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EXHIBIT 10.13
MINERAL PROPERTY OPTION AGREEMENT
THIS MINERAL PROPERTY OPTION AGREEMENT is made and dated for reference effective
(the "Effective Date") as of the day of July, 1998.
BETWEEN:
AZCO MINING INC., and on behalf of nominee or assignee, a corporation
registered in British Columbia and having its main business office at
Suite 1250 - 999 West Hastings Street, Vancouver, B.C. V6C 2W2
("AZCO")
OF THE FIRST PART
AND:
MINERA CORTEZ RESOURCES LTD., AND ON BEHALF OF ITS MEXICAN SUBSIDIARY,
incorporated under the laws of British Columbia and having its address
for notice hereunder at 5640 Marine Drive, West Vancouver, B.C., V7W
2R6
("CORTEZ")
OF THE SECOND PART
(AZCO and CORTEZ being hereinafter singularly also referred to as a
"Party" and collectively referred to as the "Parties" as the context so
requires.)
WHEREAS:
A. CORTEZ, through its Mexican subsidiary, is the owner of property (the
"Property") called the La Adelita property in the State of Sonora, Mexico and
currently optioned by CORTEZ, which Property is described in Schedule "A"
attached hereto; and
B. CORTEZ has agreed to provide AZCO with the herein option to earn
interests in the Property in accordance with this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
promises, covenants, conditions, representations and warranties herein
contained, THE PARTIES HERETO AGREE AS FOLLOWS:
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ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the
following words and phrases shall have the following meanings:
(a) "Agreement" means this Agreement as entered into between
AZCO and CORTEZ together with any Schedules attached
hereto, as amended from time to time;
(b) "arbitration" means arbitration under the laws of the
Province of British Columbia;
(c) "CORTEZ Interest" means that Property interest set forth
in section 2.2(a);
(d) "Environmental Hazard" means any and all naturally
occurring or man-made toxic materials, substances,
pollutants, contaminants or wastes;
(e) "Expenditures" or "Expenditure" means all cash, expenses,
obligations and liabilities, other than for personal
injury or property damage, of whatever kind or nature
spent or incurred directly or indirectly, including a ten
(10%) administrative allowance, in connection with
Property maintenance, mobilization and accommodation,
consulting and services, acquisition or rental of goods
and facilities, exploration and all matters pertaining
thereto, development and all matters pertaining thereto,
or equipping of the Property or any portion thereof for
Commercial Production including, without limiting the
generality of the foregoing, monies expended in
constructing, leasing or acquiring all facilities,
buildings, machinery and equipment in connection with
Mining Work, in paying any taxes, fees, charges, payments
or rentals (including payments in lieu of assessment work)
or otherwise to keep the Property or any portion thereof
in good standing (including any payment to or in respect
of acquiring any agreement or confirmation from any holder
of surface rights respecting the Property or any portion
thereof), in carrying out any survey of the Property or
any portion thereof, in doing geophysical, geochemical and
geological surveys, in drilling, assaying, metallurgical
testing, bulk sampling and pilot plan operations, in
paying the fees, wages, salaries, traveling expenses,
fringe benefits (whether or not required by law) of all
persons engaged in work with respect to and for the
benefit of the Property or any portion thereof, in paying
for the food, lodging and other reasonable needs of such
persons, in preparing any reports and in supervising and
managing any work done with respect to and for the benefit
of the Property or any portion thereof or in any other
respects necessary for the due carrying out of Exploration
and Development or Mining Work;
(f) "Exploration and Development" means, inter alia, all
direct and indirect preparation, analysis, sampling,
drilling, administration and filing work and Expenditures
conducted and incurred by AZCO or CORTEZ on the Property,
at their instruction, or on their behalf, or by assignment
to another party, for the purpose of determining the
existence of Product on the Property and the economic
viability of extracting the same;
(g) "Mining Work" means every kind of work done on or in
respect of the Property or the Products therefrom by or
under the direction of or on behalf of or for the benefit
of a
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Party and, without limiting the generality of the
foregoing, includes assessment work, geophysical,
geochemical and geological surveying, studies and mapping,
investigating, drilling, designing, examining, equipping,
improving, surveying, shaft sinking, raising, crosscutting
and drifting, digging, trucking, sampling, working and
procuring minerals, mineral products, ores, metals and
concentrates, surveying, reporting and all other work
usually considered to be prospecting, exploration,
development and mining work;
(h) "Management Committee" means the management committee
established pursuant to Article 12;
(i) "Operator" means AZCO or such other party as determined by
Article 9;
(j) "Option" means the Option hereunder granted to AZCO to
earn, directly or indirectly, up to 70% of CORTEZ's
Interest in and to the Property;
(k) "Party (party)" or "Parties (parties)" means AZCO and/or
CORTEZ and their respective successors and permitted
assigns as the context so requires;
(l) "Product" means all ores, gravel, sand, metals and
minerals including, without limitation, gold, silver,
copper, and any other mineral product, mined or extracted
from the Property or any portion thereof and any
concentrates produced therefrom;
(m) "Property" means the La Adelita property situate in the
State of Sonora, Mexico, and described in Schedule "A"
hereto; and
1.2 U.S. CURRENCY. In this Agreement, all dollar amounts are expressed in
lawful currency of the United States, unless specifically provided to
the contrary.
ARTICLE 2
REPRESENTATIONS, WARRANTIES, COVENANTS AND INDEMNITY
2.1 PARTIES' REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants and covenants to the other Party hereto that:
(a) it is a company duly incorporated, validly subsisting and
in good standing under the laws of the jurisdiction of its
incorporation and is or shall be, or its nominee or
affiliate or assignee shall be, qualified at the relevant
time to do business and to hold an interest in the
Property in the jurisdiction in which the Property is
located;
(b) it has full power and authority to carry on its business
and to enter into this Agreement and any agreement or
instrument referred to or contemplated by this Agreement
and to carry out and perform all of its obligations and
duties hereunder;
(c) it has duly obtained all authorizations for the execution,
delivery and performance of this Agreement, and such
execution, delivery and performance and the
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consummation of the transactions herein contemplated shall
not conflict with, or accelerate the performance required
by or result in any breach of any covenants or agreements,
or result in the creation of any encumbrance, lien or
charge in respect to the Property, or violate the
provisions of its constating documents or any indenture,
agreement or other instrument whatsoever to which it is a
party or by which it is bound or to which it may be
subject and shall not contravene any applicable laws; and
(d) it shall diligently and in good faith perform its
respective duties and obligations of this Agreement and in
the event of a Party conducting or supervising Exploration
and Development and Mining Work then it shall conduct or
supervise the same in a careful, diligent, efficient and
professional manner, file all eligible expenditures for
required assessment work with the appropriate authorities
and keep the Property in good standing.
2.2 CORTEZ'S REPRESENTATIONS AND WARRANTIES. CORTEZ represents and
warrants to AZCO that:
(a) through its Mexican subsidiary, it is the sole and
exclusive 100% owner (the "CORTEZ Interest") of an option
(the "Option Agreement"), which is attached as Schedule
"B" hereto, to acquire a 100% legal and beneficial
interest in and to the Property (subject only to the
reservations, conditions, and terms of the Option
Agreement set forth in Schedule "B"), the Property and the
CORTEZ Interest are in good standing under the laws of
Mexico and the relevant regulations and the Option
Agreement, there are no liens, encumbrances, royalties or
other impositions on the Property except as disclosed
herein, there are no other parties or party having any
claim thereto whatsoever (neither contingent or
un-contingent), and there are no claims, debts,
encumbrances, or any other liabilities of any nature which
will or may create an imposition on the Property, with the
sole exception of the Option Agreement and governmental
requirements pursuant to generally prevailing mining laws;
(b) the only obligation to the grantors of the Option
Agreement to earn the CORTEZ Interest (and upon earning of
the CORTEZ Interest no further obligations shall be
required except for governmental obligations of a general
nature) is the payment to the grantors of $10,000 on July
31, 1998 and cash payments each year thereafter for a
further four years increasing by $10,000 per year (i.e. -
$20,000 in 1999, $30,000 in 2000, $40,000 in 2001, and a
final $50,000 in 2002) (collectively the "Option
Payments") and the only other obligation thereto is a
finder's fee ("Finder's Fee") to Minera Cascabel S.A. de
C.V. in the amount of equal to ten (10%) percent of the
Option Payments and payable at the time of the Option
Payments;
(c) to the best of its knowledge and belief, all laws in
effect in Mexico with respect to the Property and the
Option Agreement have been complied with and such Property
has been duly and properly acquired and recorded in
accordance with such laws;
(d) to the best of its information and belief, after due
inquiry, there are no man-made mining or exploration
workings or excavations or any naturally occurring
conditions on the Property that are presently or in the
future shall or may become Environmental Hazards causing
CORTEZ or AZCO to become liable for the cost
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of restoration or reclamation work as set out under
existing legislation applicable in Mexico or as may be
ordered by any competent regulatory body or governmental
agency within Mexico;
(e) no proceedings are pending for, and CORTEZ is unaware of
any basis for the institution of any proceedings leading
to the dissolution or winding up of CORTEZ or the placing
of CORTEZ in bankruptcy or causing it to be subject to any
other laws governing the affairs of insolvent persons;
(f) it shall employ due diligence, best efforts, and good
faith in its performance of this Agreement;
(g) it shall provide to AZCO, in as expeditious a manner as
possible, all information which it has in its possession,
from time to time, or which comes into its possession
directly or indirectly related to the Option Agreement and
the Property and any of the activities of the Parties
thereto; and
(h) it shall remain sole owner of the CORTEZ Interest during
the course of this Agreement, except as otherwise
permitted by this Agreement and, while owner, it shall
take all necessary action during the life of this
Agreement to ensure that the CORTEZ interest and the
Property are maintained in good standing and it shall
advise AZCO immediately if at any time the CORTEZ Interest
or the Property, or any part, is in jeopardy and, further,
it shall grant to AZCO all such authorities as may be
necessary or advisable to perform all of its activities
contemplated by this Agreement or which it may require to
safe-guard the CORTEZ Interest and the Property.
The foregoing representations and warranties are for the benefit of
AZCO, are conditions on which AZCO has relied in entering into this
Agreement, are to be construed as both conditions and warranties and
shall, regardless of any investigation which may have been made by or
on behalf of AZCO as to the accuracy of such representations and
warranties, remain true, correct, and complete at all times for the
entire duration of this Agreement.
2.3 AZCO'S REPRESENTATIONS AND WARRANTIES. AZCO represents and warrants
to CORTEZ that:
(a) to the best of its knowledge, there are no actions, suits
or proceedings pending or threatened against or adversely
affecting, or which could adversely affect AZCO before or
by any federal, provincial, municipal or other government
court, department, commission, board, bureau or agency or
instrumentality, domestic or foreign, whether or not
insured, which would reasonably involve the possibility of
any judgment or liability against AZCO which would prevent
it from carrying out its obligations under this Agreement;
(b) no proceedings are pending for and AZCO is unaware of any
basis for the institution of any proceedings leading to
the dissolution or winding up of AZCO or the placing of
AZCO in bankruptcy or subject to any other laws governing
the affairs of insolvent persons;
(c) it shall employ due diligence, best efforts, and good
faith in its performance of this Agreement;
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(d) it shall provide to CORTEZ, in as expeditious a manner as
possible, all information which it has in its possession,
from time to time, or which comes into its possession
directly or indirectly related to the Property and any of
the activities of the Parties thereto;
(e) while operator it shall take all necessary action during
the life of this Agreement to ensure that the Property is
maintained in good standing;
(f) it shall save CORTEZ harmless in respect of all claims,
liabilities and expenses arising out of AZCO's activities
on the Property; and
(g) it shall do all work on the Property in good and
miner-like fashion and in accordance with all applicable
laws, regulations, orders and ordinances of any
governmental authority.
The foregoing representations and warranties are for the benefit of
CORTEZ, are conditions on which CORTEZ has relied in entering into
this Agreement, are to be construed as both conditions and warranties
and shall, regardless of any investigation which may have been made
by or on behalf of CORTEZ as to the accuracy of such representations
and warranties, remain true, correct, and complete at all times for
the entire duration of this Agreement.
2.4 INDEMNITY. The Parties hereto agree that any defaulting Party shall
be liable and shall indemnify and save harmless the non-defaulting
Party from any and all loss, costs, damages, actions and suits
arising out of or in connection with any breach of any
representation, warranty, covenant, agreement or condition made by it
and contained in this Agreement or ancillary thereto.
ARTICLE 3
GRANT AND MAINTENANCE OF OPTION
3.1 GRANT OF OPTION. CORTEZ hereby grants to AZCO the sole and exclusive
right and option (the "Option") to earn up to seventy (70%) percent
of the CORTEZ's Interest in and to the Property (and thereby a
seventy (70%) interest in the Property) in accordance with the terms
of this Agreement and subject to the Expenditures on the Property
referred to below.
3.2 EARNING OF INTEREST. AZCO may earn its interest (the "AZCO Interest")
in the Property by effecting the following:
(a) Payments during the Option as follows:
(i) immediately after execution hereof AZCO will subscribe
to $25,000 CDN of CORTEZ common stock at $0.25 CDN per
common share for a total of 100,000 CORTEZ common shares;
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(ii) AZCO will assume payment responsibility during the
Option for the Option Payments and Finder's Fee; and
(b) incurring, or arranging for the incurring of, Expenditures
during the Option in respect to the Property as follows:
(i) during the first year following the Effective Date of
this Agreement the sum of $75,000 (which shall include a
2500 foot drill program);
(ii) during the second year the sum of $150,000 (which
shall include a 5000 foot drilling program); and
(iii) during the third year the sum of $275,000;
whereupon, upon effecting such foregoing Expenditures and
making such foregoing payments of (a)(i) and (b) above and
by assuming the obligations of (a)(ii), AZCO shall
automatically be vested in a seventy (70%) percent
undivided interest in the CORTEZ Interest, unless within
60 days of the third anniversary of this Agreement AZCO
gives notice that it revokes the option to receive such
interest. AZCO may elect at any time to accelerate its
earning of the AZCO Interest by advancing Expenditures on
an accelerated basis.
ARTICLE 4
TERMINATION OF OPTION
4.1 TERMINATION OF OPTION. The Option shall, at the election of the party
not in default and subject to the provisions of Article 11, terminate upon the
following events:
(a) if AZCO fails to incur the required payments or
Expenditures in accordance with Article 3 above or
otherwise fails to remedy a material bona fide default; or
(b) if CORTEZ has failed to remedy a material bona fide
default.
4.2 OPTION ONLY. It is hereby agreed and acknowledged that this Agreement
is an option only and that during the term of the Option AZCO may
determine to cease and to withdraw from this Agreement upon thirty
(30) days' notice in writing to CORTEZ and upon termination of such
thirty (30) day notice period the Option shall be terminated and AZCO
shall have no further obligation to or in respect to CORTEZ, the
Option Agreement, or the Property. In the event AZCO shall have
earned the AZCO Interest and it determines to abandon its interest
and not enter into a joint venture (or other structure herein
contemplated) it shall quit-claim all interest to CORTEZ and it shall
leave the Property in good standing for a period of not less than
thirty (30) days, which shall also pertain where AZCO ceases this
Option without having earned an interest. AZCO shall also deliver to
CORTEZ all pertinent data, samples, cores, reports, and other matters
relating to its activities in respect to the Property. AZCO shall be
responsible for all remediation and reclamation work required in
respect to its activities on the Property to the effective date of
its withdrawal.
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ARTICLE 5
ACQUISITION UPON EXERCISE OF OPTION AND VESTING OF INTEREST
5.1 ACQUISITION OF INTEREST. At each such time as AZCO has incurred the
required Expenditures on the Property and made the required payments
in accordance with article 3 above, it shall be deemed to have
exercised its option with respect to acquiring the AZCO Interest
(unless revoked in the time set forth in section 3.2) and AZCO shall
have thereby, without any further act, acquired such interest, and
shall be therein vested, and CORTEZ shall transfer such interest on
the relevant public title records and with the relevant agencies or
the grantors of the Option Agreement upon AZCO's request.
5.2 JOINT VENTURE. Upon the acquisition by AZCO of the AZCO Interest, the
proportionate interests of CORTEZ and AZCO shall be governed by a
joint venture agreement or common joint venture company, whichever
counsel advises is most appropriate under Mexican law and practice
(both corporate and tax) and whose interests shall be proportionately
reflected in the agreement or entity. The parties shall form such
agreement or entity in accordance with British Columbia practice and
law, as necessarily modified for Mexican law, and such shall be
negotiated in good faith and, further, shall be negotiated at the
requirement of either party. If a joint venture agreement is
recommended by counsel, the basic form employed shall be that of the
Rocky Mountain Mineral Law Foundation Joint Venture Form 5. If a
joint venture company is recommended then the shareholder agreement
shall be that basic form commonly referenced in material of the CLE
of the law society of British Columbia. Whether corporate entity or
joint venture agreement, the following shall be encompassed in the
shareholder or joint venture agreement:
(a) required representation of each party (except where
diluted to a royalty interest only) on the board and
management committee with votes proportional to interest
ownership;
(b) all assets of and interests in the Property and activities
therein to be held by the entity, if possible, otherwise
by a mutually controlled entity or trust;
(c) financing obligations proportional to each parties
interest;
(d) dilution in the event of non-participation based upon a
deemed valuation of $100,000 per 1% interest, and a Party
converting to a 2% net smelter return interest if reduced
to an interest less than 10%;
(e) provisions for notice of, remedy for, and consequences of
failure to perform party obligations;
(f) a right of first refusal on any intended dispositions;
(g) standard terms and definitions shall be carried over from
this Agreement where the Parties cannot otherwise agree;
and
(h) unless otherwise agreed, the party with the largest
interest being operator but in the event of an equality
the operator shall be AZCO.
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ARTICLE 6
RIGHT OF FIRST REFUSAL, ASSIGNMENT, AND ABANDONMENT
6.1 PARTIES' RIGHT OF FIRST REFUSAL. Each party hereby grants unto the
other a right of first refusal to acquire the other's interest, or a
portion thereof, in the Property (direct or indirect) in the event of
any intended disposition of any interest from the date of execution
of this Agreement. In the event a party chooses to assign or
otherwise dispose of its interest, or a portion thereof, it shall
forthwith notify the other, in writing, of the terms and conditions
under which it is willing to sell its interest, which terms and
conditions shall be the same terms and conditions as those contained
in the intended offer to the third party. The receiving party shall
be entitled to elect, by written notice to the other within 60 days
from the date of receipt of the Notice, to acquire the interest on
the terms and conditions provided for in the notice. If the receiving
party does not exercise its right to acquire the offered interest,
the disposing party may, for a period of 120 days following the last
date upon which the other party could have made election, dispose of
its interest, but only on the same terms and conditions as set forth
in the notice. No disposition shall be effective until the transferee
has executed the prevailing agreements to which the Property is
subject, including this Agreement and any subsequent joint venture or
shareholder's agreement. Notwithstanding the forgoing, AZCO may
assign to a nominee or affiliate, without triggering a right of first
refusal, its rights herein or in the AZCO Interest for the purpose of
finance, for its organizational purposes, or for purpose of
compliance with Mexican law to hold a Property interest or for the
purpose of effecting a public floatation of its interests herein,
subject to AZCO maintaining a controlling interest (at least
initially for a going public process).
6.2 ABANDONMENT. In the event that any party hereto shall voluntarily
elect to abandon any part or all of the Property (this shall not
apply to abandonment required by law), or its interest therein, or
its interest in this Agreement, then it shall give not less than
thirty (30) days notice to the other party of such intent and of the
nature and encumbrances and obligations of such interest and, upon
the other party's election to receive such interest conveyed within
such period, shall assign and quit-claim such interest to such other
party for consideration of one ($1.00) dollar and the assumption of
all disclosed liabilities and obligations thereof. A party's rights
and obligations shall be calculated and accrued to the day the
abandonment becomes effective in accordance with the notice issued in
accordance with this clause.
6.3 PARTICIPATION OF MAJOR. Notwithstanding section 6.1 hereof, AZCO may
assign any portion of its interest to a major mining company at any
time.
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ARTICLE 7
REGISTRATION AND TRANSFER OF PROPERTY INTERESTS
7.1 REGISTRATION OF PROPERTY INTERESTS. The parties shall execute and
deliver such additional documentation as legal counsel for the
parties determines is necessary in order to duly register and record
in the appropriate registration and recording offices notice that
CORTEZ's Interest is subject to and bound by the terms of this
Agreement.
7.2 TRANSFER OF PROPERTY INTERESTS. Upon earning of the AZCO Interest
CORTEZ shall execute and deliver to AZCO such additional
documentation as legal counsel for AZCO determines is necessary in
order to duly register and record in the appropriate registration and
recording offices a transfer of title in and to the Property. AZCO
may, at its election and at any time, require that CORTEZ deposit in
escrow the appropriate title transfer documents as AZCO's counsel may
suggest.
ARTICLE 8
RIGHT OF ENTRY
8.1 RIGHT OF ENTRY. While this Option is in effect and when any part of
the Option is exercised or until the Option is terminated in
accordance with the terms of this Agreement without AZCO earning an
interest, AZCO, its servants and agents shall have the right to:
(a) enter in, under or upon the Property and conduct
Exploration and Development and Mining Work;
(b) exclusive and quiet possession of the Property;
(c) bring upon the Property and to erect thereon such
facilities as it may consider advisable; and
(d) remove from the Property ore or Product for the purpose of
bulk sampling, pilot plant or test operations.
ARTICLE 9
OPERATOR
9.1 OPERATOR. AZCO, or its duly authorized nominee, assignee, or
contractor, will act as the Operator of the Property, under the
authority of the Management Committee, during the currency of this
Agreement.
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9.2 POWER AND AUTHORITY. After execution of this Agreement the Operator
shall have full right, power and authority to do everything necessary
or desirable in connection with the Exploration and Development of
the Property and, without limiting the generality of the foregoing,
the right, power and authority to:
(a) regulate access to the Property subject only to the right
of the Parties to have access to the Property at all
reasonable times for the purpose of inspecting work being
done thereon but at their own risk and expense;
(b) employ and engage such employees, agents and independent
contractors as it may consider necessary or advisable to
carry out its duties and obligations hereunder and in this
connection to delegate any of its powers and rights to
perform its duties and obligations hereunder; and
(c) to engage Expenditures as the Operator may determine in
its sole discretion to conduct, provided it shall act
under the supervision and guidance of the Management
Committee, in accordance with development programs
approved from time-to-time, and in accordance with the
provisions of Clause 9.3 hereof.
9.3 DUTIES AND OBLIGATIONS. After execution of this Agreement, the
Operator shall have such duties and obligations as it may from time
to time determine, including, without limiting the generality of the
foregoing, the following duties and obligations:
(a) to manage, direct and control all exploration, development
and mining operations in and under the Property, in a
prudent and workmanlike manner, and in compliance with all
applicable laws, rules, orders and regulations;
(b) to prepare and deliver to the Parties annual work plans
and budgets and during periods of active field work to
provide monthly and quarterly progress reports of the work
in progress within 14 days of the end of the relevant
period;
(c) subject to the terms and conditions of this Agreement, to
keep the Property in good standing free of liens, charges
and encumbrances of every character arising from
operations, (except liens for taxes not yet due, other
inchoate liens and liens contested in good faith by the
Operator), and to proceed with all diligence to pay or
contest or discharge any lien that is filed;
(d) to maintain true and correct books, accounts and records
of operations;
(e) to permit the Parties, at their own expense, to inspect,
take abstracts from or audit any or all of the records and
accounts during normal business hours;
(f) to obtain and maintain, or cause any contractor engaged
hereunder to obtain and maintain, during any period in
which active work is carried out hereunder adequate
insurance;
(g) to regulate access to the Property, subject only to the
right of CORTEZ and its representatives to have access to
the Property, at all reasonable times for the purpose of
inspecting work being done thereon and to permit CORTEZ to
conduct such independent audits of the work as it may
reasonably require, at its own cost;
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(h) to arrange for and maintain worker's compensation or
equivalent coverage for all eligible employees engaged by
the Operator in accordance with local statutory
requirements;
(i) to perform its duties and obligations in a manner
consistent with good exploration and mining practices;
(j) to transact, undertake and perform all transactions,
contracts, employments, purchases, operations,
negotiations with third parties and any other matter or
thing undertaken by the Operator; and
(k) to diligently advise the parties of any material change in
the status or exploration results of the Property, to take
all necessary acts in respect to such changes, and to
assist the parties to produce timely coordinated public
announcements.
ARTICLE 10
MANAGEMENT COMMITTEE
10.1 THE MANAGEMENT COMMITTEE. The Management Committee shall consist of
four individuals, two each of whom shall be designated by each of
AZCO and CORTEZ. Either party may appoint new representatives at any
time and representatives may delegate proxies and alternates at any
time. The Management Committee shall be responsible for approving
plans and budgets for Exploration and Development and Mining Work and
Expenditures and for determining the general policies and direction
to be used in the conduct of operations hereunder. The Management
Committee shall meet at least once annually and otherwise on thirty
(30) days' notice given by a Party. All notices of Management
Committee meetings must specify, or include an agenda which
specifies, the matters to be discussed at such meetings. A Party's
representatives may in any manner and at any time waive a notice of a
meeting of the Management Committee and attendance of a Party's
representative at a meeting of the Management Committee is a waiver
of notice of the meeting, except where a Party's representative
attends a meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not
properly called. Decisions of the Management Committee shall be made
by majority vote at a duly called and constituted meeting of the
Management Committee. Each Party shall be entitled to two votes on
the committee during the Option period. In the event of any
deadlocked vote at a meeting of the Management Committee, AZCO,
during the Option (as the provider of finance) and otherwise while
Operator, shall have the casting vote. It is the intention of the
Parties that decisions of the Management Committee shall be made in
accordance with sound business and commercial judgment.
10.2 QUORUM. A quorum for a Management Committee meeting shall be present
and such meeting shall be duly constituted when proper notice has
been given or waived and 51% of the available votes are represented
and a voting representative of each Party is present in person or by
proxy at such meeting. In the event a quorum is not present at such
meeting, the Operator may immediately give notice of a second meeting
to be held within 10 days thereafter, at which meeting a quorum shall
be deemed to be present and such meeting shall be duly constituted if
50% of the available votes are represented regardless of whether
voting representatives of each Party are present. All decisions taken
by the Management Committee shall be binding upon the Parties (except
for matters requiring
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unanimity) and any decision which may be made at a meeting of the
Management Committee may also be made by an agreement or resolution
in writing signed by all of the Parties' representatives who would be
entitled to vote on that decision at a meeting of the Management
Committee. The Operator shall keep minutes of the Management
Committee meetings which, when delivered to the representatives of
all Parties, shall constitute evidence of proceedings taken and
decisions made at such meeting. All meetings of the Management
Committee, unless otherwise agreed to by the Parties, shall be held
at the location selected by the Operator. If all of the
representatives of the Parties entitled to vote at an Management
Committee meeting consent, a meeting of the Management Committee may
be held by means of such telephone, electronic or other
communications facilities as permit all persons participating in the
meeting to communicate with each other simultaneously and
instantaneously, and a Party's representative participating in such
meeting by such means is deemed for the purpose of this Agreement to
be present at that meeting. Any consent by a Party's representative
to such meetings shall be effective whether given before or after the
meeting to which it relates and may be given with respect to all
meetings of the Management Committee.
10.3 CONTINUANCE OF MANAGEMENT COMMITTEE AND AGREEMENT. Upon AZCO having
earned an interest and this Agreement requiring that the successor
agreement be engaged, this Agreement and the Management Committee and
the Operator shall continue until replaced or continued pursuant to
the successor structure agreement (whether joint venture or corporate
entity). This Agreement shall continue to govern and the Management
Committee and the Operator shall govern the Property in the same
manner as in the preceding sections until replaced by subsequent
agreement. If a party fails to contribute to costs during such an
interregnum, the other party may elect to pay the cost and the
non-paying party shall, at the election of the paying party, be
diluted at the rate of section 5.2(d). Notwithstanding the forgoing,
a Party may instead determine to carry another Party's costs as a
demand loan at an interest rate of 12% per annum calculated and
compounded monthly, not in arrears, and such Party carrying the costs
may elect to seek recovery or to dilute at any time.
ARTICLE 11
DEFAULT AND TERMINATION
11.1 DEFAULT. The Parties hereto agree that if a party is in default with
respect to any of the provisions of this Agreement, the
non-defaulting party shall give written notice to the defaulting
party, and specifying the nature of the default, and within thirty
(30) days (or such shorter period if required by imperatives of law)
after its receipt of such notice, the defaulting party shall either:
(a) cure such default, or commence proceedings to cure such
default and prosecute the same to completion without undue
delay; or
(b) give the non-defaulting party notice that it denies that
such default has occurred and that it is submitting the
question to arbitration under the provisions of this
Agreement, whereupon a party shall not be considered in
default until an arbitration so rules.
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11.2 FAILURE TO CURE DEFAULT. If:
(a) a default is not cured or the defaulting party does not
commence and diligently proceed to cure the default within
the required period; or
(b) arbitration is not sought; or
(c) the defaulting party is found in arbitration proceedings
to be in default, and fails to cure it or commence curing
it, and proceed without delay within thirty (30) days
after the rendering of the arbitration award,
then the non-defaulting party may, by written notice given while the
default continues, terminate this Agreement and seek such specific
performance and damages as it may determine. The defaulting party
shall comply with the provisions of section 4.2, mutatis mutandis, in
respect to any declaration by the non-defaulting party resulting in
withdrawal of a party from the Property.
ARTICLE 12
POWER TO CHARGE PROPERTY
12.1 POWER TO CHARGE. Except as otherwise provided in this Agreement,
neither Party may charge, encumber, mortgage, lien or otherwise
burden the Property or a Party's interest in the same, during the
currency of this Agreement, except with the consent of the Management
Committee for Property finance purposes, which consent shall not be
unreasonably with-held. The Management Committee may determine to
charge or burden the Property for finance purposes and the Parties
shall effect all such consents and documents as may be required for
such purposes.
ARTICLE 13
PARTITION AND TENANCY
13.1 PARTITION. No Party owning a partitionable interest in a Property,
shall, during the term of this Agreement, exercise any right to apply
for any partition of the Property or for sale thereof in lieu of
partition.
13.2 TENANCY. Subject to Mexican law, any interests of AZCO and CORTEZ in
and to the Property shall be held as tenants in common and not as
joint tenants.
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ARTICLE 14
FORCE MAJEURE
14.1 EVENTS. If either Party hereto is at any time during this Agreement
prevented or delayed in complying with any provisions of this
Agreement by reason of strikes, walk-outs, labour shortages, power
shortages, fires, wars, acts of God, earthquakes, storms, floods,
explosions, accidents, protests or demonstrations by environmental
lobbyists or local rights groups, delays in transportation, breakdown
of machinery, unusual disruptions in financial markets, inability to
obtain necessary materials in the open market, unavailability of
equipment, governmental regulations restricting normal operations,
shipping delays or any other reason or reasons beyond the control of
that Party, then the time limited for the performance by that Party
of its respective obligations hereunder shall be extended by a period
of time equal in length to the period of each such prevention or
delay.
14.2 NOTICE. A Party shall within seven (7) calendar days give notice to
the other Party of each event of force majeure hereinabove, and upon
cessation of such event shall furnish the other Party with notice of
that event together with particulars of the estimated number of days
by which the obligations of that Party hereunder have been extended
by virtue of such event of force majeure and all preceding events of
force majeure.
ARTICLE 15
CONFIDENTIAL INFORMATION
15.1 CONFIDENTIAL INFORMATION. The Parties shall keep all information
regarding the Property and Mining Work confidential, except for such
disclosure as may be required by law, securities regulatory bodies,
or stock exchanges governing one or more of the Parties.
ARTICLE 16
ARBITRATION
16.1 MATTERS FOR ARBITRATION. The Parties agree that all questions or
matters in dispute with respect to this Agreement shall be submitted
to arbitration pursuant to the terms hereof.
16.2 NOTICE. It shall be a condition precedent to the right of any Party
to submit any matter to arbitration pursuant to the provisions
hereof, that any Party intending to refer any matter to arbitration
shall have given not less than thirty (30) calendar days' prior
written notice of its intention to do so to the other Party together
with particulars of the matter in dispute. On the expiration of such
thirty (30) days, the Party who gave such notice may proceed to refer
the dispute to arbitration as provided in section 16.3 below.
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16.3 APPOINTMENTS. The Party desiring arbitration shall appoint one (1)
arbitrator, and shall notify the other Party of such appointment, and
the other Party shall, within thirty (30) calendar days after
receiving such notice, appoint an arbitrator, and the two arbitrators
so named, before proceeding to act, shall, within thirty (30)
calendar days of the appointment of the last appointed arbitrator,
unanimously agree on the appointment of a third arbitrator, to act
with them and be chairman of the arbitration herein provided for. If
the other Party shall fail to appoint an arbitrator within thirty
(30) calendar days after receiving notice of the appointment of the
first arbitrator then the single arbitrator shall act, and if the two
(2) arbitrators appointed by the Parties shall be unable to agree on
the appointment of the chairman, the chairman shall be appointed
under the provisions and Rules of the Arbitration Act of British
Columbia. Except as specifically otherwise provided in this section,
the arbitration herein provided for shall be conducted in accordance
with such provisions and Rules. The arbitrators, or in the case where
only one arbitrator is appointed, the single arbitrator, shall fix a
time and place in accordance with the Rules, for the purpose of
hearing the evidence and representations of the Parties, and they
shall preside over the arbitration and determine all questions of
procedure not provided for under such Rules or this section. After
hearing any evidence and representations that the Parties may submit,
the single arbitrator, or the arbitrators, as the case may be, shall
make an award and reduce the same to writing, and deliver one copy
thereof to each of the Parties. The expense of the arbitration shall
be paid as specified in the award.
16.4 AWARD. The Parties agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of such
arbitrator, shall be final, binding, and enforceable upon each of
them.
ARTICLE 17
NOTICE
17.1 NOTICE. Each notice, demand or other communication required or
permitted to be given under this Agreement shall be in writing and
shall be delivered or sent by facsimile to a Party at the address for
such Party or Parties specified above. The date of receipt of such
notice, demand or other communication shall be the date of delivery.
Copies of any notice to AZCO are to be delivered to Devlin Jensen,
Barristers & Solicitors, 2550 - 555 West Hastings Street, Vancouver,
British Columbia V6B 4N5.
17.2 CHANGE OF ADDRESS. Any Party may at any time, and from time to time,
notify the other Party in writing of a change of address and the new
address to which notice shall be given to it thereafter until further
change.
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ARTICLE 18
GENERAL PROVISIONS
18.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties hereto and supersedes every previous agreement,
communication, expectation, negotiation, representation or
understanding, whether oral or written, express or implied, statutory
or otherwise, between the Parties with respect to the subject matter
of this Agreement.
18.2 ENUREMENT. This Agreement shall enure to the benefit of and shall be
binding upon the Parties, their respective heirs, executors,
administrators and assigns.
18.3 SCHEDULES. The Schedules to this Agreement are hereby incorporated by
reference into this Agreement in their entirety.
18.4 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
18.5 FURTHER ASSURANCES. Each of the Parties covenants and agrees, from
time to time and at all times, to do all such further acts and
execute and deliver all such further deeds, documents and assurances
as may be reasonably required in order to fully perform and carry out
the terms and intent of this Agreement.
18.6 APPLICABLE LAW. For all purposes this Agreement shall be governed
exclusively by and construed and enforced in accordance with the laws
prevailing in British Columbia, however, the Parties hereto expressly
acknowledge and agree to forthwith execute any and all documentation
which may be necessary in order to ensure the valid registration
thereof as against the Property and its effectiveness under the laws
prevailing in Mexico. Interpretation hereof shall be subordinate to
Mexico mining and property law only to the extent necessary to make
this Agreement, or the rights flowing from this Agreement,
enforceable as against the Property. This Agreement is made and shall
be enforced in British Columbia but the parties shall effect such
subsidiary agreements and Mexican agreements or joint corporations as
may be required to effect this Agreement's purposes, as may be
recommended by Mexican counsel and as may be required for business
and legal necessities, including registration and tax efficiencies.
18.7 MEXICAN CONTRACT AND REGISTRATION. The Parties, at the requirement of
a Party, shall effect a contract for Mexican registration and legal
requirements in order to register and make enforceable in Mexico the
terms of this Agreement. The form of Agreement shall be that
recommended by AZCO's Mexican counsel but failing agreement by the
Parties, at AZCO's sole election, AZCO may translate and file this
Agreement and CORTEZ shall give all assistance (including original
signatures of such translation) or the Parties shall incorporate a
Mexican company to hold the Option Agreement, CORTEZ shall assign the
Option Agreement to such Mexican company, and the AZCO Option shall
be to earn up to 70% of such Mexican company wherein this Option
shall be treated as a shareholder's agreement to govern the relations
and affairs of the Parties.
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18.8 INVALID PROVISIONS. If any provision of this Agreement is at any time
unenforceable or invalid for any reason it shall be severable from
the remainder of this Agreement and, in its application at that time,
this Agreement shall be construed as though such provision was not
contained herein and the remainder shall continue in full force and
effect and be construed as if this Agreement had been executed
without the invalid or unenforceable provision.
18.9 COUNTERPARTS. This Agreement may be signed by the Parties hereto in
as many counterparts as may be necessary, each of which so signed
shall be deemed to be an original, and such counterparts together
shall constitute one and the same instrument and notwithstanding the
date of execution shall be deemed to bear the execution date as set
forth on the front page of this Agreement.
18.10 NO PARTNERSHIP OR AGENCY. The Parties have not created a partnership
and nothing contained in this Agreement shall in any manner
whatsoever constitute any Party the partner, agent or legal
representative of any other Party, nor create any fiduciary
relationship between them for any purpose whatsoever. No Party shall
have any authority to act for, or to assume any obligations or
responsibility on behalf of, any other party except as may be, from
time to time, agreed upon in writing between the Parties or as
otherwise expressly provided.
18.11 CONSENTS AND WAIVERS. No consent or waiver expressed or implied by
either Party in respect of any breach or default by the other in the
performance by such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a
consent or waiver pursuant to this section;
(b) be relied upon as a consent to or waiver of any other
breach or default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or
waiver pursuant to this section in any other or subsequent
instance.
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IN WITNESS WHEREOF the Parties hereto have hereunto set their respective hands
and seals in the presence of their duly authorized signatories effective the
date first herein set forth.
The CORPORATE SEAL of )
AZCO MINING INC. )
was hereunto affixed in the presence of: )
)
____________________________________________) (C/S)
Authorized Signatory )
The CORPORATE SEAL of )
MINERA CORTEZ RESOURCES LTD. )
was hereunto affixed in the )
presence of: )
)
____________________________________________) (C/S)
Authorized Signatory )