospectus is not granted by
the Regulatory Authorities or the transactions contemplated by this Agreement
are not completed or this Agreement is terminated, unless the failure of
acceptance or completion or the termination is the result of a breach of this
Agreement by the Agents.
16.3 The Agents may, from time to time, render accounts for their expenses to
the Issuer for payment on or before the dates set out in the accounts.
<PAGE>
-22-
16.4 The Issuer authorizes the Agents to deduct their expenses in connection
with the Private Placement from the proceeds of the Private Placement, including
expenses for which an account has not yet been rendered.
17. GARNISHING ORDERS
17.1 If at any time, up to and including the Final Closing, the Agents receive a
garnishing order or other form of attachment purporting to attach or garnish a
part or all of the sale price of any of the Securities, the Agents will be free
to pay the amount purportedly attached or garnished into court.
17.2 Any payment by the Agents into court pursuant to a garnishing order will be
deemed to have been received by the Issuer as payment by the Agents against the
sale price of the Securities to the extent of the amount paid, and the Issuer
will be bound to issue and deliver the Securities proportionately to the amount
paid by the Agents.
17.3 The Agents will not be bound to ascertain the validity of any garnishing
order or attachment, or whether in fact it attaches any moneys held by the
Agents, and the Agents will be free to act with impunity in replying to any
garnishing order or attachment.
17.4 The Issuer will release, indemnify and save harmless the Agents in respect
of all damages, costs, expenses or liability arising from any acts of the Agents
under this Section.
18. INDEMNITY
18.1 The Issuer will indemnify and save harmless the Agents and each of the
Agents' agents, directors, officers and employees (collectively, the
"Indemnified Parties") and save them harmless against all losses, claims,
damages or liabilities:
(a) existing (or alleged to exist) by reason of a misrepresentation or
alleged misrepresentation contained in the subscription agreement or
other written or oral representation made by the Issuer to an investor
or potential investor in connection with the Private Placement and in
the certificates representing the Special Warrants, or in the
Prospectus or other written or oral representation made by the Issuer
to an investor or potential investor in connection with the
Distribution and in the certificates representing the Warrants, or by
reason of the omission to state any fact necessary to make such
statements or representations not misleading (except for information
and statements referring solely to the Agents);
<PAGE>
-23-
(b) arising from an order by any of the Regulatory Authorities or a court
of competent jurisdiction that trading in any of the Issuer's
securities is to suspend or cease, or prohibiting or restricting the
Private Placement or the Distribution;
(c) arising directly or indirectly out of any order made by any regulatory
authority based upon an allegation that any such untrue statement or
representation, or omission exists (except information and statements
referring solely to the Agents), that trading in or distribution of
any of the Securities is to cease, unless such order is based solely
on activities or alleged activities of the Agents;
(d) resulting from the failure by the Issuer to obtain the requisite
regulatory approval to the Private Placement or the Prospectus unless
the failure to obtain such approval is the result of a breach of this
Agreement by the Agents;
(e) resulting from any failure by the Issuer to file the Prospectus, or an
amendment or supplement thereto;
(f) resulting from the breach by the Issuer of any of the terms of this
Agreement;
(g) resulting from any representation or warranty made by the Issuer
herein not being true or ceasing to be true;
(h) if the Issuer fails to issue and deliver the certificates representing
the Securities in the form and denominations satisfactory to the
Agents at the time and place required by the Agents with the result
that any completion of a sale of the Securities does not take place;
or
(i) if, following the completion of a sale of any of the Securities, a
determination is made by any competent authority setting aside the
sale, unless that determination arises out of an act or omission by
the Agents.
18.2 If any action or claim is brought against an Indemnified Party in respect
of which indemnity may be sought from the Issuer pursuant to this Agreement, the
Indemnified Party will promptly notify the Issuer in writing.
18.3 The rights of indemnity provided in this Section shall not apply if:
(a) the Issuer has fulfilled each of its covenants under this Agreement;
(b) the loss, claim, damage or liability suffered by an Indemnified Party
arises from a circumstance or alleged circumstance which takes place
or
<PAGE>
-24-
is alleged to have taken place entirely after closing of the Private
Placement; and
(c) the person asserting the claim against an Indemnified Party was not
provided with a copy of the Prospectus, or amendment thereto, which
corrects the misrepresentation or alleged misrepresentation relied
upon by the person asserting the claim, and which was required to have
been delivered to the person asserting the claim by the Agents under
the Acts.
18.4 The Issuer will assume the defence of the action or claim, including the
employment of counsel and the payment of all expenses.
18.5 The Indemnified Parties will have the right to employ separate counsel, and
the Issuer will pay the fees and expenses of such counsel.
18.6 The indemnity provided for in this Section will not be limited or otherwise
affected by any other indemnity obtained by the Indemnified Parties from any
other person in respect of any matters specified in this Agreement and will
continue in full force and effect until all possible liability of the
Indemnified Parties arising out of the transactions contemplated by this
Agreement has been extinguished by the operation of law.
18.7 If indemnification under this Agreement is found in a final judgment (not
subject to further appeal) by a court of competent jurisdiction not to be
available for reason of public policy, the Issuer and the Indemnified Parties
will contribute to the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) for which such indemnification is held unavailable
in such proportion as is appropriate to reflect the relative benefits to and
fault of the Issuer, on the one hand, and the Indemnified Parties on the other
hand, in connection with the matter giving rise to such losses, claims, damages,
liabilities or expenses (or actions in respect thereof). No person found liable
for a fraudulent misrepresentation (within the meaning of the Acts) will be
entitled to contribution from any person who is not found liable for such
fraudulent misrepresentation.
18.8 To the extent that any Indemnified Party is not party to this Agreement,
the Agents shall obtain and hold the right and benefit of this Section in trust
for and on behalf of such Indemnified Party.
<PAGE>
- 25 -
19. ASSIGNMENT AND SELLING GROUP PARTICIPATION
19.1 The Agents will not assign this Agreement or any of their rights under this
Agreement or, with respect to the Securities, enter into any agreement in the
nature of an option or a sub-option unless and until, for each intended
transaction, the Agents have obtained the consent of the Issuer, and any
required notice has been given to and accepted by the Regulatory Authorities.
19.2 The Agents may, in their sole discretion, offer selling group participation
in the normal course of the brokerage business to selling groups of other
licensed dealers, brokers and investments dealers, who may or who may not be
offered part of the Agent's Fee.
20. RIGHT OF FIRST REFUSAL
20.1 The Issuer will notify the Agents of the terms of any further financing
that it requires or proposes to obtain during the 12 months following the Final
Closing and the Agents will have the right of first refusal to provide such
financing.
20.2 The right of first refusal must be exercised by the Agents within 15 days
following the receipt of the notice by notifying the Issuer in writing that they
will provide such financing on the terms set out in the notice.
20.3 If the Agents fail to give written notice within the 15 days that they will
provide such financing upon the terms set out in the notice, the Issuer will
then be free to make other arrangements to obtain financing from another source
on the same terms or on terms no less favourable to the Issuer, subject to
obtaining the acceptance of the Regulatory Authorities.
20.4 If, on receipt of any notice from the Issuer under this Section, the Agents
fail to exercise the right, the right will not terminate in respect of
subsequent financings which the Issuer requires or proposes to obtain during the
12 months following the Final Closing.
21. NOTICE
21.1 Any notice under this Agreement will be given in writing and must be
delivered, sent by telex, telegram or telecopier or mailed by prepaid post and
addressed to the party to which notice is to be given at the address indicated
above, or at another address designated by the party in writing.
21.2 If notice is sent by telex, telegram or telecopier or is delivered, it will
be deemed to have been given at the time of transmission or delivery.
<PAGE>
- 26 -
21.3 If notice is mailed, it will be deemed to have been received seven (7) days
following the date of mailing of the notice.
21.4 If there is an interruption in normal mail service due to strike, labour
unrest or other cause at or prior to the time a notice is mailed the notice will
be sent by telex, telegram or telecopier or will be delivered.
22. TIME
Time is of the essence of this Agreement and will be calculated in accordance
with the provisions of the Interpretation Act (British Columbia).
23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, covenants and indemnities of the Issuer and the
Agents contained in this Agreement will survive the Final Closing and the
closing of the Distribution.
24. LANGUAGE
Wherever a singular or masculine expression is used in this Agreement, that
expression is deemed to include the plural, feminine or the body corporate where
required by the context.
25. ENUREMENT
This Agreement enures to the benefit of and is binding on the parties to this
Agreement and their successors and permitted assigns.
26. HEADINGS
The headings in this Agreement are for convenience of reference only and do not
affect the interpretation of this Agreement.
27. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which will
be deemed to be an original and all of which will constitute one agreement,
effective as of the reference date given above.
<PAGE>
- 27 -
28. LAW
This Agreement is governed by the law of British Columbia and shall be
considered to be in all respects a British Columbia contract, and the parties
hereto irrevocably attorn and submit to the jurisdiction of the courts of
British Columbia.
29. SEVERABILITY
If one or more of the provisions contained herein shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such invalidity
illegality or unenforceability shall not affect any other provision of this
agreement, but this agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein.
<PAGE>
- 28 -
30. SUPERSEDE
It is understood that the terms and conditions of this Agreement supersede any
previous verbal or written agreement between the Issuer and the Agents regarding
the Private Placement including the Letter Agreement dated October 17, 1996.
This document was executed and delivered as of the date given above:
The common seal of )
MINERA ANDES INC. was )
hereunto affixed in the presence of: )
)
)
)
Authorized Signatory ) c/s
)
)
Authorized Signatory )
The common seal of C.M. OLIVER & )
COMPANY LIMITED was hereunto )
affixed in the presence of: )
)
)
Authorized Signatory ) c/s
)
)
Authorized Signatory )
The common seal of MAJENDIE )
CHARLTON SECURITIES LTD. was )
hereunto affixed in the presence of: )
)
)
) c/s
)
)
)
SPECIAL WARRANT INDENTURE
Providing for the Issue of
Special Warrants
BETWEEN
MINERA ANDES INC.
- and -
MONTREAL TRUST COMPANY OF CANADA
Dated as of December 13, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1............................... 1
INTERPRETATION.............................................................. 1
1.1 Definitions..................................................... 1
1.2 Gender and Number............................................... 4
1.3 Interpretation not Affected by Headings, etc.................... 4
1.4 Day not a Business Day.......................................... 4
1.5 Time of the Essence............................................. 4
1.6 Currency........................................................ 4
1.7 Applicable Law.................................................. 4
ARTICLE 2............................... 4
ISSUE OF SPECIAL WARRANTS................................................... 4
2.1 Issue of Special Warrants....................................... 4
2.2 Form and Terms of Special Warrants.............................. 5
2.3 Warrantholder not a Shareholder................................. 5
2.4 Special Warrants to Rank Pari Passu............................. 5
2.5 Signing of Warrant Certificates................................. 5
2.6 Certification by the Trustee.................................... 6
2.7 Issue in Substitution for Warrant Certificates Lost, etc........ 6
2.8 Exchange of Warrant Certificates................................ 6
2.9 Charges for Exchange............................................ 6
2.10 Transfer and Ownership of Special Warrants...................... 7
ARTICLE 3............................... 8
EXERCISE OF SPECIAL WARRANTS................................................ 8
3.1 Holders Eligible to Exercise Special Warrants................... 8
3.2 Method of Exercise of Special Warrants.......................... 8
3.3 Effect of Exercise of Special Warrants.......................... 9
3.4 Partial Exercise of Special Warrants; Fractions................. 10
3.5 Common Share and Purchase Warrant Certificates.................. 10
3.6 Expiration of Special Warrants.................................. 11
3.7 Cancellation of Surrendered Special Warrants.................... 11
3.8 Accounting and Recording........................................ 11
3.9 Automatic Exercise on Behalf of Warrantholder by the Trustee.... 11
3.10 Securities Restrictions ........................................ 11
ARTICLE 4............................... 12
ADJUSTMENT OF NUMBER OF COMMON SHARES AND PURCHASE WARRANTS................. 12
4.1 Failure to Clear Prospectus..................................... 12
4.2 Adjustment of Number of Common Shares and Purchase Warrants..... 12
4.3 Entitlement to Shares on Exercise of Special Warrant............ 13
4.4 No Adjustment for Stock Options................................. 14
4.5 Determination by Corporation's Auditors......................... 14
4.6 Proceedings Prior to any Action Requiring Adjustment............ 14
4.7 Certificate of Adjustment....................................... 14
4.8 Notice of Special Matters....................................... 14
4.9 No Action after Notice.......................................... 14
4.10 Other Action.................................................... 15
<PAGE>
ii
4.11 Participation by Special Warrantholder.......................... 15
4.12 Protection of Trustee........................................... 15
ARTICLE 5............................... 15
RIGHTS OF THE CORPORATION AND COVENANTS..................................... 15
5.1 Optional Purchases by the Corporation........................... 15
5.2 General Covenants............................................... 16
5.3 Trustee's Remuneration and Expenses............................. 17
5.4 Securities Qualification Requirements........................... 17
5.5 Performance of Covenants by Trustee............................. 17
ARTICLE 6............................... 17
ENFORCEMENT................................................................. 17
6.1 Suits by Warrantholders......................................... 17
6.2 Immunity of Shareholders, etc................................... 18
6.3 Limitation of Liability......................................... 18
6.4 Waiver of Default............................................... 18
ARTICLE 7............................... 18
MEETINGS OF WARRANTHOLDERS.................................................. 18
7.1 Right to Convene Meetings....................................... 18
7.2 Notice.......................................................... 19
7.3 Chairman........................................................ 19
7.4 Quorum.......................................................... 19
7.5 Power to Adjourn................................................ 19
7.6 Show of Hands................................................... 19
7.7 Poll and Voting................................................. 20
7.8 Regulations..................................................... 20
7.9 Corporation, the Agents and Trustee May be Represented.......... 21
7.10 Powers Exercisable by Extraordinary Resolution.................. 21
7.11 Meaning of Extraordinary Resolution............................. 22
7.12 Powers Cumulative............................................... 22
7.13 Minutes......................................................... 22
7.14 Instruments in Writing.......................................... 23
7.15 Binding Effect of Resolutions................................... 23
7.16 Holdings by Corporation Disregarded............................. 23
ARTICLE 8............................... 23
SUPPLEMENTAL INDENTURES..................................................... 23
8.1 Provision for Supplemental Indentures for Certain Purposes...... 23
8.2 Successor Corporations.......................................... 24
ARTICLE 9............................... 24
CONCERNING THE TRUSTEE...................................................... 24
9.1 Trust Indenture Legislation..................................... 24
9.2 Rights and Duties of Trustee.................................... 24
9.3 Evidence, Experts and Advisers.................................. 25
9.4 Documents, Monies, etc. Held by Trustee......................... 26
9.5 Actions by Trustee to Protect Interest.......................... 26
9.6 Trustee Not Required to Give Security........................... 26
9.7 Protection of Trustee........................................... 26
9.8 Replacement of Trustee; Successor by Merger..................... 26
<PAGE>
iii
9.9 Conflict of Interest............................................ 27
9.10 Indemnity of Trustee............................................ 28
9.11 Acceptance of Trust............................................. 28
9.12 Trustee Not to be Appointed Receiver............................ 28
9.13 Special Warrant Register........................................ 28
9.14 Register Open for Inspection.................................... 28
ARTICLE 10.............................. 29
GENERAL..................................................................... 29
10.1 Notice to the Corporation, the Agents and the Trustee........... 29
10.2 Notice to Warrantholders........................................ 30
10.3 Ownership and Transfer of Special Warrants...................... 30
10.4 Evidence of Ownership........................................... 30
10.5 Counterparts.................................................... 31
10.6 Satisfaction and Discharge of Indenture......................... 31
10.7 Successors...................................................... 31
10.8 Sole Benefit of Parties and Warrantholders...................... 31
10.9 Common Shares or Special Warrants Owned by the Corporation or
its Subsidiaries - Certificate to be Provided................... 32
<PAGE>
THIS SPECIAL WARRANT INDENTURE is made as of the 13th day of December, 1996.
BETWEEN:
MINERA ANDES INC., a corporation amalgamated under the laws
of the Province of Alberta, having an office in the City of
Spokane, in the State of Washington (hereinafter referred to
as the "Corporation")
OF THE FIRST PART
AND
MONTREAL TRUST COMPANY OF CANADA, a trust company
incorporated under the laws of Canada and authorized to
carry on business in all provinces of Canada (hereinafter
referred to as the "Trustee")
OF THE SECOND PART
WHEREAS:
A. the Corporation has authorized the creation of and is proposing to issue
Special Warrants in the manner herein set forth;
B. one Special Warrant shall, subject to adjustment, entitle the holder thereof
to acquire one Common Share and of one Purchase Warrant at no additional cost
upon the terms and conditions herein set forth; and
C. all acts and deeds necessary have been done and performed to make the Special
Warrants, when issued as provided in this Indenture, legal, valid and binding
upon the Corporation with the benefits and subject to the terms of this
Indenture;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Indenture, including the recitals and schedules hereto, and in
all indentures supplemental hereto:
a. "Agency Agreement" means the agreement dated November 22, 1996 between the
Corporation and the Agents relating to the offering of Special Warrants;
b. "Agents" means collectively C.M. Oliver & Company Limited and Majendie
Charlton Securities Ltd.;
c. "Applicable Legislation" means the provisions of the statutes of Canada and
its provinces, and the regulations under those statutes, relating to trust
indentures or to the rights, duties and obligations of trustees and of
corporations under trust indentures, to the extent that such provisions are
at the time in force and applicable to this Indenture;
<PAGE>
2
d. "Business Day" means any day which is not Saturday or Sunday or a legal
holiday in the City of Calgary, Alberta;
e. "Common Shares" means fully paid and non-assessable common shares of the
Corporation as presently constituted and except where the context hereof
otherwise requires, includes Common Shares issued or to be issued in
accordance with the exercise of Special Warrants;
f. "Corporation's Auditors" means a firm of chartered accountants duly
appointed as auditors of the Corporation;
g. "Counsel" means a barrister or solicitor or a firm of barristers and
solicitors retained by the Trustee or retained by the Corporation and
acceptable to the Trustee;
h. "Current Market Price" means at any date the weighted average closing price
at which the Common Shares have been traded on The Alberta Stock Exchange
during the 30 consecutive Trading Days ending one Trading Day before such
date;
i. "director" means a director of the Corporation for the time being and,
unless otherwise specified herein, reference to action "by the directors"
means action by the directors of the Corporation as a board or, whenever
duly empowered, action by any committee of such board;
j. "Effective Date" means December 13, 1996;
k. "Exercise Date" means, with respect to any Special Warrant, the date on
which the Warrant Certificate representing such Special Warrant is
surrendered for exercise, or otherwise automatically exercised, in
accordance with Article 3;
l. "Expiry Date" means the earlier of:
i. five (5) business days after the day upon which a receipt for a
Prospectus or an Order has been obtained from each of the Securities
Commissions; and
ii. the twelve (12) month anniversary of the Effective Date;
m. "extraordinary resolution" has the meaning set forth in section 7.11;
n. "Filing Jurisdictions" means the provinces of Alberta and British Columbia;
o. "Order" means an order of a Securities Commission that permits the Common
Shares and Purchase Warrants issuable upon the exercise of the Special
Warrants to be freely tradeable;
p. "person" means an individual, body corporate, partnership, trust, trustee,
executor, administrator, legal representative or any unincorporated
organization;
q. "Prospectus" means a final prospectus, and any amendments thereto, which
qualifies the proposed distribution of Common Shares and Purchase Warrants
upon the exercise of Special Warrants;
<PAGE>
3
r. "Purchase Warrants" means the warrants created and authorized by and
issuable under the warrant indenture dated as of December 13, 1996, between
the Corporation and Montreal Trust Company of Canada, two such warrants
entitling the holder thereof, subject to the terms and conditions therein
provided, to acquire one Common Share at a price of $2.50 per share on or
before 4:30 p.m. (Calgary time) on the first anniversary of the Effective
Date or at a price of $2.88 per share on or before 4:30 p.m. (Calgary time)
on the second anniversary of the Effective Date;
s. "Sale Proceeds" means the aggregate amount of subscription funds paid on
issuance of the Special Warrants, being $2.10 per Special Warrant issued;
t. "Securities Commissions" means, collectively, the securities commissions or
similar regulatory authorities in the Filing Jurisdictions;
u. "Shareholder" means a holder of record of one or more Common Shares;
v. "Special Warrants" means the special warrants issued and certified
hereunder and for the time being outstanding entitling the holder to
acquire one Common Share and one Purchase Warrant;
w. "Special Warrant Indenture", "Indenture", "herein", "hereby", "hereof" and
similar expressions mean and refer to this indenture and any other
indenture, deed or instrument supplemental hereto, and the expressions
"Article", "section", "subsection" and "paragraph" followed by a number,
letter or both mean and refer to the specified article, section, subsection
or paragraph of this Indenture;
x. "Time of Expiry" means 4:30 p.m. (Calgary time) on the Expiry Date;
y. "Trading Day" means, with respect to a stock exchange, a day on which such
exchange is open for the transaction of business and, with respect to the
over-the-counter market, means a day on which The Alberta Stock Exchange is
open for the transaction of business;
z. "Trustee" means Montreal Trust Company of Canada or its successors from
time to time in the trust hereby created;
aa. "United States" and "U.S. Person" have the meaning given to such terms
under Regulation S of the U.S. Securities Act. For purposes of Regulation
S, "United States" means the United States of America, its territories and
possessions, any state of the United States and the District of Columbia.
"U.S. Person" includes, with certain exceptions, (i) any natural person
resident in the United States; (ii) any partnership or corporation
organized or incorporated under the laws of the United States; (iii) any
estate of which any executor or administrator is a U.S. Person; (iv) any
trust of which any trustee is a U.S. Person; (v) an agency or branch of a
foreign entity located in the United States; (vi) any non-discretionary
account or similar account (other than an estate or trust) held by a dealer
or other fiduciary for the benefit or account of a U.S. Person; (vii) any
discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States; and (viii) any partnership or
corporation if (a) organized or incorporated under the laws of any
jurisdiction other than the United States and (b) formed by a U.S. Person
principally for the purposes of investing in securities not registered
under the U.S. Securities Act;
ab. "U.S. Securities Act" means the United States Securities Act of 1933, as
amended;
<PAGE>
4
ac. "Warrant Agency" means the principal offices of the Trustee in the cities
of Calgary or Vancouver or such other place as may be designated in
accordance with subsection ;
ad. "Warrant Certificate" means a certificate issued on or after the Effective
Date to evidence Special Warrants;
ae. "Warrantholders", or "holders" without reference to Common Shares or
Purchase Warrants, means the persons who are registered holders of Special
Warrants;
af. "Warrantholders' Request" means an instrument signed in one or more
counterparts by Warrantholders entitled to acquire in the aggregate not
less than 25% of the aggregate number of Common Shares which could be
acquired pursuant to all Special Warrants then unexercised and outstanding,
requesting the Trustee to take some action or proceeding specified therein;
ag. "Warrant Register" means the register maintained by the Trustee for the
Special Warrants; and
ah. "written order of the Corporation", "written request of the Corporation",
"written consent of the Corporation" and "certificate of the Corporation"
mean, respectively, a written order, request, consent and certificate
signed in the name of the Corporation by its Chairman, President, Chief
Financial Officer or a Vice-President, and may consist of one or more
instruments so executed.
1.2 Gender and Number
Unless herein otherwise expressly provided or unless the context otherwise
requires, words importing the singular include the plural and vice versa and
words importing gender include all genders.
1.3 Interpretation not Affected by Headings, etc.
The division of this Indenture into articles and sections, the provision of a
table of contents and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Indenture
or the Special Warrants.
1.4 Day not a Business Day
In the event that any day on or before which any action is required to be taken
hereunder is not a Business Day, then such action shall be required to be taken
at or before the requisite time on the next succeeding day that is a Business
Day.
1.5 Time of the Essence
Time shall be of the essence hereof and of the Special Warrants issued
hereunder.
1.6 Currency
Except as otherwise stated, all dollar amounts herein are expressed in Canadian
currency.
1.7 Applicable Law
This Indenture and the Warrant Certificates shall be construed in accordance
with the laws of the Province of Alberta and the federal laws of Canada
applicable therein and shall be treated in all respects as Alberta contracts.
<PAGE>
5
ARTICLE 2
ISSUE OF SPECIAL WARRANTS
2.1 Issue of Special Warrants
a. Up to 3,809,524 Special Warrants are hereby created and authorized to be
issued.
b. From time to time and at any time, upon the written direction of the
Corporation signed by any one of its directors or officers, the Trustee
shall issue and register the Special Warrants in the names and
denominations as specified in such direction, and will certify and deliver
the same in accordance with such direction.
c. The Warrant Certificates (including all replacements issued in accordance
with this Indenture) shall be substantially in the form set out in Schedule
"A" hereto, shall be dated as of the Effective Date, shall bear such
distinguishing letters and numbers as the Corporation may, with the
approval of the Trustee, prescribe, and shall be issuable in any
denomination excluding fractions.
d. The Warrant Certificates and the Special Warrants represented thereby shall
be registered, together with the name and address of the registered holder
thereof, in the Warrant Register maintained by the Trustee.
2.2 Form and Terms of Special Warrants
a. Each Special Warrant authorized to be issued hereunder shall entitle the
holder thereof, upon exercise, or upon automatic exercise as provided for
in section 3.9, to acquire one Common Share and one Purchase Warrant,
subject to adjustment in accordance with Article 4, at any time after the
Effective Date and until the Time of Expiry at no additional cost to the
holder.
b. No fractional Special Warrants shall be issued or otherwise provided for
hereunder.
c. The number of Common Shares and Purchase Warrants which may be acquired
pursuant to the Special Warrants may be adjusted in the event and in the
manner specified in Article 4.
2.3 Warrantholder not a Shareholder
Except as provided for in subsection 4.2.c, nothing in this Indenture or in the
holding of a Special Warrant or Warrant Certificate or otherwise, shall, in
itself, confer or be construed as conferring upon a Warrantholder any right or
interest whatsoever as a Shareholder or as any other shareholder of the
Corporation, including, but not limited to, the right to vote at, to receive
notice of, or to attend, meetings of shareholders or any other proceedings of
the Corporation, or the right to receive dividends and other distributions.
2.4 Special Warrants to Rank Pari Passu
All Special Warrants shall rank pari passu, whatever may be the actual date of
issue thereof.
2.5 Signing of Warrant Certificates
The Warrant Certificates shall be signed by any one director or officer of the
Corporation and need not be under seal. The signature of any such director or
officer may be mechanically reproduced in facsimile and Warrant Certificates
bearing such facsimile signatures shall be binding upon the Corporation as if
they had
<PAGE>
6
been manually signed by such director or officer. Notwithstanding that
any person whose manual or facsimile signature appears on any Warrant
Certificate as a director or officer may no longer hold office at the date of
such Warrant Certificate or at the date of certification or delivery thereof,
any Warrant Certificate signed as aforesaid shall, subject to section , be valid
and binding upon the Corporation and the holder thereof shall be entitled to the
benefits of this Indenture.
2.6 Certification by the Trustee
a. No Warrant Certificate shall be issued or, if issued, shall be valid for
any purpose or entitle the holder to the benefit hereof until it has been
certified by manual signature by or on behalf of the Trustee in the form of
the certificate set out in Schedule "A" hereto, and such certification by
the Trustee upon any Warrant Certificate shall be conclusive evidence as
against the Corporation that the Warrant Certificate so certified has been
duly issued hereunder and that the holder is entitled to the benefits
hereof.
b. The certification of the Trustee on a Warrant Certificate issued hereunder
shall not be construed as a representation or warranty by the Trustee as to
the validity of this Indenture or the Warrant Certificate (except the due
certification thereof) and the Trustee shall in no respect be liable or
answerable for the use made of the Warrant Certificate or any of them or of
the consideration therefor except as otherwise specified herein.
2.7 Issue in Substitution for Warrant Certificates Lost, etc.
a. In case any Warrant Certificate becomes mutilated or is lost, destroyed or
stolen, the Corporation, subject to applicable law, shall issue and
thereupon the Trustee shall certify and deliver a new Warrant Certificate
of like tenor as the one mutilated, lost, destroyed or stolen in exchange
for and in place of and upon cancellation of such mutilated Warrant
Certificate, or in lieu of and in substitution for such lost, destroyed or
stolen Warrant Certificate, and the substitute Warrant Certificate shall be
in a form approved by the Trustee, and the Special Warrants evidenced
thereby shall be entitled to the benefits hereof and shall rank equally in
accordance with its terms with all other Special Warrants issued or to be
issued hereunder.
b. The applicant for the issue of a new Warrant Certificate pursuant to this
section shall bear the cost of the issue thereof and in case of loss,
destruction or theft shall furnish, as a condition precedent to the issue
thereof, to the Trustee such evidence of ownership and of the loss,
destruction or theft of the Warrant Certificate so lost, destroyed or
stolen as shall be satisfactory to the Trustee, in its sole discretion, and
such applicant may also be required to furnish an indemnity or security in
amount and form satisfactory to the Trustee, in its sole discretion, and
shall pay the reasonable charges of the Trustee in connection therewith.
2.8 Exchange of Warrant Certificates
a. One or more Warrant Certificates representing any number of Special
Warrants may, upon compliance with the reasonable requirements of the
Trustee, be exchanged for another Warrant Certificate or Warrant
Certificates representing the same aggregate number of Special Warrants as
represented under the Warrant Certificate or Warrant Certificates so
exchanged.
b. Warrant Certificates may be exchanged only at the Warrant Agency or at any
other place that is designated by the Corporation with the approval of the
Trustee. Any Warrant Certificate tendered for exchange shall be cancelled
and surrendered by the Warrant Agency to the Trustee.
<PAGE>
7
2.9 Charges for Exchange
Except as otherwise provided herein, the Warrant Agency may charge to the holder
requesting an exchange a reasonable sum for each new Warrant Certificate issued
in exchange for a Warrant Certificate(s), and payment of such charges and
reimbursement of the Trustee or the Corporation for any and all stamp taxes or
governmental or other charges required to be paid shall be made by such holder
as a condition precedent to such exchange.
2.10 Transfer and Ownership of Special Warrants
a. The Special Warrants may only be transferred on the Warrant Register kept
at the Warrant Agency by the holder or its legal representatives or its
attorney duly appointed by an instrument in writing in form and execution
satisfactory to the Trustee only upon surrendering to the Trustee at the
Warrant Agency the Warrant Certificate or Warrant Certificates representing
the Special Warrants to be transferred, with the transfer form thereon duly
completed and executed, signed by the Warrantholder or by the duly
appointed legal representative thereof or a duly authorized attorney,
together with evidence of authority of any such legal representative or
attorney and, if required by the transfer form, with such signature
properly guaranteed, and upon compliance with:
i. the conditions herein;
ii. such reasonable requirements as the Trustee may prescribe; and
iii. all applicable securities legislation and requirements of regulatory
authorities relating to the transferability of the Special Warrants or
restrictions thereon;
and such transfer shall be duly noted in the Warrant Register by the
Trustee. Upon compliance with such requirements, the Trustee shall issue to
the transferee a Warrant Certificate representing the Special Warrants
transferred. Such new Warrant Certificate shall be sent by first class mail
or held for pick up by the transferee in accordance with the instructions
given on the transfer form and, if no such instructions are given, shall be
sent by first class mail to the address of the transferee appearing on the
form of transfer. If less than all the Special Warrants represented by a
Warrant Certificate are transferred, the Trustee shall issue a new Warrant
Certificate representing those Special Warrants not transferred in the same
name as the name appearing on the Warrant Certificate surrendered for
transfer. Such new Warrant Certificate shall be sent by first class mail or
held for pick up in accordance with instructions given on the transfer form
and, if no instructions are given, shall be sent by first class mail to the
address of the holder of the Special Warrants surrendered for transfer
appearing on the Warrant Register.
b. The Special Warrants and the Common Shares and Purchase Warrants issuable
upon exercise thereof have not been registered under the U.S. Securities
Act, or the securities laws of any state of the United States, and may not
be transferred in the United States or to a U.S. Person unless the Special
Warrants and the Common Shares and Purchase Warrants have been registered
under the U.S. Securities Act and the securities laws of all applicable
states of the United States or an exemption from such registration
requirements is available. The Trustee shall not permit the transfer of any
Special Warrants unless the holder thereof has provided to the Trustee and
the Corporation an opinion of counsel, or other evidence, in form
reasonably satisfactory to the Corporation, to the effect that such
transfer of Special Warrants does not require registration under the U.S.
Securities Act or any applicable state laws and regulations governing the
offer and sale of securities.
<PAGE>
8
c. The Corporation and the Trustee will deem and treat the registered owner of
any Special Warrant as the beneficial owner thereof for all purposes and
neither the Corporation nor the Trustee shall be affected by any notice to
the contrary.
d. Subject to the provisions of this Indenture and applicable law,
Warrantholders shall be entitled to the rights and privileges attaching to
the Special Warrants and the issue of Common Shares and Purchase Warrants
upon the exercise of Special Warrants by any Warrantholder in accordance
with the terms and conditions herein contained shall discharge all
responsibilities of the Corporation and the Trustee with respect to such
Special Warrants and neither the Corporation nor the Trustee shall be bound
to inquire into the title of any such holder.
ARTICLE 3
EXERCISE OF SPECIAL WARRANTS
3.1 Holders Eligible to Exercise Special Warrants
The Special Warrants may not be exercised within the United States by or on
behalf of any U.S. Person or person in the United States unless the Common
Shares and Purchase Warrants are registered under the U.S. Securities Act and
the securities laws of all applicable states of the United States or an
exemption from such registration requirement is available. Any person who
voluntarily exercises a Special Warrant shall provide to the Trustee either:
a. i. written certification that it is not a U.S. Person and that such
Special Warrant is not being exercised within the United States or on
behalf of, or for the account or benefit of, a U.S. Person or a person
in the United States; or
ii. a written opinion of counsel or other evidence satisfactory to the
Corporation to the effect that the Common Shares and Purchase Warrants
have been registered under the U.S. Securities Act and applicable
state securities laws or are exempt from registration thereunder; or
b. written certification that it was an original subscriber for Special
Warrants who was a U.S. Person at the time of the acquisition of such
Special Warrants and the representations and warranties made by such person
in connection with the acquisition of such Special Warrants remain true and
correct on the date of exercise.
3.2 Method of Exercise of Special Warrants
a. The holder of any Special Warrant may exercise the right conferred on such
holder to acquire Common Shares and Purchase Warrants by surrendering,
after the Effective Date and prior to the Time of Expiry, to the Warrant
Agency the Warrant Certificate with a duly completed and executed exercise
form.
A Warrant Certificate with the duly completed and executed exercise form
referred to in this subsection 3.2.a shall be deemed to be surrendered only
upon personal delivery thereof or, if sent by mail or other means of
transmission, upon actual receipt thereof at, in each case, the Warrant
Agency.
b. Any exercise form referred to in subsection shall be signed by the
Warrantholder or by the duly appointed legal representative thereof or a
duly authorized attorney, with evidence of authority of any such legal
representative or attorney attached thereto, and, if required by the
exercise form, with such signature properly guaranteed, and shall specify:
<PAGE>
9
i. the equal number of Common Shares and Purchase Warrants which the
holder wishes to acquire (being not more than those which the holder
is entitled to acquire pursuant to the Warrant Certificate(s)
surrendered);
ii. the person or persons in whose name or names such Common Shares and
Purchase Warrants are to be issued with respective Social Insurance
Numbers;
iii. the address or addresses of such person(s); and
iv. the number of Common Shares and Purchase Warrants to be issued to each
such person if more than one is so specified.
If any of the Common Shares and Purchase Warrants subscribed for are to be
issued to a person or persons other than the Warrantholder, each such
person shall also complete and deliver, together with the exercise form
signed by the Warrantholder, an exercise form in the form attached to the
Warrant Certificate and the Warrantholder shall pay to the Corporation or
the Warrant Agency on behalf of the Corporation, all applicable transfer or
similar taxes and the Corporation shall not be required to issue or deliver
certificates evidencing Common Shares and Purchase Warrants unless or until
such Warrantholder shall have paid to the Corporation, or the Warrant
Agency on behalf of the Corporation, the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been
paid or that no tax is due.
c. In connection with the exercise of Special Warrants by any U.S. Person or
person in the United States that was not the original subscriber for the
Special Warrants or transferee in accordance with section 2.10.b, the
Corporation may, in its sole discretion, require that such Warrantholder
deliver in connection with such exercise an opinion of counsel addressed to
the Corporation and the Trustee in form and substance satisfactory to the
Corporation, that no violation of the registration provisions of the U.S.
Securities Act or the securities laws of any state would result from the
exercise of the Special Warrants by such U.S. Person.
d. In connection with the exchange of Warrant Certificates and exercise of
Special Warrants and in compliance with such other terms and conditions
hereof as may be required, the Corporation has appointed the principal
offices of the Trustee in Calgary and Vancouver as the agency at which
Warrant Certificates may be surrendered for exchange or at which Special
Warrants may be exercised. The Corporation may from time to time designate
alternate or additional places as the Warrant Agency and shall give notice
to the Trustee of any change of the Warrant Agency.
3.3 Effect of Exercise of Special Warrants
a. Upon compliance by the holder of any Warrant Certificate with the
provisions of section or upon the automatic exercise of Special Warrants
pursuant to section 3.9, and subject to section 3.4, the Common Shares and
Purchase Warrants subscribed for shall be deemed to have been issued and
the person or persons to whom such Common Shares and Purchase Warrants are
to be issued shall be deemed to have become the holder or holders of record
of such Common Shares and Purchase Warrants on the Exercise Date unless the
transfer registers of the Corporation shall be closed on such date, in
which case the Common Shares and Purchase Warrants subscribed for shall be
deemed to have been issued, and such person or persons deemed to have
become the holder or holders of record of such Common Shares and Purchase
Warrants, on the date on which such transfer registers are reopened.
<PAGE>
10
b. Within five Business Days after the Exercise Date with respect to a Special
Warrant, the Corporation shall cause to be mailed to the person or persons
in whose name or names the Common Shares and Purchase Warrants so
subscribed for have been issued, as specified in the subscription, at the
address specified in such subscription or, if so specified in such
subscription, cause to be delivered to such person or persons at the
Warrant Agency where the Warrant Certificate was surrendered, a certificate
or certificates for the appropriate number of Common Shares and Purchase
Warrants subscribed for. In the absence of instructions to the contrary,
such certificates shall be issued in the name of the registered holder of
the surrendered Warrant Certificate and shall be mailed by first class mail
to the address of such Warrantholder appearing on the Warrant Register.
3.4 Partial Exercise of Special Warrants; Fractions
a. The holder of any Special Warrants may acquire a number of Common Shares
and Purchase Warrants less than the number which the holder is entitled to
acquire pursuant to the surrendered Warrant Certificate(s). In the event of
any exercise of a number of Special Warrants less than the number which the
holder is entitled to exercise, the holder of the Special Warrants upon
such exercise shall also be entitled to receive, without charge therefor, a
new Warrant Certificate(s) in respect of the balance of the Special
Warrants represented by the surrendered Warrant Certificate(s) not then
exercised. In the absence of instructions to the contrary, such certificate
shall be issued in the name of the registered holder of the surrendered
Warrant Certificate and shall be mailed by first class mail to the address
of such Warrantholder appearing on the Warrant Register.
b. To the extent that the Warrantholder is entitled to receive on the exercise
or partial exercise thereof a fraction of a Common Share or a Purchase
Warrant, such right may only be exercised in respect of such fraction in
combination with another Special Warrant or other Special Warrants which in
the aggregate entitles the Warrantholder to receive a whole number of
Common Shares or Purchase Warrants.
If the Warrantholder is not able to or elects not to, combine Special
Warrants so as to be entitled to acquire a whole number of Common Shares
and Purchase Warrants, the Corporation shall make an appropriate cash
settlement. However, in respect of any Warrantholder, the Corporation shall
only be required to make such a cash adjustment once and for one Special
Warrant and no more. The amount of the cash adjustment with respect to the
Common Share shall be equal to the fraction of the Common Share to which
the Warrantholder would be entitled multiplied by the Current Market Price.
The amount of the cash adjustment with respect to the Purchase Warrants
shall be equal to the fraction of a Purchase Warrant to which the
Warrantholder would be entitled multiplied by the amount by which the
Current Market Price exceeds $2.10.
3.5 Common Share and Purchase Warrant Certificates
At the instruction of the Corporation, Common Shares and Purchase Warrants
issued to U.S. Persons pursuant to exercise of the Special Warrants may bear a
legend in substantially the following form:
"The securities represented hereby have not been registered under the
United States Securities Act of 1933, as amended (the "Securities Act") or
applicable state securities laws. The holder hereof, by purchasing such
securities, agrees for the benefit of the Corporation that such securities
may be offered, sold or otherwise transferred only (a) to the Corporation,
(b) outside the United States in accordance with Rule 904 of Regulation S
under the Securities Act (c) pursuant to the exemption from registration
under the Securities Act provided by Rule 144
<PAGE>
11
thereunder, if applicable, or (d) pursuant to another exemption from
registration after providing a satisfactory legal opinion to the
Corporation. Delivery of this certificate does not constitute "good
delivery" in settlement of transactions on The Alberta Stock Exchange. A
new certificate, bearing no legend, delivery of which will constitute "good
delivery" in settlement of transactions on The Alberta Stock Exchange, may
be obtained from Montreal Trust Company of Canada upon delivery of this
certificate and duly executed declaration, in form satisfactory to Montreal
Trust Company of Canada and the Corporation, to the effect that the sale of
the securities represented hereby is being made in compliance with Rule 904
of Regulation S under the Securities Act, together with such other
documentation as may be requested by the Corporation."
and may also contain such other legends as may be required by applicable
securities regulatory requirements, authorities or stock exchanges including,
without limitation, The Alberta Stock Exchange.
3.6 Expiration of Special Warrants
Subject to section 3.9, immediately after the Time of Expiry, all rights under
any Special Warrant in respect of which the right of acquisition herein and
therein provided for shall not have been exercised shall cease and terminate and
such Special Warrant shall be void and of no further force or effect.
3.7 Cancellation of Surrendered Special Warrants
All Warrant Certificates surrendered to the Warrant Agency pursuant to sections
2.7, 2.8, 2.10, 3.2 or 5.1 shall be returned to the Trustee for cancellation
and, after the expiry of any period of retention prescribed by law, destroyed by
the Trustee. Upon request by the Corporation, the Trustee shall furnish to the
Corporation a destruction certificate identifying the Warrant Certificates so
destroyed and the number of Special Warrants evidenced thereby.
3.8 Accounting and Recording
a. The Trustee shall promptly account to the Corporation with respect to
Special Warrants exercised. Any securities or other instruments from time
to time received by the Trustee shall be received in trust for, and shall
be segregated and kept apart by the Trustee in trust for, the Corporation.
b. The Trustee shall record the particulars of Special Warrants exercised
which shall include the names and addresses of the persons who become
holders of Common Shares and Purchase Warrants on exercise and the Exercise
Date. Within five Business Days of each Exercise Date, the Trustee shall
provide such particulars in writing to the Corporation.
3.9 Automatic Exercise on Behalf of Warrantholder by the Trustee
At the Time of Expiry, the rights of all holders of Special Warrants not then
exercised to acquire Common Shares and Purchase Warrants shall be exercised by
the Warrant Agency on behalf of such Warrantholders without any further action
on the part of the Warrantholders and the Common Shares and Purchase Warrants
issuable thereby shall be deemed to be issued to the Warrantholders at such
time.
Upon such automatic exercise, the Corporation shall cause to be mailed to each
Warrantholder within five business days of the Time of Expiry a certificate or
certificates representing the appropriate number of Common Shares and Purchase
Warrants.
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12
3.10 Securities Restrictions
Notwithstanding anything herein contained, Common Shares and Purchase Warrants
will only be issued pursuant to any Special Warrant in compliance with the
securities laws of any applicable jurisdiction and, without limiting the
generality of the foregoing, in the event that Special Warrants are exercised
pursuant to section prior to the issuance of a receipt for the Prospectus by the
Securities Commissions in each of the Filing Jurisdictions, the certificates
representing the Common Shares and Purchase Warrants issued thereby will bear
such legend as may, in the opinion of counsel of the Corporation, be necessary
in order to avoid a violation of any securities laws of any province in Canada
or of the United States or to comply with the requirements of any stock exchange
on which the Common Shares are listed, provided that, if at any time, in the
opinion of counsel to the Corporation, such legends are no longer necessary in
order to avoid a violation of any such laws, or the holder of any such legended
certificate, at the holder's expense, provides the Corporation with evidence
satisfactory in form and substance to the Corporation (which may include an
opinion of counsel satisfactory to the Corporation) to the effect that such
holder is entitled to sell or otherwise transfer such Common Shares or Purchase
Warrants in a transaction in which such legends are not required, such legended
certificate may thereafter be surrendered to the Corporation in exchange for a
certificate which does not bear such legend.
ARTICLE 4
ADJUSTMENT OF NUMBER OF COMMON SHARES AND PURCHASE WARRANTS
4.1 Failure to Clear Prospectus
If a receipt for the Prospectus or an Order is not obtained on or prior to the
date which is one hundred and fifty (150) days from the Effective Date (the
"Qualification Date") from each of the Securities Commissions in the Filing
Jurisdictions, each Warrantholder shall be entitled to receive, upon exercise or
automatic exercise of each Special Warrant, notwithstanding section 2.2, 1.1
Common Shares and 1.1 Purchase Warrants, subject to further adjustment in
accordance with this Article 4 hereof at anytime after the Qualification Date
until the Time of Expiry at no additional cost to the holder.
4.2 Adjustment of Number of Common Shares and Purchase Warrants
The acquisition rights in effect at any date attaching to the Special Warrants
shall be subject to adjustment from time to time as follows:
a. if and whenever at any time from the date hereof and prior to the Time of
Expiry, the Corporation shall:
i. subdivide, redivide or change its outstanding Common Shares into a
greater number of shares; or
ii. reduce, combine or consolidate its outstanding Common Shares into a
smaller number of shares;
the number of Common Shares and Purchase Warrants obtainable under
each Special Warrant shall be adjusted immediately after the effective
date of such subdivision, redivision, change, reduction, combination
or consolidation, by multiplying the number of Common Shares
theretofore obtainable on the exercise thereof by a fraction of which
the numerator shall be the total number of Common Shares outstanding
immediately after such date and the denominator shall be the total
number of Common Shares outstanding immediately prior to such date.
Such adjustment shall be made successively whenever any event referred
to in this subsection 4.2.a shall occur;
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13
b. if and whenever at any time from the date hereof and prior to the Time of
Expiry, there is a reclassification of the Common Shares or a capital
reorganization of the Corporation other than as described in subsection
4.2.a or a consolidation, amalgamation or merger of the Corporation with or
into any other body corporate, trust, partnership or other entity, or a
sale or conveyance of the property and assets of the Corporation as an
entirety or substantially as an entirety to any other body corporate,
trust, partnership or other entity, any Warrantholder who has not exercised
its right of acquisition prior to the effective date of such
reclassification, reorganization, consolidation, amalgamation, merger, sale
or conveyance, upon the exercise of such right thereafter, shall be
entitled to receive and shall accept, in lieu of the number of Common
Shares and Purchase Warrants then sought to be acquired by it, the number
of shares or other securities or property of the Corporation or of the body
corporate, trust, partnership or other entity resulting from such merger,
amalgamation or consolidation, or to which such sale or conveyance may be
made, as the case may be, that such Warrantholder would have been entitled
to receive on such reclassification, reorganization, consolidation,
amalgamation, merger, sale or conveyance, if, on the record date or the
effective date thereof, as the case may be, the Warrantholder had been the
registered holder of the number of Common Shares and Purchase Warrants
sought to be acquired by it. If determined appropriate by the Trustee to
give effect to or to evidence the provisions of this subsection 4.2.b, the
Corporation, its successor, or such purchasing body corporate, partnership,
trust or other entity, as the case may be, shall, prior to or
contemporaneously with any such reclassification, reorganization,
consolidation, amalgamation, merger, sale or conveyance, enter into an
indenture which shall provide, to the extent possible, for the application
of the provisions set forth in this Indenture with respect to the rights
and interests thereafter of the Warrantholders to the end that the
provisions set forth in this Indenture shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, with respect to any
shares, other securities or property to which a Warrantholder is entitled
on the exercise of its acquisition rights thereafter. Any indenture entered
into between the Corporation and the Trustee pursuant to the provisions of
this subsection 4.2.b shall be a supplemental indenture entered into
pursuant to the provisions of Article 8 hereof. Any indenture entered into
between the Corporation, any successor to the Corporation or such
purchasing body corporate, partnership, trust or other entity and the
Trustee shall provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided in this section 4.2 and
which shall apply to successive reclassifications, reorganizations,
amalgamations, consolidations, mergers, sales or conveyances;
c. if and whenever at any time from the date hereof and prior to the Time of
Expiry, the Corporation fixes a record date for the making of a
distribution to all or substantially all the holders of its outstanding
Common Shares or Purchase Warrants of dividends or any other distribution
of cash, property or securities, including without limitation: (i) shares
of any class; (ii) rights, options or warrants, or (iii) evidences of its
indebtedness, or (iv) assets, including shares of other corporations, any
Warrantholder who has not exercised its right of acquisition prior to such
record date, upon the exercise of such right thereafter, shall be entitled
to receive, without further payment to the Corporation, and shall accept in
addition to the number of Common Shares and Purchase Warrants to which it
was theretofore entitled upon such exercise, the kind and amount of shares
and other securities or property which such holder would have been entitled
to receive as a result of such distribution, if, on the record date it had
been the registered holder of the number of Common Shares and Purchase
Warrants to which it was theretofore entitled upon exercise; and
d. the adjustments provided for in this Article 4 in the number of Common
Shares and Purchase Warrants and classes of securities which are to be
received on the exercise of Special Warrants are cumulative. After any
adjustment pursuant to this section 4.2, the term "Common Shares" and
"Purchase Warrants" where used in this Indenture shall be interpreted to
mean securities of
<PAGE>
14
any class or classes which, as a result of such adjustment and all prior
adjustments pursuant to this section 4.2, the Warrantholder is entitled to
receive upon the exercise of its Special Warrant, and the number of Common
Shares and Purchase Warrants indicated by any exercise made pursuant to a
Special Warrant shall be interpreted to mean the number of Common Shares
and Purchase Warrants or other property or securities a Warrantholder is
entitled to receive, as a result of such adjustment and all prior
adjustments pursuant to this section 4.2, upon the full exercise of a
Special Warrant.
4.3 Entitlement to Shares on Exercise of Special Warrant
All shares or warrants of any class or other securities which a Warrantholder is
at the time in question entitled to receive on the exercise of its Special
Warrant, whether or not as a result of adjustments made pursuant to this Article
4, shall, for the purposes of the interpretation of this Indenture, be deemed to
be shares or securities which such Warrantholder is entitled to acquire pursuant
to such Special Warrant.
4.4 No Adjustment for Stock Options
Notwithstanding anything to the contrary, in this Article 4, no adjustment shall
be made in the acquisition rights attached to the Special Warrants if the issue
of Common Shares and Purchase Warrants is being made pursuant to this Indenture
or pursuant to any stock option or stock purchase plan for directors, officers,
employees or consultants of the Corporation in force from time to time.
4.5 Determination by Corporation's Auditors
In the event of any question arising with respect to the adjustments provided
for in this Article , such question shall be conclusively determined by the
Corporation's Auditors who shall have access to all necessary records of the
Corporation, and such determination shall be binding upon the Corporation, the
Trustee, all Warrantholders and all other persons interested therein.
4.6 Proceedings Prior to any Action Requiring Adjustment
As a condition precedent to the taking of any action which would require an
adjustment in any of the acquisition rights pursuant to any of the Special
Warrants, including the number of Common Shares and Purchase Warrants which are
to be received upon the exercise thereof, the Corporation shall take any
corporate action which may, in the opinion of Counsel, be necessary in order
that the Corporation has unissued and reserved in its authorized capital and may
validly and legally issue as fully paid and non-assessable all the shares and
warrants which the holders of such Special Warrants are entitled to receive on
the full exercise thereof in accordance with the provisions hereof.
4.7 Certificate of Adjustment
The Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in this Article
4, deliver a certificate of the Corporation to the Trustee specifying the nature
of the event requiring the same and the amount of the adjustment necessitated
thereby and setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based, which certificate shall be supported
by a certificate of the Corporation's Auditors verifying such calculation.
4.8 Notice of Special Matters
The Corporation covenants with the Trustee that, so long as any Special Warrant
remains outstanding, it will give notice to the Trustee and to the
Warrantholders of its intention to fix a record date that is prior to the
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15
Expiry Date for the issuance of rights, options or warrants (other than the
Special Warrants) to all or substantially all the holders of its outstanding
Common Shares. Such notice shall specify the particulars of such event and the
record date for such event, provided that the Corporation shall only be required
to specify in the notice such particulars of the event as shall have been fixed
and determined on the date on which the notice is given. The notice shall be
given in each case not less than 14 days prior to such applicable record date.
4.9 No Action after Notice
The Corporation covenants with the Trustee that it will not close its transfer
books or take any other corporate action which might deprive the holder of a
Special Warrant of the opportunity to exercise its right of acquisition pursuant
thereto during the period of 14 days after the giving of the certificate or
notices set forth in sections 4.6 and 4.7.
4.10 Other Action
In case the Corporation, after the date hereof, shall take any action affecting
the Common Shares and Purchase Warrants other than actions described in
subsection 4.2, which in the opinion of the directors of the Corporation would
materially affect the rights of the Warrantholders, the number of Common Shares
and Purchase Warrants which may be acquired upon exercise of the Special
Warrants shall be adjusted in such manner and at such time, by action of the
director, as they determine, acting reasonably, to be equitable in the
circumstances.
4.11 Participation by Special Warrantholder
No adjustments shall be made pursuant to this Article 4 if the Warrantholders
are entitled to participate in any event described in this Article 4 on the same
terms, mutatis mutandis, as if the Warrantholders had exercise their Special
Warrants prior to, or on the effective date or record date of, such event.
4.12 Protection of Trustee
Except as provided in section 9.2, the Trustee:
a. shall not at any time be under any duty or responsibility to any
Warrantholder to determine whether any facts exist which may require any
adjustment contemplated by section 4.2 or with respect to the nature or
extent of any such adjustment when made, or with respect to the method
employed in making the same;
b. shall not be accountable with respect to the validity or value (or the kind
or amount) of any Common Shares, Purchase Warrants or of any shares or
other securities or property which may at any time be issued or delivered
upon the exercise of the rights attaching to any Special Warrant;
c. shall not be responsible for any failure of the Corporation to issue,
transfer or deliver Common Shares and Purchase Warrants or certificates for
the same upon the surrender of any Special Warrants for the purpose of the
exercise of such rights or to comply with any of the covenants contained in
this Article 4; and
d. shall not incur any liability or responsibility whatsoever or be in any way
responsible for the consequences of any breach on the part of the
Corporation of any of the representations, warranties or covenants herein
contained or of any acts of the directors, officers, employees, agents or
servants of the Corporation.
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16
ARTICLE 5
RIGHTS OF THE CORPORATION AND COVENANTS
5.1 Optional Purchases by the Corporation
The Corporation may from time to time purchase by private contract or otherwise
any of the Special Warrants. Any such purchase shall be made at the lowest price
or prices at which, in the opinion of the directors, such Special Warrants are
then obtainable, plus reasonable costs of purchase, and may be made in such
manner, from such persons and on such other terms as the Corporation, in its
sole discretion, may determine. Any Warrant Certificates representing the
Special Warrants purchased pursuant to this Section shall forthwith be delivered
to and cancelled by the Trustee. No Special Warrants shall be issued in
replacement thereof.
5.2 General Covenants
The Corporation covenants with the Trustee that so long as any Special Warrants
remain outstanding:
a. it shall reserve and keep available a sufficient number of Common Shares
for the purpose of enabling it to satisfy its obligations to issue Common
Shares upon the exercise of the Special Warrants and Purchase Warrants;
b. it shall cause the Common Shares and Purchase Warrants and the certificates
representing the Common Shares and Purchase Warrants acquired pursuant to
the exercise of the Special Warrants to be duly issued and delivered in
accordance with the Warrant Certificates and the terms hereof;
c. all Common Shares which shall be issued upon exercise of the right to
acquire provided for herein and in the Warrant Certificates shall be duly
and validly issued as fully paid and non-assessable;
d. it shall maintain its corporate existence and carry on and conduct and will
cause to be carried on and conducted its business in the same manner as
heretofore carried on and conducted;
e. it shall use its best efforts to ensure that all Common Shares outstanding
or issuable from time to time (including without limitation the Common
Shares issuable on the exercise of the Special Warrants and the Purchase
Warrants) are listed and posted for trading on The Alberta Stock Exchange
or such other stock exchange as may be applicable;
f. it shall make all requisite filings under applicable Canadian securities
legislation including those necessary to remain a reporting issuer not in
default in each of the Filing Jurisdictions and those necessary to report
the exercise of the right to acquire Common Shares and Purchase Warrants
pursuant to Special Warrants;
g. it shall use its best efforts to obtain a receipt for the Prospectus, as
soon as practicable but in any event on or before the Qualification Date
(as such term is defined in section 4.1) from each of the Securities
Commissions so that the resale of the Common Shares and Purchase Warrants
will not be subject to the prospectus requirements or any "hold period"
under applicable securities legislation in such Filing Jurisdictions;
h. it shall give written notice to the Trustee and to each holder of Special
Warrants of the issuance of the receipts for a Prospectus, together with a
commercial copy of the Prospectus, as soon as practicable but, in any
event, not later than five Business Days after the issuance of such
receipts;
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17
i. if a receipt for the Prospectus dated on or before the Qualification Date
is not obtained from each of the Securities Commissions, it shall continue
to use, until the Expiry Date, its best efforts to obtain a receipt for the
Prospectus from the Securities Commissions in each of the Filing
Jurisdictions; and
j. generally, it will well and truly perform and carry out all of the acts or
things to be done by it as provided in this Indenture or as the Trustee may
reasonably require for the better accomplishing and effecting of the
intentions and provisions of this Indenture.
5.3 Trustee's Remuneration and Expenses
The Corporation covenants that it will pay to the Trustee from time to time
reasonable remuneration for its services hereunder and will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in the administration or execution of the trusts
hereby created (including the reasonable compensation and the disbursements of
its Counsel and all other advisers and assistants not regularly in its employ)
both before any default hereunder and thereafter until all duties of the Trustee
hereunder shall be finally and fully performed, except any such expense,
disbursement or advance as may arise out of or result from the Trustee's
negligence, wilful misconduct or bad faith.
5.4 Securities Qualification Requirements
a. If, in the opinion of Counsel, any instrument (not including a prospectus
except the Prospectus required to be filed with the Securities Commissions
under subsection 5.2.g) is required to be filed with, or any permission is
required to be obtained from, any governmental authority in Canada or any
other step is required under any federal or provincial law of Canada before
any Common Shares or Purchase Warrants which a Warrantholder is entitled to
acquire pursuant to the exercise of any Special Warrant may properly and
legally be issued upon due exercise thereof and thereafter traded, without
further formality or restriction, the Corporation covenants that it will
take such required action.
b. The Corporation or, if required by the Corporation, the Trustee will give
notice of the issue of Common Shares and Purchase Warrants pursuant to the
exercise of Special Warrants, in such detail as may be required, to the
Securities Commission in each of the Filing Jurisdictions in which there is
legislation or regulation permitting or requiring the giving of any such
notice in order that such issue of Common Shares and Purchase Warrants and
the subsequent disposition of the Common Shares and Purchase Warrants so
issued will not be subject to the prospectus qualification requirements of
such legislation or regulation.
5.5 Performance of Covenants by Trustee
If the Corporation shall fail to perform any of its covenants contained in this
Warrant Indenture, the Trustee may notify the Warrantholders of such failure on
the part of the Corporation or may itself perform any of the covenants capable
of being performed by it but, subject to section 9.2, shall be under no
obligation to perform such covenants or to notify the Warrantholders of such
performance by it. All sums expended or advanced by the Trustee in so doing
shall be repayable as provided in section 5.3. No such performance, expenditure
or advance by the Trustee shall relieve the Corporation of any default hereunder
or of its continuing obligations under the covenants herein contained.
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ARTICLE 6
ENFORCEMENT
6.1 Suits by Warrantholders
All or any of the rights conferred upon any Warrantholder by any of the terms of
the Warrant Certificates or the Indenture or both may be enforced by the
Warrantholder by appropriate proceedings but without prejudice to the right
which is hereby conferred upon the Trustee to proceed in its own name to enforce
each and all of the provisions herein contained for the benefit of the
Warrantholders.
6.2 Immunity of Shareholders, etc.
The Trustee and, by the acceptance of the Warrant Certificates and as part of
the consideration for the issue of the Special Warrants, the Warrantholders
hereby waive and release any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any incorporator or any past, present or
future shareholder, director, officer, employee or agents of the Corporation or
any successor corporation on any covenant, agreement, representation or warranty
by the Corporation contained herein or in the Warrant Certificates.
6.3 Limitation of Liability
The obligations hereunder are not personally binding upon, nor shall resort
hereunder be had to, the private property of any of the past, present or future
directors or shareholders of the Corporation or any successor corporation or any
of the past, present or future officers, employees or agents of the Corporation
or any successor corporation, but only the property of the Corporation or any
successor corporation shall be bound in respect hereof.
6.4 Waiver of Default
Upon the happening of any default of any covenant or obligation of the
Corporation provided for herein:
a. the holders of not less than 66 2/3% of the aggregate number of Special
Warrants then outstanding shall have power (in addition to the powers
exercisable by extraordinary resolution as provided in section 7.10) by
requisition in writing to instruct the Trustee to waive any default
hereunder and the Trustee shall thereupon waive the default upon such terms
and conditions as shall be prescribed in such requisition; or
b. the Trustee shall have power to waive any default hereunder upon such terms
and conditions as the Trustee may deem advisable, if, in the Trustee's
opinion, the same shall have been cured or adequate provision made
therefor;
provided that no delay or omission of the Trustee or of the Warrantholders to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver of any such default or
acquiescence therein and provided further that no act or omission either of the
Trustee or of the Warrantholders in the premises shall extend to or be taken in
any manner whatsoever to affect any subsequent default hereunder of the rights
resulting therefrom.
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ARTICLE 7
MEETINGS OF WARRANTHOLDERS
7.1 Right to Convene Meetings
The Trustee may at any time and from time to time, and shall on receipt of a
written request of the Corporation or of a Warrantholders' Request and upon
being indemnified and funded to its reasonable satisfaction by the Corporation
or by the Warrantholders signing such Warrantholders' Request against the cost
which may be incurred in connection with the calling and holding of such
meeting, convene a meeting of the Warrantholders. In the event of the Trustee
failing to so convene a meeting within seven days after receipt of such written
request of the Corporation or such Warrantholders' Request and indemnity and
funding being given as aforesaid, the Corporation or such Warrantholders, as the
case may be, may convene such meeting. Every such meeting shall be held in the
City of Calgary or at such other place as may be approved or determined by the
Trustee and approved by the Corporation, acting reasonably.
7.2 Notice
At least ten days prior notice of any meeting of Warrantholders shall be given
to the Warrantholders in the manner provided for in section 10.2 and a copy of
such notice shall be sent by mail to the Trustee (unless the meeting has been
called by the Trustee), the Agents and to the Corporation (unless the meeting
has been called by the Corporation). Such notice shall state the time when and
the place where the meeting is to be held, shall state briefly the general
nature of the business to be transacted thereat and shall contain such
information as is reasonably necessary to enable the Warrantholders to make a
reasoned decision on the matter, but it shall not be necessary for any such
notice to set out the terms of any resolution to be proposed or any of the
provisions of this Article 7.
7.3 Chairman
An individual (who need not be a Warrantholder) designated in writing by the
Trustee shall be chairman of the meeting and if no individual is so designated,
or if the individual so designated is not present within 15 minutes from the
time fixed for the holding of the meeting, the Warrantholders present in person
or by proxy shall choose an individual present to be chairman.
7.4 Quorum
Subject to the provisions of section 7.11, at any meeting of the Warrantholders
a quorum shall consist of Warrantholders present in person or by proxy and
entitled to purchase at least 25% of the aggregate number of Common Shares which
could be acquired pursuant to all the then outstanding Special Warrants,
provided that at least two persons entitled to vote thereat are personally
present. If a quorum of the Warrantholders shall not be present within 30
minutes from the time fixed for holding any meeting, the meeting, if summoned by
Warrantholders or on a Warrantholders' Request, shall be dissolved; but in any
other case the meeting shall be adjourned to the same day in the next week
(unless such day is not a Business Day, in which case it shall be adjourned to
the next following Business Day) at the same time and place and no notice of the
adjournment need be given. Any business may be brought before or dealt with at
an adjourned meeting which might have been dealt with at the original meeting in
accordance with the notice calling the same. No business shall be transacted at
any meeting unless a quorum be present at the commencement of business. At the
adjourned meeting the Warrantholders present in person or by proxy shall form a
quorum and may transact the business for which the meeting was originally
convened, notwithstanding that they may not be entitled to acquire at least 25%
of the aggregate number of Common Shares which may be acquired pursuant to all
then outstanding Special Warrants.
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7.5 Power to Adjourn
The chairman of any meeting at which a quorum of the Warrantholders is present
may, with the consent of the meeting, adjourn any such meeting, and no notice of
such adjournment need be given except such notice, if any, as the meeting may
prescribe.
7.6 Show of Hands
Every question submitted to a meeting shall be decided in the first place by a
majority of the votes given on a show of hands except that votes on an
extraordinary resolution shall be given in the manner hereinafter provided. At
any such meeting, unless a poll is duly demanded as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.
7.7 Poll and Voting
On every extraordinary resolution, and on any other question submitted to a
meeting and after a vote by show of hands when demanded by the chairman or by
one or more of the Warrantholders acting in person or by proxy and entitled to
acquire in the aggregate at least 5% of the aggregate number of Common Shares
which could be acquired pursuant to all the Special Warrants then outstanding, a
poll shall be taken in such manner as the chairman shall direct. Questions other
than those required to be determined by extraordinary resolution shall be
decided by a majority of the votes cast on the poll.
On a show of hands, every person who is present and entitled to vote, whether as
a Warrantholder or as proxy for one or more absent Warrantholders, or both,
shall have one vote. On a poll, each Warrantholder present in person or
represented by a proxy duly appointed by instrument in writing shall be entitled
to one vote in respect of each whole Common Share which he is entitled to
acquire pursuant to the Special Warrant or Special Warrants then held or
represented by it. A proxy need not be a Warrantholder. The chairman of any
meeting shall be entitled, both on a show of hands and on a poll, to vote in
respect of the Special Warrants and proxies, if any, held or represented by him.
7.8 Regulations
The Trustee, or the Corporation with the approval of the Trustee, may make and
vary such regulations not contrary to the provisions of this Indenture as it
shall think fit for:
a. the setting of the record date for a meeting for the purpose of determining
Warrantholders entitled to receive notice of and to vote at the meeting;
b. the issue of voting certificates by any bank, trust company or other
depositary satisfactory to the Trustee stating that the Warrant
Certificates specified therein have been deposited with it by a named
person and will remain on deposit until after the meeting, which voting
certificate shall entitle the persons named therein to be present and vote
at any such meeting and at any adjournment thereof or to appoint a proxy or
proxies to represent them and vote for them at any such meeting and at any
adjournment thereof in the same manner and with the same effect as though
the persons so named in such voting certificates were the actual bearers of
the Warrant Certificates specified therein;
c. the deposit of voting certificates and instruments appointing proxies at
such place and time as the Trustee, the Corporation or the Warrantholders
convening the meeting, as the case may be, may in the notice convening the
meeting direct;
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d. the deposit of voting certificates and instruments appointing proxies at
some approved place or places other than the place at which the meeting is
to be held and enabling particulars of such instruments appointing proxies
to be mailed, or telecopied before the meeting to the Corporation or to the
Trustee at the place where the same is to be held and for the voting of
proxies so deposited as though the instruments themselves were produced at
the meeting;
e. the form of the instrument of proxy; and
f. generally for the calling of meetings of Warrantholders and the conduct of
business thereat.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Save as such
regulations may provide, the only persons who shall be recognized at any meeting
as a Warrantholder, or be entitled to vote or be present at the meeting in
respect thereof (subject to section 7.9), shall be Warrantholders or their
counsel, or proxies of Warrantholders.
7.9 Corporation, the Agents and Trustee May be Represented
The Corporation, the Agents and the Trustee, by their respective directors,
employees and officers, and the Counsel for the Corporation, for the Agents and
for the Trustee may attend any meeting of the Warrantholders. The Corporation
and the Trustee shall not be entitled to vote thereat, whether in respect of any
Special Warrants held by them or otherwise. The Agents shall be entitled to vote
only in respect of Special Warrants held by them.
7.10 Powers Exercisable by Extraordinary Resolution
In addition to all other powers conferred upon them by any other provisions of
this Indenture or by law, the Warrantholders at a meeting shall, subject to the
provisions of section 7.11, have the power, exercisable from time to time by
extraordinary resolution:
a. to agree to any modification, abrogation, alteration, compromise or
arrangement of the rights of Warrantholders or the Trustee in its capacity
as trustee hereunder or on behalf of the Warrantholders against the
Corporation, whether such rights arise under this Indenture or the Warrant
Certificates or otherwise;
b. to amend, alter or repeal any extraordinary resolution previously passed or
sanctioned by the Warrantholders;
c. to direct or to authorize the Trustee to enforce any of the covenants on
the part of the Corporation contained in this Indenture or the Warrant
Certificates or to enforce any of the rights of the Warrantholders in any
manner specified in such extraordinary resolution or to refrain from
enforcing any such covenant or right;
d. to waive, and to direct the Trustee to waive, any default on the part of
the Corporation in complying with any provisions of this Indenture or the
Warrant Certificates either unconditionally or upon any conditions
specified in such extraordinary resolution;
e. to restrain any Warrantholder from taking or instituting any suit, action
or proceeding against the Corporation for the enforcement of any of the
covenants on the part of the Corporation in this Indenture or the Warrant
Certificates or to enforce any of the rights of the Warrantholders;
<PAGE>
22
f. to direct any Warrantholder who, as such, has brought any suit, action or
proceeding to stay or to discontinue or otherwise to deal with the same
upon payment of the costs, charges and expenses reasonably and properly
incurred by such Warrantholder in connection therewith;
g. to assent to any change in or omission from the provisions contained in the
Warrant Certificates and this Indenture or any ancillary or supplemental
instrument which may be agreed to by the Corporation, and to authorize the
Trustee to concur in and execute any ancillary or supplemental indenture
embodying the change or omission;
h. with the consent of the Corporation, such consent not to be unreasonably
withheld, to remove the Trustee or its successor in office and to appoint a
new trustee or trustees to take the place of the Trustee so removed;
i. to assent to any compromise or arrangement with any creditor or creditors
or any class or classes of creditors, whether secured or otherwise, and
with holders of any shares or other securities of the Corporation; and
j. to sanction any scheme for the reconstruction or reorganization of the
Corporation or for the consolidation, amalgamation or merger of the
Corporation with any other corporation or for the sale, leasing, transfer
or other disposition of all or substantially all the property and assets of
the Corporation.
7.11 Meaning of Extraordinary Resolution
a. The expression "extraordinary resolution" when used in this Indenture
means, subject as hereinafter provided in this section 7.11 and in section
7.14, a resolution proposed at a meeting of Warrantholders duly convened
for that purpose and held in accordance with the provisions of this Article
7 at which there are present in person or by proxy Warrantholders entitled
to acquire at least 25% of the aggregate number of Common Shares which may
be acquired pursuant to all the then outstanding Special Warrants and
passed by the affirmative votes of Warrantholders entitled to acquire not
less than 66 2/3% of the aggregate number of Common Shares which may be
acquired pursuant to all the then outstanding Special Warrants represented
at the meeting and voted on the poll upon such resolution.
b. If, at the meeting at which an extraordinary resolution is to be
considered, Warrantholders entitled to acquire at least 25% of the
aggregate number of Common Shares which may be acquired pursuant to all the
then outstanding Special Warrants are not present in person or by proxy
within 30 minutes after the time appointed for the meeting, then the
meeting, if convened by Warrantholders or on a Warrantholders' Request,
shall be dissolved; but in any other case it shall stand adjourned to such
day, being not less than 15 or more than 60 days later, and to such place
and time as may be appointed by the chairman. Not less than ten days' prior
notice shall be given of the time and place of such adjourned meeting in
the manner provided for in section 10.2. Such notice shall state that at
the adjourned meeting the Warrantholders present in person or by proxy
shall form a quorum but it shall not be necessary to set forth the purposes
for which the meeting was originally called or any other particulars. At
the adjourned meeting the Warrantholders present in person or by proxy
shall form a quorum and may transact the business for which the meeting was
originally convened and a resolution proposed at such adjourned meeting and
passed by the requisite vote as provided in subsection 7.11 shall be an
extraordinary resolution within the meaning of this Indenture
notwithstanding that Warrantholders entitled to acquire at least 25% of the
aggregate number of Common Shares which may be acquired pursuant to all the
then outstanding Special Warrants are not present in person or by proxy at
such adjourned meeting.
<PAGE>
23
c. Votes on an extraordinary resolution shall always be given on a poll and no
demand for a poll on an extraordinary resolution shall be necessary.
7.12 Powers Cumulative
Any one or more of the powers or any combination of the powers in this Indenture
stated to be exercisable by the Warrantholders by extraordinary resolution or
otherwise may be exercised from time to time and the exercise of any one or more
of such powers or any combination of powers from time to time shall not be
deemed to exhaust the right of the Warrantholders to exercise such power or
powers or combination of powers then or thereafter from time to time.
7.13 Minutes
Minutes of all resolutions and proceedings at every meeting of Warrantholders
shall be made and duly entered in books to be provided from time to time for
that purpose by the Trustee at the expense of the Corporation, and any such
minutes as aforesaid, if signed by the chairman or the secretary of the meeting
at which such resolutions were passed or proceedings had shall be prima facie
evidence of the matters therein stated and, until the contrary is proved, every
such meeting in respect of the proceedings of which minutes shall have been made
shall be deemed to have been duly convened and held, and all resolutions passed
thereat or proceedings taken shall be deemed to have been duly passed and taken.
7.14 Instruments in Writing
All actions which may be taken and all powers that may be exercised by the
Warrantholders at a meeting held as provided in this Article 7 may also be taken
and exercised by Warrantholders entitled to acquire at least 66 2/3% of the
aggregate number of Common Shares which may be acquired pursuant to all the then
outstanding Special Warrants by an instrument in writing signed in one or more
counterparts by such Warrantholders in person or by attorney duly appointed in
writing, and the expression "extraordinary resolution" when used in this
Indenture shall include an instrument so signed.
7.15 Binding Effect of Resolutions
Every resolution and every extraordinary resolution passed in accordance with
the provisions of this Article 7 at a meeting of Warrantholders shall be binding
upon all the Warrantholders, whether present at or absent from such meeting, and
every instrument in writing signed by Warrantholders in accordance with section
7.14 shall be binding upon all the Warrantholders, whether signatories thereto
or not, and each and every Warrantholder and the Trustee (subject to the
provisions for indemnity herein contained) shall be bound to give effect
accordingly to every such resolution and instrument in writing.
7.16 Holdings by Corporation Disregarded
In determining whether Warrantholders holding Warrant Certificates evidencing
the entitlement to acquire the required number of Common Shares are present at a
meeting of Warrantholders for the purpose of determining a quorum or have
concurred in any consent, waiver, extraordinary resolution, Warrantholders'
Request or other action under this Indenture, Special Warrants owned legally or
beneficially by the Corporation or any subsidiary of the Corporation shall be
disregarded in accordance with the provisions of section 10.9.
<PAGE>
24
ARTICLE 8
SUPPLEMENTAL INDENTURES
8.1 Provision for Supplemental Indentures for Certain Purposes
From time to time the Corporation (when authorized by action of the directors)
and the Trustee may, subject to the provisions hereof, and they shall, when so
directed in accordance with the provisions hereof, execute and deliver by their
proper officers, indentures or instruments supplemental hereto, which thereafter
shall form part hereof, for any one or more or all of the following purposes:
a. setting forth any adjustments resulting from the application of the
provisions of Article 4.
b. adding to the provisions hereof such additional covenants and enforcement
provisions as, in the opinion of Counsel, are necessary or advisable in the
premises, provided that the same are not in the opinion of the Trustee
prejudicial to the interests of the Warrantholders;
c. giving effect to any extraordinary resolution passed as provided in Article
7;
d. making such provisions not inconsistent with this Indenture as may be
necessary or desirable with respect to matters or questions arising
hereunder or for the purpose of obtaining a listing or quotation of the
Special Warrants on any stock exchange, provided that such provisions are
not, in the opinion of the Trustee, prejudicial to the interests of the
Warrantholders;
e. adding to or altering the provisions hereof in respect of the transfer of
Special Warrants, making provision for the exchange of Warrant
Certificates, and making any modification in the form of the Warrant
Certificates which does not affect the substance thereof;
f. modifying any of the provisions of this Indenture, including relieving the
Corporation from any of the obligations, conditions or restrictions herein
contained, provided that such modification or relief shall be or become
operative or effective only if, in the opinion of the Trustee, such
modification or relief in no way prejudices any of the rights of the
Warrantholders or of the Trustee, and provided further that the Trustee may
in its sole discretion decline to enter into any such supplemental
indenture which in its opinion may not afford adequate protection to the
Trustee when the same shall become operative; and
g. for any other purpose not inconsistent with the terms of this Indenture,
including the correction or rectification of any ambiguities, defective or
inconsistent provisions, errors, mistakes or omissions herein, provided
that in the opinion of the Trustee the rights of the Trustee and of the
Warrantholders are in no way prejudiced thereby.
8.2 Successor Corporations
In the case of the consolidation, amalgamation, merger or transfer of all or
substantially all of the undertaking or assets of the Corporation to another
corporation ("Successor Corporation"), the Successor Corporation resulting from
such consolidation, amalgamation, merger or transfer (if not the Corporation)
shall expressly assume, by supplemental indenture satisfactory in form to the
Trustee and executed and delivered to the Trustee, the due and punctual
performance and observance of each and every covenant and condition of this
Indenture to be performed and observed by the Corporation.
<PAGE>
25
ARTICLE 9
CONCERNING THE TRUSTEE
9.1 Trust Indenture Legislation
a. If and to the extent that any provision of this Indenture limits, qualifies
or conflicts with a mandatory requirement of Applicable Legislation, such
mandatory requirement shall prevail.
b. The Corporation and the Trustee agree that each will, at all times in
relation to this Indenture and any action to be taken hereunder, observe
and comply with and be entitled to the benefits of Applicable Legislation.
9.2 Rights and Duties of Trustee
a. In the exercise of the rights and duties prescribed or conferred by the
terms of this Indenture, the Trustee shall exercise that degree of care,
diligence and skill that a reasonably prudent trustee would exercise in
comparable circumstances. No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own wilful misconduct or bad faith.
b. The obligation of the Trustee to commence or continue any act, action or
proceeding for the purpose of enforcing any rights of the Trustee or the
Warrantholders hereunder shall be conditional upon the Warrantholders
furnishing, when required by notice by the Trustee, sufficient funds to
commence or to continue such act, action or proceeding and an indemnity
reasonably satisfactory to the Trustee to protect and to hold harmless the
Trustee against the costs, charges and expenses and liabilities to be
incurred thereby and any loss and damage it may suffer by reason thereof.
None of the provisions contained in this Indenture shall require the
Trustee to expend or to risk its own funds or otherwise to incur financial
liability in the performance of any of its duties or in the exercise of any
of its rights or powers unless indemnified as aforesaid.
c. The Trustee may, before commencing or at any time during the continuance of
any such act, action or proceeding, require the Warrantholders, at whose
instance it is acting, to deposit with the Trustee the Warrant Certificates
held by them, for which Warrant Certificates the Trustee shall issue
receipts.
d. Every provision of this Indenture that by its terms relieves the Trustee of
liability or entitles it to rely upon any evidence submitted to it, is
subject to the provisions of Applicable Legislation, this section 9.2 and
of section 9.3.
9.3 Evidence, Experts and Advisers
a. In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Corporation shall furnish to the Trustee
such additional evidence of compliance with any provision hereof, and in
such form, as may be prescribed by Applicable Legislation or as the Trustee
may reasonably require by written notice to the Corporation.
b. In the exercise of its rights and duties hereunder, the Trustee may, if it
is acting in good faith, rely as to the truth of the statements and the
accuracy of the opinions expressed in statutory declarations, opinions,
reports, written requests, consents, or orders of the Corporation,
certificates of the Corporation or other evidence furnished to the Trustee
pursuant to any provision hereof or of Applicable Legislation or pursuant
to a request of the Trustee, provided
<PAGE>
26
that such evidence complies with Applicable Legislation and that the
Trustee complies with Applicable Legislation and that the Trustee examines
such evidence and determines that such evidence complies with the
applicable requirements of this Indenture.
c. Whenever it is provided in this Indenture or under Applicable Legislation
that the Corporation shall deposit with the Trustee resolutions,
certificates, reports, opinions, requests, orders or other documents, it is
intended that the trust, accuracy and good faith on the effective date
thereof and the facts and opinions stated in all such documents so
deposited shall, in each and every such case, be conditions precedent to
the right of the Corporation to have the Trustee take the action to be
based thereon.
d. Proof of the execution of an instrument in writing, including a
Warrantholders' Request, by any Warrantholder may be made by the
certificate of a notary public, or other officer with similar powers, that
the person signing such instrument acknowledged to him the execution
thereof, or by an affidavit of a witness to such execution or in any other
manner which the Trustee may consider adequate.
e. The Trustee may employ or retain such Counsel, accountants, appraisers or
other experts or advisers as it may reasonably require for the purpose of
discharging its duties hereunder and may pay reasonable remuneration for
all services so performed by any of them, and shall not be responsible for
any misconduct or negligence on the part of any such experts or advisers
who have been appointed with due care by the Trustee.
9.4 Documents, Monies, etc. Held by Trustee
Any securities, documents of title or other instruments that may at any time be
held by the Trustee subject to the trusts hereof may be placed in the deposit
vaults of the Trustee or of any Canadian chartered bank or deposited for
safekeeping with any such bank. Unless herein otherwise expressly provided, any
monies held pending the application or withdrawal thereof under any provisions
of this Indenture may be deposited in the name of the Trustee in the deposit
department of the Trustee or in any Canadian chartered bank at the rate of
interest (if any) then current on similar deposits or, with the consent or at
the written direction of the Corporation, may be: (i) deposited in the deposit
department of the Trustee or any other trust company authorized to accept
deposits under the laws of Canada or a province thereof; or (ii) invested in
short term obligations of the Government of Canada or a province thereof or in
other short term investment grade debt obligations as agreed to by the
Corporation and the Agents. Unless the Corporation shall be in default hereunder
or unless otherwise specifically provided herein, all interest or other income
received by the Trustee in respect of such deposits and investments shall belong
to the Corporation.
9.5 Actions by Trustee to Protect Interest
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the Warrantholders.
9.6 Trustee Not Required to Give Security
The Trustee shall not be required to give any bond or security in respect of the
execution of the trusts and powers of this Indenture or otherwise in respect of
the premises.
9.7 Protection of Trustee
By way of supplement to the provisions of any law for the time being relating to
trustees, it is expressly declared and agreed as follows:
<PAGE>
27
a. the Trustee shall not be liable for or by reason of any statements of fact
or recitals in this Indenture or in the Warrant Certificates (except the
representations contained in section 9.9 and in the certificate of the
Trustee on the Warrant Certificates) or be required to verify the same, but
all such statements or recitals are and shall be deemed to be made by the
Corporation;
b. nothing herein contained shall impose any obligation on the Trustee to see
to or to require evidence of the registration or filing (or renewal
thereof) of this Indenture or any instrument ancillary or supplemental
hereto;
c. the Trustee shall not be bound to give notice to any person or persons of
the execution hereof; and
d. the Trustee shall not have any liability or responsibility whatever or be
in any way responsible for the consequence of any breach on the part of the
Corporation of any of the covenants herein contained or of any acts of any
directors, officers, employees, agents or servants of the Corporation.
9.8 Replacement of Trustee; Successor by Merger
a. The Trustee may resign its trust and be discharged from all further duties
and liabilities hereunder, subject to this section 9.8, by giving to the
Corporation not less than 90 days' prior notice in writing or such shorter
prior notice as the Corporation may accept as sufficient. The
Warrantholders by extraordinary resolution shall have power at any time to
remove the existing Trustee and to appoint a new Trustee. In the event of
the Trustee resigning or being removed as aforesaid or being dissolved,
becoming bankrupt, going into liquidation or otherwise becoming incapable
of acting hereunder, the Corporation shall forthwith appoint a new trustee
unless a new trustee has already been appointed by the Warrantholders;
failing such appointment by the Corporation, the retiring Trustee or any
Warrantholder may apply to a justice of the Court of Queen's Bench of the
Province of Alberta on such notice as such justice may direct, for the
appointment of a new trustee; but any new trustee so appointed by the
Corporation or by the Court shall be subject to removal as aforesaid by the
Warrantholders. Any new trustee appointed under any provision of this
section 9.8 shall be a corporation authorized to carry on the business of a
trust company in the Province of Alberta and, if required by the Applicable
Legislation for any other provinces, in such other provinces. On any such
appointment the new trustee shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named herein as
Trustee hereunder.
b. Upon the appointment of a successor trustee, the Corporation shall promptly
notify the Warrantholders thereof in the manner provided for in section
10.2 hereof.
c. Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation resulting therefrom to
which the Trustee shall be a party, or any corporation succeeding to the
trust business of the Trustee shall be the successor to the Trustee
hereunder without any further act on its part or any of the parties hereto,
provided that such corporation would be eligible for appointment as a
successor trustee under subsection 9.8.a.
d. Any Warrant Certificates certified but not delivered by a predecessor
trustee may be certified by the successor trustee in the name of the
predecessor or successor trustee.
<PAGE>
28
9.9 Conflict of Interest
a. The Trustee represents to the Corporation that at the time of execution and
delivery hereof no material conflict of interest exists between its role as
a trustee hereunder and its role in any other capacity and agrees that in
the event of a material conflict of interest arising hereafter it will,
within 90 days after ascertaining that it has such material conflict of
interest, either eliminate the same or assign its trust hereunder to a
successor trustee approved by the Corporation and meeting the requirements
set forth in subsection 9.8.a. Notwithstanding the foregoing provisions of
this subsection 9.9.a, if any such material conflict of interest exists or
hereafter shall exist, the validity and enforceability of this Indenture
and the Warrant Certificate shall not be affected in any manner whatsoever
by reason thereof.
b. Subject to subsection 9.9.a, the Trustee, in its personal or any other
capacity, may buy, lend upon and deal in securities of the Corporation and
generally may contract and enter into financial transactions with the
Corporation or any subsidiary of the Corporation without being liable to
account for any profit made thereby.
9.10 Indemnity of Trustee
Without limiting any protection or indemnity of the Trustee under any other
provision hereof, or otherwise at law, the Corporation hereby agrees to
indemnify and hold harmless the Trustee from and against any and all
liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses
and disbursements, including legal or advisor fees and disbursements, of
whatever kind and nature which may at any time be imposed on, incurred by or
asserted against the Trustee in connection with the performance of its duties
and obligations hereunder, other than such liabilities, losses, damages,
penalties, claims, actions, suits, costs, expenses and disbursements arising by
reason of the negligence or willful misconduct of the Trustee. This provision
shall survive the resignation or removal of the Trustee, or the termination of
this Indenture.
9.11 Acceptance of Trust
This Indenture is entered into with the Trustee for the benefit of, and the
Trustee declares that it holds this Indenture and all rights, interests and
benefits of this Indenture for, such persons, firms and corporations, and each
of them, who are from time to time Warrantholders. The Trustee hereby accepts
the trusts in this Indenture declared and provided for and agrees to perform the
same upon the terms and conditions herein set forth.
9.12 Trustee Not to be Appointed Receiver
The Trustee and any person related to the Trustee shall not be appointed a
receiver, a receiver and manager or liquidator of all or any part of the assets
or undertaking of the Corporation.
9.13 Special Warrant Register
The Trustee shall, at all times while any Special Warrants are outstanding,
maintain, at its principal office in Calgary, Alberta a Register in which shall
be recorded the following information:
(1) the numbers of all outstanding Warrant Certificates, including the
date of issuance;
(2) the numbers of all Warrant Certificates exchanged or exercised,
including the date of exchange or exercise;
(3) the names and addresses of all Warrantholders;
<PAGE>
29
(4) the particulars of all transfers of Special Warrants; and
(5) such other information as the Trustee, in its discretion, deems
necessary or advisable.
9.14 Register Open for Inspection
The Register shall be open at all reasonable times on a business day during
business hours for inspection by the Corporation, the Trustee or any
Warrantholder. The Trustee shall, from time to time when requested to do so by
the Corporation in writing, furnish the Corporation with a list of names and
addresses of holders of Special Warrants entered in the Register kept by the
Trustee.
ARTICLE 10
GENERAL
10.1 Notice to the Corporation, the Agents and the Trustee
a. Unless herein otherwise expressly provided, any notice to be given
hereunder to the Corporation, the Agents or the Trustee shall be deemed to
be validly given if delivered or if sent by registered letter, postage
prepaid or telecopy:
If to the Corporation:
Minera Andes Inc.
North 3303 Sullivan Road
Spokane, Washington
99216 U.S.A.
Telecopy No: (509) 921-7325
Attention: President
If to the Agents:
C.M. Oliver & Company Limited
Suite 1600, 1750 West Pender Street
Vancouver, British Columbia
V6C 2T8
Telecopy No.: (604) 662-8100
Attention: Clarence H.L. Debelle
-and-
Majendie Charlton Securities Ltd.
2710, 140 - 4th Avenue S.W.
Calgary, Alberta
T2P 3N3
Telecopy No.: (403) 265-9655
Attention: Francesco Mele
If to the Trustee:
<PAGE>
30
Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
Telecopy No.: (403) 267-6598
Attention: Manager, Corporate Trust Department
and any such notice delivered in accordance with the foregoing shall be
deemed to have been received on the date of delivery or, if mailed, on the
fifth Business Day following the date of the postmark on such notice or, if
sent by telecopy, on the next Business Day following the date of
transmission, provided that its contents are transmitted and received
completely and accurately.
b. The Corporation or the Trustee, as the case may be, may notify the other in
the manner provided in subsection 10.1.a of a change of address which, from
the effective date of such notice and until changed by like notice, shall
be the address of the Corporation or the Trustee, as the case may be, for
all purposes of this Indenture.
c. If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Trustee or to the Corporation hereunder could reasonably be considered
unlikely to reach its destination, such notice shall be valid and effective
only if it is delivered to the named officer of the party to which it is
addressed or, if it is delivered to such party at the appropriate address
provided in subsection 10.1.a, by telecopy or other means of prepaid,
transmitted and recorded communication.
10.2 Notice to Warrantholders
a. Except as otherwise provided herein, any notice to the Warrantholders under
the provisions of this Indenture shall be valid and effective if sent by
telecopier or ordinary post addressed to such holders at their post office
addresses appearing on the register hereinbefore mentioned and shall be
deemed to have been effectively given on the date of delivery or, if
mailed, five Business Days following actual posting of the notice or, if
sent by telecopy, on the next Business Day following the date of
transmission, provided that its contents are transmitted and received
completely and accurately.
b. If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Warrantholders hereunder could reasonably be considered unlikely to reach
its destination, such notice shall be valid and effective only if it is
delivered personally to such Warrantholders or if delivered to the address
for such Warrantholders contained in the register of Special Warrants
maintained by the Trustee, by telecopy or other means of prepaid
transmitted and recorded communication.
10.3 Ownership and Transfer of Special Warrants
The Corporation and the Trustee may deem and treat the registered owner of any
Special Warrants as the absolute owner thereof for all purposes and the
Corporation and the Trustee shall not be affected by any notice or knowledge to
the contrary except where the Corporation or the Trustee is required to take
notice by statute or by order of a court of competent jurisdiction. A
Warrantholder shall be entitled to the rights evidenced by its Warrant
Certificate free from all equities or rights of set off or counterclaim between
the Corporation and the original or any intermediate holder of the Special
Warrants and all persons may act accordingly and the receipt of any such
Warrantholder for the Common Shares and Purchase Warrants (and such other
property, assets and securities) which may be acquired pursuant thereto (or such
monies as may
<PAGE>
31
be payable to such Warrantholders) shall be a good discharge to the Corporation
and the Trustee for the same and neither the Corporation nor the Trustee shall
be bound to inquire into the title of any such holder except where the
Corporation or the Trustee is required to take notice by statute or by order of
a court of competent jurisdiction.
10.4 Evidence of Ownership
a. Upon receipt of a certificate of any bank, trust company or other
depositary satisfactory to the Trustee stating that the Special Warrants
specified therein have been deposited by a named person with such bank,
trust company or other depositary and will remain so deposited until the
expiry of the period specified therein, the Corporation and the Trustee may
treat the person so named as the owner, and such certificate as sufficient
evidence of the ownership by such person of such Special Warrant during
such period, for the purpose of any requisition, direction, consent,
instrument or other document to be made, signed or given by the holder of
the Special Warrant so deposited.
b. The Corporation and the Trustee may accept as sufficient evidence of the
fact and date of the signing of any requisition, direction, consent,
instrument or other document by any person: (i) the signature of any
officer of any bank, trust company, or other depositary satisfactory to the
Trustee as witness of such execution, (ii) the certificate of any notary
public or other officer authorized to take acknowledgments of deeds to be
recorded at the place where such certificate is made that the person
signing acknowledged to him the execution thereof, or (iii) a satisfactory
declaration of a witness of such execution.
10.5 Counterparts
This Indenture may be executed in several counterparts, each of which when so
executed shall be deemed to be an original and such counterparts together shall
constitute one and the same instrument and notwithstanding their date of
execution they shall be deemed to be dated as of the date hereof.
10.6 Satisfaction and Discharge of Indenture
Upon the earlier of:
a. the date by which there shall have been delivered to the Trustee for
exercise or destruction all Warrant Certificates theretofore certified
hereunder; or
b. the Time of Expiry;
and if all certificates representing Common Shares and Purchase Warrants
required to be issued in compliance with the provisions hereof have been issued
and delivered hereunder and all amounts payable hereunder have been paid, this
Indenture shall cease to be of further effect and the Trustee, on demand of and
at the cost and expense of the Corporation and upon delivery to the Trustee of a
certificate of the Corporation stating that all conditions precedent to the
satisfaction and discharge of this Indenture have been complied with, shall
execute proper instruments acknowledging satisfaction of and discharging this
Indenture. Notwithstanding the foregoing, the indemnities provided to the
Trustee by the Corporation hereunder shall remain in full force and effect and
survive the termination of this Indenture.
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10.7 Successors
All the covenants and provisions of this Indenture by or for the benefit of the
Corporation or the Trustee shall bind and enure to the benefit of their
respective successors and assigns hereunder.
10.8 Sole Benefit of Parties and Warrantholders
Nothing in this Indenture or in the Warrant Certificates, expressed or implied,
shall give or be construed to give to any person other than the parties hereto
and the Warrantholders, as the case may be, any legal or equitable right, remedy
or claim under this Indenture, or under any covenant or provision herein or
therein contained, all such covenants and provisions being for the sole benefit
of the parties hereto and the Warrantholders.
10.9 Common Shares or Special Warrants Owned by the Corporation or its
Subsidiaries - Certificate to be Provided
For the purpose of disregarding any Special Warrants owned legally or
beneficially by the Corporation or any subsidiary of the Corporation in section
7.16, the Corporation shall provide to the Trustee, from time to time, a
certificate of the Corporation setting forth as at the date of such certificate:
a. the names (other than the name of the Corporation) of the registered
holders of Special Warrants which, to the knowledge of the Corporation, are
owned by or held for the account of the Corporation or any subsidiary of
the Corporation; and
b. the number of Special Warrants owned legally or beneficially by the
Corporation or any subsidiary of the Corporation;
and the Trustee, in making the computations in section 7.16, shall be entitled
to rely on such certificate without any additional evidence.
IN WITNESS WHEREOF the parties hereto have executed this Indenture under their
respective corporate seals and the hands of their proper officers in that
behalf.
MINERA ANDES INC.
Per: ____________________________________
MONTREAL TRUST COMPANY OF CANADA
Per: ____________________________________
Per: ____________________________________
<PAGE>
THIS IS SCHEDULE "A" to the Special Warrant Indenture made
as of December 13, 1996 between MINERA ANDES INC. and
MONTREAL TRUST COMPANY OF CANADA as Trustee.
- -------------------------------------------------------------------------------
THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE UNTIL
JUNE 14, 1998, EXCEPT PURSUANT TO AN EXEMPTION FROM THE PROSPECTUS REQUIREMENTS
CONTAINED IN THE APPLICABLE SECURITIES LEGISLATION.
SPECIAL WARRANT CERTIFICATE
MINERA ANDES INC.
(A Corporation amalgamated under the laws of the Province of Alberta)
SPECIAL WARRANT
CERTIFICATE NO. ________ _________________ SPECIAL WARRANTS
entitling the holder to acquire,
subject to adjustment, one Common
Share and one Purchase Warrant for
each Special Warrant represented
hereby.
THIS IS TO CERTIFY THAT o (hereinafter referred to as the "holder") is the
registered holder of the number of Special Warrants exercisable to acquire
Common Shares (as hereinafter defined) and Purchase Warrants (as hereinafter
defined) of Minera Andes Inc. (the "Corporation") as set forth in this Special
Warrant Certificate. Each Special Warrant represented hereby entitles the holder
thereof to acquire, for no additional payment to the Corporation, in the manner
and subject to the restrictions and adjustments set forth herein, at any time
and from time to time until 4:30 p.m. (Calgary time) (the "Time of Expiry") on
the date which is the earlier of: (i) five (5) business days after the day upon
which a receipt for a final prospectus to be filed by the Corporation with
respect to the proposed distribution of the Common Shares and Purchase Warrants
upon exercise of the Special Warrants (the "Prospectus") or, alternatively, an
appropriate order that permits the Common Shares and Purchase Warrants issuable
upon exercise of the Special Warrants to be freely tradeable (the "Order"), has
been obtained from the securities commission or similar regulatory authority
(the "Securities Commission") in each of the provinces of Alberta and British
Columbia (the "Filing Provinces"); and (ii) the date which is 12 months
following the Closing Date, (as hereinafter defined) (such earlier date being
referred to as the "Expiry Date") one fully paid and non-assessable common share
(a "Common Share") without nominal or par value of the Corporation, as such
shares were constituted on December 13, 1996, for each Special Warrant
represented hereby, and one common share purchase warrant (a "Purchase Warrant")
created by and issuable under a warrant indenture dated as of December 13, 1996
between the Corporation and Montreal Trust Company of Canada, two Purchase
Warrants entitling the holder thereof, subject to the terms and conditions
therein set forth, to acquire one Common Share of the Corporation at a price of
$2.50 per share on or before 4:30 p.m. (Calgary time) on the first anniversary
of the Effective Date or at a price of $2.88 per share on or before 4:30 p.m.
(Calgary time) on the second anniversary of the Effective Date.
The right to acquire Common Shares and Purchase Warrants hereunder may only be
exercised by the holder within the time set forth above by:
a. duly completing and executing the Exercise Form attached hereto; and
<PAGE>
2
2
b. surrendering this Special Warrant certificate to Montreal Trust Company of
Canada (the "Trustee") at the principal offices of the Trustee in the
cities of Calgary or Vancouver. Warrantholders should be aware that if they
voluntarily exercise Special Warrants prior to the issue of a receipt for
the Prospectus by the Alberta and British Columbia Securities Commission,
the Common Shares, Purchase Warrants and Common Shares issuable upon
exercise of Purchase Warrants will be subject to resale restrictions.
These Special Warrants may be surrendered only upon personal delivery hereof or,
if sent by mail or other means of transmission, upon actual receipt thereof by
the Trustee at the office referred to above.
Upon surrender of these Special Warrants, the person or persons in whose name or
names the Common Shares and Purchase Warrants issuable upon exercise of the
Special Warrants are to be issued shall be deemed for all purposes (except as
provided in the Indenture hereinafter referred to) to be the holder or holders
of record of such Common Shares and Purchase Warrants and the Corporation has
covenanted that it will (subject to the provisions of the Indenture) cause a
certificate or certificates representing such Common Shares and Purchase
Warrants to be delivered or mailed to the person or persons at the address or
addresses specified in the Exercise Form within five Business Days.
The registered Warrantholder of this Special Warrant certificate may acquire any
lesser number of Common Shares and Purchase Warrants than the number of Common
Shares and Purchase Warrants which may be acquired for the Special Warrants
represented by this Special Warrant Certificate. In such event, the holder shall
be entitled to receive a new Special Warrant Certificate for the balance of the
Common Shares and Purchase Warrants which may be acquired. To the extent that
the Warrantholder is entitled to receive on the exercise or partial exercise
thereof a fraction of a Common Share or a Purchase Warrant, such right may only
be exercised in respect of such fraction in combination with another Special
Warrant or other Special Warrants which in the aggregate entitles the
Warrantholder to receive a whole number of Common Shares or Purchase Warrants.
If the Warrantholder is not able to or elects not to, combine Special Warrants
so as to be entitled to acquire a whole number of Common Shares and Purchase
Warrants, the Corporation shall make an appropriate cash settlement. However, in
respect of any Warrantholder, the Corporation shall only be required to make
such a cash adjustment once and for one Special Warrant and no more. The amount
of the cash adjustment with respect to the Common Share shall be equal to the
fraction of the Common Share to which the Warrantholder would be entitled
multiplied by the Current Market Price (as defined in the Indenture). The amount
of the cash adjustment with respect to the Purchase Warrants shall be equal to
the fraction of a Purchase Warrant to which the Warrantholder would be entitled
multiplied by the amount by which the Current Market Price (as defined in the
Indenture) exceeds $2.10.
Immediately prior to the Time of Expiry, the right of a holder to acquire Common
Shares and Purchase Warrants represented hereby will be exercised by the Trustee
on behalf of the holder and the certificates representing the Common Shares and
Purchase Warrants issued thereby will be mailed to the Warrantholder at the
address for such Warrantholder then appearing on the register of Warrantholders
maintained by the Trustee within five Business Days of the Time of Expiry.
The Special Warrants represented by this certificate are issued under and
pursuant to a Special Warrant Indenture (herein referred to as the "Indenture")
made as of December 13, 1996 (the "Effective Date") between the Corporation and
the Trustee. Reference is made to the Indenture and any instruments supplemental
thereto for a full description of the rights of the holders of the Special
Warrants and the terms and conditions upon which the Special Warrants are, or
are to be, issued and held, with the same effect as if the provisions of the
Indenture and all instruments supplemental thereto were set forth herein. By
acceptance hereof, the holder assents to all provisions of the Indenture. In the
event of a conflict between the provisions of the Special Warrant Certificate
and the Indenture, the provisions of the Indenture shall
<PAGE>
3
govern. Capitalized terms used in the Indenture have the meaning herein as
therein, unless otherwise defined.
None of the Special Warrants will be retractable in any circumstance (including,
without limitation, the failure of the Corporation to file the Prospectus) and
the Subscriber will not be entitled to a return of the purchase price for the
Special Warrants purchased by the Subscriber. Upon request, the Corporation will
provide the Warrantholder with a copy of the Indenture, without charge.
In the event that a receipt for the Prospectus, or an Order, is not obtained
from the Securities Commission in each of the Filing Provinces on or prior to
the close of business on the date that is within 150 days of the date hereof,
then the holders of the Special Warrants in each Filing Province in which such
receipt, or Order, has not been obtained, shall be entitled to receive 1.1
Common Shares and 1.1 Purchase Warrants, at no additional cost, for each Special
Warrant exercised. The Corporation covenants to continue to use its best efforts
to obtain a receipt for a Prospectus until the Expiry Time, notwithstanding that
each holder of Special Warrants shall have become entitled to receive 1.1 Common
Shares and 1.1 Purchase Warrants.
The Indenture contains provisions for adjustment of the number and kind of
securities which may be issued on exercise of the Special Warrants in certain
specified circumstances.
The registered holder of this Special Warrant certificate may, at any time prior
to the Expiry Time, upon surrender hereof to the Trustee at its principal
offices in the cities of Calgary or Vancouver exchange this Special Warrant
Certificate for other Special Warrant Certificates entitling the holder to
acquire, in the aggregate, the same number of Common Shares and Purchase
Warrants as may be acquired under this Special Warrant Certificate.
The holding of the Special Warrants evidenced by this Special Warrant
Certificate shall not constitute the holder hereof a shareholder of the
Corporation or entitle the holder to any right or interest in respect thereof
except as expressly provided in the Indenture or in this Special Warrant
Certificate.
The Indenture provides that all holders of Special Warrants shall be bound by
any resolution passed at a meeting of the holders held in accordance with the
provisions of the Indenture and resolutions signed by the holders of Special
Warrants entitled to acquire a specified majority of the Common Shares which may
be acquired pursuant to all then outstanding Special Warrants.
The Special Warrants evidenced by this Special Warrant Certificate may be
transferred on the register kept at the principal offices of the Trustee in
Calgary, Alberta by the registered holder hereof or its legal representatives or
its attorney duly appointed by an instrument in writing in form and execution
satisfactory to the Trustee, only upon compliance with the conditions prescribed
in the Indenture and upon compliance with such reasonable requirements as the
Trustee may prescribe.
This Special Warrant Certificate shall not be valid for any purpose whatever
unless and until it has been certified by or on behalf of the Trustee.
<PAGE>
4
Time shall be of the essence hereof. This Special Warrant Certificate shall be
governed by and construed in accordance with the laws of the Province of Alberta
and the federal law applicable therein and shall be treated in all respects as
an Alberta contract.
IN WITNESS WHEREOF the Corporation has caused this Special Warrant Certificate
to be signed by its duly authorized officer as of December _____, 1996.
MINERA ANDES INC.
Per: __________________________________
Allen Ambrose, President
Certified by:
MONTREAL TRUST COMPANY OF CANADA
Trustee
By: _________________________________
<PAGE>
TRANSFER OF SPECIAL WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
___________________________________, _________________ Special Warrants of
Minera Andes Inc. registered in the name of the undersigned on the records of
Montreal Trust Company of Canada represented by the Special Warrant Certificate
attached and irrevocably appoints __________________ the attorney of the
undersigned to transfer the said securities on the books or register with full
power of substitution.
If less than all the Special Warrants represented by this Warrant Certificate
are being transferred, the Warrant Certificate representing those Special
Warrants not transferred will be registered in the name appearing on the face of
this Warrant Certificate and such certificates (please check one):
(a) _________ should be sent by first class mail to the following address:
------------------------------------------------------------
------------------------------------------------------------
(b) _________ should be held for pick up at the office of the Trustee at
which this Warrant Certificate is deposited.
DATED the _____ day of __________, 19__.
_____________________________ ______________________________________________
Signature Guaranteed (Signature of Special Warrantholder)
Instructions:
1. Signature of the Special Warrantholder must be the signature of the person
appearing on the face of this Special Warrant Certificate.
2. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Trustee
and the Corporation.
3. The signature on the Transfer Form must be guaranteed by an authorized
officer of a chartered bank, trust company or an investment dealer who is a
member of a recognized stock exchange.
4. Special Warrants shall only be transferable in accordance with applicable
laws. The transfer of Special Warrants to a purchaser not resident in a
Filing Jurisdiction may result in the Common Shares and Purchase Warrants
obtained upon the exercise of the Special Warrants (whether after or before
obtaining receipts for a final prospectus relating to the
<PAGE>
2
distribution of Common Shares and Purchase Warrants upon exercise of
Special Warrants) not being freely tradeable in the jurisdiction of
residence of the purchaser.
5. The Special Warrants and the Common Shares and Purchase Warrants issuable
upon exercise thereof have not been registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act"), or the
securities laws of any state of the United States, and may not be
transferred in the United States or to a U.S. Person unless the Special
Warrants and the Common Shares and Purchase Warrants have been registered
under the U.S. Securities Act and the securities laws of all applicable
states of the United States or an exemption from such registration
requirements is available. In connection with any transfer of Special
Warrants, the holder will be required to provide to the Trustee and the
Corporation an opinion of counsel, or other evidence, in form reasonably
satisfactory to the Corporation, to the effect that such transfer of
Special Warrants does not require registration under the U.S. Securities
Act or any applicable state laws and regulations governing the offer and
sale of securities.
OFFICE OF THE TRUSTEE
Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
Telephone: (403) 267-6800
OR
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Telephone: (604) 661-9400
<PAGE>
EXERCISE FORM
TO: Minera Andes Inc. and
Montreal Trust Company of Canada
(a) The undersigned hereby exercises the right to acquire __________ Units
(each comprised of one Common Share and one Purchase Warrant of Minera Andes
Inc. as constituted on December 13, 1996 (or such number of other securities or
property to which such Special Warrants entitle the undersigned in lieu thereof
or in addition thereto under the provisions of the Indenture referred to in the
accompanying Special Warrant Certificate) in accordance with and subject to the
provisions of such Indenture.
(b) The Common Shares and Purchase Warrants (or other securities or property)
are to be issued as follows:
Name: ____________________________________________________________________
(print clearly)
Address in full: _________________________________________________________
__________________________________________________________________________
Social Insurance Number: _________________________________________________
Number Units: ____________________________________________________________
Note: If further nominees intended, please attach (and initial) schedule
giving these particulars.
(c) The undersigned hereby represents and warrants to the Corporation that the
undersigned (check one):
(i) __________ it is not a U.S. Person and the Special Warrant is not
being exercised within the United States or on behalf of, or for the account or
benefit of, a U.S. Person or a person in the United States; or
(ii) __________ it was an original subscriber for Special Warrants who was
a U.S. Person at the time of acquisition of such Special Warrants and the
representations and warranties made by the undersigned in connection with the
acquisition of such Special Warrants remain true and correct on the date hereof.
(iii) __________ it has delivered herewith to the Trustee and the
Corporation a written opinion of counsel or other evidence satisfactory to the
Corporation to the effect that the Common Shares and Purchase Warrants have been
registered under the U.S. Securities Act and applicable state securities laws or
are exempt from registration thereunder; or
Such securities (please check one):
(a) __________ should be sent by first class mail to the following address:
______________________________________________________________
______________________________________________________________
<PAGE>
2
OR
(b) __________ should be held for pick up at the office of the Trustee at
which this Special Warrant Certificate is deposited.
If the number of Special Warrants exercised are less than the
number of Special Warrants represented hereby, the undersigned requests that
the new Special Warrant Certificate representing the balance of the Special
Warrants be registered in the name of ________________________________________
______________________________________________________________________________
whose address is _____________________________________________________________
Such securities (please check one):
(a) __________ should be sent by first class mail to the following address:
______________________________________________________________
______________________________________________________________
OR
(b) __________ should be held for pick up at the office of the Trustee at
which this Special Warrant Certificate is deposited.
In the absence of instructions to the contrary, the securities
or other property will be issued in the name of or to the holder hereof and will
be sent by first class mail to the last address of the holder appearing on the
register maintained for the Special Warrants.
DATED this ____ day of __________, 199__.
__________________________________ ________________________________________
Signature Guaranteed (Signature of Special Warrantholder)
________________________________________
Print full name
________________________________________
________________________________________
Print full address
Instructions:
1. For the purposes of paragraph (c) above, the following words and phrases
have the following meanings:
"United States" and "U.S. Person" have the meaning given to such terms
under Regulation S of the U.S. Securities Act. For purposes of Regulation
S. "United States" means the United States of America, its territories and
possessions, any statue of the United States and the District of
<PAGE>
3
Columbia. "U.S. Person" includes, with certain expectations, (i) any
natural person resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States;
(iii) any estate of which any executor or administrator is a U.S. Person;
(iv) any trust of which any trustee is a U.S. Person; (v) any agency or
branch of a foreign entity located in the United States; (vi) any
non-discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. Person; (vii) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized,
incorporated or (if any individual) resident in the United States; and
(viii) any partnership or corporation if (a) organized or incorporated
under the laws of any jurisdiction other than the United States and (b)
formed by a U.S. Person principally for the purposes of investing in
securities not registered under the U.S. Securities Act;
"U.S. Securities Act" means the United States Securities Act of 1933, as
amended;
2. The registered holder may exercise its right to receive Common Shares and
Purchase Warrants by completing this form and surrendering this form and
the Special Warrant Certificate representing the Special Warrants being
exercised to Montreal Trust Company of Canada at its principal offices in
Calgary or Vancouver. Certificates for Common Shares and Purchase Warrants
will be delivered or mailed within five business days after the exercise of
the Special Warrants.
3. If the Exercise Form indicates that Common Shares and Purchase Warrants are
to be issued to a person or persons other than the registered holder of the
Certificate, the signature of such holder of the Exercise Form must be
guaranteed by an authorized officer of a chartered bank, trust company or
an investment dealer who is a member of a recognized stock exchange.
4. If the Exercise Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Trustee
and the Corporation.
5. If the registered holder exercises its right to receive Common Shares and
Purchase Warrants prior to a receipt for a prospectus being issued by the
applicable securities commission the Common Shares and Purchase Warrants
will be subject to a hold period and may be issued with a legend reflecting
such hold period.
OFFICE OF THE TRUSTEE
Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
Telephone: (403) 267-6800
OR
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Telephone: (604) 661-9400
PURCHASE WARRANT INDENTURE
Providing for the Issue of
Share Purchase Warrants
BETWEEN
MINERA ANDES INC.
- and -
MONTREAL TRUST COMPANY OF CANADA
Dated as of December 13, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1................................ 1
INTERPRETATION............................................................... 1
1.1 Definitions................................................. 1
1.2 Gender and Number........................................... 4
1.3 Interpretation not Affected by Headings, etc................ 4
1.4 Day not a Business Day...................................... 4
1.5 Time of the Essence......................................... 4
1.6 Currency.................................................... 4
1.7 Applicable Law.............................................. 5
ARTICLE 2................................ 5
ISSUE OF PURCHASE WARRANTS................................................... 5
2.1 Issue of Purchase Warrants.................................. 5
2.2 Form and Terms of Purchase Warrants......................... 5
2.3 Warrantholder not a Shareholder............................. 5
2.4 Purchase Warrants to Rank Pari Passu........................ 5
2.5 Signing of Warrant Certificates............................. 5
2.6 Certification by the Trustee................................ 6
2.7 Issue in Substitution for Warrant Certificates Lost, etc.... 6
2.8 Exchange of Warrant Certificates............................ 6
2.9 Charges for Exchange........................................ 7
2.10 Transfer and Ownership of Purchase Warrants................. 7
ARTICLE 3................................ 8
EXERCISE OF PURCHASE WARRANTS................................................ 8
3.1 Holders Eligible to Exercise Purchase Warrants.............. 8
3.2 Method of Exercise of Purchase Warrants..................... 8
3.3 Effect of Exercise of Purchase Warrants..................... 9
3.4 Partial Exercise of Purchase Warrants; Fractions............10
3.5 Common Share Certificates...................................10
3.6 Expiration of Purchase Warrants.............................11
3.7 Cancellation of Surrendered Purchase Warrants...............11
3.8 Accounting and Recording....................................11
3.9 Postponement of Delivery of Certificates....................11
3.10 Securities Restrictions ....................................12
ARTICLE 4................................12
ADJUSTMENT OF NUMBER OF COMMON SHARES........................................12
4.1 Adjustment of Number of Common Shares.......................12
4.2 Other Action................................................16
4.3 Entitlement to Shares on Exercise of Purchase Warrant.......16
4.4 No Adjustment for Stock Options.............................16
4.5 Determination by Corporation's Auditors.....................16
4.6 Proceedings Prior to any Action Requiring Adjustment........16
4.7 Certificate of Adjustment...................................16
4.8 Notice of Special Matters...................................17
4.9 No Action after Notice......................................17
4.10 Protection of Trustee.......................................17
ARTICLE 5................................17
RIGHTS OF THE CORPORATION AND COVENANTS......................................17
<PAGE>
ii
5.1 Optional Purchases by the Corporation.......................17
5.2 General Covenants...........................................18
5.3 Trustee's Remuneration and Expenses.........................18
5.4 Securities Qualification Requirements.......................18
5.5 Performance of Covenants by Trustee.........................19
ARTICLE 6................................19
ENFORCEMENT..................................................................19
6.1 Suits by Warrantholders.....................................19
6.2 Immunity of Shareholders, etc...............................19
6.3 Limitation of Liability.....................................19
6.4 Waiver of Default...........................................20
ARTICLE 7................................20
MEETINGS OF WARRANTHOLDERS...................................................20
7.1 Right to Convene Meetings...................................20
7.2 Notice......................................................20
7.3 Chairman....................................................20
7.4 Quorum......................................................21
7.5 Power to Adjourn............................................21
7.6 Show of Hands...............................................21
7.7 Poll and Voting.............................................21
7.8 Regulations.................................................22
7.9 Corporation, Agents and Trustee May be Represented..........22
7.10 Powers Exercisable by Extraordinary Resolution..............22
7.11 Meaning of Extraordinary Resolution.........................23
7.12 Powers Cumulative...........................................24
7.13 Minutes.....................................................24
7.14 Instruments in Writing......................................24
7.15 Binding Effect of Resolutions...............................25
7.16 Holdings by Corporation Disregarded.........................25
ARTICLE 8................................25
SUPPLEMENTAL INDENTURES......................................................25
8.1 Provision for Supplemental Indentures for Certain Purposes..25
8.2 Successor Corporations......................................26
ARTICLE 9................................26
CONCERNING THE TRUSTEE.......................................................26
9.1 Trust Indenture Legislation.................................26
9.2 Rights and Duties of Trustee................................26
9.3 Evidence, Experts and Advisers..............................27
9.4 Documents, Monies, etc. Held by Trustee.....................27
9.5 Actions by Trustee to Protect Interest......................28
9.6 Trustee Not Required to Give Security.......................28
9.7 Protection of Trustee.......................................28
9.8 Replacement of Trustee; Successor by Merger.................28
9.9 Conflict of Interest........................................29
9.10 Indemnity of Trustee........................................29
9.11 Acceptance of Trust.........................................29
9.12 Trustee Not to be Appointed Receiver........................29
9.13 Purchase Warrant Register...................................30
<PAGE>
iii
9.14 Register Open for Inspection................................30
ARTICLE 10...............................30
GENERAL......................................................................30
10.1 Notice to the Corporation and the Trustee...................30
10.2 Notice to Warrantholders....................................31
10.3 Ownership and Transfer of Purchase Warrants.................32
10.4 Evidence of Ownership.......................................32
10.5 Counterparts................................................32
10.6 Satisfaction and Discharge of Indenture.....................33
10.7 Successors..................................................33
10.8 Sole Benefit of Parties and Warrantholders..................33
10.9 Common Shares or Purchase Warrants Owned by the Corporation
or its Subsidiaries - Certificate to be Provided............33
<PAGE>
THIS PURCHASE WARRANT INDENTURE is made as of the 13th day of December, 1996.
BETWEEN:
MINERA ANDES INC., a corporation amalgamated under the laws of the
Province of Alberta, having an office in the City of Spokane, in the
State of Washington (hereinafter referred to as the "Corporation")
OF THE FIRST PART
AND
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under
the laws of Canada and authorized to carry on business in all
provinces of Canada (hereinafter referred to as the "Trustee")
OF THE SECOND PART
WHEREAS:
A. the Corporation has authorized the creation of and has agreed to issue up to
3,809,524 Special Warrants pursuant to the Special Warrant Indenture, each
Special Warrant entitling the holder acquire one Common Share and one Purchase
Warrant, subject to adjustment as provided in the Special Warrant Indenture.
B. the Corporation has authorized the creation of and has agreed to issue up to
380,952 broker special warrants to C.M. Oliver & Company Limited and Majendie
Charlton Securities Ltd., each broker special warrant entitling the holder to
acquire one Purchase Warrant;
C. the Corporation is duly authorized to create and issue the Purchase Warrants
to be issued as herein provided;
D. two Purchase Warrants shall, subject to adjustment, entitle the holder
thereof to acquire one Common Share upon payment of the Exercise Price, upon the
terms and conditions herein set forth; and
E. all acts and deeds necessary have been done and performed to make the
Purchase Warrants, when issued as provided in this Indenture, legal, valid and
binding upon the Corporation with the benefits and subject to the terms of this
Indenture;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Indenture, including the recitals and schedules hereto, and in
all indentures supplemental hereto:
<PAGE>
2
a. "Agents" means C.M. Oliver & Company Limited and Majendie Charlton
Securities Ltd.;
b. "Applicable Legislation" means the provisions of the Statutes of
Canada and its provinces, and the regulations under those statutes,
relating to trust indentures or to the rights, duties and obligations
of trustees and of corporations under trust indentures, to the extent
that such provisions are at the time in force and applicable to this
Indenture;
c. "Business Day" means any day which is not Saturday or Sunday or a
legal holiday in the City of Calgary, Alberta;
d. "Common Shares" means fully paid and non-assessable common shares of
the Corporation as presently constituted provided that in the event of
an adjustment of subscription rights pursuant to Article 4, then
"Common Share" shall thereafter mean a share or other security or
property purchaseable upon exercise of a Purchase Warrant as a result
of any such adjustment and, except where the context hereof otherwise
requires, includes Common Shares issued or to be issued in accordance
with the exercise of Purchase Warrants ;
e. "Corporation's Auditors" means a firm of chartered accountants duly
appointed as auditors of the Corporation;
f. "Counsel" means a barrister or solicitor or a firm of barristers and
solicitors retained by the Trustee or retained by the Corporation and
acceptable to the Trustee;
g. "Current Market Price" means at any date the weighted average closing
price at which the Common Shares have been traded on The Alberta Stock
Exchange during the 30 consecutive Trading Days ending one Trading Day
before such date;
h. "director" means a director of the Corporation for the time being and,
unless otherwise specified herein, reference to action "by the
directors" means action by the directors of the Corporation as a board
or, whenever duly empowered, action by any committee of such board;
i. "Effective Date" means December 13, 1996;
j. "Exercise Date" means, with respect to any Purchase Warrant, the date
on which the Warrant Certificate representing such Purchase Warrant is
surrendered for exercise together with full payment of the Exercise
Price, in accordance with Article 3;
k. "Exercise Price" means, with respect to the Purchase Warrants, the
price at which a Common Share may be purchased upon the exercise of
two Purchase Warrants being $2.50 any time until 4:30 p.m. (Calgary
time) on the first anniversary of the Effective Date or $2.88 any time
until 4:30 p.m. (Calgary time) on the second anniversary of the
Effective Date;
l. "Expiry Date" means December 13, 1998;
m. "extraordinary resolution" has the meaning set forth in section ;
n. "Filing Jurisdictions" means the provinces of Alberta and British
Columbia;
o. "person" means an individual, body corporate, partnership, trust,
trustee, executor, administrator, legal representative or any
unincorporated organization;
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3
p. "Prospectus" means a final prospectus, and any amendments thereto in
respect of the proposed distribution of Common Shares and Purchase
Warrants upon the exercise of Special Warrants;
q. "Purchase Warrants" means the common share purchase warrant referred
to in Article 2 and created by and authorized by and issuable under
this Indenture entitling the holder thereof, upon payment of the
Exercise Price thereof and upon tendering two (2) Warrants, to
purchase on or before Time of Expiry (before any adjustment pursuant
to Article 4 hereof) one (1) Common Share;
r. "Purchase Warrant Indenture", "Indenture", "herein", "hereby",
"hereof" and similar expressions mean and refer to this indenture and
any other indenture, deed or instrument supplemental hereto, and the
expressions "Article", "section", "subsection" and "paragraph"
followed by a number, letter or both mean and refer to the specified
article, section, subsection or paragraph of this Indenture;
s. "Securities Commission" means the securities commission or similar
regulatory authority in each of the Filing Jurisdictions;
t. "Shareholder" means a holder of record of one or more Common Shares;
u. "Special Warrants" means the special warrants issued and certified
under the Special Warrant Indenture;
v. "Special Warrant Indenture" means the special warrant indenture dated
December 13, 1996 between the Corporation and the Trustee providing
for the issuance of the Special Warrants, as amended or supplemented
from time to time;
w. "Time of Expiry" means 4:30 p.m. (Calgary time) on the Expiry Date;
x. "Trading Day" means, with respect to a stock exchange, a day on which
such exchange is open for the transaction of business and, with
respect to the over-the-counter market, means a day on which The
Alberta Stock Exchange is open for the transaction of business;
y. "Transfer Agent" means the transfer agent for the time being of the
Common Shares;
z. "Trustee" means the Montreal Trust Company of Canada or its successors
from time to time in the trust hereby created;
aa. "United States" and "U.S. Person" have the meaning given to such terms
under Regulation S of the U.S. Securities Act. For purposes of
Regulation S. "United States" means the United States of America, its
territories and possessions, any state of the United States and the
District of Columbia. "U.S. Person" includes, with certain exceptions,
(i) any natural person resident in the United States; (ii) any
partnership or corporation organized or incorporated under the laws of
the United States; (iii) any estate of which any executor or
administrator is a U.S. Person; (iv) any trust of which any trustee is
a U.S. Person; (v) an agency or branch of a foreign entity located in
the United States; (vi) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. Person; (vii) any
discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or
(if an individual) resident in the United States; and (viii) any
partnership or corporation if (a) organized or incorporated under the
laws of any jurisdiction other than the United States and (b) formed
by a U.S. Person principally for the purposes of investing in
securities not registered under the U.S. Securities Act;
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4
ab. "U.S. Securities Act" means the United States Securities Act of 1933,
as amended;
ac. "Warrant Agency" means the principal office of the Trustee in the
cities of Calgary or Vancouver or such other place as may be
designated in accordance with subsection ;
ad. "Warrant Certificate" means a certificate issued on or after the
Effective Date to evidence Purchase Warrants;
ae. "Warrantholders", or "holders" without reference to Common Shares,
means the persons who are registered holders of Purchase Warrants;
af. "Warrantholders' Request" means an instrument signed in one or more
counterparts by Warrantholders entitled to acquire in the aggregate
not less than 25% of the aggregate number of Common Shares which could
be acquired pursuant to all Purchase Warrants then unexercised and
outstanding, requesting the Trustee to take some action or proceeding
specified therein;
ag. "Warrant Register" means the register maintained by the Trustee for
the Purchase Warrants; and
ah. "written order of the Corporation", "written request of the
Corporation", "written consent of the Corporation" and "certificate of
the Corporation" mean, respectively, a written order, request, consent
and certificate signed in the name of the Corporation by its Chairman,
President, Chief Financial Officer or a Vice-President, and may
consist of one or more instruments so executed.
1.2 Gender and Number
Unless herein otherwise expressly provided or unless the context otherwise
requires, words importing the singular include the plural and vice versa and
words importing gender include all genders.
1.3 Interpretation not Affected by Headings, etc.
The division of this Indenture into articles and sections, the provision of a
table of contents and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Indenture
or the Purchase Warrants.
1.4 Day not a Business Day
In the event that any day on or before which any action is required to be taken
hereunder is not a Business Day, then such action shall be required to be taken
at or before the requisite time on the next succeeding day that is a Business
Day.
1.5 Time of the Essence
Time shall be of the essence hereof and of the Purchase Warrants issued
hereunder.
1.6 Currency
Except as otherwise stated, all dollar amounts herein are expressed in Canadian
currency.
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5
1.7 Applicable Law
This Indenture and the Warrant Certificates shall be construed in accordance
with the laws of the Province of Alberta and the federal laws of Canada
applicable therein and shall be treated in all respects as Alberta contracts.
ARTICLE 2
ISSUE OF PURCHASE WARRANTS
2.1 Issue of Purchase Warrants
a. Up to 4,571,428 Purchase Warrants are hereby created and authorized to
be issued, including Purchase Warrants issuable upon exercise of the
Special Warrants.
b. The Purchase Warrants shall be issued from time to time upon the
holders of Special Warrant Certificates duly exercising the Special
Warrants pursuant to the Special Warrant Indenture.
c. The Warrant Certificates (including all replacements issued in
accordance with this Indenture) shall be substantially in the form set
out in Schedule "A" hereto, shall bear such distinguishing letters and
numbers as the Corporation may, with the approval of the Trustee,
prescribe, and shall be issuable in any denomination excluding
fractions.
d. The Warrant Certificates and the Purchase Warrants represented thereby
shall be registered, together with the name and address of the
registered holder thereof, in the Warrant Register maintained by the
Trustee.
2.2 Form and Terms of Purchase Warrants
a. Two Purchase Warrants shall entitle the holder thereof, upon exercise,
together with payment of the Exercise Price, to acquire one Common
Share, subject to adjustment in accordance with Article 4, at any time
after the Effective Date and until the Time of Expiry.
b. The Exercise Price and the number of Common Shares which may be
acquired pursuant to the exercise of the Purchase Warrants shall be
adjusted in the events and in the manner specified in Article 4.
2.3 Warrantholder not a Shareholder
Nothing in this Indenture or in the holding of a Purchase Warrant or Warrant
Certificate or otherwise, shall, in itself, confer or be construed as conferring
upon a Warrantholder any right or interest whatsoever as a Shareholder or as any
other shareholder of the Corporation, including, but not limited to, the right
to vote at, to receive notice of, or to attend, meetings of shareholders or any
other proceedings of the Corporation, or the right to receive dividends and
other distributions.
2.4 Purchase Warrants to Rank Pari Passu
All Purchase Warrants shall rank pari passu, whatever may be the actual date of
issue thereof.
2.5 Signing of Warrant Certificates
The Warrant Certificates shall be signed by any one director or officer of the
Corporation and need not be under seal. The signature of any such director or
officer may be mechanically reproduced in facsimile and
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6
Warrant Certificates bearing such facsimile signatures shall be binding upon the
Corporation as if they had been manually signed by such director or officer.
Notwithstanding that any person whose manual or facsimile signature appears on
any Warrant Certificate as a director or officer may no longer hold office at
the date of such Warrant Certificate or at the date of certification or delivery
thereof, any Warrant Certificate signed as aforesaid shall, subject to section ,
be valid and binding upon the Corporation and the holder thereof shall be
entitled to the benefits of this Indenture.
2.6 Certification by the Trustee
a. No Warrant Certificate shall be issued or, if issued, shall be valid
for any purpose or entitle the holder to the benefit hereof until it
has been certified by manual signature by or on behalf of the Trustee
in the form of the certificate set out in Schedule "A" hereto, and
such certification by the Trustee upon any Warrant Certificate shall
be conclusive evidence as against the Corporation that the Warrant
Certificate so certified has been duly issued hereunder and that the
holder is entitled to the benefits hereof.
b. The certification of the Trustee on a Warrant Certificate issued
hereunder shall not be construed as a representation or warranty by
the Trustee as to the validity of this Indenture or the Warrant
Certificate (except the due certification thereof) and the Trustee
shall in no respect be liable or answerable for the use made of the
Warrant Certificate or any of them or of the consideration therefor
except as otherwise specified herein.
2.7 Issue in Substitution for Warrant Certificates Lost, etc.
a. In case any Warrant Certificate becomes mutilated or is lost,
destroyed or stolen, the Corporation, subject to applicable law, shall
issue and thereupon the Trustee shall certify and deliver a new
Warrant Certificate of like tenor as the one mutilated, lost,
destroyed or stolen in exchange for and in place of and upon
cancellation of such mutilated Warrant Certificate, or in lieu of and
in substitution for such lost, destroyed or stolen Warrant
Certificate, and the substitute Warrant Certificate shall be in a form
approved by the Trustee, and the Purchase Warrants evidenced thereby
shall be entitled to the benefits hereof and shall rank equally in
accordance with its terms with all other Purchase Warrants issued or
to be issued hereunder.
b. The applicant for the issue of a new Warrant Certificate pursuant to
this section shall bear the cost of the issue thereof and in case of
loss, destruction or theft shall furnish, as a condition precedent to
the issue thereof, to the Trustee such evidence of ownership and of
the loss, destruction or theft of the Warrant Certificate so lost,
destroyed or stolen as shall be satisfactory to the Trustee, in its
sole discretion, and such applicant may also be required to furnish an
indemnity or security in amount and form satisfactory to the Trustee,
in its sole discretion, and shall pay the reasonable charges of the
Trustee in connection therewith.
2.8 Exchange of Warrant Certificates
a. One or more Warrant Certificates representing any number of Purchase
Warrants may, upon compliance with the reasonable requirements of the
Trustee, be exchanged for another Warrant Certificate or Warrant
Certificates representing the same aggregate number of Purchase
Warrants as represented under the Warrant Certificate or Warrant
Certificates so exchanged.
b. Warrant Certificates may be exchanged only at the Warrant Agency or at
any other place that is designated by the Corporation with the
approval of the Trustee. Any Warrant Certificate tendered for exchange
shall be cancelled and surrendered by the Warrant Agency to the
Trustee.
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7
2.9 Charges for Exchange
Except as otherwise provided herein, the Warrant Agency may charge to the holder
requesting an exchange a reasonable sum for each new Warrant Certificate issued
in exchange for a Warrant Certificate(s), and payment of such charges and
reimbursement of the Trustee or the Corporation for any and all stamp taxes or
governmental or other charges required to be paid shall be made by such holder
as a condition precedent to such exchange.
2.10 Transfer and Ownership of Purchase Warrants
a. The Purchase Warrants may only be transferred on the Warrant Register
kept at the Warrant Agency by the holder or its legal representatives
or its attorney duly appointed by an instrument in writing in form and
execution satisfactory to the Trustee only upon surrendering to the
Trustee at the Warrant Agency the Warrant Certificate or Warrant
Certificates representing the Purchase Warrants to be transferred,
with the transfer form thereon duly completed and executed, signed by
the Warrantholder or by the duly appointed legal representative
thereof or a duly authorized attorney, together with evidence of
authority of any such legal representative or attorney and, if
required by the transfer form, with such signature properly
guaranteed, and upon compliance with:
i. the conditions herein;
ii. such reasonable requirements as the Trustee may prescribe; and
iii. all applicable securities legislation and requirements of
regulatory authorities relating to the transferability of the
Purchase Warrants or restrictions thereon;
and such transfer shall be duly noted in the Warrant Register by the
Trustee. Upon compliance with such requirements, the Trustee shall
issue to the transferee a Warrant Certificate representing the
Purchase Warrants transferred. Such new Warrant Certificate shall be
sent by first class mail or held for pick up by the transferee in
accordance with the instructions given on the transfer form and, if no
such instructions are given, shall be sent by first class mail to the
address of the transferee appearing on the form of transfer. If less
than all the Purchase Warrants represented by a Warrant Certificate
are transferred, the Trustee shall issue a new Warrant Certificate
representing those Purchase Warrants not transferred in the same name
as the name appearing on the Warrant Certificate surrendered for
transfer. Such new Warrant Certificate shall be sent by first class
mail or held for pick up in accordance with instructions given on the
transfer form and, if no instructions are given, shall be sent by
first class mail to the address of the holder of the Purchase Warrants
surrendered for transfer appearing on the Warrant Register.
b. The Purchase Warrants and the Common Shares issuable upon exercise
thereof have not been registered under the U.S. Securities Act, or the
securities laws of any state of the United States, and may not be
transferred in the United States or to a U.S. Person unless the
Purchase Warrants and the Common Shares issuable upon exercise thereof
have been registered under the U.S. Securities Act and the securities
laws of all applicable states of the United States or an exemption
from such registration requirements is available. The Trustee shall
not permit the transfer of any Purchase Warrants unless the holder
thereof has provided to the Trustee and the Corporation an opinion of
counsel, or other evidence, in form reasonably satisfactory to the
Corporation, to the effect that such transfer of Purchase Warrants
does not require registration under the U.S. Securities Act or any
applicable state laws and regulations governing the offer and sale of
securities.
<PAGE>
8
c. The Corporation and the Trustee will deem and treat the registered
owner of any Purchase Warrant as the beneficial owner thereof for all
purposes and neither the Corporation nor the Trustee shall be affected
by any notice to the contrary.
d. Subject to the provisions of this Indenture and applicable law, the
Warrantholder shall be entitled to the rights and privileges attaching
to the Purchase Warrants and the issue of Common Shares upon the
exercise of Purchase Warrants by any Warrantholder in accordance with
the terms and conditions herein contained shall discharge all
responsibilities of the Corporation and the Trustee with respect to
such Purchase Warrants and neither the Corporation nor the Trustee
shall be bound to inquire into the title of any such holder.
ARTICLE 3
EXERCISE OF PURCHASE WARRANTS
3.1 Holders Eligible to Exercise Purchase Warrants
The Purchase Warrants may not be exercised within the United States by or on
behalf of any U.S. Person or person in the United States unless the Common
Shares are registered under the U.S. Securities Act and the securities laws of
all applicable states of the United States or any exemption from such
registration requirement is available. Any person who exercises a Purchase
Warrant shall provide to the Trustee either:
a. i. written certification that it is not a U.S. Person and that
such Purchase Warrant is not being exercised within the United
States or on behalf of, or for the account or benefit of, a U.S.
Person or a person in the United States; or
ii. a written opinion of counsel or other evidence satisfactory to
the Corporation to the effect that the Common Shares have been
registered under the U.S. Securities Act and applicable state
securities laws or are exempt from registration thereunder.
b. written certification that it was an original subscriber for Special
Warrants or a transferee pursuant to the Special Warrant Indenture or
section 2.10.b who was a U.S. Person at the time of the acquisition of
the Special Warrants under which Purchase Warrants were acquired and
the representations and warranties made by such person in connection
with the acquisition of such Special Warrants remain true and correct
on the date of exercise.
3.2 Method of Exercise of Purchase Warrants
a. The holder of any Purchase Warrant may exercise the right conferred on
such holder to acquire Common Shares by surrendering, after the
Effective Date and prior to the Time of Expiry, to the Warrant Agency
the Warrant Certificate with a duly completed and executed exercise
form, together with a certified cheque, money order, cash or bank
draft, in lawful money of Canada payable to or to the order of the
Trustee at par in the city where the Warrant Agency is located for the
Exercise Price for the Common Shares subscribed for.
A Warrant Certificate with the duly completed and executed exercise
form referred to in this subsection shall, together with the payment
of the Exercise Price for the Common Shares subscribed for, be deemed
to be surrendered only upon personal delivery thereof or, if sent by
mail or other means of transmission, upon actual receipt thereof at,
in each case, the Warrant Agency.
b. Any exercise form referred to in subsection shall be signed by the
Warrantholder or by the duly appointed legal representative thereof or
a duly authorized attorney, with evidence of
<PAGE>
9
authority of any such legal representative or attorney attached
thereto, and, if required by the exercise form, with such signature
properly guaranteed, and shall specify:
i. the number of Common Shares which the holder wishes to acquire
(being not more than those which the holder is entitled to
acquire pursuant to the Warrant Certificate(s) surrendered);
ii. the person or persons in whose name or names such Common Shares
are to be issued;
iii. the address or addresses of such person(s); and
iv. the number of Common Shares to be issued to each such person if
more than one is so specified.
If any of the Common Shares subscribed for are to be issued to a
person or persons other than the Warrantholder, each such person shall
also complete and deliver an exercise form in the form attached to the
Warrant Certificate and the Warrantholder shall pay to the Corporation
or the Warrant Agency on behalf of the Corporation, all applicable
transfer or similar taxes and the Corporation shall not be required to
issue or deliver certificates evidencing Common Shares unless or until
such Warrantholder shall have paid to the Corporation, or the Warrant
Agency on behalf of the Corporation, the amount of such tax or shall
have established to the satisfaction of the Corporation that such tax
has been paid or that no tax is due.
c. In connection with the exercise of Purchase Warrants by any U.S.
Person or person in the United States that was not the original
subscriber for the Special Warrants or transferee of Warrants in
accordance with section 2.10.b, the Corporation may, in its sole
discretion, require that such Warrantholder deliver in connection with
such exercise an opinion of counsel addressed to the Corporation and
the Trustee in form and substance satisfactory to the Corporation,
that no violation of the registration provisions of the U.S.
Securities Act or the securities laws of any state would result from
the exercise of the Purchase Warrants by such U.S. Person.
d. In connection with the exchange of Warrant Certificates and exercise
of Purchase Warrants and in compliance with such other terms and
conditions hereof as may be required, the Corporation has appointed
the principal offices of the Trustee in Calgary and Vancouver as the
agency at which Warrant Certificates may be surrendered for exchange
or at which Purchase Warrants may be exercised. The Corporation may
from time to time designate alternate or additional places as the
Warrant Agency and shall give notice to the Trustee of any change of
the Warrant Agency.
3.3 Effect of Exercise of Purchase Warrants
a. Upon compliance by the holder of any Warrant Certificate with the
provisions of section , and subject to section 3.4, the Common Shares
subscribed for shall be deemed to have been issued and the person or
persons to whom such Common Shares are to be issued shall be deemed to
have become the holder or holders of record of such Common Shares on
the Exercise Date unless the transfer registers of the Corporation
shall be closed on such date, in which case the Common Shares
subscribed for shall be deemed to have been issued, and such person or
persons deemed to have become the holder or holders of record of such
Common Shares, on the date on which such transfer registers are
reopened.
b. Within five Business Days after the Exercise Date with respect to a
Purchase Warrant, the Corporation shall cause to be mailed to the
person or persons in whose name or names the Common Shares so
subscribed for have been issued, as specified in the subscription, at
the
<PAGE>
10
address specified in such subscription or, if so specified in such
subscription, cause to be delivered to such person or persons at the
Warrant Agency where the Warrant Certificate was surrendered, a
certificate or certificates for the appropriate number of Common
Shares subscribed for. In the absence of instructions to the contrary,
such certificates shall be issued in the name of the registered holder
of the surrendered Warrant Certificate and shall be mailed by first
class mail to the address of such Warrantholder appearing on the
Warrant Register.
3.4 Partial Exercise of Purchase Warrants; Fractions
a. The holder of any Purchase Warrants may acquire a number of Common
Shares less than the number which the holder is entitled to acquire
pursuant to the surrendered Warrant Certificate(s). In the event of
any exercise of a number of Purchase Warrants less than the number
which the holder is entitled to exercise, the holder of the Purchase
Warrants upon such exercise shall also be entitled to receive, without
charge therefor, a new Warrant Certificate(s) in respect of the
balance of the Purchase Warrants represented by the surrendered
Warrant Certificate(s) not then exercised. In the absence of
instructions to the contrary, such certificate shall be issued in the
name of the registered holder of the surrendered Warrant Certificate
and shall be mailed by first class mail to the address of such
Warrantholder appearing on the Warrant Register.
b. To the extent that the Warrantholder is entitled to receive on the
exercise or partial exercise thereof a fraction of a Common Share,
such right may only be exercised in respect of such fraction in
combination with another Purchase Warrant or other Purchase Warrants
which in the aggregate entitles the Warrantholder to receive a whole
number of Common Shares.
If the Warrantholder is not able to or elects not to, combine Purchase
Warrants so as to be entitled to acquire a whole number of Common
Shares, the Corporation shall make an appropriate cash settlement.
However, in respect of any Warrantholder, the Corporation shall only
be required to make such a cash adjustment once and for one Purchase
Warrant and no more. The amount of the cash adjustment with respect to
the Common Share shall be equal to the fraction of the Common Share to
which the Warrantholder would be entitled multiplied by the Current
Market Price.
c. In the event of the exercise of Purchase Warrants prior to the
Corporation obtaining a receipt for the Prospectus from each of the
Securities Commissions, the Corporation may, on the advice of Counsel
and if required by applicable law, legend the certificates
representing the Common Shares issued on such exercise to the effect
that such shares are subject to trading restrictions under applicable
legislation, and prior to the issuance of any such certificates the
Trustee shall consult with the Corporation to determine whether such
endorsing or legending is required.
3.5 Common Share Certificates
At the instruction of the Corporation, Common Shares issued to U.S. Persons
pursuant to exercise of the Purchase Warrants may bear a legend in substantially
the following form:
"The securities represented hereby have not been registered under the
United States Securities Act of 1933, as amended (the "Securities
Act") or applicable state securities laws. The holder hereof, by
purchasing such securities, agrees for the benefit of the Corporation
that such securities may be offered, sold or otherwise transferred
only (a) to the Corporation, (b) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act (c)
pursuant to the exemption from registration under the Securities Act
provided by Rule 144 thereunder, if applicable, or (d) pursuant to
another exemption from registration after providing a satisfactory
legal opinion to the Corporation. Delivery of this certificate does
not constitute "good delivery"
<PAGE>
11
in settlement of transactions on The Alberta Stock Exchange. A new
certificate, bearing no legend, delivery of which will constitute
"good delivery" in settlement of transactions on The Alberta Stock
Exchange, may be obtained from the Montreal Trust Company of Canada
upon delivery of this certificate and duly executed declaration, in
form satisfactory to the Montreal Trust Company of Canada and the
Corporation, to the effect that the sale of the securities represented
hereby is being made in compliance with Rule 904 of Regulation S under
the Securities Act, together with such other documentation as may be
requested by the Corporation."
and may also contain such other legends as may be required by applicable
securities regulatory requirements, authorities or stock exchanges including,
without limitation, The Alberta Stock Exchange.
3.6 Expiration of Purchase Warrants
Immediately after the Time of Expiry, all rights under any Purchase Warrant in
respect of which the right of acquisition herein and therein provided for shall
not have been exercised shall cease and terminate and such Purchase Warrant
shall be void and of no further force or effect.
3.7 Cancellation of Surrendered Purchase Warrants
All Warrant Certificates surrendered to the Warrant Agency pursuant to sections
2.7, 2.8, 3.2, 3.4 or 5.1 shall be returned to the Trustee for cancellation and,
after the expiry of any period of retention prescribed by law, destroyed by the
Trustee. Upon request by the Corporation, the Trustee shall furnish to the
Corporation a destruction certificate identifying the Warrant Certificates so
destroyed and the number of Purchase Warrants evidenced thereby.
3.8 Accounting and Recording
(a) The Trustee shall promptly notify the Corporation when Purchase
Warrants are exercised and forward to the Corporation at the times
hereinafter set forth (or into an account or accounts of the
Corporation with the bank or trust corporation designated by the
Corporation for that purpose) all money received on exercise of
Purchase Warrants. The Trustee shall hold money received on the
exercise of Purchase Warrants and shall forward such money to the
Corporation (or into an account or accounts of the Corporation with
the bank or trust corporation designated by the Corporation for that
purpose) within five Business Days from the date of receipt thereof.
All such money and any securities or other instruments received by the
Trustee shall be received in trust for and shall be segregated and
kept apart by the Trustee in trust for the Corporation.
(b) The Trustee shall record the particulars of the Purchase Warrants
exercised which shall include the names and addresses of the persons
who have exercised Purchase Warrants, the number of Common Shares
subscribed for upon such exercise, the Exercise Date and the Exercise
Price. Upon request of the Corporation, the Trustee shall provide
within five Business Days such particulars in writing to the
Corporation.
3.9 Postponement of Delivery of Certificates
The Corporation shall not be required to deliver certificates for Common Shares
during the period when the stock transfer books of the Corporation are closed
due to an impending meeting of shareholders or a proposed payment of dividends
or for any other purpose and in the event of a surrender of a Warrant
Certificate for the purchase of Common Shares during such period, the delivery
of certificates may be postponed for a period not exceeding 10 days after the
date of the re-opening of the stock transfer books.
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3.10 Securities Restrictions
Notwithstanding anything herein contained, Common Shares will only be issued
pursuant to any Purchase Warrant in compliance with the securities laws of any
applicable jurisdiction and, without limiting the generality of the foregoing,
in the event that Purchase Warrants are exercised pursuant to section prior to
the issuance of a receipt for the Prospectus referred to in the Special Warrant
Indenture, the certificates representing the Common Shares issued thereby will
bear such legend as may, in the opinion of counsel of the Corporation, be
necessary in order to avoid a violation of any securities laws of any province
in Canada or of the United States or to comply with the requirements of any
stock exchange on which the Common Shares are listed, provided that, if at any
time, in the opinion of counsel to the Corporation, such legends are no longer
necessary in order to avoid a violation of any such laws, or the holder of any
such legended certificate, at the holder's expense, provides the Corporation
with evidence satisfactory in form and substance to the Corporation (which may
include an opinion of counsel satisfactory to the Corporation) to the effect
that such holder is entitled to sell or otherwise transfer such Common Shares in
a transaction in which such legends are not required, such legended certificate
may thereafter be surrendered to the Corporation in exchange for a certificate
which does not bear such legend.
ARTICLE 4
ADJUSTMENT OF NUMBER OF COMMON SHARES
4.1 Adjustment of Number of Common Shares
The acquisition rights in effect at any date attaching to the Purchase Warrants
shall be subject to adjustment from time to time as follows:
a. if and whenever at any time from the date hereof and prior to the Time
of Expiry, the Corporation shall:
i. subdivide, redivide or change its outstanding Common Shares into
a greater number of shares;
ii. reduce, combine or consolidate its outstanding Common Shares into
a smaller number of shares; or
iii. issue Common Shares (or securities convertible into Common
Shares) to all or substantially all of the holders of outstanding
Common Shares by way of a stock dividend or other distribution of
Common Shares or securities convertible into Common Shares (other
than Dividends Paid in the Ordinary Course);
the Exercise Price in effect on the effective date of such subdivision
or consolidation, or on the record date of such stock dividend, as the
case may be, shall be adjusted to equal the price determined by
multiplying the Exercise Price in effect immediately prior to such
effective date or record date by a fraction of which the numerator
shall be the total number of Common Shares outstanding immediately
prior to such date and the denominator shall be the total number of
Common Shares immediately after such date. Such adjustment shall be
made successively whenever any event referred to in this subsection
(a) shall occur, and any such issue of Common Shares by way of a stock
dividend shall be deemed to have been made on the record date for the
stock dividend for the purpose of calculating the number of
outstanding Common Shares under subsections (b) and (c) of this
subsection 4.1. Upon any adjustment of the Exercise Price pursuant to
this subsection (a), the number of Common Shares subject to the right
of purchase under each Purchase Warrant not previously exercised shall
be contemporaneously adjusted by multiplying the number of Common
Shares which theretofore may have been purchased under such Purchase
Warrant by a fraction of which the
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13
numerator shall be the respective Exercise Price in effect immediately
prior to such adjustment and the denominator shall be the respective
Exercise Price resulting from such adjustments;
b. if and whenever at any time after the date hereof and prior to the
Time of Expiry, the Corporation shall fix a record date for the
distribution to all or substantially all of the holders of Common
Shares of rights, options or warrants (other than the Purchase
Warrants) entitling them for a period expiring not more than
forty-five (45) days after such record date to subscribe for or
purchase Common Shares (or securities convertible into Common Shares)
at a price (or having a conversion price or exchange price) less than
95% of the Current Market Price on such record date, the Exercise
Price shall be adjusted immediately after such record date so that it
shall equal the price determined by multiplying the Exercise Price in
effect on such record date by a fraction, of which the numerator shall
be the total number of Common Shares outstanding on such record date
plus the number arrived at by dividing the aggregate price of the
total number of additional Common Shares offered for subscription or
purchase (or the aggregate conversion or exchange price of the
convertible securities so offered) by such Current Market Price, and
of which the denominator shall be total number of Common Shares
outstanding on such record date plus the total number of additional
Common Shares offered for subscription or purchase (or into which the
convertible securities so offered are convertible); any Common Shares
owned by or held for the account of the Corporation or any Subsidiary
of the Corporation shall be deemed not to be outstanding for the
purpose of any such computation; such adjustment shall be made
successively whenever such a record date is fixed; to the extent that
any rights, options or warrants are not so issued or any such rights,
options or warrants are not exercised prior to the expiration thereof,
the Exercise Price shall then be readjusted to the Exercise Price
which would then be in effect if such record date had not been fixed
or to the Exercise Price which would then be in effect based upon the
number and aggregate price of Common Shares (or securities convertible
into Common Shares) actually issued upon the exercise of such rights,
option or warrants, as the case may be;
c. if and whenever at any time from the date hereof and prior to the Time
of Expiry, there is a reclassification of the Common Shares or a
capital reorganization of the Corporation other than as described in
subsection 4.1.a or a consolidation, amalgamation or merger of the
Corporation with or into any other body corporate, trust, partnership
or other entity, or a sale or conveyance of the property and assets of
the Corporation as an entirety or substantially as an entirety to any
other body corporate, trust, partnership or other entity, any
Warrantholder who has not exercised its right of acquisition prior to
the effective date of such reclassification, reorganization,
consolidation, amalgamation, merger, sale or conveyance, upon the
exercise of such right thereafter, shall be entitled to receive and
shall accept, in lieu of the number of Common Shares then sought to be
acquired by it, the number of shares or other securities or property
of the Corporation or of the body corporate, trust, partnership or
other entity resulting from such merger, amalgamation or
consolidation, or to which such sale or conveyance may be made, as the
case may be, that such Warrantholder would have been entitled to
receive on such reclassification, reorganization, consolidation,
amalgamation, merger, sale or conveyance, if, on the record date or
the effective date thereof, as the case may be, the Warrantholder had
been the registered holder of the number of Common Shares sought to be
acquired by it. If determined appropriate by the Trustee to give
effect to or to evidence the provisions of this subsection, the
Corporation, its successor, or such purchasing body corporate,
partnership, trust or other entity, as the case may be, shall, prior
to or contemporaneously with any such reclassification,
reorganization, consolidation, amalgamation, merger, sale or
conveyance, enter into an indenture which shall provide, to the extent
possible, for the application of the provisions set forth in this
Indenture with respect to the rights and interests thereafter of the
Warrantholders to the end that
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14
the provisions set forth in this Indenture shall thereafter
correspondingly be made applicable, as nearly as may reasonably be,
with respect to any shares, other securities or property to which a
Warrantholder is entitled on the exercise of its acquisition rights
thereafter. Any indenture entered into between the Corporation and the
Trustee pursuant to the provisions of this subsection shall be a
supplemental indenture entered into pursuant to the provisions of
Article 8 hereof. Any indenture entered into between the Corporation,
any successor to the Corporation or such purchasing body corporate,
partnership, trust or other entity and the Trustee shall provide for
adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided in this section 4.1 and which shall apply
to successive reclassifications, reorganizations, amalgamations,
consolidations, mergers, sales or conveyances;
d. if and whenever at any time from the date hereof and prior to the Time
of Expiry, the Corporation fixes a record date for the making of a
distribution to all or substantially all the holders of its
outstanding Common Shares of: (i) shares of any class other than
Common Shares, other than shares distributed to holders of Common
Shares pursuant to their exercise of options to receive dividends in
the form of such shares in lieu of Dividends Paid in the Ordinary
Course on the Common Shares, or (ii) rights, options or warrants
(excluding rights exercisable for 45 days or less where the exercise
price per share is not less than 95% of the Current Market Price on
such record date), or (iii) evidences of its indebtedness, or (iv)
assets (excluding Dividends Paid in the Ordinary Course), including
shares of other corporations, then, and in each such case, the
Exercise Price shall be adjusted immediately after such record date so
that it shall equal the price determined by multiplying the Exercise
Price in effect on such record date by a fraction, of which the
numerator shall be the total number of Common Shares outstanding on
such record date multiplied by the Current Market Price on such record
date, less the aggregate fair market value (as determined by the
directors, which determination shall be conclusive) of such shares,
rights, options, warrants, evidences of indebtedness or assets so
distributed, and of which the denominator shall be that total number
of Common Shares outstanding on such record date multiplied by such
Current Market Price; any Common Shares owned by or held for the
account of the Corporation or any subsidiary of the Corporation shall
be deemed not to be outstanding for the purpose of any such
computation; such adjustment shall be made successively whenever such
a record date is fixed; to the extent that such distribution is not so
made, the Exercise Price shall then be readjusted to the Exercise
Price which would then be in effect if such record date had not been
fixed or to the Exercise Price which would then be in effect based
upon such shares, rights, options, warrants, evidences of indebtedness
or assets actually distributed, as the case may be;
e. the adjustments provided for in this Article 4 in the Exercise Price
and number of Common Shares and classes of securities which are to be
received on the exercise of Purchase Warrants are cumulative; After
any adjustment pursuant to this section, the term "Common Shares"
where used in this Indenture shall be interpreted to mean securities
of any class or classes which, as a result of such adjustment and all
prior adjustments pursuant to this section, the Warrantholder is
entitled to receive upon the exercise of its Purchase Warrant, and the
number of Common Shares indicated by any exercise made pursuant to a
Purchase Warrant shall be interpreted to mean the number of Common
Shares or other property or securities a Warrantholder is entitled to
receive, as a result of such adjustment and all prior adjustments
pursuant to this section, upon the full exercise of Purchase Warrant;
f. for the purposes of this section, "Dividends Paid in the Ordinary
Course" means cash dividends declared payable on the Common Shares in
any fiscal year of the Corporation to the extent that such cash
dividends do not exceed, in the aggregate, the greater of: (i) 200% of
the aggregate amount of cash dividends declared payable by the
Corporation on the Common Shares in its immediately preceding fiscal
year; (ii) 300% percent of the arithmetic mean of the aggregate
<PAGE>
15
amounts of cash dividends declared payable by the Corporation on the
Common Shares in its three immediately preceding fiscal years; and
(iii) 100% percent of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its immediately preceding
fiscal year;
g. in any case which this section 4.1 shall require that an adjustment
shall become effective immediately after a record date for an event
referred to herein, the Corporation may defer, until the occurrence of
such event, issuing to the holder of any Warrant exercised after such
event the additional Common Shares issuable upon such conversion by
reason of the adjustment required by such event before giving effect
to such adjustment; provided, however, that the Corporation shall
deliver to such holder an appropriate instrument evidencing such
holder's rights to receive such additional Common Shares upon the
occurrence of the event requiring such adjustment and the right to
receive any distributions made on such additional Common Shares
declared in favour of holders of record of Common Shares on and after
the relevant date of exercise or such later date as such holder would,
but for the provisions of this subsection (g), have become the holder
of record of such additional Common Shares;
h. if the purchase price provided for in any right, warrant or option
issued as described in subsection (b) or (d) is decreased, or the
price at which Common Shares are issued as described in subsection (a)
is decreased or the rate of conversion at which any convertible
securities which are issued as described in subsection (a) is
increased, the Exercise Price shall, subject to subsection (g),
forthwith be changed so as to decrease the Exercise Price to such
Exercise Price as would have been obtained had the adjustment made in
connection with the issuance of all such rights, options or securities
been made upon the basis of such purchase price as so decreased or
such rate as so increased;
i. no adjustment in the Exercise Price or in the number of shares to be
issued pursuant to the exercise of the Warrants shall be required
unless such adjustment would result in a change of at least 1% in the
Exercise Price then in effect or unless the number of shares to be
issued would change by at least 1/100th of a share, provided, however,
that any adjustments, which, except for the provisions of this
subsection 4.1(i) would otherwise have been required to be made, shall
be carried forward and taken into account in any subsequent
adjustment;
j. no adjustment in the Exercise Price shall be made in respect of any
event described in subsections 4.1(a)(iii), 4.1(b) or 4.1(d):
i. if the Warrantholders are entitled to participate in such event
on the same terms mutais mutandis as if they had exercised their
purchase rights prior to the effective date or record date or
such event, subject to the prior approval of The Alberta Stock
Exchange to such participation if the Common Shares or the
Warrants are then listed on such exchange; or
ii. in respect of any rights to acquire shares which are presently
outstanding;
k. in determining at any time and from time to time the number of Common
Shares outstanding at any particular time for purposes of this section
4.1, there shall be included that number of Common Shares which would
be outstanding upon conversion of all convertible securities then
outstanding, and upon exercise of all rights, options or warrants then
outstanding to purchase Common Shares, and there shall be excluded any
Common Shares (and Common Shares which would be outstanding upon
conversion of convertible securities) held by or for the account of
the Corporation; and
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16
l. upon the expiry of the period for conversion of convertible securities
and the exercise period for rights, options, warrants (other than
rights, options or warrants in respect of which the Warrantholders are
entitled to participate, as contemplated in subsection 4.1(j) to
purchase Common Shares or convertible securities, the Exercise Price
shall be adjusted to what it would have been if such unconverted
convertible securities and unexercised rights, options or warrants had
not been issued.
4.2 Other Action
In case the Corporation, after the date hereof, shall take any action affecting
the Common Shares other than actions described in subsection 5.1, which in the
opinion of the directors of the Corporation would materially affect the rights
of the Warrantholders, the number of Common Shares which may be acquired upon
exercise of the Warrants shall be adjusted in such manner and at such time, by
action of the director, as they determine, acting reasonably, to be equitable in
the circumstances.
4.3 Entitlement to Shares on Exercise of Purchase Warrant
All shares or warrants of any class or other securities which a Warrantholder is
at the time in question entitled to receive on the exercise of its Purchase
Warrant, whether or not as a result of adjustments made pursuant to this
section, shall, for the purposes of the interpretation of this Indenture, be
deemed to be shares or securities which such Warrantholder is entitled to
acquire pursuant to such Purchase Warrant.
4.4 No Adjustment for Stock Options
Notwithstanding anything to the contrary, in this Article 4, no adjustment shall
be made in the acquisition rights attached to the Purchase Warrants if the issue
of Common Shares is being made pursuant to this Indenture or pursuant to any
stock option or stock purchase plan for directors, officers, employees or
consultants of the Corporation in force from time to time.
4.5 Determination by Corporation's Auditors
In the event of any question arising with respect to the adjustments provided
for in this Article 4, such question shall be conclusively determined by the
Corporation's Auditors who shall have access to all necessary records of the
Corporation, and such determination shall be binding upon the Corporation, the
Trustee, all Warrantholders and all other persons interested therein.
4.6 Proceedings Prior to any Action Requiring Adjustment
As a condition precedent to the taking of any action which would require an
adjustment in any of the acquisition rights pursuant to any of the Purchase
Warrants, including the number of Common Shares which are to be received upon
the exercise thereof, the Corporation shall take any corporate action which may,
in the opinion of counsel, be necessary in order that the Corporation has
unissued and reserved in its authorized capital and may validly and legally
issue as fully paid and non-assessable all the shares which the holders of such
Purchase Warrants are entitled to receive on the full exercise thereof in
accordance with the provisions hereof.
4.7 Certificate of Adjustment
The Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Article 4,
deliver a certificate of the Corporation to the Trustee specifying the nature of
the event requiring the same and the amount of the adjustment necessitated
thereby and setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is
<PAGE>
17
based, which certificate shall be supported by a certificate of the
Corporation's Auditors verifying such calculation.
4.8 Notice of Special Matters
The Corporation covenants with the Trustee that, so long as any Purchase Warrant
remains outstanding, it will give notice to the Trustee and to the
Warrantholders of its intention to fix a record date that is prior to the Expiry
Date for any event referred to in subsections (a), (b) or (d) of Section 4.1
(other than subdivision, consolidation or reclassification of its Common Shares)
which may give rise to an adjustment in the Exercise Price. Such notice shall
specify the particulars of such event and the record date for such event,
provided that the Corporation shall only be required to specify in the notice
such particulars of the event as shall have been fixed and determined on the
date on which the notice is given. The notice shall be given in each case not
less than 14 days prior to such applicable record date.
4.9 No Action after Notice
The Corporation covenants with the Trustee that it will not close its transfer
books or take any other corporate action which might deprive the holder of a
Purchase Warrant of the opportunity to exercise its right of acquisition
pursuant thereto during the period of 14 days after the giving of the
certificate or notices set forth in sections 4.7 and 4.8.
4.10 Protection of Trustee
Except as provided in section 9.2, the Trustee:
a. shall not at any time be under any duty or responsibility to any
Warrantholder to determine whether any facts exist which may require
any adjustment contemplated by section 4.1 or with respect to the
nature or extent of any such adjustment when made, or with respect to
the method employed in making the same;
b. shall not be accountable with respect to the validity or value (or the
kind or amount) of any Common Shares or of any shares or other
securities or property which may at any time be issued or delivered
upon the exercise of the rights attaching to any Purchase Warrant;
c. shall not be responsible for any failure of the Corporation to issue,
transfer or deliver Common Shares or certificates for the same upon
the surrender of any Purchase Warrants for the purpose of the exercise
of such rights or to comply with any of the covenants contained in
this Article; and
d. shall not incur any liability or responsibility whatsoever or be in
any way responsible for the consequences of any breach on the part of
the Corporation of any of the representations, warranties or covenants
herein contained or of any acts of the directors, officers, employees,
agents or servants of the Corporation.
ARTICLE 5
RIGHTS OF THE CORPORATION AND COVENANTS
5.1 Optional Purchases by the Corporation
The Corporation may from time to time purchase, by private contract or
otherwise, any of the Purchase Warrants. Any such purchase shall be made at the
lowest price or prices at which, in the opinion of the directors, such Purchase
Warrants are then obtainable, plus reasonable costs of purchase, and may be made
<PAGE>
18
in such manner, from such persons and on such other terms as the Corporation, in
its sole discretion, may determine. Any Warrant Certificates representing the
Purchase Warrants purchased pursuant to this section shall forthwith be
delivered to and cancelled by the Trustee. No Purchase Warrants shall be issued
in replacement thereof.
5.2 General Covenants
The Corporation covenants with the Trustee that so long as any Purchase Warrants
remain outstanding:
a. it shall reserve and keep available a sufficient number of Common
Shares for the purpose of enabling it to satisfy its obligations to
issue Common Shares upon the exercise of the Purchase Warrants;
b. it shall cause the Common Shares and the certificates representing the
Common Shares acquired pursuant to the exercise of the Purchase
Warrants to be duly issued and delivered in accordance with the
Warrant Certificates and the terms hereof;
c. all Common Shares which shall be issued upon exercise of the right to
acquire provided for herein and in the Warrant Certificates shall be
issued as fully paid and non-assessable;
d. it shall maintain its corporate existence and carry on and conduct and
will cause to be carried on and conducted its business in the same
manner as heretofore carried on and conducted;
e. it shall use its best efforts to ensure that all Common Shares
outstanding or issuable from time to time (including without
limitation the Common Shares issuable on the exercise of the Purchase
Warrants) are listed and posted for trading on The Alberta Stock
Exchange, if applicable;
f. it shall make all requisite filings under applicable Canadian
securities legislation including those necessary to remain a reporting
issuer not in default in each of the Filing Jurisdictions and those
necessary to report the exercise of the right to acquire Common Shares
pursuant to Purchase Warrants; and
g. generally, it will well and truly perform and carry out all of the
acts or things to be done by it as provided in this Indenture or as
the Trustee may reasonably require for the better accomplishing and
effecting of the intentions and provisions of this Indenture.
5.3 Trustee's Remuneration and Expenses
The Corporation covenants that it will pay to the Trustee from time to time
reasonable remuneration for its services hereunder and will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in the administration or execution of the trusts
hereby created (including the reasonable compensation and the disbursements of
its Counsel and all other advisers and assistants not regularly in its employ)
both before any default hereunder and thereafter until all duties of the Trustee
hereunder shall be finally and fully performed, except any such expense,
disbursement or advance as may arise out of or result from the Trustee's
negligence, wilful misconduct or bad faith.
5.4 Securities Qualification Requirements
a. If, in the opinion of Counsel, any permission is required to be
obtained from, any governmental authority in Canada or any other step
is required under any federal or provincial law of Canada before any
Common Shares which a Warrantholder is entitled to acquire pursuant to
the exercise of any Purchase Warrant may properly and legally be
issued upon due exercise thereof
<PAGE>
19
and thereafter traded, without further formality or restriction, the
Corporation covenants that it will take such required action, provided
that the Corporation shall not be required to file any prospectus or
registration statement in connection therewith.
b. The Corporation or, if required by the Corporation, the Trustee, will
give notice of the issue of Common Shares pursuant to the exercise of
Purchase Warrants, in such detail as may be required, to each
securities commission or similar regulatory authority in each of the
Filing Jurisdictions in which there is legislation or regulation
permitting or requiring the giving of any such notice in order that
such issue of Common Shares and the subsequent disposition of the
Common Shares so issued will not be subject to the prospectus
qualification requirements of such legislation or regulation.
5.5 Performance of Covenants by Trustee
If the Corporation shall fail to perform any of its covenants contained in this
Purchase Warrant Indenture, the Trustee may notify the Warrantholders of such
failure on the part of the Corporation or may itself perform any of the
covenants capable of being performed by it but, subject to section 9.2, shall be
under no obligation to perform such covenants or to notify the Warrantholders of
such performance by it. All sums expended or advanced by the Trustee in so doing
shall be repayable as provided in section 5.3. No such performance, expenditure
or advance by the Trustee shall relieve the Corporation of any default hereunder
or of its continuing obligations under the covenants herein contained.
ARTICLE 6
ENFORCEMENT
6.1 Suits by Warrantholders
All or any of the rights conferred upon any Warrantholder by any of the terms of
the Warrant Certificates or the Indenture or both may be enforced by the
Warrantholder by appropriate proceedings but without prejudice to the right
which is hereby conferred upon the Trustee to proceed in its own name to enforce
each and all of the provisions herein contained for the benefit of the
Warrantholders.
6.2 Immunity of Shareholders, etc.
The Trustee and, by the acceptance of the Warrant Certificates and as part of
the consideration for the issue of the Purchase Warrants, the Warrantholders
hereby waive and release any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any incorporator or any past, present or
future shareholder, director, officer, employee or agent of the Corporation or
any successor Corporation on any covenant, agreement, representation or warranty
by the Corporation contained herein or in the Warrant Certificates.
6.3 Limitation of Liability
The obligations hereunder are not personally binding upon, nor shall resort
hereunder be had to, the private property of any of the past, present or future
directors or shareholders of the Corporation or any successor Corporation or any
of the past, present or future officers, employees or agents of the Corporation
or any successor Corporation, but only the property of the Corporation or any
successor Corporation shall be bound in respect hereof.
6.4 Waiver of Default
Upon the happening of any default hereunder:
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20
a. the holders of not less than 51% of the aggregate number of Purchase
Warrants then outstanding shall have power (in addition to the powers
exercisable by extraordinary resolution as provided in section 7.10)
by requisition in writing to instruct the Trustee to waive any default
hereunder and the Trustee shall thereupon waive the default upon such
terms and conditions as shall be prescribed in such requisition; or
b. the Trustee shall have power to waive any default hereunder upon such
terms and conditions as the Trustee may deem advisable, if, in the
Trustee's opinion, the same shall have been cured or adequate
provision made therefor;
provided that no delay or omission of the Trustee or of the Warrantholders to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver of any such default or
acquiescence therein and provided further that no act or omission either of the
Trustee or of the Warrantholders in the premises shall extend to or be taken in
any manner whatsoever to affect any subsequent default hereunder of the rights
resulting therefrom.
ARTICLE 7
MEETINGS OF WARRANTHOLDERS
7.1 Right to Convene Meetings
The Trustee may at any time and from time to time, and shall on receipt of a
written request of the Corporation or of a Warrantholders' Request and upon
being indemnified and funded to its reasonable satisfaction by the Corporation
or by the Warrantholders signing such Warrantholders' Request against the cost
which may be incurred in connection with the calling and holding of such
meeting, convene a meeting of the Warrantholders. In the event of the Trustee
failing to so convene a meeting within seven days after receipt of such written
request of the Corporation or such Warrantholders' Request and indemnity and
funding being given as aforesaid, the Corporation or such Warrantholders, as the
case may be, may convene such meeting. Every such meeting shall be held in the
City of Calgary or at such other place as may be approved or determined by the
Trustee and approved by the Corporation, acting reasonably.
7.2 Notice
At least ten days prior notice of any meeting of Warrantholders shall be given
to the Warrantholders in the manner provided for in section 10.2 and a copy of
such notice shall be sent by mail to the Trustee (unless the meeting has been
called by the Trustee) and to the Corporation (unless the meeting has been
called by the Corporation). Such notice shall state the time when and the place
where the meeting is to be held, shall state briefly the general nature of the
business to be transacted thereat and shall contain such information as is
reasonably necessary to enable the Warrantholders to make a reasoned decision on
the matter, but it shall not be necessary for any such notice to set out the
terms of any resolution to be proposed or any of the provisions of this Article
7.
7.3 Chairman
An individual (who need not be a Warrantholder) designated in writing by the
Trustee shall be chairman of the meeting and if no individual is so designated,
or if the individual so designated is not present within 15 minutes from the
time fixed for the holding of the meeting, the Warrantholders present in person
or by proxy shall choose an individual present to be chairman.
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21
7.4 Quorum
Subject to the provisions of section 7.11, at any meeting of the Warrantholders
a quorum shall consist of Warrantholders present in person or by proxy and
entitled to purchase at least 25% of the aggregate number of Common Shares which
could be acquired pursuant to all the then outstanding Purchase Warrants,
provided that at least two persons entitled to vote thereat are personally
present. If a quorum of the Warrantholders shall not be present within 30
minutes from the time fixed for holding any meeting, the meeting, if summoned by
Warrantholders or on a Warrantholders' Request, shall be dissolved; but in any
other case the meeting shall be adjourned to the same day in the next week
(unless such day is not a Business Day, in which case it shall be adjourned to
the next following Business Day) at the same time and place and no notice of the
adjournment need be given. Any business may be brought before or dealt with at
an adjourned meeting which might have been dealt with at the original meeting in
accordance with the notice calling the same. No business shall be transacted at
any meeting unless a quorum be present at the commencement of business. At the
adjourned meeting the Warrantholders present in person or by proxy shall form a
quorum and may transact the business for which the meeting was originally
convened, notwithstanding that they may not be entitled to acquire at least 25%
of the aggregate number of Common Shares which may be acquired pursuant to all
then outstanding Purchase Warrants.
7.5 Power to Adjourn
The chairman of any meeting at which a quorum of the Warrantholders is present
may, with the consent of the meeting, adjourn any such meeting, and no notice of
such adjournment need be given except such notice, if any, as the meeting may
prescribe.
7.6 Show of Hands
Every question submitted to a meeting shall be decided in the first place by a
majority of the votes given on a show of hands except that votes on an
extraordinary resolution shall be given in the manner hereinafter provided. At
any such meeting, unless a poll is duly demanded as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.
7.7 Poll and Voting
On every extraordinary resolution, and on any other question submitted to a
meeting and after a vote by show of hands when demanded by the chairman or by
one or more of the Warrantholders acting in person or by proxy and entitled to
acquire in the aggregate at least 5% of the aggregate number of Common Shares
which could be acquired pursuant to all the Purchase Warrants then outstanding,
a poll shall be taken in such manner as the chairman shall direct. Questions
other than those required to be determined by extraordinary resolution shall be
decided by a majority of the votes cast on the poll.
On a show of hands, every person who is present and entitled to vote, whether as
a Warrantholder or as proxy for one or more absent Warrantholders, or both,
shall have one vote. On a poll, each Warrantholder present in person or
represented by a proxy duly appointed by instrument in writing shall be entitled
to one vote in respect of each whole Common Share which he is entitled to
acquire pursuant to the Purchase Warrant or Purchase Warrants then held or
represented by it. A proxy need not be a Warrantholder. The chairman of any
meeting shall be entitled, both on a show of hands and on a poll, to vote in
respect of the Purchase Warrants and proxies, if any, held or represented by
him.
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22
7.8 Regulations
The Trustee, or the Corporation with the approval of the Trustee, may make and
vary such regulations not contrary to the provisions of this Indenture as it
shall think fit for:
a. the setting of the record date for a meeting for the purpose of
determining Warrantholders entitled to receive notice of and to vote
at the meeting;
b. the issue of voting certificates by any bank, trust company or other
depositary satisfactory to the Trustee stating that the Warrant
Certificates specified therein have been deposited with it by a named
person and will remain on deposit until after the meeting, which
voting certificate shall entitle the persons named therein to be
present and vote at any such meeting and at any adjournment thereof or
to appoint a proxy or proxies to represent them and vote for them at
any such meeting and at any adjournment thereof in the same manner and
with the same effect as though the persons so named in such voting
certificates were the actual bearers of the Warrant Certificates
specified therein;
c. the deposit of voting certificates and instruments appointing proxies
at such place and time as the Trustee, the Corporation or the
Warrantholders convening the meeting, as the case may be, may in the
notice convening the meeting direct;
d. the deposit of voting certificates and instruments appointing proxies
at some approved place or places other than the place at which the
meeting is to be held and enabling particulars of such instruments
appointing proxies to be mailed or telecopied before the meeting to
the Corporation or to the Trustee at the place where the same is to be
held and for the voting of proxies so deposited as though the
instruments themselves were produced at the meeting;
e. the form of the instrument of proxy; and
f. generally for the calling of meetings of Warrantholders and the
conduct of business thereat.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Save as such
regulations may provide, the only persons who shall be recognized at any meeting
as a Warrantholder, or be entitled to vote or be present at the meeting in
respect thereof (subject to section 7.9) shall be Warrantholders or their
counsel, or proxies of Warrantholders.
7.9 Corporation, Agents and Trustee May be Represented
The Corporation, the Agents and the Trustee, by their respective directors,
employees and officers, and the Counsel for the Corporation and for the Trustee
may attend any meeting of the Warrantholders. The Corporation and the Trustee
shall not be entitled to vote thereat, whether in respect of any Purchase
Warrants held by them or otherwise. The Agents shall only be entitled to vote at
such meeting in respect of Purchase Warrants held by them.
7.10 Powers Exercisable by Extraordinary Resolution
In addition to all other powers conferred upon them by any other provisions of
this Indenture or by law, the Warrantholders at a meeting shall, subject to the
provisions of section 7.11 have the power, exercisable from time to time by
extraordinary resolution:
a. to agree to any modification, abrogation, alteration, compromise or
arrangement of the rights of Warrantholders or the Trustee in its
capacity as trustee hereunder or on behalf of the
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23
Warrantholders against the Corporation, whether such rights arise
under this Indenture or the Warrant Certificates or otherwise;
b. to amend, alter or repeal any extraordinary resolution previously
passed or sanctioned by the Warrantholders;
c. to direct or to authorize the Trustee to enforce any of the covenants
on the part of the Corporation contained in this Indenture or the
Warrant Certificates or to enforce any of the rights of the
Warrantholders in any manner specified in such extraordinary
resolution or to refrain from enforcing any such covenant or right;
d. to waive, and to direct the Trustee to waive, any default on the part
of the Corporation in complying with any provisions of this Indenture
or the Warrant Certificates either unconditionally or upon any
conditions specified in such extraordinary resolution;
e. to restrain any Warrantholder from taking or instituting any suit,
action or proceeding against the Corporation for the enforcement of
any of the covenants on the part of the Corporation in this Indenture
or the Warrant Certificates or to enforce any of the rights of the
Warrantholders;
f. to direct any Warrantholder who, as such, has brought any suit, action
or proceeding to stay or to discontinue or otherwise to deal with the
same upon payment of the costs, charges and expenses reasonably and
properly incurred by such Warrantholder in connection therewith;
g. to assent to any change in or omission from the provisions contained
in the Warrant Certificates and this Indenture or any ancillary or
supplemental instrument which may be agreed to by the Corporation, and
to authorize the Trustee to concur in and execute any ancillary or
supplemental indenture embodying the change or omission;
h. with the consent of the Corporation, such consent not to be
unreasonably withheld, to remove the Trustee or its successor in
office and to appoint a new trustee or trustees to take the place of
the Trustee so removed;
i. to assent to any compromise or arrangement with any creditor or
creditors or any class or classes of creditors, whether secured or
otherwise, and with holders of any shares or other securities of the
Corporation; and
j. to sanction any scheme for the reconstruction or reorganization of the
Corporation or for the consolidation, amalgamation or merger of the
Corporation with any other corporation or for the sale, leasing,
transfer or other disposition of all or substantially all the property
and assets of the Corporation.
7.11 Meaning of Extraordinary Resolution
a. The expression "extraordinary resolution" when used in this Indenture
means, subject as hereinafter provided in this section and in section
7.14, a resolution proposed at a meeting of Warrantholders duly
convened for that purpose and held in accordance with the provisions
of this Article 7 at which there are present in person or by proxy
Warrantholders entitled to acquire at least 25% of the aggregate
number of Common Shares which may be acquired pursuant to all the then
outstanding Purchase Warrants and passed by the affirmative votes of
Warrantholders entitled to acquire not less than 66 2/3% of the
aggregate number of Common Shares which may be acquired pursuant to
all the then outstanding Purchase Warrants represented at the meeting
and voted on the poll upon such resolution.
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24
b. If, at the meeting at which an extraordinary resolution is to be
considered, Warrantholders entitled to acquire at least 25% of the
aggregate number of Common Shares which may be acquired pursuant to
all the then outstanding Purchase Warrants are not present in person
or by proxy within 30 minutes after the time appointed for the
meeting, then the meeting, if convened by Warrantholders or on a
Warrantholders' Request, shall be dissolved; but in any other case it
shall stand adjourned to such day, being not less than 15 or more than
60 days later, and to such place and time as may be appointed by the
chairman. Not less than ten days' prior notice shall be given of the
time and place of such adjourned meeting in the manner provided for in
section 10.2. Such notice shall state that at the adjourned meeting
the Warrantholders present in person or by proxy shall form a quorum
but it shall not be necessary to set forth the purposes for which the
meeting was originally called or any other particulars. At the
adjourned meeting the Warrantholders present in person or by proxy
shall form a quorum and may transact the business for which the
meeting was originally convened and a resolution proposed at such
adjourned meeting and passed by the requisite vote as provided in
subsection 7.11.a shall be an extraordinary resolution within the
meaning of this Indenture notwithstanding that Warrantholders entitled
to acquire at least 25% of the aggregate number of Common Shares which
may be acquired pursuant to all the then outstanding Purchase Warrants
are not present in person or by proxy at such adjourned meeting.
c. Votes on an extraordinary resolution shall always be given on a poll
and no demand for a poll on an extraordinary resolution shall be
necessary.
7.12 Powers Cumulative
Any one or more of the powers or any combination of the powers in this Indenture
stated to be exercisable by the Warrantholders by extraordinary resolution or
otherwise may be exercised from time to time and the exercise of any one or more
of such powers or any combination of powers from time to time shall not be
deemed to exhaust the right of the Warrantholders to exercise such power or
powers or combination of powers then or thereafter from time to time.
7.13 Minutes
Minutes of all resolutions and proceedings at every meeting of Warrantholders
shall be made and duly entered in books to be provided from time to time for
that purpose by the Trustee at the expense of the Corporation, and any such
minutes as aforesaid, if signed by the chairman or the secretary of the meeting
at which such resolutions were passed or proceedings had shall be prima facie
evidence of the matters therein stated and, until the contrary is proved, every
such meeting in respect of the proceedings of which minutes shall have been made
shall be deemed to have been duly convened and held, and all resolutions passed
thereat or proceedings taken shall be deemed to have been duly passed and taken.
7.14 Instruments in Writing
All actions which may be taken and all powers that may be exercised by the
Warrantholders at a meeting held as provided in this Article 7 may also be taken
and exercised by Warrantholders entitled to acquire at least 66 2/3% of the
aggregate number of Common Shares which may be acquired pursuant to all the then
outstanding Purchase Warrants by an instrument in writing signed in one or more
counterparts by such Warrantholders in person or by attorney duly appointed in
writing, and the expression "extraordinary resolution" when used in this
Indenture shall include an instrument so signed.
<PAGE>
25
7.15 Binding Effect of Resolutions
Every resolution and every extraordinary resolution passed in accordance with
the provisions of this Article 7 at a meeting of Warrantholders shall be binding
upon all the Warrantholders, whether present at or absent from such meeting, and
every instrument in writing signed by Warrantholders in accordance with section
7.14 shall be binding upon all the Warrantholders, whether signatories thereto
or not, and each and every Warrantholder and the Trustee (subject to the
provisions for indemnity herein contained) shall be bound to give effect
accordingly to every such resolution and instrument in writing.
7.16 Holdings by Corporation Disregarded
In determining whether Warrantholders holding Warrant Certificates evidencing
the entitlement to acquire the required number of Common Shares are present at a
meeting of Warrantholders for the purpose of determining a quorum or have
concurred in any consent, waiver, extraordinary resolution, Warrantholders'
Request or other action under this Indenture, Purchase Warrants owned legally or
beneficially by the Corporation or any subsidiary of the Corporation shall be
disregarded in accordance with the provisions of section 10.9.
ARTICLE 8
SUPPLEMENTAL INDENTURES
8.1 Provision for Supplemental Indentures for Certain Purposes
From time to time the Corporation (when authorized by action of the directors)
and the Trustee may, subject to the provisions hereof, and they shall, when so
directed in accordance with the provisions hereof, execute and deliver by their
proper officers, indentures or instruments supplemental hereto, which thereafter
shall form part hereof, for any one or more or all of the following purposes:
a. setting forth any adjustments resulting from the application of the
provisions of Article 4;
b. adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of Counsel, are necessary or
advisable in the premises, provided that the same are not in the
opinion of the Trustee prejudicial to the interests of the
Warrantholders;
c. giving effect to any extraordinary resolution passed as provided in
Article 7;
d. making such provisions not inconsistent with this Indenture as may be
necessary or desirable with respect to matters or questions arising
hereunder or for the purpose of obtaining a listing or quotation of
the Purchase Warrants on any stock exchange, provided that such
provisions are not, in the opinion of the Trustee, prejudicial to the
interests of the Warrantholders;
e. adding to or altering the provisions hereof in respect of the transfer
of Purchase Warrants, making provision for the exchange of Warrant
Certificates, and making any modification in the form of the Warrant
Certificates which does not affect the substance thereof;
f. modifying any of the provisions of this Indenture, including relieving
the Corporation from any of the obligations, conditions or
restrictions herein contained, provided that such modification or
relief shall be or become operative or effective only if, in the
opinion of the Trustee, such modification or relief in no way
prejudices any of the rights of the Warrantholders or of the Trustee,
and provided further that the Trustee may in its sole discretion
decline to enter into any such supplemental indenture which in its
opinion may not afford adequate protection to the Trustee when the
same shall become operative; and
<PAGE>
26
g. for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective or inconsistent provisions, errors, mistakes or
omissions herein, provided that in the opinion of the Trustee the
rights of the Trustee and of the Warrantholders are in no way
prejudiced thereby.
8.2 Successor Corporations
In the case of the consolidation, amalgamation, merger or transfer of all or
substantially all of the undertaking or assets of the Corporation to another
corporation ("Successor Corporation"), the Successor Corporation resulting from
such consolidation, amalgamation, merger or transfer (if not the Corporation)
shall expressly assume, by supplemental indenture satisfactory in form to the
Trustee and executed and delivered to the Trustee, the due and punctual
performance and observance of each and every covenant and condition of this
Indenture to be performed and observed by the Corporation.
ARTICLE 9
CONCERNING THE TRUSTEE
9.1 Trust Indenture Legislation
a. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of Applicable
Legislation, such mandatory requirement shall prevail.
b. The Corporation and the Trustee agree that each will, at all times in
relation to this Indenture and any action to be taken hereunder,
observe and comply with and be entitled to the benefits of Applicable
Legislation.
9.2 Rights and Duties of Trustee
a. In the exercise of the rights and duties prescribed or conferred by
the terms of this Indenture, the Trustee shall exercise that degree of
care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances. No provision of this Indenture
shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct or bad faith.
b. The obligation of the Trustee to commence or continue any act, action
or proceeding for the purpose of enforcing any rights of the Trustee
or the Warrantholders hereunder shall be conditional upon the
Warrantholders furnishing, when required by notice by the Trustee,
sufficient funds to commence or to continue such act, action or
proceeding and an indemnity reasonably satisfactory to the Trustee to
protect and to hold harmless the Trustee against the costs, charges
and expenses and liabilities to be incurred thereby and any loss and
damage it may suffer by reason thereof. None of the provisions
contained in this Indenture shall require the Trustee to expend or to
risk its own funds or otherwise to incur financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers unless indemnified as aforesaid.
c. The Trustee may, before commencing or at any time during the
continuance of any such act, action or proceeding, require the
Warrantholders, at whose instance it is acting, to deposit with the
Trustee the Warrant Certificates held by them, for which Warrant
Certificates the Trustee shall issue receipts.
<PAGE>
27
d. Every provision of this Indenture that by its terms relieves the
Trustee of liability or entitles it to rely upon any evidence
submitted to it, is subject to the provisions of Applicable
Legislation, this section and of section 9.3.
9.3 Evidence, Experts and Advisers
a. In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Corporation shall furnish to the
Trustee such additional evidence of compliance with any provision
hereof, and in such form, as may be prescribed by Applicable
Legislation or as the Trustee may reasonably require by written notice
to the Corporation.
b. In the exercise of its rights and duties hereunder, the Trustee may,
if it is acting in good faith, rely as to the truth of the statements
and the accuracy of the opinions expressed in statutory declarations,
opinions, reports, written requests, consents, or orders of the
Corporation, certificates of the Corporation or other evidence
furnished to the Trustee pursuant to any provision hereof or of
Applicable Legislation or pursuant to a request of the Trustee,
provided that such evidence complies with Applicable Legislation and
that the Trustee complies with Applicable Legislation and that the
Trustee examines such evidence and determines that such evidence
complies with the applicable requirements of this Indenture.
c. Whenever it is provided in this Indenture or under Applicable
Legislation that the Corporation shall deposit with the Trustee
resolutions, certificates, reports, opinions, requests, orders or
other documents, it is intended that the trust, accuracy and good
faith on the effective date thereof and the facts and opinions stated
in all such documents so deposited shall, in each and every such case,
be conditions precedent to the right of the Corporation to have the
Trustee take the action to be based thereon.
d. Proof of the execution of an instrument in writing, including a
Warrantholders' Request, by any Warrantholder may be made by the
certificate of a notary public, or other officer with similar powers,
that the person signing such instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to such execution
or in any other manner which the Trustee may consider adequate.
e. The Trustee may employ or retain such Counsel, accountants, appraisers
or other experts or advisers as it may reasonably require for the
purpose of discharging its duties hereunder and may pay reasonable
remuneration for all services so performed by any of them, and shall
not be responsible for any misconduct or negligence on the part of any
such experts or advisers who have been appointed with due care by the
Trustee.
9.4 Documents, Monies, etc. Held by Trustee
Any securities, documents of title or other instruments that may at any time be
held by the Trustee subject to the trusts hereof may be placed in the deposit
vaults of the Trustee or of any Canadian chartered bank or deposited for
safekeeping with any such bank. Unless herein otherwise expressly provided, any
monies held pending the application or withdrawal thereof under any provisions
of this Indenture may be deposited in the name of the Trustee in the deposit
department of the Trustee or in any Canadian chartered bank at the rate of
interest (if any) then current on similar deposits or, with the consent or at
the written direction of the Corporation, may be: (i) deposited in the deposit
department of the Trustee or any other trust company authorized to accept
deposits under the laws of Canada or a province thereof; or (ii) invested in
securities issued or guaranteed by the Government of Canada or a province
thereof or of any Canadian chartered bank or trust company, provided that the
securities shall not have a maturity date of more than 60 days from the date of
investment. Unless the Corporation shall be in default hereunder or unless
otherwise specifically
<PAGE>
28
provided herein, all interest or other income received by the Trustee in respect
of such deposits and investments shall belong to the Corporation.
9.5 Actions by Trustee to Protect Interest
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the Warrantholders.
9.6 Trustee Not Required to Give Security
The Trustee shall not be required to give any bond or security in respect of the
execution of the trusts and powers of this Indenture or otherwise in respect of
the premises.
9.7 Protection of Trustee
By way of supplement to the provisions of any law for the time being relating to
trustees it is expressly declared and agreed as follows:
a. the Trustee shall not be liable for or by reason of any statements of
fact or recitals in this Indenture or in the Warrant Certificates
(except the representations contained in sections 9.9 and in the
certificate of the Trustee on the Warrant Certificates) or be required
to verify the same, but all such statements or recitals are and shall
be deemed to be made by the Corporation;
b. nothing herein contained shall impose any obligation on the Trustee to
see to or to require evidence of the registration or filing (or
renewal thereof) of this Indenture or any instrument ancillary or
supplemental hereto;
c. the Trustee shall not be bound to give notice to any person or persons
of the execution hereof; and
d. the Trustee shall not have any liability or responsibility whatever or
be in any way responsible for the consequence of any breach on the
part of the Corporation of any of the covenants herein contained or of
any acts of any directors, officers, employees, agents or servants of
the Corporation.
9.8 Replacement of Trustee; Successor by Merger
a. The Trustee may resign its trust and be discharged from all further
duties and liabilities hereunder, subject to this section 9.8, by
giving to the Corporation not less than 90 days' prior notice in
writing or such shorter prior notice as the Corporation may accept as
sufficient. The Warrantholders by extraordinary resolution shall have
power at any time to remove the existing Trustee and to appoint a new
Trustee. In the event of the Trustee resigning or being removed as
aforesaid or being dissolved, becoming bankrupt, going into
liquidation or otherwise becoming incapable of acting hereunder, the
Corporation shall forthwith appoint a new trustee unless a new trustee
has already been appointed by the Warrantholders; failing such
appointment by the Corporation, the retiring Trustee or any
Warrantholder may apply to a justice of the Court of Queen's Bench of
the Province of Alberta on such notice as such justice may direct, for
the appointment of a new trustee; but any new trustee so appointed by
the Corporation or by the Court shall be subject to removal as
aforesaid by the Warrantholders. Any new trustee appointed under any
provision of this section 9.8 shall be a corporation authorized to
carry on the business of a trust company in the Province of Alberta
and, if required by the Applicable Legislation for any other
provinces, in such other provinces. On any such appointment the new
trustee shall be
<PAGE>
29
vested with the same powers, rights, duties and responsibilities as if
it had been originally named herein as Trustee hereunder.
b. Upon the appointment of a successor trustee, the Corporation shall
promptly notify the Warrantholders thereof in the manner provided for
in section 10.2 hereof.
c. Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation resulting therefrom to
which the Trustee shall be a party, or any corporation succeeding to
the trust business of the Trustee shall be the successor to the
Trustee hereunder without any further act on its part or any of the
parties hereto, provided that such corporation would be eligible for
appointment as a successor trustee under subsection 9.8.a.
d. Any Warrant Certificates certified but not delivered by a predecessor
trustee may be certified by the successor trustee in the name of the
predecessor or successor trustee.
9.9 Conflict of Interest
a. The Trustee represents to the Corporation that at the time of
execution and delivery hereof no material conflict of interest exists
between its role as a trustee hereunder and its role in any other
capacity and agrees that in the event of a material conflict of
interest arising hereafter it will, within 90 days after ascertaining
that it has such material conflict of interest, either eliminate the
same or assign its trust hereunder to a successor trustee approved by
the Corporation and meeting the requirements set forth in subsection
9.8.a.. Notwithstanding the foregoing provisions of this subsection ,
if any such material conflict of interest exists or hereafter shall
exist, the validity and enforceability of this Indenture and the
Warrant Certificate shall not be affected in any manner whatsoever by
reason thereof.
b. Subject to subsection 9.9.a., the Trustee, in its personal or any
other capacity, may buy, lend upon and deal in securities of the
Corporation and generally may contract and enter into financial
transactions with the Corporation or any subsidiary of the Corporation
without being liable to account for any profit made thereby.
9.10 Indemnity of Trustee
Without limiting any protection or indemnity of the Trustee under any other
provision hereof, or otherwise at law, the Corporation hereby agrees to
indemnify and hold harmless the Trustee from and against any and all
liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses
and disbursements, including legal or advisor fees and disbursements, of
whatever kind and nature which may at any time be imposed on, incurred by or
asserted against the Trustee in connection with the performance of its duties
and obligations hereunder, other than such liabilities, losses, damages,
penalties, claims, actions, suits, costs, expenses and disbursements arising by
reason of the negligence or willful misconduct of the Trustee. This provision
shall survive the resignation or removal of the Trustee, or the termination of
this Indenture.
9.11 Acceptance of Trust
This Indenture is entered into with the Trustee for the benefit of, and the
Trustee declares that it holds this Indenture and all rights, interests and
benefits of this Indenture for, such persons, firms and corporations, and each
of them, who are from time to time Warrantholders. The Trustee hereby accepts
the trusts in this Indenture declared and provided for and agrees to perform the
same upon the terms and conditions herein set forth.
9.12 Trustee Not to be Appointed Receiver
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30
The Trustee and any person related to the Trustee shall not be appointed a
receiver, a receiver and manager or liquidator of all or any part of the assets
or undertaking of the Corporation.
9.13 Purchase Warrant Register
The Trustee shall, at all times while any Purchase Warrants are outstanding,
maintain, at its principal office in Calgary, Alberta a Register in which shall
be recorded the following information:
(1) the numbers of all outstanding Warrant Certificates, including the
date of issuance;
(2) the numbers of all Warrant Certificates exchanged or exercised,
including the date of exchange or exercise;
(3) the names and addresses of all Warrantholders;
(4) the particulars of all transfers of Purchase Warrants; and
(5) such other information as the Trustee, in its discretion, deems
necessary or advisable.
9.14 Register Open for Inspection
The Register shall be open at all reasonable times on a business day during
business hours for inspection by the Corporation, the Trustee or any
Warrantholder. The Trustee shall, from time to time when requested to do so by
the Corporation in writing, furnish the Corporation with a list of names and
addresses of holders of Purchase Warrants entered in the Register kept by the
Trustee.
ARTICLE 10
GENERAL
10.1 Notice to the Corporation and the Trustee
a. Unless herein otherwise expressly provided, any notice to be given
hereunder to the Corporation or the Trustee shall be deemed to be
validly given if delivered or if sent by registered letter, postage
prepaid or telecopied:
If to the Corporation:
Minera Andes Inc.
3303 North Sullivan Road
Spokane, Washington
99216 U.S.A.
Telecopy No: (509) 921-7325
Attention: President
If to the Agents:
C.M. Oliver & Company Limited
Suite 1600, 1750 West Pender Street
Vancouver, British Columbia
V6C 2T8
Telecopy No.: (604) 662-8100
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31
Attention: Clarence H.L. Debelle
-and-
Majendie Charlton Securities Ltd.
2710, 140 - 4th Avenue S.W.
Calgary, Alberta
T2P 3N3
Telecopy No.: (403) 265-9655
Attention: Francesco Mele
If to the Trustee:
Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W
Calgary, Alberta
T2P 3S8
Telecopy No.: (403) 267-6879
Attention: Manager, Corporate Trust Department
and any such notice delivered in accordance with the foregoing shall
be deemed to have been received on the date of delivery or, if mailed,
on the fifth Business Day following the date of the postmark on such
notice or, if sent by telecopy, on the next Business Day following the
date of transmission, provided that its contents are transmitted and
received completely and accurately.
b. The Corporation or the Trustee, as the case may be, may notify the
other in the manner provided in subsection 10.1.a of a change of
address which, from the effective date of such notice and until
changed by like notice, shall be the address of the Corporation or the
Trustee, as the case may be, for all purposes of this Indenture.
c. If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Trustee or to the Corporation hereunder could reasonably be considered
unlikely to reach its destination, such notice shall be valid and
effective only if it is delivered to the named officer of the party to
which it is addressed or, if it is delivered to such party at the
appropriate address provided in subsection 10.1.a, by telecopy or
other means of prepaid, transmitted and recorded communication.
10.2 Notice to Warrantholders
a. Any notice to the Warrantholders under the provisions of this
Indenture shall be valid and effective if sent by telecopier or
through the ordinary post addressed to such holders at their post
office addresses appearing on the register hereinbefore mentioned and
shall be deemed to have been effectively given on the date of delivery
or, if mailed, five Business Days following actual posting of the
notice or, if sent by telecopy, on the next Business Day following the
date of transmission, provided that its contents are transmitted and
received completely and accurately.
b. If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Warrantholders hereunder could reasonably be considered unlikely to
reach its destination, such notice shall be valid and effective only
if it is delivered personally to such Warrantholders or if delivered
to the address for such
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32
Warrantholders contained in the register of Purchase Warrants
maintained by the Trustee, by telecopy or other means of prepaid
transmitted and recorded communication.
10.3 Ownership and Transfer of Purchase Warrants
The Corporation and the Trustee may deem and treat the registered owner of any
Purchase Warrants as the absolute owner thereof for all purposes and the
Corporation and the Trustee shall not be affected by any notice or knowledge to
the contrary except where the Corporation or the Trustee is required to take
notice by statute or by order of a court of competent jurisdiction. A
Warrantholder shall be entitled to the rights evidenced by its Warrant
Certificate free from all equities or rights of set off or counterclaim between
the Corporation and the original or any intermediate holder of the Purchase
Warrants and all persons may act accordingly and the receipt of any such
Warrantholder for the Common Shares which may be acquired pursuant thereto shall
be a good discharge to the Corporation and the Trustee for the same and neither
the Corporation nor the Trustee shall be bound to inquire into the title of any
such holder except where the Corporation or the Trustee is required to take
notice by statute or by order of a court of competent jurisdiction.
10.4 Evidence of Ownership
a. Upon receipt of a certificate of any bank, trust company or other
depositary satisfactory to the Trustee stating that the Purchase
Warrants specified therein have been deposited by a named person with
such bank, trust company or other depositary and will remain so
deposited until the expiry of the period specified therein, the
Corporation and the Trustee may treat the person so named as the
owner, and such certificate as sufficient evidence of the ownership by
such person of such Purchase Warrant during such period, for the
purpose of any requisition, direction, consent, instrument or other
document to be made, signed or given by the holder of the Purchase
Warrant so deposited.
b. The Corporation and the Trustee may accept as sufficient evidence of
the fact and date of the signing of any requisition, direction,
consent, instrument or other document by any person: (i) the signature
of any officer of any bank, trust company, or other depositary
satisfactory to the Trustee as witness of such execution, (ii) the
certificate of any notary public or other officer authorized to take
acknowledgments of deeds to be recorded at the place where such
certificate is made that the person signing acknowledged to him the
execution thereof, or (iii) a satisfactory declaration of a witness of
such execution.
10.5 Counterparts
This Indenture may be executed in several counterparts, each of which when so
executed shall be deemed to be an original and such counterparts together shall
constitute one and the same instrument and notwithstanding their date of
execution they shall be deemed to be dated as of the date hereof.
10.6 Satisfaction and Discharge of Indenture
Upon the earlier of:
a. the date by which there shall have been delivered to the Trustee for
exercise or destruction all Warrant Certificates theretofore certified
hereunder; or
b. the Time of Expiry;
and if all certificates representing Common Shares required to be issued in
compliance with the provisions hereof have been issued and delivered hereunder
and if all payments required to be made pursuant to Article
<PAGE>
33
3 have been made in accordance therewith, this Indenture shall cease to be of
further effect and the Trustee, on demand of and at the cost and expense of the
Corporation and upon delivery to the Trustee of a certificate of the Corporation
stating that all conditions precedent to the satisfaction and discharge of this
Indenture have been complied with, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture. Notwithstanding
the foregoing, the indemnities provided to the Trustee by the Corporation
hereunder shall remain in full force and effect and survive the termination of
this Indenture.
10.7 Successors
All the covenants and provisions of this Indenture by or for the benefit of the
Corporation or the Trustee shall bind and enure to the benefit of their
respective successors and assigns hereunder.
10.8 Sole Benefit of Parties and Warrantholders
Nothing in this Indenture or in the Warrant Certificates, expressed or implied,
shall give or be construed to give to any person other than the parties hereto
and the Warrantholders, as the case may be, any legal or equitable right, remedy
or claim under this Indenture, or under any covenant or provision herein or
therein contained, all such covenants and provisions being for the sole benefit
of the parties hereto and the Warrantholders.
10.9 Common Shares or Purchase Warrants Owned by the Corporation or its
Subsidiaries - Certificate to be Provided
For the purpose of disregarding any Purchase Warrants owned legally or
beneficially by the Corporation or any subsidiary of the Corporation in section
7.16, the Corporation shall provide to the Trustee, from time to time, a
certificate of the Corporation setting forth as at the date of such certificate:
a. the names (other than the name of the Corporation) of the registered
holders of Purchase Warrants which, to the knowledge of the
Corporation, are owned by or held for the account of the Corporation
or any subsidiary of the Corporation; and
b. the number of Purchase Warrants owned legally or beneficially by the
Corporation or any Subsidiary of the Corporation;
<PAGE>
34
and the Trustee, in making the computations in section 7.16, shall be entitled
to rely on such certificate without any additional evidence.
IN WITNESS WHEREOF the parties hereto have executed this Indenture under their
respective corporate seals and the hands of their proper officers in that
behalf.
MINERA ANDES INC.
Per:
-----------------------------------
MONTREAL TRUST COMPANY OF CANADA
Per:
-----------------------------------
Per:
-----------------------------------
<PAGE>
THIS IS SCHEDULE "A" to the Purchase Warrant Indenture made
as of December 13, 1996 between MINERA ANDES INC. and
MONTREAL TRUST COMPANY OF CANADA as Trustee.
- -------------------------------------------------------------------------------
THE PURCHASE WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE VOID AND OF NO
VALUE UNLESS EXERCISED ON OR BEFORE 4:30 P.M. (CALGARY TIME), DECEMBER 13, 1998.
WARRANT CERTIFICATE
MINERA ANDES INC.
(A Corporation amalgamated under the laws of the Province of Alberta)
WARRANT
CERTIFICATE NO. PW_____A _________________________ PURCHASE
WARRANTS entitling the holder to acquire,
subject to adjustment, ___________________
Common Shares.
THIS IS TO CERTIFY THAT (hereinafter referred to as the "holder") is the
registered holder of that number of Purchase Warrants to acquire Common Shares
(as hereinafter defined) of Minera Andes Inc. (the "Corporation") as set forth
in this Warrant certificate ("Warrant Certificate"). Two of the Purchase
Warrants represented hereby entitle the holder thereof to acquire one fully paid
and non-assessable common share ("Common Share") of the Corporation, without
nominal or par value, as such shares were constituted on December 13, 1996, in
the manner and subject to the restrictions and adjustments set forth herein, at
a price of $2.50 per share until 4:30 p.m. (Calgary time) (the "Time of Expiry")
on the first anniversary of the Effective Date or at a price of $2.88 per share
at any time until the Time of Expiry on the second anniversary of the Effective
Date ("Expiry Date").
The right to acquire Common Shares hereunder may only be exercised by the holder
within the time set forth above by:
a. duly completing and executing the Exercise Form attached hereto;
b. surrendering this Warrant Certificate to the Montreal Trust Company of
Canada (the "Trustee") at the principal offices of the Trustee in the
cities of Calgary or Vancouver; and
c. remitting cash, certified cheque, bank draft or money order in lawful
money of Canada, payable to or to the order of the Corporation at par
where this Warrant Certificate is so surrendered, for the aggregate
purchase price of the Common Shares so subscribed for.
These Purchase Warrants may be surrendered only upon personal delivery hereof
or, if sent by mail or other means of transmission, upon actual receipt thereof
by the Trustee at the office referred to above.
Upon surrender of these Purchase Warrants, the person or persons in whose name
or names the Common Shares issuable upon exercise of the Purchase Warrants are
to be issued shall be deemed for all purposes (except as provided in the
Indenture hereinafter referred to) to be the holder or holders of record of such
Common Shares and the Corporation has covenanted that it will (subject to the
provisions of the Indenture)
<PAGE>
2
cause a certificate or certificates representing such Common Shares to be
delivered or mailed to the person or persons at the address or addresses
specified in the Exercise Form within five Business Days.
The registered holder of this Warrant Certificate may acquire any lesser number
of Common Shares than the number of Common Shares which may be acquired for the
Purchase Warrants represented by this Warrant Certificate. In such event, the
holder shall be entitled to receive a new certificate for the balance of the
Common Shares which may be acquired. To the extent that the Warrantholder is
entitled to receive on the exercise or partial exercise thereof a fraction of a
Common Share, such right may only be exercised in respect of such fraction in
combination with another Purchase Warrant or other Purchase Warrants which in
the aggregate entitles the Warrantholder to receive a whole number of Common
Shares.
If the Warrantholder is not able to, or elects not to, combine Purchase Warrants
so as to be entitled to acquire a whole number of Common Shares, the Corporation
shall make an appropriate cash settlement. However, in respect of any
Warrantholder, the Corporation shall only be required to make such a cash
adjustment once and for one Purchase Warrant and no more. The amount of the cash
adjustment with respect to the Common Share shall be equal to the fraction of
the Common Share to which the Warrantholder would be entitled multiplied by the
Current Market Price (as defined in the Indenture).
The Purchase Warrants represented by this certificate are issued under and
pursuant to a Warrant Indenture (herein referred to as the "Indenture") made as
of December 13, 1996 between the Corporation and the Trustee. Reference is made
to the Indenture and any instruments supplemental thereto for a full description
of the rights of the holders of the Purchase Warrants and the terms and
conditions upon which the Purchase Warrants are, or are to be, issued and held,
with the same effect as if the provisions of the Indenture and all instruments
supplemental thereto were set forth herein. By acceptance hereof, the holder
assents to all provisions of the Indenture. In the event of a conflict between
the provisions of the Warrant Certificate and the Indenture, the provisions of
the Indenture shall govern. Capitalized terms used in the Indenture have the
meaning herein as therein, unless otherwise defined. Upon request, the
Corporation will provide the holder with a copy of the Indenture, without
charge.
The Indenture contains provisions for adjustment of the number and kind of
securities which may be issued upon exercise of the Purchase Warrant in certain
specified circumstances.
The registered holder of this Warrant Certificate may, at any time prior to the
Expiry Date, upon surrender hereof to the Trustee at its principal offices in
the cities of Calgary or Vancouver, exchange this Warrant Certificate for other
certificates entitling the holder to acquire, in the aggregate, the same number
of Common Shares as may be acquired under this Warrant Certificate.
The holding of the Purchase Warrants evidenced by this Warrant Certificate shall
not constitute the holder hereof a shareholder of the Corporation or entitle the
holder to any right or interest in respect thereof except as expressly provided
in the Indenture or in this Warrant Certificate.
The Indenture provides that all holders of Purchase Warrants shall be bound by
any resolution passed at a meeting of the holders held in accordance with the
provisions of the Indenture and resolutions signed by the holders of Purchase
Warrants entitled to acquire a specified majority of the Common Shares which may
be acquired pursuant to all then outstanding Purchase Warrants.
The Purchase Warrants evidenced by this Warrant Certificate may be transferred
on the register kept at the principal offices of the Trustee in Calgary, Alberta
by the registered holder hereof or its legal representatives or its attorney
duly appointed by an instrument in writing in form and execution satisfactory to
the Trustee, only upon compliance with the conditions prescribed in the
Indenture and upon compliance with such reasonable requirements as the Trustee
may prescribe.
<PAGE>
3
This Warrant Certificate shall not be valid for any purpose whatever unless and
until it has been certified by or on behalf of the Trustee.
Time shall be of the essence hereof. This Warrant Certificate shall be governed
by and construed in accordance with the laws of the province of Alberta and the
federal law applicable therein and shall be treated in all respects as an
Alberta contract.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be
signed by its duly authorized officers as of December __, 1996.
MINERA ANDES INC.
Per:__________________________________
Certified by:
MONTREAL TRUST COMPANY OF CANADA
Trustee
By: _________________________________
<PAGE>
4
TRANSFER OF PURCHASE WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
___________________________________, _________________ Purchase Warrants of
Minera Andes Inc. registered in the name of the undersigned on the records of
the Montreal Trust Company of Canada represented by the Warrant Certificate
attached and irrevocably appoints __________________ the attorney of the
undersigned to transfer the said securities on the books or register with full
power of substitution.
If less than all the Purchase Warrants represented by this Warrant Certificate
are being transferred, the Warrant Certificate representing those Purchase
Warrants not transferred will be registered in the name appearing on the face of
this Warrant Certificate and such certificates (please check one):
(a) __________ should be sent by first class mail to the following address:
-----------------------------------------------------------
-----------------------------------------------------------
(b) __________ should be held for pick up at the office of the Trustee at
which this Warrant Certificate is deposited.
DATED the _____ day of __________, 19__.
- ----------------------------------- ---------------------------------------
Signature Guaranteed (Signature of Warrantholder)
Instructions:
1. Signature of the Warrantholder must be the signature of the person
appearing on the face of this Warrant Certificate.
2. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a judiciary or representative capacity, the certificate must
be accompanied by evidence of authority to sign satisfactory to the
Trustee and the Corporation.
3. The signature on the Transfer Form must be guaranteed by an authorized
officer of a chartered bank, trust company or an investment dealer who
is a member of a recognized stock exchange.
4. Purchase Warrants shall only be transferable in accordance with
applicable laws. The transfer of Purchase Warrants to a purchaser not
resident in a Filing Jurisdiction may result in the Common Shares
obtained upon the exercise of the Purchase Warrants (whether after or
before obtaining receipts for a final prospectus relating to the
distribution of Common Shares upon exercise of Purchase Warrants) not
being freely tradeable in the jurisdiction of residence of the
purchaser.
<PAGE>
5
5. The Purchase Warrants and the Common Shares issuable upon exercise
thereof have not been registered under the United States Securities
Act of 1933, as amended (the "U.S. Securities Act"), or the securities
laws of any state of the United States, and may not be transferred in
the United States or to a U.S. Person unless the Purchase Warrants and
the Common Shares have been registered under the U.S. Securities Act
and the securities laws of all applicable states of the United States
or an exemption from such registration requirements is available. In
connection with any transfer of Purchase Warrants, the holder will be
required to provide to the Trustee and the Corporation an opinion of
counsel, or other evidence, in form reasonably satisfactory to the
Corporation, to the effect that such transfer of Purchase Warrants
does not require registration under the U.S. Securities Act or any
applicable state laws and regulations governing the offer and sale of
securities.
OFFICE OF THE TRUSTEE
Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W
Calgary, Alberta
T2P 3S8
Telephone: (403) 267-6800
OR
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Telephone: (604) 661-9400
<PAGE>
EXERCISE FORM
TO: Minera Andes Inc. and
Montreal Trust Company of Canada
(a) The undersigned hereby exercises the right to acquire __________ Common
Shares of Minera Andes Inc. as constituted on December 13, 1996 (or such number
of other securities or property to which such Purchase Warrants entitle the
undersigned in lieu thereof or in addition thereto under the provisions of the
Indenture referred to in the accompanying Warrant Certificate) in accordance
with and subject to the provisions of such Indenture.
(b) The Common Shares (or other securities or property) are to be issued as
follows:
Name:
---------------------------------------------------------------------
(print clearly)
Address in full:
----------------------------------------------------------
--------------------------------------------------------------------------
Social Insurance Number:
--------------------------------------------------
Number of Common Shares:
--------------------------------------------------
Note: If further nominees intended, please attach (and initial) schedule
giving these particulars.
(c) The undersigned hereby represents and warrants to the Corporation that the
undersigned (check one):
i. __________________ it is not a U.S. Person and the Purchase Warrant
is not being exercised within the United States or on behalf of, or for the
account or benefit of, a U.S. Person or a person in the United States;
ii. _________________ it was an original subscriber for Purchase
Warrants or a transferee pursuant to section 2.10.b of the Purchase Warrant
Indenture between the Corporation and the Trustee, who was a U.S. Person at the
time of the acquisition of such Purchase Warrants and the representations and
warranties made by such person in connection with the acquisition of such
Purchase Warrants remain true and correct on the date of exercise; or
iii. ________________ it has delivered herewith to the Trustee and the
Corporation a written opinion of counsel or other evidence satisfactory to the
Corporation to the effect that the Common Shares have been registered under the
U.S. Securities Act and applicable state securities laws or are exempt from
registration thereunder.
Such securities (please check one):
(a) __________ should be sent by first class mail to the following address:
-----------------------------------------------------------
-----------------------------------------------------------
<PAGE>
2
OR
(b) __________ should be held for pick up at the office of the Trustee at
which this Warrant Certificate is deposited.
If the number of Purchase Warrants exercised are less than
the number of Purchase Warrants represented hereby, the undersigned requests
that the new Warrant Certificate representing the balance of the Purchase
Warrants be registered in the name of _________________________________________
_______________________________________________________________________________
whose address is_______________________________________________________________
_______________________________________________________________________________
Such securities (please check one):
(a) __________ should be sent by first class mail to the following address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OR
(b) __________ should be held for pick up at the office of the Trustee at
which this Warrant Certificate is deposited.
In the absence of instructions to the contrary, the
securities or other property will be issued in the name of or to the holder
hereof and will be sent by first class mail to the last address of the holder
appearing on the register maintained for the Purchase Warrants.
DATED this ____ day of __________, 199__.
- ----------------------------------- ---------------------------------------
Signature Guaranteed (Signature of Warrantholder)
---------------------------------------
Print full name
---------------------------------------
---------------------------------------
Print full address
<PAGE>
3
Instructions:
- -------------
1. For the purposes of paragraphs (c) above, the following words and
phrases have the following meanings:
"United States" and "U.S. Person" have the meaning given to such terms
under Regulation S of the U.S. Securities Act. For purposes of
Regulation S. "United States" means the United States of America, its
territories and possessions, any statue of the United States and the
District of Columbia. "U.S. Person" includes, with certain
expectations, (i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated under
the laws of the United States; (iii) any estate of which any executor
or administrator is a U.S. Person; (iv) any trust of which any trustee
is a U.S. Person; (v) any agency or branch of a foreign entity located
in the United States; (vi) any non-discretionary account or similar
account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. Person; (vii) any
discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or
(if any individual) resident in the United States; and (viii) any
partnership or corporation if (a) organized or incorporated under the
laws of any jurisdiction other than the United States and (b) formed
by a U.S. Person principally for the purposes of investing in
securities not registered under the U.S. Securities Act; and
"U.S. Securities Act" means the United States Securities Act of 1933,
as amended.
2. The registered holder may exercise its right to receive Common Shares
by completing this form and surrendering this form and the Warrant
Certificate representing the Purchase Warrants being exercised to the
Montreal Trust Company of Canada at its principal office on the 6th
Floor Western Gas Tower, 530 - 8th Avenue S.W., Calgary, Alberta or at
its principal office at 510 Burrard Street, Vancouver, British
Columbia. Certificates for Common Shares will be delivered or mailed
within five business days after the exercise of the Purchase Warrants.
3. If the Exercise Form indicates that Common Shares are to be issued to
a person or persons other than the registered holder of the
Certificate, the signature of such holder of the Exercise Form must be
guaranteed by an authorized officer of a chartered bank, trust company
or an investment dealer who is a member of a recognized stock
exchange.
4. If the Exercise Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a fiduciary or representative capacity, the certificate must
be accompanied by evidence of authority to sign satisfactory to the
Trustee and the Corporation.
<PAGE>
4
5. If the registered holder exercises its right to receive Common Shares
prior to a receipt for a prospectus being issued by the applicable
securities commission the Common Shares will be subject to a hold
period and may be issued with a legend reflecting such hold period.
OFFICE OF THE TRUSTEE
Montreal Trust Company of Canada
Suite 710, 530 - 8th Avenue S.W
Calgary, Alberta
T2P 3S8
Telephone: (403) 267-6800
OR
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Telephone: (604) 661-9400
By Fax - (509) 921-7325
1996 April 30
Mr. Allen V. Ambrose
President
MINERA ANDES INC.
3303 North Sullivan Road
Spokane, WA 99216
Dear Allen:
Further to our recent discussions, I am pleased to provide the following
proposal for Allan Marter of Waiata Resources ("Waiata") to provide financial
advisory services to Minera Andes Inc. ("Minera") as follows:
Duties
Acting in the place of a corporate officer or director, Allan Marter, Principal
of Waiata, would be available to provide financial advice on the business of
Minera as agreed. This would likely include, but would not necessarily be
limited to, oversight of the accounting function and reporting, joint venture
negotiations and documentation, business and financial planning, the review and
evaluation of investment opportunities, financing activities, dialogue with the
company's other advisors and the provision of financial advice to management.
Terms
The fee would be based on a retainer of $1,000 per month, which would entitle
Minera to up to two days advisory services from Allan Marter per month, payable
to Waiata in cash on acceptance of this agreement (the "Effective Dates") plus
monthly thereafter. Additional advisory services would be paid at the rate of
$62.50 per hour. Allan Marter would also be eligible for stock options in the
company.
Termination
The agreement may be terminated by Minera upon 30 days written notice. Subject
to a minimum three month engagement period from the Effective Date. On
termination Minera will be liable to pay all accrued and unpaid fees and
expenses.
-1-
<PAGE>
Expenses and Disbursements
Minera will reimburse all reasonable costs, charges and expenses, incurred by
Allan Marter or Waiata under this agreement. Reimbursement will be made against
presentation of invoice.
Other Services
It is agreed that Waiata or Allan Marter may provide Minera with professional
services not contemplated in Duties above, and in this event the parties shall
negotiate a fee in respect of such services in good faith, having regard to
customary practice in the market place.
Other Advisors
Minera will not engage any other advisors to provide the services contemplated
in this agreement but shall be free to engage such professional and technical
advisors as it may require.
Indemnity
Minera Will indemnify and hold Waiata and Allan Marter harmless from and against
all losses, costs, expenses and damages paid or suffered or incurred as a result
of or arising under this agreement, except as may be occasioned by gross
negligence, bad faith or willful default by Waiata or Allan Marter.
Information
Minera will provide such information, documents, data, advice, opinions and
representations as Waiata and Allan Marter may reasonably request relating to
the company and any services or transactions which are the subject of this
agreement (the "Information"). Waiata and Allan Marter shall keep all such
Information provided hereunder confidential and shall not, without the prior
consent of Minera, disclose any of the Information not already in the public
domain except as may be required by law or in connection with legal or
regulatory proceedings.
Minera shall ensure that Waiata or Allan Marter is advised on a timely basis of
any material change which may be reasonably considered relevant to this
agreement.
Minera represents and warrants that any information furnished to Waiata or Allan
Marter will not knowingly contain any untrue statement of a material fact, or
knowingly admit to state a material fact. Minera agrees that Allan Marter will
be present at, or fully informed of, all meetings. discussions and/or
negotiations in relation to this agreement.
-2-
<PAGE>
Binding Agreement
Upon execution and delivery by both parties, this letter shall become a binding
agreement between the two parties and shall be governed by and construed in
accordance with the laws of the State of Colorado.
Allen, I appreciate the opportunity to submit this proposal and look forward to
being able to assist Minera in its continued success.
Please confirm your agreement to this proposal by signature below.
WAIATA RESOURCES
/s/ ALLAN J. MARTER
- ---------------------------------
Allan J. Marter
Principal
Agreed and accepted by:
/s/ ALLAN V. AMBROSE
- ---------------------------------
MINERA ANDES INC.
Title: President
--------------------------
Date: 5/1/97
---------------------------
-3-
<TABLE>
<CAPTION>
Exhibit 11.1
Computation of Loss Per Share
Period from
Three Months Years Ended July 1, 1994
Ended --------------------------------------- Commencement)
March 31, December 31, December 31, through
1997 1996 1995 March 31, 1997
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Loss for the period $ 221,544 $ 1,248,676 $1,530,064 $3,000,284
=========== =========== ========== ==========
Shares used in computing loss
per share:
Weighted average shares
outstanding (Note 1) $14,982,550 $12,722,871 $7,772,569 $9,530,336
=========== =========== ========== ==========
Loss per share $ 0.01 $ 0.10 $ 0.20 $ 0.31
=========== =========== ========== ==========
Note 1: Due to the net losses incurred during each of the periods
presented, common share equivalents are anti-dilutive and have
been excluded from the computation.
</TABLE>
Exhibit 21.1
Subsidiaries of the Registrant
1. Minera Andes S.A., incorporated under the laws of Argentina and doing
business under the name of Minera Andes S.A.
2. NAD S.A., incorporated under the laws of Argentina and doing business under
the name of NAD S.A.
June 18, 1997 Our File No. 20427160
---------------------
Securities and Exchange Commission
Washington, D.C.
USA, 20549
Dear Sirs:
We consent to the inclusion in the registration statement on Form 10-SB of
Minera Andes Inc. of our reports on our examinations of the financial statements
of Minera Andes Inc. for the periods depicted in said registration statement. We
also consent to the reference to us under the caption "Part F/S" in said
registration statement.
Yours truly,
MacKay & Partners
Glenn Ohlhauser, C.A.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from: the interim
consolidated financial statements of Minera Andes Inc. for the three months
ended March 31, 1997, and the audited consolidated financial statements of
Minera Andes Inc. for the year ended December 31, 1996, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996
<CASH> 7,552,219 6,660,633
<SECURITIES> 0 0
<RECEIVABLES> 71,705 167,110
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,623,924 6,827,743
<PP&E> 4,091,545 3,504,238
<DEPRECIATION> 19,642 14,784
<TOTAL-ASSETS> 11,695,827 10,317,197
<CURRENT-LIABILITIES> 189,259 227,829
<BONDS> 0 0
0 0
0 0
<COMMON> 15,054,116 13,365,014
<OTHER-SE> (3,547,549) (3,275,646)
<TOTAL-LIABILITY-AND-EQUITY> 11,695,827 10,317,197
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 221,544 1,248,676
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (221,544) (1,248,676)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (221,544) (1,248,676)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (221,544) (1,248,676)
<EPS-PRIMARY> (0.01) (0.10)
<EPS-DILUTED> 0 0
</TABLE>
