Settlement Agreement Between Minera Andes Inc. and N.A. Degerstrom, Inc.



 Exhibit 10.20 
  
 

 
  
 December 2, 2003

  
 N.A. Degerstrom, Inc. 
 N. 3303 Sullivan Road 
 Spokane, Washington 99216 
  
 Attn: N. A. Degerstrom 
  
 Dear Sirs: 
  
 Settlement Agreement

  
 We refer to the following agreements: 
  

	(a)	the Asset and Share Acquisition Agreement made March 8, 1995 among N.A. Degerstrom, Inc. (NADI), Brian Gavin (Gavin), Jorge Vargas (Vargas), Enrique Rufino Marzari Elizalde
(Elizalde), Minera Andes S.A. (MASA), Minera Andes Inc. (MAI) and NAD (S.A.) (NADSA) 

 (the Asset Agreement); 
  

	(b)	the Operating Agreement dated effective March 15, 1995 among MAI, NADSA, MASA and NADI 

 (the Operating Agreement); 
  

	(c)	the letter agreement between NADI and MAI dated May 30, 2003 providing for a lock-up over all shares of MAI held by NADI 

 (the Existing Lock-up Agreement). 
  
 The parties acknowledge that: 
  

	(a)	pursuant to the Asset Agreement, Vargas granted an option to MAI to acquire the one issued and outstanding shares in the capital of MASA held by him (the Vargas Option) and Elizalde
granted an option to MAI to acquire the one issued and outstanding shares in the capital of NADSA held by him (the Elizalde Option); 

  

	(b)	MAI has incorporated a wholly-owned subsidiary, Minera Andes (Cayman) Inc. (MACA); 

  

 3303 N. Sullivan Road    •    Spokane, Washington
99216    •     Phone: (509) 921-7322    •    Fax: (509) 921-7325 









	(c)	MAI has sold to NADI all of the issued and outstanding shares in the capital of NADSA held by it (being all of the issued and outstanding shares of NADSA other than the one share of
NADSA held by Elizalde) and has assigned to NADI the Elizalde Option (collectively, the NADSA Sale) and NADSA is no longer a party to the Operating Agreement; 

  

	(d)	prior to the NADSA Sale, the NAD Properties (as such term is defined in the Asset Agreement) were transferred to MASA; 

  

	(e)	pursuant to the Asset Agreement, the Royalty (as such term is defined in the Asset Agreement) was granted to NADI by MAI and MASA (among others) in respect of the Properties, the
MASA Properties the NAD Properties and any Future Properties (as such terms are defined in the Asset Agreement); 

  

	(f)	attached to this letter agreement as Schedule A is a list of all properties that are, as at the date of this letter agreement, the subject of the Royalty (collectively, the Current
Properties); 

  

	(g)	pursuant to the Asset Agreement, MAI agreed, in certain circumstances, to issue additional common shares in the capital of MAI to NADI as a Bonus (as such term is defined in the
Asset Agreement); and 

  

	(h)	the number of shares that were the subject of the Bonus is equal to 1,213,409 common shares of MAI. 

  
 The purpose of this letter agreement is to set forth the agreement reached by the parties to terminate the Operating Agreement and the
Existing Lock-up Agreement, and to terminate certain provisions of and assign certain benefits under the Asset Agreement. 
  
 As a consequence of the NADSA Sale and the fact that NAD is no longer a party to the Operating Agreement, the agreement of NADSA and of Elizalde are not required in order
to give effect to the transactions contemplated by this letter agreement and they therefore are not parties to this letter agreement. As there are no obligations of Gavin or Vargas arising under the Asset Agreement that have not been performed, the
agreement of Gavin and of Vargas are not required in order to give effect to the transactions contemplated by this letter agreement and they therefore are not parties to this letter agreement. 
  
 In consideration of entering into this letter agreement and the payment to each party by the
other of $1.00 and other good and valuable consideration, but subject to the conditions referred to below, the parties agree as follows: 
  

	1.	Termination of Operating Agreement 

  

	1.1.	The Operating Agreement is terminated effective December 31, 2003 or such earlier date as MAI may direct by notice in writing given to NADI, provided that section 5.9
(Confidentiality) of the Operating Agreement will survive such termination and continue to be binding. 

  

 Settlement Agreement and Lockup - Page 2 









	1.2.	Following termination of the Operating Agreement, NADI will provide one or more accounts to MAI for any outstanding amounts owed under the Operating Agreement and MAI will pay those
accounts promptly following receipt. 

  

	1.3.	Upon termination of the Operating Agreement MAI will vacate the office space currently provided by NADI under the Operating Agreement. 

  

	2.	Transitional Matters 

  

	2.1.	Prior to January 1, 2004, MAI will establish its own accounting system and NADI and MAI will transfer MAI’s accounting data from NADI’s accounting system to MAI’s
accounting system. NADI will cooperate with MAI and any consultants it may retain and will assist MAI in transferring the accounting data to the MAI accounting system. NADI will provide MAI and its auditors with access to the accounting system as
required for the purpose of completing the preparation and audit of MAI’s financial statements for the year ended December 31, 2003. 

  

	2.2.	NADI shall not, unless otherwise consented to in writing by MAI, for a period of five years following the termination of the Operating Agreement, destroy or otherwise dispose of any
books, records, financial or accounting data relating to MAI (the “Records”) without first offering to surrender the Records to MAI. NADI shall provide MAI and its authorized representatives with access to the Records during normal
business hours following the termination of the Operating Agreement upon prior written notice for purposes of tax and other government audits, litigation and other proceedings by and against MAI. 

  

	2.3.	Until December 31, 2003 or for such shorter period as may be requested by MAI, NADI will provide Judi Tallman on a full time basis to assist in transitioning MAI into a self
sufficient operation including training personnel, if needed. Subsequently, NADI will enable Judi Tallman to provide such assistance as may be reasonably required by MAI in preparing its financial statements and preparing and making other regulatory
filings until December 31, 2004, including without limitation its annual report on Form 10K-SB. 

  

	2.4.	NAD will provide MAI with such assistance as is necessary for MAI to produce its annual financial statements for the year ended December 31, 2003, including entering data into
NAD’s accounting system so as to allow production of the statements. 

  

	2.5.	Until December 31, 2003, or for such shorter period as may be requested by MAI, NADI will provide MAI with payroll and benefits (including retirement and medical plans) services.


  

	2.6.	NADI will bill MAI for any out-of-pocket expenses of NADI in providing the transitional services referred to in this Section 2 and MAI will pay those accounts promptly following
receipt. 

  

	3.	Board of Directors 

  

	3.1.	The parties acknowledge that NADI has never had and, upon termination of the Operating Agreement will not have, any right to nominate persons for election as a director of MAI or to
otherwise have any board representation. 

  

 Settlement Agreement and Lockup - Page 3 









	4.	Lock-up Agreement 

  

	4.1.	The Existing Lock-up Agreement is terminated effective immediately. 

  

	4.2.	MAI covenants and agrees with NADI that it will continue to assist NADI in identifying a suitable buyer for some or all of the common shares of MAI held by NADI and to discuss with
NADI alternatives that are available for such a sale, provided that MAI shall have no obligation to include such shares as part of any public offering or private placement undertaken by MAI. NADI agrees to liaise with MAI with respect to any
proposed sale by NADI of is shares so as not to disrupt an orderly market for MAI’s common shares and so as to minimize any effect upon MAI’s own capital raising efforts. 

  

	5.	The Asset Agreement – Assignment of Royalty and Cancellation of Bonus 

  

	5.1.	NADI hereby represents and warrants to MACA that it has not previously sold, assigned or transferred the Royalty to any other party or in any way encumbered the Royalty. NADI and
MACA acknowledge that no amounts have been paid (nor have any amounts been required to have been paid) under the Royalty to the date of this letter agreement. 

  

	5.2.	NADI hereby agrees to sell, assign and transfer to MACA and MACA hereby agrees to purchase all of NADI’s right, title and interest in the Royalty, effective the date that MACA
provides to NADI a notice of transfer, together with payment in accordance with section 5.5(a). 

  

	5.3.	All parties acknowledge that the Royalty covers only the Current Properties and that, effective upon the transfer referred to in section 5.2, it will be held by MACA. 


  

	5.4.	Effective upon completion of the transfer of the Royalty pursuant to section 5.2, NADI hereby releases MAI and the other parties to the Asset Agreement from any obligation to issue
the shares comprised in the Bonus and the parties agree that such obligation will be extinguished. 

  

	5.5.	MAI and MACA agree to pay to NADI: 

  

	 	(a)	forthwith after receipt of the approvals referred to below under Conditions and written notice by MACA to NADI under section 5.2, the sum of US$500,000; and


  

	 	(b)	forthwith after written notice by MACA to NADI under section 5.2 and: 

  

	 	(i)	receipt by MAI or any of its subsidiaries of a Bankable Feasibility (as such term is defined in the Asset Agreement), or 

  

	 	(ii)	if no Bankable Feasibility is prepared, upon attaining commercial production; 

  

in respect of any of the Current Properties other than those properties listed in paragraph 2(b) of Schedule A (which are the properties that comprise
the San José project), the sum of US$250,000, provided that the obligation to make this additional payment: 
  

 Settlement Agreement and Lockup - Page 4 









	 	(iii)	shall expire on the tenth anniversary of the date on which MAI becomes obligated to make the payment to NADI referred to in paragraph (a) immediately above;


  

	 	(iv)	shall not extend to any Current Property that MAI abandons or in respect of which MAI determines to allow its rights to lapse; 

  

	 	(v)	for greater certainty, shall extend to any Current Property that MAI sells; and 

  

	 	(vi)	shall only arise once, in respect of the first of the Current Properties to satisfy the conditions set out in clauses (i) or (ii) immediately above. 

  

	6.	Conditions 

  

	6.1.	This Agreement is conditional upon approval by the board of directors of MAI and approval by the independent directors of MAI. 

  

	6.2.	The parties agree that: 

  

	 	(a)	the provisions of Section 4 of this letter agreement take effect immediately after NADI receives notice of the approval referred to in section 6.1 and are not subject to any other
condition; and 

  

	 	(b)	the provision of Sections 1, 2 and 5 are subject to the condition in Section 6.1 and receipt by MAI of the approval of the TSX Venture Exchange (the TSXV) and, if required by the
TSXV, the approval of the shareholders of MAI. The parties agree to exercise all commercially reasonable efforts to obtain such approvals on a timely basis. 

  

	7.	General  

  

	7.1.	Any notice to be given hereunder shall be in writing and shall be delivered in person or transmitted by facsimile or other means of recorded electronic communication to the address
of each party show below next to their signature or to such other address or addresses as any such party may from time to time designate for itself by like notice. 

  
 Any such notice or other communication shall be deemed to have been given and received on the day on which it was delivered
or transmitted or, if such day is not a business day in the place of receipt, on the next following business day. 
  

	7.2.	The parties agree to execute and deliver all such further documents and to do all such other acts and things that may be necessary or desirable, or that another party may reasonably
request, from time to time in order to give effect fully to the provisions and intent of this letter agreement. 

  

	7.3.	This letter agreement shall be governed by the laws of Washington State. The parties hereto hereby attorn to the non-exclusive jurisdiction of the Courts of Washington State.


  

 Settlement Agreement and Lockup - Page 5 









	7.4.	This letter agreement shall enure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. No party
hereto may assign or transfer all or any part of its rights hereunder or any interest therein without the prior written consent of the other parties from whom the rights in question are derived, such consent not to be unreasonably withheld.


  

	7.5.	Time shall be of the essence of this letter agreement. 

  

	7.6.	This letter agreement may be signed 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. Executed copies of this letter agreement may be delivered by facsimile transmission and it shall not be necessary to confirm execution by delivery of originally executed documents. 

  

	7.7.	Each party shall pay any expenses incurred by it incident to this letter agreement and preparing to consummate the transactions provided for herein. 

  

 Settlement Agreement and Lockup - Page 6 









	7.8.	If the foregoing accurately sets forth the agreement we have reached, please sign a copy of this letter and return it to us. 

  
 Yours truly 
  

					
	MINERA ANDES INC.	  	 Address for Notice:
 3303 North Sullivan Road
 Spokane,
Washington
 USA 99216
 Fax: (509) 921-7325

	 	  	 	  
	 	  	 	  
	 By:
	  	 /s/ Allen V. Ambrose

	  
	 	  	 President
	  	 

  
 Date:   December 2, 2003 
  
 We agree to the foregoing: 
  

					
	N.A. DEGERSTROM, INC.	  	 Address for Notice:
 3303 N. Sullivan Road
 Spokane, WA 99216
 Fax: (509) 927-2010

	  
 By:
	  	  
 /s/ James A.
Fish

	  
	 	  	 Title: Vice President
	  
	 Date:
	  	 December 2, 2003
	  
		
	MINERA ANDES S.A.	  	 Address for Notice:
 c/o Minera Andes Inc.
 3303 N. Sullivan Road
 Spokane, WA 99216
 Fax: (509) 921-7325

	  
 By:
	  	  
 /s/ Brian
Gavin

	  
	 	  	 Title: Apoderado
	  
	 Date:
	  	 December 2, 2003, 2003
	  
		
	MINERA ANDES (CAYMAN) INC.	  	 Address for Notice:
 c/o Minera Andes Inc.
 3303 N. Sullivan Road
 Spokane, WA 99216
 Fax: (509) 921-7325

	  
 By:
	  	  
 /s/ Allen V.
Ambrose

	  
	 	  	 Title:
	  
	 Date:
	  	 December 2, 2003
	  

  

 Settlement Agreement and Lockup - Page 7 








 SCHEDULE A 
  
 Set forth below is a description of the current properties: 
  
 Properties are held either directly by Minera Andes S.A. (“MASA”) or indirectly
through MASA’s ownership of 49% of Minera Santa Cruz S.A. (“MSC”). MSC is the holding and operating company for the San José project, a joint venture between Minera Andes Inc. (“MAI”) and Mauricio Hochschild y
Compañia Limitada (“MHC”). The San José project includes the Huevos Verdes area. 
  

	1.	San Juan Province 

  
 The following properties are owned by Minera Andes S.A. 
  

	(a)	Cateos 

  

					
	 File Number

	  	Department

	  	Area (Hectares)


	 545.955-D-94
	  	Calingasta	  	7,200 has
	 545.957-D-94
	  	Calingasta	  	1,920 has
	 545.996-D-94
	  	Calingasta	  	4,900 has
	 545.997-D-94
	  	Calingasta	  	9,750 has
	 545.949-N-94
	  	Calingasta	  	8,800 has
	 545.995-N-94
	  	Calingasta	  	3,500 has

  

	(b)	Manifestations of Discovery 

  

					
	 File Number

	  	Department

	  	Area (Hectares)


	 520-0358-97
	  	Calingasta	  	4,980 has
	 520-0963-97
	  	Calingasta	  	1,200 has
	 520-0279-98
	  	Calingasta	  	2,098 has
	 520-0280-98
	  	Calingasta	  	1,320 has
	 0229-F-28
	  	Calingasta	  	4,987.5 has
	 0952-F-28
	  	Calingasta	  	7,62.5 has
	 0953-F-28
	  	Calingasta	  	1,000 has
	 0954-F-28
	  	Calingasta	  	1,000 has
	 0955-F-28
	  	Calingasta	  	1,000 has
	 0956-F-28
	  	Calingasta	  	1,000 has
	 0230-F-28
	  	Calingasta	  	3,500 has









	2.	Santa Cruz Province 

  

	(a)	Minera Andes S.A. 

  
 The following properties are owned by Minera Andes S.A. 
  

	i.	Cateos 

  

					
	 File Number

	  	Name

	  	Area (Hectares)


	 406081/MA/02
	  	Lago de Olín	  	1,400 has
	 406082/MA/02
	  	La Taba	  	2,000 has
	 406083/MA/02
	  	La Española	  	1,500 has
	 406084/MA/02
	  	El Meridiano	  	2,000 has
	 406085/MA/02
	  	Sierrra Morena	  	4,000 has
	 406086/MA/02
	  	San Agustín	  	3,900 has
	 406087/MA/02
	  	Las Lomas	  	2,400 has
	 406088/MA/02
	  	La Mata	  	5,000 has
	 406089/MA/02
	  	La Huella	  	3,445 has
	 406090/MA/02
	  	El Truma	  	2,450 has
	 406091/MA/02
	  	C° Mojon	  	5,850 has
	 406092/MA/02
	  	C° Dos Aguadas	  	3,420 has
	 406093/MA/02
	  	C° Botellón	  	2,000 has
	 406094/MA/02
	  	Bajo de los Calafates	  	1,500 has
	 406350/MA/02
	  	Oeste	  	5,067 has
	 406347/MA/02
	  	Este	  	4,746 has
	 407541/MA/03
	  	El Truma II	  	3,824 has

  

	ii.	Manifestations of Discovery 

  

					
	 File Number

	  	Name

	  	Area (Hectares)


	 411.338/MA/99
	  	Dos A	  	999.6 has
	 411.337/MA/99
	  	Dos B	  	999.6 has
	 411.336/MA/99
	  	Dos C	  	999.6 has
	 411.335/MA/99
	  	Dos D	  	501.2 has
	 412.847/MA/00
	  	Seis D	  	869.75 has
	 412.848/MA/99
	  	Siete B	  	750 has
	 414.783/MA/00
	  	Once D	  	900 has
	 413.101/MA/00
	  	Cuatro A	  	750 has
	 413.102/MA/00
	  	Cuatro B	  	750 has
	 413.103/MA/00
	  	Cuatro C	  	675 has
	 413.104/MA/00
	  	Nueve A	  	1.000 has
	 414.285/MA/00
	  	Ocho C	  	874 has
	 414.268/MA/00
	  	Nueve B	  	1.000 has
	 414.269/MA/00
	  	Nueve C	  	671.5 has
	 414.270/MA/00
	  	Nueve D	  	671.5 has
	 400.244/MA/01
	  	Seis E	  	900 has
	 400.245/MA/01
	  	Seis G	  	817 has
	 404.639/MA/01
	  	Cinco F	  	1,022 has
	 401.504/MA/01
	  	Cinco I	  	930 has









					
	 File Number

	  	Name

	  	Area (Hectares)


	 401.218/MA/01
	  	Dos H	  	911.35 has
	 401.219/MA/01
	  	Dos I	  	797.1 has
	 402.318/MA/01
	  	Seis H	  	994 has
	 402.316/MA/01
	  	Seis I	  	994 has
	 402.317/MA/01
	  	Seis J	  	887 has
	 414.525/MA/00
	  	Dos E	  	911.35 has
	 414.526/MA/00
	  	Dos F	  	990 has
	 414.524/MA/00
	  	Dos G	  	990 has
	 401.220/MA/01
	  	Dos J	  	900 has
	 413.099/MA/00
	  	Cinco B	  	950 has
	 413.100/MA/00
	  	Cinco C	  	490.6 has

  

	(b)	Minera Santa Cruz S.A. 

  
 The following properties are owned by Minera Santa Cruz S.A., which owns the following properties as part of the San José Project, a joint venture with Mauricio Hochschild y Compañía Limitada.

  

	i.	Cateos 

  

					
	 File Number

	  	Name

	  	Area (Hectares)


	 403089/MSC/01
	  	Cateo	  	10,200 has

  

	ii.	Manifestations of Discovery 

  

					
	 File Number

	  	Name

	  	Area (Hectares)


	 410089/MA/99
	  	Saavedra 5	  	800 has
	 410090/MA/99
	  	Saavedra 7a	  	1,000 has
	 410091/MA/99
	  	Saavedra 2a	  	1,000 has
	 410092/MA/99
	  	Saavedra 8	  	1,000 has
	 410093/MA/99
	  	Saavedra 1a	  	1,000 has
	 410094/MA/99
	  	Saavedra 6b	  	800 has
	 410095/MA/99
	  	Saavedra 4	  	800 has
	 410096/MA/99
	  	Saavedra 3	  	800 has
	 410411/MA/99
	  	El Pluma 1	  	750 has
	 410412/MA/99
	  	El Pluma E1	  	1,000 has
	 411331/MA/99
	  	Tres Colores B	  	998.5 has
	 411332/MA/99
	  	Tres Colores A	  	1,000 has
	 411333/MA/99
	  	Tres A	  	1,000 has
	 411334/MA/99
	  	Tres B	  	750 has
	 412277/MA99
	  	El Pluma 2	  	1,000 has
	 412278/MA/99
	  	El Pluma E2	  	1,000 has
	 412279/MA/99
	  	El Pluma 3	  	750 has
	 412280/MA/99
	  	El Pluma E3	  	800 has
	 412281/MA/99
	  	El Pluma 4	  	1,000 has
	 413095/MA/00
	  	Uno A	  	840 has
	 413096/MA/00
	  	Uno B	  	840. has
	 413097/MA/00
	  	Uno C	  	820.2 has
	 413395/MA/00
	  	Saavedra 10	  	1,000. has









					
	 File Number

	  	Name

	  	Area (Hectares)


	 413396/MA/00
	  	Saavedra 9	  	1,000. has
	 414264/MA/00
	  	Tres C	  	980. has
	 414265/MA/00
	  	Tres D	  	770.13 has
	 414266/MA/00
	  	Tres E	  	999.93 has
	 414267/MA/00
	  	Tres F	  	999.93 has
	 414639/MA/00
	  	Tres Colores G	  	397.5 has
	 414640/MA/00
	  	Tres Colores D	  	90. has
	 414641/MA/00
	  	Tres Colores F	  	901 has
	 414642/MA/00
	  	Tres Colores C	  	901 has
	 414643/MA/00
	  	Tres Colores E	  	901 has
	 400625/MA/01
	  	SaavNE1	  	1,000 has
	 400626/MA/01
	  	SaavNE2	  	1,000 has
	 400627/MA/01
	  	SaavNE3	  	500 has
	 400764/MA/01
	  	Uno F	  	594 has
	 400765/MA/01
	  	Uno D	  	840. has
	 400766/MA/01
	  	Uno E	  	840 has
	 401507/MA/01
	  	Uno G	  	1,103.7 has
	 401508/MA/01
	  	Uno H	  	560.4 has
	 401509/MA/01
	  	Uno I	  	560.4 has
	 401874/MA/01
	  	Saavedra 11	  	1,000 has
	 401875/MA/01
	  	Saavedra 12	  	1,000 has
	 401876/MA/01
	  	Saavedra 13	  	1,000 has
	 401877/MA/01
	  	Saavedra 14	  	1,000 has

  

	3.	Chubut Province 

  
 The following properties are owned by Minera Andes S.A. 
  

	(a)	Cateos 

  

					
	 File Number

	  	Name

	  	Area (Hectares)


	 13127/97
	  	La María	  	4,000 has
	 13309/98
	  	El Valle 2	  	2,750 has
	 13970/02
	  	El Triunfo	  	2,600 has
	 13971/02
	  	Los Zorros	  	3,998.5 has
	 13972/02
	  	Los Zorros II	  	4,805 has
	 13973/02
	  	El Montero	  	1,500 has
	 13974/02
	  	La Morena	  	2,430 has
	 13975/02
	  	La Morena Este	  	1,485 has
	 13976/02
	  	Cerro Negro Oeste	  	980 has
	 13977/02
	  	Cerro Negro Norte	  	1,482 has
	 13978/02
	  	Estancia Shaman	  	1,800 has
	 13979/02
	  	El Mogote	  	1,480 has

  

	(b)	Manifestations of Discovery 

  

					
	 File Number

	  	Name

	  	Area (Hectares)


	 13658/01
	  	La Maria I	  	1,600 has
	 13659/01
	  	La María II	  	1,600 has
	 13660/01
	  	La María III	  	1,600 has
	 13749/01
	  	Valle Uno a	  	625 has
	 13750/01
	  	Valle Uno b	  	625 has
	 13751/01
	  	Valle Uno c	  	625 has
	 13752/01
	  	Valle Dos a	  	900 has
	 13753/01
	  	Valle Dos b	  	900 has
	 13754/01
	  	Valle Dos c	  	900 has
	 13755/01
	  	Valle Dos d	  	100 has
	 13759/01
	  	Valle Uno d	  	625 has
	 13792/02
	  	La María IV	  	1,600 has
	 13793/02
	  	La María V	  	1,600 has
	 13794/02
	  	La María VI	  	1,600 has
	 13796/02
	  	Valle Dos e	  	900 has
	 13797/02
	  	Valle Dos f	  	900 has
	 13798/02
	  	Valle Dos g	  	900 has
	 14088/03
	  	Valle Dos h	  	1,600 has
	 14089/03
	  	Valle Dos i	  	400 has