EXHIBIT 4.3
MINERAL PROPERTY OPTION AGREEMENT DATED JANUARY 8, 2006
MINERAL PROPERTY OPTION AGREEMENT
THIS OPTION AGREEMENT dated for reference as of the 8th day of January, 2006
BETWEEN:
ALB HOLDINGS LTD., a company duly incorporated pursuant
to the laws of the Province of British Columbia and having
a business office situated at 1305 - 0000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, Fax 000-000-0000
("ALB")
OF THE FIRST PART
AND:
ROCHESTER RESOURCES LTD., a company duly incorporated
pursuant to the laws of the Province of British Columbia
and having a business office situated at 000 - 000 Xxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, Fax 000-000-0000
(the "Optionee")
OF THE SECOND PART
AND:
XXXXXXX XXXXX XXXXXX, an individual residing at Xxxxxxxxxx 00,
Xxx Xxxxxx, in the city of Xxxxx, Xxxxxx 00000 Fax
00-000-000-0000
("Xxxxxx")
OF THE THIRD PART
WHEREAS:
(A) ALB owns fifty (50%) percent of Dessarrollos Mineras de Occidente S.A.
de CV (herein called "DMO")
(B) Compania Minera Huajicari SA de CV owns the remaining 50% interest in
DMO and has agreed to the cancellation of its share interest upon payment of the
sum of One Million Eight Hundred Thousand (US$1,800,000) dollars at the rate of
$75,000 per month commencing July 1, 2006;
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(C) Xxxxxx owns one hundred (100%) percent of Mina Real Mexico S.A. de CV
(herein called "Mina Real"), a recently incorporated Mexican corporation, and is
in the process of transferring 100% to ALB;
(D) DMO is the recorded and beneficial owner of an undivided 100% interest
in approximately 2,400 hectares of exploration and mining concessions situated
in Nayarit, Mexico, as detailed in the specific description of exploration and
mining concessions attached hereto as Schedule "A" (herein called the "Initial
Concessions") and Mina Real is the recorded and beneficial owner of
approximately 1,000 additional hectares of exploration and mining concessions
located adjacent to the Initial Concessions and more particularly described in
Schedule "B" hereto (herein called the "Second Concessions") (the Initial
Concessions and the Second Concessions are collectively called the "Mina Real
Property");
(E) Mina Real has guaranteed the obligation of DMO to pay to Compania
Minera Huajicari SA de CV the One Million Eight Hundred Thousand (US$1,800,000)
dollars for return to treasury and cancellation of the remaining fifty (50%)
percent of DMO;
(F) ALB has agreed to transfer to the Optionee 50% of the issued shares of
Mina Real and to grant to the Optionee an exclusive right to acquire ownership
of up to that 50% of the shares of Mina Real by paying certain amounts, issuing
certain shares and incurring certain exploration, development and infrastructure
expenditures as detailed herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the Optionee's
agreement to promptly seek TSX Venture Exchange acceptance for this Agreement
and for other good and valuable consideration, the receipt and sufficiency
whereof is hereby acknowledged by ALB and Xxxxxx, the parties hereto covenant
and agree as follows:
PART 1
DEFINITIONS
1.1 In this Agreement, except as otherwise expressly provided or as the
context otherwise requires,
(a) "AFFILIATE" means: a relative; a spouse; a partner; a corporation or
other legal entity in which a party hereto has a legal or beneficial interest
or shares any common management; any director officer or employee of any
affiliate corporation or other legal entity; and any other party acting in
concert with or on behalf of a party hereto;
(b) "AREA OF COMMON INTEREST" means, subject to Part 17, the area lying
within the perimeter of the Mina Real Property and any and all other lands
which any of ALB, DMO, Mina Real, Xxxxxx or the Optionee or any Affiliate
thereof may
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acquire either wholly or in part, directly or indirectly, that have a border
the nearest point of which is within five (5) kilometres of the nearest
border of the Mina Real Property;
(c) "EFFECTIVE DATE" means the date upon which the TSX Venture Exchange
grants to the Optionee its acceptance respecting this Agreement subject to
ss.4.5;
(d) "EXPENDITURES" means all direct or indirect exploration, development
and infrastructure expenses incurred by Mina Real on the Property after
January 1, 2006 pursuant to Part 4 hereof. Expenditures shall include all
governmental fees, taxes, permit costs, inspections and approvals, and
including travel, hotel, per diems and other reasonable expenses for any
party hereto (including without limitation the officers, directors, employees
and consultants of any corporate party hereto) from the principal place of
business of such party for the purpose of attendance on the Property or at
any meeting required to advance the exploration or development of the
property wherever held. The certificate of the Controller or other financial
officer of the Optionee, together with a statement of Expenditures in
reasonable detail shall be prima facie evidence of such Expenditures;
(e) "FORCE MAJEURE" has the meaning set forth in Part 13;
(f) "JOINT VENTURE" means the joint venture to be formed between ALB and
the Optionee in respect of the Property as more particularly described in
ss.5.8;
(g) "JOINT VENTURE AGREEMENT" means the joint venture agreement to be
entered into between ALB and the Optionee as provided for in ss.5.8;
(h) "MINA REAL PROPERTY" means the approximately 3,400 hectares of
exploration and mining concessions situated in Nayarit, Mexico referred to
herein as the Initial Concession and the Second Concessions and collectively
known and described as the Mina Real Property described in Schedules A and B
as they from time to time may be augmented pursuant to Part 17 or reduced
under Part 12, and all mining concessions and other mining interests derived
from any such concessions, and a reference herein to a mineral concession
comprised in the Property includes any mineral concessions or other interests
into which such mineral concession may have been converted and the term Mina
Real Property includes all Property Rights;
(i) "NET SMELTER RETURN" shall have the definition set forth in Schedule
"C";
(j) "OPTION" means the exclusive right herein granted by ALB to the
Optionee to permit the Optionee to acquire up to 50% vested beneficial
ownership of Mina Real;
(k) "OPTION PERIOD" means the period from the date above written on page
one to and including the earliest of
(i) the date of exercise of the Option,
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(ii) the first anniversary of the Effective Date, and
(iii) the termination hereof pursuant to Part 16;
(l) "PROPERTY RIGHTS" means all licenses, permits, easements, rights-of-
way, surface or water rights and other rights, approvals obtained by either
of the parties either before or after the date of this Agreement and
necessary or desirable for the development of the Property, or for the
purpose of placing the Property into production or continuing production
therefrom;
(m) "REGULATORY AUTHORITIES" means the TSX Venture Exchange; (N) "SHARES"
means common shares of the Optionee.
PART 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ALB
2.1 ALB represents and warrants to the Optionee that
(a) it has been duly incorporated and validly exists as a corporation in
good standing under the laws of British Columbia;
(b) that it owns 50% of the issued shares of DMO free and clear of all
liens, charges, options or rights to purchase and other legal or financial
encumbrances and that it shall retain such interest unencumbered in any
manner during the currency of this agreement;
(c) that it has, subject to payment therefore in the amount of One Million
Eight Hundred Thousand (US$1,800,000) Dollars U. S. Funds, the contractual
right to cancel the other 50% of the issued shares of DMO and that it shall
perform all purchase obligations required to complete the cancellation of the
aforementioned 50% interest, all as more particularly set forth in Part 4
hereof;
(d) that there exist no outstanding unexercised options, warrants or other
rights to purchase shares from the treasury of DMO and that ALB shall neither
suffer nor permit the issuance of any further shares, options, warrants or
other rights to purchase shares from the treasury of DMO during the currency
of this agreement;
(e) that it has the right to acquire and prior to the Effective Date will
acquire from Xxxxxx one hundred (100%) percent of Mina Real;
(f) that to the best of its knowledge there exist no outstanding
unexercised options, warrants or other rights to purchase shares from the
treasury of Mina Real and that after the execution of this agreement ALB
shall neither suffer nor permit the issuance of any further shares, options,
warrants or other rights to
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purchase shares from the treasury of Mina Real during the currency of this
agreement without the prior consent of the Optionee;
(g) that Mina Real was recently incorporated solely for the purpose of
holding the Mina Real Property, is authorized to hold exploration and mining
concessions in Nayarit, Mexico and it is exclusively legally entitled to hold
the Mina Real Property and all of exploration and mining concessions
comprised therein, and all Property Rights held by it and will remain so
entitled until all beneficial ownership interests in Mina Real which may be
earned by the Optionee shall have been duly vested in the Optionee as
contemplated hereby or this Option has terminated;
(h) that as soon as possible following the Effective Date but before any
monies are advanced under ss.5.4 hereof, Mina Real will be the recorded
holder and beneficial owner of all of the exploration and mining concessions
comprising the Mina Real Property free and clear of all liens, charges and
claims of others and no taxes or rentals are due in respect of any thereof
and to its knowledge and belief; the exploration and mining concessions
comprised in the Mina Real Property have been duly and validly granted under
the mining laws of Mexico and duly and properly recorded in the appropriate
office of the Ministry of Mines, and, except as specified in Schedules A and
B and accepted by the Optionee, are in good standing in the Ministry of Mines
on the date hereof and until the dates set opposite the respective names
thereof in Schedules A and B,
(i) that as at the Effective Date, Mina Real will have no liabilities, no
payables, no claims, no contingent liabilities and no circumstances
outstanding that are capable of becoming liabilities, payables, claims or
contingent liabilities except for the guarantee by Mina Real of the
contractual obligation of DMO to Compania Minera Huajicari SA de CV as
described in Recital B hereof other than liabilities for expenditures
incurred on or after January 1, 2006,
(j) there is no adverse claim or challenge against or to the ownership of
or title to any of the exploration and mining concessions comprising the Mina
Real Mina Real Property, nor to the knowledge of ALB is there any basis
therefor, and there are no outstanding agreements or options to acquire or
purchase the Mina Real Property or any portion thereof, and no person has any
royalty or other interest whatsoever in production from any of the mineral
claims comprising the Mina Real Property,
(k) no third party consent of any kind is required by ALB to enter into
this Agreement and grant the Option,
(l) upon request by the Optionee, ALB shall deliver or cause to be
delivered to the Optionee copies of all available maps and other documents
and data in its possession or under its indirect care and control respecting
the Mina Real Property,
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(m) ALB shall assume sole responsibility and liability for any obligations
outstanding as of the date hereof with respect to reclamation of the Mina
Real Property,
(n) the execution and delivery of this Agreement and the agreements
contemplated hereby by ALB will not violate or result in the breach of the
laws of any jurisdiction applicable or pertaining thereto or of its
constating documents, and
(o) this Agreement constitutes a legal, valid and binding obligation ofALB.
2.2 The representations and warranties contained in ss.2.1 are provided for
the exclusive benefit of the Optionee, and a breach of any one or more thereof
may be waived by the Optionee in whole or in part at any time without prejudice
to its rights in respect of any other breach of the same or any other
representation or warranty; and the representations and warranties contained in
ss.2.1 will survive the execution hereof and continuE throughout the Option
Period.
PART 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF XXXXXX
3.1 Xxxxxx represents and warrants to the Optionee:
(a) that he holds one hundred (100%) percent of the issued shares of
Mina Real free and clear of all liens, charges, options or rights to purchase
and other legal of financial encumbrances;
(b) that there exist no outstanding unexercised options, warrants or
other rights to purchase shares from the treasury of Mina Real and that after
the execution of this Agreement Xxxxxx shall neither suffer nor permit the
issuance of any further shares, options, warrants or other rights to purchase
shares from the treasury of Mina Real during the currency of this Agreement
without the prior written consent of the Optionee;
(c) that Mina Real was recently incorporated solely for the purpose of
holding the Mina Real Property, is authorized to hold exploration and mining
concessions in Nayarit, Mexico and it is exclusively legally entitled to hold
the Mina Real Property and all of exploration and mining concessions
comprised therein, and all Property Rights held by it and will remain so
entitled until all beneficial ownership interests in Mina Real which may be
acquired by the Optionee shall have been duly vested in the Optionee as
contemplated hereby or this Option has terminated;
(d) that as soon as possible following the Effective Date but before
any monies are advanced under ss.5.4 hereof, Mina Real will be the recorded
holder
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and beneficial owner of all of the exploration and mining concessions
comprising the Mina Real Property free and clear of all liens, charges and
claims of others and no taxes or rentals are due in respect of any thereof
and to its knowledge and belief; the exploration and mining concessions
comprised in the Mina Real Property have been duly and validly granted under
the mining laws of Mexico and duly and properly recorded in the appropriate
office of the Ministry of Mines, and, except as specified in Schedulse A and
B and accepted by the Optionee, are in good standing in the Ministry of Mines
on the date hereof and until the dates set opposite the respective names
thereof in Schedules A and B,
(e) that as at the Effective Date, Mina Real will have no liabilities,
no payables, no claims, no contingent liabilities and no circumstances
outstanding that are capable of becoming liabilities, payables, claims or
contingent liabilities except for the guarantee by Mina Real of the
contractual obligation of DMO to Compania Minera Huajicari SA de CV as
described in Recital B hereof other than liabilities for expenditures
incurred on or after January 1, 2006,
3.2 The representations and warranties contained in ss.3.1 are provided for
the exclusive benefit of the Optionee, and a breach of any one or more thereof
may be waived by the Optionee in whole or in part at any time without prejudice
to its rights in respect of any other breach of the same or any other
representation or warranty; and the representations and warranties contained in
ss.3.1 will survive the execution hereof and continuE throughout the Option
Period.
PART 4
REPRESENTATIONS AND WARRANTIES OF OPTIONEE
4.1 The Optionee represents and warrants to ALB and Xxxxxx, as the case may
be, that
(a) it has been duly incorporated and validly exists as a corporation in
good standing under the laws of British Columbia is in compliance with all of
the prevailing securities laws and regulations and is authorized to enter
into this agreement;
(b) neither the execution and delivery of this Agreement by the Optionee
nor the performance by the Optionee of its obligations hereunder conflicts
with the Optionee's constating documents, any securities laws or regulations
or any agreement to which it is bound;
(c) as at the date of the issuance of the Shares the Optionee will be a
reporting issuer in good standing in British Columbia so that only a four
month and one day hold period, as contemplated by the multi-lateral
securities resale instrument MI 45-102 as promulgated by the Canadian
securities regulators, will apply to the Shares to be issued as an option
payment pursuant to this agreement;
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(d) the execution and delivery of this Agreement and the agreements
contemplated hereby by the Optionee will not violate or result in the breach
of the laws of any jurisdiction applicable or pertaining thereto;
(e) this Agreement constitutes a legal, valid and binding obligation of the
Optionee.
4.2 The representations and warranties contained in ss.4.1 are provided for
the exclusive benefit of ALB and Xxxxxx and a breach of any one or more thereof
may be waived by either or both of ALB and Xxxxxx in whole or in part at any
time without prejudice to their rights in respect of any other breach of the
same or any other representation or warranty and in the case of any unilateral
waiver by either of ALB or Xxxxxx such waiver shall no prejudice any rights of
the other in respect of such breach, and the representations and warranties
contained in ss.4.1 will survive the execution hereof and continue throughout
the Option Period.
PART 5
GRANT AND EXERCISE OF OPTION
5.1 Following execution hereof and forthwith upon receipt from Xxxxxx, ALB
shall transfer title to fifty (50%) of the issued shares of Mina Real to the
Optionee, and ALB hereby grants to the Optionee the sole and exclusive right and
option, subject to the terms of this Agreement, to acquire up to fifty 50%
percent beneficial ownership of Mina Real free and clear of all charges and
encumbrances, the consideration for which grant of option and vesting of
beneficial interest shall be as follows:
(a) Upon the execution hereof paying the sum of Forty Thousand (US$40,000)
dollars to ALB;
(b) Upon regulatory acceptance of this agreement hereof paying the sum of
Seventy Thousand (US$70,000) dollars and issuing Two Hundred Fifty Thousand
(250,000) Shares from treasury to ALB.
5.2 ALB shall, at its expense, cause to be prepared and shall deliver to
the Optionee:
(a) a qualifying geological report in compliance with NI 43-101 for
submission to the regulatory authorities, and thereafter shall be
responsible, at its expense, for all additions, deletions, amendments or
corrections to that report that may be required by the regulatory authorities
relative to the approval of this transaction; and
(b) a title report on the Property, such title report to be in form and
substance satisfactory to the Optionee and, if applicable, to include a
certified translation thereof.
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5.3 ALB acknowledges and agrees that if ALB fails to deliver any of the
documents required to be delivered by ss.5.2 hereof then the Optionee may at its
election either cause the required documents to be prepareD and deduct the costs
thereof from any amount owing to ALB or may terminate this agreement and all
amounts paid by the Optionee to ALB or on behalf of ALB shall be repaid by ALB
to the Optionee forthwith.
5.4 The exercise price of the option granted herein is an aggregate of Two
Million Four Hundred Thousand (US$2,400,000) dollars, which price shall be paid
and beneficial ownership interests acquired and vested in the following manner:
(a) by incurring One Million Five Hundred Thousand (US$1,500,000)
dollars in Expenditures within a period of twelve months from the Effective
Date for which a Twenty (20%) percent beneficial ownership interest will be
acquired and vest for each Seven Hundred Fifty Thousand (US$750,000) of
Expenditures incurred; and
(b) by paying to ALB, or as permitted herein on ALB's behalf, the sum
of Nine Hundred Thousand (US$900,000) dollars at the rate of Seventy-five
Thousand (US$75,000) dollars each month commencing July 1, 2006 with each
such payment made vesting 0.9166% ownership interest at the time of payment.
5.5 ALB acknowledges that the Optionee has a business interest in
protecting the right of cancellation of the remaining fifty (50%) percent of DMO
owned by Compania Minera Huajicara SA de CV upon payment of the sum of One
Million Eight Hundred Thousand (US$1,800,000) at the rate of $75,000 per month
commencing July 1, 2006 and in protecting Mina Real from any potential calling
of the guarantee to pay such amounts and ALB therefore agrees:
(a) that if DMO or ALB is unable or unwilling then to make the payments to
Compania Minera Huajicara SA de CV as required then the Optionee may make the
monthly payments required by ss.5.4(b) hereof directly to Compania Minera
Huajicara SA de CV;
(b) that any payments made pursuant to ss.5.5(a) shall be good and
sufficient payment under ss.5.4(b) hereof As though such payment had been
made directly to ALB;
(c) that if, after making all payments required by ss.5.4(b) hereof
directly to Compania Minera Huajicari SA de CV the contract of ALB with
Compania Minera Huajicari SA de CV remains in default or becomes again in
default then the Optionee, at its election, may make such further payments to
Compania Minera Huajicari SA de CV as may be required to remedy any default
and ALB agrees that in return for making any such payments the Optionee shall
earn from ALB additional ownership interests in Mina Real as calculated by
the dollar amount of such further payments made divided by One Million Eight
Hundred Thousand (US$1,800,000) dollars and multiplying the product by .50,
and ALB shall forthwith transfer such additional percentage interest to the
Optionee.
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5.6 That during the currency of this Option the Expenditures shall be
managed and supervised according to the following agreements:
(a) notwithstanding the percentage ownership of Mina Real, each of ALB
and Optionee shall have equal representation on the board of directors and
equal representation within the management structure;
(b) all decisions of the board of directors and the management of Mina
Real shall be by consensus;
(c) the first president of Mina Real shall be Xxxxxxx Xxxxx Xxxxxx;
(d) the initial project manager shall be Xxxxxxx Xxxxx Xxxxxx; and
(e) all budgets of Mina Real and all work program and Expenditures shall be
first approved by the Optionee;
provided however, that ss.5.6(c) and (d) are specifically subject to ALB and
Xxxxxx agreeing, and they both do hereby agree, that the engagement of Xxxxxx as
president and project manager shall be full-time and exclusive to Mina Real.
5.7 Following the exercise of the Option by the Optionee or the termination
of this Option or, at the election of the Optionee, following the vesting of an
ownership interest in Mina Real ALB and the Optionee will form a Joint Venture
for the purpose of carrying out further exploration, development and production
work on the Mina Real Property and will in good faith, negotiate and execute a
Joint Venture Agreement, said agreement to have standard Rocky Mountain Mineral
Law Foundation terms and shall include, but not be limited to, the following
more particular provisions:
(a) the initial interest of the parties in the Joint Venture will be equal
to the beneficial ownership interests in Mina Real vested at the time of
formation of the Joint Venture.
(b) the party with the larger beneficial interest in the Joint Venture at
the time the Joint Venture agreement is executed shall be the initial
operator of the Joint Venture and thereafter the joint venturer with the
larger beneficial ownership interest in Mina Real shall have the right to be
or to designate the operator;
(c) the operations of the Joint Venture will be overseen by a management
committee, with each party to have voting rights on such committee equal to
their participating interest in the Joint Venture;
(d) the participating interests of the parties in the Joint Venture will be
subject to dilution for non-contribution on a straight line basis providing
that if any party's participating interest falls below 10%, it shall be
deemed to be converted into a 5% Net Smelter Return royalty interest and, for
the purpose of calculating such dilution on formation of the Joint Venture,
prior expenditures incurred by the parties shall be calculated as follows:
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i) as to the Optionee the amount of its Expenditures, and
ii) as to the Optionor the amount of the Optionees expenditures
multiplied by the Optionor's ownership interest in Mina Real
divided by the Optionee's ownership interest in Mina Real.
(e) each party will have 15 days following adoption of a work program to
elect to participate therein and invoices rendered to participating parties
in respect of any work program shall be payable within 30 days. For
production programs the election periods will be increased by 60 days and the
time to contribute funds shall be accelerated so that they are due in advance
of the Operator actually expending them;
(f) each party will grant to the other a 21 day right of first refusal with
respect to any proposed sale of such party's interest in the Joint Venture to
a third party. If a sale is completed the third party must agree to be bound
to the terms of the joint venture agreement; and
(g) all disputes in either reaching a binding joint venture agreement
and in regards to its interpretation or in the event of deadlock on the
management committee, shall be resolved, insofar as lawfully possible, by
binding arbitration.
PART 6
EXERCISE OF OPTION
6.1 The Optionee, in its sole discretion, may accelerate at any time the
performance of the exploration Expenditures required by ss.5.4(a) to exercise
the Option and thereby earlier acquire and vest the beneficial ownership
interests in Mina Real referred to therein.
6.2 The Optionee, in its sole discretion, may accelerate at any time the
cash payments referred to in by ss.5.4(b) and thereby earlier acquire and vest
the beneficial ownership interest in Mina Real referred to therein.
6.3 As and when each portion of the Option capable of vesting has been
exercised up to the total of fifty (50%) percent each beneficial interest so
acquired in and to Mina Real will vest in the Optionee free and clear of all
liens, charges, encumbrances and claims but subject to the obligation to enter
into the Joint Venture Agreement.
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PART 7
RIGHT OF ENTRY
7.1 Throughout the Option Period, the Directors, Officers, employees and
designated consultants of the Optionee and its servants, agents and independent
contractors, will have the right in respect of Mina Real and the Mina Real
Property to
(a) enter the premises of Mina Real and attend upon the Property,
(b) have full, complete and unfettered access to books and records of Mina
Real,
(c) audit the Expenditures made and any other costs incurred by Mina Real
or with respect to the Mina Real Property, and
(d) have full, complete and unfettered access to all maps records, reports
and other geological or financial information regarding the Mina Real
Property,
PART 8
RECORD OF OPTION AGREEMENT
8.1 The Optionee will be entitled to record a notice of the existence of
this Option in the applicable office or offices of the Ministry of Mines or such
other governmental office or ministry as may be required or permitted by Mexican
mining law.
PART 9
OBLIGATIONS OF MINA REAL DURING OPTION PERIOD
9.1 During the Option Period the Optionee, ALB and Xxxxxx shall cause Mina
Real to:
(a) maintain in good standing those mineral concessions comprised in the
Mina Real Property that are in good standing on the date hereof by the doing
and filing of the maximum available assessment work credits on the Mina Real
Property or by making of payments in lieu of the minimum requirements, by the
payment of taxes and rentals and the performance of all other actions which
may be necessary in that regard and in order to keep such mineral concessions
free and clear of all liens and other charges arising from Mina Real's
activities thereon,
(b) keep the mineral concessions comprised in the Mina Real Property free
and clear of all liens, charges and encumbrances, will obtain all necessary
licenses and
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permits as shall be necessary, carry out all prospecting, exploration,
development, construction or other mining operations on the mineral
concessions in a good and miner-like fashion and report to ALB and the
Optionee on not less than a quarterly basis, and more regularly as may be
requested by either party, as to the results of all such exploration,
development, construction or other mining operation,
(c) have exclusive and quiet possession of the Mina Real Property for the
purpose of prospecting, exploration, development, construction or other
mining operations on the mineral concessions,
(d) do such prospecting, exploration, development and other mining work as
ALB and the Optionee shall jointly determine to be advisable,
(e) bring upon and erect upon the Property buildings, plant, machinery and
equipment as ALB and the Optionee shall jointly determine to be advisable,
(f) remove from the Property and dispose of reasonable quantities of ores,
mineral and metals for the purpose of obtaining assays or making other tests.
(g) permit the directors, officers, employees and designated consultants of
ALB and the Optionee, at their own risk, access to the Property at all
reasonable times subject always to Part 13, and providing ALB or the
Optionee, as the case may be, agrees to indemnify Mina Real against and to
save Mina Real harmless from all costs, claims, liabilities and expenses that
ALB or the Optionee or their directors, officers, employees and designated
consultants may incur or suffer as a result of any injury (including injury
causing death) to any such director, officer, employee or designated
consultant while on the Mina Real Property,
(h) promptly deliver to ALB and the Optionee after the completion of each
phase of work a report (including up-to-date maps if there are any)
describing the results of work done together with reasonable details of all
Expenditures made, and
(i) indemnify and save ALB and the Optionee harmless in respect of any and
all costs, claims, liabilities and expenses arising out of Mina Real's
activities on the Mina Real Property and, without limiting the generality of
the foregoing will, during the currency of this Agreement, cause any of its
independent contractors to carry not less than $1 million in third party
liability insurance, or such other amount as the parties hereto shall from
time to time agree, in respect of their operations conducted on the Mina Real
Property on behalf of Mina Real, such insurance to be for the benefit of ALB
and the Optionee as their ownership interests in Mina Real appear.
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PART 10
TERMINATION OF OPTION
10.1 If the Effective Date has not occurred within 90 days of the date of
execution hereof, then either party may terminate this Option Agreement without
liability, by notice to the other party.
PART 11
TRANSFERS
11.1 The Optionee may at any time (and from time to time) either during the
Option Period or thereafter, sell, transfer or otherwise dispose of all or any
portion of its interest in and to the Property and this Agreement provided that
any purchaser, grantee or transferee of any such interest will have first
delivered to ALB its agreement related to this Agreement and to the Property,
containing
(a) a covenant by such transferee to perform all the obligations of the
Optionee to be performed under this Agreement in respect of the interest to
be acquired by it from the Optionee to the same extent as if this Agreement
had been originally executed by the Optionee and such transferee as joint and
several obligors making joint and several covenants, and
(b) a provision subjecting any further sale, transfer or other disposition
of such interest in the Property and this Agreement or any portion thereof to
the restrictions contained in this ss. 11.1.
11.2 No assignment by the Optionee of any interest less than its entire
interest in this Agreement and in the Property will, as between the Optionee and
ALB, discharge it from any of its obligations hereunder, but upon the transfer
by the Optionee of the entire interest at the time held by it in this Agreement
(whether to one or more transferees and whether in one or in a number of
successive transfers), the Optionee will be deemed to be discharged from all
obligations hereunder save and except for the fulfilment of contractual
commitments which have accrued due before the date on which the Optionee will
have no further interest in this Agreement.
11.3 If either of ALB or the Optionee
(a) receives a bona fide offer from an independent third party ("Proposed
Purchaser") dealing at arm's length with the either of ALB or Optionee, as
the case may be (the "Offerree") to purchase all or substantially all of its
interest in Mina Real, which offer the Offerree desires to accept, or
(b) either of ALB or the Optionee intend to sell all or substantially all
of their interest in the Option or in Mina Real,
605118.3
15
then the Offerree will first offer (the "Offer") such interest in writing to the
other party hereto upon terms no less favourable than those offered by the
Proposed Purchaser or intended to be offered by the Offerree, as the case may
be.
11.4 The Offer will specify the price and terms and conditions of such sale,
the name of the Proposed Purchaser (which term will, in the case of an intended
offer by the Offerree, mean the person or persons to whom the Offerree intends
to offer its interest) and, if the offer received by the Offerree from the
Proposed Purchaser provides for any consideration payable to the Offerree
otherwise than in cash, the Offer will include the Offerree's good faith
estimate of the cash equivalent of the non-cash consideration.
11.5 If within a period of 30 days of the receipt of the Offer the party
receiving the offer notifies the Offerree in writing that it will accept the
same, the Offerree will be bound to sell such interest to the other party
(subject as hereinafter provided with respect to price) on the terms and
conditions of the Offer.
11.6 If the Offer so accepted by the Offerree contains the Offerree's good
faith estimate of the cash equivalent consideration as aforesaid, and if the
other party disagrees with the Offerree's best estimate, the other party will so
notify the Offerree at the time of acceptance and the other party will, in such
notice, specify what it considers, in good faith, the fair cash equivalent to be
and the resulting total purchase price.
11.7 If the other party so notifies the Offerree, the acceptance by the
other party will be effective and binding upon the Offerree and the other party
and the cash equivalent of any such non-cash consideration will be determined by
binding arbitration under the COMMERCIAL ARBITRATION ACT (British Columbia) and
will be payable by the other party, subject to prepayment as hereinafter
provided, within 10 days following its determination by arbitration.
11.8 The other party will in such case pay to the Offerree, against receipt
of an absolute transfer of clear and unencumbered title to the interest of the
Offerree being sold, the total purchase price which is specified in its notice
to the Optionee and such amount will be credited to the amount determined
following arbitration of the cash equivalent of any non-cash consideration.
11.9 If the other party fails to notify the Offerree before the expiration
of the time limited therefore that it will purchase the interest offered, the
Offerree may sell and transfer such interest to the Proposed Purchaser at the
price and on the terms and conditions specified in the Offer for a period of 45
days, provided that the terms of this Part 11 will again apply to such interest
if the sale to the Proposed Purchaser is not completed within the said 45 days.
11.10 Any sale hereunder will be conditional upon the delivery by the
Proposed Purchaser to the other party of a written undertaking, in form and
substance satisfactory to counsel for the other party, to be bound by the terms
and conditions of this Agreement.
605118.3
16
PART 12
SURRENDER AND ACQUISITION OF PROPERTY INTERESTS BEFORE TERMINATION OF AGREEMENT
12.1 During the Option Period Mina Real may elect to abandon any one or more
of the mineral concessions comprised in the Mina Real Property provided that
Mina Real shall first give written notice to the Optionee of such intention.
12.2 For a period of 30 days after the date of delivery of such notice the
Optionee may elect to have any or all of the mineral concessions in respect of
which such notice has been given transferred to it by delivery of a request
therefore to Mina Real, whereupon Mina Real will deliver to the Optionee a quit
claim or Xxxx of Sale or other appropriate transfer document in registerable
form transferring such mineral concessions to the Optionee.
12.3 Any mineral concessions so transferred, if in good standing at the date
hereof or if Mina Real causes the same to be placed in good standing after the
date hereof, will be in good standing under the mining laws of Mexico for at
least six months from the date of transfer. If the Optionee fails to make
request for the transfer of any mineral concessions as aforesaid within such
30-day period, then Mina Real may abandon such mineral concessions without
further notice to the Optionee. Upon any such transfer or abandonment the
mineral concessions so transferred or abandoned will for all purposes of this
Agreement cease to form part of the Property.
PART 13
FORCE MAJEURE
13.1 If at any time either during the Option Period the Optionee is
prevented or delayed in complying with the Expenditure requirements in Part 5 of
this Agreement by reason of strikes, walk-outs, labour shortages, power
shortages, fuel shortages, fires, wars, acts of God, governmental regulations
restricting operations, shipping delays or any other reason or reasons beyond
the control of either Mina Real or the Optionee (and for greater certainty
excluding factors related to a lack of funding), the time limited for the
performance by the Optionee of its obligations hereunder will be extended by a
period of time equal in length to the period of each such prevention or delay,
provided however that nothing herein will discharge the Optionee from its
obligation to timely issue the Shares under ss.5.1.
13.2 The Optionee will within seven days of becoming aware of an event of
force majeure give notice to ALB of each event of force majeure under ss.13.1
and upon cessation of such event will furnish ALB with notice to that effect
together with particulars of the number of days by which the obligations of the
Optionee hereunder have been extended by virtue of such event of force majeure
and all preceding events of force majeure.
605118.3
17
PART 14
CONFIDENTIAL INFORMATION
14.1 No material information in respect of the activities carried out on the
Mina Real Property by Mina Real will be published, disseminated or conveyed,
either publicly or privately, by Xxxxxx except to ALB and the Optionee without
the prior written consent of the Optionee and Xxxxxx acknowledges the importance
of keeping all confidential information confidential until publicly disseminated
and agrees that the Optionee shall be exclusively responsible for the public
dissemination of factual data and other material information regarding Mina Real
and the Mina Real Property as may be required to be publicly disclosed pursuant
to applicable securities or corporation laws or regulations.
14.2 No material information furnished by Mina Real to ALB hereunder in
respect of the activities carried out on the Property will be published,
disseminated or conveyed, either publicly or privately, by ALB without the prior
written consent of the Optionee and ALB agrees that the Optionee shall be
exclusively responsible for the public dissemination of factual data and other
material information regarding Mina Real and the Property as may be required to
be publicly disclosed pursuant to applicable securities or corporation laws or
regulations.
PART 15
ARBITRATION
15.1 All questions or matters in dispute with respect to the interpretation
of this agreement or the Joint Venture Agreement will, insofar as lawfully
possible, be submitted to arbitration pursuant to the terms hereof.
15.2 It will 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 will have given not less than 30
days' prior written notice of its intention so to do to the other party together
with particulars of the matter in dispute.
15.3 On the expiration of such 30 days, the party who gave such notice may
proceed to refer the dispute to arbitration as provided in this Part 15.
15.4 The party desiring arbitration will appoint one arbitrator, and will
notify the other party of such appointment, and the other party will, within 30
days after receiving such notice, appoint an arbitrator, and the two arbitrators
so named, before proceeding to act, will, within 30 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.
15.5 If the other party fails to appoint an arbitrator within 30 days after
receiving notice of the appointment of the first arbitrator, and if the two
arbitrators
605118.3
18
appointed by the parties fail to agree on the appointment of the chairman, the
chairman will be appointed under the provision of the Commercial Arbitration Act
(British Columbia).
15.6 Except as specifically otherwise provided in this Part 15 the
arbitration herein provided for will be conducted in accordance with such Act.
15.7 The chairman, or in the case where only one arbitrator is appointed,
the single arbitrator, will fix a time and place in Vancouver, British Columbia,
for the purpose of hearing the evidence and representations of the parties, and
he will preside over the arbitration and determine all questions of procedure
not provided for under such Act or this Part 15.
15.8 After hearing any evidence and representations that the parties may
submit, the single arbitrator, or the arbitrators, as the case may be, will make
an award and reduce the same to writing, and deliver one copy thereof to each of
the parties.
15.9 The expense of the arbitration will be paid as specified in the award.
15.10 The parties may agree that the award of a majority of the arbitrators,
or in the case of a single arbitrator, of such arbitrator, will be final and
binding upon each of them.
PART 16
DEFAULT AND TERMINATION
16.1 If at any time during the Option Period the Optionee fails to perform
any obligation hereunder or any representation or warranty given by it proves to
be untrue, then the Optionor may terminate this Agreement providing
(a) it first gives to the Optionee a notice of default containing
particulars of the obligation which the Optionee has not performed, or the
warranty breached, and
(b) if it is reasonably possible to cure the default, the Optionee does
not, within 30 days after delivery of such notice of default, cure such
default by appropriate payment or performance if such default reasonably
requires more than 30 days.
16.2 If the Optionee fails to comply with the provisions of ss.16.1 or 5.4
the Optionor may thereafteR terminate this Agreement, and the provisions of Part
10 will then be applicable.
16.3 The Optionee may at any time terminate this Option by giving notice of
termination to the Optionor and shall thereupon be relieved of any further
obligations in connection herewith but shall remain liable for obligations which
have accrued to the date of notice.
605118.3
19
16.4 In the event of termination any unvested beneficial interest in Mina
Real held by the Optionee shall be conveyed to ALB within thirty (30) days of
such termination.
PART 17
AREA OF INTEREST
17.1 There shall exist an area of common interest within the area lying
inside the perimeter of the approximately 3,400 hectares of exploration and
mining concessions as detailed in the attached Schedules A and B and any and all
other lands which any of ALB, Davilo, DMO, Mina Real, the Optionee or their
Affiliates may acquire either wholly or in part, directly or indirectly, that
have a border the nearest point of which is within five (5) kilometres of the
nearest border of the of exploration and mining concessions as detailed in the
attached Schedules A and B. If any Party (or permitted assignee) beneficially
acquires any interest in mineral claims within such area they shall, at the
election of any other party (made within 10 days of written notice), be made
part of the Mina Real Property for all purposes and may be referred to as
Additional Property. That is, if acquired by the Optionee, such additional
claims shall be transferred to Mina Real without additional cost other than its
costs of acquisition and if acquired by ALB or Xxxxxx shall be transferred to
Mina Real as if part of the Mina Real Property (and without additional
consideration being demanded from the Optionee).
PART 18
NOTICES
18.1 Each notice, demand or other communication required or permitted to be
given under this Agreement will be in writing and will be sent by personal
delivery, fax or prepaid registered mail to the addresses of the parties written
on page 1.
18.2 The date of receipt of such notice, demand or other communication will
be the date of delivery or fax thereof if delivered or faxed during business
hours, or, if given by registered mail as aforesaid, will be deemed conclusively
to be the third day after the same will have been so mailed except in the case
of interruption of postal services for any reason whatever, in which case the
date of receipt will be the date on which the notice, demand or other
communication is actually received by the addressee.
18.3 Either 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 will
be given to it thereafter until further change.
605118.3
20
PART 19
GENERAL
19.1 This Agreement will supersede and replace any other agreement or
arrangement, whether oral or written, heretofore existing between the parties in
respect of the subject matter of this Agreement.
19.2 All references to sums, currency or denominations of money shall be
references to United States currency.
19.3 No consent or waiver expressed or implied by either party in respect of
any breach or default by the other in the performance of such other of its
obligations hereunder will be deemed or construed to be consent to or a waiver
of any other breach or default.
19.4 The parties will promptly execute or cause to be executed all
documents, deeds, conveyances and other instruments of further assurance which
may be reasonably necessary or advisable to carry out fully the intent of this
Agreement or to record wherever appropriate the respective interests from time
to time of the parties in the Property.
19.5 This Agreement will enure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
19.6 This Agreement will be construed in accordance with the laws of the
Province of British Columbia and the laws of Canada applicable therein.
19.7 The headings appearing in this Agreement are for general information
and reference only and this Agreement will not be construed by reference to such
headings.
19.8 In interpreting this Agreement and the schedule hereto attached, where
the context so requires, the singular will include the plural, and the masculine
will include the feminine, the neuter, and vice versa.
19.9 Nothing herein will constitute or be taken to constitute the Parties as
partners or create any fiduciary relationship between them provided, however,
that this qualification will not limit the express duty of each Party to act
toward the other Party at all times in good faith with respect to all their
obligations under this Agreement.
19.10 No modification, alteration or waiver of the terms herein contained
will be binding unless the same is in writing, dated subsequently hereto, and
fully executed by the Parties.
19.11 All notices required to be provided shall be made to the addresses as
facsimile numbers as designated on the face page hereof provided that a party
hereto may change the address or contact facsimile number by notice in writing
to the other party.
605118.3
21
19.12 This Agreement may be executed in one or more counterparts and by
facsimile transmission and when so executed all such copies shall be read and
construed as one document.
19.13 Time is of the essence hereof.
IN WITNESS WHEREOF this Option Agreement has been executed on behalf of ALB and
the Optionee by their duly authorized officers and by Xxxxxx personally on the
8th day of January, 2006.
ALB HOLDINGS LTD.
Per: /s/ XXXXXXX XXXXX XXXXXX
--------------------------------
Authorized Signatory
ROCHESTER RESOURCES LTD.
Per: /s/ XXXXXXX GOOD
--------------------------------
Authorized Signatory
Signed, sealed and )
delivered by Xxxxxxx )
Xxxxx Xxxxxx in the )
presence of: ) /s/ XXXXXXX XXXXX XXXXXX
) ---------------------------
/s/ XXXX XXXXXX ) XXXXXXX XXXXX XXXXXX
--------------------------------- )
ACCOUNTANT )
--------------------------------- )
605118.3
SCHEDULE A
PROPERTIES COMPRISING THE INITIAL CONCESSIONS
=============================================================================================================
CONCESSION CONCESSION ACRES EXPIRY
NAME TYPE TITLE NUMBER (HECTARES) DATE
-------------------------------------------------------------------------------------------------------------
Xx Xxxx Xxxxxxxxxxx 000000 2,266.76
-------------------------------------------------------------------------------------------------------------
Tajos Cuates Exploration 213209 120.57
-------------------------------------------------------------------------------------------------------------
Total 2,387.33
=============================================================================================================
All concessions lie within the INEGI topographic sheets F13D32 (Santa Xxxxx del
Oro) and F13D42 (Ixtlan del Rio)
SCHEDULE B
PROPERTIES COMPRISING THE SECOND CONCESSIONS
===========================================================================================================
CONCESSION CONCESSION ACRES EXPIRY
NAME TYPE TITLE NUMBER (HECTARES) DATE
-----------------------------------------------------------------------------------------------------------
Pending Exploration Pending
-----------------------------------------------------------------------------------------------------------
Pending Exploration Pending
-----------------------------------------------------------------------------------------------------------
Total 1,000
===========================================================================================================
All concessions lie within the INEGI topographic sheets F13D32 (Santa Xxxxx del
Oro) and F13D42 (Ixtlan del Rio)
AREA OF COMMON INTEREST
That area lying inside the perimeter of the above described approximately 3,400
hectares of exploration and mining concessions called herein the Mina Real
Property and any and all other lands which any of the ALB, Xxxxxx, DMO, Xxxx
Real or the Optionee may acquire, either wholly or in part, directly or
indirectly, that have a border the nearest point of which is within five (5)
kilometres of the nearest border of the of exploration and mining concessions
above described.
605118.3
SCHEDULE "C"
NET SMELTER ROYALTY
"NET SMELTER RETURNS" means Gross Proceeds less Allowable Deductions.
"GROSS PROCEEDS" means all proceeds received deemed to be received by Mina Real
from the sale of Products from the Mina Real properties, whether processed on or
off the Mina Real Property.
"ALLOWABLE DEDUCTIONS" means all costs, charges, and expenses paid or incurred
by Mina Real with respect to the Products after they leave the Mina Real
Property, including without limitation:
a) charges for treatment and smelting and refining processes
(including handling, processing, interest and provisional
settlement fees, sampling, assaying and representation costs,
penalties and other processor deductions);
b) actual costs of transportation (including freight, insurance,
security transaction taxes, handling, port, demurrage, delay and
forwarding expenses incurred by reason of or in the course of such
transportation) of Production from the Mina Real Property to the
place of treatment and then to the place of sale;
c) costs or charges of any nature for or in connection with the
insurance, storage, or representation at a smelter or refinery for
the Products or refined metals therefrom;
d) actual sales and brokerage costs on Products and on refined metals
there from;
e) sales, production, severance, net proceeds or mine, or net
proceeds of production , and AD VELOREM taxes and any other tax or
royalty payable to any governmental authority based upon or
calculated with respect to the severance, production, removal,
sale or disposition of Products, but excluding any taxes based
upon net income of Xxxx Xxxx.
"PRODUCTS" means all ores, dore, concentrates, minerals, mineral products, and
refined metals which are produced or extracted by or on behalf of Mina Real from
the Mina Real Property.
605118.3
