(ENGLISH VERSION)
CONTRACTS OF MINING EXPLORATION AND OF PROMISE OF ASSIGNMENT OF RIGHTS ENTERED
INTO BY AND BETWEEN, AS A FIRST PARTY, XX. XXXXXX XXXXXXXX XXXXXXX, ACTING ON
HIS OWN BEHALF AND IN THE NAME AND ON BEHALF OF HIS WIFE, XXX. XXXXXXX XXXX
XXXXXXX XX XXXXXXXX (IN THIS DOCUMENT THE "TITLEHOLDER"); AND, AS A SECOND
PARTY, POLO Y XXX MINERALES, S.A. DE C.V., (IN THIS CONTRACT THE "BENEFICIARY"),
REPRESENTED HEREIN BY XX. XXXXX X. XXXXXXXXX, IN ACCORDANCE WITH THE FOLLOWING
DECLARATIONS AND CLAUSES:
D E C L A R A T I O N S
I. The TITLEHOLDER declares:
1. That he is Mexican by birth, of legal age, married as it is evidenced with
copy of the corresponding marriage certificate, recorded in the Federal
Taxpayers' Registry under code EUEH-340308-MU7, with legal capacity to enter
into contracts and to hold mining concessions, in accordance with that
established in the Mining Law and its Regulations;
2. That he is the only holder of the rights deriving from the mining exploration
concessions covering the mining lot named "EL VOLADO", title 197967, as well as
the only holder of the rights deriving from the mining exploitation concessions
covering the mining lot named "XX XXXXXX", title 156895 (in these contracts
jointly identified as the LOTS), which identification data are the following:
a) "EL VOLADO", mining exploration concession, title 197967, issued on
September 30, 1993; located in the Municipality of Zacualpan, State of
Mexico, with a surface of 3.7899 hectares, recorded under number 27, page
14, volume 276 of the General Book of Mining Concessions of the Public
Registry of Mining; and,
b) "XX XXXXXX", mining exploitation concession, title 156895, issued on May
12, 1972, located in the Municipality of Zacualpan, State of Mexico, with a
surface of 111.7074 hectares, recorded under number 49, page 13, volume 199
of the General Book of Mining Concessions of the Public Registry of Mining.
Attached as Exhibit I, are copies of the mining concession titles covering the
LOTS described in the above subparagraphs.
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3. That, as concerns the obligation related to the filing of proof of the
assessment of works carried out on the LOTS, the TITLEHOLDER untimely filed
those corresponding to 1994 and 1996, reason why it is still pending that the
General Direction of Mines approves such extemporary proof of works and
determine the fine to be paid thereof, in order for the TITLEHOLDER to be
considered as current in the fulfillment of this obligation.
With respect to the payment of mining duties over mining concessions established
in the Federal Duties Law (surface taxes) the TITLEHOLDER states that, for the
periods comprised between the first semester of 1993 and the second semester of
1998 he has not paid any amount as surface taxes for any of the concessions
covering the LOTS.
In line with that mentioned in the preceding paragraph, the TITLEHOLDER also
states that he has received an official communication from the General Direction
of Mines, whereby said authority requests him to prove the payment of such
surface taxes by means of the filing of the corresponding receipts, including
the up-dating of such debt and surcharges deriving from such incompliance;
having a 60 calendar day term to prove the foregoing, which term will expire on
December 24, 1998, approximately.
For said purposes, attached hereto as Exhibit II are added copies of the
documents by means of which the TITLEHOLDER filed with the mining authorities
the proof of the exploration works carried out in the LOTS from 1993 through
1997.
As Exhibit III are added copies of the certifications referred to by the second
paragraph of article 23 of the Mining Law, whereby it is evidenced that the
concessions covering the LOTS are in effect, also showing the legal status of
the mining concessions covering the LOTS.
4. That the monuments indicating the location of the starting point of each one
of the LOTS, are well preserved, built in the terms of law and maintained in the
same place previously approved by the mining authorities.
5. That the rights derived from the mining concessions that cover the LOTS are
free of any liens, encumbrances, burdens or limitations of domain of any nature,
and that to the date of execution of this document, the TITLEHOLDER has not
entered nor will enter into any Contract, nor he has performed nor will perform
any act with respect to the LOTS, which could encumber, burden or limit, in any
manner whatsoever, the rights that he has over the abovementioned mining
concessions; therefore, the TITLEHOLDER guaranties the existence, validity and
availability of the rights referred to herein.
6. That with respect to the activities performed in the LOTS, as of this date,
no legal provisions in the environmental area nor of any other nature have been
breached, also stating the TITLEHOLDER that -when so required- all of the
authorizations required to perform works in the LOTS were obtained, reason why
as of the date of execution of this document, no environmental contingency nor
of any other nature that may affect the validity of the mining concessions
covering the LOTS exists.
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7. That the TITLEHOLDER hereby wishes to grant to the BENEFICIARY, the exclusive
right to evaluate and explore the LOTS, for a term of 12 (twelve) months counted
from the date of execution and ratification before Notary Public of these
Contracts by both parties; which exploration shall be carried out under the
terms and conditions established in this document, considering that the
BENEFICIARY is capable to be holder of mining concessions in accordance with the
Mining Law and its Regulations and that this Contract of Exploration is
authorized in terms of the applicable legal provisions.
8. That, furthermore, the TITLEHOLDER hereby wishes to enter with BENEFICIARY,
for the same term, into a Contract of Promise of Assignment of all of the Rights
derived from the mining concessions covering the LOTS, as well as in connection
with all the rights that the TITLEHOLDER has to access the surface covered by
the LOTS, such as rights for the expropriation of land, temporary occupations,
licenses, permits, authorizations, easements or any other equivalent permits
that, in general, allow the performance of the mining works; the foregoing, in
the terms and conditions set forth in this document.
9. That the TITLEHOLDER has the authority to act in the name and on behalf of
his wife, Xxx. Xxxxxxx Xxxx Xxxxxxx xx Xxxxxxxx obligating the latter in the
terms of these Contracts, as evidenced in public instrument number 5,867, of
August 5, 1998, granted before Xx. Xxxxxxxxx Xxxxxxxx Xxxxx, Notary Public
number 15 of Guanajuato, Gto.; authority that, as of the date of execution of
this document, has not been revoked, limited of modified in any manner
whatsoever.
II. The BENEFICIARY declares through its representative:
1. That his principal is a Mexican mining company, incorporated in accordance
with the Laws of the Mexican United States, as evidenced in public instrument
8,299 of March 10, 1988, granted before Xx. Xxxx Xxxxxxx Xxxxxxxxx y Xxxx, at
that moment Notary Public 21 for the District of Morelos; and that, in
accordance with its corporate purpose, it is capable to be holder of mining
concessions, as well as to enter into contracts whose subject matter are rights
derived from such concessions.
2. That as representative of the BENEFICIARY, he has the authority to act in the
name and on behalf of the latter, obligating itself under the terms of these
Contracts, as evidenced in public instrument number 3,889, of February 6, 1998,
granted before Mrs. Xxxxx del Xxxxxx Breach xx Xxxxxxxxx, Notary Public 26 for
the District of Morelos; authority that, as of the date of execution of this
document, has not been revoked nor modified in any manner.
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3. That given the declarations of the TITLEHOLDER, the BENEFICIARY wishes: (i)
to enter into a Mining Exploration Contract with the TITLEHOLDER, with respect
to each and all of the LOTS; and, (ii) that, in case that the BENEFICIARY
exercises the right to acquire granted herein, the TITLEHOLDER enters into a
definitive Contract or Contracts of Assignment of all the rights deriving from
both or one of the LOTS, as determined by the BENEFICIARY; the above in the
terms and conditions mentioned below.
Given the foregoing declarations, the parties agree the following:
C L A U S E S
CONTRACT OF EXPLORATION
FIRST. The TITLEHOLDER hereby transfers to the BENEFICIARY, the exclusive right
to evaluate and explore the LOTS, which identification data are specified in
declaration I.2. of this document, in accordance with the following provisions:
1. Term. The life of this Contract of Exploration is of 12 (twelve) months,
counted from the date of execution and ratification of this document before
Notary Public.
1.1 The aforesaid term shall be compulsory for the TITLEHOLDER, and voluntary
for the BENEFICIARY; therefore, the latter may terminate this Contract of
Exploration, at any time, at its sole discretion and without any responsibility
for itself, by means of a written notice delivered to the TITLEHOLDER, with 15
(fifteen) days anticipation to the date on which the BENEFICIARY wishes such
termination to be effective; the BENEFICIARY obligating itself to pay any
outstanding debt which same had committed to pay according to this document and
is considered due to the BENEFICIARY, prior to the date on which the termination
be effective.
That indicated in the last part of the preceding paragraph means that, in order
to determine if, upon the termination of these Contracts, any outstanding debt
to be paid by the BENEFICIARY exists or not, the parties agree on the following:
(i) As concerns the payment of duties over mining concessions (surface taxes)
owed by the TITLEHOLDER on the date of execution of this Contract (back
taxes): it is agreed that, if in the date on which the term granted to
the TITLEHOLDER by the General Direction of Mines to file the receipts
evidencing the payment of the back taxes expires these Contracts remain
in effect -because the BENEFICIARY had not delivered the respective
termination notice or because such termination has not became effective-
then the BENEFICIARY shall pay to the TITLEHOLDER the amount established
in subparagraph b) of section 4.2 of Clause Second of these Contracts,
with the purpose to pay such debt; otherwise, should the BENEFICIARY had
delivered to the TITLEHOLDER the respective termination notice with at
least 15 days anticipation to the date on which the abovementioned 60
day-term elapses, then such obligation of payment shall be of the
exclusive responsibility of the TITLEHOLDER.
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(ii) As concerns the payment of duties over mining concessions (surface taxes)
to be generated for the first and second semesters of 1999: if on January
1, 1999 these Contracts remain in effect -because the BENEFICIARY had not
delivered the respective termination notice or because such termination
has not became effective- then the BENEFICIARY shall reimburse to the
TITLEHOLDER the corresponding amount paid as surface taxes for the first
semester of 1999; otherwise, it is expressly agreed that such surface
taxes shall be of the exclusive responsibility of the TITLEHOLDER. The
foregoing shall be also applicable on July 1, 1999, with respect to the
surface taxes corresponding to the second semester of 1999.
(iii) As concerns the payments established in sections 4. and 4.2 of Clause
Second of these Contracts: it is expressly agreed that, should any of the
dates -individually considered- referred to in each subparagraph of
section 4.2 of Clause Second arrives and these Contracts are still in
effect -because the BENEFICIARY had not delivered the respective
termination notice or because such termination has not became effective-
then the BENEFICIARY shall pay the corresponding amount according to the
respective subparagraph; otherwise, the provision referring to "release
of the obligation of making payments" contained in Section 5. of Clause
Second of these Contracts shall be applicable.
That indicated in this section 1.1 means that the TITLEHOLDER, as of now, grants
his broadest consent, should that be the case, for the BENEFICIARY to terminate
in advance this Contract, in the manner agreed in this section, without it being
necessary to enter into an express termination agreement or for the BENEFICIARY
to comply with any other formality; the foregoing is stated for all legal
purposes and particularly for the purpose of that mentioned in the last
paragraph of article 76 of the Regulations to the Mining Law, taking into
consideration that this document is ratified by the parties before a Notary
Public.
1.2 Given the duration of this Contract of Exploration, it is expressly agreed
that any titles of mining concessions that replace or derive from the titles
currently covering the LOTS, shall be incorporated to the subject matter of this
Contract under the concept LOTS, and therefore shall be subject to that set
forth in this document.
2. Access. Given the exclusive right to explore herein granted to the
BENEFICIARY, the TITLEHOLDER obligates himself to cooperate with the BENEFICIARY
in order for the latter to obtain free and full access to the surface covered by
the LOTS, stating the TITLEHOLDER that all the authorizations required from the
owners or possessors of the surface where the LOTS are located have been
obtained, in order to allow the BENEFICIARY the free access to same for the
execution of the exploration works referred to in this document. The expenses to
obtain future authorizations to have access to the LOTS shall be borne by the
BENEFICIARY, prior authorization by the latter for such purposes.
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2.1 Likewise, the TITLEHOLDER obligates himself that, if during the term of this
Contract of Exploration the owners or possessors of the surface where the LOTS
are located change, or the circumstances under which the corresponding
authorizations were granted to have free access to the LOTS and to carry out the
exploration works change, he shall cooperate with the BENEFICIARY to obtain new
authorizations, as required, in order for the BENEFICIARY to be able to carry
out the exploration works indicated in this Contract, according to its work
program.
3. Works. The exploration to be carried out by the BENEFICIARY, be it directly
or through contractors who render their services to the BENEFICIARY, includes,
among others, the works that allow the location, identification and
determination of mineral substances existing in the LOTS, consisting on site
preparation, geological investigations and examinations, including geological
explorations, topographical works, drilling of any kind and mining works such as
drifts, trenches, fronts, crosscuts, shafts and the like considered convenient,
additionally to one or more feasibility studies for the evaluation of this
project aimed at establishing a new mining unit.
Likewise the exploration to be carried out by the BENEFICIARY includes all such
activities related thereto and permitted by the applicable legal provisions in
the area of mining, particularly those indicated in articles 28 and 29 of the
Mining Law, and which may be used to prove the assessment works to which the
TITLEHOLDER is obligated as concessionaire of the LOTS.
4. Buildings and Constructions. From this date, the BENEFICIARY is authorized to
perform, at its own cost and risk, by itself or by means of third parties, all
of the works and build the structures, buildings, improvements, means of access
and others, as well as to install and use all the machinery and equipment
required for the exploration, which may be removed at any time, during the life
of this Contract of Exploration and during an additional term of 90 (ninety)
days after the termination this Contract, whether the property of the
BENEFICIARY or of its contractors or third parties, if and when the removal of
same does not jeopardize the safety of the works carried out, in which case they
may not be removed.
4.1 It is understood that the permanent support works, struts and in general the
works necessary for the safety and stability of the mines may not be removed, in
accordance with that provided by the Mining Law.
4.2 The BENEFICIARY may request the support and assistance of the TITLEHOLDER,
should that be necessary, to negotiate with the owners or possessors of the
surface covered by the LOTS, for the performance of the works and constructions
referred to in this section 4, whether temporary or permanent. The expenses to
obtain such authorizations shall be borne by the BENEFICIARY.
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5. Consideration for the Right to Explore and Investment Commitments. As
consideration for the right to explore granted by the TITLEHOLDER to the
BENEFICIARY in accordance with this Contract, the latter obligates itself,
during the life thereof, to carry out investments in exploration, development of
mining works, and any other activities which purpose is to evaluate the
potential mineral existing in the LOTS, for which purposes, the BENEFICIARY
shall invest the amounts that it considers convenient, taking into consideration
the minimum investments set forth in the Mining Law and in its Regulations.
5.1 It is expressly agreed that the BENEFICIARY shall have the right to explore
the LOTS with no restriction whatsoever during all the time in which this
Contract of Exploration is in effect.
5.2 Acts of God or Force Majeure. It is expressly understood that the
BENEFICIARY shall not be liable for the delay or total or partial
non-fulfillment of its obligations, consisting in the performance of the
exploration works in terms of this document, as well as of making the payments
referred to in section 4 of Clause Second of these Contracts, when such delay or
non-fulfillment results from an Act of God or force majeure, this is, from facts
or events of nature or man that are unforeseeable or that even in the case they
might be foreseen, they cannot be avoided by the BENEFICIARY.
In accordance with that indicated in the above paragraph, the parties agree that
the events mentioned below, as examples but not in a limitative manner, shall be
considered as acts of God or force majeure: accidents such as fire, explosions,
flooding, tempests, tremors, epidemics, civil disturbances, labor disturbances,
strikes, wars, invasions, oppositions or disturbances caused by rural
communities, ejido's communities or any other kind of association legally
created or not, as well as oppositions or disturbances caused by any other
person impeding the free access of the BENEFICIARY to the LOTS or obstructing
the performance of the mining works set forth in this Contract, as well as
actions or omissions of any governmental authority, whether Federal, State or
Municipal, which include the delay or impossibility to timely obtain such
permits required from any governmental authority, individual or corporation,
group or entity to carry out the mining works provided for in this document.
It is expressly agreed that, should the BENEFICIARY need to obtain permits for
the use of explosives from the Ministry of Defense, in order to perform the
exploration works on the LOTS, the normal course of the procedure to obtain
such permits shall not be considered as force majeure.
The aforecited events -without the exception made- shall be considered as acts
of God or force majeure, as the case may be, if in the event of occurrence they
obstruct or delay, whether totally or partially, the fulfillment of the
obligations of the BENEFICIARY, if and when such event is not provoked by an
action or omission imputable to the BENEFICIARY itself.
In the event that an occurrence takes place causing an act of God or force
majeure, the BENEFICIARY shall notify it to the TITLEHOLDER within a term of 30
(thirty) calendar days, counted from the date on which the BENEFICIARY becomes
aware of such event.
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If the act of God or force majeure continues, the term to carry out the works of
exploration shall be extended for a term equal to the duration of the act of God
or force majeure, in order for the term of the exploration to be of one
effective year.
5.3 Proof of Works It shall be the responsibility of the TITLEHOLDER that
indicated in section 8 of this Clause First and section 3 of Clause Second of
these Contracts, with respect to the proof of the mining works carried out in
the LOTS; the foregoing, under the terms of that provided by the Mining Law and
its Regulations.
For the purposes of that indicated above, the BENEFICIARY obligates itself to
inform in writing to the TITLEHOLDER not later than April 30, 1999, with respect
to the exploration works performed under the terms of this Contract, furnishing
to the TITLEHOLDER copies of the documents evidencing the investments made.
5.4 Definitive Suspension of the Investment Commitments. If at any time the
BENEFICIARY would decide not to proceed, and therefore, to terminate this
Contract of Exploration in advance, it shall not be obligated to make any
further investments other than those carried out as of the date of the
termination notice.
In this latter case, the BENEFICIARY shall inform the TITLEHOLDER of the works
carried out as of the date of the termination notice, and shall deliver to the
TITLEHOLDER a copy of the documents evidencing the investments carried out, and
which documents had not been previously delivered to the TITLEHOLDER, and the
BENEFICIARY shall withdraw without keeping any interest whatsoever in the LOTS.
6. Use of Mineral. So long as the BENEFICIARY does not exercise its right to
acquire mentioned below, the BENEFICIARY is authorized to take gratuitously up
to 500 (five hundred) tons of mineral from both LOTS during the life of this
Contract of Exploration, in order to carry out all kind of samples and
metallurgic tests.
6.1 Trade of Mineral Extracted during the Life of these Contracts, in Excess of
the First 500 Tons. In the event that -only and exclusively during the life of
these Contracts- the BENEFICIARY would have extracted mineral from the LOTS in
excess of the first 500 tons and in a commercial amount, the BENEFICIARY may
freely trade or dispose of such mineral; if and when the latter commits itself
to pay a 3.5% Net Smelter Return royalty to the TITLEHOLDER on such mineral
traded; which royalty shall be calculated, paid and received, according to the
formula enclosed hereto as Exhibit IV.
That mentioned in the above paragraph shall also be applicable, even if the
trade of such mineral extracted prior to the exercise of the option is made
after the option has been exercised; in this latter case, the BENEFICIARY
commits itself to separate and storage such mineral extracted prior to the
exercise of the option and to provide the TITLEHOLDER with a report, in order
for the TITLEHOLDER to be informed on the tonage subject matter of this
provision.
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For the purposes of that mentioned in the preceding paragraphs, the TITLEHOLDER
is authorized -at his own cost, risk and responsibility- to appoint in writing
the representatives he deems prudent, in order for the latter to represent the
TITLEHOLDER at the place where the sampling, weighing and measuring of the
mineral extracted from the LOTS prior to the exercise of the option is located
(either at the mine, other facilities or the plant); the above, with the purpose
of checking the information previously provided by the BENEFICIARY.
It is expressly agreed that the TITLEHOLDER and his representatives should not
interfere the performance of the BENEFICIARY's activities and, any expense in
which the latter may incur in order to avoid such interference, shall be
reimbursed by the TITLEHOLDER to the BENEFICIARY.
It is also expressly agreed that, with respect to the mineral that is extracted
from the LOTS after the date on which the BENEFICIARY exercise the right to
acquire the LOTS, no royalty payments shall be made to the TITLEHOLDER nor the
BENEFICIARY shall have any obligation whatsoever towards the former in such
respect.
7. Obligations of the Beneficiary. In the performance of the exploration, the
BENEFICIARY obligates itself to the following:
a) To carry out the exploration works pursuant to custom and usage of the good
miner and in accordance with the Mining Law, its Regulations and other legal
provisions related to the mining activities, allowing the TITLEHOLDER to inspect
the works carried out by the BENEFICIARY, if and when the former does not
interfere or interrupt the activities which are being carried out by the
BENEFICIARY in the LOTS.
b) To preserve the LOTS in good maintenance conditions, when carrying out the
exploration of same.
c) To take care of the maintenance of the monuments of the starting point and of
location of each one of the LOTS, for which purposes the TITLEHOLDER shall
deliver to the BENEFICIARY the corresponding documents, such as expert reports
and others.
d) To deliver to the TITLEHOLDER, within a term of 60 (sixty) calendar days
following the termination of this Contract of Exploration, if the definitive
Contract of Assignment of Rights mentioned below is not executed, a
non-interpretative report on the exploration operations, which shall include a
report with respect to the mineral deposits located in the LOTS, as well as in
connection with the geological, mining and sampling works performed, with copies
of the geological and topographical maps and of the drilling made; such
information and documents shall not be interpretative and may be delivered in
English version, should the originals have been drafted in such language.
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e) To comply with the labor, social security, tax and other obligations with
respect to the personnel of the BENEFICIARY working on the LOTS, as a
consequence of the exploration carried out by the BENEFICIARY in accordance with
this Contract.
f) To hold the TITLEHOLDER free and harmless of any claim tried against him by
employees or workers of the BENEFICIARY or by third parties contracted by the
latter to whom the BENEFICIARY may have entrusted the rendering of a service on
the LOTS.
g) To comply with the obligations in the environmental area, with respect to the
activities carried out on the LOTS directly by the BENEFICIARY or through its
contractors.
h) To reimburse the TITLEHOLDER, as from the date of execution of this Contract
of Exploration and during the life of same, the surface taxes deriving from the
LOTS that in the future become due and be effectively paid by the TITLEHOLDER;
such reimbursement shall be made by the BENEFICIARY within the 30 (thirty)
calendar days following the date on which the TITLEHOLDER delivers to the
BENEFICIARY the corresponding payment receipts; the foregoing taking into
consideration that provided in subparagraph (ii) of section 1.1 of this Clause
First.
i) Deliver to the TITLEHOLDER a written report on the mineral extracted from the
LOTS prior to the exercise of the option mentioned herein below, with the
purpose to determine the royalty that, in its case, shall be paid to the
TITLEHOLDER once such mineral be traded by the BENEFICIARY.
8. Obligations of the TITLEHOLDER. Given the right to explore granted to the
BENEFICIARY by the TITLEHOLDER, the latter obligates himself during the life of
these Contracts to the following:
a) To maintain in force and in his favor the rights derived from the mining
concessions that cover the LOTS.
b) Not to transfer the rights derived from the mining concessions covering or
that in the future may cover the LOTS to third parties different to the
BENEFICIARY, or its designee, in case the right to acquire is exercised in the
terms and conditions of the Contract of Promise of Assignment of Rights
contained herein.
c) To maintain the rights derived from the mining concessions that cover each
one of the LOTS, free from all encumbrances, liens, burdens or ownership
limitations of any nature, except for that indicated in this document.
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d) Not to interfere, impede nor to obstruct the exclusive right to evaluate and
to explore the LOTS granted to the BENEFICIARY in accordance with this Contract;
on the contrary, the TITLEHOLDER obligates himself to make his best efforts to
facilitate and support the activities performed by the BENEFICIARY and shall
cooperate with same to the extent required by it, in order for the BENEFICIARY
to conclude such evaluation and exploration at its entire satisfaction.
e) To cooperate with the BENEFICIARY in order to obtain free access to the LOTS,
in terms of that mentioned in section 2 of this Clause First.
f) To comply with the labor, social security, tax and other obligations with
respect to the personnel of the TITLEHOLDER working on the LOTS, as a
consequence of any activity that the TITLEHOLDER carries out.
g) To hold the BENEFICIARY, its representatives, officers and outside advisors
free and harmless from any claim and/or responsibility that may be tried against
them, as a consequence of acts directly imputable or of the exclusive
responsibility of the TITLEHOLDER, his workers, or derived from any act deriving
from the exclusive responsibility of the TITLEHOLDER.
h) To maintain in secrecy during the duration of this Contract and for an
additional period of 1 (one) year, counted from the date of acquisition of the
LOTS -if the right to acquire is exercised by the BENEFICIARY- any and all
information that the TITLEHOLDER receives from the BENEFICIARY and that has not
been of the public knowledge before and in any manner whatsoever, which
information shall be of an industrial nature and shall be considered and treated
as privileged information and industrial secret.
i) To prove the works and mining works performed in the LOTS during the life of
this Contract, under the terms of the applicable legal provisions, as well as to
continue complying with other obligations assessed upon mining concessionaires
by the Mining Law, its Regulations and other legal provisions.
For the purposes of the proof of assessment works mentioned above, the
BENEFICIARY obligates itself to inform in writing to the TITLEHOLDER not later
than April 30, 1999, with respect to the exploration works performed under the
terms of this Contract, furnishing to the TITLEHOLDER copies of the documents
evidencing the investments made.
j) To continue paying during the life of this contract and with respect to the
LOTS, the totality of the duties on mining concessions referred to by the
Federal Duties Law (surface taxes); same taxes that will be reimbursed by the
BENEFICIARY to the TITLEHOLDER as from the date of execution of this Contract of
Exploration, taking always into consideration that provided in subparagraphs (i)
and (ii) of section 1.1 of this Clause First.
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k) To pay -prior to the expiration of the term granted by the General Direction
of Mines by means of the official communications numbers 610/13867 and
610/14646- the totality of the back surface taxes corresponding to the LOTS,
filing to the mining authorities -also before the abovementioned term expires-
copies of the receipts evidencing such payments, which receipts must include the
up-dating and surcharges deriving from the TITLEHOLDER's incompliance.
CONTRACT OF PROMISE OF ASSIGNMENT OF RIGHTS
SECOND. The TITLEHOLDER hereby promises and obligates himself to assign in
property to the BENEFICIARY or to its designee, without any reserve or
limitation, free of all encumbrances, liens, burdens or ownership limitations of
any nature, the totality of the rights derived from any or both of the titles of
mining concessions which cover or in the future may cover the LOTS, upon request
to the TITLEHOLDER the assignment of said rights, by means of a written notice
addressed to the TITLEHOLDER, with a 15 (fifteen) calendar days anticipation to
the date on which the right herein referred to is desired to be exercised, if
and when that mentioned below is complied with.
If the right to acquire the LOTS is exercised, the TITLEHOLDER obligates himself
to simultaneously assign to the BENEFICIARY or its designee for such purposes,
without any reserve or limitation, all the rights that the TITLEHOLDER may have
to access the surface comprising the LOTS, such as rights for the land
expropriation, temporary occupations, licenses, permits, authorizations,
easements or any equivalent permits that, in general, allows the carrying out of
the mining works.
This Promise of Assignment of Rights shall be additionally governed by the
following:
1. Term. The term during which the BENEFICIARY may exercise, at any time, the
right to assign to the BENEFICIARY itself or to its designee, the rights derived
from any or both of the titles of mining concession which cover the LOTS, as
well as the above referred rights that the TITLEHOLDER may have to access the
LOTS, shall be of a period of 12 (twelve) months counted from the date of
execution and ratification before a Notary Public of these Contracts.
1.1 The aforesaid term shall be compulsory for the TITLEHOLDER, and voluntary
for the BENEFICIARY; therefore, the latter may terminate this Contract of
Promise, at any time, at its sole discretion and without any responsibility for
itself, by means of a written notice addressed to the TITLEHOLDER, with 15
(fifteen) days anticipation to the date on which the BENEFICIARY desires the
termination to be effective; obligating the BENEFICIARY itself to pay any
outstanding debt that the latter had committed to pay in terms of these
Contracts and that is considered due to the BENEFICIARY prior to the date on
which the termination becomes effective. In relation to that stated in this
section, the provisions referred to in subparagraphs (i), (ii) and (iii) of
section 1.1 of Clause First of these Contracts shall be also applicable.
12
That indicated in the preceding paragraph, means that the TITLEHOLDER, from this
date, grants his broadest consent, should that be the case, for the BENEFICIARY
to terminate in advance these Contracts, in the manner agreed in this section,
without being necessary to enter into an express termination agreement or for
the BENEFICIARY to comply with any other formality; the foregoing is stated for
all legal purposes and particularly for the purpose of that mentioned in the
last paragraph of article 76 of the Regulations to the Mining Law, taking into
consideration that this document is ratified by the parties before a Notary
Public.
1.2 Given the duration of this Contract of Promise, it is expressly agreed that
any titles of mining concession that replace or derive from the titles currently
covering the LOTS, shall be incorporated to the subject matter of this Contract
under the concept LOTS, and therefore shall be subject to that set forth in this
document.
2. Obligations of the Titleholder. The TITLEHOLDER obligates himself that,
during the term indicated, he shall not encumber, burden nor limit in any manner
whatsoever, the rights derived from each and all the mining concessions that
cover and will cover in the future the LOTS, nor to enter into any contract with
respect to the LOTS, except with the BENEFICIARY or with its designee; therefore
the TITLEHOLDER guarantees the existence, validity and availability of the
aforecited rights.
2.1 Likewise, the TITLEHOLDER obligates himself not to request reduction,
subdivision nor unification of the surface which cover the LOTS; likewise, the
TITLEHOLDER obligates himself not to waive from the rights derived from the same
LOTS; the foregoing without prior written authorization provided by the
BENEFICIARY through a legal representative with authority therefor.
3. Other Obligations The TITLEHOLDER obligates himself to comply with the
execution and to file the proof of assessment works carried out in the LOTS, in
terms of that provided in the applicable legal provisions of the Mining Law and
its Regulation, according to the investments made by the BENEFICIARY, in
accordance with the Contract of Exploration contained in this document, as well
as in accordance with any other investments made, in its case, by the
TITLEHOLDER.
4. Consideration for the Promise and for the Assignment of Rights. The
consideration that shall be paid to the TITLEHOLDER for the onerous promise and
for the assignment of all the rights derived from the mining concessions which
cover or which in the future may cover the LOTS, shall be in the amounts
mentioned in subparagraphs a) through h) of section 4.2 below, which amounts
will be paid on the dates indicated.
4.1 Currency and VAT. The payments to be made to the TITLEHOLDER as
consideration for the promise and for the assignment of the rights referred to
in this Contract, shall be made in dollars, currency of the United States of
America or its equivalent in Mexican currency on the date of payment, plus the
corresponding Value Added tax (VAT) to each payment.
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4.2 Schedule of Payments. The amounts referred to in section 4 above shall be as
follow:
a) The date on which this Contract of Promise of Assignment of Rights be
executed and ratified before a Notary Public, the total amount of $6,000.00
(six thousand dollars 00/100).
b) If the TITLEHOLDER receives from the mining authorities an official
communication granting a 60 day-term to make the payment of the back
surface taxes, and if at the time the abovementioned 60 day-term expires
these Contracts be still in effect -because the BENEFICIARY had not
delivered the respective termination notice or because such termination has
not became effective- then the BENEFICIARY shall pay to the TITLEHOLDER the
total amount of $14,000.00 (fourteen thousand dollars 00/100) with the
purpose to pay such debt; and, if the amount to be paid as back surface
taxes be higher, the BENEFICIARY shall also pay the amount in excess,
deducting such from the following payment to be made to the TITLEHOLDER
and, if it is not enough, from the following payments listed herein below.
c) On December 31, 1998, provided that the Contracts contained in this
document are still in effect, the total amount of $10,000.00 (ten thousand
dollars 00/100).
d) On February 1, 1999, provided that the Contracts contained in this document
are still in effect, the total amount of $14,000.00 (fourteen thousand
dollars 00/100).
e) On March 31, 1999, provided that the Contracts contained in this document
are still in effect, the total amount of $14,000.00 (fourteen thousand
dollars 00/100).
f) On May 31, 1999, provided that the Contracts contained in this document are
still in effect, the total amount of $14,000.00 (fourteen thousand dollars
00/100).
g) On July 30, 1999, provided that the Contracts contained in this document
are still in effect, the total amount of $14,000.00 (fourteen thousand
dollars 00/100).
h) On September 30, 1999, provided that the Contracts contained in this
document are still in effect, the total amount of $14,000.00 (fourteen
thousand dollars 00/100). At the moment this last payment is made, it will
be understood that the right to acquire the LOTS has been fully exercised.
i) Should the option to acquire the LOTS be exercised prior to September 30,
1999, the BENEFICIARY shall pay to the TITLEHOLDER, such amounts referred
to in subparagraphs b) to h) above which had not been paid with respect to
the dates which have not been arrived, in order for the total consideration
for the promise and for the assignment of all the rights deriving from the
mining concessions which at that moment cover the LOTS be, in any case, the
total amount of $100,000.00 (one hundred thousand dollars 00/100).
14
5. Release of the Obligation of Making Payments. It is expressly agreed, as
indicated above, that the BENEFICIARY shall have the right to terminate this
Contract of Promise of Assignment of Rights at any time, at its own discretion
and without any obligation, by means of a written notice delivered to the
TITLEHOLDER and, in such event, the BENEFICIARY shall have no obligation to make
any further payment of those amounts referred in all subparagraphs of section
4.2 above, with respect to the dates that have not elapsed, the BENEFICIARY
obligating itself to cover any amounts due or those that become due prior to the
termination notice to be effective.
5.1 Xxxxxxx money. It is expressly understood that, in the event the BENEFICIARY
terminates this Contract in advance, the amounts that the TITLEHOLDER would have
received as of the date on which the BENEFICIARY delivers to him the notice of
termination, shall inure to his benefit as xxxxxxx money.
COMMON TO BOTH CONTRACTS
THIRD. Other Obligations of Both Parties. The TITLEHOLDER and the BENEFICIARY
expressly obligate themselves that, during the life of these Contracts in the
performance of their respective activities they will faithfully comply with all
obligations imposed upon them by the Mining Law, its Regulations, the
environmental, water, security and hygiene in the mines, labor, tax and other
applicable legal provisions; likewise, they obligate themselves not to incur in
any of the causes for nullity, cancellation, suspension or expiration of rights
referred to by the Mining Law, with respect to the mining concessions which
cover and will cover in the future the LOTS.
Given that no labor relationship whatsoever will exist between the workers or
contractors of each one of the parties, with respect to the other, the
TITLEHOLDER and the BENEFICIARY agree that each party shall assume its entire
responsibility whether of a labor, social security, or tax nature, and others,
with respect to their own workers and contractors; therefore, each party agrees
to hold the other free and harmless of any claim, lawsuit or accusation or
complain that could be filed against the other party, by the workers or
employees of said party, by its contractors or by the authorities in the labor
or administrative area.
FOURTH. Incompliance. Notwithstanding any stipulation on the contrary agreed in
this document, should any party be or incur on incompliance (the "Non-complying
Party"), with respect to any obligation stated in these Contracts, the affected
party of such incompliance (the "Affected Party"), may give written notice
specifying in which the incompliance consists ("Notice of Incompliance") to the
Non-complying Party, in order to:
15
(a) within the five working days following to the reception of the Notice of
Incompliance -referring to the lack of payment of any amounts that must be
paid in terms of these Contracts- the Non-complying Party: (i) pays to the
Affected Party the totality of such amounts due; (ii) proves that such
amounts have been paid; or, (iii) justifies the valid reasons -not
imputable to itself- why the corresponding payments have not been made.
(b) within the 30 (thirty) calendar days following to the reception of the
Notice of Incompliance -which refers to an incompliance different that the
lack of payment- the Non-complying Party cures such incompliance or fault,
if and when same may be easily corrected within such period; or
(c) in case that the incompliance be different to lack of payment, and that,
deriving from its nature it may not be easily corrected during the 30
(thirty) days period referred to in subparagraph (b) above, the
Non-complying Party shall initiate -within such 30 (thirty) days term
following the reception of the Notice of Incompliance- the necessary and
prudent actions in order to correct the incompliance and, therefore, follow
such actions in a proper manner until the incompliance be completely cured
within a term not exceeding 90 (ninety) calendar days counted from the date
on which the Non-complying Party received the Notice of Incompliance.
Notwithstanding the foregoing, the affected party shall be authorized to seek in
good faith for any remedy applicable to such incompliance; with no prohibition
that, in case that the Non-complying Party does not carry out that mentioned in
subparagraphs (a), (b) or (c) above, within the maximum terms therein
contemplated for each case, the Affected Party may exercise its right to rescind
these Contracts and to request the payment of damages and detriment; or, in its
case, the right to request the compulsory compliance of the obligations of the
Non-complying Party and the payment of damages and detriment.
FIFTH. Registration. The BENEFICIARY expressly obligates itself to register in
the Public Registry of Mining these Contracts of Mining Exploration and of
Promise of Assignment of Rights, as well as the definitive Contract or Contracts
of Assignment of Rights that be executed, should that be the case.
SIXTH. Expenses, Fees and Taxes. All the expenses, fees and taxes caused as a
consequence of the execution of these Contracts of Mining Exploration and of
Promise of Assignment of Rights, shall be for the account of the BENEFICIARY.
The foregoing, except for the Income Tax applicable to the TITLEHOLDER, who
obligates himself to issue the corresponding receipts (invoices) for the amounts
that he receives; the foregoing in accordance to the Income Tax Law.
Likewise, the TITLEHOLDER obligates himself to comply with all the obligations
imposed upon him by the applicable tax provisions in force, given that he has
stated to the BENEFICIARY that he is recorded in the Federal Taxpayers'
Registry, under code EUEH-340308-MU7.
16
Given that mentioned in the preceding paragraphs, it is understood that, so long
the applicable tax provisions do not provide otherwise, for each payment to be
made to the TITLEHOLDER, the corresponding withholding of the Income Tax will be
made, delivering to the TITLEHOLDER the withholding certificate and, once such
tax be paid, shall deliver to the TITLEHOLDER copy of the corresponding income
tax return.
In accordance with that provided by the Value Added Tax Law, for each payment
that the TITLEHOLDER receives, he shall separate in an express manner the amount
corresponding to the Value Added Tax, as set forth in the applicable articles of
the abovementioned Law, as well as on those applicable of the Fiscal Code of the
Federation.
SEVENTH. Guaranty of Compliance. The TITLEHOLDER Xx. Xxxxxx Xxxxxxxx Xxxxxxx,
obligates himself in accordance with articles 2554 fourth paragraph, 2587 and
2596 first paragraph, of the Civil Code for the Federal District on Common
Matters and for all of the Republic on Federal Matters, to grant before a Notary
Public, a special and irrevocable power of attorney, in order to guarantee the
compliance with the obligations undertaken by the TITLEHOLDER in accordance with
this document, in the following terms:
"Xx. Xxxxxx Xxxxxxxx Xxxxxxx, on his own behalf, hereby grants to Messrs.
Xxxxxxxx Xxxxx Xxxxxxxxx Xxxxxx, Xxxx Xxxxxxx Xxxxxx Xxxxxxx Xxxx, Xxxxxxxxx
Xxxxxxx Xxxxxxx, Xxxxxxxx Xxxxxxx Xxxxx, Xxxxx Xxxxx Xxxxxxxx and Xxxxxxx
Xxxxxxxx Xxxxxxx Xxxxxxx, a special and irrevocable power of attorney to be
exercised jointly or individually, in order that in the name and on behalf of
the grantor:
They comply, if so required by Polo y Xxx Minerales, S.A. de C.V. -or by its
designee- expressly and in writing, with the obligations undertaken by Xx.
Xxxxxx Xxxxxxxx Xxxxxxx in favor of Polo y Xxx Minerales, S.A. de C.V., in the
Contracts of Mining Exploration and of Promise of Assignment of Rights entered
into between the grantor as promisor (in said Contracts the "TITLEHOLDER") and
Polo y Xxx Minerales, S.A. de C.V. as promisee (in said Contract the
"BENEFICIARY"), consisting on executing with the latter or with its designee,
Definitive Assignment Contract(s) of the Rights derived from the titles of
mining concession covering the LOTS:
a) "EL VOLADO", mining exploration concession, title 197967, issued on
September 30, 1993; located in the Municipality of Zacualpan, State of
Mexico, with a surface of 3.7899 hectares, recorded under number 27, page
14, volume 276 of the General Book of Mining Concessions of the Public
Registry of Mining; and,
b) "XX XXXXXX", mining exploitation concession, title 156895, issued on May
12, 1972, located in the Municipality of Zacualpan, State of Mexico, with a
surface of 111.7074 hectares, recorded under number 49, page 13, volume 199
of the General Book of Mining Concessions of the Public Registry of Mining.
17
This power of attorney is granted with the limitation that in order to exercise
the authority to assign the rights therein referred, the attorney(s)-in-fact
exercising this mandate must evidence to the Notary Public before whom the
signatures of the Contract or Contracts of Assignment of Rights derived from the
LOTS are ratified, that it has been delivered to the TITLEHOLDER the total
amount of the price agreed for the promise and for the assignment of rights of
the LOTS, or that such consideration has been deposited in favor of the
TITLEHOLDER.
This power of attorney is granted, in addition, in order that if so required
expressly and in writing by the BENEFICIARY or its designee, the
attorneys-in-fact exercise all of the rights that the Mining Law, its
Regulations and other applicable provisions in the area of mining grant to the
concessionaires with respect to their concessions, as well as to comply with the
obligations assessed upon Xx. Xxxxxx Xxxxxxxx Xxxxxxx, among which are included,
in an exemplarily manner though not limited to, file the reports and proofs of
the execution of the mining works to which the Mining Law and its Regulations
refer; initiate mining opposition procedures; exercise administrative remedies
in terms of the Mining Law, its Regulations and other applicable provisions;
initiate constitutional protection proceedings; and, other acts which are
applicable in accordance with said provisions, except to relinquish, subdivide,
reduce or unify surface of the LOTS, which shall only operate by means of a
written authorization jointly signed by the TITLEHOLDER and the representative
of the BENEFICIARY.
Within the specialty of the power of attorney, the attorneys-in-fact shall have
all of the authority corresponding to a general power of attorney for lawsuits
and collections, to administer property, and for acts of ownership, with the
broadest authority, as provided for in article 2554 (two thousand five hundred
and fifty four) of the Civil Code for the Federal District on Common Matters and
for all of the Republic on Federal Matters and the corresponding article of the
Civil Code of each State of the Mexican United States; with the limitation that
the attorneys-in-fact may only exercise this power of attorney in matters
related to rights deriving from the mining concessions that cover or will cover
in the future the LOTS subject matter of the Contracts referred to herein.
Given that the power of attorney contained in this public instrument is granted
for the compliance of obligations acquired by the grantor in a bilateral
contract, it is expressly stated that the power of attorney is granted with an
irrevocable nature, under the terms of article 2596 (two thousand five hundred
and ninety six) of the Civil Code for the Federal District on Common Matters and
for all the Republic on Federal Matters and the corresponding article of the
Civil Code of each State of the Mexican United States.
This power of attorney will be in effect during the time in which the
obligations of the grantor in the Contracts of Mining Exploration and of Promise
of Assignment of Rights referred to subsist, of which copy is attached hereto in
order to form an integral part of this instrument."
18
EIGHTH. BENEFICIARY's guaranty. The BENEFICIARY shall become liable before the
TITLEHOLDER, of each and all the obligations acquired by the attorneys-in-fact
in the mandate referred to in the above Clause, should either it or the
attorneys-in-fact illegally exercise the authority conferred upon them by such
mandate.
NINTH. The TITLEHOLDER obligates himself to furnish to the BENEFICIARY all the
information that it requests, as well as to sign, evidence and comply with any
other necessary requirement and to exercise the legal actions that may be
required, in order to: (i) obtain, whenever needed, any authorizations for the
BENEFICIARY to exercise the rights herein granted; (ii) maintain the LOTS
subject matter of these Contracts, free of any charge, lien, burden, or
limitation of domain of any nature, according to that agreed in this document;
and, (iii) in general, to solve any contingency that may affect the legal status
of the LOTS and that may prevent, limit or hinder the exercise of the rights
granted by virtue of this document to the BENEFICIARY.
TENTH. Communications. All communications to be made among the parties pursuant
to these Contracts, shall be in writing, delivered at their domiciles in an
authentic manner; and, for such purpose, the parties designate the following
domiciles:
THE TITLEHOLDER:
XX. XXXXXX XXXXXXXX XXXXXXX
Xxxxx xx xx Xxxxxxxx Xx. 00
Cerro del Xxxxx
36000, Guanajuato, Gto.
THE BENEFICIARY:
POLO Y XXX MINERALES, S.A. DE C.V.
Xxxxxxx Xxxxx Xxxxxxx Xx. 000
Xxxxxxxxx, Xxxxxxxxx
Att'n: Xx. Xxxxx Xxxxxxxxx
Any change of domicile or of representative shall be notified in writing,
delivered in an authentic manner.
ELEVENTH. Alternative Formalities. The TITLEHOLDER authorizes the BENEFICIARY,
from this date, to formalize this document in public instrument before a Notary
Public of its choice, at the expense of the latter and without requiring the
appearance of the TITLEHOLDER.
TWELFTH. Assignment. The TITLEHOLDER, expressly authorizes the BENEFICIARY, from
this date, to assign totally or partially without the need to obtain the consent
of the TITLEHOLDER the rights and obligations deriving from this document in
favor and in charge of the BENEFICIARY; the foregoing if and when: (i) the
document whereby such assignment of rights and obligations is made has the legal
formality of being a Contract of Assignment of Rights, executed in Mexico and in
accordance with the Mexican laws; (ii) in the same document, the express
acceptance of the assignee in order to subrogate in all the obligations that by
virtue of this document the BENEFICIARY acquires is contained; and, (iii) after
such Contract of Assignment of Rights be executed, the TITLEHOLDER receives a
written notice informing the latter on the general data of the third party that
have acquired the rights and obligations deriving from these Contracts.
Likewise, the third party acquiring such rights and obligations, must commit
itself that, in case that in the future executes another contract whereby
transfers or sells such rights and obligations, shall contain the same clause.
19
The parties agree that so long as these Contracts are in effect, they shall be
valid and binding for the contracting parties, as well as for the designee of
the BENEFICIARY and the respective successors or assignees of the parties, and
for the heirs or legatees of the TITLEHOLDER.
THIRTEENTH. Absence of Injury. The parties, notwithstanding the nature of this
document, expressly declare that in the covenants subject matter of same there
is that no injury and, even in case it exists, they expressly waive the right to
request the relative nullity referred to in articles 2228 and 2239 of the Civil
Code for the Federal District on Common Matters and for all the Republic on
Federal Matters and the corresponding article of the Civil Code of each State of
the Mexican United States.
FOURTEENTH. Applicable Laws and Jurisdiction. This Contract which is entered
into under the terms of article 78 of the Commerce Code, is of a mercantile
nature; therefore, for all that not expressly agreed upon herein and for the
interpretation of and compliance with same, there shall be applied the Mining
Law, its Regulations and the Commerce Code, as well as suppletory law the Civil
Code for the Federal District on Common Matters and for all of the Republic on
Federal Matters, for that not provided for in the first two.
For the resolution of any controversy which might arise from this document, the
parties expressly agree to submit themselves to the jurisdiction of the
competent courts in Mexico City, Federal District.
FIFTEENTH. Headings. The parties acknowledge that the headings in the Clauses,
sections, subparagraphs in which these Contracts are divided, have been stated
only with the purpose of easy reading of this document, therefore, such headings
have no interpretative or linking value.
Once this document, was read by the parties, they ratify same in its entirety
and sign it as evidence thereof, the TITLEHOLDER on November 30, 1998, in Mexico
City, Federal District; and, the BENEFICIARY on November 30, 1999, in Mexico
City, Federal District.
THE TITLEHOLDER THE BENEFICIARY
POLO Y XXX MINERALES,
S.A. DE C.V.
/s/ Xxxxxx Xxxxxxxx Xxxxxxx /s/ Xxxxx Xxxxxxxxx
--------------------------- -------------------
Xxxxxx Xxxxxxxx Xxxxxxx Xxxxx Xxxxxxxxx
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