COOPERATION AGREEMENT
ON THE
CUTTING AND MARKETING OF ANGOLAN DIAMONDS
WHEREAS, Angola is acknowledged as a preeminent world producer of rough diamonds
of remarkable quality and size, wishing, therefore, to promote the insertion of
the private initiative in the diamond cutting industry;
WHEREAS, Xxxxxx Xxxxxx International ("LKI") possesses unsurpassed expertise in
the cutting and marketing of such diamonds internationally, and owns suitable
trading networks in the major markets;
WHEREAS, Empresa Nacional de Diamantes de Angola ("Endiama"), Angola's national
diamond mining company, is in charge of diamond mining and takes keen interest
in participation in projects which might contribute to improving its position in
the market, that interest having been indicated during the signing of the
"Agreement for the Marketing of Diamonds and Sale after Cutting," dated December
9, 1988, between LKI and Endiama, and the "Declaration of Intent," dated
December 5, 1989, between the two Parties;
WHEREAS, Sociedade Angolana de Exploracao, Lapidacao e Comercializacao de
Diamantes, owned by a consortium of Angolan investors, is entitled to undertake
diamond cutting activities and wishes to exploit that right in such a way that
it may promote the national interests; Endiama being interested in adjusting the
above-mentioned contract to the new existing reality;
NOW, THEREFORE, the Parties hereby agree to a program of cooperation in the
cutting and marketing of Angolan diamonds in three States according to the
following aspects described below:
1. Stage One will commence upon execution of this Agreement and
will include the following activities:
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* Confidential portions omitted and filed separately with the Commission.
(A) Sociedade Angolana de Exploracao, Lapidacao e Comercializacao de
Diamantes and Endiama will form an offshore company (the "Joint
Venture") owned 60.8% by Sociedade Angolana de Exploracao, Lapidacao e
Comercializacao de Diamantes and 39.2% by Endiama, and that Joint
Venture shall designate a representative to coordinate Agreement
implementation with a representative designated by LKI.
(B) On the Joint Venture's behalf, Endiama will sell to LKI in Angola,
commencing with the first Endiama sales cycle after approval of this
Agreement by the Government of Angola, rough diamonds of sizes and
qualities suitable for cutting and sale. To that effect, Endiama shall
sell at least * of the diamonds produced by operators licensed under * .
The Parties acknowledge that their intention is to create a diamond
polishing cooperation in Angola with the capacity for polishing at least
$40 million of rough diamonds per year;
(C) LKI shall be responsible for the insurance and cutting of such
diamonds at its facilities in Puerto Rico, Botswana and/or elsewhere
with the participation of a representative designated by Endiama and for
the sale, through its international marketing networks, of the resulting
polished diamonds at maximum prices as well as the resale of any rough
diamonds in its possession whose cutting is not commercially feasible;
(D) Upon the first sale of rough diamonds to LKI by Endiama, LKI will
begin selecting, from among candidates identified by the Joint Venture,
Angolans possessing the requisite background, dexterity, disposition and
other vital characteristics and qualifications rendering those
individuals suitable for training as diamond cutters;
(E) Upon the sale by Endiama, for * consecutive sales cycles, of * worth
of rough diamonds to LKI in each such sales cycle, LKI will commence a
comprehensive Feasibility Study exercise, involving the Joint Venture
and establishing the basis upon which diamond cutting could be both
expanded and relocated within Angola by securing competitive conditions
necessary and appropriate in the global cutting industry. A Feasibility
Study report, to be delivered by LKI within four months of the Study's
commencement, would address such issues as the optimal location, design,
size, skills level, funding, production volumes, and market conditions
and strategies required for an Angolan cutting factory to succeed.
Consistent with the findings of the Feasibility Study, the Parties agree
that they will use their
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best efforts to create the conditions necessary to establish
a commercially viable diamond cutting operation in Angola.
2. Stage Two will commence as soon as trainees in sufficient numbers have been
identified and selected and LKI has purchased diamonds totalling at least * for
a period of * consecutive months. In addition to the foregoing cutting and
marketing, State Two activities will include the full training of those
trainees, at LKI's state-of-the-art facilities in Puerto Rico, Botswana and/or
elsewhere, in the cutting and preparation for sale of Angolan diamonds, with LKI
advancing all subsistence, transport, and other costs associated with such
period of training. If for any reason there is failure in the fulfillment of the
minimum selling requirements, as well as its regularity, or if otherwise decided
by unanimous consent due to the non-feasibility of this State, the Parties may
terminate the present Agreement.
3. Stage Three will commence at such time as all issues bearing upon the
commercial viability of an Angolan cutting factor have been resolved to the
satisfaction of LKI and the Joint Venture, and will entail establishment of that
factory, employing Angolans trained by LKI, in accordance with the blueprint set
forth in the Feasibility Study and the following projected corporate structure:
(A) Ownership of the factory by an offshore company established by LKI
and the Joint Venture without any capital contribution from the Joint
Venture;
(B) Shares in that company to be held 49% by LKI and 51% by the Joint
Venture;
(C) All material company decisions to be taken by consensus;
(D) Management and marketing to be provided by LKI under contract; and
(E) A shareholders agreement among the company's shareholders
formalizing their respective rights and obligations.
4. Financial and Payment Terms
*
(B) Within * days of the sale by Endiama of rough diamonds exported for
cutting or resale under this Agreement, LKI will pay to Endiama the Base
Price of those diamonds, as jointly valuated and agreed by LKI and the
Joint Venture on the basis of market prices. *
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(C) Profits (and any losses) from the sale of diamonds -- meaning sales
proceeds after deduction of the Base Price and after reimbursement in
full of all other costs with respect to the cutting, marketing, selling,
training, financing and other activities provided for in this Agreement
-- will be allocated 49% to LKI and 51% to the Joint Venture, whose
share will be paid by LKI offshore.
5. Further Obligations of the Parties. In addition to the obligations
enumerated above.
(A) LKI will obtain all visas and approvals, and arrange all logistical
support, in connection with the training of diamond cutters outside of
Angola;
(B) Endiama, Sociedade Angolana de Exploracao, Lapidacao e
Comercializacao de Diamantes and the Joint Venture will assure that all
export and other licenses, and all official approvals conferring upon
this project and its participants the full protection and rights
available under Angolan law, are procured; and
(C) Without delaying such implementation of this Agreement, the Parties,
based upon counsel from their respective legal and financial advisors,
will expeditiously conclude a further Agreement instituting such
corporate or other governance structures for this Agreement, and
containing such additional standard terms and specifications, as may be
advised by legal and technical counsel.
6. Term; Disputes. This Agreement shall be valid for a period of five years from
the date of its execution, renewable for a further five years, and any disputes
hereby shall be subject to the exclusive jurisdiction of the Provincial Tribunal
of Luanda, applying the Commercial Code of Angola.
SIGNED in Luanda, July 5, 1996, in Portuguese and English in two copies, each of
which has equal force and legal validity.
For LKI For Endiama
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxxxx Xxxxxx
For Sociedade Angolana de Exploracao,
Lapidacao e Comercializacao de Diamantes
/s/ Licenio Assis
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