EXHIBIT 4.27
MFC BANCORP LTD
("THE PURCHASER")
AND
NEWMONT AUSTRALIA LIMITED
("NEWMONT")
AND
NEWMONT LASOURCE S.A.S
("NLS")
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SHARE SALE AGREEMENT
BANFF RESOURCES LTD.
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KELLY & CO
LAWYERS
91 King William Street
ADELAIDE SA 5000
Tel: (08) 8205 0800
Fax: (08) 8205 0805
DX 301 Adelaide
Ref: AGC/203631
THIS AGREEMENT IS made the 7th day of August, 2002
PARTIES:
NEWMONT AUSTRALIA LIMITED (ABN 80 009 295 765) of 100 Hutt Street ADELAIDE SA
5000 (NEWMONT)
NEWMONT LASOURCE S.A.S a company incorporated in accordance with the laws of
France of 42 Avenue de la Grande Armee, Paris, France (NLS),
MFC BANCORP LTD a company organized under the laws of the Yukon Territory,
Canada (MFCB) of Millenium Tower, Handelskai 92-94, CHA-1200 Vienna, Austria,
(PURCHASER)
RECITALS
A. Banff Resources Ltd. is a company organised under the laws of the Yukon
Territory, Canada and listed on the TSX Venture Exchange as a Tier 1
Company;
B. NLS is a wholly owned subsidiary of Newmont and is the registered holder of
the Banff Shares which represent 85.3% of the issued shares of Banff;
C. Banff's principal asset is a 63% interest in Kasese Cobalt Company Limited
(KCCL) a company incorporated under the laws of Uganda;
D. NLS is owed money by Banff;
E. KCCL is the owner and operator of the Kasese Cobalt Mine located at Kasese,
Uganda;
F. The Purchaser, NLS and Newmont acknowledge that Banff purports to have an
option to acquire a 65% interest in the Kilembe Tailings Project from
Kilembe Mines Limited the validity and enforceability of which is disputed
by Kilembe Mines Limited; and
G. Newmont and NLS have agreed to sell, and the Purchaser agreed to purchase,
the Banff Shares and the Shareholder Loans, on the terms and conditions
specified in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and subject to and on the terms and conditions herein set
forth, the parties hereto covenant and agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement, including the recitals hereto, unless the context
otherwise requires:
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AFFILIATE with respect to any person means any other person directly or
indirectly controlling, controlled by or under common control with that
person. The term "control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly,
50% or more of the voting rights attributable to the shares of the
controlled corporation and, with respect to any person other than a
corporation, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of such person;
AGREED ADJUSTMENTS means the adjustments to the balance sheet of KCCL
agreed upon by the Purchaser and Newmont as set forth in the "Agreed
Adjustments" column in the Indicated Balance Sheet;
ANGLETON means Angleton Enterprises Corp. a company organized under the
laws of the British Virgin Islands;
BANFF means Banff Resources Ltd.;
BANFF SHARES means 55,210,984 shares in Banff;
BUSINESS DAY means any day other than a Saturday, a Sunday or a day on
which banks in Vancouver, British Columbia are authorized or obligated by
law to close;
CLOSING BALANCE SHEET means a balance sheet of KCCL prepared as at 31 July
2002 in accordance with GAAP;
COMPLETION means completion of the transactions contemplated by this
Agreement;
COMPLETION DATE means the later of:
(i) the day after written notice by the Parties to each other of the
satisfaction or waiver of the conditions in clause 2.1(a), (b) and
(c); or
(ii) 7 August 2002,
or such other date as may be mutually agreed upon by the Parties hereto;
EFFECTIVE DATE means 1 July 2002;
ENCUMBRANCE includes any and all encumbrances including options, mortgages,
pledges, charges, debentures, liens, assignments, hypothecations, security
interests, title retentions, preferential rights, court orders, trust
arrangements and any other legal or equitable interests or claims;
GAAP means generally accepted accounting principles of the United States of
America consistently applied;
INDICATED BALANCE SHEET means the balance sheet of KCCL prepared in
accordance with GAAP as at June 30, 2002 attached as Appendix "A" hereto;
KASESE COBALT MINE means the cobalt processing plant located at Kasese,
Uganda
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owned and operated by KCCL for processing tailings from the former Kilembe
mine;
KCCL DEBT PURCHASE AGREEMENT means the agreement executed at or about the
time of this Agreement between Newmont, NLS, and Angleton relating to the
sale and purchase of certain debts of, and securities granted by, KCCL
therein called Senior Debt, Shareholders Loans and Senior Debt Security;
LITIGATION means the actual and potential claims and disputes (whether or
not legal proceedings have been commenced or demands have been made)
between:
(a) KCCL and its contractors, suppliers and consultants (including Le
Bureau de Recherches Geologiques et Minieres ("BRGM")) engaged in the
development, design and construction of the Kasese Cobalt Mine
processing facilities and associated infrastructure because of which
KCCL has claims against such contractors, suppliers and consultants
including claims for breach of contract and breach of duty of care and
in certain cases such contractors, suppliers and consultants have
notified KCCL of claims and counterclaims arising from the
development, design and construction of the Kasese Cobalt Mine
processing facilities and associated infrastructure; and
(b) between KCCL and any insurer of KCCL or insurance broker used in
arranging insurance of KCCL in respect of business interruption
arising from machinery breakdown or damage occurring prior to the
Effective Date because of which KCCL has claims against such insurers
or brokers; and
(c) between KCCL and insurers of such contractors, suppliers and
consultants in respect of professional negligence of such contractors,
suppliers or consultants because of which KCCL has claims against such
insurers,
but excluding any claim or dispute arising from acts or omissions of any
person occurring after Completion;
MINE CLOSURE COSTS means the cost of closing down and rehabilitating the
Kasese Cobalt Mine site following closure of that mine in accordance with
its current mine plan;
MINING OPERATIONS means the Kasese Cobalt Mine and/or Kilembe Tailings
Project;
NET WORKING CAPITAL means the current assets of KCCL less current
liabilities of KCCL as set forth in a balance sheet prepared in accordance
with GAAP;
PARTIES means the parties to this Agreement;
ROYALTY AGREEMENT means an agreement between Newmont, NLS and the Purchaser
pursuant to which the Purchaser will grant to NLS a royalty in the form
attached hereto as Appendix B;
SHAREHOLDER LOANS means any and all amounts due, owing or accruing from
Banff to NLS or its Affiliates as at the date of Completion, which totalled
$11,430,667 as at 30 June 2002;
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SPECIFIED LIABILITIES means all amounts due or payable by or liabilities of
KCCL and its Affiliates as at the date of Completion for cobalt and
limestone royalties and to the Ugandan Electricity Board for electrical
supply;
TAILINGS PIPELINE PROJECT means the current project of KCCL to build and
bring into operation an approximately 8 km tailings outflow pipeline
replacement;
TRADE LIABILITIES means all staff and external creditor liabilities of KCCL
as at the Effective Date other than liabilities: (i) arising out of the
Litigation (but not being legal or consultants fees for past services in
connection with any of the Litigation); and (ii) to Newmont, NLS and their
Affiliates, officers and directors;
VENDOR means either Newmont and/or NLS as the case may be and "VENDORS"
means either or both of them; and
WARRANTY means each of the warranties and representations made by Newmont
and NLS contained in schedule 2 to this Agreement;
1.2 INTERPRETATION
In this Agreement, unless the context otherwise requires:
(a) a reference to any document is a reference to that document as varied,
novated or replaced from time to time;
(b) the singular includes the plural and vice versa;
(c) a reference to a gender includes all other genders;
(d) the use of the word "including" shall not imply any limitation;
(e) a reference to a thing includes all or any part of it;
(f) where a word or phrase is defined, its other grammatical forms have a
corresponding meaning;
(g) a reference to a person or entity includes a natural person, a
partnership, corporation, trust, association, an unincorporated body,
authority or other entity;
(h) a reference to a person includes that person's legal personal
representative, successors and permitted assigns;
(i) a term which purports to bind or benefit two or more persons binds or
benefits them jointly and severally;
(j) a reference to a statute, ordinance, code or other law includes
regulations and other instruments issued under it and consolidations,
amendments, re-enactments or replacements of any of them;
(k) a reference to DOLLARS or $ is to an amount in United States of
America currency.
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(l) a reference to time is to local time in Vancouver, Canada;
(m) a reference to a clause, schedule or annexure is a reference to a
clause of, or schedule or annexure to this Agreement; and
(n) headings have been inserted for convenience only and shall not affect
the interpretation of this Agreement.
2. CONDITIONS PRECEDENT
2.1 CONDITIONS
Completion of this Agreement is subject to satisfaction of each of the
following conditions:
(a) Banff obtaining any regulatory or shareholder approvals necessary
under the laws of Canada in respect of the transactions contemplated
by this Agreement;
(b) KCCL obtaining any regulatory board or shareholder approvals necessary
under the laws of Uganda or its constituent documents in respect of
the transactions contemplated by this Agreement;
(c) Newmont and the Purchaser obtaining an expression of support by the
Ugandan Government for the transactions contemplated by this
Agreement;
(d) Newmont, NLS and Angleton entering into the KCCL Debt Purchase
Agreement;
(e) International Finance Corporation ("IFC") and Societe De Promotion Et
De Participation pour la Cooperation Economique SA ("Proparco") each
entering into an agreement with the Purchaser to sell all of their
shares in KCCL to the Purchaser for the sum of US$1.00 each at
Completion; and
(f) Completion occurring under the KCCL Debt Purchase Agreement.
2.2 REASONABLE ENDEAVOURS
The Parties agree to use their respective reasonable endeavours to ensure
that the conditions precedent in clause 2.1 are satisfied prior to 7 August
2002.
2.3 BENEFIT OF CONDITIONS
The conditions precedent in clause 2.1(a) and (b) are for the benefit of
Newmont and NLS and may only be waived by Newmont and NLS. The condition
precedent in clause 2.1(e) is for the benefit of the Purchaser and may only
be waived by the Purchaser and the conditions precedent in clauses 2.1(c),
(d) and (f) are for the mutual benefit of both Newmont and the Purchaser
and may only be waived by both of them. Each Party hereto shall promptly
give written notice to the other Party upon satisfaction or waiver of any
of the conditions in clause 2.1 which are for its benefit.
2.4 FAILURE TO MEET CONDITIONS
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If the conditions precedent are not satisfied by 30 September 2002, then,
except for clauses 14, 15.10, 15.11 and 15.13 and any rights or liabilities
a party may have for prior breach of this clause 2 of this Agreement shall
terminate and have no further effect.
3. SALE OF SHARES
3.1 SALE AND PURCHASE OF SHARES
On Completion, with effect from the Effective Date, Newmont shall procure
that NLS, and NLS shall, as the legal and beneficial owner sell and
transfer to the Purchaser and the Purchaser agrees to buy from NLS, the
Banff Shares free from any Encumbrance or third party interest and with all
benefits, rights and entitlements (including dividend rights) attached or
accruing to them on and from the Effective Date, for the Sale Price as set
forth in clause 3.3 and otherwise on the terms and conditions of this
Agreement.
3.2 TITLE AND RISK
Title to and property and risk in the Banff Shares:
(a) remains with NLS until Completion; and
(b) passes to the Purchaser on and from Completion.
3.3 SALE PRICE
The Sale Price for the Banff Shares shall be $1.00 payable to NLS.
4. COMPLETION
4.1 TIME AND PLACE OF COMPLETION
Completion will occur on the Completion Date at the offices of Sangra,
Moller, 1000-925 West Georgia Street, Vancouver, British Columbia, Canada,
V6C 3L2 at 4:00 pm (Pacific Standard Time), or on such other date and time
as agreed to in writing by the Parties.
4.2 DELIVERIES
At Completion:
(a) the Purchaser shall pay to NLS or as NLS directs the Sale Price in
clear funds;
(b) the Purchaser, Newmont and NLS will enter into the Royalty Agreement;
(c) the Vendors will procure that its nominees on the board of Banff and
on the board of KCCL resign and are replaced with nominees of the
Purchaser;
(d) the Vendors will:
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(i) subject to clause 4.2(e)(ii), deliver to the Purchaser
possession or control of the following: (1) files, documents,
papers, contracts, agreements, legal descriptions, open books
of account or ledgers and documentation in support thereof used
or useful in the operation of the Mining Operations, and (2) all
other information, whether in writing, on computer diskette or
other form or medium, that pertains to the use or ownership
of the assets utilized in the Mining Operations, Banff or
the Banff Shares;
(ii) as soon as is reasonably practicable after the Completion Date,
deliver to the Purchaser possession or control of all items in
the immediately above subclause that Newmont and NLS were unable
to deliver at Completion; and
(iii) deliver to the Purchaser possession of all share registers,
minute books and corporate books and records for Banff in the
possession or control of Newmont or NLS or any of their
Affiliate.
(e) Newmont will, in form and substance satisfactory to the Purchaser
acting reasonably, provide sufficient documentation to:
(i) evidence that those matters specified in this Agreement as being
required to occur prior to or at Completion have occurred; and
(ii) enable the Banff Shares and the Shareholder Loans to be duly
assigned, transferred to and registered in the Purchaser's name
in accordance with applicable laws; and
(f) concurrently with the sale and transfer of the Banff Shares pursuant
to clause 3.1 hereof, and as a condition thereof, IFC and Proparco
shall assign and transfer all of their shares of KCCL to the Purchaser
or its order for the sum of $1.00 each.
4.3 INTERDEPENDENCY
The obligations of the Parties in respect of Completion under this
Agreement and completion under the KCCL Debt Purchase Agreement are
interdependent. All things or actions required to be done at Completion
under this Agreement and at completion under the KCCL Debt Purchase
Agreement will be treated as having taken place simultaneously and (unless
all of the Parties agree in writing to the contrary) no delivery or payment
will be treated as having been made until all deliveries and payments due
to be made at Completion under this Agreement and completion under the KCCL
Debt Purchase Agreement have been made. Completion under this Agreement and
completion under the KCCL Debt Purchase Agreement will be taken for all
purposes not to have occurred unless and until all those deliveries and
payments have been made unless all of the Parties agree in writing to the
contrary.
4.4 RESCISSION RIGHTS
If Completion does not occur on the Completion Date as the result of a
default by one of the Parties hereto, then, subject to clause 4.5 hereof,
the non-defaulting Party or Parties
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may, by not less than twenty one days written notice to the defaulting
Party setting forth such default and requesting such defaulting Party to
remedy the default, rescind this Agreement without prejudice to any other
rights, powers or remedies at law, equity or otherwise the Parties may
have. If the KCCL Debt Purchase Agreement is rescinded, this Agreement
shall be taken to have automatically been rescinded also in accordance with
this clause.
4.5 NOTICE OF RESCISSION
If a notice is duly given under clause 4.4 and:
(a) the defaulting Party or Parties do not rectify the breach specified in
such notice before the expiry of the twenty-one day period in such
notice; and
(b) Completion does not occur before the expiry of the period of notice
given then at the expiry of that period of notice,
then at the expiry of that period of notice this Agreement will be at an
end and of no further force or effect save that the rights of the Party or
Parties not in default and the liability of the Party or Parties in default
for breach of this Agreement and loss of the benefit of this Agreement will
continue unaffected.
4.6 NEWMONT'S AND NLS' OBLIGATIONS UNTIL REGISTRATION
After Completion and until the Banff Shares are registered in the name of
the Purchaser or its nominee, Newmont shall procure NLS and NLS must
convene and attend general meetings of Banff, vote at those meetings and
take all other action in the capacity of registered holder of the Banff
Shares as the Purchaser may lawfully require from time to time by written
notice.
5. LIABILITIES OF BANFF
5.1 SHAREHOLDER LOANS
At Completion and concurrently with the sale and transfer of the Banff
Shares pursuant to clause 3.1 hereof, NLS shall and Newmont shall procure
that NLS shall assign to the Purchaser, or its order, and the Purchaser
agrees to the assignment of:
(a) all of the Shareholder Loans free from any Encumbrance or third party
interest and with all benefits, rights and entitlements attached or
accruing thereto as at the Effective Date; and
(b) any and all Encumbrances held by Newmont or NLS or any of their
respective Affiliates over the assets of Banff;
For the avoidance of doubt, except as set forth in this Agreement, nothing
in this clause shall be taken to entitle the Purchaser, or Banff to seek
contribution or payment from Newmont or NLS or their respective Affiliates
under any guarantee, indemnity, agreement or covenant given either alone or
jointly with Banff or any other person.
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5.2 EXCLUSION OF LIABILITIES
For the avoidance of doubt, the following liabilities will remain with KCCL
following Completion:
(a) all Trade Liabilities;
(b) all liabilities which have arisen or arise out of the Litigation; and
(c) all Mine Closure Costs.
5.3 SPECIFIED LIABILITIES
Newmont shall be solely liable for the Specified Liabilities and, unless
agreed otherwise between the Purchaser and Newmont, at, before, or as soon
as reasonably practicable after Completion, shall pay to the relevant
creditors in cash the amount of the Specified Liabilities due to them or as
accepted by the relevant creditors in full satisfaction, provided that, if
the amounts are not determinable, the amounts to be paid on, before, or as
soon as reasonably practicable after Completion shall be equal to the
amounts shown on KCCL's financial statements as at 30 June 2002 and
adjusted to the actual amount of the relevant Specified Liability within 30
days of Completion.
6. LITIGATION
(a) Newmont and the Purchaser agree that Newmont shall have the right to
prosecute, institute, settle or compromise the Litigation in the name
of KCCL and the right and obligation to defend, settle or compromise,
in good faith, any and all claims or counterclaims that may be brought
by contractors, suppliers, consultants, and insurers against KCCL, the
Purchaser, their Affiliates and their respective directors and
officers arising out of the Litigation provided that Newmont shall use
all commercially reasonable efforts to at all times keep the Purchaser
and KCCL reasonably informed on all matters relating to the
Litigation.
(b) Newmont shall be solely entitled to and shall retain the proceeds and
benefit of KCCL's claims arising out of the Litigation and shall be
responsible for any indebtedness or liability of KCCL, the Purchaser,
their Affiliates and their respective officers and directors in
respect of any successful claims or counterclaims brought by such
contractors, suppliers, consultants and insurers arising out of the
Litigation and for all of the costs of the prosecution, settlement,
compromise or defence of any Litigation.
(c) Newmont agrees to indemnify and to hold the Purchaser and KCCL
harmless against all and any claims and counterclaims that may be
brought against KCCL, Banff, the Purchaser, their Affiliates and their
respective officers and directors in connection with or arising,
directly or indirectly, out of the Litigation, the costs of that
Litigation and the actions, deeds or inactions of the Seconded
Personnel (as hereinafter defined).
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(d) The Purchaser agrees to do all things necessary and commercially
reasonable to procure KCCL to enable Newmont to prosecute, institute
defend, settle or compromise the Litigation in the name of KCCL and
have the benefit and burden of the Litigation as contemplated in this
clause 6 including but not limited to, as may be necessary and legally
permissible:
(i) the secondment of up to two Newmont personnel (the "Seconded
Personnel") to the employ of KCCL (at Newmont's expense) or the
appointment of a Newmont nominee as a director without voting
rights or other officer of KCCL for the sole purpose of
prosecuting, instituting, defending, settling or compromising
the Litigation;
(ii) giving access to or making available all books and records of
KCCL including the copying of such books and records as Newmont
may reasonably request; and
(iii) granting access to the Kasese Cobalt Mine to such persons as
Newmont may reasonably request for the purposes of inspection,
gathering evidence and conducting tests at reasonable times and
in a reasonable manner without any interference with the
operation of the Kasese Cobalt Mine.
(e) The Purchaser must use all commercially reasonable efforts to procure
that KCCL acts in accordance with the lawful directions of Newmont
given from time to time in connection with the Litigation and does not
settle, compromise, abandon or make any admission in connection with
any of the Litigation without Newmont's written consent or direction.
(f) Subject to paragraph (g) below, any performance or security bonds or
guarantees provided to or in favour of KCCL by or on behalf of
contractors, suppliers, consultants or insurers of KCCL that are in
dispute with KCCL shall be for the benefit of Newmont and may only be
dealt with as Newmont directs in writing and if any proceeds of any
such bonds or guarantees are received whether before or after
Completion, such proceeds must be paid to Newmont as soon as possible
after receipt of same by KCCL, Banff or the Purchaser or applied as
Newmont directs in writing.
(g) The Parties acknowledge that KCCL has called on a performance bond
provided by Fritz Werner and that an amount of approximately Euro
370,665 is in a Euro denominated bank account in Kampala in the name
of KCCL in respect of such performance bond. To the extent that KCCL
is entitled to the proceeds from the performance bond provided by
Fritz Werner, KCCL may apply up to $260,000 of such proceeds to
rectification works at the Kasese Cobalt Mine. The application of the
said $260,000 by KCCL prior to it being finally determined or agreed
with Fritz Werner that KCCL is entitled to such proceeds shall be
entirely at the risk of the Purchaser, Banff and KCCL. Newmont shall
not be liable to KCCL, Banff or the Purchaser in any respect including
but not limited to the indemnity provided by Newmont pursuant to
clause 6(c), arising from the application of the said
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$260,000 by KCCL, Banff or the Purchaser prior to it being finally
determined or agreed that KCCL is entitled to such proceeds.
7. CLOSING BALANCE SHEET ADJUSTMENTS
(a) Forthwith after Completion, the Purchaser shall cause KCCL to prepare
and deliver the Closing Balance Sheet to each of the Purchaser and
NLS. If the Net Working Capital disclosed by the Closing Balance Sheet
after giving effect to the Agreed Adjustments to the extent not
already taken into account is less than the Net Working Capital on the
Indicated Balance Sheet after giving effect to the Agreed Adjustments,
NLS shall pay an amount equal to the difference to KCCL as an addition
to the Shareholder Loans forthwith upon delivery of the Closing
Balance Sheet to it by KCCL. If the Net Working Capital disclosed by
the Closing Balance Sheet after giving effect to the Agreed
Adjustments to the extent not already taken into account is higher
than the Net Working Capital on the Indicated Balance Sheet after
giving effect to the Agreed Adjustments, the Purchaser shall cause
KCCL to pay the difference in clear funds to NLS forthwith upon
receipt of the Closing Balance Sheet.
(b) For the avoidance of doubt, the Purchaser acknowledges that if
Completion occurs after 31 July 2002 and the Net Working Capital of
KCCL deteriorates or improves by comparison to the Net Working Capital
disclosed in the Closing Balance Sheet, no further adjustment is to be
made and none of NLS, Newmont or their respective Affiliates are under
no obligation to fund KCCL after 31 July 2002 other than by payment of
the difference (if any) pursuant to clause 7(a).
8. KCCL AGREEMENTS WITH NEWMONT
At the request of the Purchaser from time to time, at Completion and
thereafter, Newmont shall and shall procure the discharge and termination
(without cost or expense to KCCL, Banff or their Affiliates) by Newmont and
its Affiliates of such agreements, contracts and obligations among Newmont
and/or its Affiliates (on the one hand) and KCCL, Banff and/or their
Affiliates (on the other hand) provided that in respect of a shareholder's
agreement between KCCL and NLS made the 17th day of July, 1997, Newmont
may, at its election, instead of terminating it as aforesaid indemnify and
save harmless KCCL and its Affiliates from any and all costs, fees,
expenses, claims or damages in respect thereof. The Purchaser agrees to
procure KCCL's cooperation in any arrangements contemplated by this clause.
9. ROYALTY
9.1 ROYALTY CONSIDERATION
At Completion, in consideration of NLS assigning the Shareholder Loans and
Encumbrances therefor to the Purchaser pursuant to clause 5.1 hereof, the
Purchaser will grant a royalty to NLS on the terms of the Royalty
Agreement.
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10. TRANSITION
10.1 MANAGEMENT ASSISTANCE
(a) For the period from Completion until the earlier of three (3) months
after Completion or until the Purchaser or KCCL has engaged
satisfactory replacement employees or contractors as may be required
to manage the Mining Operations in the ordinary course and consistent
with its operation prior to the Effective Date, Newmont must:
(i) make available to KCCL such Newmont employees as are working at
the Mining Operations on Completion Date;
(ii) supply any necessary staff required by the Purchaser or KCCL due
to the resignation of existing personnel at the Mining
Operations;
(iii) during any period that the Mining Operations is on a care and
maintenance basis, assist in the recruitment of any necessary
expatriate replacement employees or contractors involved in the
care and maintenance program of the Mining Operations which the
Parties estimate will be three people.
(b) Newmont must cooperate with KCCL in the recruiting and management of
staff of KCCL and must assist KCCL in the recruitment of a start up
crew of expatriate employees or contractors when operations recommence
at the Mining Operations, such assistance being in the form of:
(i) general advice and recommendations;
(ii) referrals of possible candidates; and
(iii) review and comment on KCCL selections and provide comments on
capabilities of candidates if the candidate is known to Newmont.
(c) The Purchaser must procure KCCL to pay the actual costs of Newmont,
incurred in the ordinary course and consistent with past practice, in
providing the services referred to in clauses 10.1(a) and (b),
including actual salary, wages and associated amounts such as annual
leave, workers insurance and travel and accommodation of those Newmont
employees seconded to KCCL and any other out of pocket costs and
expenses actually incurred by Newmont plus a margin of 15% to cover
overheads. Newmont may invoice monthly for such amounts and such
amounts must be paid within 14 days of receipt of the invoice.
(d) The Purchaser shall indemnify and keep indemnified Newmont in respect
of any claims, costs and expenses of third parties including KCCL
incurred by Newmont in providing the services referred to in this
clause 10.1, other than those resulting from the wilful misconduct or
bad faith of Newmont and/or its personnel providing the services
referred to in this clause 10.1;
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(e) Newmont shall not be liable to the Purchaser, KCCL or any other person
for any loss, claim, action or demand arising from any act or omission
of any person provided by Newmont to provide the services under this
clause 10.1, and the Purchaser hereby releases and shall procure KCCL
releases Newmont in respect of any such action, liability, claim or
demand.
10.2 SECURITY
The Purchaser will use all commercially reasonable efforts to procure KCCL
to continue to retain Gray's Security to provide security at the Kasese
Cobalt Mine in the manner and on the terms it is currently providing
security, until completion of the Purchaser's program to place the Kasese
Cobalt Mine in care and maintenance.
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11.1 CARE AND MAINTENANCE
If, during the period of time after Completion and the first anniversary
thereof, operations cease at the Kasese Cobalt Mine and it is put on a care
and maintenance footing:
(a) the Purchaser shall use all commercially reasonable efforts to cause
KCCL to procure that as many as possible Ugandan nationals employed at
Kasese Cobalt Mine remain employed for the maximum possible time at no
less than 3 days per week;
(b) the Purchaser shall use all commercially reasonable efforts to procure
KCCL's working capital is applied towards funding the care and
maintenance of the Kasese Cobalt Mine; and
(c) if the trailing average cobalt price for 60 days exceeds US$12 per
pound then the Purchaser shall use all commercially reasonable efforts
to procure that processing operations recommence at Kasese Cobalt
Mine.
11.2 CONTINUING OBLIGATION
The Purchaser acknowledges and agrees that no action or omission by
Angleton whether in compliance with or in breach of the KCCL Debt Purchase
Agreement shall relieve the Purchaser of its obligations pursuant to clause
11.1 and the Purchaser shall indemnify the Vendors against any claim, loss,
action, costs or demand suffered by the Vendors arising from the Purchaser
not complying with its obligations pursuant to clause 11.1 hereof as a
result of a breach by Angleton of its obligations under the KCCL Debt
Purchase Agreement.
11.3 TAILINGS PIPELINE PROJECT
Newmont shall indemnify and save harmless KCCL and its Affiliates from all
costs, expenses and claims in excess of US$55,000 in respect of completing
the Tailings Pipeline Project in a good, workmanlike and professional
manner and having it operational in a manner satisfactory to KCCL, acting
reasonably. The Parties hereto agree that KCCL shall be considered to be a
party in interest for the purposes of this clause 11.3, and in connection
therewith KCCL shall
14
and shall be deemed to have been conferred all of the rights and remedies
available under this clause, and that following Completion, either KCCL in
its own name or the Purchaser (but without duplication) in its own name or
in the name of KCCL, may enforce any and all claims, rights and benefits
set forth in this clause 11.3 against Newmont. Newmont shall not be obliged
by this clause to pay any amount that is the obligation of KCCL to pay,
which amount arises due to any material variation, delay, extension of time
or amendment under or of the contract for the Tailings Pipeline Project
arising or agreed to after Completion.
12. WARRANTIES
12.1 WARRANTIES BY NEWMONT AND NLS
Newmont and NLS hereby jointly and severally represent, warrant and
undertake to the Purchaser that each of the Warranties is complete and
accurate on the date of this Agreement and will be complete and accurate at
the Completion Date as if made on each of those dates and in the same
terms.
12.2 PURCHASER WARRANTIES
The Purchaser warrants and represents to Newmont and NLS that at the date
of this Agreement:
(a) the execution and delivery of this Agreement has been properly
authorised by all necessary corporate action by the Purchaser;
(b) the Purchaser has full corporate power and lawful authority to execute
and deliver this Agreement and to consummate and perform or cause to
be performed its obligations under this Agreement;
(c) this Agreement constitutes a legal, valid and binding obligation of
the Purchaser enforceable in accordance with its terms (subject to the
discretion of Courts as to equitable remedies and laws relating to
creditors rights generally);
(d) it is able to pay its debts as and when they fall due; and
(e) the Purchaser had net assets of at least CDN $5,000,000 as shown in
its most recently prepared financial statements.
12.3 CONSTRUCTION OF WARRANTIES
Each Warranty is independent of the other Warranties and any other
representation made under or in respect of this Agreement and accordingly
is not affected by any of them.
12.4 LIMITATION OF LIABILITY
The Purchaser is only entitled to a claim against the Vendors in respect of
any breach of this Agreement by the Vendors if the amount of all claims, in
the aggregate, exceed $US100,000, in which event the Vendors shall be
liable for all claims,
15
including those counted to arrive at such $US100,000, provided that such
limitation will not apply to claims by the Purchaser as a result of: (a)
any breach of the Warranty set forth in clause 5(b) of Schedule 2 to this
Agreement; (b) any breach of the Vendors' covenants and obligations set
forth in clause 4.2(c) of this Agreement; and (c) any breach resulting from
the willfull misconduct, bad faith or gross negligence of the Vendors or
any of them, for which in each case of (a), (b) or (c) above recovery by
the Purchaser shall be on a dollar for a dollar basis.
13. PURCHASER ACKNOWLEDGMENTS
The Purchaser hereby expressly acknowledges and agrees with Newmont and NLS
as follows:
(a) no warranties, representations, assurances or conditions (other than
are herein contained) are given by Newmont or NLS or their respective
Affiliates and all other warranties, representations, assurances and
conditions are excluded and negatived to the extent permissible at
law;
(b) the Purchaser has agreed to purchase the Banff Shares as a result of
the Purchaser's own investigations and enquiries and in so doing has
not relied upon any warranty, representation or assurance given by or
on behalf of Newmont or NLS or any of their respective Affiliates
other than those herein contained; and
(c) the Purchaser has been informed that Banff is not presently in
compliance with Tier 1 Tier Maintenance Requirements of the TSX
Venture Exchange and that failure to meet such requirements may lead
to the downgrading of Banff to Tier 2 status or suspension from
trading on the TSX Venture Exchange.
14. CONFIDENTIALITY
The Parties must maintain absolute confidentiality concerning the existence
and terms of this Agreement and no public announcement or communication
relating to the negotiations of the Parties or the existence, subject
matter or terms of this Agreement may be made or authorised by or on behalf
of a Party without the prior written approval of the other Parties except
that a Party may make such disclosures in relation to this Agreement as it
may in its absolute discretion think necessary:
(a) to its shareholders, staff (including contract staff), professional
advisers and financiers upon those persons undertaking to keep
confidential any information so disclosed; or
(b) to comply with any applicable law or the requirement of any regulatory
body (including any relevant stock exchange or NASDAQ) providing that
it shall use reasonable efforts to permit the other Party to review
and comment on any proposed releases; or
(c) for inclusion in any document inviting capital to be invested in that
Party or a related body corporate; or
16
(d) as may reasonably be required in order to satisfy any of the
conditions precedent in clause 2.1.
15 GENERAL
15.1 AMENDMENT
This Agreement may only be amended or supplemented in writing, signed by
the Parties.
15.2 WAIVER
The non-exercise of or delay in exercising any power or right of a Party
does not operate as a waiver of that power or right, nor does any single
exercise of a power or right preclude any other or further exercise of it
or the exercise of any other power or right. A power or right may only be
waived in writing, signed by the Party to be bound by the waiver.
15.3 ENTIRE AGREEMENT
This Agreement including the exhibits and schedules hereto contains the
entire agreement between the Parties with respect to the subject matter
hereof and supercedes all prior agreements and understandings, oral or
written, with respect to such matters.
15.4 SEVERABILITY
Any provision in this Agreement which is invalid or unenforceable in any
jurisdiction is to be read down for the purposes of that jurisdiction, if
possible, so as to be valid and enforceable, and is otherwise capable of
being severed to the extent of the invalidity or unenforceability, without
affecting the remaining provisions of this Agreement or affecting the
validity or enforceability of that provision in any other jurisdiction,
unless it materially alters the nature or any material term of this
Agreement.
15.5 NO ASSIGNMENT
No Party may assign or transfer any of its rights or obligations under this
Agreement without the prior consent in writing of all the other Parties.
15.6 NO MERGER
No provision of this Agreement:
(a) merges on or by virtue of Completion; or
(b) is in any way modified, discharged or prejudiced by reason of any
investigations made or information acquired by or on behalf of the
Purchaser.
17
15.7 FURTHER ASSURANCE
Each Party must do, sign, execute and deliver and must procure that each
of its employees and agents does, signs, executes and delivers, all deeds,
documents, instruments and acts reasonably required of it or them by
notice from another Party to effectively carry out and give full effect to
this Agreement and the rights and obligations of the Parties under it,
both before and after Completion.
15.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts and all of
those counterparts taken together constitute one and the same instrument.
15.9 ATTORNEYS
Each attorney who executes this Agreement on behalf of a Party declares
that the attorney has no notice of the revocation or suspension of the
power of attorney under the authority of which the attorney executes this
Agreement.
15.10 GOVERNING LAW
This Agreement shall be governed exclusively by the laws of the Province
of British Columbia, and the federal laws of Canada applicable therein
without giving effect to any choice or conflict of law provision or rule
(whether of the Province of British Columbia or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other
than the laws of the Province of British Columbia, and the federal laws of
Canada applicable therein, and the Parties irrevocably submit to the
non-exclusive jurisdiction of the Supreme Court of British Columbia,
situate in Vancouver.
15.11 COSTS GENERALLY
Each Party must bear and is responsible for its own costs in connection
with the preparation, execution, Completion and carrying into effect of
this Agreement.
15.12 TAXES AND STAMP DUTY
The Purchaser must bear and is responsible for all transaction taxes,
stamp duty or other government impost imposed on or in respect of:
(a) this Agreement;
(b) the sale, purchase, assignment or transfer of any property under this
Agreement; and
(c) any instrument or transaction contemplated by this Agreement.
15.13 NOTICES
The provisions of schedule 1 apply to Notices.
18
15.14 SERVICE OF PROCESS
A Party may by Notice to all other Parties specify an address for the
service of process. Otherwise each Party agrees that any process to be
served on it in respect of any matter arising out of this Agreement may be
served by delivery to its registered office or at its address specified in
schedule 1 and for that purpose the requirements of paragraph 2(a) of
schedule 1 apply.
19
SCHEDULE 1
NOTICES
1. DELIVERY
A Notice must be in writing and delivered on a Business Day, sent by
prepaid mail (airmail if overseas) or by facsimile to the address or
facsimile number of the recipient Party set out in paragraph 3 or to such
other address or facsimile number as that Party may from time to time
notify the other Parties for the purposes of this schedule.
2. RECEIPT
A Notice given in accordance with paragraph 1 will be treated as having
been received:
(a) if it is delivered before 5.00 pm on a Business Day, at the time of
delivery otherwise at 9.00 am on the next following Business Day;
(b) on the third Business Day (or seventh Business Day if sent overseas)
after posting; and
(c) if sent by facsimile, upon production of a correct and complete
transmission report by the machine from which the facsimile was sent
which indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient notified for the purposes of this
paragraph (but if the communication is not completed by 5.00 pm on a
Business Day, at 9.00 am on the next following Business Day).
3. ADDRESSES FOR NOTICES
For the purposes of this schedule, the address and facsimile details of
each Party are as follows:
NEWMONT
Attention: Company Secretary
Address: 100 Hutt Street Adelaide South Australia 5000
Facsimile: +618 8303 1900
NLS
Attention: Managing Director
Address: 42 Avenue de Le Grande Armee, 75017, Paris, France
Facsimile: +331 56 68 06 66
20
PURCHASER
Attention: President:
Address: c/o 1000 Cathedral Place, 925 West Georgia Street,
Vancouver, B.C. V6C 3L2
Facsimile: +604-669-8803
21
SCHEDULE 2
WARRANTIES
1. NEWMONT AND NLS
In respect of each of Newmont and NLS:
(a) Newmont and NLS are duly incorporated and validly exist under the laws
of their respective places of incorporation;
(b) no meeting has been convened or resolution proposed, or petition
presented, and no order has been made, for winding up of either
Newmont or NLS;
(c) no distress, execution or other similar order or process has been
levied on any of the property or assets of either Newmont or NLS;
(d) no voluntary arrangement has been proposed or reached with any
creditors of either Newmont or NLS;
(e) no receiver, receiver and manager, provisional liquidator, officer of
the court, controller or other external administrator has been
appointed in relation to either Newmont or NLS; and
(f) each of Newmont and NLS are able to pay their respective debts as and
when they fall due.
2. DUE AUTHORISATION
(a) The execution and delivery of this Agreement has been properly
authorised by all necessary corporate action of each of Newmont and
NLS and each of Newmont and NLS have full power and lawful authority
to execute and deliver this Agreement and to consummate and perform or
cause to be performed their respective obligations under this
Agreement.
(b) This Agreement constitutes a legal, valid and binding obligation of
each of Newmont and NLS enforceable in accordance with its terms by
appropriate legal remedy (subject to the discretion of the Courts as
to equitable remedies and laws relating to creditors rights
generally).
(c) This Agreement and Completion do not conflict with or result in a
breach of or default or give any third Party the right to modify,
terminate or accelerate any obligation under any provision of either
of Newmont's or NLS' constitution, or any material term or provision
of any agreement, deed or any writ, order or injunction, judgment,
law, rule or regulation to which either of them is a Party or is
subject or by which they are respectively bound.
22
3. THE SHARES
The Banff Shares:
(a) have been duly and validly authorized and issued and are fully paid
and non-assessable; and
(b) are free and clear of any Encumbrance; and
(c) together with the other common shares in Banff are the only securities
in the capital of Banff or convertible into capital of Banff.
(d) There are no agreements, arrangements or understandings in force or
securities issued which call for the present or future issue of, or
grant to any person the right to require the issue of any shares or
other securities in Banff.
4. NLS
(a) NLS is a wholly owned subsidiary of Newmont;
(b) NLS holds full legal and beneficial title to the Banff Shares and such
shares constitute 85.3% of the issued shares of Banff;
(c) NLS and/or Newmont hold full legal and beneficial title to the
Shareholder Loans; and
(d) NLS possesses all authority, ability and consents necessary to and
shall upon Completion transfer the Banff Shares and the Shareholder
Loans to the Purchaser free and clear from all Encumbrances subject
only to receipt of the approvals referred to in clause 2.1 of this
Agreement;
5. THE COMPANY
(a) Banff is the sole legal and beneficial owner of record of 1,411 class
B shares of KCCL (the "KCCL B Shares"), the KCCL B shares rank pari
passu in all respects, including without limitation voting, dividends
and liquidation, with all other classes of shares of KCCL, the KCCL B
Shares represent 63% of all of the issued shares of all classes of
KCCL, the KCCL B Shares are validly and legally issued and are fully
paid and non-assessable and at Completion will not be subject to any
Encumbrance.
(b) Neither Banff nor KCCL have any obligation or liability to pay any
person a commission, agent's fee, finder's fee or spotter's fee as a
result of the sale of the Banff Shares and Shareholder Loans
contemplated in this Agreement.
6. COMPLETION
23
(a) On Completion, NLS shall have complied with and satisfied all of its
obligations to duly and validly repay, discharge, release and/or assign and
transfer the Shareholder Loans and the security therefor pursuant to clause
5.1 hereof.
(b) Immediately prior to Completion there shall be no loans or amounts payable
by Banff to any shareholder of Banff other than the Shareholders Loans due
to NLS and no person has any ownership interest in the Shareholder Loans
other than NLS.
APPENDIX A
INDICATED BALANCE SHEET
KASESE COBALT COMPANY LIMITED INDICATED BALANCE SHEET
INDICATED
KCCL AGREED BALANCE
GROUP ACCOUNT @30/06/2002 ADJUSTMENTS SHEET ADJUSTMENT COMMENTS
- ------------- ----------- ------------ ------------ -------------------------------------------------
ASSETS:
CURRENT ASSETS
Cash 2,111,335 (500,000) 1,611,335 500k returned to Newmont in July, wrongly sent to
Kasese in June for contractor settlement payment.
Inventory 3,886,953 3,886,953
Accounts Receivable -
VAT Receivable - Uganda 793,142 793,142
Other 675,381 - 675,381
Prepaid Expenses 578,885 578,885
------------ ------------ ------------
8,045,696 (500,000) 7,545,696
------------ ------------ ------------
LONG TERM ASSETS:
Due from related parties 1,224,000 1,224,000
Fixed Assets 350,000 350,000
Other Assets
------------ ------------ ------------
1,574,000 - 1,574,000
------------ ------------ ------------
------------ ------------ ------------
TOTAL ASSETS: 9,619,696 (500,000) 9,119,696
------------ ------------ ------------
LIABILITIES:
CURRENT LIABILITIES:
Accounts Payable & Accruals
Trade Payables & Accruals - Plant 341,589 - 341,589 Payables relate to construction works litigation.
Construction
Less indemnity from Newmont (341,589) (341,589) Offset by Newmont indemnity.
Trade Payables & Accruals - 160,992 - 160,992 Payables relate to non-construction works.
Construction
Trade Payables & Accruals -
Uganda
Accruals - UEB Consumption 562,183 (562,183) - Assume UEB paid out prior to settlement
Accruals - General
Royalties (Limestone & 1,110,104 (1,110,104) - Assume Royalty paid out prior to settlement.
Cobalt)
Other 372,452 372,452
Other 1,523,616 (610,048) 913,568 Reversal of Newmont charge backs.
Retention Control Account 7,830 7,830
------------ ------------ ------------
TOTAL 4,078,766 (2,623,924) 1,454,842
------------ ------------ ------------
Loans Payable - EIB 408,000 - 408,000
Less Indemnity from Newmont (408,000) (408,000) Offset by Newmont indemnity
Loans Payable - Other 11,268,832 (11,268,832) - Senior debt paid out.
Accruals Finance 712,880 (712,880) - Senior debt paid out.
Due to KML
Due to Related Party 17,705,362 (17,705,362) - Move to long term for ease of showing $6.1m WC
------------ ------------ ------------
34,173,840 (32,718,998) 1,454,842
------------ ------------ ------------
------------ ------------ ------------
NET WORKING CAPITAL (26,128,144) (32,218,998) 6,090,854
------------ ------------ ------------
NON CURRENT LIABILITIES:
Provision for Rehabilitation 409,336 409,336
Due to related company 85,273,258 54,012,270 139,285,528
Long Term Debt 22,542,861 (22,542,861) - Senior debt paid out
------------ ------------ ------------
108,225,455 31,469,409 139,694,864
------------ ------------ ------------
EQUITY:
Share Capital 44,000,040 44,000,040
Contributed Surplus
25
INDICATED
KCCL AGREED BALANCE
GROUP ACCOUNT @30/06/2002 ADJUSTMENTS SHEET ADJUSTMENT COMMENTS
- ------------- ----------- ------------ ------------ -------------------------------------------------
Current Years - Profit/(Loss) (15,269,244) 749,589 (14,519,655) Newmont indemnities (341,589+408,000)
Deficit (161,510,395) (161,510,395)
------------ ------------ ------------
(132,779,599) 749,589 (132,030,010)
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS 9,619,696 (500,000) 9,119,696
EQUITY
------------ ------------ ------------
APPENDIX B
ROYALTY AGREEMENT
DATED: AUGUST 7, 2002
MFC BANCORP LTD
and
NEWMONT AUSTRALIA LIMITED
ABN 80 009 295 765
and
NEWMONT LASOURCE S.A.S
- -------------------------------------------------------------------------------
ROYALTY DEED
- -------------------------------------------------------------------------------
(KELLY & CO. LAWYERS LOGO)
THIS DEED is made on August 7, 2002
BETWEEN:
MFC BANCORP LTD a company organized under the laws of the Yukon Territory,
Canada of Millennium Tower, Handelskai 92-94, CHA-1200 Vienna, Austria ("MFCB")
NEWMONT AUSTRALIA LIMITED (ABN 80 009 295 765) of 100 Hutt Street Adelaide SA
5000 ("NEWMONT")
AND:
NEWMONT LASOURCE S.A.S incorporated in accordance with the laws of France 42
Avenue de Le Grande Armee, 75017, Paris, France ("NLS'")
RECITALS:
In accordance with the terms and conditions of the Share Sale Agreement MFCB has
agreed to pay the Royalty and Interest to NLS on the terms of the Royalty
Agreement (as defined therein). This Deed sets out the terms and conditions in
respect thereto.
TERMS OF DEED:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Deed, unless the context otherwise requires:
AFFILIATE with respect to any person means any other person directly or
indirectly controlling, controlled by or under common control with that
person. The term "control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly,
50% or more of the voting rights attributable to the shares of the
controlled corporation and, with respect to any person other than a
corporation, the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of such person;
BANFF means Banff Resources Ltd.;
CAPITALIZED MAINTENANCE EXPENSES means all capital costs and expenses
actually expended from Completion on or for operations, plant, equipment
and maintenance at or directly related to the Kasese Cobalt Mine that are
properly categorized as capital as determined by KCCL in accordance with
GAAP;
CASH COSTS means costs incurred in the mining, processing, transportation,
storage and sale of minerals produced and/or processed at or from the
Mining Operations comprised of:
(i) operating costs and expenses of the Mining Operations; and
-2- ROYALTY DEED
- --------------------------------------------------------------------------------
(ii) interest and other fees and expenses on loans and other financial
facilities directly and solely related to financing the Mining
Operations other than on the loans and other financial facilities
comprising the Shareholder Loans and the Senior Debt; and
(iii) marketing expenses directly related thereto; and
(iv) administrative expenses directly related thereto; and
(v) taxes, dues, duties, excises, tariffs and other levies imposed by
the Government of Uganda in respect of the production, transport or
export of the minerals from the Mining Operations; and
(vi) taxes, dues, duties, tariffs and other levies imposed in the
country of the port of discharge on the import of the minerals to
the extent only to which the same have been paid by KCCL; and
(vii) Capitalized Maintenance Expenses (to the extent that they are not
already counted in one of the other paragraphs of this subclause);
and
(viii) all transport, freight charges, insurance, port and handling
charges; and
(ix) weighing, sampling, assaying, inspection, surveying, representation
and selling agency costs and charges and storage costs and
commissions associated with the sale of cobalt or other minerals
and incurred after such cobalt or other minerals have left the
production facilities at the Mining Operations; and
(x) Transition Fees means such fees pursuant to the terms of clause
10.1 of the Share Sale Agreement.
COMPLETION means completion of the transactions contemplated by the Share
Sale Agreement;
DEED means this Deed;
DISPOSE means in respect of an ownership interest in the Mining Operations,
to sell, assign, transfer, surrender or otherwise dispose (other than
through an Encumbrance) of any interest in the Mining Operations with the
result that the Percentage Interest of MFCB and its Affiliates is or will
be reduced;
ENCUMBRANCE includes any and all encumbrances including options, mortgages,
pledges, charges, debentures, liens, assignments, hypothecations, security
interests, title retentions, preferential rights, court orders, trust
arrangements and any other legal or equitable interests or claims;
EFFECTIVE DATE means 1 July 2002;
FREE CASH FLOW has the meaning set out in clause 2.2(b);
FISCAL YEAR means the period commencing on the Effective Date and ending on
the next following 31 December and each period of 12 consecutive months
thereafter;
-3- ROYALTY DEED
- --------------------------------------------------------------------------------
GAAP means generally accepted accounting principles of the United States of
America consistently applied;
INTEREST means the interest payable in accordance with clause 3.1 hereof;
INTEREST THRESHOLD means in any Fiscal Year of KCCL, a positive gross
profit margin of KCCL (calculated according to GAAP) for such year equal to
or greater than 20%;
KCCL means Kasese Cobalt Company Limited, a company incorporated under the
laws of Uganda;
KASESE COBALT MINE means the cobalt processing plant located at Kasese,
Uganda owned and operated by KCCL for processing tailings from the former
Kilembe mine;
KILEMBE TAILINGS PROJECT means the tailings project owned directly or
indirectly by Kilembe Mines Limited and in which Banff purports to have an
option to acquire a 65% interest;
MINING OPERATIONS means the Kasese Cobalt Mine and/or Kilembe Tailings
Project;
PARTY means a party to this Deed;
PERCENTAGE INTEREST means the total percentage ownership interest of MFCB
and its Affiliates in the Mining Operations (whether held directly or
indirectly or alone or jointly with any other person);
PRESCRIBED RATE means LIBOR plus 2 percentage points;
ROYALTY means the royalty to be paid to Newmont and NLS pursuant to the
terms and conditions set forth in this Deed;
ROYALTY PERIOD means each of:
(a) the period commencing upon the Effective Date and ending on 30
September, 2002; and
(b) every subsequent calendar quarter ending upon 31 December 31 March, 30
June and 30 September
ROYALTY STATEMENT means a statement prepared by MFCB in accordance with
GAAP, setting out in reasonable detail all information and data necessary
for the calculation of the Royalty payable in respect of a particular
Royalty Period.
SENIOR DEBT means any and all amounts, which as at Completion were due and
owing by KCCL to the Senior Lenders including, without limitation, fees and
expenses, which as at 30 June 2002 was comprised of those amounts set out
in Appendix A;
SENIOR LENDERS means International Finance Corporation, The Standard Bank
of South Africa Limited acting through its Standard Corporate and Merchant
Bank division, Societe De Promotion Et De Participation pour la Cooperation
Economique ("Proparco") SA and European Investment Bank and Royal Bank of
Scotland;
-4- ROYALTY DEED
- --------------------------------------------------------------------------------
SHAREHOLDER LOANS means any and all amounts due, owing or accruing from
KCCL or their Affiliates to Newmont, NLS or their Affiliates as at
Completion, which such amounts totalled $114,409,287 as at 30 June 2002,
and were comprised of those amounts set out in Appendix A hereto; and
SHARE SALE AGREEMENT means the agreement inter alia for the sale of
55,210,984 shares in Banff entered into by NLS, MFCB and Newmont executed
at or about the time of this Deed,
1.2 INTERPRETATION
In this Deed, unless the context otherwise requires:
(a) a reference to any document, agreement or deed is a reference to that
document, agreement or deed as varied, novated or replaced from time
to time;
(b) the singular includes the plural and vice versa;
(c) a reference to a gender includes all other genders;
(d) the use of the word "including" or any similar terms does not limit
what else might be included;
(e) a reference to a thing includes all or any part of it;
(f) where a word or phrase is defined, its other grammatical forms have a
corresponding meaning;
(g) a reference to a person or entity includes a natural person, a
partnership, corporation, trust, association, unincorporated body,
authority or other entity;
(h) a term which purports to bind or benefit two or more persons binds or
benefits them jointly and severally;
(i) a reference to a party includes that party's legal personal
representatives, successors and permitted assigns;
(j) headings are inserted in this Deed for convenience only and are not
intended to affect the interpretation of this Deed;
(k) a reference to a statute, ordinance, code or other law includes
regulations and other instruments issued under it and consolidations,
amendments, re-enactments or replacements of any of them;
(l) a reference to a clause, schedule, appendix or annexure is, except
where otherwise indicated, a reference to a clause of, or schedule,
appendix or annexure to this Deed;
(m) a reference to time is to local time in Vancouver, Canada;
(n) capitalized terms not defined herein shall have the meaning ascribed
thereto in the Share Sale Agreement; and
-5- ROYALTY DEED
- --------------------------------------------------------------------------------
(o) all monies payable by MFCB to Newmont and NLS under this document
shall be payable in US dollars.
1.3 CAPACITY
(a) MFCB warrants and represents to Newmont and NLS that, as at the date
of this document, MFCB has obtained all consents and approvals
necessary to enter into this Deed.
(b) MFCB shall be responsible and liable for the actions and omissions of
each of its Affiliates in relation to this Deed. MFCB enters into this
Deed both in its own right and as agent of and trustee for all of its
Affiliates.
2. ROYALTY
2.1 GRANT OF ROYALTY
For the consideration set out in the Share Sale Agreement and subject to
clause 1.4, MFCB agrees, subject to the terms and conditions in this Deed,
to pay the Royalty to NLS provided that nothing herein shall obligate or be
deemed to obligate MFCB or any of its Affiliates (including after
Completion Banff and/or KCCL) to conduct or maintain any level of operation
at the Mining Operations.
2.2 CALCULATION OF ROYALTY
(a) The Royalty to be paid by MFCB shall be an amount equal to 10% of the
Free Cash Flow up to an aggregate maximum of US$10,000.000 (the
"Royalty Cap"), payable in accordance with clause 2.3. For greater
certainty, if for any Royalty Period, there is no Free Cash Flow or
the same is a negative amount, no Royalty shall be paid or payable by
MFCB hereunder for such period.
(b) For the purposes of calculating the amount of the Royalty, "FREE CASH
FLOW" means the actual proceeds of sale from all cobalt and other
minerals produced from the Mining Operations received by KCCL or Banff
during each Royalty Period less the Cash Costs incurred during that
Royalty Period. For the purposes of this definition, in the case of
any disposal of cobalt or other minerals by KCCL which is not at a
sale on arms length commercial terms, KCCL will be taken to have
received at the time at which that disposal took place proceeds of
sale equal to the proceeds of sale which it would be reasonable to
expect that KCCL would have received had that disposal been a sale at
arms length commercial terms.
-6- ROYALTY DEED
- --------------------------------------------------------------------------------
3. PAYMENT OF INTEREST
3.1 CALCULATION OF INTEREST
In addition to the payment of the Royalty, MFCB agrees, subject to clause
1.4, to pay to NLS, in any Fiscal Year during which the Interest Threshold
is met, Interest at the rate of 5% per annum (based upon a 365 day year)
compounding semi-annually on so much of the amount of the Royalty Cap
outstanding from time to time during such Fiscal Year. For greater clarity,
if the Interest Threshold is not met, no Interest shall accrue or be paid
or payable in respect of such Fiscal Year
3.2 PAYMENT OF INTEREST
Interest shall be calculated and paid in clear funds and without deduction
of any kind within 30 days after the end of each Fiscal Year.
4. PAYMENT OF ROYALTY
4.1 DUE DATE FOR PAYMENT
MFCB must pay the Royalty due to NLS for a particular Royalty Period within
14 days after the end of that Royalty Period in clear funds and without
deduction of any kind.
4.2 ROYALTY STATEMENT
MFCB must submit a Royalty Statement to NLS at the same time as payment of
the Royalty for each Royalty Period and, in any event, within 14 days after
the end of the relevant Royalty Period.
4.3 FAILURE TO PAY ROYALTY
If MFCB fails to pay a Royalty payment due to NLS by the date on which such
payment is due and payable then, without prejudice to any other rights of
NLS, MFCB shall pay to NLS (as the case may be) immediately upon receipt of
written demand:
(a) interest at the Prescribed Rate on the unpaid Royalty payment
calculated daily from such due date until such Royalty payment has
been made in full; and
(b) all reasonable out of pocket costs and expenses (including reasonable
legal costs and disbursements) attributable to MFCB's failure to pay
the Royalty by its due date for payment.
5. ACCOUNTS AND AUDIT
5.1 RECORDS
MFCB must use all reasonable commercial efforts to cause KCCL to keep and
maintain or ensure that there are kept and maintained accurate books of
account, records, reports, invoices, statements, and other documents as are
reasonably necessary to verify and substantiate the amount of the Royalty
payable for each Royalty Period and the payment of Interest.
-7- ROYALTY DEED
- --------------------------------------------------------------------------------
5.2 ACCESS TO RECORDS
MFCB shall exercise its rights as a direct or indirect shareholder of KCCL
and cause its nominees on the board of KCCL to vote to procure that one of
Newmont or NLS and its representatives (including its auditors) have full
access during regular business hours upon reasonable prior notice (but no
more than twice in any 12 month period) to all of the books of account,
records, reports, invoices, statements and other documents kept and
maintained in accordance with Clause 5.1.
5.3 AUDIT
NLS (but only once in any 12 month period) shall have the right at their
own expense upon 30 days written notice to MFCB to audit at its own cost
the calculation of the Royalty as referred to in each Royalty Statement. If
an audit is undertaken and reveals any underpayment of the Royalty for any
Royalty Period, then MFCB must pay the amount of the Royalty outstanding
and interest on the amount outstanding at the Prescribed Rate upon written
demand by NLS. If the amount of the Royalty outstanding is at least
$100,000 in aggregate over four consecutive Royalty Periods then MFCB must
also pay the reasonable out-of-pocket costs and expenses of NLS's audit. In
the event that the audit determines the Royalty was correctly calculated,
NLS shall pay to MFCB the reasonable out-of-pocket costs and expenses
incurred by MFCB and KCCL in respect thereto.
5.4 DISPUTES
If there is a dispute as to the amount of the Royalty due which cannot be
resolved by the Parties within 20 days after delivery of written notice of
such dispute, then each of the Parties shall prepare and submit a written
statement setting forth the specific matters in dispute to the Vancouver,
British Columbia office of PriceWaterhouse Coopers (the "CA Firm") along
with any information, supporting documentation and other materials in
respect of each Party's determination of such calculation and the specific
matters in dispute, which firm shall render its opinion as to such matters
in accordance with the terms of this Deed. Based on that opinion, the CA
Firm shall then send to the Parties a written determination of the matters
in dispute and a written determination of the Royalty due (the "Royalty
Calculation") based upon such opinion, whereupon the Royalty Calculation
shall be final and binding upon the Parties. If the CA Firm determines that
the Royalty due for the relevant Royalty Period was underpaid by MFCB, then
MFCB shall pay any costs incurred by the CA Firm and forthwith pay to NLS
the amount of the underpayment. If the CA Firm determines that the Royalty
due for the relevant Royalty Period was paid accurately or overpaid by
MFCB, then Newmont or NLS shall pay any costs incurred by the CA Firm. In
the event of any overpayment, the requisite adjustment between the Parties
shall be made during the next Royalty Period to the Royalty payable in
respect thereof and, in the event MFCB is unable to fully recover such
overpayment during such Royalty Period, during the next succeeding Royalty
Periods until such overpayment is fully recovered.
6. ASSIGNMENT BY MFCB
6.1 RESTRICTION ON DISPOSAL OF INTEREST IN MINING OPERATIONS
MFCB covenants and agrees that it will not Dispose and will procure each of
its Affiliates to not Dispose of any interest in the Mining Operations
except: (i) to an Affiliate of MFCB; or (ii) with the prior written consent
of Newmont and NLS, which consent Newmont and NLS
-8- ROYALTY DEED
- --------------------------------------------------------------------------------
agree will not be unreasonably withheld or refused in the case of a
Disposal of an interest in a Mining Operations to another person
("ASSIGNEE"), where the Assignee would be reasonably expected to be able to
meet the obligations of MFCB under this Deed in respect of the Mining
Operations.
6.2 ROYALTY DEED
A Disposal by MFCB or any Affiliate of any interest in a Mining Operations
will not be effective unless the Assignee or relevant Affiliate
respectively enters into a royalty deed with Newmont and NLS in identical
terms, mutatis mutandis, to this Deed in respect of the interest in the
Mining Operations concerned or the Mining Operations which is Disposed of
to the Assignee.
6.3 RELEASE
Upon the due execution by MFCB and the Assignee or relevant Affiliate, and
the delivery to Newmont and NLS of the duly executed royalty deed referred
to in clause 6.2, MFCB shall be released and discharged from all
obligations arising out of this Deed attributable to the interest in the
Mining Operations so Disposed of or attributable to the Affiliate concerned
and arising after the execution and delivery of that royalty deed. Unless
and until the release in this clause becomes effective MFCB shall continue
to be liable to pay the Royalty pursuant to the terms hereof as if the
relevant Disposal had not occurred and this Deed shall be read and
construed accordingly.
6.4 RESTRICTION ON ASSIGNING OTHER INTERESTS IN THIS DEED
Except as provided in Clause 6, MFCB must not assign, transfer or otherwise
dispose of its rights or obligations under this Deed.
7. ASSIGNMENT BY NEWMONT OR NLS
Newmont or NLS may assign their rights and obligations under this Deed by
giving 14 days prior written notice to MFCB.
8. CONFIDENTIALITY
The Parties agree that the contents of this Deed and documents and
information disclosed pursuant to this Deed shall be kept confidential and
shall not be disclosed by the Parties otherwise than to each other or with
the consent of all Parties in an agreed format or:
(a) to its shareholders, staff (including contract staff), professional
advisers and financiers upon those persons undertaking to keep
confidential any information so disclosed;
(b) to comply with any applicable law or the requirement of any regulatory
body (including any relevant stock exchange or NASDAQ);
(c) for inclusion in any document inviting capital to be invested in that
disclosing Party or a related body corporate;
(d) to the financial institutions to which the disclosing Party or any of
its Affiliates owe
-9- ROYALTY DEED
- --------------------------------------------------------------------------------
continuing disclosure obligations as at the date of execution of this
Deed;
(e) to a financial institution in connection with any loan sought to be
arranged by the disclosing Party or any of its Affiliates;
(f) to a prospective purchaser of or subscriber for shares in the
disclosing party or an Affiliate; and
(g) to a potential assignee of the disclosing Party or an Affiliate of the
disclosing Party,
provided that any disclosures pursuant to paragraphs (f) or (g) above shall
only be made subject to the person to whom the disclosure is made
covenanting and agreeing with the disclosing party in a form enforceable by
the disclosing Party and the other Parties that the relevant information
shall not be disclosed to any other person for any purposes whatsoever.
9. NO INTEREST IN MINING OPERATIONS
This Deed does not confer upon Newmont or NLS, and Newmont and NLS will not
claim, any legal or equitable interest in any Mining Operations.
10. WAIVER
10.1 EFFECTIVENESS
No waiver by any Party or any provision of this Deed is effective unless it
is in writing executed by that Party and any waiver is effective only in
the specific instance and for the specific purpose for which it was given.
10.2 FAILURE OR DELAY
No failure or delay by any Party to exercise any right, power or remedy
under this Deed or to insist on strict compliance by the other Party with
any obligation under this Deed, and no custom or practice of the Parties at
variance with the terms of this Deed, constitutes a waiver of any Party's
right to demand exact compliance with this Deed.
11. NOTICE
The provisions of Appendix A apply to notices given under this document.
12. FURTHER ASSURANCES
Each party must do, sign, execute and deliver and must procure that each of
its employees and agents does, signs, executes and delivers all deeds,
documents, instruments and acts reasonably required of it or them by notice
from another party effectively to carry out and give full effect to this
Deed and the rights and obligations of the parties under it, both before
and after Completion.
13. RELATIONSHIP
This Deed does not create any partnership, joint venture or agency
relationship between the Parties. The Parties shall be treated as
independent contractors.
-10- ROYALTY DEED
- --------------------------------------------------------------------------------
14. COSTS
Each Party shall each bear its own costs and expenses in relation to the
preparation and execution of this Deed.
15. TERMINATION
This Deed shall automatically terminate, and the grant of the Royalty and
other obligations hereunder shall be cancelled upon the earlier of: (i) the
date which is seven calendar months after payment by MFCB of Royalties in
the aggregate amount of the Royalty Cap; (ii) the date of the permanent
closure of the Kasese Cobalt Mine and (iii) December 31, 2025. Upon
termination of this Deed, MFCB shall have no further obligations or
liabilities under this Deed.
16. SEVERANCE
If any provision of this Deed is prohibited, invalid or unenforceable in
any jurisdiction, that provision will, as to that jurisdiction be
ineffective to the extent of the prohibition, invalidity or
unenforceability without invalidating the remaining provisions of this Deed
or affecting the validity or enforceability of that provision in any other
jurisdiction.
17. AMENDMENT
This Deed may only be amended in writing signed by all the Parties and may
not be amended in any other manner.
18. COUNTERPARTS
This Deed may be executed in any number of counterparts. All counterparts
together will be taken to constitute one document and this Deed will come
into effect on the last exchange of either original or facsimile
counterparts.
19. ENTIRE AGREEMENT
While certain other agreements (including the Share Sale Agreement) contain
provisions that relate to this Deed, this Deed contains the entire
agreement of the Parties in relation to the Royalty. The terms of this Deed
shall prevail over the provisions of any other agreement to the extent of
any inconsistency in relation to the Royalty.
20. GOVERNING LAW
This Deed shall be governed exclusively by the laws of the Province of
British Columbia, and the federal laws of Canada applicable therein without
giving effect to any choice or conflict of law provision or rule (whether
of the Province of British Columbia or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the laws
of the Province of British Columbia, and the federal laws of Canada
applicable therein, and the parties irrevocably submit to the non-exclusive
jurisdiction of the Supreme Court of British Columbia, situate in
Vancouver.
-11- ROYALTY DEED
- --------------------------------------------------------------------------------
EXECUTED as a deed.
EXECUTED for and on behalf of MFC )
BANCORP LIMITED by: )
)
Signature
- ---------------------------- ---------------------------
Print Name
- ---------------------------- ---------------------------
Director/Secretary
- ---------------------------- ---------------------------
EXECUTED for and on behalf of )
NEWMONT AUSTRALIA LIMITED )
by: )
Signature
- ---------------------------- ---------------------------
Print Name
- ---------------------------- ---------------------------
Director/Secretary
- ---------------------------- ---------------------------
OR
Signed by Charles Main as Attorney for ) NEWMONT AUSTRALIA LIMITED by its
NEWMONT AUSTRALIA LIMITED who ) Attorney
certifies that he has not had notice of
revocation of his appointment as Attorney in
the presence of --------------------------------
Power of Attorney
- -----------------------------
Witness
- -----------------------------
Full Name of Witness
-12- ROYALTY DEED
- --------------------------------------------------------------------------------
EXECUTED for and on behalf of )
NEWMONT LASOURCE S.A.S. by: )
)
Signature
- ---------------------------- ---------------------------
Print Name
- ---------------------------- ---------------------------
Director/Secretary
- ---------------------------- ---------------------------
OR
Signed by Charles Main as Attorney for ) NEWMONT LASOURCE S.A.S. by its
NEWMONT LASOURCE S.A.S. who ) Attorney
certifies that he has not had notice of
revocation of his appointment as Attorney
in the presence of -------------------------------
Power of Attorney
- ---------------------------------
Witness
- ---------------------------------
Full Name of Witness
APPENDIX A
NOTICES
1. DELIVERY
A Notice must be in writing and delivered on a Business Day, sent by
prepaid mail (airmail if overseas) or by facsimile to the address or
facsimile number of the recipient party set out in paragraph 3 or to such
other address or facsimile number as that party may from time to time
notify the other parties for the purposes of this schedule.
2. RECEIPT
A Notice given in accordance with paragraph 1 will be treated as having
been received:
(a) if it is delivered before 5.00pm on a Business Day, at the time of
delivery otherwise at 9.00 am on the next following Business Day;
(b) on the third Business Day (or seventh Business Day if sent overseas)
after posting; and
(c) if sent by facsimile, upon production of a correct and complete
transmission report by the machine from which the facsimile was sent
which indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient notified for the purposes of this
paragraph (but if the communication is not completed by 5.00pm on a
Business Day, at 9.00 am on the next following Business Day).
3. ADDRESSES FOR NOTICES
For the purposes of this schedule, the address and facsimile details of
each party are as follows:
NEWMONT
Attention: Company Secretary
Address: 100 Hut Street Adelaide South Australia 5000
Facsimile: +618 8303 1900
NLS
Attention: Managing Director
Address: 42 Avenue de Le Grande Armee, 75017, Paris, France
Facsimile: +331 56 68 06 66
MFCB
Attention: President:
Address: c/o 1000 Cathedral Place, 925 West Georgia Street,
Vancouver, B.C. V6C 3L2
Facsimile: +604-669-8803
APPENDIX A
SENIOR DEBT AND SHAREHOLDER LOANS
SUMMARY OF KASESE SENIOR DEBT AND SHAREHOLDER LOANS
AS AT 30 JUNE 2002
BORROWED BY BORROWED FROM CURRENCY AMOUNT
- ----------- ---------------- -------- -----------
SENIOR DEBT - GUARANTEED
- ------------------------
KCCL IFC US$ 8,000,000
KCCL Proparco US$ 8,400,000
KCCL EIB US$ 6,502,600
KCCL SCMB US$ 10,909,091
Interest & Finance Charges US$ 712,880
----- -----------
Total US$ 34,524,571
----- -----------
SENIOR DEBT - OTHER
- -------------------
KCCL EIB Euros 480,000
----- -----------
SHAREHOLDER LOANS
- -----------------
KCCL Newmont LaSource US$ 102,978,620
----- -----------
Total Shareholder Loans US$ 102,978,620
----- -----------
SUMMARY OF BANFF SHAREHOLDER LOANS
AS AT 30 JUNE 2002
BORROWED BY BORROWED FROM CURRENCY AMOUNT
- ----------- ---------------- -------- ----------
Banff Newmont LaSource US$ 11,430,667
--- ----------
Total Shareholder Loans US$ 11,430,667
--- ----------
24
THIS SHARE SALE AGREEMENT
EXECUTED AS AN AGREEMENT
Signed by CHARLES MAIN as Attorney for NEWMONT AUSTRALIA LIMITED by its
NEWMONT AUSTRALIA LIMITED who Attorney
certifies that he has not had notice of
revocation of his appointment as Attorney in /s/ Charles B. Main
the presence of --------------------------------
Power of Attorney
/s/ Joseph P. Giuffre
- ---------------------------------
Witness
Joseph P. Giuffre
- ---------------------------------
Full Name of Witness
Signed by CHARLES MAIN as Attorney for NEWMONT LA SOURCE SAS by its
NEWMONT LA SOURCE SAS who certifies Attorney
that he has not had notice of revocation of
his appointment as Attorney in the presence /s/ Charles B. Main
of -------------------------------
Power of Attorney
/s/ Joseph P. Giuffre
- ---------------------------------
Witness
Joseph P. Giuffre
- ---------------------------------
Full Name of Witness
Executed for and on behalf of MFC
Bancorp Ltd. by:
- --------------------------------------------------------------------------------
/s/ James M. Carter
- --------------------------------- Signature -----------------------
James M. Carter
- --------------------------------- Print Name -----------------------
Vice-President
- --------------------------------- Director or Secretary -----------------------