Exhibit 4.2
TAMBO GRANDE MINING PROJECT
OPTION AGREEMENT FOR THE INCORPORATION
OF A STOCK COMPANY
CEPRI-XXXXXX PERU S.A. - CENTROMIN PERU X.X.
Xxxx, May 17 , 1999
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TABLE OF CONTENTS
Introduction
Clause One: Background
Clause Two: Definitions
Clause Three: Purpose
Clause Four: Term of the Option
Clause Five: Feasibility Study
Clause Six: Financing Plan
Clause Seven: Supervision of Agreement
Clause Eight: Requirements for exercising the Option
Clause Nine: Representations and Warranties of the Optionee
Clause Ten: Representations and Warranties of Xxxxxx Peru
Clause Eleven: Environment
Clause Twelve: Assignment of Contractual Position
Clause Thirteen: Force Majeure
Clause Fourteen: Governing Law and Domicile
Clause Fifteen: Interpretation of the Agreement
Clause Sixteen: Arbitration
Clause Seventeen: Termination of the Agreement
Clause Eighteen: Arbitration
Clause Nineteen: Termination of the Agreement
Clause Twenty: Elements and Conditions of the Agreement for the
Incorporation of a Stock Company
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TRANSFER OPTION AGREEMENT
To the Notary,
Kindly enter in your Register of Public Deeds, one evidencing an Option
Agreement for the Incorporation of a Stock Company to conduct mining activities
in the concessions which make up the Tambo Grande Mining Project, granted by
Empresa Minera del Peru S.A. (hereinafter XXXXXX PERU), with Taxpayer's
Registration Number 10009561, with registered address at Xx. Xx Xxxxxx 000, Xxx
Xxxxx, Xxxx, acting by and through its General Manager, Engineer Xxxxx XXXXXXX
XXXXXX, identified by Voter Registration Card 07276927, in accordance with a
Power of Attorney registered on Entry No. 02007339 of the Register of Bodies
Corporate of the Lima and Callao Registry Office, duly authorized by Board of
Directors Resolution of April 29, 1999; in favor of Manhattan Minerals Corp.
(hereinafter "the OPTIONEE"), acting by and through Xx. Xxxxxx XXXX XXXXXXXXXXX,
identified by Voter Registration Card No. 08243249, and Xx. Xxxx Xxxxxx XXXXXXXX
VELANDO, identified by Voter Registration Card No. 08273043, with domicile at
Xx. Xxxxx Xxxxx 000-000, Xxxxxxxxxx, in accordance with a Power of Attorney
registered in Entry 1., Card 16301 of the Register of Individuals and Bodies
Corporates and Mandates of the Mining Registry.
The Agreement is made under the following terms and conditions:
CLAUSE ONE: BACKGROUND
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1.1 Supreme Decree 019-78-EM/DGM of November 22, 1978 declared an area of 100
Km2 in the District of Tambo Grande, Province and Department of Piura, a
National Reserve Area for a period of five (5) years, assigning it to the
Institute of Geology and Mining - INGEOMIN for the purposes of performing
prospecting and exploration works jointly with Bureau de Recherches
Geologiques et Min1&res of France (hereinafter BRGM).
1.2 Decree Law 22672 declared the national need to explore and develop the area
referred to in Supreme Decree 019-78-EM/DGM of November 22, 1978.
1.3 Supreme Decree 021-79-EM/DGM of September 10, 1979, approved the Base
Agreement entered into by and between the Ministry of Energy and Mines
(MEM) and BRGM, with the purpose of prospecting, exploring and eventually
developing the Tambo Grande area, District of Tambo Grande, Province and
Department of Piura, on the basis of a pre-feasibility study to be
conducted by BRGM.
1.4 Supreme Decree 016-81-EM/SG of July 3, 1981 approved the Additional
Agreement amending the Base Agreement. Among other purposes, this amendment
changed the contributions of the parties and provided for the preparation
of a feasibility study of the Tambo Grande deposit through a Special Mining
Company to be incorporated by XXXXXX PERU and COFRAMINES, to which BRGM had
assigned all its rights, interests and obligations.
1.5 At the request of XXXXXX PERU, Government's Special Rights were constituted
over the area referred to in Point 1.1 above, by Ministerial Resolution
352-81EM/SG of
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August 25, 1981, assigning these special mining rights to XXXXXX PERU for
the sole purposes related to the Base Agreement and the Additional
Agreement.
1.6 Pursuant to provisions of Article 5.1 of the Base Agreement and Point 5c of
the Background and Prior Formalities of the Additional Agreement to the
Base Agreement, the Tambo Grande Special Rights assigned to XXXXXX PERU
were to be made available, by Contract, to the Special Mining Company to be
incorporated by XXXXXX PERU and COFRAMINES in order to undertake the
exploration works and the Feasibility Study.
1.7 Law 25284 of November 30, 1990 declared as a national need, the exercise of
mining activities in the Tambo Grande Special Rights, which were
constituted and assigned to XXXXXX PERU. It also authorized BRGM and/or
entities or companies to which BRGM may assign its rights and obligations
in the Tambo Grande project, to participate in the aforesaid project.
Article 7 of the said law provided for the transfer of the Government's
Special Rights on the Tambo Grande polymetallic deposit, to the Regional
Government of the Xxxx Region.
1.8 On February 26, 1996, COFRAMINES formalized the reversion in favor of BRGM,
of the rights assigned by the latter.
1.9 Through a letter dated November 8, 1996, BRGM requested that a Ministerial
Resolution be issued approving the assignment of all its rights in the
Tambo Grande Project to BRGM S.A.
1.10 According to the letter referred to in Point 1.9 above, the petition made
by BRGM was considered to be a request for the assignment of its
contractual position in the Base Agreement and Additional Agreement
referred to in Points 1.3 and 1.4 hereof, respectively, involving the
assignment of its interests and responsibilities to BRGM S.A., except for
the Government's Special Rights, now known as Tambo Grande Mining
Concessions.
1.11 Ministerial Resolution 047-97-EM/SG of February 12, 1997, approved the
assignment of the contractual position undertaken by BRGM in favor of BRGM
S.A., stipulated by the Base Agreement and the Additional Agreement
referred to in Points 1.3 and 1.4 of the said Ministerial Resolution,
involving interests and responsibilities in the Tambo Grande Project, but
excluding the transfer of the Tambo Grande Mining Concessions, transferred
to the Regional Government of the Xxxx Region, in accordance with Article 7
of Law 25284.
1.12 Through resolution adopted on December 1, 1998, the Private Investment
Promotion Commission (COPRI) approved the Private Investment Promotion Plan
for the Tambo Grande Mining Project. Said resolution was confirmed by
Supreme Resolution N(degree) 149-98-EM dated December 31, 1998.
1.13 Pursuant to Article 20 of Legislative Decree 674, through resolution
adopted on December 1, 1998, COPRI approved to order the Provisional
Regional Administration Council of Piura to transfer the Tambo Grande
mining concessions mentioned in Point
5
3.2 below, to XXXXXX PERU. Said transfer was formalized through Public Deed
dated March 1, 1999, granted before Xx. Xxxxxx Xxxxxx Xxxxxxx, Notary
Public in and for Piura, and was registered in Entry 2 of Books 012291,
12292, 012299, 012300, 12301, 12302, 12303, 012304, 012305 and 012306 of
the Public Registry of Xxxxxxxx.
1.14 Through resolutions adopted on the meetings of January 19 and January 26,
1999, the Special Privatization Committee of XXXXXX PERU (CEPRI XXXXXX
PERU) and the Private Investment Promotion Commission (COPRI),
respectively, approved the assignment of the contractual position of BRGM
S.A. in favor of Manhattan Minerals Corp. with respect to the agreements
referred to in Points 1.3 and 1.4 above, as well as the Option Agreement
for the Incorporation of a Stock Company and its Annex, the Agreement for
the Incorporation of a Stock Company.
COPRI agreed that the aforementioned approval would be formalized through a
Supreme Decree, for which purpose, and as stipulated in Article 71 of the
Constitution, Manhattan Minerals Corp. should first obtain the
authorization to acquire the Mining Concessions since they were located
within 50 km. of the border.
1.15 On February 5, 1999, Manhattan Minerals Corp. requested the aforementioned
authorization from the Ministry of Energy and Mines and on May 7, 1999,
Supreme Decree 014-99-EM was published, which declared the need to invest
in mining activities in the Mining Concessions and authorized Manhattan
Minerals Corp. to acquire the Mining Concessions from XXXXXX PERU S.A.
1.16 On May 15, 1999, Supreme Decree 015-99-EM was published, which approved the
Option Agreement for the Incorporation of a Stock Company and its Annex,
the Agreement for the Incorporation of a Stock Company, to be entered into
by and between Manhattan Minerals Corp. and XXXXXX PERU S.A., already
approved by CEPRI XXXXXX PERU and COPRI as indicated in point 1.14 above.
CLAUSE TWO: DEFINITIONS
----------
2.1 Mining Concessions: All those referred to in Points 3.2 of the Agreement
with no exceptions whatsoever, and which comprise the Tambo Grande Mining
Project.
2.2 Agreement of Incorporation of a Stock Company: This is the Agreement for
the Incorporation of a Stock Company, whereby EMTG is incorporated, which
corporate purpose and objective will be the development of the Tambo Grande
Mining Project. This agreement is included as Annex A hereof.
2.3 Option Agreement for the Incorporation of a Stock Company or Agreement:
This document, including Annex A.
2.4 Agreements: Those referred to in Clause One, Points 1.3 and 1.4.
2.5 Supreme Decree: The Supreme Decree issued by the Peruvian Government, which
approves this Agreement.
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2.6 EMTG: Empresa Minera Tambo Grande S.A., to be incorporated pursuant to the
Agreement for the Incorporation of a Stock Company in the event that the
OPTIONEE exercises the option referred to in the Agreement.
2.7 Feasibility Study: Document prepared by the OPTIONEE as a result of
exploration work conducted and studies carried out in the Mining
Concessions which make up the Tambo Grande Mining Project. This study will
be useful in determining whether or not the OPTIONEE. will exercise the
option and proceed with the development of the Project. The Feasibility
Study will be prepared in accordance with Clause Five hereof.
2.8 Financing Plan: This is the document which supports the manner in which the
OPTIONEE will obtain and dispose of the funds necessary for the development
of the Project. This document will be prepared in accordance with Clause
Six hereof.
2.9 Parties: XXXXXX PERU and the OPTIONEE.
2.10 Tambo Grande Mining Project or Project: The Tambo Grande Mining Project
consisting of the undertaking of the necessary studies and the construction
of the required infrastructure in accordance with the Feasibility Study,
for the development of the Mining Concessions.
CLAUSE THREE: PURPOSE
------------
3.1 XXXXXX PERU hereby grants to the OPTIONEE an option to celebrate the
Agreement of Incorporation of a Stock Company to be named EMTG, with the
purpose of undertaking the development of the Tambo Grande Mining Project.
The right to exercise the option shall be subject to compliance of the
terms hereof.
3.2 The Mining Concessions which make up the Tambo Grande Mining Project are
registered in the name of XXXXXX PERU in the Mining Registry of the
Xxxxxxxx Regional office, with the following details:
--------------------------------------------------------------------------------
|Name of Concession | Code | Area | Registration in Mining Registry|
|-------------------|-------------|-----------|--------------------------------|
| | | | Entry | Volume |
| | | (Ha) | | |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 1 | 610070-A | | 002 | 01230|
| | | 1000 | | 6 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 2 | 610070-B | | 002 | 01230|
| | | 1000 | | 5 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 3 | 610070-C | | 002 | 01230|
|-------------------|-------------|-----------|--------------|-----------------|
| | | 1000 | | 4 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 4 | 610070-D | | 002 | 01230|
|-------------------|-------------|-----------|--------------|-----------------|
| | | 1000 | | 3 |
--------------------------------------------------------------------------------
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|-------------------|-------------|-----------|--------------|-----------------
|Tambo Grande 5 | 610070-E | | 002 | 01230|
| | | 1000 | | 2 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 6 | 610070-F | | 002 | 01230|
| | | 1000 | | 1 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 7 | 610070-G | | 002 | 01230|
| | | 1000 | | 0 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 8 | 610070-H | | 002 | 01229|
| | | 1000 | | 1 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 9 | 610070-1 | | 002 | 1229 |
| | | 1000 | | 2 |
|-------------------|-------------|-----------|--------------|-----------------|
|Tambo Grande 10 | 610070-J | | 002 | 1229 |
| | | 1000 | | 9 |
|-------------------|-------------|-----------|--------------|-----------------|
|Total Area | | 10000 | |
--------------------------------------------------------------------------------
3.3 The Mining Concessions referred to in Point 3.2 above shall be contributed
by XXXXXX PERU to EMTG as stipulated in the Agreement of Incorporation of a
Stock Company.
The valuation of the Mining Concessions contributed shall be made taking
into account the market value of Mining Concessions with similar
characteristics in Peru, as at the date of the exercise of the option, and
the Feasibility Study, and shall be made according to international
standards generally accepted for mining concessions valuation procedures.
3.4 XXXXXX PERU is the owner of existing studies related to the Mining
Concessions as at the date of execution of the Agreement.
XXXXXX PERU hereby agrees to submit the said studies on the date of the
execution of the Agreement so that they may be taken into account, if
applicable, in the design and preparation of the Feasibility Study.
3.5 As prescribed in the Agreement of Incorporation of a Stock Company, the
OPTIONEE hereby agrees to contribute to EMTG, the Feasibility Study and
Financing Plan stipulated in Clauses Five and Six of the Agreement,
respectively.
The valuation of the Feasibility Study and Financing Plan shall take into
consideration any costs incurred by the OPTIONEE while performing the
above-mentioned studies.
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CLAUSE FOUR: EXERCISE AND TERM OF THE OPTION
-----------
4.1 The option referred to in Point 3 .1 shall be subject to a term of three
(3) years, counted as from the date of execution of the Agreement.
During the term stipulated in the preceding paragraph, the OPTIONEE, either
directly or through its Peruvian subsidiary, is authorized by XXXXXX PERU
to undertake exploration activities and technical studies in the Mining
Concessions which make up the Tambo Grande Mining Project described in
Point 3.2 above. To this effect, the OPTIONEE shall have the responsibility
for negotiating with landowners. XXXXXX PERU hereby agrees to cooperate
with whatever may be necessary to allow the OPTIONEE to have access and use
of the land.
Furthermore, the OPTIONEE, or its Peruvian subsidiary, may extract as much
mineral as it may consider convenient in order to carry out the tests
necessary for the undertaking of the studies that would lead to determining
and measuring the exploitation facilities. To this effect, it may install a
pilot plant for the treatment of the said mineral.
4.2 The OPTIONEE may exercise its option rights at any time within the term
prescribed in Point 4.1 above, and must communicate its decision to XXXXXX
PERU by notarial letter, enclosing seven (7) copies of the Feasibility
Study and Financing Plan, written in the Spanish language, together with
the information prescribed in Point 4.9 below.
The exercise of the option shall be subject to the condition that the
OPTIONEE complies with the requirements outlined in Clause Eight hereof.
4.3 The OPTIONEE may waive its right to the option at any time within the term
stipulated in Point 4.1. In this case, the OPTIONEE hereby agrees to
communicate its decision to XXXXXX PERU by notarial letter, subject to the
provisions of Points 4.4 and 4.5 below.
4.4 As from the time when the communication referred to in Point 4.3 is
received by XXXXXX PERU, the Agreement shall be considered automatically
terminated and the Parties and the Peruvian Government will thus be free
from any and all commitments and obligations deriving both from the
Agreement and the prior Agreements.
The OPTIONEE shall have sixty (60) days from the date of the communication
referred to in Point 4.4, to remove all equipment, machinery, material and
all other elements which may be movable or removable and which it may have
used during the execution of the Agreement, whether its property or that of
third parties.
Furthermore, the OPTIONEE shall deliver to XXXXXX PERU, free of any cost,
all studies it may have undertaken up to that time, as well as any fixed
installations that the OPTIONEE may have installed or built and which may
not be removed without destructing or affecting the Mining Concessions; and
it shall return all studies and documents received in accordance with the
provisions of Point 3.4.
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4.5 The OPTIONEE hereby commits to deliver to XXXXXX PERU the following
documents corresponding to the area of the Mining Concessions and related
areas, which may have been prepared in compliance with the obligations of
the Agreement:
(a) All geological, geophysical and metallurgical reports and feasibility
studies;
(b) All drill cores, petrographical sections and certificates of
laboratory tests existing at XXXXXX PERU;
(c) Topographical and cadastre plans, aerial photographs and similar
items;
(d) Any other necessary technical records which may be in the possession
of the OPTIONEE and which are the property of XXXXXX PERU.
4.6 The provisions of Points 4.4 and 4.5 shall also be applicable in the event
that the OPTIONEE does not exercise its option at the end of the three (3)
year term of the option.
4.7 Any payments made by the OPTIONEE during the term of the Agreement,
whatever their nature and use, as well as any expenses or investments
incurred, shall not be reimbursed to the OPTIONEE by XXXXXX PERU or the
Peruvian Government, under any circumstances whatsoever.
4.8 Once the option has been exercised by the OPTIONEE, the Parties must sign
the preliminary deed and public deed enclosing the Agreement of
Incorporation of a Stock Company within thirty (30) days following receipt
of the communication referred to in Point 4.2 above.
4.9 At the same time it exercises the option, the OPTIONEE shall appoint four
(4) regular members and four (4) alternate members to comprise the first
Board of Directors, as well as the General Manager.
On the other hand, within five (5) days following receipt of the
communication referred to in Point 4.2 of the Agreement, XXXXXX PERU shall
appoint one (1) regular member and one (1) alternate member to comprise the
first Board of Directors. In the event that XXXXXX PERU does not appoint
its regular member and alternate member within the prescribed term, the
company shall be incorporated with the directors appointed by the OPTIONEE,
leaving the appointment of the fifth director by XXXXXX PERU pending. To
this effect, the parties hereby agree to convene the corresponding
Shareholders, Meeting at the request of XXXXXX PERU.
CLAUSE FIVE: FEASIBILITY STUDY
-----------
5.1 The OPTIONEE hereby agrees that during the term of the Agreement, directly
or through its Peruvian subsidiary, and at its own cost and risk, it will
prepare the Feasibility Study of the Project. In the preparation of the
Feasibility Study, the OPTIONEE shall be subject to the minimum standards
prescribed herein.
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The preparation of the Feasibility Study shall be the sole responsibility
of the OPTIONEE.
For the preparation of the Feasibility Study, the OPTIONEE shall hire an
internationally renowned consulting firm selected from the list appearing
in Point 5.4.
5.2 The Feasibility Study must determine the total investment required by EMTG
for the development of the Project within a maximum period of four (4)
years.
5.3 The Feasibility Study shall be prepared in accordance with international
standards normally accepted by the mining industry, financial institutions,
investors and regulators.
The Feasibility Study must include the following information, which at
least must be organized as set forth below:
(a) Introduction
(b) Executive Summary
(c) Mining and surface properties
(d) Geological resources
(e) Mining
(f) Metallurgy
(g) Accessory infrastructure and processing facilities
(h) Disposal of tailings
(i) Port facilities
(j) Energy
(k) Access roads
(l) External facilities
(m) Environmental assessment
(n) Technical commentary
(o) Capital costs
(p) Operating costs
(q) Execution plan
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(r) Marketing
(s) Financial analysis
5.4 The Feasibility Study shall be prepared by one of the following consulting
companies previously approved by XXXXXX PERU for these purposes:
- Xxxxxxx Corporation
- Xxxxx Xxxxxxx & Company
- Fluor Xxxxxx Xxxxxx
- Xxxxxxx SNC-Lavalin Engineering
- Xxxxxx Engineering Group Inc., X.X. Mincorp
- Kvaerner Metals Davy Ltd.
- X.X. Xxxxxx Ltd.
- Xxxxxxx Xxxxxxxxx Xxxxxxx
5.5 In the procurement of economic resources required for the preparation of
the Feasibility Study, the OPTIONEE shall not, directly or indirectly,
commit in any manner whatsoever, the Mining Concessions which make up the
Tambo Grande Mining Project, or the natural resources of the said Mining
Concessions.
CLAUSE SIX: FINANCING PLAN
----------
6.1 Within the term prescribed in Point 4.1 above, with the participation of
one of the consulting companies listed in Point 6.2 below, the OPTIONEE
shall prepare, directly or through third parties and at its own cost, the
Financing Plan that would make possible the development of the Project. The
Financing Plan shall include the financial and economic aspects determined
in the Feasibility Study and both must be delivered to XXXXXX PERU at the
time the option is exercised.
6.2 The Financing Plan shall be prepared by the OPTIONEE with the assistance of
one of the following consulting companies, which have been previously
approved by XXXXXX PERU for these purposes:
- N.M. Rothschild & Sons
- CIBC Wood Xxxxx - Xxxxxx Xxxxx
- First Marathon Securities
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6.3 The Financing Plan shall be prepared in accordance with high quality
international standards usually accepted in the mining industry, financial
institutions and regulators. The Financing Plan shall take into
consideration all regular and usual funding sources available, directly or
through third parties, including but without being limited to loans, bonds,
leasing, conditional sales, financing against production and future mineral
sales.
6.4 The Financing Plan shall identify the sources to be selected for financing
the development of the Project on the part of EMTG. All debts and
obligations shall be assumed by EMTG and paid with its own funds and cash
flows, and guaranteed by its assets. The Financing Plan shall determine
real and personal guaranties to be granted by EMTG and/or its shareholders,
with EMTG and/or its shareholders being under the obligation to ensure that
they are duly constituted and formalized.
6.5 The Financing Plan shall determine the percentage of the investment for the
development of the Project, that will be funded by capital contributions to
be made by the OPTIONEE in favor of EMTG, and the percentage to be funded
by third parties, in accordance with the Feasibility Study. Such percentage
shall take into consideration the provisions of Point 9.14 of the Agreement
of Incorporation of a Stock Company.
6.6 The Financing Plan to be prepared by the OPTIONEE shall reflect the optimum
financing structure for the development of the Project, at least taking the
following into consideration:
(a) Estimated proven, probable and possible reserves.
(b) Annual rate of production anticipated for the Project and the duration
of production.
(c) EMTG cash flows projected for the Project.
(d) Availability and cost of all financing alternatives provided by third
parties.
(e) Internal rate of return on the equity invested in the capital stock of
EMTG and the net present value of that investment.
6.7 Waiving its rights to the option shall release the OPTIONEE from the
obligation of preparing the Financing Plan prescribed in this Clause.
CLAUSE SEVEN: SUPERVISION OF AGREEMENT
------------
7.1 The OPTIONEE hereby agrees to report on a semi-annual basis, on activities
undertaken in compliance with the obligations deriving from the Agreement.
In the said reports, the OPTIONEE must describe at a reasonable level of
detail, progress made in the obligations being implemented. Furthermore,
the OPTIONEE must also include any additional information requested by
XXXXXX PERU.
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7.2 During the term of the option, the OPTIONEE is obliged to allow XXXXXX
PERU to inspect its operations, upon receipt of seven (7) days advance
notice.
CLAUSE EIGHT: REQUIREMENTS FOR THE EXERCISE OF THE OPTION
------------
8.1 Within the term of the option, but before exercising it, the OPTIONEE must
provide evidence to XXXXXX PERU that it has complied with the following
requirements:
(a) That it operates a mining complex with an average treatment capacity
of 10 000 tons of ore per day; and
(b) That it has net equity (net assets) in an amount equal to or greater
than US$100 000 000.
8.2 The OPTIONEE shall comply with the requirements outlined in Point 8.1, a)
and b) above, by submitting the corresponding certificates issued by a
mining consulting company and an auditing firm, respectively. Both firms
must be internationally well known.
The submission of the said certificates must be made at the time when the
option is exercised. XXXXXX PERU must evaluate said documentation within
ten (10) days following receipt thereof. Once the term of ten (10) days has
expired without XXXXXX PERU issuing an opinion, it shall be understood that
the OPTIONEE has complied with the requirements for exercising the option.
8.3 Notwithstanding the provisions of Point 8.2 above, it is agreed that the
OPTIONEE has complied with the requirements outlined in Point 8.1, if a
company or the parent company of a company which has complied with the
requirements of Point 8.1 a) and b) above (either referred hereinafter as
the PARENT COMPANY), directly or indirectly owns at least 25% of the shares
or interest in: (1) the OPTIONEE; (2) the parent company of the OPTIONEE;
or (3) any subsidiary of the parent company of the OPTIONEE.
In the event that the OPTIONEE exercises the right conferred in the
preceding paragraph, the PARENT COMPANY shall jointly and severally
guarantee compliance with any and all obligations of the OPTIONEE and EMTG
deriving from the Agreement and the Agreement of Incorporation of a Stock
Company, and for such purpose it shall sign the corresponding documents.
CLAUSE NINE: REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
-----------
9.1 The OPTIONEE hereby represents and warrants the following:
(a) That it has obtained all permits and approvals required for the
execution of the Agreement.
(b) That it will obtain all permits and authorizations required by the
corresponding authorities in Peru to carry out the Feasibility Study
and the Financing Plan.
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(c) That because it has visited the location of the Mining Concessions, it
knows their surroundings and the environmental reality, It also hereby
declares that it knows that the town of Tambo Grande is located in the
Mining Concessions and knows the current legal situation thereof.
(d) That it assumes responsibility for any environmental damage caused by
the activities included in and deriving from the implementation of the
Agreement, independently from whether or not it exercises the option,
even if it waives its right to exercise it. In addition, it assumes
responsibility for any damages caused by the activities developed
under the Agreements.
(e) That upon exercising the option, it does so after having conducted the
necessary evaluations on the basis of information obtained by its
Feasibility Study and taking into account the Financing Plan.
Accordingly, the OPTIONEE shall not file any claims of responsibility
against XXXXXX PERU or the Peruvian Government.
The OPTIONEE hereby recognizes that neither XXXXXX PERU nor the
Peruvian Government have assumed any commitments, except for those
expressly assumed herein, which may affect the execution of the
obligations deriving from the Agreement or which may become a reason
for the suspension or extension of the term prescribed in Point 4.1
above.
(f) That it commits to comply with all obligations set forth by Peruvian
legislation during the term of the option.
(g) That even though XXXXXX PERU is responsible for the payment of
Standing Fees of the Mining Concessions, the OPTIONEE hereby commits
to make the funds available to XXXXXX PERU for the corresponding
payment. The said funds shall be delivered twenty (20) days before the
expiry of the last day for payment, with XXXXXX PERU agreeing to make
the payment within the following ten (10) days.
In the event that the OPTIONEE does not comply with delivering the
amount of the Standing Fees in the manner prescribed in the foregoing
paragraph, XXXXXX PERU shall make the payment. In such case, the
OPTIONEE will automatically be in arrears, with arrears interest
accruing as from the date of non-compliance at the legal interest rate
fixed by the Central Reserve Bank.
(h) Without prejudice to the stipulations contained in Clause Five, the
Feasibility Study shall determine the technical and economic
feasibility of the Project, considering for this purpose every
reasonable technical and economic alternative available and proposing
the best thereof for the development of the Project, within the
maximum term of four (4) years mentioned in Point 9.1 of Annex A. In
addition, the Feasibility Study must evaluate every technology
reasonably available, as well as the technological and financial
possibilities required for attaining an optimum technical and economic
solution for the development of the
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Project. Furthermore, it must determine the optimum processing
capacity, considering mining, technical and economic factors, for the
Project development and production.
9.2 The OPTIONEE hereby represents and warrants that XXXXXX PERU shall not have
any responsibility towards any third parties the OPTIONEE may contract or
subcontract in complying with the obligations deriving from the Agreement.
Furthermore, XXXXXX PERU shall not assume any responsibility with workers,
employees or staff members of the OPTIONEE.
CLAUSE TEN: REPRESENTATIONS AND WARRANTIES OF MINERQ PERU
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XXXXXX PERU hereby represents and warrants the following:
(a) That it is the owner of the Mining Concessions, which are duly
registered on the Cards and entries described in Point 3.2, in the
Register of Mining Concessions of the Mining Registry, free and exempt
from any liens and encumbrances. The entire Mining Concessions are in
full force, as the corresponding standing fees have been paid and all
obligations prescribed by law have been complied with completely and
on time. The Mining Concessions are free of any liens, limitations or
encumbrances which may restrict their free use or which may give rise
to situations which may prevent the OPTIONEE from carrying out
exploration work, and, if the option is exercised, from exploiting the
Mining Concessions in partnership with XXXXXX PERU, except for the
provisions of Law 25284 and surface rights belonging to third parties.
(b) The Mining Concessions shall not be encumbered nor assigned during the
term of the Agreement,
(c) The Mining Concessions are not undergoing any legal or arbitration
proceedings and no pending actions, suits, claims or proceedings exist
with respect thereto.
(d) That it has no knowledge of any environmental damage produced as a
consequence of exploration activities carried out previously.
(e) That it has no knowledge of situations which would prevent the
OPTIONEE from complying with the objective to perform exploration
works and prepare the Feasibility Study, or from the development of
the Project.
(f) It will make the Mining Concessions available to the OPTIONEE on the
date the Agreement is executed.
(g) The Mining Concessions have preferential and final title over any
claims or requests from third parties.
(h) XXXXXX PERU will cooperate with the OPTIONEE in the procurement of
authorizations, permits and rights-ofway necessary for the execution
of the obligations contained in the Agreement.
16
(i) The guaranties referred to in Points a), b), d) and g) of this Clause,
shall be in force and remain in effect to the time when XXXXXX PERU
makes the contribution of the Mining Concessions to EMTG, in
accordance with the provisions of the Agreement of Incorporation of a
Stock Company.
CLAUSE ELEVEN: ENVIRONMENT
-------------
11.1 The OPTIONEE hereby declares that it knows the legislation in force
applicable to environmental issues and the obligations resulting therefrom.
11.2 The OPTIONEE hereby commits to comply with the environmental legislation in
force, including provisions referring to communities.
11.3 The OPTIONEE hereby commits to adopt all necessary measures to prevent
contamination of the environment; and in the event that the nature of its
operations may cause contamination, it hereby agrees to adopt pertinent
measures for the necessary and immediate repair, as well as other
reasonable actions for restoration or for mitigation of the damage caused,
in accordance with legislation in force.
11.4 During the term prescribed in Point 4.1, the OPTIONEE must adopt the
necessary prevention and repair measures, as well as those necessary at the
time of abandonment of the installations upon expiry of the Agreement.
11.5 Within thirty (30) days prior to commencement of the field works, the
OPTIONEE shall submit to XXXXXX PERU for its information, an environmental
study which will include all the locations where it will conduct
exploration works.
11.6 All expenses and investments to be incurred by the OPTIONEE during the term
of the Agreement in relation with the environment, including communities,
shall be at the sole cost and risk of the OPTIONEE.
CLAUSE TWELVE: ASSIGNMENT OF CONTRACTUAL POSITION
-------------
12.1 During the term of the Agreement, the OPTIONEE may assign its contractual
position or the rights and obligations deriving from the Agreement, subject
to the prior consent of XXXXXX PERU. Notwithstanding the aforesaid, XXXXXX
PERU will necessarily consent to the assignment, provided the assignee
meets the requirements referred to in paragraphs a) and b) of Point 8.1.
Compliance with these requirements shall be substantiated in accordance
with the provisions of Point 8.2. In this case, the provisions of Point 8.3
shall not be applied.
12.2 The OPTIONEE expressly consents in advance, for XXXXXX PERU to totally or
partially assign its contractual position in the Agreement to any other
government company or body whenever it deems it pertinent. The assignee
shall be obliged to abide by all the provisions established herein.
XXXXXX PERU shall inform the OPTIONEE of the assignment, through notarial
letter. As from the date of receipt of the said communication, all
obligations and rights of
00
XXXXXX XXXX originated by or derived from the Agreement, shall be assumed
by the assignee.
Any assignment carried out by XXXXXX PERU, shall not affect the rights of
the OPTIONEE in any manner.
CLAUSE THIRTEEN: FORCE MAJEURE
---------------
13.1 The Parties shall not be responsible for noncompliance with an obligation,
or partial, untimely or defective compliance thereof, during the period
when the said obligation is affected by an act of God or force majeure. The
OPTIONEE must provide evidence to XXXXXX PERU that said events prevented it
from adequately complying with the obligation.
Acts of God or force majeure are defined as those events which are beyond
reasonable control and which may not be anticipated by the Parties; or
those which, having been anticipated, could not be reasonably prevented.
13.2 The Party whose obligation is affected shall notify the other Party within
five (5) days following the occurrence of the event of force majeure, and
must substantiate it by describing the manner in which it will affect
performance of the corresponding obligation. The Party receiving the
communication shall answer in writing, indicating whether or not it accepts
the reasons for the occurrence, within seven (7) days following receipt of
the aforesaid communication.
In all cases, the Party affected by acts of God or force majeure shall use
its best efforts to provide a timely and complete solution, in accordance
with the common intention of the Parties contained in the Agreement. The
affected Party must at all times continue with the performance of the
contractual obligations which have not been affected by such event.
The affected Party must restart compliance with the affected obligations as
soon as the said event or events disappear. To this effect, it shall send a
notice to the other Party within five (5) days following the disappearance
of the said event. The Parties may cooperate with each other in solving the
existing circumstances.
13.3 The period during which the effects of the act of God or force majeure
affect compliance with any contractual obligation, shall be added to the
term set forth for compliance with the said affected obligation, and if
necessary, to the term of the option.
In the latter case, XXXXXX PERU must expressly approve in writing the
extension of the term through notarial letter delivered to the OPTIONEE.
In the event of discrepancies with respect to the existence of an act of
God or force majeure, the issue shall be submitted to arbitration and be
resolved within thirty (3Q) calendar days following the date on which the
arbitrators learn of the circumstances.
18
CLAUSE FOURTEEN: GOVERNING LAW AND DOMICILE
---------------
14.1 The Agreement shall be governed, interpreted and executed in accordance
with the laws of the Republic of Peru.
14.2 For the purposes of the execution of the Agreement, the parties indicate
that their domicile in Peru shall be as described in the introductory
section hereof.
14.3 Any change in the domicile of any of the Parties shall bear no effect on
the other unless it has been communicated by notarial letter.
14.4 For the purposes hereof, it shall be understood that knowledge of all
communications, requirements and notices shall take place when the said
communications arrive to the domicile of the addressee.
14.5 The OPTIONEE hereby irrevocably and unconditionally waives all rights to
claims through diplomatic channels in relation herewith. However, this
shall not affect the right of the OPTIONEE to claim for benefits granted by
MIGA or similar benefits deriving from international agreements
guaranteeing investments, which it may have entered into or may enter into
in the future with the Peruvian Government.
CLAUSE FIFTEEN: INTERPRETATION OF AGREEMENT
--------------
15.1 This Agreement has been prepared in the Spanish language and accordingly,
all interpretations hereof version and according to shall be based on that
Peruvian legal provisions.
15.2 Clause headings used in the Agreement are merely illustrative and shall
only serve as reference, as they shall have no effect on the interpretation
hereof.
15.3 All references to a clause in the Agreement refer to the entire text of the
clause of the Agreement. References made in the Agreement to a clause,
include all points forming part thereof and references to a point include
all paragraphs thereof.
CLAUSE SIXTEEN: ARBITRATION
--------------
16.1 Any disputes which may arise or derive from the Agreement, including those
regarding claims for nullity or invalidity, which may not be solved by
mutual agreement of the Parties, shall be solved by a final and
unappealable award issued by the Arbitration Court of the National
Institute of Mining and Petroleum Law, in accordance with the Arbitration
Rules of the National Institute of Mining and Petroleum Law, to which
regulations the Parties hereby unconditionally submit.
16.2 One Party submitting a dispute to arbitration shall suffice for the other
Party to be automatically bound by the arbitration.
19
16.3 The beginning and continuation of an arbitration process shall not inhibit
the Parties from ongoing compliance with obligations which are not subject
to arbitration or which would not be affected by the results of the
arbitration.
16.4 The Parties hereby agree that arbitrators may not, during the arbitration
process, suspend the execution of the Agreement at any time, nor suspend
compliance with the obligations hereof, except those obligations which are
subject to arbitration or which would be affected by the results of the
arbitration, including the term referred to by Point 4.1 hereof.
16.5 There shall be three (3) arbitrators. One shall be appointed by each of the
Parties and the third one by the arbitrators appointed by the Parties. In
the event that thirty (30) days have elapsed since the appointment of the
arbitrators by the Parties, and the third arbitrator has not been
appointed, any of the Parties may request the National Institute of Mining
and Petroleum Law to appoint the third arbitrator within ten (10) days
following the date when it learns of the request.
16.6 In order to solve the substantive part of the litigation, dispute,
difference or claim submitted to arbitration, the arbitrators shall apply
the internal substantive laws of the Republic of Peru. Arbitration shall
take place in the City of Lima, Peru.
16.7 The Parties hereby agree and declare that the arbitration award is final,
binding and immediately enforceable. Thus, they hereby waive all rights of
appeal, appeal for reversal and any other objection to the arbitration
award.
The Parties hereby commit to carry out all acts necessary for the conduct
of the arbitration process until its completion and enforcement.
16.8 The maximum term for the arbitration process shall be sixty (60) business
days, counted as from the date of installation of the arbitration court or
similar act. Due to any justifiable reasons, the arbitration court may
extend the term for an additional period of sixty (60) days.
16.9 In the event that the obliged Party does not comply with the arbitration
award, it must be enforced in any place in or outside Peru by a lower court
judge or equivalent, to whom the Parties shall submit with no limitations
or prior formalities.
16.10In the event that the arbitration deals with non-compliance of the
obligation indicated in Point 9.1(8), one of the companies mentioned in
Point 5.4, other than the company responsible for preparing the Feasibility
Study, shall act as arbitrator.
CLAUSE SEVENTEEN: TERMINATION OF THE AGREEMENT
----------------
17.1 Whenever one of the Parties fails to comply with any of the obligations
stipulated in the Agreement due to reasons other than an act of God or
force majeure, or any matter which may be pending in an arbitration
process, the other Party shall notify the Party in default, informing it of
the non-compliance and its intention to terminate the Agreement on the
expiry of a sixty (60) day term, unless within this term, the said
non-compliance is
20
stopped, corrected, or to the satisfaction of the other Party, it can be
demonstrated that it is in process of correction.
If the Party receiving a notice of non-compliance questions or denies the
existence thereof, the said Party may refer the issue to arbitration, in
accordance with the provisions of Clause Six within thirty (80) days
following receipt of the notice. In these cases, the sixty (60) day term
shall be suspended until the arbitration award is communicated to the
Parties. The Agreement shall terminate if once a condition of
non-compliance has been confirmed, it is not stopped, corrected, or, to the
satisfaction of the other Party, it cannot be demonstrated that it is in
process of correction.
17.2 The option referred to in Point 3.1 above shall expire if the OPTIONEE does
not exercise this right within the term prescribed in Point 4.1. Once the
option has expired, the Agreement shall be automatically terminated, unless
the Parties agree to renew it.
17.3 By mutual agreement, the Parties may resolve to invalidate the Agreement at
any time.
Upon termination of the Agreement, all rights and obligations of the
Parties specified in the Agreement shall have no effect and the provisions
of Points 4.4 and 4.5 shall apply.
Furthermore, the termination of the Agreement releases the Parties from the
obligations deriving from the Agreements; therefore, XXXXXX PERU will
freely dispose of the Mining Concessions.
CLAUSE EIGHTEEN: EXPENSES AND TAXES
---------------
18.1 Expenses related to the conversion of the preliminary deed of the Agreement
into a Public Deed and its registration in the Mining Registry shall be at
the account and cost of the OPTIONEE.
18.2 At its own cost and risk, the OPTIONEE shall be responsible for contracting
all insurance policies necessary to protect the assets of XXXXXX PERU which
may be affected by the operations to be performed by the OPTIONEE under the
Agreement.
18.3 All taxes applicable as a consequence of the Agreement shall be assumed by
the Party responsible according to law.
CLAUSE NINETEEN: FINAL PROVISIONS
---------------
19.1 The Parties hereby agree and declare that this Agreement substitutes the
Agreements in all their contents and scope. To this effect, from the date
of subscription of the Agreement, neither the OPTIONEE nor XXXXXX PERU may
invoke the substituted Agreements in their own name or on behalf of third
parties.
19.2 In accordance with the provisions of the first paragraph of Article 62 of
the Political Constitution of Peru, Article 1357 of the Civil Code and
Article 39 of Legislative Decree 757 - Framework Law for the Growth of
Private Investment, once approved by the
21
corresponding Supreme Decree, this Agreement may not be amended or
unilaterally invalidated by any of the Parties.
19.3 This Agreement shall be effective on the date of execution thereof by the
parties and must be registered in the Mining Registry.
19.4 By mutual agreement, the Parties may amend the Contract due to reasonable
causes; in such case, amendments must be approved by the Board of Directors
or equivalent body of each of the Parties, and no legal provision or
government authorization confirming or aproving the said amendments will be
required.
CLAUSE TWENTY: ELEMENTS AND CONDITIONS OF THE AGREEMENT OF INCORPORATION OF A
------------- STOCK COMPANY
The elements and conditions referred to in points 6.1, 6.2 and 9.1 of the
Agreement of Incorporation of a Stock Company shall be established on the basis
of the studies to be conducted under the Agreement.
Kindly add all other clauses required by law and forward the pertinent notices
to the Mining Registry.
Lima, May 17, 1999
----------------------
XX-XX/MANHAT.028
TAMBO GRANDE MINING PROJECT
ANNEX A
AGREEMENT FOR THE INCORPORATION OF A STOCK COMPANY
CEPRI-XXXXXX PERU S.A. - CENTROMIN PERU X.X.
Xxxx, May 17 , 1999
2
TABLE OF CONTENTS
Introduction
Clause One: Background
Clause Two: Definitions
Clause Three: Incorporation and Purpose of the Stock Company
Clause Four: Domicile of the Company
Clause Five: Duration of the Company
Clause Six: Capital Stock and Shares
Clause Seven: Appointment of First Board of DIrectors
Clause Eight: Appointment of the General Manager
Clause Nine: Investment Commitment
Clause Ten: Compensation for the account of EMTG
Clause Eleven: Solution of Disputes
Clause Twelve: Interpretation
Clause Thirteen: By-laws
3
ANNEX A
Attached to the Option Agreement for the Incorporation of a Stock Company
AGREEMENT FOR THE INCORPORATION OF A STOCK COMPANY
To the Notary:
Kindly enter in your Register of Public Deeds, the AGREEMENT FOR THE
INCORPORATION OF A STOCK COMPANY entered into by and between: Empresa Minera del
Peru S.A., as party of the first part, hereinafter referred to as XXXXXX PERU,
with Taxpayer's Registration No. 10009561, registered on Card No. 14047 of the
Book of Contracting Companies and Other Bodies Corporate of the Mining Registry
of Lima, with registered address at , _________________ Peru, acting by and
through its General Manager, ______________________, duly authorized by Board of
Directors' Resolution No. _______, dated __________________, to be inserted
herein; and as party of the second part, Manhattan Minerals Corp., hereinafter
referred to as MANHATTAN, with Taxpayer's Registration No. _______, acting by
and through Mr. ______________ identified by Voter's Registration Card No.
________, with registered address at ________________________, authorized by
Power of Attorney registered in Entry ______, Card No. ______, of the Book of
Contracting Companies and Other Bodies Corporate of the Mining Registry.
The Agreement is made under the following terms and conditions:
ARTICLES OF INCORPORATION
-------------------------
CLAUSE ONE: BACKGROUND
----------
1.1 Supreme Decree 019-78-EM/DGM of November 22, 1978 declared an area of 100
Km2 in the District of Tambo Grande, Province and Department of Piura, a
National Reserve Area for a period of five (5) years, assigning it to the
Institute of Geology and Mining -INGEOMIN for the purposes of performing
prospecting and exploration work jointly with Bureau de Recherches
Geologiques et Minieres of France (hereinafter BRGM).
1.2 Decree Law 22672 declared the national need to explore and develop the area
referred to in Supreme Decree 019-78-EM/DGM of November 22, 1978.
1.3 Supreme Decree 021-79-EM/DGM of September 10, 1979, approved the Base
Agreement entered into by and between the Ministry of Energy and Mines
(MEM) and BRGM with the purpose of prospecting, exploring and eventually
developing the Tambo Grande area, District of Tambo Grande, Province and
Department of Piura, on the basis of a pre-feasibility study to be
conducted by BRGM.
1.4 Supreme Decree 016-81-EM/SG of July 3, 1981 approved the Additional
Agreement amending the Base Agreement. Among other purposes, this amendment
changed the contributions of the parties and provided for the preparation
of a feasibility study of the Tambo Grande deposit through a Special Mining
Company to be incorporated by
4
XXXXXX PERU and COFRAMINES, to which BRGM had assigned all its rights,
interests and obligations.
1.5 At the request of XXXXXX PERU, Government's Special Rights were constituted
over the area referred to in Point 1.1 above, by Ministerial Resolution
352-81EM/SG of August 25, 1981, assigning these special mining rights to
XXXXXX PERU for the sole purposes related to the Base Agreement and the
Additional Agreement.
1.6 Pursuant to provisions of Article 5.1 of the Base Agreement and Point 5c of
the Background and Prior Formalities of the Additional Agreement to the
Base Agreement, the Special Rights over the Tambo Grande area assigned to
XXXXXX PERU were to be made available, by Contract, to the Special Mining
Company to be incorporated by XXXXXX PERU and COFRAMINES in order to
undertake the exploration work and the Feasibility Study.
1.7 Law 25284 of November 30, 1990 declared as a national need, the exercise of
mining activities in the Tambo Grande Special Rights, which were
constituted and assigned to XXXXXX PERU. It also authorized BRGM and/or
entities or companies to which BRGM may assign its rights and obligations
in the Tambo Grande project, to participate in the aforesaid project.
Article 7 of the said law provided for the transfer of the Government's
Special Rights on the Tambo Grande polymetallic deposit, to the Regional
Government of the Xxxx Region.
1.8 On February 26, 1996, COFRAMINES formalized the reversion in favor of BRGM,
of the rights assigned by the latter.
1.9 Through a letter dated November 8, 1996, BRGM requested that a Ministerial
Resolution be issued approving the assignment of all its rights in the
Tambo Grande Project to BRGM S.A.
1.10 According to the letter referred to in Point 1.9 above, the petition made
by BRGM was considered to be a request for the assignment of its
contractual position in the Base Agreement and Additional Agreement
referred to in Points 1.3 and 1.4 hereof, respectively, involving the
assignment of its interests and responsibilities to BRGM S.A., except for
the Government's Special Rights, now known as Tambo Grande Mining
Concessions.
1.11 Ministerial Resolution 047-97-EM/SG of February 12, 1997, approved the
assignment of the contractual position undertaken by BRGM in favor of BRGM
S.A., stipulated by the Base Agreement and the Additional Agreement
referred to in Points 1.3 and 1.4 above, involving interests and
responsibilities in the Tambo Grande Project, but excluding the transfer of
the Tambo Grande Mining Concessions, transferred to the Regional Government
of the Xxxx Region, in accordance with Article 7 of Law 25284.
1.12 Through resolution adopted on December 1, 1998, the Private Investment
Promotion Commission (COPRI) approved the Private Investment Promotion Plan
for the Tambo Grande Mining Project. Said resolution was confirmed by
Supreme Resolution N(degree) 149-98-EM dated December 31, 1998.
5
1.13 Pursuant to Article 20 of Legislative Decree 674, through resolution
adopted on December 1, 1998, COPRI approved to order the Provisional
Regional Administration Council of Piura to transfer the Tambo Grande
Mining Concessions mentioned in Point 3.2 below, to XXXXXX PERU. Said
transfer was formalized through Public Deed dated March 1, 1999, granted
before Xx. Xxxxxx Xxxxxx Xxxxxxx, Notary Public in and for Piura, and was
registered in Entry 2 of Books 012291, 12292, 012299, 012300, 12301, 12302,
12303, 012304, 012305 and 012306 of the Public Registry of Xxxxxxxx.
1.14 Through resolutions adopted on the meetings of January 19 and January 26,
1999, the Special Privatization Committee of XXXXXX PERU (CEPRI XXXXXX
PERU) and the Private Investment Promotion Commission (COPRI),
respectively, approved the assignment of the contractual position of BRGM
S.A. in favor of Manhattan Minerals Corp. with respect to the agreements
referred to in Points 1.3 and 1.4 above, as well as the Option Agreement
for the Incorporation of a Stock Company and its Annex, the Agreement for
the Incorporation of a Stock Company.
The aforementioned approval would be formalized through a Supreme Decree,
for which purpose, and as stipulated in Article 71 of the Constitution,
Manhattan Minerals Corp. should first obtain the authorization to acquire
the Mining Concessions since they were located within 50 km. of the border.
1.15 On February 5, 1999, Manhattan Minerals Corp. requested the aforementioned
authorization from the Ministry of Energy and Mines and on May 7, 1999,
Supreme Decree 014-99-EM was published, which declared the need to invest
in mining activities in the Mining Concessions and authorized Manhattan
Minerals Corp. to acquire the Mining Concessions from XXXXXX PERU S.A.
1.16 On May 15, 1999, Supreme Decree 015-99-EM was published, which approved the
Option Agreement for the Incorporation of a Stock Company and its Annex,
the Agreement for the Incorporation of a Stock Company, to be entered into
by and between Manhattan Minerals Corp. and XXXXXX PERU S.A., already
approved by CEPRI XXXXXX PERU and COPRI as indicated in Point 1.14 above.
1.17 Through Public Deed dated May 31, 1999, granted before Xx. Xxxxxx X. XXXXXX
XXXXXXX, Notary Public in and for Piura, MANHATTAN and XXXXXX PERU signed
the Option Agreement for the Incorporation of a Stock Company and its
Annex, as referred to in Points 1.14 and 1.16 of the Agreement. The Option
was duly exercised through Notarial Letter dated __________________, in
compliance with Point 4.2 of the said Option Agreement.
1.18 The option, as referred to in Point 4.2 of the Option Agreement, having
been validly exercised, the Agreement for the Incorporation of a Stock
Company has been duly perfected between XXXXXX PERU and MANHATTAN, with the
purpose of developing the Tambo Grande Mining Project.
6
CLAUSE TWO: DEFINITIONS
----------
2.1 MINING CONCESSIONS: All those listed in Point 6.2a) hereof, without any
exceptions whatsoever.
2.2 AGREEMENT: This document.
2.3 OPTION AGREEMENT FOR THE INCORPORATION OF A STOCK COMPANY OR OPTION
AGREEMENT: The Agreement entered into by and between MANHATTAN and XXXXXX
PERU, granted by Public Deed dated May 31, 1999, before Xx. Xxxxxx X.
XXXXXX XXXXXXX, Notary Public in and for Piura.
2.4 AGREEMENTS: Those listed in Clause One: Background, in Points 1.3 and 1.4
of the Option Agreement.
2.5 DAYS: Working days.
2.6 EMTG: EMPRESA MINERA TAMBO GRANDE S.A.
2.7 FEASIBILITY STUDY: The document prepared as a result of explorations and
studies carried out in the Mining Concessions belonging to the Tambo Grande
Mining Project and which was prepared in accordance with the provisions of
the Option Agreement.
2.8 PARTIES: XXXXXX PERU and MANHATTAN.
2.9 TAMBO GRANDE MINING PROJECT OR PROJECT: The Tambo Grande Mining Project,
which includes carrying out the necessary studies and construction of the
infrastructure required according to the Feasibility Study, with the
purpose of developing the Mining Concessions.
CLAUSE THREE: INCORPORATION AND PURPOSE OF THE STOCK COMPANY
------------
3.1 XXXXXX PERU and MANHATTAN agree to incorporate a stock company called
EMPRESA MINERA TAMBO GRANDE S.A., which may use the abbreviation EMTG S.A.
3.2 EMTG shall have as its object, the carrying out of all mining industry
activities in accordance with Article VI of the Preliminary Title of the
Uniform Text of the General Mining Law, approved by Supreme Decree
014-92-EM and/or any substitute regulations. Mining industry activities
shall be carried out in the Mining Concessions, which form part of the
Tambo Grande Mining Project.
CLAUSE FOUR: DOMICILE OF THE COMPANY
-----------
EMTG is domiciled in the City of Lima, and may establish branches, agencies or
offices in any other place within the territory of the Republic of Peru.
7
CLAUSE FIVE: DURATION OF THE COMPANY
-----------
EMTG has an indefinite life and shall commence operations immediately after it
is registered in the Book of Contracting Companies and Other Bodies Corporate of
the Lima Regional Office of the Mining Registry. Nevertheless, those acts
carried out before this date in the name of the Company are subject to
registration thereof and must be ratified by the Board of Directors within three
(3) months following commencement of operations.
CLAUSE SIX: CAPITAL STOCK AND SHARES
----------
6.1 The capital stock of EMTG is S/. ___________________ Nuevos Soles),
represented by Class A shares and ___________________ Class B shares, all
having a face value of S/. 1,00 each, fully subscribed and paid up. The
capital, class, title and percentage of shares have been established in
accordance with the provisions contained in this clause.
Class A shares represent 75% of the capital stock and shall be originally
owned by MANHATTAN. Class B shares, in turn, represent 250 of the capital
stock and shall be originally owned by XXXXXX PERU.
6.2 The contribution and subscription of the shares is made by the shareholders
in the following amounts and proportions:
(a) XXXXXX PERU contributes the following Mining Concessions to EMTG:
--------------------------------------------------------------------------------
| Name of Concession | Code No. | Area (Hectares) | Mining Registry |
| | | | Entry Volume |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 1 | 610070-A | 1 000 | 002 012306 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 2 | 610070-B | 1 000 | 002 012305 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 3 | 610070-C | 1 000 | 002 012304 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 4 | 610070-D | 1 000 | 002 012303 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 5 | 610070-E | 1 000 | 002 012302 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 6 | 610070-F | 1 000 | 002 012301 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 7 | 610070-G | 1 000 | 002 012300 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 8 | 610070-H | 1 000 | 002 012291 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 9 | 610070-1 | 1 000 | 002 012292 |
|---------------------|--------------|-------------------|---------------------|
|Tambo Grande No. 10 | 610070-J | 1 000 | 002 012299 |
|---------------------|--------------|-------------------|---------------------|
|Total Area | | 10 000 | |
--------------------------------------------------------------------------------
The said mining concessions have been valued at S/ ______________, as
established in Point 3.3 of the option Agreement.
8
(b) MANHATTAN shall contribute to EMTG the Feasibility Study and the
Financing Plan referred to in Clauses Five and Six of the Option
Agreement, the value of which is S/ ___________________, in accordance
with the stipulations in Point 3.5 of the Option Agreement.
6.3 Any capital contribution to EMTG, made by Class A shareholders, including
that referred to in paragraph b) of Point 6.2, shall be distributed in the
following form: 75% of the contribution shall be represented by shares in
favor of Class A shareholders, and the remaining 25% shall correspond to a
supplementary premium in favor of Class B shareholders. This premium shall
be capitalized and the shares issued to Class B shareholders.
For its part, any capital contribution to EMTG, made by Class B
shareholders, including that referred to in paragraph a) of Point 6.2,
shall be distributed in the following form: 250 of the contribution shall
be represented by shares in favor of Class B shareholders, and the
remaining 75% shall be a supplementary premium for Class A shareholders.
The supplementary premium shall be capitalized and the resulting shares
shall be issued in favor of Class A shareholders.
6.4 Class A and Class B shares have the same rights, except as indicated in the
following paragraph:
Insofar as XXXXXX PERU is titleholder of Class B shares representing at
least ten percent (10%) of EMTG shares, the affirmative vote of XXXXXX PERU
shall be required to adopt the following resolutions:
(a) Transfer of mining concessions and rights.
(b) Entering into agreements with subsidiaries, affiliates or parent
companies and companies related to MANHATTAN.
(c) Amendments to the By-laws which may represent an amendment to the
Articles of Incorporation.
The aspects to which the foregoing point refers, may only be dealt with in
a Shareholders' General Meeting, which must be called expressly for such
purpose. If XXXXXX PERU, as Class B shareholder does not attend the first
meeting, the resolutions will be adopted in the second meeting by those
shares which are represented therein and will be fully binding on the
Company. In no case may the Shareholders' Meeting delegate the discussion
and approval of the aforementioned issues to the Board of Directors.
6.5 If XXXXXX PERU becomes owner of Class B shares representing less than ten
percent (10%) of the capital stock of EMTG, the restrictions and rights
stipulated in Point 6.4 above shall be null and void, as a matter of law,
the titleholders of Class B shares being obliged to formalize the amendment
to the Articles of Incorporation mentioned in Point 6.4 above.
9
6.6 MANHATTAN recognizes the right of XXXXXX PERU to not be obliged to make any
other capital contribution to EMTG, in addition to that indicated in Point
6.2 a).
It is the responsibility of MANHATTAN, as a Class A shareholder, and of
future Class A shareholders, to obtain through EMTG the necessary resources
to develop the Tambo Grande Mining Project and to contribute to EMTG
capital the required funds in order for XXXXXX PERU to keep its interest at
twentyfive percent (25%) of the capital stock during the life of EMTG,
except if XXXXXX PERU transfers all or some of its Class B shares, in which
case the transferred shares shall be automatically converted into Class A
shares, persisting the obligation to keep the stockholding percentage of
XXXXXX PERU, only with respect to the Class B shares which XXXXXX PERU
still owns.
The aforementioned share conversion shall not be made if XXXXXX PERU
transfers its shares to a state-owned company or any other Peruvian
Government body.
6.7 XXXXXX PERU, in addition to the representation corresponding to it in the
Shareholders' Meeting, shall participate actively in the Board of Directors
of the Company, in accordance with the cumulative voting mechanism
regulated by the Business Corporations Act and with at least one director,
provided that it holds Class B shares representing at least ten percent
(10%) of EMTG capital stock.
6.8 The parties are obliged to pledge their shares in EMTG if the Financing
Plan referred to in Clause Six of the Option Agreement calls for this,
expressly authorizing EMTG to constitute such pledge or guarantee on its
behalf and representation, through its General Manager or other
representative. This agreement constitutes a Power of Attorney with
Representation in accordance with the provisions of Articles 1790 and 1806
of the Civil Code, and the attorney shall not receive any compensation
whatsoever with respect to this.
Without prejudice to the stipulations in the foregoing paragraph, the
Parties agree that if any of them fail to constitute the aforesaid pledge
or guarantee, this may be constituted by the Arbitration Court referred to
in Clause Eleven, being expressly authorized for this by virtue of the said
clause.
CLAUSE SEVEN: APPOINTMENT OF THE FIRST BOARD OF DIRECTORS
------------
The first EMTG Board of Directors shall consist of five (5) directors, the
following persons having been appointed:
Regular Directors:
1. .............. a ............. Citizen, identified by .............
2. .............. a ............. Citizen, identified by .............
3. .............. a ............. Citizen, identified by .............
4. .............. a ............. Citizen, identified by .............
5. .............. a ............. Citizen, identified by .............
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Alternate Directors
6. .............. a ............. Citizen, identified by .............
7. .............. a ............. Citizen, identified by .............
8. .............. a ............. Citizen, identified by .............
9. .............. a ............. Citizen, identified by .............
10................ a ............. Citizen, identified by .............
CLAUSE EIGHT: APPOINTMENT OF GENERAL MANAGER
------------
The General Manager shall be Mr. ________________, identified by
________________, and he shall enjoy the powers indicated in Article 37 of the
By-laws and any other powers conferred upon him by the Shareholders' Meeting or
the Board of Directors.
CLAUSE NINE: INVESTMENT COMMITMENT
-----------
9.1 MANHATTAN is hereby expressly committed before XXXXXX PERU to ensure that
EMTG shall invest, during a period of not more than four years, a sum equal
to hereinafter called the Investment Commitment, for the development and
implementation of the Project, which sum has been determined from the
Feasibility Study in accordance with the provisions of paragraph one of
Point 5.2 of the Option Agreement.
The period of four (4) years referred to in this clause, shall be counted
from the date of execution of the Public Deed resulting from this
Agreement.
This term of four (4) years shall be divided into four annual periods for
the purposes stipulated in Point 9.2.
9.2 For the purposes of evidencing the investment being carried out during the
four year period, for the development of the Project, MANHATTAN must submit
to XXXXXX PERU, within sixty (60) days following the end of each one of the
annual periods referred to in Point 9.1, a sworn statement of the
investment made by EMTG in the respective annual period, which investment
must be duly recorded according to accounting standards generally accepted
in Peru and countersigned by a firm of independent internationally renowned
auditors selected by XXXXXX PERU from a minimum of three (3) firms proposed
by MANHATTAN. The auditors' fees shall be for the account of XXXXXX PERU.
The auditing firm will be the same during the whole period of the
investment commitment, unless the Parties mutually agree otherwise.
MANHATTAN shall formulate its proposal for auditing firms as referred to in
the foregoing paragraph, within four (4) months following the date of
signing hereof, and XXXXXX PERU must select the auditing firm within two
(2) months following the receipt of the proposal from MANHATTAN.
9.3 In the event that at the end of the four (4) year period, an amount less
than the Investment Commitment indicated in Point 9.1 has been invested in
accordance with the opinion of the auditing firm selected by XXXXXX PERU,
MANHATTAN must pay in cash to
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XXXXXX PERU, thirty percent (30%) of the difference between the Investment
Commitment and the investment actually made during the said period. The
payment of this sanction shall be made within fifteen (15) working days
following the request in writing from XXXXXX PERU.
The payment of this sanction shall fully satisfy the obligation of
MANHATTAN and shall, consequently, free it from completing the Investment
Commitment.
Notwithstanding what has been expressed in the previous paragraphs, and at
the request of any of the Parties, the result of the audit carried out to
determine the investment made by EMTG during the four (4) year period, may
be checked by either of the other two auditing firms proposed as stipulated
in Point 9.2. The opinion of this auditing firm shall be final and
unappealable by whoever requested the checking, with the other party being
able to request that the investment made should be checked by the third
auditing firm. The decision of this firm shall be final, unappealable and
mandatory for both parties. In any of these cases, the fees of the auditing
firm shall be paid by the party requesting the audit.
9.4 The period foreseen in Point 9.1 shall be suspended if, during the time of
performance of the Investment Commitment, an act of God or force majeure
occurs, or in case of arbitration, provided that the assumptions of Point
11.6 are met.
Acts of God or force majeure are defined as those events which are beyond
the reasonable control and which may not be anticipated by the Parties, or
those which having been anticipated, could not be reasonably prevented by
the Parties.
The suspension shall continue as long as the act of God or force majeure
stops or prevents MANHATTAN and/or EMTG from complying with the Investment
Commitment.
9.5 Should an act of God or force majeure occur, MANHATTAN must send a written
notice to XXXXXX PERU as soon as is reasonably possible, informing it about
the incident and indicating the aspects of the Investment Commitment that
will be affected.
MANHATTAN must continue with the performance of the Investment Commitment
in those aspects which are not affected by the act of God or force majeure.
XXXXXX PERU shall reply in writing indicating whether or not it accepts the
reason for the occurrence, within five (5) days following receipt of the
aforementioned communication. In the event of any discrepancy regarding the
existence of an act of God or force majeure, it shall be submitted to
arbitration in accordance with Clause Eleven hereof.
The guarantee stipulated in Point 9.9 must be maintained in force and must
be renewed in accordance with Point 9.10.
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9.6 For the purposes of this Clause, the entire funds used by EMTG for the
development of the Project shall be considered as investment counting
towards compliance with the Investment Commitment of MANHATTAN.
Without prejudice to the foregoing, investments made under any of the
following headings shall be considered as funds used by EMTG for the
development of the Project:
(a) Technical and/or financial feasibility studies.
(b) Exploration and development.
(c) Construction work and equipment destined for the exploitation and
processing of ore.
(d) Construction of infrastructure work for transport, receipt and
dispatch; and for supply and distribution of water and energy, as well
as sewage and environmental control.
(e) Acquisition of surface land, rights of way and other rights over real
property, as well as construction of civil infrastructure works,
including offices and housing.
(f) Import duties and all taxes paid by EMTG in complying with the
Investment Commitment, which are incorporated into the assets and are
not recoverable as tax credit.
(g) Insurance and freight charges.
(h) Financial costs which correspond strictly to the preoperative stage.
The above list is for all purposes illustrative and not specific.
9.7 If any of the disbursements allocated to pay some of the items mentioned in
Point 9.6 above are registered as expenses in EMTG accounting or exceed
what is a reasonable market value, under no circumstances will they be
considered as investment.
9.8 Investments made in domestic currency shall be converted, for the purposes
of this Clause, into US Dollars at the selling exchange rate published by
the Superintendency of Banking and Insurance in the Official Gazette El
Peruano, on the date of their entry in the accounting books.
9.9 As guarantee of compliance with the Investment Commitment, MANHATTAN shall
provide XXXXXX PERU, upon signing of the Agreement, with an irrevocable,
unconditional, joint letter of guarantee, for automatic execution, without
the benefit of excursion, issued by a bank in favor of XXXXXX PERU for US$
__________ (____________ US Dollars). The letter of guarantee shall be
valid for a period of not less than fourteen (14) months counted from the
date of execution hereof. The amount of the guarantee shall be equivalent
to 300 of the Investment Commitment indicated in Point 9.1. The guarantee
indicated in the foregoing paragraph shall be renewed upon expiry of
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each of the annual periods referred to in Point 9.1, under the same
conditions, for a period of not less than twelve (12) months and for an
amount equivalent to 30% of the remaining amount of the Investment
Commitment. The remaining amount of the Investment Commitment shall be
evidenced in the sworn statement of investment stipulated in Point 9.2.
These renewals shall be carried out until full completion of the Investment
Commitment indicated in Point 9.1.
If MANHATTAN refuses to renew the guarantee in the form indicated in the
foregoing paragraph, XXXXXX PERU shall be entitled to foreclose the
guarantee which is due, thus freeing MANHATTAN from its Investment
Commitment.
9.10 Notwithstanding the provisions of Point 9.9, the Parties hereby agree that
MANHATTAN shall have complied with the Investment Commitment, if in spite
of not having complied with the said Commitment, the Project is fully
completed within the term established in Point 9.1 and therefore, no
sanction whatsoever shall be applicable and XXXXXX PERU shall return the
bank guarantee to MANHATTAN.
For these purposes, the company that prepared the Feasibility Study or any
of the other companies referred to in Point 5.4 of the Option Agreement -
at the choice of XXXXXX PERU - shall verify in situ whether or not the
development of the Project has been complied with in the manner,
characteristics and specifications indicated by the Feasibility Study,
issuing the corresponding completion certificate, as the case may be. The
costs for in situ verification by the selected company, shall be borne by
MANHATTAN.
In the event that XXXXXX PERU, following receipt of a communication from
MANHATTAN stating that the Project has been completed, fails to select a
company to confirm whether or not this is true, within 15 days following
receipt of the said communication, the selection will be made by MANHATTAN
and the result of the verification carried out shall be compulsory for
XXXXXX PERU.
9.11 MANHATTAN hereby declares to know Article 5 of Law 25284 and guarantees
that the open pit or underground mining methods to be used will not
physically affect the town of Tambo Grande, nor cause damage to its
population. In addition, the tailings will be located in special dump areas
so as not to affect the agriculture areas in the Project's zone of
influence, under responsibility of MANHATTAN.
9.12 The obligation agreed by MANHATTAN by virtue of this Clause is independent
of its condition as EMTG shareholder or of the number of shares which it
may hold; therefore, the obligation fully persists, even if MANHATTAN
transfers the whole or part of its shareholding, unless it assigns its
contractual position in this Agreement in accordance with the provisions
contained in Article 1435 of the Civil Code. Once the assignment is
approved, MANHATTAN shall be exempted from each and every one of the
obligations hereunder.
14
9.13 MANHATTAN consents in advance to any assignment of contractual position
made by XXXXXX PERU to a Peruvian state-owned company or any other Peruvian
Government body.
9.14 The Parties hereby expressly agree that EMTG shall mantain a Liabilities to
Capital ratio not greater than 1,5 to 1.
The Liabilities to Capital ratio may be changed at the request of MANHATTAN
provided it is sustained on reasonable grounds and represents a greater
benefit for EMTG. XXXXXX PERU shall not refuse to comply with the said
request unless the change affects its interests, in which case the refusal
must be sustained on reasonable grounds.
CLAUSE TEN: COMPENSATION FOR THE ACCOUNT OF EMTG
----------
10.1 EMTG undertakes to pay compensation to XXXXXX PERU, as from the beginning
of commercial operation for any sale, exchange of ore or any other
mechanism used for the transfer of the same, in accordance with the
following table, as per LME grade "A" Settlement quotation:
Up to US$ 0,60 per lb of copper None
More than US$ 0,60 to US$ 0,70 per lb of copper 1,0%
More than US$ 0,70 to US$ 0,80 per lb of copper 2,0%
More than US$ 0,80 to US$ 0,90 per lb of copper 3,0%
More than US$ 0,90 to US$ 1,00 per lb of copper 3,5%
More than US$ 1,00 to us$ 1,10 per lb of copper 4,0%
More than US$ 1,10 to US$ 1,20 per lb of copper 4,5%
More than US$ 1,20 per lb of copper 5,0%
The net sales value shall be determined as a function of the settlements for
sale of the production from the Concessions subject matter hereof less
deductions for smelting and refining costs, any taxes arising in the country,
chargeable to the operation or to local or export sales, currently in force or
to be created and actually applied, as well as discounts usually deductible by
law and for losses due to impurities, as well as transport expenses from the
mine to the port of shipment and from. the Peruvian port of shipment to the
point of destination of the products, and any expenses on account of broker's
fees and sales commission, insurance expenses from the warehouse in the port of
shipment to the warehouse in the port of destination in the case of exports, as
well as expenses incurred in sample taking. All of these concepts must be in the
range of costs prevailing in the market, duly governed, in addition, by the
principle that compensation will be paid atthe time and in the form in which
payment is made for the products.
10.2 The compensation indicated in Point 10.1 constitutes an obligation on the
Tambo Grande Mining Concessions mentioned in Point 6.2 during the life of
the Project. Said obligation must be recorded in the Mining Concessions
Register of the Mining Register.
10.3 Compensation shall be paid by EMTG to XXXXXX PERU in US dollars, over the
final sales settlement and within the first five (5) calendar days of the
month following the month when the sales were made.
15
10.4 Failure to comply with timely payments shall accrue interest at the LIBOR
rate plus five percent (5%). This due will be charged automatically.
CLAUSE ELEVEN: SOLUTION OF DISPUTES
-------------
11.1 Any disputes which result or arise from the interpretation, application,
validity and execution of the Articles of Incorporation and/or By-laws, and
which cannot be solved between the Parties, shall be solved by means of a
final and unappealable award, issued by an arbitration court from the
National Institute of Mining and Petroleum Law in accordance with the
Arbitration Rules of the said Institute, to which rules the parties hereto
unconditionally submit.
11.2 The arbitration shall be de jure.
11.3 One party submitting a dispute to arbitration shall suffice for the other
party to be automatically bound by the arbitration.
11.4 There shall be three (3) arbitrators and each party shall appoint one,
while the third, who shall preside over the arbitration court, shall be
appointed by the two arbitrators chosen by the Parties. In the event that
thirty (30) days have elapsed since the appointment of the arbitrators by
the Parties, and the third arbitrator has not been appointed, either of the
two Parties may request the National Institute of Mining and Petroleum Law
to appoint the third arbitrator within ten (10) days following the date
when it learns of such request.
11.5 The arbitrators shall apply the internal substantive laws of the Republic
of Peru. The arbitration shall take place in the City of Lima, Peru.
11.6 The Parties hereby agree that under no circumstances may the arbitrators
interrupt the execution of this Agreement nor compliance with the
obligations contained hereunder, while the arbitration procedure is in
process, except for those obligations submitted to arbitration or which may
be affected by the arbitration procedure.
11.7 The Parties hereby agree and declare that the arbitration award is final,
binding and immediately enforceable. Thus, they hereby waive all rights of
appeal, appeal for reversal and any other objection to the arbitration
award.
11.8 The maximum term for the arbitration process shall be one hundred and
twenty (120) business days, counted as from the date of installation of the
arbitration court or similar act. Due to any justifiable reasons, the
arbitration court may extend the term.
CLAUSE TWELVE: INTERPRETATION
-------------
12.1 In case of conflict the Articles of Incorporation shall prevail over the
By-laws.
12.2 By mutual agreement, the Parties may amend the Contract due to reasonable
causes; in such case, amendments must be approved by the Board of Directors
or equivalent body of each of the Parties, and no legal provision or
government authorization confirming or approving the said amendments will
be required.
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CLAUSE THIRTEEN: BY-LAWS
---------------
The Company shall be ruled by the following By-laws.
BY-LAWS
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TITLE ONE
NAME, PURPOSE, REGISTERED OFFICE AND EXISTENCE
ARTICLE 1: NAME OF THE CORPORATION
The name of the corporation is Empresa Minera Tambo Grande S.A., but it may also
use the abbreviation EMTG S.A.
ARTICLE 2: CORPORATE PURPOSE
The purpose of the corporation is to carry out mining activities in accordance
with Article VI of the Preliminary Title, Single Uniform Text of the General
Mining Law, approved by Supreme Decree 014-92-EM. The mining activities shall be
carried out in the Mining Concessions which comprise the Tambo Grande Mining
Project.
ARTICLE 3: REGISTERED OFFICE OF THE CORPORATION
The registered office of the corporation is in the City of Lima. The corporation
may establish branches, agencies or offices in any other place within the
Republic of Peru.
ARTICLE 4: EXISTENCE OF THE CORPORATION
The corporation is organized on a perpetual basis and shall begin its operations
after being registered in the Book of Contractual Corporations and Other Bodies
Corporate of the Regional Registry Office in and for Lima of the Public Registry
of Mines. Notwithstanding the foregoing, those acts performed previously on
behalf of the corporation shall be subject to its registration and must be
ratified by the Board of Directors within three (3) months following
commencement of its operations.
TITLE TWO
CAPITAL STOCK AND SHARES
ARTICLE 5: CAPITAL STOCK
The capital stock of the corporation adds up to S/. _________________
(_________________ Million Nuevos Soles), represented by ________ Class A shares
and ________ Class B shares, with a face value of S/.1.00 each, fully subscribed
and paid-up. The capital stock, class, title ownership and stockholding
percentage have been duly established in the Articles of Incorporation.
2
ARTICLE 6: RIGHTS OF SHARES
Without prejudice to the rights and obligations contemplated in the Articles of
Incorporation for Class A and B shares, any and all shares entitled to vote
confer upon their legitimate holders the status of shareholders and at least the
following rights:
(a) To participate in the profit sharing and the net worth resulting from the
liquidation;
(b) To intervene and vote in the Shareholders' Meetings;
(c) To control, in the form established by Law and these By-laws, the corporate
management;
(d) To participate in the election of the Board of Directors;
(e) To leave the corporation in the cases and in the manner provided for by
Law.
Except for the special rights inherent in the Class B shares as indicated in the
Articles of Incorporation and these By-laws, all shares establish the same
rights and obligations for their holders. Any and all shares of the same class
shall enjoy the same rights and assume the same obligations.
ARTICLE 7: OWNERSHIP OF SHARES
The corporation considers holder of a share the person appearing as such in the
Share Register. In case of litigation with respect to the ownership of a share,
the exercise of the shareholder's rights by the person registered as holder
thereof in the corporation shall be accepted, except for a court order on the
contrary.
ARTICLE 8: SHARE REGISTER
The corporation shall keep a Share Register to enter the creation, issue,
transfer, split-off, split-up or split of shares, creation of rights and liens
thereon, share transfer restrictions and shareholders' agreements or agreements
with third parties regarding the shares or aimed at the exercise of rights
inherent therein.
ARTICLE 9: CONTENTS OF SHARE CERTIFICATES
Share certificates shall contain the following information:
(a) The name of the corporation, its registered office, its existence, the date
of the public deed of its articles of incorporation and the name of the
Notary Public executing the same, as well as details of the registration of
the corporation with the corresponding Registry;
(b) The capital stock amount and the face value of each share;
(c) The class of shares represented by the certificate;
3
(d) The number of shares represented by the certificate and the rights and
obligations inherent in the shares;
(e) The amount partially paid-up for each share, or the indication that the
share has been fully paid-up;
(f) Any lien or charge imposed upon the share;
(g) Any transfer restriction on the shares represented by the certificate; and
h) Date of issue and number of certificate.
Each Share Certificate shall be countersigned by two (02) Directors or by one
(O1) Director and the General Manager.
ARTICLE 10: INTERIM SHARE CERTIFICATES
No share certificates or shares may be issued before the corporation or the
corresponding capital stock increase is duly registered with the pertinent
Registry. However, if the share meets the legal subscription and payment
requirements, interim certificates may be issued, expressly indicating that the
registration of the corporation or of the corresponding capital stock increase
is pending.
TITLE THREE
BODIES OF THE CORPORATION
Shareholders' Meetings
ARTICLE 11: GENERAL PROVISION
The Shareholders' Meeting is the highest-ranking authority in the corporation.
When duly called and if the required quorum is present and pursuant to the
Articles of Incorporation and these By-laws, the Shareholders' Meeting resolves
any and all matters within its competence. Any and all shareholders, even
dissenters and those not attending the Shareholders' Meeting, shall be subject
to the resolutions adopted thereby, without prejudice to the rights of challenge
and removal granted by Law to shareholders. It is presumed that each shareholder
is fully aware, due to his capacity as such, of the provisions contained in the
Articles of Incorporation and these Corporate By-laws.
ARTICLE 12: VENUE OF THE SHAREHOLDERS' MEETING
The Shareholders' Meetings shall take place in the corporation's registered
office or in any other place within the country or abroad.
ARTICLE 13: CALL TO THE SHAREHOLDERS' MEETING
The Shareholders' Meeting shall be called by the Board of Directors when
provided for by Law or these By-laws, or when the Board of Directors deems it
convenient for the corporate interest
4
or when requested by shareholders representing at least ten percent (10%) of the
subscribed shares entitled to vote.
ARTICLE 14: CALL TO A SHAREHOLDERS' MEETING AT THE REQUEST OF THE SHAREHOLDERS
Whenever one or more shareholders representing at least ten percent (10%) of the
subscribed shares entitled to vote request, by means of a notarial letter, that
a Shareholders' Meeting be held, the Board of Directors must publish the
corresponding notice within fifteen (15) days following receipt of the said
request, which must indicate the matters to be dealt with as proposed by the
said shareholders.
The Shareholders' Meeting shall be held within fifteen (15) days following the
date of publication of the pertinent notice.
ARTICLE 15: ANNUAL REGULAR SHAREHOLDERS' MEETING
The Shareholders' Meeting shall be compulsorily held at least once a year within
three (3) months following the end of each fiscal year in order to:
(a) Issue an opinion on the corporate management and the economic results of
the previous fiscal year, as contained in the corresponding financial
statements;
(b) Decide on the profit sharing, if any;
(c) Elect the Board of Directors' members and fix their compensations;
(d) Decide on all other matters contained in the notice;
(e) Designate the independent auditors to be in charge of reviewing the
financial statements.
ARTICLE 16: OTHER DUTIES OF THE SHAREHOLDERS' MEETING
In addition, the Shareholders' Meeting shall also deal with the following
matters:
(a) Remove the Board of Directors' members and elect the persons who will
replace them;
(b) Amend the Corporate By-laws;
(c) Increase or reduce the capital stock. The Shareholders' Meeting may
delegate to the Board of Directors the faculty to agree on capital
increases within the parameters established in Article 206 of the General
Corporations' Act;
(d) Issue bonds;
(e) Agree on the disposal in one single act, of assets with a book value in
excess of fifty percent (50%) of the capital stock;
(f) Order special inquiries and audits;
5
(g) Agree on the transformation, merger, break-up, reorganization and
dissolution of the corporation, and decide on its liquidation;
(h) Decide on the matters with respect to which the Law, the Articles of
Incorporation and these By-laws order its intervention and on any other
matter which is in the corporate interest.
ARTICLE 17: REQUIREMENTS TO CALL A MEETING
Notices for all Shareholders' Meetings must be published in the Official Gazette
El Peruano and in another daily of wide circulation in Lima. In the case of the
Annual Regular Shareholders' Meeting, the notice must be published at least ten
(10) calendar days in advance of the date fixed therefor. In all other cases, it
must be published at least three (3) days in advance, unless otherwise provided
for by Law.
The notice indicates the venue, date and time of the Shareholders' Meeting as
well as the matters to be dealt with therein. Likewise, it may indicate the
place, date and time that it will be held on second and third call, if this is
the case.
The Shareholders' Meeting may only deal with the matters indicated in the
notice, except for~the cases permitted by Law.
ARTICLE 18: SECOND CALL
If a duly called Shareholders' Meeting is not held upon the first call and the
date for a second call has not been indicated in the notice, the second call
shall be made subject to the same publication requirements as those set forth
for the first call, indicating that it is a second call, within ten (10) days
following the date of the meeting not held and at least three (3) days in
advance of the second meeting.
ARTICLE 19: ATTENDANCE TO THE SHAREHOLDERS' MEETING
The holders of shares entitled to vote and registered in their name in the Share
Register up to two (2) days prior to the Shareholders' Meeting can attend the
same and exercise their rights therein.
If the Directors and the General Manager are not shareholders, they may attend
the Shareholders' Meeting, with the right to speak but not to vote.
The Shareholders' Meeting or the Board of Directors may authorize the attendance
of officers, professionals and technicians working for the corporation or for
other persons interested in the good running of the corporate matters, with the
right to speak but not to vote.
ARTICLE 20: REPRESENTATION IN THE SHAREHOLDERS' MEETINGS
Any and all shareholders entitled to participate in the Shareholders' Meetings
may be represented therein by another person.
6
The said representation must be evidenced in writing and shall be special for
each Shareholders' Meeting, except in the case of powers of attorney granted by
means of a public deed. Special powers of attorney for each Shareholders'
Meeting may be sent by fax.
Powers of attorney must be registered with the corporation at least twenty-four
(24) hours before the date fixed for the Shareholders' Meeting.
The representation in the Shareholders' Meeting may be revoked. The personal
attendance of the represented shareholder to the Shareholders' Meeting shall
imply the revocation of the special power of attorney granted or the suspension
for such meeting of the power of attorney conferred by means of a public deed.
The provisions contained in this paragraph shall not apply to irrevocable powers
of attorney or express agreements set forth by the By-laws or to other cases
permitted by Law.
ARTICLE 21: QUORUM
The quorum is counted and established at the beginning of the Shareholders'
Meeting. Once the quorum has been verified, the Chairman declares the
Shareholders' Meeting open.
Shares belonging to shareholders that have entered the Shareholders' Meeting
after it has been opened shall not be counted in order to establish the quorum,
but they may be used to exercise the right to vote.
ARTICLE 22: SIMPLE QUORUM
The Shareholders' Meeting shall be considered validly open in the first call
when at least fifty percent (50%) of the subscribed shares entitled to vote are
represented therein.
The attendance of any number whatsoever of subscribed shares entitled to vote
shall be enough in the second call.
ARTICLE 23: QUORUM AND SPECIAL MAJORITIES
In order to adopt any resolution whatsoever in a Shareholders' Meeting that
deals with any of the matters mentioned in the Articles of Incorporation, the
stipulations contained in the Articles of Incorporation shall apply.
ARTICLE 24: CHAIRMAN AND SECRETARY OF THE SHAREHOLDERS' MEETING
The Shareholders' Meeting shall be presided over by the Chairman of the Board of
Directors or, in his absence, by the Vice Chairman or, in absence of the latter,
by any person to be designated by the Shareholders' Meeting from the attendants
thereto. The General Manager of the corporation shall serve as Secretary. In
case of absence or impediment of the latter, the person designated by the
Shareholders' Meeting shall serve as Secretary.
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ARTICLE 25: SPECIAL SHAREHOLDERS' MEETINGS
In view that there are different classes of shares in the corporation, the
resolutions of the Shareholders' Meeting affecting the special rights of any of
the said classes must be approved in a separate meeting by the Special
Shareholders' Meeting of the affected class.
The Special Shareholders' Meeting shall be governed by the provisions regulating
the Shareholders' Meeting, if applicable, and may be called together with the
Shareholders' Meeting.
ARTICLE 26: MINUTES OF THE SHAREHOLDERS' MEETINGS
The Shareholders' Meeting as well as the resolutions adopted therein must be
recorded in minutes, which shall contain a summary of the meeting and shall be
entered in a minutes book or in loose sheets kept according to the legal
requirements.
The minutes of each meeting shall state the place, date and time of the meeting;
the indication whether the meeting is held upon a first or a second call; the
names of the shareholders or shareholders' representatives attending the
meeting; the number and class of shares held by them; the names of the persons
who served as Chairman and Secretary; the dates and form of the notices; the
method and outcome of the voting; the resolutions adopted; and any other
information required by Law.
Corporate Management
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ARTICLE 27: ADMINISTRATORS
The corporation is managed by the Board of Directors and the General Management.
Board of Directors
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ARTICLE 28: THE BOARD OF DIRECTORS
The Board of Directors is composed of five (5) members. In addition, five (5)
alternate Directors may be elected to replace the regular ones in case of
vacancy, absence or impediment thereof.
ARTICLE 29: NUMBER OF DIRECTORS, DURATION AND ELECTION OF THE BOARD OF DIRECTORS
Directors, both regular and alternate, are elected by the Shareholders' Meeting
for a one-year term and may be reelected on an indefinite basis. Directors shall
continue holding their positions even if the period for which they were elected
has already expired, until a new election is carried out.
ARTICLE 30: PLACE OF MEETINGS
The meetings of the Board of Directors may be held in the registered office or
any other place within the country or abroad. They shall be presided over by the
Chairman of the Board of Directors and, in his absence, by the alternate
Director thereof. In case of absence of
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both of them, the meeting shall be presided over by the person to be designated
by the Board of Directors. The General Manager or any person appointed by the
Board of Directors shall serve as Secretary.
ARTICLE 31: CALL AND REPRESENTATIVES
The Board of Directors shall meet when called by the Chairman or requested by
any of its members or by the General Manager. The meeting shall be called at
least ten (10) days in advance by means of a notice delivered with
acknowledgment of receipt or by letter, fax or telex, indicating the matters to
be dealt with.
Any Director may submit for the consideration of the Board of Directors the
matters deemed convenient for the corporate interest.
In the event that both the regular Director and his alternate are unable to
attend the meeting, any other alternate Director may replace them.
ARTICLE 32: QUORUM
The quorum of the Board of Directors shall be composed of three (3) of its
members. Each Director shall be entitled to one vote. Resolutions shall be
adopted with the favorable vote of at least two (2) Directors.
ARTICLE 33: COMPENSATION OF DIRECTORS
The position of Director shall be remunerated and the corresponding amount shall
be fixed by the Shareholders' Meeting. The sharing of profits for the Board of
Directors may only be made from the net profits and, if applicable, after taking
the legal reserve corresponding to the pertinent fiscal year.
ARTICLE 34: RESOLUTIONS
Resolutions to be adopted by the Board of Directors shall be recorded in minutes
kept in a book authenticated pursuant to Law. When due to any circumstance
whatsoever, the minutes of a meeting may not be recorded in the pertinent book,
a special document will be issued for this purpose and shall be then transcribed
in the said book.
ARTICLE 35: BOARD OF DIRECTORS' DUTIES
The Board of Directors enjoys the management and legal representation faculties
required to administer the corporation in accordance with its corporate
purposes, except for the matters assigned to the Shareholders' Meeting whether
by Law or these By-laws.
The Board of Directors enjoys the following faculties, among others:
(a) To elect its Chairman;
(b) To regulate its own proceedings;
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(c) To accept the resignation of its members and call the alternate Directors
to fill any vacancies;
(d) To entrust one or more of the Directors with the solution or execution of
certain matters, without prejudice to the powers it may grant to any person
whatsoever;
(e) To appoint the General Manager and the top-ranking officials, fixing their
duties and compensation;
(f) To annually submit before the shareholders the annual report, the financial
statements and the profit sharing proposal, if any;
(g) To decide on the filing, continuation, abandonment or settlement of
judicial and/or administrative proceedings and the submission of disputes
to arbitration;
(h) To declare dividends when authorized by the Shareholders' Meeting to
distribute them; and i) To enter into any and all kind of contracts and
commitments and take decisions on any and all kind of businesses, except
for those corresponding to the Shareholders' Meeting.
Management
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ARTICLE 36: APPOINTMENT
The corporation shall have a General Manager appointed by the Board of
Directors. The General Manager shall hold such position for an indefinite period
and may be removed by the Board of Directors at any moment, without indicating
the reason therefor.
ARTICLE 37: DUTIES
The General Manager shall have the following duties:
(a) To perform and execute any usual acts and contracts related to the
corporate purpose;
(b) To represent the corporation, enjoying the general and special powers set
forth in the Civil Procedural Code;
(c) To attend the Board of Directors' meetings with the right to speak but not
to vote, except in the case of private meetings;
(d) To attend the Shareholders' Meetings with the right to speak but not to
vote, unless otherwise decided by the Shareholders' Meeting;
(e) To designate and remove the officers and employees and suspend them from
their duties, informing thereof to the Board of Directors;
(f) To submit the general expenses budget before the Board of Directors for its
approval;
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(g) To supervise the administration, being responsible for controlling the
employees' work and the various corporate activities;
(h) To issue certificates and authentications regarding the contents of the
corporate books and records;
(i) To serve as Secretary in the Shareholders' Meetings and the Board of
Directors' meetings;
(j) To open current accounts and draw checks against the corporation's funds
kept on said accounts, under the signature system approved by the Board of
Directors;
(k) To endorse the checks drawn to the order of the corporation to be deposited
in the checking accounts kept thereby with banks;
(l) All other faculties agreed to be granted to him whether by the
Shareholders' Meeting or the Board of Directors.
TITLE IV
AMENDMENT TO THE BY-LAWS;
CAPITAL STOCK INCREASE AND REDUCTION
ARTICLE 38: AMENDMENTS TO THE BY-LAWS
The following is required to amend these By-laws:
(a) The notice for the Shareholders' Meeting shall clearly and accurately
indicate the matters which amendment shall be proposed to the Shareholders'
Meeting; and
(b) The corresponding resolution shall be adopted with the presence of the
required quorum and the majority vote established by Law.
ARTICLE 39: INCREASE THROUGH NEW CONTRIBUTIONS
A capital increase through new contributions or through capitalization of
credits against the corporation requires that all subscribed shares have been
fully paid-up.
ARTICLE 40: INCREASE OR REDUCTION ORDERED BY LAW
In case the law requires that the capital stock amount be amended, the said
amount and the face value of the shares shall be considered amended by Law when
the Shareholders' Meeting approve the financial statements reflecting said
amendment to the capital stock amount, without changing each shareholder's
interest. The certified copy of the corresponding minutes is enough to register
such amendment.
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ARTICLE 41: PREEMPTIVE RIGHT FOR SUBSCRIPTION
In the case of capital increases due to new contributions, shareholders shall
enjoy a preemptive right for the subscription, on a prorata basis with respect
to the shares held by them, of the new shares which creation has been
authorized. By virtue of a resolution adopted by the Shareholders' Meeting, this
right may be evidenced in an instrument called preemptive subscription
certificate, which may be freely transferred among shareholders and acquired by
them in proportion to the shares held by them. In case no shareholder is
interested in the subscription of the new shares or all of them are not
subscribed, they may be transferred to third parties.
ARTICLE 42: CAPITAL REDUCTION
The capital reduction resolution must contain the amount by which the capital is
reduced, the manner in which the said reduction is carried out, the funds
against which it is made and the procedure whereby it is performed. The
reduction must affect all shareholders on a prorata basis with respect to their
interest in the capital stock, without modifying their stockholding percentage.
The said resolution must be published three (3) times every five (5) days.
ARTICLE 43: REDUCTION DUE TO REFUND OF CONTRIBUTIONS
In case the capital reduction implies a contribution refund or the exemption
from any liability dividends or any other amount owed for contributions, the
said reduction may only be carried out once thirty (30) days have elapsed from
the last publication of the notice described in article 43 above and provided no
third party opposes the reduction.
ARTICLE 44: REDUCTION DUE TO LOSSES
A capital reduction is compulsory when as a result of losses, the capital is
decreased by more than fifty percent (500), and those losses are not overcome
after one fiscal year, unless the corporation has legal reserves or freely
disposable reserves, new contributions are made, or the shareholders assume the
said losses by an amount offsetting the same.
TITLE V
FINANCIAL STATEMENTS AND PROFIT SHARING
ARTICLE 45: Within a maximum term of ninety (90) calendar days following the
closing date of each fiscal year, the Board of Directors must prepare the annual
report, the financial statements and the profit sharing proposal, if any, to
submit them before the Shareholders' Meeting for their approval.
ARTICLE 46: The financial statements shall be prepared and submitted in
accordance with the applicable legal provisions and pursuant to accounting
principles generally accepted in Peru, consistently and appropriately applied,
in order to supply all information required to meet the Peruvian accounting and
tax laws. The corporation shall provide their shareholders with any additional
financial information reasonably requested by them, delivering them free copies
of the documents indicated by Law.
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The financial statements of the corresponding fiscal year shall be subject to an
independent audit to be performed by certified public accountants, acting as
agents in Peru of internationally renowned auditing firms.
ARTICLE 47: Dividends may only be paid against profits actually obtained or
freely disposable reserves in the form, manner and time determined by the
Shareholders' Meeting, which may delegate to the Board of Directors the faculty
to resolve the allocation of interim dividends, subject to the provisions
contained in the General Corporations' Act and the Policy for the Allocation of
Dividends approved by the Shareholders' Meeting.
TITLE VI
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE CORPORATION
ARTICLE 48: The corporation shall be dissolved due to the causes provided for by
Law or when resolved by a Shareholders' Meeting specially called to such effect.
ARTICLE 49: The corporation so dissolved shall maintain its legal status while
the liquidation is carried out. The Shareholders' Meeting shall designate the
liquidators and the alternates thereof and establish their attributions.
ARTICLE 50: Once the corporate assets have been distributed, the termination of
the corporation shall be entered in the pertinent Registry.
Kindly add, Mr. Notary, all other clauses required by Law and forward the
pertinent notices to the Mining Registry of Lima, to file the reservation of
registration priority in the name of the corporation and of this Incorporation
Agreement.
Lima, May 17, 1999
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RM/MANHAT027
