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EXHIBIT 10.12
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT is made and dated for reference
effective as of the 19th day of December, 1996.
BETWEEN:
P.T. PURI PERMATA MEGAH, an Indonesian company, with its business
address and address for notice and service located at Jalan:
Wolter Mongin Sidi No. 11, Jakarta, Indonesia
("Puri");
OF THE FIRST PART
AND
P.T. NARIMA PASIR LAUT, an Indonesian company, with its business
address and address for notice and service located at Jalan:
Wolter Mongin Sidi No. 11, Jakarta, Indonesia
("Narima");
OF THE SECOND PART
AND:
AZCO MINING INC, a British Columbia company, with its business
address and address for notice and service located at 999 West
Hastings Street, Vancouver, B.C., V6C 2W2
("AZCO");
OF THE THIRD PART
(Puri and Narima being hereafter collectively referred to as the
"Assignors" and the Assignors and AZCO being hereinafter
singularly also referred to as a "Party" and collectively as the
"Parties" as the context so requires).
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WHEREAS:
A. The Assignors own all beneficial and legal rights to explore
and develop certain property (collectively, the "Property") which is located in
Indonesia, which is registered with the Mining Ministry of Indonesia under the
name of Puri and Narima and which Property is more particularly described in
Schedule "A" which is attached hereto and which forms a material part hereof
(the Property of Puri is referred to as "Pongkor South" and the Property of
Narima is referred to as "Pongkor West"); and
B. In consideration of assigning the stated interests in the
Property to AZCO, AZCO has promised certain considerations and terms which are
embodied and reflected in this agreement (the "Agreement");
NOW THEREFORE THIS AGREEMENT WITNESSES THAT the Parties
hereunto do agree as follows:
1. TRANSFER OF PROPERTY. The Assignors hereby transfer
absolutely unto AZCO a ninety percent (90%) undivided interest in the Property,
which they warrant are hereby assigned to AZCO free and clear of all
encumbrances and with full and unrestricted right of exploration and
development by AZCO, or its qualified subsidiary, in accordance with the laws
of Indonesia. The remaining ten (10%) percent interest in the Property the
Assignors warrant is owned by and is under the control and administration of
the Assignors, as to five (5%) percentage points each of the residual ten (10%)
percentage points, and such Assignors warrant they have the full right to
contract the same as hereafter provided in this Agreement. The Assignors shall
cause AZCO, or its qualified subsidiary, to be the registered owner of the
Property, where lawfully possible, as soon as reasonably possible following
execution of this Agreement (whereupon AZCO shall hold the Assignors' aggregate
10% interest in trust for them) and, where registration is not possible to
AZCO, the Assignors shall hold the same in trust as to ninety percent (90%) for
the benefit of AZCO. AZCO shall have the right, at any time, to require that
the Property be transferred to an appropriate eligible subsidiary of AZCO.
Regardless of registration, AZCO shall at all times be the operator of the
Property with full liberty, at its sole discretion, to effect and conduct all
such programs thereon as it shall desire and the Assignors warrant to provide
AZCO with full and unimpeded access to the Property and full and unimpeded
freedom of conduct of operations thereon, limited only by applicable Indonesia
law.
2. CONSIDERATION FOR PROPERTY INTERESTS. AZCO shall pay the
following as consideration for the within transfer of Property interests and
rights:
$300,000 US to the Assignors of which the Assignors acknowledge having
received payment of $150,000 US and the remainder of which the
Assignors shall receive by the Assignors making application
for refund of surety monies deposited with the Indonesian
Mines Ministry for a property on the island of
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Java (which the Assignors or their associates had previously
assigned to AZCO) and from which the Assignors, upon receipt of
such surety money, may deduct $150,000 US and shall remit the
remainder to AZCO. AZCO shall provide all such reasonable
assistance as the Assignors may require for such refund of
surety monies; and
common shares of AZCO valued at $50,000 US (as to $25,000 US per
Property), as valued on the business day following a press
release announcing this Agreement (or if no press release then
on the business day following execution of this Agreement), and
issued within 10 business days of regulatory approval to the
terms and conditions of this Agreement by all regulatory bodies
and agencies having jurisdiction over the affairs of AZCO.
3. FEASIBILITY STUDY. AZCO shall provide for all financial
requirements of the Property to the completion of a feasibility study (the
"Feasibility Study"), in accordance with such programs and in a form as
determined solely by AZCO, including, without derogation from the generality of
the foregoing, the following:
(a) the cost of all payments required by law in respect to the
Property, including all deposits with the Ministry of Mines for
Indonesia for Contracts of Work ("COWs") (which shall be the
property of AZCO if refunded), all taxes, excises, registration
fees and any other cost relating to title, the securing of the
same, and the defending and maintenance of the same;
(b) all costs of exploration and development of the Property prior
to completion of a Feasibility Study;
(c) all costs of consultants, counsel, independent contractors and
staff;
(d) all improvements to the Property and all costs of maintenance of
the same; and
(e) all costs of reports regarding exploration of the Property to
the date of production of a Feasibility Study.
4. ASSIGNORS ELECTION FOR PARTICIPATING INTEREST OR NSR. Upon
production of a Feasibility Study and delivery thereof by AZCO, the Assignors
shall have a period of sixty (60) days to determine whether they wish to have
each of their then five percent (5%) beneficial interest in the Property to be
a participating interest or whether either wishes to convert the same into a
one percent (1%) net smelter return interest ("NSR") (if both elect then for an
aggregate 2% NSR) (such NSR defined herein as calculated on gross sales value
of Property product less transport costs, third party costs excluding on-site
mining and concentrating costs, smelting cost, cost of sales, and sales and
commodity taxes and excises). If an Assignor fails to elect then it shall be
deemed to have elected to hold an NSR. In the event that both or either of the
Assignors proceeds as a participating interest, then the relevant Parties shall
enter into a joint venture agreement providing for, but not being limited
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to, the following (if the parties shall fail to enter into a joint
venture agreement then this Agreement including the following shall
govern):
(a) a management committee to supervise and instruct the operator,
for which each Assignor may appoint one representative and AZCO
three representatives, and votes on the committee shall be in
accordance with participating interests;
(b) AZCO, or its appointee, shall be the operator of the Property
and shall have full and plenary authority to conduct operations
on the Property on behalf of the participants unless a duly
constituted management committee otherwise directs;
(c) an assignment to a major mining corporation, bank financing for
Property development and other such matters affecting the
Property generally shall be imposed on the interests of all
participating Parties, pari passu as applicable and AZCO shall
be the agent of and has full power of attorney to negotiate and
conclude such agreements on behalf of the Parties;
(d) the Parties shall be required to elect to contribute funds, pari
passu with their participating interests as they may be from
time-to-time, in accordance with programs established by the
management committee, or in the absence of the same, the
operator. In the event that a Party elects not to contribute
then dilution shall be applicable to the Party electing not to
contribute, based upon a reduction (and concomitant transfer to
the contributing Parties pro-rata in accordance with their
interests) of one-tenth of an interest point (0.1%) for each
$100,000 US not contributed. The commencement of the joint
venture shall be deemed to have commenced 61 days after delivery
of the Feasibility Study to the Assignors. In the event a Party
elects not to contribute then the contributing Party may cause
the management committee to reduce the program, but if the
program is reduced by more than twenty percent (20%) then the
non-contributing Party shall have another opportunity to elect
to contribute. In the event a Party elects to contribute but
fails to contribute, then the other Party shall have an election
to make the contribution and may choose to either dilute the
non-contributing Party at one hundred and fifty percent (150%)
of the usual rate or treat the advance as a demand loan bearing
interest at prime (Royal Bank of Canada ) plus five percent (5%)
compounded quarterly;
(e) there shall be a 60 day right of first refusal for any intended
sale of interest to arms'-length parties;
(f) there shall be a form of required purchase/sale ("Shot-gun
Clause")of a parties' interests at another party's election in
the event of dispute; and
(g) any dispute not eliminated by employing the Shot-gun Clause
shall be settled
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by, firstly, a thirty (30) day good faith negotiating period,
and secondly, by arbitration in accordance with the provisions
of the British Columbia Arbitration Act and held in Vancouver,
British Columbia. Any such arbitration decision shall be final
and binding upon the parties and may be entered in to any
relevant court registry in Indonesia for recognition and
enforcement without further requirement for proof or argument
and in accordance with international arbitration award
recognition provisions of the laws of Indonesia.
In the event that the Parties cannot agree upon and execute a joint venture
agreement then AZCO shall have the right and option at any time to require that
the Assignors' residual interests shall be converted to the NSR interests above
described and the Assignors shall, upon such AZCO election, be absolutely deemed
to have surrendered their residual participating interests and to maintain only
the said NSR and AZCO shall be vested with a 100% exclusive working and
participating interest in the Property subject only to the NSR as provided for
in this Agreement and such NSR shall be subject to the terms as set forth above
and in section 5.
5. OPTION TO PURCHASE THE NSR UPON ELECTION. In the event that
the relevant Assignors shall elect (or be compelled or deemed to elect in
accordance with section 4 above) to convert their participating interests to
the NSR then AZCO shall have the right and option to purchase such NSR, at any
time during its existence, for a price of U.S. $1,500,000 for each of the two
1% NSR's payable in either cash or in common shares of AZCO. However, if mine
production is annually at 50,000 ounces of gold equivalent, or less, then each
1% NSR shall be capped at a total production payout of U.S. $1,500,000 (or AZCO
may directly purchase at such price less all royalties paid to the date of
pay-out). In the event that the Property contains in excess of 1,000,000 gold
ounces equivalent at the time of the Feasibility Study report and the
Feasibility Study recommends production at an internal rate of return
acceptable to AZCO, then the relevant Assignors may require that AZCO's
election to purchase the NSR's be exercised in common shares of AZCO only. The
Parties agree to make or permit all such filings with the Indonesian
authorities as are required to record such NSR's or to acquire approval of the
same and the Assignors hereby delegate and grant their power of attorney to
AZCO to effect all such filings and to register such transfers and seek any
necessary government approvals. In the event that Indonesian law or practice
does not recognize the concept of an NSR then the NSR shall be recorded as the
transfer of a carried participating interest (but non-participating in
management) with such terms as shall create an equivalent economic effect to
the NSR and such shall be subject to the aforesaid AZCO purchase option.
6. PERFORMANCE AND PROPER LAW. Each Party warrants to employ
good faith and best efforts in the performance of this Agreement and warrants
and agrees that it shall not, whether directly or indirectly, seek to undermine
this Agreement, seek to disavow this Agreement or otherwise to diminish the
rights and obligations flowing herefrom. This Agreement shall be governed by
the laws of the Province of British Columbia, and any dispute in respect to
this Agreement shall be arbitrated in Vancouver, British Columbia, in
accordance with the provisions of the British Columbia Arbitration Act and in
accordance with the procedures of the Vancouver International Arbitration
Center and shall be enforceable in Indonesia as a judgment and not appealable.
An arbitration award may be entered by a Party in any court of competent
jurisdiction in Indonesia for recognition and enforcement pursuant to laws of
Indonesia governing and permitting the recognition and enforcement of
international arbitration awards and such shall be entered and enforceable
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without any further requirement for proof or argument as to the Parties claims,
or merits, or proof of jurisdiction. No Party shall be entitled to commence or
maintain any action in a court of law in relation to any dispute of this
Agreement except to enforce an award of such arbitration. In order to confirm
the final and binding nature of the arbitral award, the Parties expressly waive
the Indonesian law contained in section 641 of the Reglement de Rechtsvordering
and any rights they may have under Article V(i) and Article VI of the 1958 New
York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
7. CONFIDENTIALITY. This Agreement shall be confidential to the
Parties, except to the extent required for registration of interests and as may
be required by governmental or regulatory authorities to which either of the
Parties hereto are subject.
8. FURTHER AGREEMENT AND ASSURANCES. At the request of either
Party this Agreement may be rendered into a more detailed agreement, including
the creation of a detailed joint venture agreement. Prior to any such
successor agreement, this Agreement shall be binding and enforceable on the
Parties hereto. This Agreement, and any subsequent agreement thereto, shall,
if required by law, be translated into a form acceptable pursuant to the laws
of Indonesia and shall be executed and appropriately certified and recorded in
accordance with the requirements of law in Indonesia to be fully and
effectually enforceable and, as applicable, registerable in accordance with the
law of Indonesia. No Party hereto shall refuse to effect such matters as are
required to render this Agreement fully enforceable in accordance with its
provisions and intent and shall effect all reasonable means to render this
Agreement fully enforceable. No Party may plead defect of form or filing or
certification or recording under Indonesian law as grounds to render or plead
this Agreement as unenforceable or void. In the event of any conflict between
this Agreement and any Indonesian form of this Agreement, this English version
shall prevail.
9. RIGHT OF FIRST REFUSAL. If at any time during the term of
this Agreement either Party shall determine to option, sell or otherwise
dispose of or alienate any interest it may have in and to the Property or this
Agreement, it shall first grant the other Party hereto the right to purchase
such interest on the same terms intended to be so offered or sold. The Party
receiving notice of an intention to offer an interest shall be given all
material details as to the terms of the offer and shall have a period of no
less than sixty (60) days to determine whether it wishes to exercise its within
right of first refusal. It is hereby acknowledged and agreed that a Property
finance decision by AZCO, or by it to joint venture the Property, or to assign
an interest in the Property to a major mining company, or to mortgage the
Property to a major mining company or a financial institution for the purpose
of developing the Property, shall not be considered an assignment or offer
giving rise to the within right of first refusal. Any assignment or mortgaging
or other disposition of the Property for finance and Property development
purposes by AZCO shall be contributed to by the Parties pro-rata in accordance
with their participating interests and AZCO shall be the agent and power of
attorney for all Parties hereto for such purposes and may execute any agreement
in relation thereto and for such purposes on behalf of all Parties.
10. FINANCE ASSIGNMENT OBLIGATIONS. The Parties hereto agree to
make their respective interests in and to the Property or this Agreement
available for assignment or joint venture or mortgaging to major mining
corporations, or for mortgaging to financial institutions, for the purpose of
Property development, and such assignment or assignments shall be made pari
passu with the interests of the Parties hereto and with the grant of power
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of attorney to AZCO of section 9 above..
11. ENUREMENT. This Agreement shall enure to the benefit of and
bind the Parties hereto and their respective heirs, successors, administrators
and permitted assigns.
12. COUNTERPART. This Agreement shall be effective and
enforceable by facsimile signature and transmission and may be executed in
counterparts, and such counterparts shall constitute a single, enforceable
agreement. Where required, the Indonesian form of this Agreement shall be
witnessed appropriately in accordance with the laws of Indonesia and no Party
hereto shall deny its signature or execution hereof or thereof, but in the
event of any such allegation, the burden of proof shall be on the Party denying
its signature.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement to date 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.
14. REPRESENTATION AND COSTS. It is hereby acknowledged by each
of the Parties hereto that, as between the Parties hereto, Devlin Jensen acts
solely for AZCO, and that the Assignors have been advised by each of AZCO and
Devlin Jensen to obtain independent legal advice with respect to its review and
execution of this Agreement. In addition, it is hereby further acknowledged
and agreed by the Parties hereto that each Party to this Agreement will bear
and pay its own costs, legal and otherwise, in connection with its respective
preparation, review and execution of this Agreement and, in particular, that
the costs involved in the preparation of this Agreement, and all documentation
necessarily incidental thereto, by Devlin Jensen shall be at the cost of AZCO.
15. SEVERABILITY AND CONSTRUCTION. Each section, clause
paragraph, term and provision of this Agreement, and any portion thereof, shall
be considered severable, and if, for any reason, any portion of this Agreement
is determined to be invalid, contrary to or in conflict with any applicable
present or future law, rule or regulation in a final unappealable ruling issued
by any court, agency or tribunal with valid jurisdiction in a proceeding to any
of the Parties hereto is a party, that ruling shall not impair the operation
of, or have any other effect upon, such other portions of this Agreement as may
remain otherwise intelligible (all of which shall remain binding on the Parties
and continue to be given full force and agreement as of the date upon which the
ruling becomes final).
16. CAPTIONS. The captions and clause and paragraph numbers and
letters appearing in this Agreement are inserted for convenience of reference
only and shall in no way define, limit, construe or describe the scope or
intent of this Agreement nor in any way affect this Agreement.
17. 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
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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. 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.
IN WITNESS WHEREOF the Parties have hereunto set their
respective hands and seals by their authorized signatories effective the date
first herein set forth.
P.T. PURI PERMATA MEGAH WITNESSED BY:
Per:
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Authorized Signatory Signature
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Name (Please Print)
P.T. NARIMA PASIR LAUT WITNESSED BY:
Per:
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Authorized Signatory Signature
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Name (Please Print)
AZCO MINING INC. WITNESSED BY:
Per:
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Authorized Signatory Signature
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Name (Please Print)
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