Document:

McDonough Employment Agreement

Exhibit 10.1

EMPLOYMENT AGREEMENT 

        This
Agreement, made the 14th day of March, 2005, is effective as of January 1,
2005, by and between Coventry Health Care, Inc., a Delaware corporation (the
“Company”), and Thomas P. McDonough (the “Executive”). 

        WHEREAS,
the Company employed the Executive as its Executive Vice President and Chief Operating
Officer pursuant to an Employment Agreement dated February 6, 2004, and the parties wish
to amend the terms of such employment as set forth herein. 

        NOW,
THEREFORE, in consideration of the mutual covenants contained in this Employment Agreement
(“Agreement”), the parties hereby agree as follows: 

     1.    
          TERM AND DUTIES 

        1.1
The term of this Agreement commenced as of January 1, 2005, shall continue through
December 31, 2007 (the “Initial Term”), and will continue on a year-to-year
basis thereafter (the “Renewal Term”), until the Executive’s employment is
terminated as outlined in Section 4 herein. 

        1.2
Executive shall serve as President, Coventry Health Care, Inc., and President and Chief
Executive Officer, First Health Group Corporation, shall report to the Chief Executive
Officer, Coventry Health Care, Inc., and shall be responsible for broad executive
responsibilities, including, but not limited to, the establishment and implementation of
policies and directives, formulation of company goals and objectives, effective management
of employees, and such other powers and duties normally associated with such position or
as may be delegated or assigned to the Executive by the Company’s Chief Executive
Officer. During the Initial or Renewal Term of the Agreement, the Executive shall also
serve without additional compensation in such other offices of the Company or its
subsidiaries or affiliates to which he may be elected or appointed. 

     2.    
          COMPENSATION AND BENEFITS 

        2.1
The Company shall pay the Executive a base salary (“Base Salary”) of not less
than Eight-Hundred Fifty Thousand Dollars ($850,000) per annum, subject to applicable
withholdings. The Base Salary shall be payable according to the customary payroll
practices of the Company. The Base Salary shall be reviewed annually and shall be subject
to increase from time to time. 

        2.2
The Executive shall be eligible for an annual bonus (“Bonus”). In addition,
Executive shall be eligible for a 2005 and a 2006 Special Performance Bonus. All bonuses
are in accordance with the Company’s 2004 Incentive Plan. 

        2.3
The terms and conditions of all stock options and restricted share awards previously
granted to Executive shall remain in full force and effect. 

        2.4 The Executive will be entitled to
participate in all employee benefit plans or programs and receive all benefits and
perquisites to which any salaried employee is eligible under any existing or future plan
or program for salaried employees, including, without limitation, all plans developed for
executive officers of the Company. These plans or programs may include group
hospitalization, health care, dental care, vision care, life or other insurance, tax
qualified pension, car allowance, savings, thrift and profit sharing plans, sick leave
plans, travel or accident insurance, disability insurance, and contingent compensation
plans, including capital accumulation programs, deferred compensation plans, restricted
stock programs, stock purchase programs and stock option plans. Nothing in this Agreement
will preclude the Company from amending or terminating any of the plans or programs
applicable to salaried employees or executive officers. 

        2.5       The Executive will be entitled to four (4) weeks of annual paid vacation.

        2.6
The Company will reimburse the Executive for all reasonable travel and other expenses
incurred by the Executive in connection with the performance of his duties upon proper
documentation in accordance with Company policies. In addition, Executive shall be
entitled to a discretionary monthly car allowance, payable on a grossed-up basis. 

        2.7
The Executive will be entitled to 20 hours of personal use of the Company plane and full
reimbursement of the associated additional income tax liability. 

         3.       
          DEATH AND DISABILITY COMPENSATION 

        3.1
In the event of the Executive’s death during the Initial or Renewal Term, the
Agreement terminates and all payments under the Agreement shall cease as of the date of
death, except for the following benefits to be paid to the Executive’s beneficiaries: 

                    (a)    
          any earned but unpaid base salary and a lump sum payment equal to the average
          annual bonus compensation for the two (2) calendar years immediately preceding
          the death of Executive; 

                    (b)    
          for twenty-four (24) months following the date of the Executive’s death,
          the Company shall pay the cost of medical, dental, and vision insurance premiums
          as in effect at the date of the Executive’s death, to the Executive’s
          designated beneficiary, subject to a formal election by the beneficiary; 

                    (c)    
          the exercisability of stock options granted to the Executive shall be governed
          by any applicable stock option agreements and the terms of the respective stock
          option plans; and 

                    (d)    
          the Executive’s designated beneficiary will be entitled to receive the
          proceeds of any life or other insurance or other death benefit programs provided
          or referred to in this Employment Agreement. 

        3.2
Notwithstanding the short-term disability of the Executive, the Company will continue to
pay the Executive pursuant to Section 2 hereof during the Initial or Renewal Term, unless
the Executive’s employment is earlier terminated in accordance with this Agreement.
In the event the Executive becomes disabled (as defined by the Company’s long-term
disability plan), the Executive’s employment will be termed and the Company will pay
the Executive amounts equal to the following: 

                    (a)    
          any earned but unpaid Base Salary and a lump sum payment equal to the average
          annual Bonus for the two (2) calendar years immediately preceding the year of
          termination due to disability; 

                    (b)    
          for twenty-four (24) months following the date of the Executive’s
          termination due to disability, the Company shall pay for the cost of the
          Executive’s medical, dental, and vision insurance premiums as in effect at
          the date of the Executive’s termination, subject to a formal election by
          the Executive; and 

                    (c)    
          the Executive will receive a monthly payment equal to 60% of the
          Executive’s pre- disability earnings (as defined by the qualified long-term
          disability plan) less any monthly benefit paid under the qualified long-term
          disability program. Such payments shall continue to cessation of payments under
          the Company’s qualified long-term disability program. 

                    (d)    
          the Executive will receive twelve (12) months additional vesting credit for all
          stock options and restricted stock awards. 

        3.3
During the period the Executive is receiving payments following his disability and as long
as he is physically and mentally able to do so, the Executive will furnish information and
assistance to the Company and from time to time will make himself available to the Company
to undertake assignments consistent with his position or prior position with the Company
and his physical and mental health. 

        3.4
For purposes of this Agreement, the term “disabled” or “disability”
will have the same meaning as is attributed to such term, or any substantially similar
term, in the Company’s long-term disability income plan as in effect from time to
time. The Company’s group long-term disability policy in existence at the time of
disability shall be considered to be a part of this Agreement. 

         4.       
          TERMINATION OF EMPLOYMENT 

        4.1
The Company may terminate this Agreement with or without cause at any time during the term
of this Agreement with ninety (90) days prior notice (the “Notice”). . However,
except in the case of the two year period following a Change in Control (as hereinafter
defined), if the Executive suffers a Termination Without Cause (hereinafter defined) or a
Constructive Termination (as hereinafter defined), the Company will continue to pay the
Executive the following: 

                    (a)    
          for a period of twelve (12) months after Termination Without Cause or
          Constructive Termination, a monthly amount equal to 100% of the sum of the
          Executive’s combined (i) Base Salary as in effect at the time of the
          termination and (ii) the average Bonus for the two (2) calendar years
          immediately preceding the year of termination, divided by twelve (12); and 

                    (b)    
          for twelve (12) months following such Termination Without Cause or Constructive
          Termination, the Company shall pay the cost of the Executive’s medical,
          dental, and vision insurance premiums as in effect at the date of termination,
          subject to a formal election by the Executive. However, if Executive obtains
          employment with another employer during such twelve (12) month period, such
          coverage will cease as of the date Executive, his spouse and family can be
          covered under the plans of the new employer without exclusion for preexisting
          conditions, if earlier than the end of the 12-month period; and 

                    (c)       
          the Executive will receive twelve (12) months additional vesting credit for all
          stock options and restricted stock awards. 

        4.2
If the Executive suffers a Termination Without Cause or Constructive Termination within
two (2) years following a Change in Control, the Company will pay to the Executive the
following: 

                    (a)    
          in a lump sum upon such termination an amount equal to the sum of (i) 200% of
          the Executive’s combined (A) Base Salary as in effect at the time of the
          termination and (B) average Incentive Bonus for the two (2) calendar years
          immediately preceding the year of termination, and (ii) to the extent that such
          foregoing amount or any other payment in the nature of compensation (within the
          meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and
          the regulations promulgated thereunder (“Section 280G”)) to or for the
          benefit to the Executive (or any part of such amount or other payment)
          constitutes an “excess parachute payment” within the meaning of
          Section 280G, the amount, if any, of (A) such “excess parachute
          payment” multiplied by a fraction, the numerator of which is the number one
          (1.00) and the denominator of which is (I) the number (1.00) minus (II) the
          effective tax rate under Section 280G applicable to the Executive expressed as
          decimal, minus (B) the amount of such “excess parachute payment”; 

                    (b)    
          for twenty-four (24) months following such Termination Without Cause or
          Constructive Termination following a Change of Control, the Company shall pay
          for the cost of the Executive’s medical, dental, vision insurance premiums
          as in effect at the date of termination, subject to a formal election by the
          Executive; and 

                    (c)    
          all stock options and all restricted stock granted to the Executive shall vest
          in full upon a Change of Control. 

        4.3
Executive may terminate his employment hereunder at any time during the term of this
Agreement with notice (as defined in Section 4.1 herein). If the Executive suffers a
Termination with Cause or the Executive terminates his employment with the Company not due
to a Constructive Termination, death or disability (as defined in Section 3.4) (a
“Voluntary Termination”), then the Company will not be obligated to pay the
Executive any amounts of compensation or benefits following the date of termination,
except earned but unpaid Base Salary through the date of termination, which will be paid
in accordance with standard company procedures. The exercisability of stock options
granted to the Executive shall be governed by any applicable stock option agreements and
plans. 

        4.4     For purposes of this Employment Agreement, the following terms have the following meanings:

                    (a)    
          A “Change in Control” shall occur if at any time, substantially all of
          the assets of the Company are sold or transferred by sale, merger or otherwise,
          to an entity which is not a direct or indirect subsidiary of the Company, or if
          any “person” (as such term is used in Sections 13(d) or 14 (d) of the
          Securities Exchange Act of 1934, as amended) is or becomes the beneficial owner,
          directly or indirectly, of securities of the Company representing 35% or more of
          the combined voting power of the then existing outstanding securities of the
          Company. 

                    (b)    
          “Constructive Termination” means termination by the Executive which
          follows (i) a reassignment of duties, responsibilities, title, or reporting
          relationships that are not at least the equivalent of his then current position
          as set forth in Section 1.2 or a material reduction in the compensation and
          benefits provided herein, or (ii) the intentional or material breach by the
          Company of this Agreement, or (iii) a reassignment, after a Change of Control,
          to a geographic location more than fifty miles from Bethesda, Maryland. The
          Executive shall have a period of ninety (90) days after termination of his
          employment to assert against the Company that he suffered a Constructive
          Termination, and after the expiration of such ninety (90) day period, the
          Executive shall be deemed to have irrevocably waived the right to such
          assertion. 

                    (c)    
          “Termination With Cause” means termination by the Company, acting in
          good faith, by written notice to the Executive specifying the event relied upon
          for such termination, due to; (i) the Executive’s indictment or conviction
          of a felony, (ii) the Executive’s intentional perpetration of a fraud,
          theft, embezzlement or other acts of dishonesty, (iii) the Executive’s
          intentional breach of a trust or fiduciary duty which materially adversely
          affects the Company or its shareholders. 

                    (d)    
          “Termination Without Cause” means termination by the Company other
          than due to the Executive’s death or disability or Termination With Cause. 

     5.    
          OTHER DUTIES OF THE EXECUTIVE 

        5.1 The Executive shall devote
substantially all of his working time to the business of the Company and during the Term
shall not take, directly or indirectly, an active role in any other business without the
prior written consent of the Company; but except as provided in Section 5.3, this Section
shall not prevent the Executive from serving as a director of other entities not
affiliated with the Company, from making real estate or other investments of a passive
nature or from participating in the activities of a charitable organization where such
participation does not adversely affect the Executive’s ability to perform his duties
under this Agreement. 

        5.2 The Executive will, upon
reasonable notice, during or after the Term of this Employment Agreement, furnish
information as may be in his possession and cooperate with the Company as may reasonably
be requested in connection with any claims or legal actions in which the Company is or may
become a party. The Executive shall receive reasonable compensation for the time expended
by him pursuant to this Section 5.2 after the Term. 

        5.3 The Executive acknowledges that
certain information pertaining to the business and operations of the Company such as
strategic plans, product development, financial costs, pricing terms, sales data or new or
developing business opportunities (“Confidential Information”), is confidential
and is a unique and valuable asset of the Company. Access to and knowledge of this
Confidential Information are essential to the performance of the Executive’s duties
under this Agreement. The Executive will not during the term of this Agreement or
following termination of his employment except to the extent reasonably necessary in the
performance of his duties under this Agreement, give to any person, firm, association,
corporation or governmental agency any Confidential Information except as required by law.
The Executive will not make use of this Confidential Information for his own purposes or
for the benefit of any person or organization other than the Company. The Executive will
also use his best efforts to prevent the disclosure of this Confidential Information by
others. All records, memoranda, etc. relating to the business of the Company whether made
by the Executive or otherwise coming into his possession will remain the property of the
Company. 

        5.4 The Executive will not Compete
with the Company (as hereinafter defined) at any time while he is employed by the Company.
Except after a Change in Control or after non-renewal under Section 1.1, in the event of
Termination Without Cause or Constructive Termination pursuant to Section 4.1, the
Executive will not Compete with the Company for a period of one (1) year from the date of
such termination. In the event of a termination after a Change in Control that gives rise
to payments to Executive under Section 4.2, the Executive will not Compete with the
Company for one (1) year from the date of termination. In the event of a Voluntary
Termination in which the Executive only receives payment as defined under Section 4.3, or
which follows a Company non-extension notice under Section 1.1, there will be no
restriction on the Executive’s right to Compete with the Company after the date his
employment terminates. For the purposes of this Section 5.4, the term “Compete with
the Company” means action by the Executive, direct or indirect, either as an officer,
director, stockholder, owner, partner, employee or in any other capacity, resulting in the
Executive having any legal or equitable ownership or other financial or non-financial
interest in or employment with, any HMO, managed care or health insurance business within
a fifty mile radius of any location where the Company or any subsidiary or affiliate of
the Company conducts such business at the date of a termination of the Executive’s
employment; provided, however, that the term “Compete with the Company” shall
not include ownership (without any more extensive relationship) of a less than a five
percent (5%) interest in any publicly-held corporation or other business entity. The
Executive acknowledges that the covenants contained herein are reasonable as to geographic
and temporal scope. The Executive acknowledges that his breach or threatened or attempted
breach of any provision of Section 5.4 may cause irreparable harm to the Company not
compensable in monetary damages and that the Company may be entitled, in addition to all
other applicable remedies, to a temporary and permanent injunction and a decree for
specific performance of the terms of Section 5.4. 

     6.    
          INDEMNIFICATION OF EXECUTIVE 

        6.1 The Company shall indemnify the
Executive and shall reimburse the Executive’s expenses under the circumstances
described, and to the maximum extent provided under the mandatory and the permissive
indemnification and expense reimbursement provisions of Delaware law. The provisions of
this Section 6.1 shall continue in full force and effect after Executive ceases to serve
as an officer, director, employee or in any other capacity with the Company or any of its
affiliates, and shall inure to the benefit of his heirs, executors or administrators. 

     7.    
          MISCELLANEOUS 

        7.1 This Agreement contains the
entire understanding between the Company and the Executive with respect to the subject
matter and supersedes any prior employment or severance agreements between the Company and
its affiliates, and the Executive. 

        7.2 This Agreement may not be
modified or amended except in writing signed by the parties. No term or condition of this
Employment Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver shall operate only as to a specific term or condition waived
and will not constitute a waiver for the future or act on anything other than that which
is specifically waived. 

        7.3 Should any part of this Agreement
be declared invalid for any reason, such invalidity shall not affect the validity of any
remaining portion hereof and such remaining portion shall continue in full force and
effect as if this Employment Agreement had been originally executed without including the
invalid part. Should any covenant of this Employment Agreement be unenforceable because of
its geographic scope or term, its geographic scope or term shall be modified to such
extent as may be necessary to render such covenant enforceable. 

        7.4 Titles and captions in no way
define, limit, extend or describe the scope of this Agreement nor the intent of any
provision thereof. 

        7.5 This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. 

        7.6 This Employment Agreement has
been executed and delivered in the State of Maryland and its validity, interpretation,
performance and enforcement shall be governed by the laws of that state. Any dispute among
the parties hereto shall be settled by arbitration in Bethesda, Maryland, in accordance
with the rules then obtaining of the American Arbitration Association and judgment upon
the award rendered may be entered in any court having jurisdiction thereof. All provisions
hereof are for the protection and are intended to be for the benefit of the parties hereto
and enforceable directly by the binding upon each party. Each party hereto agrees that the
remedy at law of the other for any actual or threatened breach of this Employment
Agreement would be inadequate and that the other party shall be entitled to specific
performance hereof or injunctive relief or both, by temporary or permanent injunction or
such other appropriate judicial remedy, writ or orders as may be decided by a court of
competent jurisdiction in addition to any damages which the complaining party may be
legally entitled to recover. 

        7.7 All notices, requests, consents
and other communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first-class postage prepaid by registered mail, return
receipt requested, or when delivered if by hand, overnight delivery service or confirmed
facsimile transmission to the following: 

          		    (i)       
               If to the Company, at 6705 Rockledge Drive, Suite 900, Bethesda, Maryland,
               20817, Attention: Chairman of the Compensation Committee, or at such other
               address as may have been furnished to the Executive by the Company in writing;
               or 

               

          		    (ii)       
               If to the Executive, at 6705 Rockledge Drive, Suite 900, Bethesda, Maryland,
               20817 or ______________________________________________________ or such other
               address as may have been furnished to the Company by the Executive in writing. 

               

        7.8      This Employment Agreement shall be binding on the parties' successors, heirs and assigns.

        IN
WITNESS WHEREOF, the undersigned have executed this Employment Agreement as of the date
first above written. 

	COVENTRY HEALTH CARE, INC.	EXECUTIVE:

 

	By:         /s/ Dale B. Wolf
	              /s/ Thomas P. McDonough

	             Dale B. Wolf	             Thomas P. McDonough
	             Chief Executive OfficerFiled by Automated Filing Services Inc. (604) 609-0244 - Coastport Capital Inc. - Exhibit 10.1

 

 EXHIBIT 10-1 

 RADIUS GOLD INC.

  830 – 355 Burrard Street 

  Vancouver, BC 

  V6C 2G8 

 February 11, 2005 

 Coastport Capital Inc. 

  13492 Marine Drive 

  Surrey, BC V4A 1G2 

 Dear Sirs: 

	 Re:  	 Option Agreement (San Ramon Project – Nicaragua)
      (the  
	  	“Agreement”) made as of the 20th day
      of July, 2004 

 We hereby agree to waive the requirement set out in Section
  3.1(b) of the Agreement to incur exploration expense of at least $330,000
  Cdn. in aggregate on the Licenses by February 1, 2005. 

 All of the other terms and conditions contained in the Agreement
  shall remain unchanged.

 Yours truly,

 RADIUS GOLD INC. 

 “Simon Ridgway” 

 Simon Ridgway 

  President 

 OPTION AGREEMENT

  (San Ramon Project - Nicaragua) 

Made as of the 20th day of July, 2004 

BETWEEN: 

  
    
       RADIUS GOLD INC., a corporation duly amalgamated
        pursuant to the laws of British Columbia and having an office at 830-355
        Burrard Street, Vancouver, BC V6C 2G8 

        (the “Optionor”) 

    

  

AND: 

  
    
       COASTPORT CAPITAL INC., a corporation duly incorporated
        pursuant to the laws of Alberta and having an office at 13492 Marine Drive,
        Surrey, BC V4A 1G2 

        (the “Optionee”) 

    

  

WHEREAS: 

	 A.      	 The Optionor, pursuant to the terms of an Option
        Agreement dated October 1, 2003 (the “Underlying Mena Option
        Agreement”) with Frank Mena (the “Underlying Optionor”)
        has the right to acquire a 70% interest in various exploration concessions
        and the applications for exploration concessions, including, but not restricted
        to, a 70% interest (the “Underlying Interest”) in the
        exploration concessions and the applications for exploration concessions
        listed in Schedule “A” to this Agreement (the “Licenses”
        and also herein called the “San Ramon Project”), all of which
        are located in north-central Nicaragua, Central America, as more particularly
        described in Schedule “A”; 

	 
	 B.      	 Subject to the terms of the Underlying Mena Option
        Agreement, the Optionor has exclusive possession of and the right to explore
        and mine the Licenses free and clear of all claims, liens or encumbrances;
        and 

	 
	 C.      	 The parties now wish to enter into an agreement
        whereby the Optionor will grant an option to the Optionee to purchase
        indirectly through the ownership in Newco (unless otherwise agreed) 50%
        of the right, title and interest in and to the Licenses (being approximately
        71.43% of the Underlying Interest) on the terms and conditions as hereinafter
        set forth; 

 THE PARTIES AGREE AS FOLLOWS: 

	1. 	INTERPRETATION 
	 	 	 
	1.1	 In this Agreement: 
	 	 	 
	 	 (a)      	 “Commercial Production” means the commercial
        exploitation of mineral products from the Licenses or any part as a mine
        subsequent to a production program, but does not include milling for the
        purpose of testing or milling by a pilot plant. Commercial Production
        shall be deemed to have commenced: 

 - 2 - 

	 	 	 (i)     
      
	 if a plant is located on the Licenses, on the first
        day following the first period of 45 consecutive days during which mineral
        products have been produced from the Licenses at an average rate not less
        than 80% of the initial design rated capacity of the facilities, or 

	 
	 	 	 (ii)      
	 if no plant is located on the Licenses, on the first
        day of the month following the first period of 45 consecutive days during
        which mineral products have been shipped from the Licenses on a reasonably
        regular basis for the purpose of earning revenue; 

	 
	 	 (b)      	 “Defaulting Party” has that
        meaning set out in Subsection 18.1; 

	 
	 	 (c)      	 “Dollars ($)” means legal
        currency of the United States; 

	 
	 	 (d)      	 “Exchange” means the TSX Venture
        Exchange; 

	 
	 	 (e)      	 “Holdco” has that meaning
        as set out in Subsection 6.1(a); 

	 
	 	 (f)      	 “Intervening Event” has that
        meaning as se out in Subsection 22.1; 

	 
	 	 (g)      	 “Licenses” means those exploration
        concessions and applications for exploration concessions set out in Schedule
        “A” of this Agreement and includes any mineral licenses covering
        any portion of the ground currently covered by the Licenses which may
        have been re-acquired by the Optionee or its successors, assigns or associates
        as a result of any of the Licenses having been previously abandoned; 

	 
	 	 (h)      	 “Newco” has that meaning set
        out in Subsection 6.1(a); 

	 
	 	 (i)      	 “Nominee Agreement” is an
        agreement dated October 1, 2003 between the Optionor and Intima Management
        N.V., a copy of which forms Schedule “C” to this Agreement;
      

	 
	 	 (j)      	 “Option” has that meaning
        set out in Subsection 3.1; 

	 
	 	 (k)      	 “Qualifying Transaction” means
        that term as defined in Policy 2.4 of the Exchange’s Corporate Finance
        Manual; 

	 
	 	 (l)      	 “Royalty” has that meaning
        set out in the Underlying Option Agreement; 

	 
	 	 (m)      	 “San Ramon Project” has that
        meaning set out in Recital “A” to this Agreement; 

	 
	 	 (n)      	 “Underlying Interest” has
        that meaning set out in Recital “A” to this Agreement; 

	 
	 	 (o)      	 “Underlying Mena Option Agreement”
        has that meaning set out in Recital “A” to this Agreement
        and a copy of same is attached hereto as Schedule “D” to this
        Agreement; and 

	 
	 	 (p)      	 “Underlying Optionor” has
        that meaning set out in Recital “A” to this Agreement. 

- 3 - 

	 2.      	 REPRESENTATIONS AND WARRANTIES
      

	 
	 2.1      	 The Optionee represents and warrants to
        the Optionor that: 

	 
	 	 (a)     
      
	 it is a body corporate duty incorporated, organized,
        amalgamated and validly subsisting under the laws of the jurisdiction
        of its amalgamation; 

	 
	 	 (b)      
	 it has full power and authority to carry on its
        business and to enter into this Agreement and any agreement or instrument
        referred to or contemplated by this Agreement; 

	 
	 	 (c)      
	 neither the execution and delivery of this Agreement
        nor any of the agreements referred to herein or contemplated hereby, nor
        the consummation of the transactions hereby contemplated will conflict
        with, result in the breach of or accelerate the performance required by
        any agreement to which the Optionor is a party or by which it is bound;
      

	 
	 	 (d)      
	 the execution and delivery of this Agreement and
        the agreements contemplated hereby will not violate or result in the breach
        of the laws of any jurisdiction applicable or pertaining thereto; 

	 
	 	 (e)      
	 effective at the open of the market on February
        16, 2004, the Optionee transferred to NEX from Tier 2 of the Exchange,
        and trading was reinstated in the securities of the Optionee; 

	 
	 	 (f)      
	 the trading in the shares of the Optionee is now
        halted in accordance with Exchange requirements; and 

	 
	 	 (g)      
	 the Optionee is required to complete a reactivation,
        by way of a Qualifying Transaction, which meets the applicable Exchange
        policies. 

	 
	 2.2      	 The Optionor represents and warrants to
        the Optionee: 

	 
	 	 (a)      
	 it is a body corporate duly incorporated and validly
        subsisting under the laws of British Columbia; 

	 
	 	 (b)      
	 the Licenses have been duly and validly located,
        staked and recorded, are accurately described in Schedule “A”,
        are presently in good standing under the laws of the jurisdiction in which
        they are located and, except as set forth herein, are free and clear of
        all liens, charges and encumbrances; 

	 
	 	 (c)      
	 the Optionor is the sole beneficial owner of an
        exclusive right to acquire the Underlying Interest in and to the Licenses
        by acquiring 70% of the issued and outstanding shares of Holdco, to be
        the sole owner of a Newco to which title to the Licences is to be transferred
        upon the exercise of the Option), subject to the right of the Underlying
        Optionor to convert his remaining 30% interest in the Licenses into a
        4% Royalty (as that term is defined in the Underlying Mena Option Agreement,
        in which case the Optionor will have the right to acquire 100% of the
        shares of Holdco), and has the exclusive right to enter into this Agreement
        and all necessary authority to dispose of a 50% interest in and to the
        Licenses in accordance with the terms of this Agreement; 

	 
	 	 (d)      
	 the Optionor is not in default of the Underlying
        Mena Option Agreement; and specifically the Optionor has paid those amounts
        required pursuant to sections 4.3 and 4.4(a) thereof; 

 - 4 - 

	 	 (e)      	 no person, firm or corporation has any proprietary
        or possessory interest in the Licenses other than the Optionor and the
        Underlying Optionor and no person is entitled to any royalty or other
        payment in the nature of rent or royalty on any diamonds, minerals, ores,
        metals or concentrates or any other such products removed from the Licenses
        (except the 4% Royalty payable to the Underlying Optionor if he converts
        his 30% interest into the 4% Royalty, in accordance with Section 5.3 of
        the Underlying Mena Option Agreement and except the royalty payable to
        the government according to the Mining Law of Nicaragua, as disclosed
        in Subsection 3.2(b) of the Underlying Mena Option Agreement; 

	 
	 	 (f)      	 there are no other outstanding agreements or options
        to acquire or purchase any interest or any right in or to the Licenses,
        and no person has any royalty or other interest whatsoever in the Licenses
        or any production there from except as referred to in herein and applicable
        government royalties, fees, taxes or charges; 

	 
	 	 (g)      	 the Optionor has the right to dispose of all or
        a portion of the Underlying Interest in accordance with this Agreement,
        subject to the terms and conditions set out in Section 7 of the Underlying
        Mena Option Agreement; 

	 
	 	 (h)      	 the Nominee Agreement was entered into pursuant
        to the terms of the Underlying Mena Option Agreement and is in good standing
        and in full force and effect; and 

	 
	 	 (i)      	 effective at 12:01 am July 1, 2004, PilaGold Inc.
        (formerly Pillar Resources Inc.) amalgamated with Radius Explorations
        Ltd. and continued as one company named Radius Gold Inc.; and 

	 
	 	 (j)      	 to the best knowledge of the Optionor, the term
        “Transfer Date” as it is defined in the Underlying Mena Option
        Agreement means a date not earlier than February 6, 2004. 

	 
	 2.3      	 The representations and warranties hereinbefore
        set out are conditions on which the parties have relied in entering into
        this Agreement and will survive the acquisition of any interest in the
        Licenses by the Optionee and each party will indemnify and save the other
        party harmless from all loss, damage, costs, actions and suits arising
        out of or in connection with any breach or any representation, warranty,
        covenant, agreement or condition made by the other party and contained
        in this Agreement. 

	 
	 3.      	 GRANT OF OPTION TO PURCHASE 

	 
	 3.1      	 Subject to Section 4.1 the Optionor hereby
        grants to the Optionee the exclusive and irrevocable option (the “Option”)
        to acquire, free of all liens, charges, encumbrances, claims or rights
        of others, an undivided 50% right, title and interest in and to the Licenses,
        exercisable by the Optionee: 

	 
	 	 (a)      	 incurring exploration expense of at least $200,000
        Cdn. on the Licenses by December 1, 2004; 

	 
	 	 (b)      	 incurring exploration expense of at least $330,000
        Cdn. In aggregate on the Licenses by February 1, 2005; 

	 
	 	 (c)      	 incurring exploration expense of at least $1,000,000
        in aggregate on the Licenses by December 31, 2005; and 

 - 5 - 

	 	 (d)      
	 incurring exploration expense of at least $2,000,000
        in aggregate on the Licenses by July 1, 2006. 

	 
	 4.      	 CONDITIONS OF THE OPTIONEE - QUALIFYING
        TRANSACTION & FINANCING 

	 
	 4.1      	 The granting of the Option by the Optionor
        to the Optionee is subject to: 

	 
	 	 (a)     
      
	 receipt of written notice from the Exchange to the
        Optionee on or before September 30, 2004, unless otherwise agreed by the
        parties, that the Exchange has accepted for filing all material amounting
        to a Qualifying Transaction including the granting of the Option. The
        parties will use their collective best efforts to obtain such approval
        as expeditiously as is reasonably possible; 

	 
	 	 (b)      
	 the Optionee having exploration funds of at least
        $500,000 Cdn available at the time the Optionee receives Exchange
        approval to the Qualifying Transaction; 

	 
	 	 (c)      
	 pursuant to Article 7 of the Underlying Mena Option
        Agreement, the Underlying Optionor having consented to proposed transfer
        to the Optionee; and 

	 
	 	 (d)      
	 pursuant to Section 7.4 of the Underlying Mena Option
        Agreement, the Optionee having covenanted to and agreed to be bound by
        the Underlying Mena Option Agreement with respect to the San Ramon Project
        only. 

	 
	 5.      	 EXERCISE OF OPTION 

	 
	 5.1      	 Upon the completion of the incurrence
        of exploration expense set out in Subsection 3.1 the Option shall be exercised
        and the Optionee will, subject to the right of the Underlying Optionor
        to receive the Royalty, own 50% of the right, title and interest in and
        to the Licenses. 

	 
	 6.      	 TRANSFER OF TITLE 

	 
	 6.1      	 Upon completion of the exercise of the
        Option, the Optionor, will either: 

	 
	 	 (a)      
	 cause a new corporation to be incorporated in Aruba
        (“Holdco”) and a new corporation to be incorporated
        in Nicaragua (“Newco”), cause all of the shares in
        Newco to be issued to Holdco and cause all of the interest in the Property
        of the Underlying Optionor and the Optionor to be transferred to Newco
        and have issued to or transferred to the Optionee such percentage interest
        in Holdco such that Optionee will own a 50% indirect interest in the Licenses;
        or 

	 
	 	 (b)      
	 with the written consent of the Optionee (and the
        written consent of the Underlying Optionor, if at such time either the
        Optionee or Optionor are of the opinion that such consent is then necessary)
        deliver to the Optionee a duly executed transfer in registrable form of
        50% right, title and interest in and to the Licenses in favour of the
        Optionee which the Optionee will be entitled to register against title
        to the Licenses. 

	 
	 7.      	 OPTION ONLY 

	 
	 7.1      	 Except for incurring the exploration expense
        set out in Subsection 3.1(a) of this Agreement, which is a commitment
        of the Optionee and except for the exploration expense set out in Subsection
        3.1(b), if and only if the Optionee has not advised the Optionor in writing
        by 

 - 6 - 

	 	 December 1, 2004 that the Optionee will
        not be incurring the exploration expense set out in Subsecction 3.1(b)
        this Agreement is for an option only, and the Optionee is not obliged
        to make any payment of money to the Optionor, issue and deliver any shares
        in the capital of the Optionee or incur exploration expense on the Licenses.
      

	 
	 7.2      	 Subject to Section 7.1, the Optionor hereby
        agrees that the Optionee may terminate the Option at any time and the
        Optionee hereby agrees that, upon any termination of the Option by it,
        the Licenses will be unencumbered and in good standing. The Optionee will
        pay all taxes and assessments required to maintain the Licenses in good
        standing during the term of the Option. Upon termination the Optionee
        shall have no further obligations to incur exploration expenditures on
        the Licenses. 

	 
	 8.      	 JOINT VENTURE 

	 
	 8.1      	 The Optionor will use its best efforts
        to cause the Underlying Optionor to convert his 30% interest in the Licenses
        to a royalty. 

	 
	 8.2      	 In the event that the Underlying Optionor
        does not convert his interest into a royalty, then, the Optionor, the
        Optionee and the Underlying will enter into the form of shareholder agreement
        required by Subsection 5.4(a) of the Underlying Mena Option Agreement,
        unless each of the Optionor, the Optionee and the Underlying Optionor
        have agreed to enter into a joint venture. 

	 
	 8.3      	 Subject to either (a) the Underlying Optionor
        converting his 30% interest into a royalty and the Optionor and the Optionee
        agreeing to enter into a joint venture (rather than a shareholders agreement
        as anticipated by the Underlying Mena Option Agreement) or (b) the Underlying
        Optionor, the Optionor and the Optionee agreeing to enter into a joint
        venture (rather than a shareholders agreement as anticipated by the Underlying
        Mena Option Agreement), upon the Optionee earning its interest under Section
        5.1, all operations shall be conducted as a joint venture in accordance
        with a Joint Venture Agreement the salient provisions of which are set
        forth in Schedule “B”. The establishment of the Joint Venture
        Agreement and the assignment of interests in the Licenses in accordance
        with the terms of this Agreement shall be effected in the manner as may
        be determined by the Optionor and the Optionee to be the most advantageous
        having regard to the mining and taxation laws applicable at that time.
      

	 
	 9.      	 RIGHT OF ENTRY 

	 
	 9.1      	 During the currency of this Agreement,
        the Optionee, its employees, agents and independent contractors, will
        have the sole and exclusive right to: 

	 
	 	 (a)     
      
	 enter upon the Licenses; 

	 
	 	 (b)      
	 have exclusive and quiet possession thereof, 

	 
	 	 (c)      
	 do such prospecting, exploration, development or
        other mining work thereon and thereunder as the Optionee in its sole discretion
        may consider advisable; and 

	 
	 	 (d)      
	 bring and erect upon the Licenses such facilities
        as the Optionee may consider advisable. 

 - 7 - 

	 10.      	 COVENANTS OF THE OPTIONOR 

	 
	 10.1      	 During the currency of this Agreement
        the Optionor will: 

	 
	 	 (a)     
      
	 not do any act or thing which would or might in
        any way adversely affect the rights of the Optionee hereunder; 

	 
	 	 (b)      
	 make available to the Optionee and its representatives
        all records and files in the possession of the Optionor relating to the
        Licenses and permit the Optionee and its representatives at its own expense
        to take abstracts therefrom and make copies thereof; 

	 
	 	 (c)      
	 promptly provide the Optionee with any and all notices
        and correspondence received by the Optionor from government agencies in
        respect of the Licenses; 

	 
	 	 (d)      
	 as it pertains to the Licenses, keep the Underlying
        Mena Option Agreement in good standing; 

	 
	 	 (e)      
	 promptly advise the Optionee in the event there
        is a default by the Optionor in the Underlying Mena Option Agreement;
      

	 
	 	 (f)      
	 if there is a default or imminent potential default
        of the Optionor under the Underlying Option Agreement, to allow the Optionee
        to make such payment or do such thing, as to ensure that the rights of
        the Optionee are not adversely affected by such default; and 

	 
	 	 (g)      
	 upon exercise by the Optionee of the Option hereunder,
        exercise its option to the Licenses under the Underlying Mena Option Agreement,
        including fulfilling those conditions in section 5.1 hereof. 

	 
	 11.      	 COVENANTS OF THE OPTIONEE 

	 
	 11.1      	 During the currency of this Agreement,
        the Optionee will: 

	 
	 	 (a)      
	 keep the Licenses free and clear of all liens, charges
        and encumbrances arising from their operations hereunder and in good standing
        by the doing and filing of all necessary work and by the doing of all
        other acts and things and making all other payments which may be necessary
        in that regard; 

	 
	 	 (b)      
	 permit the Optionor, or its representatives duly
        authorized by it in writing, at its own risk and expense, access to the
        Licenses at all reasonable times and to all records prepared by the Optionee
        in connection with work done on or with respect to the Licenses; 

	 
	 	 (c)      
	 conduct all work on or with respect to the Licenses
        in a careful and minerlike manner and in compliance with all applicable
        Federal, State and local laws, rules, orders and regulations, and indemnify
        and save the Optionor harmless from any and all claims, suits, actions
        made or brought against it as a result of work done by the Optionee on
        or with respect to the Licenses; and 

	 
	 	 (d)      
	 not do any act or omit to do any act so as to cause
        the Optionor to be or become in default under the Underlying Mena Option
        Agreement. 

 - 8 - 

	 12.      	 REGISTRATION OF AGREEMENT 

	 
	 12.1      	 Notwithstanding any term of this Agreement,
        the Optionee will have the right at any time to register this Agreement
        or a Memorandum thereof against title to the Licenses, subject to the
        laws of Nicaragua. 

	 
	 13.      	 DISPOSITION OF LICENSES 

	 
	 13.1      	 Subject to Subsection 13.2, the Optionee
        may at any time sell, transfer or otherwise dispose of all or any portion
        of its interest in and to the Licenses and this Agreement. 

	 
	 13.2      	 In the event that the Optionee intends
        to sell, transfer or otherwise dispose of all of its interest in and to
        the Licenses and this Agreement, it will first: 

	 
	 	 (a)     
      
	 pursuant to Article 7 of the Underlying Mena Option
        Agreement, have the Underlying Optionor consent to proposed transfer;
      

	 
	 	 (b)      
	 pursuant to Section 7.4 of the Underlying Mena Option
        Agreement, have the Optionee covenant to and agree to be bound by the
        Underlying Mena Option Agreement; and 

	 
	 	 (c)      
	 cause the intended transferee to agree in writing
        with the Optionor to comply with the terms of this Agreement. 

	 
	 14.      	 CONFIDENTIAL NATURE OF INFORMATION
      

	 
	 14.1      	 The parties agree that all information
        obtained from the work carried out hereunder and under the operation of
        this Agreement will be the exclusive property of the parties and will
        not be used other than for the activities contemplated hereunder except
        as required by law or by the rules and regulations of any regulatory authority
        having jurisdiction, or with the written consent of both parties, such
        consent not to be unreasonably withheld. Notwithstanding the foregoing,
        it is understood and agreed that a party will not be liable to the other
        party for the fraudulent or negligent disclosure of information by any
        of its employees, servants or agents, provided that such party has taken
        reasonable steps to ensure the preservation of the confidential nature
        of such information. 

	 
	 15.      	 FURTHER ASSURANCES 

	 
	 15.1      	 The parties hereto agree that they and
        each of them will execute all documents and do all acts and things within
        their respective powers to carry out and implement the provisions or intent
        of this Agreement. 

	 
	 16.      	 NOTICE 

	 
	 16.1      	 Any notice, direction or other instrument
        required or permitted to be given under this Agreement will be in writing
        and will be given by the delivery or the same or by mailing the same by
        prepaid registered or certified mail in each case addressed as provided
        in page 1 of this Agreement. 

	 
	 16.2      	 Any notice, direction or other instrument
        aforesaid will, if delivered, be deemed to have been given and received
        on the day it was delivered, and if mailed, be deemed to have been given
        and received on the tenth business day following the day of mailing, except
        in the event of disruption of the postal services in which event notice
        will be deemed to be received only when actually received. 

 - 9 - 

	 16.3      	 Any party may at any time give to the other notice
        in writing of any change of address of the party giving such notice and
        from and after the giving of such notice, the address or addresses therein
        specified will be deemed to be the address of such party for the purpose
        of giving notice hereunder. 

	 
	 17.      	 HEADINGS 

	 
	 17.1      	 The headings to the respective sections herein will
        not be deemed part of this Agreement but will be regarded as having been
        used for convenience only. 

	 
	 18.      	 DEFAULT 

	 
	 18.1      	 If any party (a “Defaulting Party”)
        is in default of any requirement herein set forth (not including any provision
        of Subsection 3.1 of this Agreement), the party affected by such default
        will give written notice to the defaulting Party specifying the default
        and the Defaulting Party will not lose any rights under this Agreement,
        unless within 30 days after the giving of notice of default by the affected
        party the Defaulting Party has not cured the default by the appropriate
        performance and if the Defaulting Party fails within such period to cure
        any such default, the affected party will be entitled to seek any remedy
        it may have on account of such default. 

	 
	 19.      	 PAYMENT 

	 
	 19.1      	 All references to monies hereunder will be in United
        States funds except where otherwise designated. All payments to be made
        to any party hereunder will be either wired to the bank account of the
        intended party or mailed or delivered to such party at its address for
        notice purposes as provided herein, or for the account of such party at
        such bank or banks as such party may designate from time to time by written
        notice. Said bank or banks will be deemed the agent of the designating
        party for the purpose of receiving, collecting and receiving such payment.
      

	 
	 20.      	 ENUREMENT 

	 
	 20.1      	 This Agreement will enure to the benefit of and
        be binding upon the parties hereto and their respective successors and
        permitted assigns. 

	 
	 21.      	 TERMS 

	 
	 21.1      	 The terms and provisions of this Agreement shall
        be interpreted in accordance with the laws of British Columbia and the
        applicable laws of Nicaragua. 

	 
	 22.      	 FORCE MAJEURE 

	 
	 22.1      	 No party will be liable for its failure to perform
        any of its obligations under this Agreement due to a cause beyond its
        control (except those caused by its own lack of funds) including, but
        not limited to acts of God, fire, flood, explosion, strikes, lockouts
        or other industrial disturbances, laws, rules and regulations or orders
        of any duly constituted governmental authority or non-availability of
        materials or transportation (each an “Intervening Event”).
      

	 
	 22.2      	 All time limits imposed by this Agreement will be
        extended by a period equivalent to the period of delay resulting from
        an Intervening Event described in Subsection 22.1. 

 - 10 - 

	 22.3      	 A party relying on the provisions of Subsection
        22.1 will take all reasonable steps to eliminate an Intervening Event
        and, if possible, will perform its obligations under this Agreement as
        far as practical, but nothing herein will require such party to settle
        or adjust any labour dispute or to question or to test the validity of
        any law, rule, regulation or order of any duly constituted governmental
        authority or to complete its obligations under this Agreement if an Intervening
        Event renders completion impossible. 

	 
	 23.      	 ENTIRE AGREEMENT 

	 
	 23.1      	 This Agreement constitutes the entire agreement
        between the parties and replaces and supersedes all prior agreements,
        memoranda, correspondence, communications, negotiations and representations.
      

	 
	 24.      	 TIME OF ESSENCE 

	 
	 24.1      	 Time will be of the essence in this Agreement. 

	 
	 25.      	 EXECUTION OF AGREEMENT 

	 
	 25.1      	 This Agreement may be signed in counterpart and
        by fax. 

	 RADIUS GOLD INC.  	 )  	 
	  	 )  	 
	  	 )  	 
	 Per:  	 )  	 
	  “Simon T. Ridgway” 
    	 )  	 
	 Signature of Authorized Signatory  	 )  	 
	  	 )  	 
	 Simon T. Ridgway  	 )  	 
	 Name of Authorized Signatory  	 )  	 
	  	 	 
	  	 	 
	 COASTPORT CAPITAL INC.  	 )  	 
	  	 )  	 
	  	 )  	 
	 Per:  	 )  	 
	 “Laurie W. Sadler”  	 )  	 
	 Signature of Authorized Signatory  	 )  	 
	  	 )  	 
	 Laurie W. Sadler  	 )  	 
	 Name of Authorized Signatory  	 )  	 

 Schedule “A” 

  This is Schedule “A” to the Option Agreement dated July 20, 2004
  between Radius Gold 

  Inc., as Optionor and Coastport Capital Inc., as Optionee 

 San Ramon Project 

  NICARAGUA, CENTRAL AMERICA

 The San Ramon Project is located in north-central Nicaragua,
  Central America. The Project consists of a one granted licence and two licence
  applications. 

San Ramon Project - Mineral Concessions (11,150 ha) 

	 Granted Licences (800.0ha)  
	  	              
         Name  
 
 	 Project  	 Valid  	 Area (ha)  	 Details  
 
	 1  	 S. Ramón Matiguas  	  San Ramon  	 25 years  	 800  	 granted 8-Apr-02  
	  	  	  	  	 800  	  
	 Applications (10,350.0ha)a  
	 2  	 S. Ramón Mat.II  	  San Ramon  	 applicatio  	 4,800  	 applied for 7/9/2003  
	 3  	 Mina Verde  	  San Ramon  	 applicatio  	 5,550  	 applied for 8/21/2003  
	  	  	  	  	 10,350  	  
	 

   

- 12 - 

Schedule “B” 

 This is Schedule “B” to the Option Agreement dated
  July 20, 2004 between Radius Gold

  Inc., as Optionor and Coastport Capital Inc., as Optionee 

 MINIMUM TERMS OF JOINT VENTURE

 The Joint Venture Agreement will contain the following minimum
  terms together with such other terms and conditions as the respective counsel
  for the parties may reasonably request in order that the affairs of the Optionor,
  Frank Mena (if and only if he has not converted his 30% interest into a royalty)
  and the Optionee (the "Participants") in respect of the Licenses may be reasonably
  carried out as a joint venture operation (the “Joint Venture”):

	 1.      	 on the date that the Optionee has exercised the
        Option in full and acquired its 50% interest in the Licenses, the Optionor
        will hold either a 20% participating interest or a 50% participating interest
        and, in any event, the Optionee will hold a 50% participating interest
        in the Joint Venture (the “Proportionate Interests”); 

	 	 
	 2.      	 the Proportionate Interest of each Participant in
        the deemed Expenditures (“Participant’s Initial Contribution”)
        at the time of exercise of the Option will be: 

	 Participant  	 Participating Interest  
	 The Optionor  	 US $2,000,000 (deemed), if it holds a 50%
      interest at the time of the exercise of the Option, otherwise $800,000
      (deemed)
	 The Optionee  	 US $2,000,000 (deemed)
	 Frank Mena  	 $1,200,000 (deemed), if he has not converted
      his 30% interest into a royalty prior to the exercise of the option

	 3.      	 the parties agree that if the Optionee arranges
        an agreement with a major company to participate in the Joint Venture,
        then each of the Optionor and the Optionee will contribute pro rata
        from their Proportionate Interest to the major company. 

	 
	 4.      	 the objectives of the Joint Venture will be to further
        explore and, if feasible, to place the Licenses or some part thereof into
        Commercial Production; 

	 
	 5.      	 the affairs of the Joint Venture will be governed
        by the direction and control of a management committee (the “Management
        Committee”) to be composed of one representative and one alternate
        from each of the Participants, with decisions of the Management Committee
        to be determined by a majority of the percentage interests in the Licenses
        as voted by the representatives, except that if there is a deadlock, the
        deciding vote will be cast by the Operator; 

	 
	 6.      	 any decision to place the Licenses into Commercial
        Production is to be based on a bankable feasibility study approved by
        the Management Committee; 

	 
	 7.      	 The Optionee will initially act as the Operator
        of the Joint Venture, subject to the budget and programmes which when
        duly approved by the parties under the Joint Venture shall be “Approved
        Programme and Budget” as determined by the Management Committee
        and will have 

 - 13 - 

	 	 such other powers and duties as required
        to carry out that function. If the Optionee’s interest falls below
        50%, then the Optionor may request a change of Operator. The Operator
        will be paid a fee as follows: 

	 
	 	 (a)     
      
	 following formation of a Joint Venture between the
        Participants but prior to the Commencement of Commercial Production, 5%
        of all exploration expenditures except in the case of exploration expenditures
        under a single contract in excess of $100,000 in which case the fee
        will be 2% of those expenditures; and 

	 
	 	 (b)      
	 after the commencement of Commercial Production,
        3% of all development and production expenditures except in the case of
        development and production expenditures under a single contract in excess
        of $100,000 in which case the fee will be 2% of such development and
        production expenditures; 

	 
	 8.      	 the joint operations under the Joint Venture
        will commence automatically on the date of the Exercise, whether or not
        a formal joint venture agreement has been entered into. The Management
        Committee will hold its first joint venture meeting within 60 days of
        the Exercise, and the parties agree to have a formal joint venture agreement
        finalized within 190 days of the Exercise; 

	 
	 9.      	 each Participant is entitled to elect
        to participate, in proportion to its interest (“Proportionate Share”),
        the exploration, development, and mining operation of the Licenses subject
        to the following: 

	 
	 	 (a)      
	 If Participant elects not to contribute its share
        of costs and the other Participant elects to contribute to the shortfall
        which has been created thereby, the interests of the Participants shall
        be adjusted so that each Participant holds an interest which is proportionate
        to its contribution to the total exploration, development and mining operation
        costs. If a Participant permits its interest to be reduced to 15% or less,
        then that Participant shall be deemed to have withdrawn from the Joint
        Venture and its interest will be converted to a 2% Net Smelter Returns
        Royalty; 

	 
	 	 (b)      
	 If a Participant elects not to contribute its share
        of costs, or elects to contribute less than its agreed upon share of costs,
        and the other Participant is unwilling or unable to contribute to the
        shortfall which has been created thereby, that Participant may elect to
        continue with the programme based on its proportionate share of costs,
        and the interests of the Participants shall be adjusted so that each Participant
        holds an interest which is proportionate to its contribution to the total
        exploration costs. If a Participant permits its interest to be reduced
        to 15% or less, then that Participant shall be deemed to have withdrawn
        from the Joint Venture and its interest will be converted to a 2% Net
        Smelter Returns Royalty; 

	 
	 10.      	 a Participant contributing its Proportionate
        Share of mine costs is entitled to receive, in kind, its proportionate
        share of any minerals produced from a mine on the property and to separately
        dispose of the same; 

	 
	 11.      	 each Participant will have a right of
        first refusal for sixty days in respect of the other Participant wishing
        to dispose all or a part of its Proportionate Share in the Joint Venture;
      

	 
	 12.      	 if a Participant defaults in paying its
        share of expenditures related to an Approved Programme and Budget in which
        it elected to participate, the non-defaulting Participant shall apprise
        the defaulting Participant of the default whereupon the defaulting Participant
        shall have 30 days to pay the moneys owed. If, after receiving the notice
        and opportunity to cure the default of the 

 - 14 - 

	  	 moneys remaining unpaid, the defaulting
        Participant's interest will be reduced according to the following formula: 
      

	 	 
	 Divide the sum
        of:  

	 	 
	 (i)  
	 the agreed value of the Participant's
        Initial Contribution;  

	 	 
	 (ii)  
	 the total of all of the Participant's
        Contribution under the Joint Venture; and  

	 	 
	 (iii)  
	 the amount, if any, the Participant elects
        to contribute and does contribute (including such amount paid on account
        of default of another Participant) to the adopted Approved Programme and
        Budget;

	 	 
	 by the sum of
        (i), (ii), and (iii) for all Participants; and Multiply the result by
        100.  

 Schedule “C” 

  This is Schedule “C” to the Option Agreement dated July 20, 2004
  between Radius Gold

  Inc., as Optionor and Coastport Capital Inc., as Optionee 

 

Copy of the Nominee Agreement 

NOMINEE AGREEMENT

  "Chorti Aruba A.V.V."

  Aruba, October 1, 2003 

	To:	Pillar Resources Inc. 

      Suite 830, 355 Burrard Street 

      Vancouver, BC V6C 2G8 

      Canada. 

 Dear Sirs, 

 This is to confirm that the undersigned, Intima Management
  N.V., a company incorporated and established under the laws of Aruba, hereinafter
  referred to as "Intima", has received 700 shares, hereinafter referred to as
  the "Shares", having a par value of US$ 1 each in the capital stock of Chorti
  Aruba A.V.V., a company incorporated and established under the laws of Aruba,
  hereinafter referred to as the "Company", and having its registered office located
  at Watapanastraat 7, Ponton, Oranjestad, Aruba, said shares having been paid
  for in full by you, are your full and absolute property, and are being held
  by Intima as your nominee. 

 Intima will only act with respect to voting rights and all
  other aspects relating to the Shares in accordance with your written instructions:

	1.	the Shares will not be sold or pledged without your prior consent; 
	 	 
	2.	no dividend paid out by the Company may be retained or disposed of by
      us without your prior consent; 
	 	 
	3.	Intima shall not vote to authorize the Company to enter into any other
      activities or agreements unless so instructed by you;
	 	 
	4.	 the Shares will be assigned to you or to your order, upon receipt of
      written request from you; 
	 	 
	5.	any other shareholder rights will only by exercised upon receipt of your
      written instructions. 

Any dividends emanating from our holding of the Shares will
  be received for your account. 

 We shall keep this agreement confidential to the extent that
  this is legal under the laws of Aruba, the laws of any jurisdiction wherein
  the Company is doing business or the laws of the jurisdiction where the principal(s)
  and/or beneficial owner(s) ofthe Company is/are legally residing or established,
  or until we are obliged to disclose its contents by virtue of an Aruba Court
  Order or Court Order of any aforementioned jurisdictions. 

 This agreement may be terminated at any time by either of
  us, providing that the other party is duly notified of such termination. You
  hereby agree to hold us at all times hereafter indemnified against any and all
  actions, proceedings, liabilities, claims, losses, damages, costs, legal and/or
  other expenses which we might incur or which could arise by reason of any act
  done or omitted to be done under the terms of this agreement, or by carrying
  out any instruction hereafter given to us by you with respect to the aforementioned
  shares, except that I shall not be indemnified in the event of any act of gross
  negligence or willful malfeasance on our part. 

 If this letter accurately reflects our understanding and agreement,
  please sign the enclosed copy in the appropriate space below and return same
  to us. 

	Sincerely Yours,

      /s/

      Intima Management N.V.
	Accepted,

      /s/

      Pillar Resources Inc.

 

 Schedule “D” 

  This is Schedule “D” to the Option Agreement dated July 20, 2004
  between Radius Gold 

  Inc., as Optionor and Coastport Capital Inc., as Optionee 

 

Copy of the Underlying Mena Option Agreement 

 FRANK MENA 

 and 

 PILLAR RESOURCES INC. 

 

 

 OPTION AGREEMENT 

  

FASKEN MARTINEAU DUMOULIN 

  BARRISTERS & SOLICITORS 

  2100 - 1075 GEORGIA STREET 

  VANCOUVER, B.C. 

  V6G 3G2

 TABLE OF CONTENTS 

	  	 ARTICLE 1	  
	  	 INTERPRETATION	  
	 	 	 
	 Section 1.1	 Defined Terms	 2
	 Section 1.2	 Included Words	 6
	 Section 1.3	 Headings	 6
	 Section 1.4	 References	 6
	 Section 1.5	 Currency	 7
	 Section 1.6	 Schedules	 7
	 Section 1.7	 Governing Law	 7
	 Section 1.8	 Severability	 7
	 	 	 
	  	 ARTICLE 2	  
	  	 CONDITIONS PRECEDENT	  
	 	 	 
	 Section 2.1	 Regulatory Approval	 8
	 Section 2.2	 Optionor’s Covenants	 8
	 Section 2.3	 Optionee’s Covenants	 8
	 Section 2.4	 Fulfilment of Conditions	 8
	 	 	 
	  	 ARTICLE 3	  
	  	 REPRESENTATIONS AND WARRANTIES	  
	 	 	 
	 Section 3.1	 Mutual Representations and Warranties	 9
	 Section 3.2	 Optionor's Representations and Warranties	 9
	 Section 3.3	 Optionee's Representations and Warranties	 10
	 Section 3.4	 Survival of Representations and Warranties	 11
	 	 	 
	  	 ARTICLE 4	 
	  	 GRANT AND EXERCISE OF OPTION	  
	 	 	 
	 Section 4.1	 Grant of Option	 11
	 Section 4.2	 Completed Requirements	 11
	 Section 4.3	 Further Payment by Optionee	 11
	 Section 4.4	 Further Requirements for Exercise
      of Option	 12
	 Section 4.5	 Cash In Lieu of Expenditure	 12
	 Section 4.6	 Failure to Keep Option in Good Standing
      Generally	 12
	 Section 4.7	 Failure to Keep Option in Good Standing
      Specifically	 13
	 Section 4.8	 Optionee’s Exploration Programs	 13
	 Section 4.9	 Optionee’s Termination	 13
	 Section 4.10	 Effect of Termination	 13
	 Section 4.11	 Termination of Entire Option	 14

 - ii -

	  	 ARTICLE 5	  
	  	 VESTING	  
	 	 	 
	 Section 5.1	 Further Requirements to Vesting	 15
	 Section 5.2	 Incorporation of Newco and Newco
      Parent	 15
	 Section 5.3	 Conversion of Optionor’s Interest	 15
	 Section 5.4	 Joint Project Structure	 16
	 Section 5.5	 Last Project	 16
	 	 	 
	  	ARTICLE 6	  
	  	 OPTION PERIOD	  
	 	 	 
	 Section 6.1	 Voting and Management	 16
	 Section 6.2	 Right of Entry During Option Period	 18
	 Section 6.3	 Obligations of the Optionee During
      the Option Period	 18
	 Section 6.4	 Additional Indemnity by Optionee	 19
	 	 	 
	  	 ARTICLE 7	  
	  	 TRANSFERS	  
	 	 	 
	 Section 7.1	 Limitations on Transfers	 19
	 Section 7.2	 Prohibited Dispositions	 19
	 Section 7.3	 Exceptions	 19
	 Section 7.4	 Conditions of Transfers	 20
	 	 	 
	  	 ARTICLE 8	  
	  	 FORCE MAJEURE	  
	 	 	 
	 Section 8.1	 Events	 20
	 Section 8.2	 Effect of Intervening Events	 20
	 Section 8.3	 Obligation to Remove Intervening
      Events	 21
	 Section 8.4	 Giving Notice	 21
	 Section 8.5	 Option Requirements	 21
	 	 	 
	  	 ARTICLE 9	  
	  	 CONFIDENTIAL INFORMATION	  
	 	 	 
	 Section 9.1	 Confidential Information	 21
	 Section 9.2	 Information in Public Domain	 21
	 Section 9.3	 Request to Disclose	 22
	 	 	 
	  	 ARTICLE 10	  
	  	 ARBITRATION	  
	 	 	 
	 Section 10.1	 Single Arbitrator	 22
	 Section 10.2	 Prior Notice	 22
	 Section 10.3	 No Agreement on the Arbitration	 22

 - iii -

	 Section 10.4	 Conduct of Arbitration	 22
	 Section 10.5	 Default	 23
	 	 	 
	  	 ARTICLE 11	  
	  	 NOTICE	  
	 	 	 
	 Section 11.1	 Method	 23
	 Section 11.2	 Amending Addresses	 24
	 	 	 
	  	 ARTICLE 12	  
	  	 AREA OF INTEREST	  
	 	 	 
	 Section 12.1	 Limitation on Right to Acquire Mineral
      or Surface Interests	 24
	 Section 12.2	 Expansion of Concession Areas	 24
	 Section 12.3	 Acquisition within Area of Interest	 24
	 Section 12.4	 Further Assurance	 25
	 Section 12.5	 Notice of Rejection	 25
	 Section 12.6	 Non-Compliance Constitutes Default	 25
	 Section 12.7	 Other Activities and Interests	 25
	 	 	 
	  	 ARTICLE 13	  
	  	 GENERAL	  
	 	 	 
	 Section 13.1	 Entire Agreement	 26
	 Section 13.2	 No Waiver of Breaches	 26
	 Section 13.3	 Further Assurances	 26
	 Section 13.4	 Manner of Payment	 26
	 Section 13.5	 Enurement	 26
	 Section 13.6	 Special Remedies	 27
	 Section 13.7	 Time of the Essence	 27

	 SCHEDULES	  
	  	 
	 SCHEDULE 1	 Properties Description and Fees
	 SCHEDULE 2	 Royalty Agreement
	 SCHEDULE 3	 Form of Shareholders’ Agreement
	 SCHEDULE 4	 Trust Provisions

 OPTION AGREEMENT 

 THIS OPTION AGREEMENT is made as of the 1st day of October, 2003 

 AMONG: 

  
    
      
         Frank Mena, a businessman, residing at Los
          Robles, Embajada Gran Bretaña 1/2 Cuadra Abajo, Managua, Nicaragua
          (the "Optionor") 

      

    

  

 AND: 

  
    
      
         Pillar Resources Inc., a company incorporated
          under the laws of British Columbia having its principal offices in Vancouver,
          Canada (the "Optionee") 

      

    

  

 WITNESSES THAT WHEREAS: 

	 A.      	 The Optionor owns or controls 30% of the issued
        and outstanding shares of Chorti Holdings S.A., a Nicaraguan company,
        and the balance of such shares are held by a trustee; 

	 
	 B.      	 Chorti Holdings S.A. is or will be the owner and
        registered holder of a one hundred percent (100%) interest in and to several
        mineral concessions located in Nicaragua and described in Schedule 1 of
        this Agreement; 

	 
	 C.      	 Pursuant to a letter agreement between the Parties
        dated February 27, 2003, the Optionor has agreed to grant to the Optionee,
        subject to and upon the terms of this Agreement, an option to acquire
        indirectly a 70% interest in such mineral concessions; 

	 
	 D.      	 The Optionor and the Optionee have established a
        new company incorporated under the laws of Aruba, Chorti Aruba A.V.V.,
        which will be the sole owner of Chorti Holdings S.A., and the Optionee
        has agreed to establish as its wholly owned subsidiary a new company incorporated
        under the laws of Nicaragua through which the Optionee will conduct exploration
        and mining operations on the Properties; 

 NOW THEREFORE in consideration of the premises and
  the covenants, agreements, representations and warranties herein, the sufficiency
  of which is hereby acknowledged, the Parties hereto covenant and agree as follows:

 - 2 -

 ARTICLE 1 

  INTERPRETATION 

 Section 1.1         Defined
  Terms. 

 As used in this Agreement, the following terms have the following
  meanings:

“Affiliate”
  means, with respect to any Person, any other Person who directly or indirectly
  controls or is controlled by that Person and for any individual includes his
  or her Associates. For the purposes of this definition “control”
  means possession, directly or indirectly, of the power to direct or cause direction
  of management and policies through the ownership of voting securities, contract,
  voting trust or otherwise. 

“Agreement” means
  this option agreement and all schedules and instruments in amendment or confirmation
  of it and the expressions “Article” and “Section”
  followed by a number mean and refer to the specified article or section of this
  Agreement. 

“Area of Interest”
  means the area within a perimeter that is two kilometres from the boundaries
  of the Properties, as they exist from time to time, including any New Concession
  acquired under Article 12 but excluding any Mineral Rights or Surface Rights
  already held at the time of the acquisition of the New Concession by a Party
  and wholly or partly within the Area of Interest of such New Concession. 

"Associate" means one or more
  of the following relationships with an individual Person: 

	 	 (i)      	 a corporation which that Person or another Associate
        of that Person controls; 

	 
	 	 (ii)      	 a partner of that Person; 

	 
	 	 (iii)      	 a trust or estate in which that Person has a substantial
        beneficial interest or for which that Person serves as trustee or in a
        similar capacity; 

	 
	 	 (iv)      	 that Person's spouse or an immediate relative (i.e.
        child, parent, sibling, spouse of a sibling or child of a sibling) of
        that Person or that Person's spouse. 

“Authorization”
  means, with respect to any Person, any order, permit, approval, waiver, licence
  or similar authorization of any governmental or public department, central bank,
  commission, board, bureau, agency or instrumentality or stock exchange having
  jurisdiction over the Person. 

 - 3 -

“Business Day”
  means any day of the year, other than a Saturday, Sunday or any other day on
  which banks closed in Vancouver, British Columbia, Canada or in Aruba. 

“Chorti” means Chorti
  Holdings S.A. 

“Chorti Aruba” means
  Chorti Aruba A.V.V., incorporated under the laws of Aruba, the shares of which
  are owned by the Optionor as to 30% and Trustco as to 70%. 

“Concession Area” means
  one of the Properties that are described in Schedule 1 of this Agreement, as
  it may be modified and varied under the laws of Nicaragua from time to time,
  and includes the area of any New Concession adjacent to such Property, but excludes
  any Newco Property. 

“Effective Date" means
  the date that the Option commences, being the date that the conditions precedent
  set out in Section 2.1 have been met. 

“Encumbrances” means
  any mortgage, charge, pledge, hypothecation, security interest, assignment,
  lien (statutory or otherwise), charge, title retention agreement or arrangement,
  restrictive covenant, option, right of pre-emption, privilege or any contract
  to create any of the foregoing or any other arrangement or condition which,
  in substance, secures payment or performance of an obligation or which is capable
  of registration against title. 

"Expenditures" means all costs
  and expenses of whatever kind or nature spent or incurred by or on behalf of
  the Optionee since the date of the Letter Agreement in the conduct of exploration,
  development and evaluation activities on or in relation to the Properties including,
  without limitation: 

	 	 (i)      	 in holding the Properties in good standing (including
        any monies expended as required to comply with the Laws, such as for the
        completion and submission of assessment work and filings required in connection
        therewith), in curing title defects and in acquiring and maintaining surface
        and other ancillary rights, including payments to underlying property
        owners; 

	 
	 	 (ii)      	 in preparing for and in the application for and
        acquisition of environmental and other permits necessary or desirable
        to commence and complete exploration, development and evaluation activities
        on the Properties; 

	 
	 	 (iii)      	 in doing geophysical and geological surveys, drilling,
        assaying and metallurgical testing, including costs of assays, metallurgical
        testing and other tests and analyses to determine the quantity and quality
        of minerals, water and other materials or substances; 

 - 4 -

	 	 (iv)      	 in acquiring services or facilities or the use thereof
        and for all parts, supplies and consumables; 

	 
	 	 (v)      	 for salaries and wages, including actual labour
        overhead expenses for employees assigned to exploration, development and
        evaluation activities; 

	 
	 	 (vi)      	 travelling expenses and fringe benefits (whether
        or not required by law) of all persons engaged in work with respect to
        and for the benefit of the Properties including for their food, lodging
        and other reasonable needs; 

	 
	 	 (vii)      	 payments to contractors or consultants for work
        done, services rendered or materials supplied; 

	 
	 	 (viii)      	 all taxes or other imposts levied against or in
        respect of the Properties or activities thereon and the cost of insurance
        premiums and performance bonds or other security; and 

	 
	 	 (ix)      	 a charge equal to 10% of all Expenditures referred
        to in clauses (i) to (viii) above for unallocable overhead and head office
        expenses of the Optionee and all other expenses relating to supervision
        and management of all work done with respect to and for the benefit of
        the Properties. 

“Holdco”
  means a new company incorporated under the laws of Aruba as the parent company
  of a Newco and, unless the Optionor converts its Interest to the Royalty, to
  be jointly owned by the Optionor and the Optionee initially in the ratio of
  70% to 30%. 

“Interest” means
  an undivided right, title and interest, directly or indirectly, in a Concession
  Area, including through the ownership of shares of a company which, directly
  or indirectly, owns the Concession Area.

“Laws” means any
  and all applicable laws including all statutes, codes, ordinances, decrees,
  rules, regulations, municipal by-laws, judicial or arbitral or administrative
  or ministerial or departmental or regulatory judgments, orders, decisions, rulings
  or awards, policies, guidelines, and general principles of common and civil
  law and equity, binding on or affecting the Person referred to in the context
  in which the word is used. 

“Letter Agreement”
  means the letter agreement dated February 27, 2003 between the Optionor and
  the Optionee which contemplated the Parties entering into this Agreement. 

“Mineral Rights” means
  interests in minerals and rights to minerals including, without limitation,
  exploration licenses, mineral concessions and other forms of mineral title under
  the laws of Nicaragua, whether contractual, statutory or otherwise.

 - 5 -

“New Concession”
  means a new concession that is adjacent to any of the Properties and which is
  granted to Chorti after the Effective Date. 

“Newco” means a new
  company to be incorporated under the laws of Nicaragua and, if the Option is
  exercised in relation to a Concession Area, to which such Concession Area will
  be transferred pursuant to the terms of this Agreement. 

“Newco Property”
  means any Concession Area for which the Option has been exercised. 

“Opco” means a new
  company incorporated under the laws of Nicaragua, wholly owned by the Optionee,
  through which exploration and mining operations will be conducted on the Properties.

“Option” has the
  meaning specified in Section 4.1.

“Option Period” means:

	 	 (i)      	 in relation to any Concession Area, the period commencing on the Effective
      Date and ending on the earliest of the dates upon which the Option for such
      Concession Area has been exercised, has been terminated by the Optionor
      pursuant to Section 4.4 or Section 4.5 or has been terminated by the Optionee
      pursuant to Section 4.9; and 
	 	 	 
	 	 (ii)      	 in relation to the entire Option, the period commencing on the Effective
      Date and ending on the date that the Option Period for the last Concession
      Area held by Chorti ends. 

“Parties”
  means the Optionor and the Optionee and any other Person who may become a party
  to this Agreement by, through or under the Optionor or the Optionee. 

“Person” means a
  natural person, partnership, limited liability partnership, corporation, joint
  stock company, trust, unincorporated association, joint venture or other entity
  or governmental entity, and pronouns have a similarly extended meaning. 

“Properties” means
  the Nicaraguan mineral concession areas described in Schedule 1 of this Agreement,
  as they exist on the date of this Agreement. 

"Regulatory Approval" means the
  Authorizations required by the Optionee for its participation in the transactions
  contemplated herein from all stock exchanges and other regulatory authorities
  having jurisdiction and includes, if required by any such authority, the approval
  of shareholders. 

 - 6 -

“Royalty”
  means, in relation to any Concession Area, a 4% net smelter return royalty interest
  to which the Optionor may be entitled pursuant to Section 5.3, subject to the
  Optionee’s the right to buy back up to 2% of such any royalty at price
  of $1,250,000 per percentage point, all in accordance with the Royalty Agreement.

“Royalty Agreement” means,
  with respect to any Concession Area, the royalty agreement in substantially
  the form set forth in Schedule 2 of this Agreement, duly executed by the Optionee
  as payor and the Optionor as royalty holder, in the circumstances described
  in Section 5.3. 

“Shareholders’ Agreement”
  means, with respect to any Holdco, a shareholders’ agreement in substantially
  the form set forth in Schedule 3 of this Agreement, duly executed by the Parties
  and by Holdco, that sets out the rights and obligations of the Parties with
  respect to the management of Holdco and its Newco subsidiary and the conduct
  of their respective businesses and affairs. 

”Surface Rights”
  means any interest in any real property, whether freehold, leasehold, license,
  right of way, easement or any other surface or other right in relation to real
  property, and includes water rights or any interest therein, but not including
  any Mineral Rights. 

“Transfer Date” means,
  for any Property, the date that the Property was transferred to and registered
  or recorded in the name of Chorti. 

“Trust Agreement”
  means the trust agreement between Trustco and the Parties, containing the trust
  conditions described in Schedule 4 of this Agreement.

 “Trustco” means
  the trustee under the Trust Agreement. 

 Section 1.2         Included
  Words 

                This
  Agreement will be read with such changes in gender or number as the context
  will require. 

 Section 1.3         Headings
  

                The
  headings to the articles, paragraphs, parts or clauses of this Agreement are
  inserted for convenience only and will not affect the construction hereof. 

 Section 1.4         References
  

                Unless
  otherwise stated, a reference herein to a numbered or lettered article, paragraph,
  clause or schedule refers to this article, paragraph, clause or schedule 

 - 7 -

 bearing that number or letter in this Agreement. A reference
  to this Agreement, hereof, hereunder, herein or words of similar meaning, means
  this Agreement including the schedules hereto, together with any amendments
  thereof. 

 Section 1.5         Currency
  

                All
  dollar amounts expressed herein, unless otherwise specified, refer to lawful
  currency of the United States. 

 Section 1.6         Schedules
  

                The
  following schedules are incorporated into this Agreement by reference: 

	 Schedule  	 	 Description  
	 1  	 	 Properties Description and Fees  
	 2  	 	 Royalty Agreement  
	 3  	 	 Form of Shareholders’ Agreement  
	 4  	 	 Trust Conditions  

 Section 1.7         Governing
  Law 

                This
  Agreement will be construed and governed by the laws in force in British Columbia
  and, except where matters are expressed herein to be subject to arbitration,
  the courts of British Columbia will have exclusive jurisdiction to hear and
  determine all disputes arising hereunder. This Section 1.7 will not be construed:

	 	 (a)      	 to affect the rights of a Party to enforce a judgment
        or award outside British Columbia, including the right to record or enforce
        a judgment or award in a jurisdiction in which any of the Properties is
        situated; 

	 	 	 
	 	 (b)      	 to supersede the laws of Nicaragua applicable to
        the Concession Areas and the rights and obligations of a concession holder
        thereunder. 

 Section 1.8         Severability
  

                If
  any provision of this Agreement is or becomes illegal, invalid or unenforceable,
  in whole or in part, the remaining provisions will nevertheless be and remain
  valid and subsisting and the said remaining provisions will be construed as
  if this Agreement had been executed without the illegal, invalid or unenforceable
  portion. 

 - 8 -

 ARTICLE 2 

  CONDITIONS PRECEDENT 

 Section 2.1        
  Regulatory Approval 

                As
  soon as practicable following the execution of this Agreement, the Optionee
  will use its best efforts to obtain Regulatory Approval. If Regulatory Approval
  has not been received by [June 30, 2003?], then the Optionee will have
  the right to terminate this Agreement by notice to the Optionor. Upon such notice,
  this Agreement will be at an end and neither party will have any obligation
  to the other hereunder. 

                The
  Optionee will forthwith provide to the Optionor evidence of the completion of
  its obligations under this Section 2.1. 

 Section 2.2         Optionor’s
  Covenants 

                As
  soon as practicable after the execution of this Agreement, the Optionor will,
  at the expense of the Optionee, cause the transfer to Chorti of any of the Properties
  that are not already held by Chorti, such that Chorti becomes the registered
  holder of the each of the Properties. 

                As
  soon as practicable after the Optionee has completed its obligations under Section
  2.1, the Optionor will execute and deliver the Trust Agreement to each of the
  Optionee and Trustco. 

                The
  Optionor will forthwith provide to the Optionee evidence of the completion of
  its obligations under this Section 2.2. 

 Section 2.3         Optionee’s
  Covenants 

                Subject
  to the Optionor’s completion of its obligations under Section 2.2, the
  Optionee will promptly: 

	 (a)      	 procure the incorporation of Opco under the laws
        of Nicaragua as a wholly owned subsidiary of the Optionee; and 

	 	 
	 (b)      	 reimburse the Optionor for the reasonable costs
        and expenses of compliance with its obligations under Section 2.2, to
        the extent that the Optionee did not bear such costs and expenses in the
        first instance. 

 Section 2.4         Fulfilment
  of Conditions 

                The
  date that the last of the Optionor’s obligations under Section 2.2 is
  fulfilled will be the date that the Option commences, provided that if the Optionor
  has failed to 

 - 9 -

 complete all of such requirements by December 31, 2003, then
  the Optionee will be entitled to terminate this Agreement by notice to the Optionor.

 ARTICLE 3 

  REPRESENTATIONS AND WARRANTIES 

 Section 3.1         Mutual
  Representations and Warranties 

                Each
  of the Parties represents and warrants to the other Party hereto that: 

	 (a)      	 neither the execution and delivery of this Agreement
        nor the consummation of the transactions hereby contemplated conflict
        with, result in the breach of or accelerate the performance required by
        any agreement to which it or he is a party; 

	 
	 (b)      	 the execution and delivery of this Agreement do
        not violate or result in the breach of any Laws; 

	 
	 (c)      	 this Agreement constitutes a legal, valid and binding
        obligation of the Party enforceable against it or him in accordance with
        its terms; and 

	 
	 (d)      	 no proceedings are pending or threatened for and
        the Party is unaware of any basis for the institution of any proceedings
        leading to its or his bankruptcy or subjection to bankruptcy or to any
        other Laws governing the affairs of insolvent persons. 

 Section 3.2         Optionor's
  Representations and Warranties 

                The
  Optionor represents and warrant to the Optionee that: 

	 (a)      	 the Properties: 
	 
	 	 (i)     
      
	 are fully and accurately described in Schedule 1
        of this Agreement, and the Optionor has no an interest in any other Mineral
        Rights or Surface Rights which are located wholly or in part within the
        Area of Interest; 

	 
	 	 (ii)      
	 are in good standing under the applicable laws of
        Nicaragua, including the incurring of expenditures and the payment of
        surface taxes or other monies, until the dates shown in Schedule 1 of
        this Agreement; 

	 
	 	 (iii)      
	 have been duly and validly staked or otherwise properly
        and legally acquired, and 

	 
	 	 (iv)      
	 are recorded or registered in the name of Chorti,
        free and clear of all Encumbrances except those specifically identified
        in Schedule 1 of this Agreement, and the Optionor and Chorti are in exclusive
        possession of each Property; 

 - 10 -

	 (b)      	 there are no outstanding agreements or options to
        acquire or purchase any of the Properties, no person has any royalty or
        other interest whatsoever in production therefrom (except the royalty
        payable to the government according to the Mining Law of Nicaragua), and
        there is no adverse claim or challenge against or to the ownership of
        or title to any of the Properties (including, without limitation, from
        any artisanal miner, garimpeiro or aboriginal group), nor to the best
        of its knowledge is there any basis therefor; 

	 
	 (c)      	 has received no notice and has no knowledge of any
        proposal to terminate or vary the terms of or rights in the Properties
        from any government or other regulatory authority; 

	 
	 (d)      	 there are no orders or directions relating to environmental
        matters requiring any work, repairs, construction or capital expenditures
        with respect to the Properties, nor to the best of its knowledge have
        any activities on or in relation to the Properties been in violation of
        any environmental Laws, and to the best of his knowledge, conditions on
        and relating to the Property are in compliance with such Laws; and 

	 
	 (e)      	 there are no consents, approvals, waivers or other
        authorizations from third parties necessary for the Optionor to enter
        into or carry out his obligations under this Agreement except those which
        have already been obtained. 

	 
	 (f)      	 to the best of his knowledge there is no fact or
        circumstance known to him which has not been disclosed to the Optionee
        which would render any of the foregoing representations and warranties
        untrue, incomplete or otherwise misleading. 

 Section 3.3         Optionee's
  Representations and Warranties 

                The
  Optionee represents and warrants to the Optionor as follows: 

	 (a)      	 it is a body corporate duly incorporated,
        organized and validly subsisting under the laws of its incorporating jurisdiction;
      

	 
	 (b)      	 it has full power and authority to carry
        on its business and to enter into this Agreement; 

	 
	 (c)      	 the execution and delivery of this Agreement
        do not violate or result in the breach of its organizational documents;
      

	 
	 (d)      	 there are no proceedings pending or threatened
        for its dissolution or winding-up; 

	 
	 (e)      	 other than Regulatory Approval: 

	 
	 	 (i)     
      
	 all corporate authorizations have been obtained
        for the execution of this Agreement and for the performance of its obligations
        hereunder, and 

	 
	 	 (ii)      
	 there are no consents, approvals, waivers or other
        authorizations from third parties necessary for the Optionee to enter
        into or carry out its 

 - 11 -

obligations under this Agreement except those which
  have already been obtained. 

 Section 3.4         Survival
  of Representations and Warranties 

                The
  representations, warranties and covenants contained in this Agreement are conditions
  on which the parties have relied in entering into this Agreement and will survive
  the execution hereof and the acquisition of any interest in any of the Properties
  by the Optionor hereunder. Each Party will indemnify and save the other harmless
  from all loss, damage, costs, actions and suits arising out of or in connection
  with any breach of any representation, warranty, covenant, agreement or condition
  made by them and contained in this Agreement. A Party may waive any of such
  representations, warranties, covenants, agreements or conditions in whole or
  in part at any time without prejudice of its right in respect of any other breach
  of the same or any other representation, warranty, covenant, agreement or condition.

 ARTICLE 4 

  GRANT AND EXERCISE OF OPTION 

 Section 4.1         Grant
  of Option. 

                The
  Optionor hereby grants to the Optionee the sole and exclusive right and option
  (the "Option") exercisable in accordance with this Article 4, to acquire
  indirectly a 70% interest in each of the Concession Areas, in each case by acquiring
  70% of the issued and outstanding shares of a Holdco, the sole owner of a Newco
  to which such Concession Area has been transferred , free and clear of all Encumbrances
  and defects in title. 

 Section 4.2         Completed
  Requirements 

                The
  Optionor acknowledges that: 

	 (a)      	 in accordance with the Letter Agreement, the Optionee
        has paid to the Optionor the sum of $50,000 upon the signing of the
        Letter Agreement; and 

	 	 
	 (b)      	 upon signing of the Letter Agreement, the Optionee
        has incurred the aggregate sum of $375,462 in Expenditures, which
        sum will be credited towards the earn in requirements set forth in Section
        4.4(b)(i). 

 Section 4.3         Further
  Payment by Optionee 

                The
  Optionee will pay to the Optionor the sum of $150,000 no later than the
  latest Transfer Date. 

 - 12 -

 Section 4.4         Further
  Requirements for Exercise of Option 

                In
  addition to the payments already made as set forth in Section 4.2 and Section
  4.3, to complete the exercise of the Option in respect of a Concession Area,
  the Optionee must: 

	 (a)      	 pay the sum of $25,000 to the Optionor
        by that date which is 180 days after the Transfer Date for each Property
        for which the Optionee wishes to maintain the Option; and 

	 
	 (b)      	 undertake exploration of such Concession
        Area and fund Expenditures in connection therewith, as follows: 

	 
	 	 (i)     
      
	 at least $300,000 by the first anniversary of
        the Transfer Date of the relevant Property (including the Expenditures
        since the Letter Agreement, as described in Section 4.2, and any Expenditures
        incurred after the execution of this Agreement and prior to the Effective
        Date); 

	 
	 	 (ii)      
	 an additional $700,000, for aggregate Expenditures
        of at least $1,000,000 by the second anniversary of such Transfer
        Date; and 

	 
	 	 (iii)      
	 an additional $1,000,000 (for aggregate Expenditures
        of $2,000,000 no later than the third anniversary of such Transfer
        Date. 

                Expenditures
  in any period in excess of the minimum may be carried over to the subsequent
  period or periods. 

 Section 4.5         Cash
  In Lieu of Expenditure 

                In
  lieu of an amount of Expenditures specified in Section 4.4(b) required by a
  date specified therein, the Optionee may pay to the Optionor such amount or
  any portion thereof by such date. Upon such payment such amount will be deemed
  to have been Expenditures incurred by the Optionee by such date. 

 Section 4.6         Failure
  to Keep Option in Good Standing Generally 

                The
  Optionor may terminate the Option on all of the Concession Areas if, subject
  to Article 8, the Optionee fails to maintain the Option on at least one Concession
  Area and fails to pay to the Optionor the aggregate sum of $100,000 (whether
  or not the Optionee has elected to maintain the Option on at least four of the
  Properties) pursuant to Section 4.4(a) by that date which is 180 days from the
  latest Transfer Date for the Properties. To terminate the Option under this
  Section 4.5, the Optionor must give notice to the Optionee of its default and
  if the Optionee does not, within 30 days after such notice, cure the default,
  then the entire Option will terminate effective upon the expiry of the 30 day
  period. 

 - 13 -

 Section 4.7         Failure
  to Keep Option in Good Standing Specifically 

                The
  Optionor may terminate the Option in respect of any Concession Area if, subject
  to Section 4.5 and Article 8: 

	 (a)      	 the Optionee fails to make the payment for the relevant
        Property specified in Section 4.4(a) by the date specified therein, or
      

	 	 
	 (b)      	 the Optionee has failed to fund the Expenditures
        on such Concession Area specified in Section 4.4.(b) by the date specified
        therein. 

 To terminate the Option on a specific Concession Area, the
  Optionor must give notice to the Optionee of its default. If the Optionee does
  not, within 30 days after such notice, cure the default, then the Option with
  respect to the relevant Concession Area will be terminated upon the expiry of
  the 30 day period. Those Concession Areas on which the Option has been terminated
  will be promptly transferred to the Optionor. 

 Section 4.8         Optionee’s
  Exploration Programs 

                All
  exploration will be conducted and Expenditures will be made as the Optionee,
  in its sole discretion, may determine. 

 Section 4.9         Optionee’s
  Termination 

                The
  Optionee may, by notice to the Optionor, terminate the Option in respect of
  any of the Concession Areas at any time prior to exercising the Option in respect
  of such Concession Area. 

 Section 4.10        Effect
  of Termination 

                Upon
  termination of the Option in respect of any Concession Area (in this section,
  the “Abandoned Concession”) pursuant to Section 4.6, Section 4.7
  or Section 4.9, this Agreement will be of no further force or effect in respect
  of the Abandoned Concession, and the Optionee will have no Interest in and no
  further obligations hereunder in respect of the Abandoned Concession, except
  the following: 

	 (a)      	 to leave the Abandoned Concession in a safe and
        orderly condition and, with respect to activities carried out thereon
        by the Optionee during the Option Period, in accordance with all applicable
        pollution control and reclamation Laws and permits, and without any outstanding
        work orders or directions related to the environment requiring any work,
        repairs, construction or capital expenditures with respect to Abandoned
        Concession; 

	 	 
	 (b)      	 the Optionee will remain responsible for all of
        its activities on any Abandoned Concession Area during the Option Period,
        and will indemnify and hold the 

 - 14 -

	 	 Optionor harmless from all loss, damage,
        costs, actions and suits arising out of or in connection with such activities.
      

	 
	 (c)      	 to make available to the Optionor or its
        designee, at no cost: 

	 
	 	 (i)     
      
	 all data, information and reports on work carried
        out by the Optionee on the Abandoned Concession, all drill core, assay
        pulps, maps, drilling logs, assay results and other technical data compiled
        by the Optionee with respect to the Abandoned Concession and copies of
        all books, accounts and records of operations conducted by or on behalf
        of the Optionee on the Abandoned Concession and not previously delivered
        to the Optionor; and 

	 
	 	 (ii)      
	 upon the request of the Optionor, a form of quitclaim
        or other instrument executed by the Optionee and appropriate to evidence
        that the Optionee has no further interest in the Abandoned Concession;
        and 

	 
	 (d)      	 within a period of 180 days following
        such termination, to remove from the Abandoned Concession all temporary
        structures, plant, equipment, machinery, tools, appliances and supplies
        erected, installed or brought upon the Abandoned Concession by or on behalf
        of the Optionee. 

                Upon
  any such termination (other than as contemplated in Section 4.11), the Abandoned
  Concession Area will be forthwith transferred to the Optionor. 

 Section 4.11        Termination
  of Entire Option 

                If
  the Option has been terminated as to all of the Concession Areas, then pursuant
  to the Trust Agreement, Trustco will transfer to and cause the registration
  in the name of the Optionor or his nominee of the Chorti Aruba shares held by
  Trustco, and thereupon this Agreement will terminate, except that each of the
  Parties will: 

	 (a)      	 perform any other covenants under the Agreement
        the performance of which by such Party is due prior to such termination;
        and 

	 	 
	 (b)      	 observe and perform its confidentiality and other
        obligations pursuant to Article 9 which are intended to survive such termination.
      

 The Optionee will remain responsible for all of its activities
  on the Concession Areas during the Option Period, and will indemnify and hold
  the Optionor harmless from all loss, damage, costs, actions and suits arising
  out of or in connection with such activities. 

 - 15 -

 ARTICLE 5 

  VESTING 

 Section 5.1         Further
  Requirements to Vesting 

                If
  the Optionee completes all of the requirements specified in Section 4.4 within
  the times specified therein in respect of a Concession Area and has thereby
  exercised its Option to acquire a 70% Interest in such Concession Area, then
  upon the fulfilment of the following conditions the Optionee will be vested
  with such Interest: 

	 (a)      	 payment to the Optionor of $250,000; and 
	 
	 (b)      	 delivery to the Optionor of a comprehensive report
        on such Concession Area detailing the results obtained from the Expenditures
        thereon and a description of any further exploration and development work
        in relation thereto that the Optionor recommends. 

 Section 5.2         Incorporation
  of Newco and Newco Parent 

                After
  the vesting of the Optionee’s 70% Interest in a Concession Area and prior
  to the expiry of the Optionor’s 90 day election period under Section 5.3,
  the Parties will cause to be incorporated a Holdco and as its subsidiary, a
  Newco, and to transfer such Concession Area to Newco. The initial shareholder
  of Holdco will be the Optionee as to at least 70% of the issued and outstanding
  shares, with the remaining 30% of the issued and outstanding shares of Holdco
  issued to the Optionor only if it does not exercise its right to convert its
  Interest to a royalty under Section 5.3. 

 Section 5.3         Conversion
  of Optionor’s Interest 

                Prior
  to the expiry of the 90 day period after the vesting of the Optionee’s
  70% Interest in a Concession Area, the Optionor may, by notice to the Optionee,
  elect to convert its 30% Interest therein to a Royalty on such Concession Area.
  Upon such notice the Optionee and the Optionor will execute and deliver a Royalty
  Agreement with respect to such Concession Area, and the Optionee will be entitled
  thereafter to be the sole owner of that Holdco and its subsidiary Newco that
  holds the Concession Area, free of any interest or claim by or through the Optionor
  other than pursuant to the Royalty Agreement. However, the Optionee will remain
  responsible for all of its activities on such Concession Area during the Option
  Period, and will indemnify and hold the Optionor harmless from all loss, damage,
  costs, actions and suits arising out of or in connection with such activities.

 - 16 -

 Section 5.4         Joint
  Project Structure 

                If
  the Optionor does not exercise its conversion right under Section 5.3, then
  the Optionor will be entitled to have issued to him Holdco shares such that
  30% of the issued and outstanding shares of Holdco are held by and registered
  in his name. Concurrently with such share issuance: 

	 (a)      	 the Parties and Holdco will enter into a Shareholders’
        Agreement with respect to Holdco and Newco, and 

	 
	 (b)      	 the Newco Property will be excluded from this Agreement.
      

 Section 5.5         Last
  Project 

                If
  only one Concession Area remains in Chorti and the Optionee becomes vested with
  its 70% Interest therein, then the Parties may determine, in lieu of incorporating
  a Holdco with a Newco subsidiary, to permit the joint exploration and development
  of such Concession Area to proceed through Chorti Aruba and Chorti. In this
  event: 

	 (a)      	 the parties will enter into a shareholders’
        agreement in substantially the form set forth in Schedule 3 of this Agreement,
        to govern the rights and obligations of the Parties with respect to the
        management of Chorti Aruba and Chorti and the conduct of their respective
        businesses and affairs 

	 
	 (b)      	 70% of the shares of Chorti Aruba will be transferred
        from Trustco to the Optionee, and 

	 
	 (c)      	 this Agreement will be at an end and of no further
        force and effect, except as may have arisen prior to its termination and
        the confidentiality and other obligations of the parties under Article
        9. 

      ARTICLE 6 

  OPTION PERIOD 

 Section 6.1         Voting
  and Management 

                During
  the Option Period: 

	 (a)      	 the Optionee will be entitled: 

	 
	 	 (i)     
      
	 to vote the shares of Chorti Aruba that are held
        by Trustco, and 

	 
	 	 (ii)      
	 to have two nominees to the board of directors of
        each of Chorti Aruba and Chorti; 

	 
	 (b)      	 the Optionor will be entitled to have
        one nominee to the board of directors of each of Chorti Aruba and Chorti,
        and to appoint from among the directors the chairman of the board of directors;
      

 - 17 -

	 (c)      	 all decisions of the board of directors
        of each of Chorti Aruba and Chorti will be made by simple majority; 

	 
	 (d)      	 each Party will vote the shares of Chorti
        Aruba, and otherwise take all such steps as may reasonably be within its
        power (including to cause its respective nominees as directors or officers
        of Chorti Aruba or Chorti to so comply): 

	 
	 	 (i)     
      
	 cause Chorti Aruba and Chorti to comply with and
        act in the manner contemplated by the provisions of this Agreement, and
      

	 
	 	 (ii)      
	 implement to its full extent the provisions of this
        Agreement; 

	 
	 (e)      	 each Party will refrain from voting and
        from taking any other action as a shareholder of Chorti Aruba (and will
        cause Chorti Aruba as the sole shareholder of Chorti and its representatives
        appointed as directors or officers of Offshore or Chorti to so refrain)
        in favour of or which would have any of the following consequences or
        effects: 

	 
	 	 (i)      
	 a fundamental change in Chorti Aruba or Chorti;
      

	 
	 	 (ii)      
	 the undertaking by Chorti Aruba or Chorti of business
        activity unrelated or not reasonably ancillary to the exploration and
        development of one or more of the Concession Areas or, in the case of
        Chorti Aruba, to the holding of shares in Chorti; 

	 
	 	 (iii)      
	 except in the ordinary course of business, the borrowing
        of funds by Chorti Aruba or Chorti other than as contemplated herein or
        from each other, or the encumbrance of any assets of any of them; 

	 
	 	 (iv)      
	 the making of any loan or granting of any guarantee
        by Chorti Aruba or Chorti other than to each other; 

	 
	 	 (v)      
	 the amendment, discharge, modification, release,
        surrender or termination, whether by execution and delivery of a written
        instrument or by failure to perform conditions precedent or obligations,
        of any of the agreements or other documents under which a Concession Area
        or any portion thereof is held, or the surrender of any part of the Concession
        Areas other than in accordance with this Agreement; 

	 
	 	 (vi)      
	 the settlement of any legal action, suit, claim,
        cause of action, arbitration or other dispute resolution proceeding involving
        payments, commitments or obligations of Chorti Aruba or Chorti in excess
        of $20,000 in cash or value; 

	 
	 	 (vii)      
	 a change in the external auditors of Chorti Aruba
        or Chorti; 

	 
	 	 (viii)      
	 any other activity that is inconsistent with any
        provision of this Agreement. 

 - 18 -

 Section 6.2         Right
  of Entry During Option Period 

                Throughout
  the Option Period, the Optionee, Opco and their respective Affiliates, employees,
  agents and independent contractors will have the right in respect of the Property
  to: 

	 (a)      	 enter thereon; 

	 
	 (b)      	 have exclusive and quiet possession thereof; 

	 
	 (c)      	 do such prospecting, exploration, development and/or
        other mining work thereon and thereunder as the Optionee in its sole discretion
        may determine to be advisable including, without limitation, the removal
        of ores, minerals and metals from the Property, but only for the purpose
        of testing; and 

	 
	 (d)      	 bring upon and erect upon the Property such facilities
        as the Optionee may deem advisable. 

 The Optionee's rights pursuant to this section will at all
  times be subject to any restrictions that may be required by the Laws and to
  a right of entry in favour of the Optionor to observe the results of the exploration
  work after reasonable notice is given to the Optionee. 

 Section 6.3         Obligations
  of the Optionee During the Option Period 

                During
  the Option Period the Optionee will ensure that: 

	 (a)      	 all work on or with respect to the Concession Areas
        is conducted in a manner consistent with good exploration, engineering
        and mining practices and in compliance with the Laws; 

	 
	 (b)      	 the Concession Areas are properly maintained in
        good standing according to the Laws, including the timely payment of the
        fees described in Schedule 1; 

	 
	 (c)      	 the Optionor receives bi-monthly reports during
        periods of active field activity and otherwise annual reports (including
        up-to-date maps if there are any) containing information on exploration
        activity and results during the period reported on; 

	 
	 (d)      	 the Optionor receives, within a reasonable time
        after request, any other information respecting the work on the Concession
        areas as the Optionee is reasonably able to provide; and 

	 
	 (e)      	 the maintenance of true and correct books, accounts
        and records of operations on each Concession Area. 

 - 19 -

 Section 6.4         Additional
  Indemnity by Optionee 

                The
  Optionee acknowledges that the Optionor has other mining and business interests
  in Nicaragua, and that the Optionee’s activities on the Concession Areas
  or otherwise in Nicaragua could impact upon such interests. Accordingly, the
  Optionee will, in addition to the indemnities provided elsewhere in the Agreement,
  indemnify and hold the Optionor harmless from all loss, damage, costs, actions
  and suits arising out of or in connection with the Optionee’s activities
  during the Option Period on the Concession Areas or otherwise in Nicaragua.

 ARTICLE 7 

  TRANSFERS 

 Section 7.1         Limitations
  on Transfers 

                Except
  if permitted under and in accordance with this Agreement the Optionor or the
  Optionee will not transfer, convey, assign, mortgage or grant an option in respect
  of or grant a right to purchase or in any manner transfer, alienate or otherwise
  dispose of (in this Article, whether as a noun or verb and in any form, “Transfer”)
  any interest in any of the Concession Areas or its shares in Chorti or Chorti
  Aruba, or transfer or assign any of its rights under this Agreement. 

 Section 7.2         Prohibited
  Dispositions 

                A
  Party is prohibited from Transferring any interest in any of the Concession
  Areas, its shares in Chorti Aruba or Chorti or any of its rights under this
  Agreement unless: 

	 (a)      	 such Transfer occurs when such Party is not in default
        of any of its covenants and agreements herein contained; and 

	 
	 (b)      	 it has received the consent of the other Party to
        such Transfer, such consent not to be unreasonably withheld. 

 Section 7.3         Exceptions
  

                Nothing
  in Section 7.2 applies to or restricts in any manner: 

	 (a)      	 a disposition by the Transferring Party an Affiliate
        of the Transferring Party, provided that the Transferring Party remains
        bound and such Affiliate first assumes and agrees in writing with the
        other Party to be bound by the terms of this Agreement and to retransfer
        the Holdings to the Transferring Party before ceasing to be an Affiliate
        of the Transferring Party; or 

 - 20 -

	 (b)      	 an amalgamation or corporate reorganization involving
        the Transferring Party which has the effect in law of the amalgamated
        or surviving corporation possessing all the property, rights and interests
        and being subject to all the debts, liabilities and obligations of each
        amalgamating or predecessor corporation; or 

	 
	 (c)      	 a sale, forfeiture, charge, withdrawal, transfer
        or other disposition or encumbrance which is otherwise specifically required
        or permitted under this Agreement. 

 Section 7.4         Conditions
  of Transfers 

                As
  a condition of any Transfer other than to another Party or an Affiliate of a
  Party, the transferee must covenant to and agree with the remaining Party to
  be bound by this Agreement, including this Article 7, and prior to the completion
  of any such Transfer, the Transferring Party must deliver to the remaining Party
  evidence thereof in a form satisfactory to such remaining Party. Notwithstanding
  any such Transfer, the Transferring Party will remain liable for all of its
  obligations hereunder, unless the Holdings have been Transferred to a third
  party with consent pursuant to Section 7.2(b) or the remaining Party has approved
  the Transfer on the basis that the Transferring Party will be released, such
  approval not to be unreasonably withheld. 

 ARTICLE 8 

  FORCE MAJEURE 

 Section 8.1         Events
  

                Notwithstanding
  any other provisions contained herein, a Party will not be liable for its failure
  to perform any of its obligations nor will it lose any of its rights under this
  Agreement due to a cause beyond its control (except those caused by its own
  lack of funds) including, but not limited to: acts of God, acts of war, terrorism,
  fire, flood, explosion, strikes, lockouts or other industrial disturbances or
  civil disturbance; Laws; or non-availability of materials or transportation
  or protests, demonstrations or other events causing work stoppages by environmental
  lobbyists, political or ethnic groups (each an "Intervening Event"). 

 Section 8.2         Effect
  of Intervening Events 

                All
  time limits imposed by this Agreement (other than for the payment of monies)
  will be extended by a period equivalent to the period of delay resulting from
  an Intervening Event described in this Article 8. 

 - 21 -

 Section 8.3         Obligation
  to Remove Intervening Events 

                A
  Party relying on the provisions of this Article 8 will take all reasonable steps
  to eliminate any Intervening Event and, if possible, will perform its obligations
  under this Agreement as far as practical, but nothing herein will require such
  Party to settle or adjust any labour dispute or to question or to test the validity
  of any law, rule, regulation or order of any duly constituted court or governmental
  authority or to complete its obligations under this Agreement if an Intervening
  Event renders completion impossible. 

 Section 8.4         Giving
  Notice 

                A
  Party relying on the provisions of this Article 8 will give notice to the other
  Party forthwith upon the occurrence of the Intervening Event and forthwith after
  the end of the period of delay when such Intervening Event has been eliminated
  or rectified. 

 Section 8.5         Option
  Requirements 

                For
  the purposes of this Article 8, inability of the Optionee or Opco to conduct
  planned work on any Concession Area by reason of an Intervening Event will be
  deemed to be an Intervening Event with respect to the Optionor’s payments
  to the Optionor and its funding of Expenditures necessary to maintain and exercise
  its Option on such Concession Area. The Optionor will take all reasonable steps
  to eliminate any Intervening Event, as contemplated in Section 8.2. 

 ARTICLE 9 

  CONFIDENTIAL INFORMATION 

 Section 9.1         Confidential
  Information 

                Except
  as specifically otherwise provided for herein, all information obtained hereunder
  will be confidential and notwithstanding any termination of this Agreement,
  neither of the Parties will disclose or permit the disclosure of such information
  or the terms of this Agreement, or use or permit the use of such information
  other than for the activities contemplated hereunder, as required by law or
  by the rules and regulations of any regulatory authority or stock exchange having
  jurisdiction, or with the written consent of the other Party, such consent not
  to be unreasonably withheld. 

 Section 9.2         Information
  in Public Domain 

                The
  provisions of this Article 9 do not apply to information which is or becomes
  part of the public domain other than through a breach of the terms hereof. 

 - 22 -

 Section 9.3         Request
  to Disclose 

                Where
  a request is made for permission to disclose confidential information hereunder,
  a reply thereto will be made within three Business Days after receipt of such
  request, failing which the Party requesting will be entitled as if consent had
  been given to disclose such information in the limited circumstances specified
  in such request. 

 ARTICLE 10 

  ARBITRATION 

 Section 10.1         Single
  Arbitrator 

                Any
  matter required or permitted to be referred to arbitration hereunder or in dispute
  hereunder will be determined by a single arbitrator to be appointed by the parties
  hereto. 

 Section 10.2         Prior
  Notice 

                Any
  Party may refer any such matter to arbitration by written notice to the other
  Party and, within 10 days after receipt of such notice, the parties will agree
  on the appointment of an arbitrator. No person will be appointed as an arbitrator
  hereunder unless such person is, by a combination of education and experience
  qualified to adjudicate the matter in dispute and agrees in writing to act.

 Section 10.3         No
  Agreement on the Arbitration 

                If
  the parties cannot agree on a single arbitrator as provided in Section 10.2,
  or if the person appointed is unwilling or unable to act, either Party may submit
  the matter to arbitration before a single arbitrator in accordance with the
  Rules for Conciliation and Arbitration of the International Chamber of Commerce
  (the “Rules”). 

 Section 10.4         Conduct
  of Arbitration 

                Except
  as specifically provided in this Article 10, an arbitration hereunder will be
  conducted in English in accordance with the Rules. The arbitrator will fix a
  time and place in Florida for the purpose of hearing the evidence and representations
  of the parties and will preside over the arbitration and determine all questions
  of procedure not provided for under the Rules Act or this Article 10. After
  hearing any evidence and representations that the parties may submit, the arbitrator
  will make an award and reduce the same to writing and deliver one copy thereof
  to each of the parties. The decision of the arbitrator will be made within 45
  days after his or her appointment, subject to any reasonable delay due to unforeseen
  circumstances. The expense of the 

 - 23 -

 arbitration will be paid as specified in the award. The award
  of the single arbitrator will be final and binding upon each of the parties.

 Section 10.5         Default
  

                If
  a Party is in default of any requirement herein, the other Party may give written
  notice to the Party in default specifying the default. In such event the Party
  in default will not lose any rights under this Agreement unless, within 30 days
  after the giving of the notice of default the defaulting Party has failed to
  take reasonable steps to cure the default by the appropriate performance or
  has failed to dispute the notice of default. Neither Party will lose any rights
  under this Agreement during the period when they are disputing, in good faith,
  a notice of default. If a notice of default is not so disputed, the Party delivering
  such notice will be entitled to seek any remedy it may have on account of such
  default pursuant to this Agreement or under the Laws. 

 ARTICLE 11 

  NOTICE 

 Section 11.1         Method
  

                Each
  notice, demand or other communication required or permitted to be given under
  this Agreement will be in writing and will be delivered, mailed (by first class
  postage prepaid) or sent by facsimile transfer or some other similar form of
  telecommunication addressed as follows: 

	(a)	If to the Optionor at: 
	 	 	 
	 	 	Los Robles, Embajada Gran Bretaña 1/2 Cuadra Abajo 

      Managua, Nicaragua 

      Fax: 505-278-6713 
	 	 
	(b) 	If to the Optionee at: 

	 	 	 
	 	 	355 Burrard Street, Suite 830 

        Vancouver, BC V6C 2G8, Canada 

        Attention: Mr. Simon Ridgway, President 

        Fax: 604-662-8829 

The date of receipt of such notice, demand or other communication
  will be the date of delivery thereof if delivered or mailed and, if given by
  facsimile transfer or some other form of electronic communication, will be deemed
  to have been given and received on the next Business Day following the day on
  which it was sent, unless it can be shown that such notice was not actually
  received by the addressee. 

 - 24 -

 Section 11.2         Amending
  Addresses 

                Either
  Party may at any time and from time to time notify the other Party in writing
  in accordance with this Article 11 of a change of address for the purposes of
  this Agreement. 

 ARTICLE 12 

  AREA OF INTEREST 

 Section 12.1         Limitation
  on Right to Acquire Mineral or Surface Interests 

                No
  Party may acquire, nor will it permit any Affiliate to acquire, any Mineral
  Rights or Surface Rights located wholly or in part within the Area of Interest
  or any Mineral Rights adjacent thereto unless the acquisition is made subject
  to the terms of this Agreement and the acquiring Party, or the Party whose Affiliate
  made the acquisition, complies with the provisions of this article. 

 Section 12.2         Expansion
  of Concession Areas 

                During
  the Option Period, the Parties will use their best efforts to acquire, at the
  request of the Optionee: 

	 (a)      	 any Surface Rights in relation to any Concession
        Area, or 

	 
	 (b)      	 any Mineral Rights adjacent to any Concession Area,
      

 which the Optionee reasonably believes are necessary or advisable
  to further the exploration or development of any the Concession Areas. Any New
  Concession will be acquired in the name of Chorti. 

 Section 12.3         Acquisition
  within Area of Interest 

                If
  during the Option Period either Party or an Affiliate of a Party acquires Mineral
  Rights or Surface Rights in the Area of Interest other than under Section 12.2,
  then forthwith after completing the acquisition: 

	 (a)      	 if the acquiring party is the Optionee or an Affiliate
        of the Optionee, the Optionee will have such Mineral Rights or Surface
        Rights registered or recorded in the name of or transferred to Chorti;
        or 

	 
	 (b)      	 if the acquiring party is the Optionor or an Affiliate
        of the Optionor, the Optionor will give written notice thereof to the
        Optionee setting out the location of the Mineral Rights or Surface Rights,
        including all information known to the Optionor or the acquiring party
        about the same, the costs of acquisition and all other pertinent details
        relating thereto, and upon receipt of such notice, the 

 - 25 -

	 	 Optionee will have a period of 15 days to decide
        whether the Mineral Rights or Surface Rights in question or any portion
        thereof will be transferred to Chorti and made a part of the relevant
        Concession Area. 

	 
	 (c)      	 any Mineral Rights or Surface Rights registered
        or recorded in the name of or transferred to Chorti pursuant to this Section
        12.3 will thereafter form a part of the relevant or adjacent Concession
        Area. 

 Section 12.4         Further
  Assurance 

                Each
  of the parties hereto will execute and deliver or cause to be executed and delivered
  such further documents and instruments and give such further assurances as the
  other may reasonably require to evidence and give effect to any acquisition
  and/or transfer of a mineral interest as provided in this article. 

 Section 12.5         Notice
  of Rejection 

                If,
  within the 15-day period referred to in Section 12.3(b), the Optionee does not
  notify the Optionor that Mineral Rights or Surface Rights must be transferred
  to Chorti, then it will be deemed to have consented to the acquisition by the
  acquiring party of the Mineral Rights or Surface Rights not so transferred and
  the same may thereafter be held or dealt with by the acquiring party and the
  Optionor free of the terms and conditions of this Agreement. The terms of this
  article will continue to apply with respect to any future acquisitions of Mineral
  Rights or Surface Rights within the Area of Interest. 

 Section 12.6         Non-Compliance
  Constitutes Default 

                Non-compliance
  with the provisions of this article by any acquiring party which is an Affiliate
  of a Party will constitute a default under this Agreement by such Party unless
  such Party can satisfy the other Party that its Affiliate was acting independently
  and at arm's length, without information from or direction by the Party and
  that the Party could not reasonably have enforced compliance with the terms
  hereof by its Affiliate in the circumstances. 

 Section 12.7         Other
  Activities and Interests 

                This
  Agreement and the rights and obligations of the parties hereunder are strictly
  limited to the Concession Areas and the Area of Interest. Each Party will have
  the free and unrestricted right to enter into, conduct and benefit from business
  ventures of any kind whatsoever, whether or not competitive with the activities
  undertaken pursuant hereto, without disclosing such activities to the other
  Party or inviting or allowing the other to participate. 

 - 26 -

 ARTICLE 13 

  GENERAL 

 Section 13.1         Entire
  Agreement 

                This
  Agreement and the schedules hereto constitute the entire agreement between the
  parties hereto and supersedes and replaces the Letter Agreement and any other
  agreement or arrangement, whether oral or written, express or implied, statutory
  or otherwise heretofore existing between the parties in respect of the subject
  matter of this Agreement. This Agreement may not be amended or modified except
  by an instrument in writing signed by each of the parties hereto. 

 Section 13.2         No
  Waiver of Breaches 

                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 will be deemed or construed to be a consent to or a waiver of any
  other breach or default. 

 Section 13.3         Further
  Assurances 

                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 Parties’ respective Interests from time
  to time including their respective shares or voting rights in relation to Chorti
  Aruba and Chorti, and the interests of Chorti or any Newco in any Concession
  Area, the shareholdings of Chorti Aruba in Chorti and of Holdco in any Newco.

 Section 13.4         Manner
  of Payment 

                Except
  as otherwise specifically provided hereunder, payments to be made to any Party
  hereunder may be made by cheque or bank draft mailed or delivered to such Party
  at its address for notice purposes as provided herein, or for the account of
  such Party at such bank or banks in Canada as such Party may designate from
  time to time by written notice. Such bank or banks will be deemed the agent
  of the designating Party for the purposes of receiving, collecting and receipting
  such payment. 

 Section 13.5         Enurement
  

                This
  Agreement will enure to the benefit of and be binding upon the parties and their
  respective successors and permitted assigns. 

 - 27 -

 Section 13.6         Special
  Remedies 

                Each
  of the parties agrees that its failure to comply with the covenants and restrictions
  set out in Articles 7, 9 and 12 would constitute an injury and damage to the
  other Party impossible to measure monetarily and, in the event of any such failure,
  the other Party will, in addition and without prejudice to any other rights
  and remedies at law or in equity, be entitled to injunctive relief restraining,
  enjoining or specifically enforcing the provisions of Article 7, Article 9 or
  Article 12, as the case may be, and any Party intending to breach the provisions
  of Article 9 or 12 hereby waives any defence it may have in law to such injunctive
  or equitable relief. 

 Section 13.7         Time
  of the Essence 

                Time
  is of the essence in the performance of each obligation under this Agreement.

 IN WITNESS WHEREOF the Parties have executed this Option Agreement.

	 FRANK MENA  	 	  
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 
    	 	
      Witness  

	 The  Corporate  Seal  of  PILLAR 	 )  	 
	 RESOURCES INC. was  affixed  in the 	 )  	 
	 presence of:  	 )  	 
	  	 )  	 
	  	 )  	 
	
      Authorized Signatory  	 ) 	C/S  
	 	 )  	 
	  	 )  	 
	
      Authorized Signatory  	 )  	 

 SCHEDULE 1 

 to the Option Agreement made as of October 1, 2003 between
  FRANK 

  MENA and PILLAR RESOURCES INC. 

 PROPERTIES DESCRIPTION AND FEES 

 Description: 

	 Concession  	 Ministry Agreement No.  	 Date Granted  	 Expiry Date  	 Area (hectares)  
	 Columbus  	 180-RN-MC-2002  	 Feb. 4, 2002  	 Feb. 3, 2027  	 14,000  
	 El Gallo  	 190-RN-MC-2002  	 Apr. 9, 2002  	 April 8, 2027  	 7,200  
	 San Albino Group:  
    Guapinol 
      
    Chachagua  
    San Albino  

    	

      177-RN-MC-2002  

      178-RN-MC-2002  

      179-RN-MC-2002  
 	

      Feb. 4, 2002  

      Feb. 4, 2003  

      Feb. 4, 2003  
 	

      Feb. 3, 2027  

      Feb. 3, 2027  

      Feb. 3, 2027  	

      3,000 

      3,600 
 8,700 

      15,300  
	 San Ramon /	 189-RN-MC-2002  	 Apr. 9, 2002  	 April 8, 2027  	 800  
	 Kisilala  	 Application  	 N/A  	 N/A  	 13,500  

 Surface Land Taxes (Granted Concessions): 

	 Concession  	 Year  	 1st Instalment (US$) 
    	 2nd Instalment (US$) 
    	 Yearly Total (US$)  
	 Columbus  	 2002 

      2003 

      2004 

      2005 

      2006 

      2007 

      2008 

      2009 

      2010 

      2011 
 	 1,121.92 

      3,356.56 

      6,789.04 

      6,731.51 

      13,463.01 

      13,463.01 

      18,104.11 

      17,950.68 

      35,901.37 

      35,901.37 

      53,852.05 
 	 2,090.41 

      6,254.10 

      12,542.47 

      12,542.47 

      25,084.93 

      25,084.93 

      33,446.58 

      33,446.58 

      66,893.15 

      66,893.15 

      100,339.73 
 TOTAL:  	 3,212.33 

      9,610.66 

      19,331.51 

      19,273.98 

      38,547.94 

      38,547.94 

      51,550.69 

      51,397.26 

      102,794.52 

      102,794.52 
 154,191.78 
 591,253.12 

    
	 El Gallo  	 2002 

      2003 

      2004 

      2005 

      2006 

      2007 

      2008 

      2009 

      2010 

      2011 
 	 414.25 

      1,239.34 

      2,485.48 

      2,485.48 

      4,970.96 

      4,970.96 

      6,627.95 

      6,627.95 

      13,255.89 

      13,255.89 

      19,883.84  	 1,385.75 

      4,160.66 

      8,314.52 

      8,314.52 

      16,629.04 

      16,688.22 

      22,172.05 

      22,172.05 

      44,344.11 

      44,344.11 

      66,516.16 
 TOTAL:  	 1,800.00 

      5,400.00 

      10,800.00 

      10,800.00 

      21,600.00 

      21,659.18 

      28,800.00 

      28,800.00 

      57,600.00 

      57,600.00 
 86,400.00 
 331,259.18 

    

 - 2 - 

	 Concession  	 Year  	 1st Instalment (US$) 
    	 2nd Instalment (US$) 
    	 Yearly Total (US$)  
	 San Albino Group:  
    Guapinol 
      
 
 
 
 
 
 
 
 
 
 
 
 
  
       Chachagua  
 
 
 
 
 
 
 
 
 

      
 
 
    San Albino  
 
 
 
 
 

      
 
 
 
 	

      2002 

      2003 

      2004 

      2005 

      2006 

      2007 

      2008 

      2009 

      2010 

      2011  
 
 

      2002 

      2003 

      2004 

      2005 

      2006 

      2007 

      2008 

      2009 

      2010 

      2011 
 
 
 

      2002 

      2003 

      2004 

      2005 

      2006 

      2007 

      2008 

      2009 

      2010 

      2011 
 	

      240.41 

      719.26 

      1,454.79 

      1,442.47 

      2,884.93 

      2,884.93 

      3,879.45 

      3,846.58 

      7,693.15 

      7,693.15 

      11,539.73 
 
 

      288.49 

      863.11 

      1,745.75 

      1,730.96 

      3,461.92 

      3,461.92 

      4,655.34 

      4,615.89 

      9,231.78 

      9,231.78 

      13,847.67 
 
 

      697.19 

      2,085.86 

      4,218.90 

      4,183.15 

      8,366.30 

      8,366.30 

      11,250.41 

      11,155.07 

      22,310.14 

      22,310.14 

      33,465.21 
 
 
 	

      447.95 

      1,340.16 

      2,687.67 

      2,687.67 

      5,375.34 

      5,375.34 

      7,167.12 

      7,167.12 

      14,334.25 

      14,334.25 

      21,501.37 
 TOTAL: 
 

      537.53 

      1,608.20 

      3,225.21 

      3,225.21 

      6,450.41 

      6,450.41 

      8,600.55 

      8,600.55 

      17,201.10 

      17,201.10 

      25,801.64 
 TOTAL: 
 

      1,299.04 

      3,886.48 

      7,794.25 

      7,794.25 

      15,588.49 

      15,588.49 

      20,784.66 

      20,784.66 

      41,569.32 

      41,569.32 

      62,353.97 
 TOTAL:  	

      688.36 

      2,059.42 

      4,142.46 

      4,130.14 

      8,260.27 

      8,260.27 

      11,046.57 

      11,013.70 

      22,027.40 

      22,027.40 
 33,041.10 
 126,697.10 

      

      826.02 

      2,471.31 

      4,970.96 

      4,956.17 

      9,12.33 

      9,12.33 

      13,255.89 

      13,216.44 

      26,432.88 

      26,432.88 
 39,649.31 
 152,036.52 

      

      1,996.23 

      5,972.34 

      12,013.15 

      11,977.40 

      23,954.79 

      23,954.79 

      32,035.07 

      31,939.73 

      63,879.46 

      63,879.46 
 95,819.18 
 367,421.58 

    
	 San  Ramon  /

      Matiguas  	 2002 

      2003 

      2004 

      2005 

      2006 

      2007 

      2008 

      2009 

      2010 

      2011 
 	 46.03 

      137.70 

      276.16 

      276.16 

      552.33 

      552.33 

      736.44 

      736.44 

      1,472.88 

      1,472.88 

      2,209.32  	 153.97 

      462.30 

      923.84 

      923.84 

      1,847.67 

      1,854.25 

      2,463.56 

      2,463.56 

      4,927.12 

      4,927.12 

      7,390.68 
 TOTAL:  	 200.00 

      600.00 

      1,200.00 

      1,200.00 

      2,400.00 

      2,406.58 

      3,200.00 

      3,200.00 

      6,400.00 

      6,400.00 
 9,600.00 
 36,806.58 

    

 SCHEDULE 2 

 to the Option Agreement made as of October 1, 2003 between
  FRANK 

  MENA and PILLAR RESOURCES INC. 

 Royalty Agreement 

 

 

 NET SMELTER RETURNS ROYALTY AGREEMENT 

 

 Between 

 PILLAR RESOURCES INC.

  and

  [NEWCO] 

 and 

 FRANK MENA 

  Dated •

 TABLE OF CONTENTS

	 ARTICLE 1 INTERPRETATION	 2
	  	 	 
	 SECTION 1.1	 DEFINITIONS	 2
	 SECTION 1.2	 EXHIBITS	 5
	 SECTION 1.3	 GOVERNING LAW	 5
	 SECTION 1.4	 SEVERABILITY	 5
	 SECTION 1.5	 CALCULATION OF TIME	 5
	 SECTION 1.6	 HEADINGS	 5
	 SECTION 1.7	 OTHER MATTERS OF INTERPRETATION	 5
	  	 	 
	 ARTICLE 2 ROYALTY
      DESCRIPTION	 6
	  	 	 
	 SECTION 2.1	 ROYALTY RESERVED	 6
	 SECTION 2.2	 OWNER'S BUYOUT RIGHT	 6
	 SECTION 2.3	 AUTOMATIC REDUCTION OF ROYALTY
      RATE	 6
	 SECTION 2.4	 INTEREST IN LAND	 7
	  	 	 
	 ARTICLE 3 OPERATION
      OF THE PROPERTIES	 7
	  	 	 
	 SECTION 3.1	 OWNER TO DETERMINE OPERATIONS	 7
	 SECTION 3.2	 INSURANCE	 8
	 SECTION 3.3	 COMMINGLING	 8
	  	 	 
	 ARTICLE 4 ASSIGNMENT	 8
	  	 	 
	 SECTION 4.1	 ASSIGNMENT BY THE ROYALTY HOLDER	 8
	 SECTION 4.2	 RIGHT OF FIRST REFUSAL	 8
	 SECTION 4.3	 MULTIPLE PARTIES	 10
	 SECTION 4.4	 ASSIGNMENT BY OWNER	 10
	  	 	 
	 ARTICLE 5 PAYMENTS	 10
	  	 	 
	 SECTION 5.1	 PAYMENT OBLIGATION	 10
	 SECTION 5.2	 PROVISIONAL SETTLEMENTS	 10
	 SECTION 5.3	 DUE DATE	 11
	 SECTION 5.4	 ROYALTY STATEMENTS	 11
	 SECTION 5.5	 ADJUSTMENTS	 11
	 SECTION 5.6	 CONVERSION OF CURRENCY	 12
	 SECTION 5.7	 WIRE TRANSFER	 12
	 SECTION 5.8	 TRADING ACTIVITIES OF OWNER	 12
	 SECTION 5.9	 BOOKS AND RECORDS	 13
	  	 	 
	 ARTICLE 6 INDEMNITY	 13
	  	 	 
	 SECTION 6.1	 INDEMNITY	 13
	 SECTION 6.2	 LIMITATION	 13
	  	 	 
	 ARTICLE 7 DISPUTE
      RESOLUTION	 13
	  	 	 
	 SECTION 7.1	 SINGLE ARBITRATOR	 13
	 SECTION 7.2	 PRIOR NOTICE	 13
	 SECTION 7.3	 NO AGREEMENT ON THE ARBITRATION	 14
	 SECTION 7.4	 CONDUCT OF ARBITRATION	 14
	  	 	 
	 ARTICLE 8 MISCELLANEOUS	 14
	  	 	 
	 SECTION 8.1	 OTHER ACTIVITIES AND INTERESTS	 14
	 SECTION 8.2	 DEFAULT	 14

 - ii - 

	 SECTION 8.3	 CONFIDENTIALITY	 15
	 SECTION 8.4	 NO PARTNERSHIP	 15
	 SECTION 8.5	 NOTICE	 16
	 SECTION 8.6	 FURTHER ASSURANCES	 16
	 SECTION 8.7	 ENTIRE AGREEMENT	 16
	 SECTION 8.8	 NO WAIVERS	 17
	 SECTION 8.9	 TIME OF THE ESSENCE	 17
	 SECTION 8.10	 COUNTERPARTS	 17
	 SECTION 8.11	 PARTIES IN INTEREST	 17
	  	 	 
	 EXHIBIT 1 PROPERTY	  

 NET SMELTER RETURNS ROYALTY AGREEMENT

 THIS AGREEMENT dated as of the  • day of
   •,  •.

 BETWEEN: 

  
    
      
         PILLAR RESOURCES INC., a company incorporated
          under the laws of British Columbia having its principal offices in Vancouver,
          Canada (“Pillar”) and [Newco](the "Owner") 

      

    

  

 OF THE FIRST PART 

 AND: 

  
    
      
         FRANK MENA, a businessman, residing in <*>
          (the "Royalty Holder") 

      

    

  

 OF THE SECOND PART 

                 WITNESSES
  THAT: 

                 WHEREAS
  pursuant to an option agreement dated October 1, 2003 between Pillar as optionee
  and the Royalty Holder as optionor (the “Option Agreement”) Pillar
  has been vested with an undivided 70% interest in a certain Concession Area,
  as that term is defined under the Option Agreement, known as the Mena Properties
  and more particularly described in Exhibit 1 to this Agreement (the “Property”)
  and the Royalty Holder holds the remaining undivided 30% interest in such Property;

                 AND
  WHEREAS pursuant to the Option Agreement the Royalty Holder has elected to convert
  its 30% undivided interest in the Property to a four percent net smelter returns
  royalty in respect of such Property; 

                 AND
  WHEREAS pursuant to the Option Agreement Pillar and the Royalty Holder have
  caused to be incorporated an Aruba company called <**> and as its wholly
  owned subsidiary, the Owner, and have caused the Property to be transferred
  to the Owner; 

                 NOW
  THEREFORE for good and valuable consideration, the receipt and sufficiency of
  which is acknowledged by each of the Parties, the Parties covenant and agree
  as follows: 

 - 2 - 

 ARTICLE 1

  INTERPRETATION 

 Section 1.1       
  Definitions

                 In
  this agreement, unless otherwise provided: 

	 	 (a)      	 "Affiliate" means any person, partnership,
        joint venture, corporation or other form of enterprise which directly
        or indirectly controls, is controlled by, or is under common control with,
        a Party. For purposes of the preceding sentence, "control" means possession,
        directly or indirectly, of the power to direct or cause direction of management
        and policies through ownership of voting securities, contract, voting
        trust or otherwise; 

	 
	 	 (b)      	 "Agreement" means this royalty
        agreement; 

	 
	 	 (c)      	 "Allowable Deductions" means all
        costs, charges and expenses paid, incurred, or deemed incurred by the
        Owner for or with respect to Products including: 

	 
	 	 	 (i)     
      
	 charges for treatment in the smelting, refining
        and other beneficiation process (including handling, processing, interest,
        and provisional settlement fees, weighing, sampling, assaying umpire and
        representation costs, penalties, and other processor deductions), 

	 
	 	 	 (ii)      
	 actual costs of transportation (including loading,
        freight, insurance, security, transaction taxes, handling, port, demurrage,
        delay, and forwarding expenses incurred by reason of or in the course
        of transportation) of Products from the Property to the place of treatment
        and then to the place of Sale, 

	 
	 	 	 (iii)      
	 costs or charges of any nature for or in connection
        with insurance, storage, or representation at a smelter or refinery for
        Products or refined metals, and 

	 
	 	 	 (iv)      
	 sales, use, severance, excise, net proceeds of mine,
        and ad valorem taxes and any tax on or measured by mineral production,
        but not including income taxes of the Owner or Royalty Holder, 

	 
	 	 	 provided that: 

	 
	 	 	 (v)      
	 whether Products are processed on or off the Property
        in a facility wholly or partially owned by the Owner or Pillar or by an
        Affiliate 

 - 3 - 

	 	 	  	of the Owner or an Affiliate of a Pillar, Allowable
        Deductions will not include any costs that are in excess of those which
        would be incurred on an arm's length basis, or which would not be Allowable
        Deductions if those Products were processed by an independent third party;
        and 

	 
	 	 	 (vi)      	 there will be no Allowable Deductions from Gross
        Proceeds received as a result of a Loss; 

	 
	 	 (d)      	 "Business Day" means a day on which
        banks are generally open for business in <**>; 

	 
	 	 (e)      	 "Gross Proceeds" means, subject
        to the provisions of section 5.6, proceeds received or deemed to be received
        by the Owner for the Sale of Products from the Property, whether processed
        on or off of the Property (for greater certainty, including insurance
        proceeds in respect of any Loss), determined as follows: 

	 
	 	 	 (i)      
	 if Products are sold by the Owner in the form of
        ore, doré, or concentrates, then the Gross Proceeds in respect
        of such ore, doré or concentrates will be equal to the amount of
        the proceeds actually received by the Owner during the calendar month
        from the sale of such raw ore, doré or concentrates; 

	 
	 	 	 (ii)      
	 if Products are sold by the Owner in the form of
        refined gold, then such gold will be deemed to have been sold at the Monthly
        Average Gold Price for the month in which it was produced, and the Gross
        Proceeds in respect of gold will be determined by multiplying Gold Production
        for the calendar month by the Monthly Average Gold Price; 

	 
	 	 	 (iii)      
	 if Products are sold by the Owner in the form of
        refined silver, then such silver will be deemed to have been sold at the
        Monthly Average Silver Price for the month in which it was produced, and
        the Gross Proceeds in respect of silver will be determined by multiplying
        Silver Production for the calendar month by the Monthly Average Silver
        Price; and 

	 
	 	 	 (iv)      
	 if Products are sold by the Owner in the form of
        refined metals other than gold or silver then the Gross Proceeds will
        be equal to the amount of the proceeds actually received by the Owner
        during the calendar month from the sale of such refined metal; 

	 
	 	 	 (v)      
	 if there is a Loss of Products then the Gross Proceeds
        will be equal to the sum of the insurance proceeds in respect of such
        Loss, and 

 - 4 - 

	 	 	 	 the Gross Proceeds from any sale of such Products,
        determined under section 1.1(e)(iv); 

	 
	 	 (f)      	 "Loss" means an insurable
        loss of or damage to Products, whether or not occurring on or off the
        Property and whether the Products are in the possession of the Owner or
        otherwise. 

	 
	 	 (g)      	 "Monthly Average Gold
        Price" means the average of the London Bullion Market Association
        P.M. Gold Fix, calculated by dividing the sum of all such prices reported
        for the month by the number of days for which such prices were reported;
      

	 
	 	 (h)      	 "Monthly Average Silver
        Price" means the average New York Silver Price as published daily
        by Handy & Harman (or, should that publication cease, another similar
        publication acceptable to the Parties, acting reasonably), calculated
        by dividing the sum of all such prices reported for the calendar month
        by the number of days for which such prices were reported; 

	 
	 	 (i)      	 "Net Smelter Returns"
        for any Product means the Gross Proceeds from the Sale of such Product
        less Allowable Deductions related to such Product; 

	 
	 	 (j)      	 "Party" or "Parties"
        means one or more of the parties to this Agreement; 

	 
	 	 (k)      	 "Person" means any
        individual, corporation, partnership, joint venture, association, joint-stock
        company, trust, unincorporated organization, or government or any agency
        or political subdivision thereof; 

	 
	 	 (l)      	 "Products" means all
        ores mined from the Property and all concentrates and other mineral products,
        metals or minerals (including diamonds) which are derived therefrom, whether
        on or off the Property, for which there has been a Sale; 

	 
	 	 (m)      	 "Property" means the
        mineral concessions described in Exhibit 1 to this Agreement and any other
        mineral titles to which such Exhibit 1 mineral titles may hereafter be
        converted; 

	 
	 	 (n)      	 "Royalty" means the
        percentage of Net Smelter Returns to which the Royalty Holder is entitled
        pursuant to this Agreement, being four percent reducible to two percent
        pursuant to section 2.2 or section 2.3; 

	 
	 	 (o)      	 "Sale" means a sale
        of a Product by or on behalf of the Owner or any Affiliate of the Owner
        to a Person who is not an Affiliate of the Owner, and is deemed to include
        any Loss prior to any such sale; 

 - 5 - 

	 	 (p)      	 "Silver Production" means the quantity of
        refined silver outturned during a calendar month to the Owner's pool account
        by an independent third party refinery in respect of Products, on either
        a provisional or final settlement basis. 

 Section 1.2        Exhibits

                 Exhibit
  1, which is attached to this Agreement, is by reference incorporated into and
  forms part of this Agreement: 

 Section 1.3       
  Governing Law

                 This
  Agreement will in all respects be governed by and be construed in accordance
  with the laws in force in British Columbia and, subject to section 7.1, will
  be under the exclusive jurisdiction of the courts of British Columbia. 

 Section 1.4       
  Severability

                  If
  any one or more of the provisions contained in this Agreement is held to be
  invalid, illegal or unenforceable in any respect under the laws of any jurisdiction,
  the validity, legality and enforceability of such provision will not in any
  way be affected or impaired thereby under the laws of any other jurisdiction
  and the validity, legality and enforceability of the remaining provisions contained
  herein will not in any way be affected or impaired thereby. 

 Section 1.5       
  Calculation of Time

                 If
  any time period set forth in this Agreement ends of a day of the week which
  is not a Business Day, then notwithstanding any other provision of this Agreement,
  such period will be extended until the end of the next following day which is
  a Business Day. 

 Section 1.6       
  Headings

                 The
  headings to the articles and sections of this Agreement are inserted for convenience
  only and will not affect the construction hereof. 

 Section 1.7       
  Other Matters of Interpretation

                 In
  this Agreement: 

	 	 (a)      	 the singular includes the plural and vice versa;
      

	 
	 	 (b)      	 the masculine includes the feminine and vice versa;
      

	 
	 	 (c)      	 references to "article", "section" and "subsection"
        are to articles, sections and subsections of this Agreement, respectively;
      

 - 6 - 

	 	 (d)      	 all provisions requiring a Party to do or refrain
        from doing something will be interpreted as the covenant of that Party
        with respect to that matter notwithstanding the absence of the words "covenants"
        or "agrees" or "promises"; 

	 
	 	 (e)      	 all provisions requiring a Party to do something
        will be interpreted as including the covenant of that Party to cause that
        thing to be done when the Party cannot directly perform the covenant but
        can indirectly cause that covenant to be performed, whether by an Affiliate
        under its control or otherwise; 

	 
	 	 (f)      	 the word "person" includes an individual, partnership,
        firm, corporation, company, body politic, or government or department
        thereof; and 

	 
	 	 (g)      	 the words "hereto", "herein", "hereby", "hereunder",
        "hereof" and similar expressions when used in this Agreement refer to
        the whole of this Agreement and not to any particular article, part, section,
        exhibit or portion thereof. 

 ARTICLE 2 

  ROYALTY DESCRIPTION 

 Section 2.1        Royalty
  Reserved

                 The
  Royalty Holder has reserved and the Owner agrees to pay to the Royalty Holder
  a royalty in respect of the Property equal to the aggregate of four percent
  (as may be reduced pursuant to section 2.2 or section 2.3) of the Net Smelter
  Returns on all Products, on the terms and conditions specified in this Agreement.
  Pillar, as sole shareholder of the Owner, will vote its shares in the Owner
  and otherwise cause the Owner to comply with the terms of this Agreement. 

 Section 2.2       
  Owner's Buyout Right

                 The
  Owner has the right, exercisable by payment of the sum of $1,250,000 (without
  deduction for Royalty amounts already paid) per percentage point to the Royalty
  Holder at any time and from time to time prior to the Royalty Holder having
  been paid an aggregate of $2,500,000 pursuant to this Agreement, to reduce
  the percentage of Net Smelter Returns constituting the Royalty payable under
  this Agreement by up to two percent. 

 Section 2.3       
  Automatic Reduction of Royalty Rate

                 If
  the Owner has not exercised all of its buyout right as set forth in section
  2.2, upon the Royalty Holder having received an aggregate of $2,500,000
  pursuant to any 

 - 7 - 

 buyout right exercised and by way of Royalty payments under
  this Agreement, then the percentage of the Net Smelter Returns payable under
  this Agreement will thereafter and automatically be reduced to two percent of
  the Net Smelter Returns from the Property. 

 Section 2.4       
  Interest in Land

                 The
  Parties intend that the Royalty constitute an interest in the Property and,
  accordingly agree that: 

	 	 (a)      	 the Royalty will run with the Property, and every
        interest therein; 

	 
	 	 (b)      	 any sale or other disposition of any interest in
        the Property will be effective only in accordance with section 5.3 hereof;
      

	 
	 	 (c)      	 the Owner will upon request sign and deliver to
        the Royalty Holder, and the Royalty Holder may register or otherwise record
        against titles to the Property, the form of notice or other document or
        documents as the Royalty Holder may reasonably request to give notice
        of the existence of the Royalty to third parties, to secure payment of
        the Royalty and to protect the Royalty Holder's right to receive the Royalty
        as contemplated herein; and 

	 
	 	 (d)      	 if any mineral titles hereafter become a part of
        the Property, the Owner agrees to execute and deliver such document or
        documents as the Royalty Holder may reasonably request to acknowledge
        that the Royalty is applicable thereto including, without limitation,
        any registration document of the nature contemplated in section 2.4(c).
      

 ARTICLE 3 

  OPERATION OF THE PROPERTIES 

 Section 3.1       
  Owner to Determine Operations

                 The
  Owner may, but will not be obligated to treat, mill, heap leach, sort, concentrate,
  refine, smelt, or otherwise process, beneficiate or upgrade the ores, concentrates,
  and other Products at sites located on or off the Property, prior to sale, transfer,
  or conveyance to a purchaser, user, or consumer. The Owner will not be liable
  for mineral values lost in processing under sound practices and procedures,
  and no Royalty will be due on any such lost mineral values. The Owner will have
  complete discretion concerning the nature, timing and extent of all exploration,
  development, mining and other operations conducted on or for the benefit of
  the Property and may suspend operations and production on the Property at any
  time it considers prudent or appropriate to do so. The Owner will owe the Royalty
  Holder no duty to explore, 

 - 8 - 

 develop or mine the Property, or to do so at any rate or in
  any manner other than that which the Owner may determine in its sole and unfettered
  discretion. 

 Section 3.2       
  Insurance

                 Notwithstanding
  section 3.1, the Owner will obtain and maintain insurance against Loss of Products
  prior to their Sale, in such amounts and with such coverage as is customary
  in the industry (including, without limitation, fidelity insurance to protect
  against theft and business interruption coverage) with the Royalty Holder as
  a named insured. 

 Section 3.3       
  Commingling

                 The
  Owner will not commingle of Products from the Property with other ores, doré,
  concentrates, mineral products, metals or minerals produced elsewhere, unless
  the Parties have agreed upon procedures for the weighing, sampling, assaying
  and other measuring or testing necessary to fairly allocate valuable metals
  contained in such Products and in the other ores, doré, concentrates,
  mineral products, metals and minerals. 

 ARTICLE 4 

  ASSIGNMENT 

 Section 4.1       
  Assignment by the Royalty Holder

                 The
  Royalty Holder may sell all or any undivided portion of the Royalty payable
  either for a stated term of years or up to a specified dollar amount (a “Royalty
  Right”), provided that such sale will not be effective against the Owner
  and Pillar: 

	 	 (a)      	 unless the Royalty Holder has first offered the
        Royalty Right to Pillar and Pillar has not exercised its right to purchase
        it pursuant to section 4.2; and 

	 
	 	 (b)      	 until the assignee has delivered to the Owner a
        written and enforceable undertaking, whereby such assignee agrees to be
        bound, to the extent of the interest assigned, by all of the terms and
        conditions of this Agreement. 

                 The
  Royalty Holder may not otherwise convey, assign or otherwise dispose of any
  of the Royalty. 

 Section 4.2        Right
  of First Refusal

	 (1)      	 If the Royalty Holder intends to sell a Royalty
        Right, then it must first give notice in writing to Pillar of such intention
        together with the terms and conditions on which the Royalty Holder intends
        to make the sale. Any communication of an intention to sell pursuant to
        this sections 4.2(1) will be in writing delivered in 

 - 9 - 

	 	 accordance with section 8.4 and will set out fully
        and clearly all of the terms and conditions of any intended sale. 

	 
	 (2)      	 If the Royalty Holder receives any offer to purchase
        any Royalty Right which it intends to accept, then the Royalty Holder
        will not accept such offer unless it has first provided a copy of such
        offer to Pillar in accordance with section 8.4. 

	 
	 (3)      	 Any communication by the Royalty Holder to Pillar
        pursuant to section 4.1(1) or section 4.2(2) will be deemed to constitute
        an offer (the "Offer") by the Royalty Holder to Pillar to sell the Royalty
        Right described in the Offer on the terms and conditions set out in such
        Offer. 

	 
	 (4)      	 If the Offer pursuant to section 4.2(3) refers to
        any non-cash consideration then it will also contain the Offeror's estimate
        of the cash equivalent of such non-cash consideration. If the Offeror
        and the Offeree have not within 30 days after delivery of the Offer agreed
        upon the cash equivalent of the non-cash consideration then the question
        will be determined by arbitration pursuant to article 7 (and for the purposes
        of this section any consideration which is anything other than payment
        in lawful money of Canada or the United States will be deemed to be a
        "non-cash consideration"). The time for acceptance of the Offer will be
        extended for the time required to complete the arbitration, which will
        be deemed complete when the arbitration award is rendered. 

	 
	 (5)      	 Any Offer made as contemplated in section 4.2(3)
        will be open for acceptance by Pillar for a period of 60 days from the
        date of receipt by the Offeree. 

	 
	 (6)      	 If Pillar accepts the Offer within the time provided
        in section 4.2(5), then such acceptance will constitute a binding agreement
        of purchase and sale between Pillar and the Royalty Holder for the Royalty
        Right on the terms and conditions set out in the Offer. 

	 
	 (7)      	 If Pillar does not accept the Offer within the time
        provided in section 4.2(5), then the Royalty Holder may complete the sale
        of the Royalty Right on substantially the same terms and conditions set
        out in the Offer, and such sale will be completed within 60 days from
        the expiration of Pillar’s right to accept such Offer or the Royalty
        Holder must again comply with the provisions of this section 4.2 with
        respect to the sale of that or any other Royalty Right. 

	 
	 (8)      	 Following an Offer under section 4.2(3), no other
        Offer may be made by the Royalty Holder unless the 60-day period referred
        to in section 4.2(5) has expired and no sale of the Royalty Right has
        been completed in accordance with the terms of the first-mentioned Offer.
      

 - 10 - 

 Section 4.3        Multiple
  Parties

                 Notwithstanding
  any sale of a Royalty Right by the Royalty Holder, the Owner will not be or
  become liable to make payments in respect of the Royalty to, or to otherwise
  deal in respect of this Agreement with, more than one Person. If any Person
  besides the Royalty Holder holds any rights to any of the Royalty, then the
  Royalty Holder and all such Persons will, as a condition of receiving payment
  hereunder, nominate one person to act as agent and common trustee for receipt
  of monies payable hereunder and to otherwise deal with the Owner in respect
  of such interests (including, without limitation, the giving of notice to take
  or cease taking in kind) and no royalty holder will be entitled to administer
  or enforce any provisions of this Agreement except through such agent and trustee.
  In such events, the Owner will, after receipt of notice respecting the nomination
  of such agent and trustee, thereafter make and be entitled to make payments
  due hereunder in respect of the Royalty to such agent and trustee and to otherwise
  deal with such agent and trustee as if it were the sole holder of the Royalty
  hereunder. 

 Section 4.4       
  Assignment by Owner

                 The
  Owner may transfer, sell, assign or otherwise dispose of all or any portion
  of its interest in the Property provided that such disposition will not be effective
  as against the Royalty Holder until the purchaser has delivered to the Royalty
  Holder a written and enforceable undertaking agreeing to be bound, to the extent
  of the interest disposed of, by all of the terms and conditions of this Agreement.

 ARTICLE 5 

  PAYMENTS 

 Section 5.1        Payment
  Obligation

                 The
  obligation to pay the Royalty will accrue when there has been a Sale of Products,
  provided that: 

	 	 (a)      	 there will be deemed to have been a Sale of treated
        metals upon the outturn of metals from such Products by the treatment
        facility to the account of the seller; and 

	 
	 	 (b)      	 any Royalty due in respect of a Loss will accrue
        when the insurance proceeds are paid. 

 Section 5.2        Provisional
  Settlements

                 Where
  the outturn of treated metals or a Sale of other Products (including an insurance
  settlement in respect of a Loss) is made on a provisional basis, the amount
  of 

 - 11 - 

 the Royalty payable will be based upon the amount of metal
  or other Products or the value of the Loss credited by such provisional settlement,
  but will be adjusted to account for the amount of metal or other Products or
  the value of the Loss established by final settlement with the treatment facility
  or with the purchaser or insurer of other Products, as the case may be. 

 Section 5.3       
  Due Date

                 Royalty
  payments will be due and payable quarterly on the last day of the month next
  following the end of the calendar quarter in which the same accrued. 

 Section 5.4       
  Royalty Statements

                 Royalty
  payments will be accompanied by a statement showing in reasonable detail on
  a Product by Product basis for the relevant quarter: 

	 	 (a)      	 the quantities and grades of Products produced and
        for which there was a Sale in the quarter; 

	 
	 	 (b)      	 the actual proceeds of Sale received in the quarter;
      

	 
	 	 (c)      	 the Allowable Deductions in the quarter; and 

	 
	 	 (d)      	 other pertinent information in sufficient detail
        to explain the calculation of the Royalty payment. 

 Section 5.5        Adjustments

                 Subject
  to section 5.2 hereof, all Royalty payments will be considered final and in
  full satisfaction of all obligations of the Owner with respect thereto, unless
  the Royalty Holder notifies the Owner and Pillar describing his specific objection
  or objections to the determination thereof within one year after his receipt
  of the quarterly Royalty statement. If the Royalty Holder objects to a particular
  quarterly statement as herein provided, then: 

	 	 (a)      	 the Royalty Holder will have the right, upon reasonable
        notice and at a reasonable time, to have the Owner's accounts and records
        relating to the calculation of the Royalty in question audited by a chartered
        accountant selected by the Royalty Holder and who enters into a confidentiality
        undertaking substantially on the terms of section 8.2 hereof. 

	 
	 	 (b)      	 If such audit determines that there has been a deficiency
        or an excess in the payment made to the Royalty Holder, such deficiency
        or excess will be resolved by adjusting the next quarterly Royalty payment
        due hereunder. 

 - 12 - 

	 	 	 If production has ceased, settlement will be made
        between the the Royalty Holder and the Owner by cash payment. 

	 
	 	 (c)      	 The Royalty Holder will pay all costs of such audit
        unless a deficiency of five percent or more of the amount due to the Royalty
        Holder is determined to exist. The Owner will pay the costs of such audit
        if a deficiency of five percent or more of the amount due is determined
        to exist. 

                 Failure
  on the part of the Royalty Holder to make claim on the Owner for adjustment
  in such one year period will establish the correctness of the payment and preclude
  the filing of exception thereto or making of claims for adjustment thereon.

 Section 5.6       
  Conversion of Currency

                 All
  payments to be made under this Agreement will be made in US dollars. 

 Section 5.7       
  Wire Transfer

                 Payments
  to the Royalty Holder hereunder will be made without demand, notice, set-off,
  or reduction, by wire transfer in good, immediately available funds, to such
  account or accounts as the Royalty Holder may designate pursuant to wire instructions
  provided by the Royalty Holder to the Owner and Pillar not less than three (3)
  Business Days prior to the dates upon which such payments are to be made. 

 Section 5.8       
  Trading Activities of Owner

                 The
  Owner will have the right to market and sell refined metals and other Products
  in any manner it may elect, and will have the right to engage in forward sales,
  futures trading or commodity options trading and other price hedging, price
  protection, and speculative arrangements ("trading activities") which may involve
  the possible physical delivery of Products. The Royalty will not apply to, and
  the Royalty Holder will not be entitled to participate in, the proceeds generated
  by the Owner, Pillar or an Affiliate of either of them in trading activities
  or in the actual marketing or sales of Products. In determining the net proceeds
  from any Products subject to the Royalty, the Owner will not be entitled to
  deduct from Gross Proceeds any losses suffered by the Owner, Pillar or the Affiliate
  in trading activities. In the event that the Owner engages in trading activities,
  the Royalty will be determined on the basis of the value of Products produced
  and without regard to the price or proceeds actually received by the Owner,
  for or in connection with the sale, or the manner in which a sale to a third
  party is made by the Owner. In the event that the Owner engages in trading activities
  in respect of Products other than refined metals, the Gross Proceeds will be
  determined on the basis of the value of such Products ex headframe or minesite
  loading facility in the case of ores or ex mill or other treatment facility
  in the case of other Products. 

 - 13 - 

 Section 5.9        Books
  and Records

                 All
  books and records used by the Owner to calculate Royalty due hereunder will
  be kept according to international generally accepted accounting principles.

 ARTICLE 6

  INDEMNITY 

 Section 6.1        Indemnity

                 The
  Owner agrees that it will defend, indemnify, reimburse and hold harmless the
  Royalty Holder and his heirs and permitted assigns (collectively the "indemnified
  parties"), and each of them, from and against any and all claims, demands, liabilities,
  actions and proceedings, which may be made or brought against the Royalty Holder
  or which he may sustain, pay or incur that whosoever result from or relate to
  operations conducted on or in respect of the Property that result from or relate
  to the mining, handling, transportation, smelting or refining of the Products
  or the handling of transportation of the Products. 

 Section 6.2       
  Limitation

                 The
  indemnity provided in section 6.1 is limited to claims, demands, liabilities,
  actions and proceedings that may be made or taken against an indemnified party
  its or his capacity as or related to the Royalty Holder as a holder of the Royalty
  and will not include any indemnity in respect of any claims, demands, liabilities,
  actions and proceedings against an indemnified party in any other capacity.

 ARTICLE 7 

  DISPUTE RESOLUTION 

 Section 7.1        Single
  Arbitrator

                 Any
  matter required or permitted to be referred to arbitration hereunder or in dispute
  hereunder will be determined by a single arbitrator to be appointed by Pillar
  and the Royalty Holder (for the purposes of this article 7 only, a “Party”
  or the “Parties”). 

 Section 7.2       
  Prior Notice

                 Either
  Party may refer any such matter to arbitration by written notice to the other
  Party and, within 10 days after receipt of such notice, the Parties will agree
  on the appointment of an arbitrator. No person will be appointed as an arbitrator
  hereunder unless such person is, by a combination of education and experience
  qualified to adjudicate the matter in dispute and agrees in writing to act.

 - 14 - 

 Section 7.3        No
  Agreement on the Arbitration

                 If
  the Parties cannot agree on a single arbitrator as provided in section 7.2,
  or if the person appointed is unwilling or unable to act, either Party may submit
  the matter to arbitration before a single arbitrator in accordance with the
  Rules for Conciliation and Arbitration of the International Chamber of Commerce
  (the “Rules”). 

 Section 7.4       
  Conduct of Arbitration

                 Except
  as specifically provided in this article 7, an arbitration hereunder will be
  conducted in English in accordance with the Rules. The arbitrator will fix a
  time and place in Florida for the purpose of hearing the evidence and representations
  of the parties and will preside over the arbitration and determine all questions
  of procedure not provided for under the Rules or this article 7. After hearing
  any evidence and representations that the parties may submit, the arbitrator
  will make an award and reduce the same to writing and deliver one copy thereof
  to each of the Parties. The decision of the arbitrator will be made within 45
  days after his or her appointment, subject to any reasonable delay due to unforeseen
  circumstances. The expense of the arbitration will be paid as specified in the
  award. The award of the single arbitrator will be final and binding upon each
  of the Parties and the Owner. 

 ARTICLE 8 

  MISCELLANEOUS 

 Section 8.1        Other
  Activities and Interests

                 This
  Agreement and the rights and obligations of the Parties hereunder are strictly
  limited to the Property. Each party will have the free and unrestricted right
  to enter into, conduct and benefit from any and all business ventures of any
  kind whatsoever, whether or not competitive with the activities undertaken pursuant
  hereto, without disclosing such activities to the other party or inviting or
  allowing the other to participate therein including activities involving mineral
  claims or mineral leases adjoining the Property. 

 Section 8.2       
  Default

                 If
  a Party is in default of any requirement herein, any other Party may give written
  notice to the Party in default specifying the default. In such event the Party
  in default will not lose any rights under this Agreement unless, within 30 days
  after the giving of the notice of default the defaulting Party has failed to
  take reasonable steps to cure the default by the appropriate performance or
  has failed to dispute the notice of default. No Party will lose any rights under
  this Agreement during the period when he or it is disputing, in good faith,
  a notice of default. If a notice of default is not so 

 - 15 - 

 disputed, the Party delivering such notice will be entitled
  to seek any remedy it may have on account of such default pursuant to this Agreement
  or under applicable law. 

 Section 8.3       
  Confidentiality

                 All
  information, data, reports, records, feasibility studies and test results relating
  to the Property and the activities of the Owner, Pillar or any other party thereon
  and the terms and conditions of this Agreement, all of which will hereinafter
  be referred to as "confidential information", will be treated by the Royalty
  Holder as confidential and will not be disclosed to any person not a Party to
  this Agreement, except in the following circumstances: 

	 	 (a)      	 the Royalty Holder may disclose confidential information
        to his auditors, legal counsel, institutional lenders, brokers, underwriters
        and investment bankers, provided that such non-party users are advised
        of the confidential nature of the confidential information, undertake
        to maintain the confidentiality thereof and are strictly limited in their
        use of the confidential information to those purposes necessary for such
        non-party users to perform the services for which they were retained by
        the Royalty Holder; 

	 
	 	 (b)      	 the Royalty Holder may disclose confidential information
        where that disclosure is necessary to comply with his disclosure obligations
        and requirements under any securities law, rules or regulations or stock
        exchange listing agreements, policies or requirements or in relation to
        proposed credit arrangements, provided that the proposed disclosure is
        limited to factual matters and that the Royalty Holder will have availed
        itself of the full benefits of any laws, rules, regulations or contractual
        rights as to disclosure on a confidential basis to which it may be entitled;
        or 

	 
	 	 (c)      	 with the approval of Pillar and the Owner. 

 Any confidential information that becomes part of the public
  domain by no act or omission in breach of this section 8.2 will cease to be
  confidential information for the purposes of this section 8.2. 

 Section 8.4       
  No Partnership

                 This
  Agreement is not intended to, and will not be deemed to, create any partnership
  relation between the Parties including, without limitation, a mining partnership
  or commercial partnership. The obligations and liabilities of the Parties will
  be several and not joint and no Party will have or purport to have any authority
  to act for or to assume any obligations or responsibility on behalf of any other
  Party. Nothing 

 - 16 - 

 herein contained will be deemed to constitute a Party the
  partner, agent or legal representative of another Party. 

 Section 8.5       
  Notice

                 Any
  notice, election, proposal, objection or other document required or permitted
  to be given hereunder ("Notices") will be in writing addressed to the Parties
  as follows: 

	 Owner:  	 [Newco]  
	  	 <address>  
	  	 Attention: <**>  
	  	 Fax: <**>  
	  	 
	 Royalty Holder:  	 Mr. Frank Mena  
	  	 <address>  
	  	 Fax: <**>  

 All Notices will be given by personal delivery, facsimile
  transmission or prepaid registered mail, return receipt requested. All Notices
  will be effective and will be deemed delivered as follows: 

	 	 (a)      	 if by personal delivery, on the date of delivery
        if delivered during normal business hours on a Business Day, and, if not,
        then on the next Business Day following delivery; 

	 
	 	 (b)      	 if by electronic communication, on the next Business
        Day following receipt of the electronic communication; and 

	 
	 	 (c)      	 if by mail, on the next Business Day after actual
        receipt. 

 A Party may at any time change its address for future Notices
  hereunder by Notice in accordance with this section. 

 Section 8.6        Further
  Assurances

                 Each
  Party will, at the request of another Party and at the requesting Party's expense,
  execute all such documents and take all such actions as may be reasonably required
  to effect the purposes and intent of this Agreement. 

 Section 8.7        Entire
  Agreement

                 This
  Agreement, including the exhibit hereto, constitutes the entire agreement of
  the Parties with respect to the subject matter hereof, all previous agreements
  and promises in respect thereto being hereby expressly rescinded and replaced
  hereby. No modification or alteration of this Agreement will effective unless
  in writing executed 

 - 17 - 

 subsequent to the date hereof by all Parties. No prior written
  or contemporaneous oral promises, representations or agreements are binding
  upon the Parties. There are no implied covenants contained herein. 

 Section 8.8       
  No Waivers

                 No
  waiver of or with respect to any term or condition of this Agreement will be
  effective unless it is in writing and signed by the waiving Party, and then
  such waiver will be effective only in the specific instance and for the purpose
  of which given. No course of dealing between or among the Parties, or any failure
  to exercise or delay in exercising, any right, power or privilege hereunder
  will operate as a waiver thereof, nor will any single or partial exercise of
  any specific waiver of any right, power or privilege hereunder preclude any
  other or further exercise thereof or the exercise of any other right, power
  or privilege. 

 Section 8.9       
  Time of the Essence

                 Time
  is of the essence in the performance of any and all of the obligations of the
  Parties including, without limitation, the payment of monies. 

 Section 8.10      
  Counterparts

                 This
  Agreement may be executed in multiple counterparts, each of which will constitute
  an original, but all of which together will constitute one and the same instrument.

 Section 8.11      
  Parties in Interest

                 This
  Agreement will enure to the benefit of and be binding on the Parties and their
  respective heirs, successors and permitted assigns. 

                 IN
  WITNESS WHEREOF, the Parties have caused this Agreement to be executed and
  delivered as of the date first set forth above. 

	 FRANK MENA  	 	  
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 
    	 	
      Witness  

 - 18 - 

	 [NEWCO]  	 
	 	 	 
	By:  	 	 
	 	 	 
	Name:  	 	 
	 	 	 
	Title: 	 	 
	 	  	 
	 	 	 
	 PILLAR RESOURCES INC.  	 
	 	 	 
	By:  	 
    	 
	 	 	 
	Name:  	 
    	 
	 	 	 
	Title: 	 
    	 

 EXHIBIT 1 

  PROPERTY

 

 

 

 SCHEDULE 3 

 to the Option Agreement made as of October 1, 2003, between
  FRANK MENA 

  and PILLAR RESOURCES INC. 

 Form of Shareholders’ Agreement 

 

 

 

 SHAREHOLDERS’ AGREEMENT 

 BETWEEN 

 FRANK MENA 

 AND 

 PILLAR RESOURCES INC. 

 AND 

 [HOLDCO] 

 

 <*>, 200<*> 

 TABLE OF CONTENTS 

	  	  	 Page
	  	 	 
	  	 	 
	  	 	 
	 	ARTICLE 1	 
	  	INTERPRETATION	 
	 1.1	 Definitions	 2
	 1.2	 Included Words	 5
	 1.3	 Headings	 5
	 1.4	 References	 5
	 1.5	 Exhibits	 5
	  	 	 
	  	ARTICLE 2	 
	  	INITIAL INTERESTS, PURPOSE
      AND SCOPE	 
	 2.1	 Shareholders’ Interests	 6
	 2.2	 Implementation	 6
	 2.3	 No Representative Actions	 6
	 2.4	 Business	 6
	 2.5	 Area of Interest	 6
	 2.6	 Abandonment	 7
	  	 	 
	  	ARTICLE 3	 
	  	SHAREHOLDERS	 
	 3.1	 Shareholder Meetings	 7
	 3.2	 Information Provided to Shareholders	 8
	 3.3	 Unencumbered Shares	 9
	 3.4	 Special Matters	 9
	 3.5	 Deemed Consent	 10
	  	 	 
	  	ARTICLE 4	 
	  	BOARD OF DIRECTORS	 
	 4.1	 Nomination	 10
	 4.2	 Retirement	 10
	 4.3	 Removal	 10
	 4.4	 Preservation of Nominees	 10
	 4.5	 Chairman	 11
	 4.6	 Board Meetings	 11
	 4.7	 Board Authority	 12
	 4.8	 Subsidiary Matters	 12
	  	 	 
	  	ARTICLE 5	 
	  	BUSINESS AND OPERATIONS	 
	 5.1	 Operator	 12
	 5.2	 Operational Compliance	 12
	 5.3	 Financial Books and Records	 13

 -i- 

 TABLE OF CONTENTS

   (continued) 

	  	  	 Page
	  	 	 
	 5.4	 Fiscal Year and Financial Statements	 13
	 5.5	 Bank Accounts	 13
	 5.6	 Shareholder Access	 14
	  	 	 
	 	ARTICLE 6	 
	  	PROJECT FINANCING AND NET
      CASH FLOW	 
	 6.1	 Proportionate Equity Funds	 14
	 6.2	 Project Financing	 14
	 6.3	 Limited Recourse	 14
	 6.4	 Working Capital Shortfalls	 15
	 6.5	 Shareholder Financing	 15
	 6.6	 Terms of Advances	 16
	 6.7	 Pillar Funding Option	 16
	 6.8	 Interest	 16
	 6.9	 Repayment	 17
	 6.10	 Pillar Lien	 17
	 6.11	 Funding from Cash Flow	 17
	 6.12	 Distributions	 17
	 6.13	 Net Cash Flow	 17
	 6.14	 Project Financing Liability	 18
	  	 	 
	  	ARTICLE 7	 
	  	RESTRICTIONS ON TRANSFER	 
	 7.1	 Restrictions	 18
	 7.2	 Transfers to Affiliates	 18
	 7.3	 No Royalties or Encumbrances	 19
	 7.4	 Privity	 19
	 7.5	 Pillar Pre-Emptive Right	 19
	  	 	 
	  	ARTICLE 8	 
	  	CONFIDENTIALITY AND PUBLIC
      STATEMENTS	 
	 8.1	 Confidential Information	 20
	 8.2	 Exceptions	 20
	 8.3	 Public Statements	 20
	 8.4	 Due Diligence Defense	 20
	 8.5	 Consent Process	 20
	 8.6	 Exclusion	 20
	 8.7	 Pillar Proprietary Information	 20
	  	 	 
	  	ARTICLE 9	 
	  	ARBITRATION	 
	 9.1	 Best Efforts to Settle Disputes	 21

 -ii- 

 TABLE OF CONTENTS

  (continued) 

	  	  	 Page
	  	 	 
	  	 	 
	 9.2	 Arbitration	 21
	 9.3	 Urgent Relief	 22
	 9.4	 Applicable Law	 22
	  	 	 
	  	ARTICLE 10	 
	  	GENERAL PROVISIONS	 
	 10.1	 Share Certificates	 22
	 10.2	 Force Majeure	 22
	 10.3	Severability	 22
	 10.4	 Carrying on Business	 22
	 10.5	Termination	 23
	 10.6	 Notice	 23
	 10.7	 Waiver	 24
	 10.8	 Entire Agreement	 24
	 10.9	 Amendment	 24
	 10.10	 Time of the Essence	 24
	 10.11	 Governing Law	 24
	 10.12	 Successors and Assigns	 25
	 10.13	 Interpretation	 25
	 10.14	 Headings	 25
	 10.15	 Paramountcy	 25
	 10.16	 Counterparts	 25

	 Exhibit I 
       	 Company Share Capital 
       
	 Exhibit II 
       	 Management Agreement 
       

 -iii- 

 DRAFT 

  Sept. 03, 2003 

 SHAREHOLDERS’ AGREEMENT 

                       THIS
  SHAREHOLDERS’ AGREEMENT made as of the <*> day of <*>,
  200<*>. 

 BETWEEN: 

  
    
      
         FRANK MENA, a businessman, residing
          at Los Robles, Embajada Gran Bretaña 1/2 Cuadra Abajo, Managua,
          Nicaragua (“Mena”) 

      

    

  

 OF THE FIRST PART 

 AND 

  
    
      
         PILLAR RESOURCES INC., a company incorporated
          under the laws of British Columbia having its principal offices in Vancouver,
          Canada (“Pillar”) 

      

    

  

 OF THE SECOND PART 

 AND 

  
    
      
         [HOLDCO], a body corporate organized
          under the laws of Aruba (the “Company”) 

      

    

  

 OF THE THIRD PART 

 WHEREAS: 

 A.                 Pursuant
  to an agreement dated October 1, 2003 (the “Option Agreement”),
  Pillar as optionor was vested with a 70% interest in a mineral concession owned
  by Chorti Holdings S.A. (“Chorti”), owned in part by Mena; 

 B.                 Pursuant
  to section 5.2 of the Option Agreement Mena and Pillar have caused: 

	 	 (a)      	 the Company to be incorporated under the laws of
        Aruba by memorandum and articles of incorporation effective <*>,
        with the authorized capital and the issued and outstanding capital as
        set out in Exhibit I to this Agreement, 

	 
	 	 (b)      	 a wholly owned subsidiary of the Company, [Newco]
        (the “Subsidiary”) to be incorporated under the laws of Nicaragua,
        and 

	 
	 	 (c)      	 such mineral concession to be transferred to the
        Subsidiary; 

 - 2 - 

	 	 (d)      	 70% of the issued and outstanding shares of the
        Company (the “Shares”) to be issued to and registered in the
        name of Pillar, and 30% of the Shares to be issued to and registered in
        the name of Mena; 

 C.                 Pursuant
  to the Option Agreement, Mena as optionor did not exercise his conversion right
  under sec. 5.3 thereof 

 D.                
  Pursuant to section 5.4 of the Option Agreement, Pillar and Mena agreed to enter
  into this agreement; 

 E.                 The
  parties intend to hereafter conduct their business in relation to the Area of
  Interest (as hereinafter defined) through the Company, to which all rights and
  obligations in relation thereto have been transferred, and by this shareholders'
  agreement intend to govern their respective shareholdings in the Company and
  the further exploration and development of the Area of Interest; 

                       NOW
  THEREFORE THIS AGREEMENT WITNESSES THAT in consideration for the mutual
  promises herein contained and other good and valuable consideration the receipt
  and sufficiency of which is hereby acknowledged, the parties hereby agree as
  follows. 

 ARTICLE 1 

  INTERPRETATION 

 1.1                Definitions
  

                       Whenever
  used in this Agreement, unless there is something in the subject matter or context
  inconsistent therewith, the following words and terms will have the respective
  meanings ascribed to them as follows: 

	 	 (a)      	 “Act” means the laws of Aruba as the
        same may be amended from time to time and any successor legislation thereto;
      

	 
	 	 (b)      	 “Affiliate” means with respect to any
        Person, a company, partnership or other entity, Controlled by, Controlling
        or under common Control of such Person; 

	 
	 	 (c)      	 “Agreed Rate” means the per annum rate
        of interest for Project Financing provided to the Company by Pillar for
        Expenses to be incurred after the completion and delivery of a feasibility
        study to the Board, which will be equal to the best rate of interest available
        from a third party lender for the financing of the Project development
        costs described in the feasibility study, having regard to all available
        equipment financings and any guarantees, subsidies, political risk insurance
        and other forms of government and international agency support, and with
        each of the Shareholders pledging its shares in the Company and causing
        the Company to pledge its shares in the Subsidiary and the Subsidiary
        to pledge all of its cash flow and assets in support of the loan; 

 - 3 - 

	 	 (d)      	 “Agreement” means this shareholders’
        agreement, as may from time to time be amended or supplemented; 

	 
	 	 (e)      	 “Area of Interest” means the area within
        a a perimeter that is two kilometres from the boundaries of the Property,
        as they exist from time to time; 

	 
	 	 (f)      	 “Auditor” means a firm of internationally
        recognized accountants selected by the Board to be the Company’s
        auditors; 

	 
	 	 (g)      	 “Board” means the board of Directors;
      

	 
	 	 (h)      	 “Business Day” means any day of the
        year, other than a Saturday, Sunday or any other day on which banks are
        closed in Vancouver, Canada or in Managua, Nicaragua; 

	 
	 	 (i)      	 “Chairman” means the chairman of the
        Board; 

	 
	 	 (j)      	 “Constitution” means the memorandum
        and articles constituting a company; 

	 
	 	 (k)      	 “Control” means, with respect to any
        company, the ownership of shares of such company carrying more than 50%
        of the voting rights attached to all outstanding shares of such company,
        which voting rights are exercisable at the relevant time, or the right
        to so vote or to appoint more than 50% of the directors of such company
        other than through ownership of shares, and “Controlled” and
        “Controlling” have corresponding meanings; 

	 
	 	 (l)      	 “Company” means [Holdco] and includes
        any successor to the Company resulting from any merger, amalgamation,
        arrangement or other reorganization of or including the Company or any
        continuance thereof under the laws of any other jurisdiction; 

	 
	 	 (m)      	 “Directors” means the directors of the
        Company; 

	 
	 	 (n)      	 “Encumbrance” means a lien, claim, security
        interest or other encumbrance of any nature or kind; 

	 
	 	 (o)      	 “Expenses” means the costs and expenses
        associated with the conduct of the business of the Company and the Subsidiary
        and the advancement of the Project; 

	 
	 	 (p)      	 “Management Agreement” means the agreement
        between the Company, the Subsidiary and [insert name of Pillar operating
        entity] dated as of the date hereof for the management of the Project
        and the operations of the Company and Subsidiary, in substantially the
        form attached as Exhibit I to this Agreement; 

	 
	 	 (q)      	 “Minerals” means all minerals and mineral
        substances except radioactive materials; 

 - 4 - 

	 	 (r)      	 “Mineral Products” means all
        commercially saleable products from Minerals extracted from the Property;
      

	 
	 	 (s)      	 “Net Cash Flow” has the meaning
        ascribed to that term in section 6.13; 

	 
	 	 (t)      	 “Operator” means the manager
        of the Project as contemplated in section 5.1; 

	 
	 	 (u)      	 “Option Agreement” has the
        meaning ascribed to that term in recital A to this Agreement; 

	 
	 	 (v)      	 “Party” means a party to this
        Agreement; 

	 
	 	 (w)      	 “Person” includes an individual,
        partnership, association, body corporate, trustee, executor, administrator
        or legal representative; 

	 
	 	 (x)      	 “Project” means the exploration
        for Minerals located on or in the Property and elsewhere within the Area
        of Interest and, if commercially feasible, the exploitation thereof and
        the marketing, sale and delivery of Mineral Products resulting therefrom;
      

	 
	 	 (y)      	 “Project Financing” means
        loans to the Company or the Subsidiary to finance Expenses to be incurred
        after the completion and delivery to the Board of a feasibility study;
      

	 
	 	 (z)      	 “Property” means the Property,
        as defined under the Option Agreement as of the date of this Agreement,
        together with any additional mineral concessions or interests therein
        acquired within the Area of Interest as contemplated in section 2.5(b),
        but excluding any portion of the Property abandoned in accordance with
        section 2.6; 

	 
	 	 (aa)      	 “Shares” means the issued
        and outstanding shares in the capital of the Company and includes: 

	 
	 	 	 (i)     
      
	 any shares or securities into which any Shares may
        hereafter be converted, changed, reclassified, re-divided, re-designated,
        consolidated, subdivided or otherwise changed, 

	 
	 	 	 (ii)      
	 any shares in the capital of the Company which may
        hereafter be created in connection with stock dividends or otherwise,
        and 

	 
	 	 	 (iii)      
	 any shares of the Company or any successor or other
        body corporate which may be received by the holders of Shares on a Company
        reorganization, amalgamation, consolidation or merger, statutory or otherwise;
      

	 
	 	 (bb)      	 “Shareholder” means, at any
        time, any Party who is the beneficial owner of any Shares at such time;
      

 - 5 - 

	 	 (cc)      	 “Shareholder Claims” means with respect
        to any Shareholder all claims of whatsoever nature and howsoever arising
        which such Shareholder has and may from time to time in the future have
        against the Company solely by virtue of being a holder of such shares
        (other than Shareholder claims arising from the default of any other Shareholder)
        including, without limitation, in respect of any shareholder loans; 

	 
	 	 (dd)      	 “Shareholder Interest” means, with respect
        to any Shareholder, the percentage of all Shares and loans convertible
        into Shares then held by such Shareholder together with any Shareholder
        Claims in the same proportion as such percentage; 

	 
	 	 (ee)      	 “Subsidiary” means [Newco], a wholly
        owned subsidiary of the Company incorporated under the laws of Nicaragua;
      

	 
	 	 (ff)      	 “Transfer” includes any sale, transfer,
        exchange, assignment, conveyance, donation, gift, bequest, disposition
        or other arrangement by which possession, legal title or beneficial ownership
        passes from one Person to another, whether or not voluntary and whether
        or not for value, and any agreement to effect any of the foregoing, and
        includes any grant of an Encumbrance. 

 1.2                Included
  Words 

                       This
  Agreement will be read with such changes in gender or number as the context
  requires. 

 1.3                Headings
  

                       The
  headings to the articles and sections of this Agreement are inserted for convenience
  only and are not intended to affect the construction hereof. 

 1.4                References
  

                       Unless
  otherwise stated, a reference herein to a numbered or lettered article, section,
  recital or schedule refers to the article, section, recital or schedule bearing
  that number or letter in this Agreement. A reference to "this Agreement", "hereof",
  "hereunder", "herein" or words of similar meaning, means this shareholders’
  agreement including the schedules hereto, together with any amendments hereto
  or thereto. 

 1.5                Exhibits
  

                       The
  following exhibits are attached to and incorporated in this Agreement by this
  reference: 

                      Exhibit
  I -       Company Share Capital  

                        Exhibit
  II -      Management Agreement  

 - 6 - 

 ARTICLE 2 

  INITIAL INTERESTS, PURPOSE AND SCOPE 

 2.1                Shareholders’
  Interests 

	 	 (a)      	 On the effective date of this Agreement, each of
        the Shareholders will have the following Shareholder Interest: 

	 
	 	 	 Mena – 30%               Pillar
        – 70% 

	 
	 	 (b)      	 The initial Shareholder Interests set out in section
        2.1 will be adjusted only upon the Transfer of Shares from one Shareholder
        to another Shareholder in accordance with Article 7. 

	 
	 	 (c)      	 Each Shareholder will be entitled to all dividends
        and other distributions from the Company in proportion to its Shareholder
        Interest. 

 2.2                Implementation
  

                       Each
  Shareholder agrees that it will vote and act as a Shareholder and in all other
  respects will use its best efforts to take all such steps as may reasonably
  be within its power to: 

	 	 (a)      	 cause the Company and the Subsidiary to comply with
        and act in the manner contemplated by the provisions of this Agreement
        and the Management Agreement; 

	 
	 	 (b)      	 implement to its full extent the provisions of this
        Agreement; and 

	 
	 	 (c)      	 cause its respective nominees, to the extent permitted
        by law, as a directors or officers of the Company to so to act. 

 2.3                No
  Representative Actions 

                       Each
  Shareholder hereby agrees that it will not apply to any court to have the Company
  or the Subsidiary wound up or dissolved for any cause whatsoever, nor will it
  resort to or make use of rights of dissent under the Act or any other applicable
  legislation. 

 2.4                Business
  

                       The
  business of the Company and the Subsidiary will be restricted solely to the
  Project and the doing of all such acts and things as are incidental thereto.
  For greater certainty, neither the Company nor the Subsidiary will engage or
  be engaged in any other business or undertaking whatsoever. 

 2.5                Area
  of Interest 

	 	(a) 	The Project will be confined to the Area of Interest. 

 - 7 - 

	 	 (b)      	 All exploration, mining, surface and other rights
        (including, without limitation, any rights to take or divert water) within
        the Area of Interest acquired after the date of this Agreement by the
        Subsidiary or by any Shareholder or an Affiliate of a Shareholder will
        comprise part of the Property and will be deemed to be included in the
        Property as of its acquisition. If the acquiror is other than the Subsidiary,
        then such rights will be promptly transferred to the Subsidiary. 

	 
	 	 (c)      	 Each Shareholder will have the unrestricted right
        to engage in (either on its own or in association with any other Person)
        and receive the full benefits of any activities undertaken by it outside
        the Area of Interest, unless otherwise restricted by the provisions of
        the Option Agreement or any other agreement between Pillar and Mena. 

 2.6                Abandonment
  

                       Portions
  of the Property to be abandoned will be first offered to the Shareholder who
  is not the Operator and, once transferred to such Shareholder or abandoned,
  will cease to form part of the Property or the Area of Interest. If the Shareholder
  who is not the Operator does not accept such a transfer, then the relevant portion
  of the Property may be abandoned, but the Operator and its Affiliates will be
  prohibited from acquiring any interest therein for a period of one year following
  the abandonment. 

 ARTICLE 3 

  SHAREHOLDERS 

 3.1                Shareholder
  Meetings 

	 	 (a)      	 The Shareholders will meet no less frequently than
        annually and may meet in person or by telephone conference call. The annual
        general meeting of the Company will be held within the 120 day period
        following the end of each fiscal year. 

	 
	 	 (b)      	 Meetings of the Shareholders will be at such place
        as the Shareholders may unanimously agree from time to time, otherwise
        by telephone conference call. 

	 
	 	 (c)      	 Meetings of the Shareholders will be called by the
        Chairman upon at least 21 days’ notice to the Shareholders. Any
        Shareholder may also request a meeting upon at least 21 days’ notice
        to the Company and the other Shareholder. 

	 
	 	 (d)      	 Notice of a Shareholder meeting may be waived if
        each Shareholder is represented at the meeting and all Shareholders present
        agree upon the waiver and upon the proposed agenda. 

	 
	 	 (e)      	 Notice of all Shareholder meetings must specify
        the time and place of, and the agenda for, the meeting. No material item
        of business will be transacted at a Shareholder meeting unless the item
        appears on the agenda or unless all Shareholders unanimously agree to
        the item being added to the agenda. 

 - 8 - 

	 	 (f)      	 A quorum for any Shareholder meeting will
        be present if both Shareholders are present or participating by telephone.
        A Shareholder will be deemed to be present or participating if its duly
        authorized representative, as notified to the Company, is present or participating.
        If a quorum is present at the meeting, the Shareholders will be competent
        to exercise all of the authorities, powers and discretions bestowed upon
        the Board under this Agreement. No business other than the adjournment
        or termination of the meeting will be transacted at any meeting unless
        a quorum is present at the commencement of the meeting but the quorum
        need not be present throughout the meeting. If within half an hour from
        the time appointed for a meeting, a quorum is not present, the meeting
        will, at the election of the Shareholder who is present: 

	 
	 	 	 (i)     
      
	 be dissolved; or 

	 
	 	 	 (ii)      
	 be adjourned to the same place or for reconvening
        by the same method, as applicable, but on a date and at a time, to be
        fixed by the Chairman before the adjournment, which will be not less than
        24 hours following the adjournment. Notice of the adjourned meeting will
        be given to all Shareholders forthwith after the adjournment of the meeting.
        If at the adjourned meeting, a quorum is not present within half an hour
        from the time appointed, the Shareholder present will constitute a quorum.
      

	 
	 	 (g)      	 All matters to be determined by the Shareholders
        hereunder will be determined at a Shareholders’ meeting as contemplated
        in this Article 3. Except with respect to decisions requiring unanimity
        hereunder, the Shareholders will decide every matter submitted to them
        at a Shareholders’ meeting by simple majority vote, with each Shareholder
        entitled to cast the number of votes which is equal to the number of Shares
        held by it. 

	 
	 	 (h)      	 The Chairman will appoint a secretary
        for the meeting to take minutes of that meeting and circulate copies of
        the minutes, signed by the Chairman and secretary, to each Shareholder
        within 14 days after the meeting. 

	 
	 	 (i)      	 Any decision made by obtaining the consent
        in writing of all Shareholders will be as valid as a decision made at
        a Shareholders’ meeting duly called and held. 

	 
	 	 (j)      	 Each Shareholder will bear the expenses
        incurred by its representatives in attending meetings of the Shareholders
        unless otherwise approved by both Shareholders. 

	 
	 	 (k)      	 The Shareholders may establish such other
        rules of procedure, not inconsistent with this Agreement, as the Shareholders
        deem fit. 

 3.2                Information
  Provided to Shareholders 

                       The
  Company will provide, and will cause the Subsidiary to provide, to any Shareholder
  such information, data and statements as such Shareholder may from time to time
  reasonably request relating to any business, financial affairs and operations
  of the Company or 

 - 9 - 

 the Subsidiary including, without limitation, such information
  as may be required by such Shareholder to be furnished relating to income or
  other taxes. The provision of the foregoing information will be in addition
  to any information required to be provided by the Operator pursuant to the Management
  Agreement. 

 3.3                Unencumbered
  Shares 

                       Each
  Shareholder covenants and agrees to keep its Shares and its Shareholder Claims
  free and clear of all Encumbrances. Notwithstanding the foregoing, each Shareholder
  will be entitled and will, to the extent required by the lender of any Project
  Financing, pledge its Shares and postpone its Shareholder Claims to such lender
  provided that such lender agrees to be bound by the terms and conditions of
  this Agreement and the Management Agreement (if such Shareholder is a party),
  in the place and stead of such Shareholder should it wish to realize upon all
  or any portion of the Shares constituting security for any indebtedness or liability
  of a Shareholder. 

 3.4                Special
  Matters 

                       Notwithstanding
  any other provision of this Agreement or the Company Constitution, the following
  matters will not be determinable by the Board or by the shareholder or board
  of directors of the Subsidiary but will be reserved for determination by the
  Shareholders and will require their unanimity: 

	 	 (a)      	 a fundamental change in the Company or the Subsidiary
        including, without limitation, increase or decrease in share capital (other
        than as contemplated hereunder), changes to the Company Constitution or
        the Subsidiary Constitution, and dissolution or winding up of the Company
        or the Subsidiary (other than following a mine closure unanimously approved
        by the Shareholders); 

	 
	 	 (b)      	 borrowing by the Company or the Subsidiary, other
        than for (i) Project Financing, (ii) replacement of capital items in the
        ordinary course, or (iii) an operating line of credit in an amount which
        would be customary for a comparable project; 

	 
	 	 (c)      	 a guarantee or indemnity by the Company other than
        with respect to its own obligations or those of the Subsidiary; 

	 
	 	 (d)      	 suspension of mining operations other than for sound
        economic, technical or operational reasons; 

	 
	 	 (e)      	 mine closure; 

	 
	 	 (f)      	 variation from the dividend policy set forth in
        section 6.12; 

	 
	 	 (g)      	 a contract (other than the Management Agreement)
        between the Company and a Shareholder or an Affiliate of a Shareholder
        and any termination or material variation of such contract, and any termination
        or material variation of the Management Agreement; 

 - 10 - 

	 	(h) 	a merger with or acquisition of another Person. 

 3.5                Deemed
  Consent 

                       Any
  resolution in writing signed by a Director nominated by a particular Shareholder
  will be deemed to constitute the consent of that Shareholder to the matters
  contained therein. Any matter recorded in the minutes of a meeting of the Board
  or Shareholders as having been approved or agreed upon in accordance with this
  Agreement, by resolution or otherwise, will be deemed to have been consented
  to by a particular Shareholder if the minutes are signed by a member of the
  Board nominated by that Shareholder or otherwise by that Shareholder. 

 ARTICLE 4

  BOARD OF DIRECTORS 

 4.1                Nomination
  

                       The
  Board will consist of three Directors, one of whom will be nominated by Mena
  and two of whom will be nominated by Pillar. Each Director may from time to
  time appoint an alternate to act in his stead and who will for all purposes
  hereunder have the duties and powers of the appointing Director. 

 4.2                Retirement
  

                       If
  a Director ceases to be a Director for any reason (a “retiring director”),
  the Shareholders will fill the vacancy thereby created by forthwith appointing
  that individual who is nominated by the Shareholder who nominated the retiring
  director. Until the vacancy is filled, the Board will not transact any business
  or exercise any of their powers or duties except those necessary to elect such
  new Director or to preserve the business and assets of the Company. If the Shareholder
  entitled to do so fails for any reason to nominate an individual to fill such
  vacancy within thirty days after such vacancy arises, then the remaining Directors
  will appoint an individual to fill such vacancy. That individual will be deemed
  to be the nominee of such Shareholder but will resign, or be removed by the
  Shareholders, in favour of any individual thereafter nominated by such Shareholder.

 4.3                Removal
  

                       If
  the removal of any Director is proposed, each Shareholder agrees to vote for
  such removal if, and against such removal unless, it has been proposed or approved
  by the Shareholder who nominated such Director. 

 4.4                Preservation
  of Nominees 

                       Each
  of the Shareholders will vote at all Shareholder meetings and act in all other
  respects in connection with the corporate proceedings of the Company so as to
  ensure that the nominees of the Shareholders provided for in section 4.1 are
  elected, appointed and maintained in office from time to time as the Directors.

 - 11 - 

 4.5                Chairman
  

                       The
  Shareholder having the larger Shareholder Interest will be entitled to appoint
  and remove the Chairman. 

 4.6                Board
  Meetings 

	 	 (a)      	 The Board will meet no less
        frequent than once every quarter and may meet in person or by telephone
        conference call. 

	 
	 	 (b)      	 Board meetings will be held
        at such place as the Directors may unanimously agree from time to time,
        otherwise by conference telephone call. 

	 
	 	 (c)      	 Board meetings will be called
        by the Chairman upon at least 14 days’ notice, provided that in
        the case of an emergency, a meeting may be called upon at least 24 hours’
        notice. Any Shareholder may also request a meeting upon at least 21 days’
        notice to the Company and the other Shareholder. 

	 
	 	 (d)      	 Notice of a Board meeting
        may be waived if each Shareholder is represented at the meeting by at
        least one of its nominees and all the Directors present at the meeting
        agree upon the waiver and upon the proposed agenda. 

	 
	 	 (e)      	 Notice of all Board meetings
        will specify the time and place of, and the agenda for, the meeting, and
        a description of any business required to be specified under the Act.
        No material item of business will be transacted at a Board meeting unless
        the item appears on the agenda or at least one nominee of each Shareholder
        is present and those Directors unanimously agree to the item being added
        to the agenda. 

	 
	 	 (f)      	 A quorum for any Board meeting
        will be present if one nominee of each Shareholder (or his alternate)
        is present or participating by telephone. If a quorum is present at the
        meeting, the Board will be competent to exercise all of the authorities,
        powers and discretions bestowed upon it under this Agreement. No business
        other than the adjournment or termination of the meeting will be transacted
        at any meeting unless a quorum is present at the commencement of the meeting
        but the quorum need not be present throughout the meeting. If within half
        an hour from the time appointed for a meeting, a quorum is not present,
        the meeting will, at the election of those Directors who are present:
      

	 
	 	 	(i) 
	 be dissolved; or 

	 
	 	 	(ii) 
	 be adjourned to the same place or for reconvening
        by the same method, as applicable, but on a date and at a time, to be
        fixed by the Chairman before the adjournment, which will be not less than
        24 hours after the adjournment. Notice of the adjourned meeting will be
        given to all of the Directors forthwith after the adjournment of the meeting.
        If at the adjourned meeting, a quorum is not present within half an hour
        from the time appointed, the Director or Directors present will constitute
        a quorum. 

 - 12 - 

	 	 (g)      	 All matters to be determined by the Board or by
        the Directors hereunder or under the Management Agreement will be determined
        by resolution of the Board as contemplated in this Article 4. The Board
        will decide every matter submitted to it by simple majority, with each
        Director entitled to cast one vote. 

	 
	 	 (h)      	 The Chairman will appoint a secretary for the meeting
        to take minutes of that meeting and circulate copies of the minutes, signed
        by the Chairman and secretary, to each Director within 14 days after the
        meeting. 

	 
	 	 (i)      	 Any decision made by obtaining the consent in writing
        of all of the Directors will be as valid as a decision made at a Board
        meeting duly called and held. 

	 
	 	 (j)      	 Each Director will be entitled to reimbursement
        by the Company for expenses incurred in attending meetings of the Board.
      

	 
	 	 (k)      	 The Board may establish such other rules of procedure,
        not inconsistent with this Agreement, as it deems fit. 

 4.7                Board
  Authority 

                       Subject
  to section 4.6 and any other constraints specifically imposed by this Agreement,
  the Board will be responsible and have authority for the supervision of the
  management of the Project and of the business and affairs of the Company and
  the Subsidiary and will have such other authority as is set out in this Agreement.

 4.8                Subsidiary
  Matters 

                       The
  Shareholders and the Company will operate and administer the Subsidiary in accordance
  with the provisions of this Article 4, mutatis mutandis, unless otherwise
  unanimously determined by the Shareholders, and otherwise in accordance with
  this agreement and the Management Agreement. 

 ARTICLE 5 

  BUSINESS AND OPERATIONS 

 5.1                Operator
  

                       Pillar
  or an Affiliate of Pillar will be the Operator unless and until it resigns or
  is removed pursuant to the Management Agreement, in which event the Shareholders
  will select a new Operator and the Company and the Subsidiary will enter into
  a new management agreement upon substantially those terms and conditions as
  are set forth in Exhibit II to this Agreement. 

 5.2                Operational
  Compliance 

                       The
  business of the Company and the Subsidiary and their respective operations will
  be undertaken and implemented in accordance with: 

	 	(a) 	this Agreement and the Management Agreement; 

 - 13 - 

	 	 (b)      	 the Company Constitution and the Subsidiary Constitution; 
	 
	 	 (c)      	 the Act and all other applicable laws and regulations
        including, without limitation, the laws and regulations of Nicaragua applicable
        to the Project. 

 If there is any inconsistency between this Agreement or the
  Management Agreement and the Company Constitution or the Subsidiary Constitution,
  or between this Agreement or the Management Agreement and the Act or any other
  law or regulation, then the relevant agreement will prevail, unless otherwise
  prohibited by applicable law. 

 5.3                Financial
  Books and Records 

                       Proper
  books of account and other financial records will be kept by the Company and
  the Subsidiary, and entries will be made therein of all matters, terms, transactions
  and things as are customarily written and entered into books of account and
  other financial records in accordance with international generally accepted
  accounting principles and the Management Agreement. At the fiscal year end of
  the Company and the Subsidiary and at such other times as may reasonably be
  requested by either of the Shareholders, an audit of the books and records of
  the Company will be conducted by the Auditor and, for such purposes, the Auditor
  will have access to all books of account, records, vouchers, cheques, papers
  and documents of or which may relate to the Company and the Subsidiary, including
  those of the Shareholders to the extent to which they relate to the Company
  or the Subsidiary. If the Board so determines or if a Shareholder reasonably
  requests, an audit will also be conducted of the books and records of the Subsidiary.

 5.4                Fiscal
  Year and Financial Statements 

                       The
  fiscal year of Company and of the Subsidiary will be a period of 12 calendar
  months ending on <*>, provided that the first fiscal period will be the
  period from <*> to <*>, 200<*>. Annual financial statements
  of the Company, audited by the Auditor, and financial statements of the Subsidiary
  (audited, if so required by the Board) consisting of: 

	 	 (a)      	 statements of income and of changes in financial
        position for the fiscal year, and 

	 
	 	 (b)      	 a balance sheet as at the end of such fiscal year,
      

 will be prepared by the Company and delivered to the Shareholders
  within 120 days after the end of each fiscal year. Comparable unaudited quarterly
  financial statements will be prepared by the Company and delivered to the Directors
  within 60 days after the end of each quarter. 

 5.5                Bank
  Accounts 

                       The
  Company and the Subsidiary will maintain a bank account or accounts at such
  bank or trust company as the Board determines from time to time in accordance
  with this Agreement and the Management Agreement. All Project bank accounts
  will be kept in the name of the Company or the Subsidiary, as appropriate, and
  all cheques, bills, notes, drafts or other instruments will require the signatures
  of such individuals as the Board may from time to time specify. All monies received
  from time to time for the account of the Company or the Subsidiary 

 - 14 - 

 will be deposited immediately into the relevant Project bank
  accounts for the time being in operation in the same drafts, cheques, bills
  or cash in which they are received and all disbursements on account of the Company
  or the Subsidiary will be made by cheque or wire transfer drawn on such bank
  or trust company. 

 5.6                Shareholder
  Access 

                       Each
  of the Shareholders and its authorized representatives will, upon reasonable
  advance notice and at their own risk and expense, have free access to examine
  the Property and other assets of the Company and the Subsidiary and their respective
  books of account and corporate and other records. 

 ARTICLE 6 

  PROJECT FINANCING AND NET CASH FLOW 

 6.1                Proportionate
  Equity Funds 

                       Until
  the approval of a final feasibility study in respect of a mine on the Property,
  all Expenses to be incurred by the Subsidiary will be funded by each of the
  Shareholders subscribing for and purchasing additional Shares of the Company
  at $1.00 per Share in proportion to their respective Shareholder Interests
  at that time. Upon receipt of the subscription funds, the Company will advance
  such funds to the Subsidiary by way of loan or equity contribution, as the Board
  may determine. 

 6.2                Project
  Financing 

                       From
  the approval of a final feasibility study in respect of a mine on the Property
  until the commencement of commercial production from such mine, all Expenses
  to be incurred by the Subsidiary will be funded by Project Financing through
  the Company. 

 6.3                Limited
  Recourse 

	 	 	 All Expenses funded in accordance with section 6.2
        will be funded on a basis that: 

	 
	 	 (a)      	 does not require either Shareholder to issue, reserve
        or contract to issue or reserve any share capital or to grant, transfer
        or assign, (except by way of security for any financing undertaken by
        the Company) any of its Shares or Shareholder Claims or advances to the
        Company to any other Person by way of a bonus or otherwise; 

	 
	 	 (b)      	 does not require either Shareholder to become obligated
        to any Person giving financing to the Company to any greater extent than
        the other Shareholder, determined proportionately in accordance with their
        respective Shares; and 

	 
	 	 (c)      	 limits any lender's recourse as against either Shareholder
        to its Shares, any Shareholder Claims or advances to the Company and its
        rights under this Agreement. 

 - 15 - 

 Each of the Shareholders will, if required to obtain the Project
  Financing, issue to any lender to the Company bonds, debentures or other written
  acknowledgements of its indebtedness in respect of any financing to the Company,
  secured by a first priority pledge, mortgage or charge of its Shares and Shareholder
  Claims. 

 6.4                Working
  Capital Shortfalls 

	 	 (a)      	 All working capital requirements, as hereinafter
        defined, which are not satisfied by the incurring of Project Financing
        or out of the Company's cash flow (in accordance with the terms of an
        approved feasibility study), will be funded pro rata by the Shareholders
        according to their respective Shareholder Interests by way of subordinated
        loans from the Shareholders convertible to Shares at the rate of one share
        per dollar of loan or, if the Board so determines, purchases of Shares
        at $1.00 per Share. 

	 
	 	 (b)      	 For the purposes of this section 6.4, "working capital
        requirements" means the amount of working capital of the Company necessary
        to be advanced to the Subsidiary to ensure continuity of production at
        70% of its mine's initial rated capacity until revenues are sufficient
        to meet cash operating costs. 

 6.5                Shareholder
  Financing 

                       If
  after the approval of a final feasibility study for a mine on the Property the
  Board determines for any reason that sufficient Project Financing is not available
  on acceptable terms, the Board will advise the Shareholders by notice in writing
  (the "Board's Notice") of the respective amounts (according to their Shareholder
  Interests) of additional funds required by the Company that each Shareholder
  may provide by way of subscribing for and purchasing additional Shares at $1.00
  per Share. Thereafter: 

	 	 (a)      	 each Shareholder must, by notice to the Board, indicate,
        within thirty (30) days after receipt of the Board's Notice, whether or
        not it intends to provide up to its proportionate share of any additional
        financing by subscribing for and purchasing additional Shares of the Company
        at $1.00 per Share, failure to give such notice within such period
        of time being deemed to be delivery of a notice declining to fund. 

	 
	 	 (b)      	 if a Shareholder indicates that it intends to provide
        such funding by way of subscribing for and purchasing additional Shares,
        then such Shareholder will be obliged and hereby agrees to provide the
        amount specified in the Board's Notice of its proportionate share of such
        additional funding. Such funding must be provided within sixty (60) days
        of the Board's Notice. 

	 
	 	 (c)      	 If, during the thirty (30) day period after the
        Board's Notice, either of the Shareholders elects not to fund its proportionate
        share, or elects to fund only a portion thereof, in relation to any required
        additional financing, then the Shareholder who has agreed to contribute
        his or its entire proportionate share (the "Contributing Shareholder")
        will have the right to provide the shortfall by way of subscribing for
        and purchasing additional Shares at $1.00 per Share, provided that
      

 - 16 - 

	 	 	 if the Contributing Shareholder does not elect to
        provide a sufficient amount of such shortfall to permit the program proposed
        through such financing to be carried out, the Board will be required to
        consider and approve a new program which requires a lesser amount of financing
        and the provisions of this section 6.5 will apply to the additional funds
        required for such new program. 

	 
	 	 (d)      	 If a Shareholder (the "Defaulting Shareholder")
        fails to pay or advance any additional financing required to be paid or
        advanced by it pursuant to this section 6.5 after having elected to provide
        such financing, such Defaulting Shareholder thereafter will have no further
        right to provide any additional funding for such financing by way of subscription
        for and purchase of additional Shares and the other Shareholder (provided
        that it has paid or advanced its own proportionate share) will have the
        right but not the obligation to contribute such additional financing that
        should have been provided by the Defaulting Shareholder on a pro rata
        basis (excluding the Defaulting Shareholder) by subscribing for and purchasing
        additional Shares at $0.50 per Share. 

	 
	 	 (e)      	 Notwithstanding the other provisions of this section
        6.5, if all Shareholders agree, additional funding may be provided by
        way of Advances rather than subscriptions for and purchase of additional
        Shares at $1.00 per share. Such Advances will be on terms determined
        by the Board and approved by the all of the Shareholders. 

 6.6                Terms
  of Advances 

                       The
  Shareholders will subordinate and postpone their Advances (including postponement
  of the date for payment of principal and interest thereon) as may be required
  from time to time in order to facilitate other Project Financing or to keep
  the Company in compliance with the terms of any credit facilities from time
  to time being used by the Company, and the Company will, at any time upon request
  by any Shareholder, execute and deliver to that Shareholder a promissory note
  and such other documentation as such Shareholder may reasonably require evidencing
  the obligations of the Company to that Shareholder in connection with the Advances.
  All Advances will be repaid before the Company is permitted to declare or pay
  any dividend. 

 6.7                Pillar
  Funding Option 

                       Pillar
  may, at its option, assume responsibility for all or a portion of any Project
  Financing pursuant to section 6.2 which, if provided by Pillar, will be on terms
  no less favourable to the Company and the Subsidiary than would be available
  from a third party lender and otherwise in accordance with section 6.3. 

 6.8                Interest
  

                       Project
  Financing provided by Pillar will bear simple interest at the Agreed Rate. Interest
  will be applied to the amount of Project Financing owed to Pillar and outstanding
  from time to time from the date of each advance until such Project Financing
  is repaid. 

 - 17 - 

 6.9                Repayment
  

                       Project
  Financing provided by Pillar will be repayable by the Company out of the Net
  Cash Flow from the Project, as contemplated in section 6.13. 

 6.10               Pillar
  Lien 

                       So
  long as the any principal or interest on any Project Financing provided by Pillar
  remains outstanding, Pillar will have, and the Company and the Subsidiary hereby
  grants to Pillar, a lien upon and security interest in their respective assets.
  Such lien will be subordinate to any security granted in connection with Project
  Financing provided by a third party lender. 

 6.11               Funding
  from Cash Flow 

                       After
  production of Mineral Products commences from the Property, to the extent that
  the Subsidiary has available cash not otherwise dedicated as contemplated in
  section 6.12 to the retirement of debt or dividends, such cash will be used
  for Expenses before the Subsidiary incurs any additional debt. 

 6.12               Distributions
  

                       Sales
  of Mineral Products from the Project will be made at regular intervals, as would
  be customary in the industry for a comparable project. Not less than 20% of
  the Net Cash Flow, as defined in section 6.13, will be distributed to the Company
  for distribution to the Shareholders pro rata according to their respective
  Shareholder Interests as dividends, subject to (i) dividend restrictions of
  applicable law and (ii) the terms of any outstanding Project Financing. Dividends
  will be by way of cash distributions, which will be made no less frequently
  than quarterly, with an annual final adjustment after finalization of the annual
  financial statements of the Company. 

 6.13               Net
  Cash Flow 

                       For
  the purposes of this Agreement, “Net Cash Flow” means Revenues less
  Operating Costs, each defined as follows: 

	 	 (a)      	 “Revenues” means all revenues from the
        sale of Mineral Products, and all other Project revenues including, without
        limitation, insurance proceeds not allocated for replacement assets, proceeds
        from the sale of obsolete equipment and or other assets of the Subsidiary.
      

	 
	 	 (b)      	 “Operating Costs” means all costs and
        expenses of maintaining the Subsidiary, of maintaining and operating any
        mine on the Property, and for the marketing, sale and delivery of Mineral
        Products, and includes, without limitation, any royalties, taxes, fees
        payable to the Operator pursuant to the Management Agreement, reasonable
        working capital, and such provisions for reclamation and closure cost
        or other liabilities as the Auditor or the Board may reasonably require
        to be reserved. 

 - 18 - 

 6.14               Project
  Financing Liability 

                       Notwithstanding
  any other provision of this Article 6, to the extent that Net Cash Flow is insufficient
  for the repayment by the Subsidiary and the Company of Project Financing according
  to its terms, each of the Shareholders will be responsible for and agrees to
  advance to the Company for its pro rata share of such repayment, as and
  when required. The amount owing by a Shareholder to the Company under this section
  6.14 may, if it is not advanced to the Company when due, be advanced by the
  other Shareholder and upon such advance will be deemed to be a loan to such
  defaulting Shareholder, repayable on demand and bearing interest at the Agreed
  Rate from time to time plus 5%. To secure its obligations in respect of any
  such loan, each Shareholder hereby pledges its Shares and grants a security
  interest in its Shareholder Interest (and the proceeds therefrom) to the other
  Shareholder. 

 ARTICLE 7 

  RESTRICTIONS ON TRANSFER 

 7.1                Restrictions
  

	 	 (a)      	 No Shareholder will Transfer any of its Shares or
        Shareholder Claims except (i) as permitted under section 7.2, (ii) in
        accordance with section 7.5, or (iii) with the prior written consent of
        the other Shareholder, which may be withheld in its sole discretion. 

	 
	 	 (b)      	 Except as permitted under section 7.2, no Transfer
        of Shares may be effected without a Transfer of the corresponding Shareholder
        Claims, and no Transfer of any Shareholder Claims may be effected without
        a Transfer of the corresponding Shares. 

 7.2                Transfers
  to Affiliates 

                       Section
  7.1 will not prohibit a Shareholder from Transferring some or all of its Shares
  or its Shareholder Claims to an Affiliate of such Shareholder, provided that
  the transferee complies with section 7.4. Notwithstanding the foregoing, where
  a Shareholder Transfers its Shares or Shareholder Claims to an Affiliate, the
  transferor will thereafter be jointly and severally liable with the transferee
  for the observance and performance of the covenants and obligations of the transferee
  under this Agreement, and will indemnify the other Shareholder against any loss,
  damage or expense incurred as a result of the failure by the transferee to comply
  with the provisions of this Agreement. 

 7.3                No
  Royalties or Encumbrances 

                       No
  royalties in relation to the Property or any other Encumbrance on any assets
  of the Company or on any of the Shares will be permitted except as payable to
  the Nicaraguan government in accordance with Nicaraguan law, or in connection
  with Project Financing and then only subject to this Agreement, the Pillar lien
  described in section 6.10, the Shareholder security interests under section
  6.14 and any security granted by the Company to secure an operating line of
  credit. 

 - 19 - 

 7.4                Privity
  

                       No
  Transfer of Shares and Shareholder Claims, other than to an existing Shareholder,
  will be effective and no transferee will have any rights hereunder until the
  transferee has executed an agreement agreeing to be bound by the terms and conditions
  of this Agreement and the Management Agreement to which the transferring Shareholder
  is a party, and upon such execution such transferee will thenceforth be bound
  as fully as though an original party, and will be subject to the duties and
  obligations, and may exercise each and every right, of a Party hereunder and,
  if applicable, of a party under the Management Agreement. 

 7.5                Pillar
  Pre-Emptive Right 

                       Mena
  may only dispose of all and not less than all of its Shares and its Shareholder
  Claims. Prior to any such disposition, Mena must first, offer to sell the Shares
  and the Shareholder Claims to Pillar for cash consideration and upon such other
  terms and conditions as Mena deems fit or, if Mena has received a third party
  offer, then upon the terms and conditions of such offer, a copy of which will
  be delivered to Pillar with Mena’s offer. If the third party offer includes
  non-cash consideration, then it will be accompanied by a certificate of Mena
  stating, to the best of his knowledge, the cash equivalent consideration. If,
  within 30 days of Mena’s offer to sell, Pillar does not by written notice
  to Mena, accompanied by a certified cheque or bank draft in the amount of the
  purchase price, elect to purchase Mena’s Shares and Shareholder Claims
  upon the terms and conditions offered, then Mena will be free to dispose of
  the Shares and Shareholder Claims to a third party at any time within 90 days
  after the 30 day Pillar offer period, but only upon terms and conditions no
  less favourable to Mena than those contained, in the offer to sell to Pillar.
  If the Shares and Shareholder Claims are not so disposed of by Mena, then their
  disposition will again be subject to Pillar’s pre-emptive rights under
  this section 7.5. 

 7.6                Mena
  Pre-Emptive Right 

                       Pillar
  may only dispose of all and not less than all of its Shares and its Shareholder
  Claims. Prior to any such disposition, Pillar must first, offer to sell the
  Shares and the Shareholder Claims to Mena for cash consideration and upon such
  other terms and conditions as Pillar deems fit or, if Pillar has received a
  third party offer, then upon the terms and conditions of such offer, a copy
  of which will be delivered to Mena with Pillar’s offer. If the third party
  offer includes non-cash consideration, then it will be accompanied by a certificate
  of a senior officer of Pillar stating, to the best of his or her knowledge,
  the cash equivalent consideration. If, within 30 days of Pillar’s offer
  to sell, Mena does not by written notice to Pillar, accompanied by a certified
  cheque or bank draft in the amount of the purchase price, elect to purchase
  Pillar’s Shares and Shareholder Claims upon the terms and conditions offered,
  then Pillar will be free to dispose of the Shares and Shareholder Claims to
  a third party at any time within 90 days after the 30 day Mena offer period,
  but only upon terms and conditions no less favourable to Pillar than those contained,
  in the offer to sell to Mena. If the Shares and Shareholder Claims are not so
  disposed of by Pillar, then their disposition will again be subject to Mena’s
  pre-emptive rights under this section 7.5. 

 - 20 - 

 ARTICLE 8 

  CONFIDENTIALITY AND PUBLIC STATEMENTS 

 8.1                Confidential
  Information 

                       All
  documents, information and data concerning the Project (in this section called
  the “Confidential Information”) will be and remain confidential,
  and no Party will disclose any Confidential Information except if required by
  law or by the rules of any stock exchange or as otherwise permitted in this
  Article 8. 

 8.2                Exceptions
  

                       A
  Party may disclose Confidential Information to an Affiliate, consultant, advisor,
  lender, financier or potential purchaser, provided that it obtains from such
  disclosee an undertaking of confidentiality at least as onerous as the undertakings
  of the Parties in this Article 8. 

 8.3                Public
  Statements 

                       Press
  releases and other public announcements by any Shareholder respecting this Agreement,
  the Project or the Company will be made only after consultation with the other
  Shareholder. Press releases and other public announcements by the Company will
  be made only with the consent of each of the Shareholders, such consent not
  to be unreasonably withheld. 

 8.4                Due
  Diligence Defense 

                       No
  Party will be liable to the other for the fraudulent or negligent disclosure
  of information by any of its employees, servants or agents, provided that such
  Party has taken reasonable steps to ensure the preservation of the confidential
  nature of the Confidential Information. 

 8.5                Consent
  Process 

                       Where
  a request is made for permission to disclose confidential information hereunder,
  a reply thereto will be made within three Business Days after receipt of such
  request, failing which the Party requesting will be entitled as if consent had
  been given to disclose such information in the limited circumstances specified
  in such request. Consent to any such request will not be unreasonably withheld
  by any Shareholder. 

 8.6                Exclusion
  

                       The
  provisions of section 8.1 do not apply to information which is or becomes part
  of the public domain other than through a breach of the terms hereof. 

 8.7                Pillar
  Proprietary Information 

                       All
  the technology that Pillar may own, use or develop and all Pillar intellectual
  property relating to such technology will remain the exclusive property of Pillar.
  In delivering 

 - 21 - 

 the results of and its interpretations and recommendations
  in relation to any work program or any other activities hereunder or under the
  Management Agreement, Pillar will not be obliged to disclose or release any
  information concerning any of such technology or intellectual property or to
  provide the methodology of any interpretations made by Pillar. 

 ARTICLE 9 

  ARBITRATION 

 9.1                Best
  Efforts to Settle Disputes 

                       If
  any dispute, claim or question (a “Dispute”) arises out of or in
  connection with this Agreement or the Management Agreement, or with the performance,
  enforcement, breach, termination or validity of either such agreement, then
  the Shareholders will use all reasonable efforts to settle the Dispute. To this
  end, they will consult and negotiate with each other, in good faith and without
  undue delay, to reach a just and equitable solution satisfactory to both. 

 9.2                Arbitration
  

                       If
  the Shareholders do not reach a solution pursuant to section 9.1 within a period
  of 15 Business Days following formal notice of the Dispute by either Shareholder
  to the other, then upon further written notice by one Shareholder to the other,
  the Dispute will be finally settled under the Rules of Arbitration of
  the International Chamber of Commerce by one or more arbitrators appointed under
  such rules and in accordance with the following; 

	 	 (a)      	 the arbitrator or arbitration panel will be instructed
        that time is of the essence in the arbitration proceeding and, in any
        event, the arbitration award must be made within 30 days of the submission
        of the Dispute to arbitration; 

	 
	 	 (b)      	 after written notice is given to refer any Dispute
        to arbitration, the parties will, within 10 Business Days after delivery
        of the notice, negotiate in good faith any changes in these arbitration
        provisions or the Rules of Arbitration which are herein adopted,
        in an effort to expedite the process and otherwise ensure that the process
        is appropriate given the nature of the Dispute and the values at risk.
      

	 
	 	 (c)      	 the arbitration will be conducted in the English
        language and will take place in Vancouver, British Columbia; 

	 
	 	 (d)      	 the arbitration award will be given in writing and
        will be final and binding on the parties, not subject to any appeal, and
        will deal with the question of costs of arbitration and all related matters;
      

	 
	 	 (e)      	 to the extent that the assistance of a court is
        necessary in the enforcement of the arbitration award, the Shareholders
        hereby attorn to the exclusive jurisdiction of the British Columbia courts.
      

 - 22 - 

 9.3                Urgent
  Relief 

                       Nothing
  in this Article 9 restricts a Shareholder seeking urgent relief in any appropriate
  court pending the outcome of any arbitration proceedings, or seeking the assistance
  of an appropriate court in enforcing an arbitration award. 

 9.4                Applicable
  Law 

                       All
  Disputes referred to arbitration (including the scope of the agreement to arbitrate,
  any statute of limitations, set-off claims, conflict of laws rules, tort claims
  and interest claims) will be governed by the substantive law of British Columbia.

 ARTICLE 10 

  GENERAL PROVISIONS 

 10.1              Share
  Certificates 

                       All
  outstanding certificates representing Shares, and every certificate representing
  the Shares hereafter issued, will have endorsed thereon in legible characters
  a notation to the effect that the Shares represented by such certificates are
  subject to the terms of this Agreement, and that a copy of this Agreement may
  be examined at the head office of the Company. 

 10.2              Force
  Majeure 

                       If
  and to the extent that a Shareholder is prevented from complying with any obligation
  under this agreement by reason of circumstances beyond the control of that Shareholder,
  other than shortage of funds (a “Force Majeure”), then: 

	 	 (a)      	 the Shareholder will be excused to such extent from
        performance of the relevant obligation for so long as the Force Majeure
        persists and provided that it diligently attempts to eliminate or mitigate
        its effects; and 

	 
	 	 (b)      	 where the obligation was to have been performed
        within a time limit, the relevant period of time will be extended for
        a period equivalent to the duration of the Force Majeure. 

 10.3              Severability
  

                       If
  any provision of this Agreement is determined by an arbitrator or any court
  of competent jurisdiction to be illegal, invalid or unenforceable, that provision
  will be severed from this Agreement and the remaining provisions will continue
  in full force and effect. 

 10.4              Carrying
  on Business 

                       The
  Company covenants and agrees to carry on the Project and its business and operations
  in accordance with the provisions of this Agreement and the Management Agreement,
  and to take no action which would constitute a contravention of either. 

 - 23 - 

 10.5              Termination
  

                       This
  Agreement will continue in full force and effect from the date hereof until
  terminated by the earlier to occur of the following: 

	 	 (a)      	 an instrument in writing signed by all of the Shareholders
        by which they agree to such termination; or 

	 
	 	 (b)      	 the filing of articles of dissolution or other final
        process for the winding-up or dissolution of the Company; or 

	 
	 	 (c)      	 the acquisition by one Shareholder, directly or
        through a wholly owned subsidiary or subsidiaries, of all of the issued
        and outstanding Shares. 

 10.6              Notice
  

	 	 (a)      	 Any notice or other communication given
        under this Agreement (including notices of Shareholders’ meetings)
        will be in writing and given by delivering it or sending it by facsimile
        or other similar form of electronic communication addressed to: 

	 
	 	 	 (i)     
      
	 Mena at: 

	 
	 	 	 	 <*> 

	 	 	 	 Attention: <*> 

        Fax No.: <*> 

	 
	 	 	 (ii)      
	 Pillar at: 

	 
	 	 	 	 <*> 

	 	 	 	 Attention: <*> 

        Facsimile: <*> 

	 
	 	 	 (iii)      
	 The Company: 

	 
	 	 	 	 <*> 

	 	 	 	 Attention: <*> 

        Facsimile: <*> 

	 
	 	 	 	 with a copy to the Shareholder that is not the sender.
      

	 
	 	 (b)      	 Any such communication will be deemed
        to have been validly and effectively given if personally delivered, on
        the date of such delivery if such date is a Business Day and such delivery
        was made prior to 4:00 p.m. in the jurisdiction of the addressee and otherwise
        on the next Business Day, or if transmitted by facsimile or similar means
        of electronic communication on the Business Day following the date of
        transmission. Any Party may change its address for service 

 - 24 -

	 	form time to time by notice given in accordance with
        the foregoing and any subsequent notice will be sent to such Party at
        its changed address. 

 10.7              Waiver
  

	 	 (a)      	 No waiver of any of the provisions of this Agreement
        will be deemed to constitute a waiver of any other provision (whether
        or not similar); nor will such waiver be binding unless executed in writing
        by the Party to be bound by the waiver. 

	 
	 	 (b)      	 No failure on the part of any Party to exercise,
        and no delay in exercising any right under this Agreement will operate
        as a waiver of such right; nor will any single or partial exercise of
        any such right preclude any other or further exercise of such right or
        the exercise of any other right. 

 10.8              Entire
  Agreement 

                       This
  Agreement constitutes the entire agreement between the Shareholders as shareholders
  of the Company and in relation to the Subsidiary and the Area of Interest, and
  supersedes all prior agreements, understandings, negotiations and discussions,
  whether oral or written, between them in that regard including, without limitation,
  the Option Agreement. There are no representations, warranties, covenants, conditions
  or other agreements, express or implied, collateral, statutory or otherwise,
  between the parties hereto in connection with the subject matter of this Agreement
  except as specifically set forth herein and therein and no Party has relied
  or is relying on any other information, discussion or understanding in entering
  into and completing, the transactions contemplated in this Agreement and the
  Management Agreement. 

 10.9              Amendment
  

                       This
  Agreement and the schedules annexed hereto may only be amended, supplemented
  or otherwise modified by written agreement signed by all of the Parties. 

 10.10            Time
  of the Essence 

                       Time
  will be of the essence of this Agreement. 

 10.11            Governing
  Law 

	 	 (a)      	 Except for matters of title to the Properties or
        their transfer, which will be governed by the laws of Nicaragua, this
        Agreement will be governed by and interpreted and enforced in accordance
        with the laws of British Columbia. 

	 
	 	 (b)      	 Without derogating from the obligations of the parties
        to submit to arbitration pursuant to section 9.2, each of the parties
        irrevocably attorns and submits to the non-exclusive jurisdiction of the
        courts of British Columbia and each of Pillar and Mena hereby appoints
        <*> [<*> agent] and <*> [<*> agent], respectively,
        as its agent for the service of any process with respect to any matter
        arising under or related to this Agreement. 

 - 25 - 

 10.12            Successors
  and Assigns 

                       This
  Agreement will become effective when executed by the Parties and after that
  time will be binding upon and enure to the benefit of the Parties and their
  respective successors, heirs and administrators, and their respective permitted
  assigns. 

 10.13            Interpretation
  

                       Unless
  the context otherwise requires, words used in this Agreement importing either
  the masculine or neuter gender include the masculine, feminine and neuter genders
  and words importing the singular include the plural and vice versa. 

 10.14            Headings
  

                       Headings
  are inserted in this Agreement for convenience of reference only and will not
  affect the interpretation hereof. 

 10.15            Paramountcy
  

                       To
  the extent permitted by law, the provisions of this Agreement will supersede
  and override the provisions of the Company Constitution and the Subsidiary Constitution.

 10.16            Counterparts
  

                       This
  Agreement may be executed by facsimile signatures and in any number of counterparts
  and all such counterparts taken together will be deemed to constitute one and
  the same instrument. 

                       IN
  WITNESS WHEREOF the parties hereto have executed this Agreement on the day,
  month and year first above written. 

	
      FRANK MENA  	 
	 	 	 
	 	 	 
	 	 	 
	 PILLAR RESOURCES INC.  	 
	 	 	 
	 	 	 
	Per:	 
    	 
	 	 	 
	 	 	 
	 [HOLDCO]  	 
	 	 	 
	 	 	 
	Per:	 	 
	 	 	 
	 	 	 
	Per:	 	 

 EXHIBIT I 

 to the Shareholders’ Agreement dated <*> between
  FRANK MENA, PILLAR 

  RESOURCES INC. and [HOLDCO] 

 Company Share Capital 

 The authorized capital of the Company consists of <*>.

 The issued and outstanding capital of the Company consists
  of the following: 

	 Name of Shareholder  	 Number of Shares Held  
	 	 
	 Mena  	 <*>  
	 	 
	 Pillar  	 <*>  

 EXHIBIT II 

  
    
      
         to the Shareholders’ Agreement dated <*>
          between FRANK MENA, PILLAR RESOURCES INC. and [HOLDCO] 

      

    

  

 Management Agreement 

 MANAGEMENT AGREEMENT

  
    
      
         THIS AGREEMENT is dated as of the <**> day of <**>,
          <**> 

      

    

  

 BETWEEN: 

  
    
      
         [HOLDCO], a company incorporated under the
          laws of Aruba having offices at <address + fax number>
        

         ("Holdco") 

      

    

  

 AND: 

  
    
      
         [SUBSIDIARY], a company incorporated under
          the laws of Nicaragua having offices at <address + fax number>

         (the "Subsidiary") 

      

    

  

 AND: 

  
    
      
         [PILLAR OPERATING COMPANY], a company incorporated
          under the laws of Aruba having offices at <address + fax number>
        

         (“Opco”) 

      

    

  

 WITNESS THAT WHEREAS: 

 A.        Under a shareholders’
  agreement (the “Shareholders’ Agreement”) dated as of the
  date hereof between Pillar Resources Inc. (“Pillar”), the sole owner
  of Opco and a 70% shareholder of the Company, and Frank Mena (“Mena”),
  a 30% shareholder of the Company, the parties agreed to enter into this agreement
  with respect to the management of Holdco and the Subsidiary’s mining project
  and the operations of the Holdco and the Subsidiary (together, the “Company”);

 B.        The Company is
  engaged in the exploration, development and exploitation of mineral resources
  on the <**> property in Nicaragua, which property is more particularly
  described in Exhibit 1 to this Management Agreement (the “Property”);

 - 2 - 

             NOW
  THEREFORE THIS MANAGEMENT SERVICES AGREEMENT WITNESSES that in consideration
  of the sum of TEN ($10.00) DOLLARS now paid by the Company to Opco and of
  the mutual covenants and agreements hereinafter contained, the parties agree
  as follows: 

 1.        ENGAGEMENT

 1.1       The Company hereby
  retains and engages Opco, and Opco hereby accepts such retainer and engagement,
  to provide the facilities and personnel and to perform the services set forth
  in article 2 hereof on the terms and conditions hereinafter set forth. 

 1.2       The term of this
  Management Agreement will be for an indefinite period commencing on the date
  hereof and ending upon termination in accordance with article 6 (the “Term”).

 2.        SERVICES

 2.1       During the Term Opco
  will provide the following corporate, administrative and technical services
  and supplies to the Company:

	 	 (a)      	 general corporate management and strategic planning
        services, and planning and implementing financings and acquisitions; 

	 
	 	 (b)      	 reception, secretarial, office management and communications
        services, use of general of f ice equipment, and office supplies; 

	 
	 	 (c)      	 day-to-day bookkeeping and ongoing record keeping
        and accounting services and arranging f or collection and payment of all
        receivables and payables of the Company; 

	 
	 	 (d)      	 communications with the shareholders of the Company
        including responding to shareholder enquiries and matters in relation
        to general meetings of shareholders of the Company; 

	 
	 	 (e)      	 attending to all filings and reporting as may be
        required in the normal course of business with all applicable governmental
        and regulatory authorities on behalf of the Company; 

	 
	 	 (f)      	 maintaining records in relation to mineral properties
        of the Company, including filing of assessment work and advising the Company
        as to requirements to keep its mineral properties in good standing; and
      

	 
	 	 (g)      	 communications with the Company's professional advisors
        including, without limitation, its solicitors, auditors, fiscal agents
        and independent 

 - 3 - 

	 	 	 consultants, with respect to general corporate matters
        regarding the Company; and 

	 
	 	 (h)      	 carrying all of the activities necessary or advisable
        for exploration, development and exploitation of the Property by the Company
        in accordance with the Shareholders’ Agreement. 

 2.2       The services
  to be performed by Opco hereunder will be performed only by appropriately qualified
  and experienced personnel. 

 2.3       Opco will carry
  out the services to be performed hereunder in a careful and workmanlike manner,
  in accordance with applicable law and such that the Company is at all times
  in compliance with the Shareholders’ Agreement 

 3.        COMPENSATION
  AND EXPENSES

 3.1       During Term the
  Company will pay to Opco, and Opco hereby accepts in full payment and satisfaction
  for all the services rendered pursuant to article 2: 

	 	 (a)      	 for the services of all Opco personnel whose time
        can be directly allocated to activities on behalf of the Company hereunder
        including, without limitation, secretarial and word processing services,
        bookkeeping, accounting and record keeping services, in-house legal services,
        shareholder communication services and corporate financing services, a
        monthly fee equal to a pro rata portion of the monthly corporate cost
        to Opco of the each of the personnel providing such services (including
        in such costs all benefits provided by Opco, at cost) equal to the percentage
        that the time spent by such individual on matters pertaining to the Company
        is of the total time spent by such individual on all matters during such
        period, based on either hours or days (eight working hours) as is appropriate
        to the nature of the services provided (the "Direct Costs").; and 

	 
	 	 (b)      	 for all overhead and management services of Opco
        personnel which cannot reasonably be directly allocated to time spent
        on behalf of the Company including, without limitation, pursuant to paragraph
        2.2(a), a monthly management fee of $<**> (the "Management Services
        Fee”). 

 3.2       The Company will
  pay the Direct Costs and Management Services Fee to Opco on a monthly basis
  upon presentation of an invoice therefor by Opco in respect of services rendered
  during the past month. 

 3.3       The Company will
  reimburse Opco on a monthly basis for all reasonable costs, expenses and disbursements
  incurred by Opco on behalf of the Company including, 

 - 4 - 

 without limitation, filing fees, travel, food and lodging
  costs, long distance telephone calls, facsimile charges, delivery and courier
  charges, bulk postage and special duplicating and printing charges, without
  any mark-up thereon. If Opco disburses such funds on behalf of the Company in
  advance, it will be entitled to charge a reasonable rate of interest on such
  advances, until paid, not exceeding ten percent (10%) per annum. 

 3.4       Opco will provide
  for the use of the Company such office space and furnishings as it deems appropriate,
  and for the provision of such space, Opco will be entitled to charge the Company
  a pro rata portion of the total rent paid by Opco for its offices, based
  on the proportion of the total space allocated to the Company. The Company will
  pay such rent on a monthly basis upon presentation of an invoice therefor by
  Opco. 

 3.5       The Company will
  be responsible for payment of or reimbursement of Opco for any value added tax,
  sales tax or other taxes exigible on any of the charges provided for in this
  Agreement, all of which charges will be in addition to the charges set forth
  elsewhere in this Management Agreement. 

 3.6       Opco will cause
  its personnel to maintain appropriate records of time spent performing services
  hereunder on behalf of the Company and of reimbursable costs, and will make
  such records available to the Company upon request 

 3.7       All payments
  due to Opco hereunder will be made in US dollars by direct deposit to a bank
  account in Aruba specified by Opco. 

 4.        RELATIONSHIP
  OF THE COMPANY AND OPCO

 4.1       The Company acknowledges
  that during the Term Opco will engage in other business activities for gain,
  profit or other pecuniary advantage, including without limitation, the provision
  of services to other public and private companies similar or identical to those
  to be rendered to the Company, and that Opco and its directors, officers, employees
  and servants will therefore only be required to devote such time and effort
  to the provision of services to the Company hereunder as are reasonably necessary
  to efficiently and competently perform and carry out such services. 

 4.2       Opco will perform
  all services on behalf of the Company hereunder as an independent contractor,
  and neither Opco nor any of its directors, officers, employees, agents or servants
  will, in the performance of the services hereunder, be considered for any reason
  to be partners, employees or servants of the Company or, except to the extent
  expressly permitted hereunder, as agents of the Company. 

 4.3       To the extent
  necessary to permit Opco to perform the services required hereunder, the Company
  will provide evidence of the authority of Opco or its representatives as agent
  for the Company hereunder. 

 - 5 - 

 4.4       Opco and the
  Company acknowledge that from time to time certain directors, officers, employees,
  agents or servants of Opco may also be directors or officers of the Company
  and as such may perform services, other than those contemplated under this Management
  Agreement, directly for the Company. With respect to the performance of such
  services directly for the Company, such persons will be considered as directors,
  officers', agents or servants of the Company and not of Opco and such services
  will not form part of the services to be rendered or compensated for hereunder.

 5.        ACCESS
  TO INFORMATION

 5.1       Opco will provide
  full access to representatives of the Company's auditors to all accounting records
  and supporting documentation relating to the Company and Expenditures, and will
  permit them, at the Company's expense, to take such copies as may be reasonably
  requested. 

 5.2       The officers,
  directors and authorized representatives of the Company and the auditors and
  solicitors of the Company will be entitled, during normal business hours, to
  full and complete access to all records maintained by Opco on behalf of the
  Company and with respect to the business, properties or mineral exploration
  programs of the Company. 

 6.        TERMINATION

 6.1       This Management
  Agreement will terminate upon any one or more of the following events: 

	 (a)      	 if Opco commits an act of bankruptcy,
        is adjudicated a bankrupt or otherwise becomes subject to the provisions
        of the Bankruptcy Act (Canada), Companies Creditors Arrangements Act (Canada)
        or similar legislation, or if a receiver, liquidator or receiver manager
        is appointed for the assets or business of Opco; 

	 
	 (b)      	 at the written election of the Company
        if: 

	 
	 	 (i)     
      
	 there is a complete or substantially complete refusal
        by Opco to render the required services hereunder, or 

	 
	 	 (ii)      
	 if Opco refuses to efficiently and competently perform
        and carry out the required services hereunder; 

	 
	 	 	 and after notice of such default, the Company has
        failed to cure the default within 60 days after such notice; or 

 - 6 - 

	 	 (c)      	 at the election of Opco, upon Opco giving no less
        than thirty (30) days,' written notice to the Company of its intention
        to terminate this Management Agreement. 

 7.        MISCELLANEOUS

 7.1       If there is a
  disagreement or a dispute between Opco and the Company with respect to this
  Management Agreement or the interpretation thereof, or the services, facilities
  or equipment to be provided hereunder, then such dispute or disagreement will
  be referred to arbitration in accordance with Article 10 of the Shareholders’
  Agreement, which by this reference is hereby incorporated into this Agreement
  mutatis mutandis. 

 7.2       The failure of
  a party to insist upon strict adherence to any one or more of the terms of this
  Management Agreement on one or more occasions will not be construed as a waiver
  of any such term by such party or deprive the such party of the right to require
  strict compliance thereafter with the same or any other term of this Management
  Agreement. 

 7.3       If any portion
  of this Management Agreement is held to be invalid or unenforceable by a court
  of competent jurisdiction, the remaining covenants and restrictions or portions
  thereof will remain in full force and effect. 

 7.4       The obligations
  and rights of the Company under this Management Agreement may not be assigned
  or transferred. The obligations and rights of Opco under this Management Agreement
  may not be assigned or transferred without the prior written consent of the
  Company first being obtained, such consent not to be unreasonably withheld.

 7.5       Any notice or
  other communication to be given hereunder will be in writing and will be addressed
  to the party to receive such notice or communication at the address for such
  party set out on page one hereof. All notices will be either sent by telecopier
  or delivered by prepaid courier, in each case addressed to the recipient party
  and will be deemed to have been given and received if delivered, on the day
  of delivery or if sent by telecopier, on the business day following the date
  it was so sent. Any party may at any time give notice in writing to the other
  parties of a change in its address for the purposes of this Management Agreement.

 7.6       The headings
  used throughout this Management Agreement are inserted for reference purposes
  only and are not to be considered, or taken into account, in considering the
  terms or provisions of this Management Agreement, nor to be deemed in any way
  to qualify, modify or explain the effect of any such terms or provisions. 

 - 7 - 

 7.7       This Management
  Agreement may only be changed or modified by an agreement in writing signed
  by all of the parties hereto. 

 7.8       This Management
  Agreement will be governed by and interpreted in accordance with the laws of
  British Columbia and, without derogating from the obligation to arbitrate pursuant
  to section 7.1, the courts and arbitrators of British Columbia will have exclusive
  jurisdiction with respect hereto. 

             IN
  WITNESS WHEREOF Opco, Holdco and the Subsidiary have executed this agreement
  as of the day and year first above written. 

	 [HOLDCO]  	 
	 	 
	 Per:  	 
	 	 
	
      Authorized Signatory  	 
	 	 
	 	 
	 [SUBSIDIARY]  	 
	 	 
	 Per:  	 
	 	 
	
      Authorized Signatory  	 
	 	 
	 	 
	 [OPCO]  	 
	 	 
	 Per:  	 
	 	 
	
      Authorized Signatory  	 

 SCHEDULE 4

to the Option Agreement made as of October 1, 2003,
  between FRANK MENA and PILLAR RESOURCES INC. 

 

 TRUST PROVISIONS 

	 1.      	 Trustco will hold 70% of the issued and outstanding
        shares of Chorti Aruba (the ”Shares”) in trust in accordance
        with the Trust Agreement. 

	 
	 2.      	 If the Option is terminated as to all of the Concession
        Areas at the election of the Optionee under Section 4.9 of the Option
        Agreemnt, then the Optionee will notify Trustco concurrently with notice
        to the Optionor under Section 4.9 as to the last Concession Area terminated.
      

	 
	 3.      	 If the Option is terminated as to all of the Concession
        Areas due to the Optionee’s failure to cure a default under Section
        4.6 or Section 4.7 of the Option Agreement, then the Optionor will notify
        Trustco upon the expiry of the 30 day cure period under that section.
      

	 
	 4.      	 Upon receipt of notification from the Optionee under
        paragraph 2 or from the Optionor under paragraph 3, Trustco will transfer
        the Shares to the Optionor or his nominee and cause their registration
        in the name of the transferee. 

	 
	 5.      	 If pursuant to Section 5.5 of the Option Agreement
        the Optionor and the Optionee determine to permit the joint exploration
        and development of the last remaining Concession Area held by Chorti to
        proceed through Chorti Aruba and Chorti, then they will jointly notify
        Trustco. Upon receipt of such notification, Trustco will transfer the
        Shares to the Optionee or its nominee and cause their registration in
        the name of the transferee. 

	 
	 6.      	 If the Optionor and the Optionee jointly notify
        Trustco to transfer the Shares, then Trustco will transfer the Shares
        and cause their registration in the name of the transferee in accordance
        with such notification. 

	 
	 7.      	 Trustco will execute all documents and do all other
        things necessary to permit the Optionee to exercise its rights under Section
        6.1(a) of the Option Agreement and the Optionor to exercise its rights
        under Section 6.1(b) of the Option Agreement. 

	 
	 8.      	 Trustco will have the same obligations of confidentiality
        as those of the Optionor and the Optionee under Article 9 of the Option
        Agreement. 

	 
	 9.      	 The Optionee will be responsible for and will bear
        and pay all of the fees and disbursements of Trustco, properly invoiced
        and with reasonable supporting documentation, in carrying out Trustco’s
        obligations under the Trust Agreement. 

	 
	 10.      	 If there is any dispute or disagreement concerning
        the Trust Agreement, it will settled by arbitration under the same provisions
        for arbitration as are contained in Article 10 of the Option Agreement.
      

 To: Frank Mena Morenco and Associates 

Re: Investment and Option Agreement. 

Date: 2003-02-27 

 Dear Frank, 

 Following up on our discussions of today, I herein outline the terms of
  the agreement reached between us whereby Pillar Resources Inc. or its assignee,
  is hereby granted the exclusive right and option to acquire a 70% interest in
  eight mineral concessions areas in Nicaragua held by you, your associates and
  assignees. 

 The concession areas are outlined in detail in schedule A attached. It
  is further agreed by the parties that some of the concession areas will be expanded
  with new applications at the request of Pillar. These new applications will
  be adjacent to the present concessions and, far all intents and purposes of
  this agreement, will form part of the concession area to which the application
  is adjacent 

 Pillar Resources Inc agrees to fund all costs related to the new concession
  applications, concession transfers and legal costs related to this agreement
  and the corporate structure herein proposed.

STRUCTURE 

	1.	 A new Company will be incorporated in Nicaragua,
      a holding Company, to be referred to in this proposal as (NewCo). All of
      the concessions in Schedule A will be transfereed into NewCo.
      
	 	 	 
	2.	 30% of the issued shares in NewCo will be
      issued in the name of Frank Mena, his associates or assignees, to be referred
      to in this proposal as (Frank)
	 	 	 
	3. 	70% of the shares in NewCo will be issued
      in the name of a representative of the incorporating law firm, preferably
      a firm of international status, and those shares will be held in trust.
      
	 	 	 
	4.	 The contract between us will call for the
      law firm to hold those shares in trust until one of the following two things
      occur: 
	 	 	 
	 	C)	 Pillar completes its obligations under the agreement regarding all
      of the concessions still held by NewCo and the 70% interest in NewCo is
      transferred to Pillar or its  assignee.
	 	 	 
	 	 	Or
	 	 	 
	 	B)	 Pillar does not complete its obligations under the agreement on any
      of the concessions and all of the concessions are transferred out of NewCo
      back to Frank. At this point the 70% interest in NewCo may also be transferred
      to Frank upon request. 

 It is agreed that any disagreements between the parties regarding the agreement
  will be settled by arbitration under the arbitration laws of Florida, USA or
  any other jurisdiction if agreed to by both parties. 

 A second company will he incorporated in the country and that will be the
  operating company, to be referred to in this agreement as (OpCo). 100% of the
  shares of OpCo will be owned by NewCo. Pillar will appoint the general Manager
  and staff of OpCo. 

 Obligations of Pillar Resources Inc regarding Earn-In
  

 To earn an interest in any one or all of the concessions, Pillar must complete
  the following cash payments and property expenditures. 

	 	1.	 US$50,000 upon signing of this binding
      letter agreement between us outlining the terms whereby Pillar has an exclusive
      right to earn a 70% interest in the concession areas outlined in schedule
      A attached.
	 	 	 	 
	 	2. 	US$150,000 upon the transfer of these
      concessions into NewCo, which will be done as quickly as possible. (I appreciate
      that all of the concessions are not granted yet, so this payment will he
      made on a pro-rata basis as the concessions are transferred in. With, of
      course, a guarantee that all of the concessions will be transferred in as
      quickly as possible. 
	 	 	 	 
	 	3.	 US25,000 per concession on the six-month
      anniversary of each concessions transfer into NewCo, to be paid on each
      of the concessions that Pillar wishes to continue the option. There will
      be a minimum payment amount of $100,000 provided Pillar continues the
      option on at least one of the concessions. All of the concessions on which
      Pillar does not wish to continue the option will be transferred back to
      Frank. 
	 	 	 	 
	 	4. 	In order for Pillar to earn its 70% interest
      in any one of the concessions, US$2,000,000 must be spent on that concession
      in exploration and development. US$2,000,000 must be spent on each and
      every concession in which Pillar wishes to earn the 70% interest. The expenditures
      must be incurred in the following manner and minimum yearly amounts: 
	 	 	 	 
	 	 	A)	US$300,000 in the first year following the transfer of title of that
      concession to NewCo. 
	 	 	 	 
	 	 	B)	 US$700,000 in the second year following the transfer of title
      of that concession to NewCo. 
	 	 	 	 
	 	 	C)	 US$1,000,000 in the third year following the transfer of title
      to NewCo. 

 Pillar may spend the required amounts and earn their interest quicker if
  they desire. The expenditures above are the minimum yearly expenditures required
  for each concession that Pillar wishes to continue the option 

 Each year upon the close of the twelve-month period on each
  concession, an accounting of the monies spent and a geological report of results
  obtained will be presented to Frank. 

 If Pillar failed to make the required expenditure on any concession, Pillar
  will have the right to either:

	 	A)	 Make up the difference by making a cash payment to Frank equal to
      the shortfall
	 	 	 
	 	 	Or 
	 	 	 
	 	B)	 Transfer that or those concessions out of NewCo back to Frank.

  Pillar will have the right to transfer any concession out of NewCo
  back to Frank at any time. 

 Upon Pillar completing the US$2,000,000 earn-in expenditure on any
  one concession, to complete the earn-in of the 70% interest in that concession,
  Pillar must pay to Frank US$250,000. This payment must be made for each
  and every concession area that Pillar completes the $2,000,000 expenditure
  and wishes to acquire the 70% interest.

 Following Pillars earn-in of a 70% interest in a concession, the following
  shall occur: 

 Pillar will give to Frank a comprehensive report on that concession detailing
  results obtained, potential and plans going forward.

 Frank will have 90 days from the receipt of the report to decide if they
  wish to convert the 30% working interest to a 4% NSR or if they wish to continue
  with a 30% contributing interest. 

 If Frank coverts to a 4% NSR, Pillar will have the right at any time to
  purchase 2 of that 4% NSR for US$1,250,000 per percentage point. If Pillar
  purchases the 2% NSR, the Company will have a first right of refusal to purchase
  the remaining 2% if Frank puts it for sale. 

 If Frank decides to remain with a 30 % participating interest, a standard
  shareholders agreement would be prepared and signed by the parties, with all
  of the normal and acceptable rules and clauses for our industry.
  The form of the shareholders agreement is to be further defined in the formal
  agreement to be prepared between us. 

 If the above terms are acceptable to you, please sign below to acknowledge
  the agreement between us. Upon the receipt of the payment of US$50,000 a
  binding agreement will be formed between us and NewCo and OpCo will be incorporated
  with all haste. 

 It is further agreed that upon the formation of NewCo and OpCo, a more
  formal agreement will be drafted and signed by the parties, further defining
  the terms of the agreement between us. 

	Signed:

      /s/ Frank Mena Morenco and Associates

      Frank Mena Morenco and Associates
	Signed:

      /s/ Simon Thomas Ridgway

      Simon Thomas Ridgway

 Schedule A 

	 No.  	 Concession Name  	 Company  	 Area (Ha.)  	 Government 

      Agreement

      No. 
	  1  	 El Gallo  	 Resources and Mining, S.A.  	 7,200  	 190-RN- 

      MC/2002 
	2 	 El Guayabo  	 Delgratia Mining Corporation  	 21,400  	 182-RN-

      MC/2002 
	  3  	 Guapinol  	 Delgratia Mining Corporation  	 3,000  	 177-RN- 

      MC/2002 
	  4  	 Chachagua  	 Delgratia Mining Corporation  	 3,600  	 178-RN-

      MC/2002 
	5 	 San Albino-Murra  	 Delgratia Mining Corporation  	 8,700  	 179-RN-

      MC/2002 
	  6  	 Columbus  	 Delgratia Mining Corporation  	 14,000  	 180-RN-

      MC/2002 
	  7  	 San Ramon Matiguas  	 Delgratia Mining Corporation  	 800  	 189-RN-

      MC/2002 
	  8  	 Kisilala  	 Delgratia Mining Corporation  	 13,500

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00080-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00080-of-00352.parquet"}]]