Dated June 26, 2002
WEXFORD GOLDFIELDS LIMITED
and
THE LAW DEBENTURE
TRUST CORPORATION p.l.c
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ROYALTY AGREEMENT
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TABLE OF CONTENTS
PAGE
1 DEFINITIONS AND INTERPRETATION...................................................1
2 COVENANTS, REPRESENTATIONS AND WARRANTIES PERTAINING TO THE MINE, THE
MINING LEASE AND OPERATIONS......................................................3
3 ROYALTY..........................................................................4
4 PREEMPTIVE RIGHTS................................................................5
5 ASSIGNMENT AND TRANSFER..........................................................6
6 EVENT OF DEFAULT.................................................................7
7 DISPUTES.........................................................................7
8 RELEASE OF SECURITY..............................................................8
9 WAIVER...........................................................................8
10 AMENDMENTS.......................................................................8
11 COUNTERPARTS.....................................................................9
12 SUCCESSORS AND ASSIGNS...........................................................9
13 GOVERNING LAW....................................................................9
14 JURISDICTION.....................................................................9
15 INVALIDITY.......................................................................9
SCHEDULE 1 ROYALTY RATE
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THIS ROYALTY AGREEMENT is dated June 26, 2002 and made between:
(1) WEXFORD GOLDFIELDS LIMITED, a company incorporated under the laws of the
Republic of Ghana ("WGL"); and
(2) THE LAW DEBENTURE TRUST CORPORATION P.L.C., a company incorporated under
the laws of England, in its capacity as security trustee (as more
particularly described in Clause 17 of the Common Terms Agreement) and
in its capacity as the seller of certain assets pursuant to the Asset
Sale Agreement dated 1st March 2002 between The Law Debenture Trust
Corporation p.l.c. and WGL (the "ROYALTY HOLDER").
WHEREAS
WGL has agreed to purchase and the Royalty Holder has agreed to sell without
warranty certain Acquired Assets pursuant to the Asset Sale Agreements and the
Gold Royalty forms part of the deferred price payable by WGL to the Royalty
Holder for the Acquired Assets under the Asset Sale Agreements.
IT IS AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless otherwise expressly defined herein, terms
defined in the Common Terms Agreement have the same meaning when used in
this Agreement, and unless the context otherwise requires:
"AGREEMENT" means this Royalty Agreement;
"AREA OF INTEREST" means the area which is the subject of the Mining
Lease;
"COMMENCEMENT DATE" means the date of this Agreement;
"COMMON TERMS AGREEMENT" means that certain agreement dated on or about
the date hereof, 2002, as amended, modified or supplemented from time to
time between (1) WGL, as borrower, (2) the other obligors party thereto
from time to time, (3) Standard Bank London Limited, as facility agent
and security trustee and (4) the Royalty Holder;
"DEPARTMENT" means the Minerals Commission of Ghana and the Minister of
Mines of Ghana;
"$" and U.S. dollars means the lawful currency of the United States of
America;
"EXCLUDED PROVISIONS" means Clause 15.11 of the Common Terms Agreement
and Clause 7;
"EXPLORATION ACTIVITIES" means:
(a) all activities and operations which have as their purpose the
discovery, location and delineation and further investigation of
ore bodies within the Area of Interest, the testing of such ore
bodies and the analysis of samples derived from such ore bodies,
including feasibility, viability and amenability studies and the
administration of field offices for the performance of any of
these functions;
(b) the acquisition, registration and maintenance of exploration or
mining tenements within the Area of Interest; and
(c) the study and evaluation of mining methods and of treatment
plants and processes and the preparation of pre-feasibility and
feasibility studies in respect of discoveries of gold and other
Minerals within the Area of Interest;
"GOLD ROYALTY" means the royalty interest referred to in Clause 3.1 and
the proceeds therefrom, calculated in accordance with Clause 3.3;
"MINERALS" shall have the meaning given to it in PNDCL 153;
"MINING OPERATIONS" means every kind of work done on, or in respect of,
the Mining Lease, including developing, designing, constructing,
equipping, extracting, mining, improving, crushing, smelting, treating,
refining, transporting, handling gold and other Minerals and everything
incidental thereto;
"PARTIES" means each of the parties to this Agreement and "PARTY" means
either one of them;
"PNDCL 153" means the Minerals and Mining Law, 1986 (PNDCL 153) as
amended by the Minerals and Mining Amendment Act, 1994 (Act 475);
"PURCHASE PRICE" means, on any date and in respect of any offer made
pursuant to Clause 4.1:
(a) the higher of:
(i) Proven and Probable Reserves on such date, and
(ii) proven and probable reserves in the area the subject of
the Mining Lease on such date, calculated in accordance
with the standards of Canada's National Instrument NI
43-101, multiplied by:
(b) the higher of:
(i) the Royalty Rate on the date such offer is made, and
(ii) the Royalty Rate on the date payment is made pursuant to
such offer
multiplied by (subject to Clause 7.1) the Recovery Rate; and
"ROYALTY RATE" means, on any date, the applicable royalty rate for such
date set forth in Schedule 1.
2
1.2 INTERPRETATION
This Agreement is a Finance Document and shall be interpreted and
construed in accordance with the terms and provisions of the Common
Terms Agreement (including Clauses 1.2 to 1.5 and 17 thereof which are
hereby incorporated into this Agreement with all necessary consequential
changes).
2 COVENANTS, REPRESENTATIONS AND WARRANTIES PERTAINING TO THE MINE, THE
MINING LEASE AND OPERATIONS
2.1 WGL will:
(a) supply the Royalty Holder with copies of all returns and notices
provided to the Department and all returns and notices from the
Department;
(b) unless it is not commercially justified having regard to the
current London Gold Price and business conditions in Ghana, carry
out Exploration Activities within the Area of Interest in
accordance with good industry practices;
(c) unless it is not commercially justified having regard to the
current London Gold Price and business conditions in Ghana, use
its best endeavours to obtain extensions of the term of the
Mining Lease, renewals and conversions of the Mining Lease and to
comply with conditions imposed on the Mining Lease unless
otherwise agreed by the Royalty Holder in writing;
(d) act as a reasonable and prudent miner in exploring, developing
and operating the Area of Interest;
(e) act in accordance with all applicable laws, rules and
regulations; and
(f) use its best efforts, consistent with the standards of a
reasonable and prudent operator, to keep and perform all of the
terms, conditions and covenants, express and implied, of the
servitudes, Mining Lease and other interests comprising the Area
of Interest or imposed by other parties or governmental
authorities.
2.2 WGL agrees to conduct and carry on, or cause to be conducted and carried
on all operations respecting the Mining Lease with reasonable and
prudent business judgment and in accordance with good mining field
practices and to cause every Mine within the Area of Interest to be
operated in a good, prudent and workmanlike manner, and all improvements
and equipment necessary or useful to the operation of the same to be
provided and all to be done that a reasonably prudent operator would do,
to the end that the Area of Interest shall be operated and produced to
optimise returns to WGL and Royalty Holder.
2.3 WGL shall, subject to the other terms of this Agreement, have exclusive
charge, management and control of all operations to be conducted on the
Area of Interest. WGL shall promptly pay all costs and expenses incurred
in developing, operating and maintaining the Area of Interest.
3
3 ROYALTY
3.1 WGL will pay to the Royalty Holder, its successors and assigns forever,
a royalty interest in the Mining Lease and Area of Interest in all gold
in, under and extracted from the Area of Interest by or on behalf of WGL
(or any subsequent owner of the Mining Lease) or any other Person (the
"GOLD ROYALTY") provided that the aggregate Gold Royalty shall be
limited to $38 million.
3.2 WGL agrees to execute and deliver, at WGL's cost and expense, all other
and further instruments, certificates, agreements and other documents
necessary or desirable to further evidence or document the creation of
the Gold Royalty, including all filings and registrations of every kind
with the Department and other Governmental Agencies.
3.3 WGL hereby agrees to pay the Gold Royalty in accordance with the terms
of this Agreement. WGL will make quarterly payments of the Gold Royalty
to the Royalty Holder in arrears on each Cash Sweep Date and provide
written details of the amount of any such payments to the Royalty Holder
at the same time such payment is made. The Gold Royalty for any period
shall be calculated by multiplying the numbers of Ounces of Gold
produced and shipped from the Mine from the Area of Interest during such
period by the applicable Royalty Rate set out in Schedule 1 (such
Royalty Rate to be calculated as at the last Business Day of such
period); provided that WGL may not hold more than the higher of:
(a) two weeks average production; or
(b) 5,000 ounces,
of dore at the Mine without shipping such ounces of dore.
3.4 Without prejudice to any provision of any other Finance Document, the
Royalty Holder shall never personally be responsible for payment of any
part of the costs, expenses or other liabilities related to the Area of
Interest including, but not limited to, liabilities incurred by anyone
in developing, exploring, equipping, operating and abandoning the Area
of Interest, after the Effective Date, and WGL hereby agrees to
indemnify and save the Royalty Holder harmless from and against any and
all such responsibility and liability. Nothing herein shall ever be
construed to create a partnership, joint venture, mining partnership or
association between WGL and the Royalty Holder.
3.5 WGL shall within seven days after each Cash Sweep Date give to the
Royalty Holder a notice detailing the calculation and the amount of the
Gold Royalty for the particular quarter. The Royalty Holder shall have
the right to appoint a person or persons to audit WGL's books and
records, and to examine and inspect the Mine and to observe any and all
Mining Operations at any time and from time to time.
3.6 No later than March 31 in each year, WGL shall provide to the Royalty
Holder a certificate from its auditors confirming the amount of Ounces
so produced during that financial year and the quarterly statements
shall, if necessary, be adjusted accordingly and any adjusting payment
shall be made on the date such auditor's certificate is
4
delivered, together with interest from the date such payment should have
been made until such payment is actually received, at the Default Rate.
3.7 All books, accounts and records used by WGL to calculate the Gold
Royalty shall be kept in accordance with GAAP.
3.8 As soon as reasonably possible (but in all events not more than 30 days)
after the close of each calendar quarter, WGL shall furnish to the
Royalty Holder a detailed reconciliation statement of the Proven and
Probable Reserves as of the close of business on the last day of the
preceding calendar quarter.
4 PREEMPTIVE RIGHTS
4.1 (a) In the event that the Royalty Holder receives a written offer
from a third party to purchase the Gold Royalty under this
Agreement and such offer shall be acceptable to the Royalty
Holder, the Royalty Holder shall advise WGL of such proposal
including a written summary of the price and credit terms offered
by such third party. WGL shall then have the right, for a period
of 10 Business Days to acquire (or cause any Affiliate to
acquire) the Gold Royalty under the same price and credit terms
offered by such third party. In the event that WGL declines to
exercise its first right of refusal or fails to communicate its
intentions to do so to the Royalty Holder within the 10 Business
Day notice period, WGL shall be deemed to have granted approval
to the Royalty Holder's disposal of its rights or obligations
under this Agreement to such third party and the Royalty Holder
may assign and transfer such rights and obligations in accordance
with the provisions of Clause 5 of this Agreement and the
relevant provisions of the Common Terms Agreement to such third
party on the same price and credit terms within 10 Business Days
of WGL declining to exercise its first right of refusal or the
initial 10 Business Day notice period expiring, whichever occurs
sooner.
(b) If, in accordance with Clause 4.1(a), WGL advises it wishes to
acquire (or cause a Group Member to acquire) the Gold Royalty
then, upon payment by WGL or such Group Member (as the case may
be) of the amount due from WGL or such Group Member of the
purchase price specified in the relevant offer, the Gold Royalty
shall terminate, the Royalty Holder shall immediately thereafter
be irrevocably and unconditionally released from all its
obligations to WGL under each Finance Document, and (other than
in respect of the Excluded Provisions) WGL's obligations to the
Royalty Holder under the Finance Documents shall cease.
4.2 (a) At its election, and upon presentation of a quarterly statement
of Proven and Probable Reserves, as provided for in Clause 3.8,
WGL shall have the right to acquire the Gold Royalty from the
Royalty Holder at a price equal to the Purchase Price;
(b) As a condition to acquiring the Gold Royalty of the Royalty
Holder pursuant to this Clause 4.2, WGL must, inter alia, make a
written offer to the Royalty Holder in compliance with sub-clause
(c);
(c) Any offer made pursuant to Clause 4.2(b) shall:
5
(i) be for cash;
(ii) contain details of the Purchase Price offered, including
reasonable details thereof including each component of
the calculation thereof;
(iii) attach a certificate of the Sponsor representing and
warranting the accuracy of the calculation of:
(A) the Proven and Probable Reserves; and
(B) the proven and probable reserves calculated
pursuant to paragraph (a)(ii) of the definition
of "Purchase Price";
(iv) provide details of the date payment will be made
pursuant to such offer, which must not be more than 60
days after such offer is made;
(d) Subject to Clause 7, upon (i) making such offer and payment in
accordance with Clause 4.2(c)(iv), and (ii) the Royalty Holder
advising it does not intend to exercise its rights pursuant to
Clause 7.1 with respect to such offer, or the expiration of 60
days after such offer is made, the Gold Royalty shall terminate,
the Royalty Holder shall immediately thereafter be irrevocably
and unconditionally released from all its obligations to WGL
under each Finance Document, and (other than in respect of the
Excluded Provisions) WGL's obligations to the Royalty Holder
under each Finance Document shall cease.
5 ASSIGNMENT AND TRANSFER
5.1 WGL will not sell, transfer, assign, mortgage, encumber, charge or
pledge or otherwise deal with any rights or obligations arising under
this Agreement without the prior written approval of the Royalty Holder.
5.2 The Royalty Holder may, subject always to Clause 4.1 and in accordance
with Clauses 5.3 and 5.4 of this Agreement, sell, transfer, assign,
mortgage, encumber, charge or pledge or otherwise deal with the Gold
Royalty and any of its rights or obligations arising under this
Agreement without the consent of WGL, provided that the Royalty Holder
may not sell, transfer or assign the Gold Royalty to any person where
payment of the Gold Royalty to such person would lead to a breach of
U.S., Canadian or Ghanaian Applicable Law.
5.3 A transfer is effected in accordance with this Agreement and the Common
Terms Agreement when a New Royalty Holder executes an otherwise duly
completed Royalty Holder Deed of Accession delivered to it by the
Retiring Royalty Holder or WGL (as the case may be). WGL agrees that it
shall, as soon as reasonably practicable after receipt by it of a
Royalty Holder Deed of Accession duly completed by the Retiring Royalty
Holder appearing on its face to comply with the terms of this Agreement
and the Common Terms Agreement, execute that Royalty Holder Deed of
Accession.
5.4 On the execution of a Royalty Holder Deed of Accession by all the
parties thereto:
(a) each of the Retiring Royalty Holder and WGL shall be released
from further obligations towards one another under this Agreement
and their respective
6
rights against one another shall be cancelled (being the
"DISCHARGED RIGHTS AND OBLIGATIONS");
(b) each of the New Royalty Holder and WGL shall assume obligations
towards one another and/or acquire rights against one another
which differ from the Discharged Rights and Obligations only
insofar as that New Royalty Holder and WGL have assumed and/or
acquired the same in place of that Retiring Royalty Holder and
WGL;
(c) the New Royalty Holder and WGL shall acquire the same rights and
assume the same obligations between themselves as they would have
acquired and assumed had the New Royalty Holder been the First
Royalty Holder with the rights and/or obligations acquired or
assumed by it as a result of the transfer and to that extent the
Retiring Royalty Holder shall be released from any further
obligations to WGL and/or the New Royalty Holder under this
Agreement; and
(d) the New Royalty Holder shall become a party to this Agreement as
"Royalty Holder".
6 EVENT OF DEFAULT
6.1 Upon the occurrence of an Event of Default, the Royalty Holder may
terminate the obligations of the Royalty Holder hereunder and, in
exchange for the surrender of the Gold Royalty, may demand and receive
liquidated damages (calculated pursuant to Clause 6.2) be paid to it.
Upon such demand being made, WGL shall pay to the Royalty Holder the
amount of liquidated damages due from it (calculated pursuant to Clause
6.2).
6.2 The amount of liquidated damages payable by WGL pursuant to Clause 6.1
shall be equal to the amount of Proven and Probable Reserves (as set
forth in the most recent statement delivered pursuant to Clause 3.8 but
subject to dispute pursuant to Clause 7) multiplied by the applicable
Royalty Rate set out in Schedule 1, calculated as at the date of demand
made pursuant to Clause 6.1; provided that the amount of liquidated
damages payable by WGL pursuant to Clause 6.1 shall not exceed
$38,000,000 in aggregate.
7 DISPUTES
7.1 The Royalty Holder may dispute (a) the amount of a particular royalty,
(b) the amount of Proven and Probable Reserves, or (c) the calculation
of the Purchase Price (or any component forming part thereof, including
without limitation, the Recovery Rate, but, for the avoidance of doubt,
in each case only in respect of circumstances existing as at the date of
calculation of the Purchase Price) if it serves a notice upon WGL within
24 calendar months after the receipt by the Royalty Holder of that
particular royalty, or after service of a statement pursuant to Clause
3.8 or after any offer is made pursuant to Clause 4.1, as the case may
be (a "DISPUTE NOTICE"). Each Dispute Notice shall set out in reasonable
detail the grounds upon which the Royalty Holder is contesting the
particular royalty, statement of Proven and Probable Reserves or
calculation of the Purchase Price, as the case may be.
7
7.2 If WGL receives a Dispute Notice, then:
(a) WGL shall use its best endeavours to resolve the dispute within
60 days of the date of such Dispute Notice;
(b) if the dispute is not so resolved within 60 days of the date of
the Dispute Notice then the Expert shall determine the dispute
within 28 days of its appointment and the Parties shall give such
Expert all such assistance, access to information and other
documentation as such Expert may require;
(c) the Parties shall accept such Expert's determination of the
matter in dispute as final and binding and shall comply with such
determination forthwith; and
(d) the costs incurred by the Expert in making such determination
shall be borne by WGL, unless the Expert (based upon information
provided to the Royalty Holder prior to the date of service of a
Dispute Notice by or on behalf of the Royalty Holder) determines
the dispute in favour of WGL, in which case the Royalty Holder
shall pay such costs.
8 RELEASE OF SECURITY
Upon the occurrence of the later of:
(a) the Discharge Date;
(b) the payment in full of all royalties that may be payable under
any other royalty agreement secured by any Security Agreement;
and
(c) the sixth anniversary of the New Ownership Date,
and, provided that no Default shall have occurred, the Royalty Holder
shall exercise its voting rights under the Common Terms Agreement by
voting to instruct the Security Trustee to release all assets the
subject of a lien in favour of the Security Trustee pursuant to any
Security Agreement.
9 WAIVER
No waiver by either Party of any provision of or right, remedy or power
of that Party under this Agreement shall be effective unless it is in
writing signed by a director or senior officer of that Party and such
waiver shall be effective only in the specific instance and for the
specific purposes for which it was given and no failure or delay by any
Party to exercise any right, remedy or power under this Agreement or to
insist on strict compliance by the other Party with any obligation under
this Agreement, and no custom or practice of the parties at variance
with the terms of this Agreement shall act as a waiver of any Party's
rights hereunder.
10 AMENDMENTS
This Agreement may be only amended as set forth in the Common Terms
Agreement.
8
11 COUNTERPARTS
This Agreement may be signed in any number of counterparts and all
counterparts taken together shall be deemed to constitute one
instrument.
12 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns and each
Party shall, at its own expense, execute and cause its successors and
permitted assigns to execute any instrument and do everything necessary
to bind its successors and permitted assigns to this Agreement.
13 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws in force in England.
14 JURISDICTION
Each Party irrevocably and unconditionally:
(a) submits to the exclusive jurisdiction of the courts of England;
(b) waives any objection it may now or in the future have to the
bringing of proceedings in those courts and any claim that any
proceedings have been brought in an inconvenient forum; and
(c) agrees, without preventing any other mode of service permitted by
law, that any document required to be served in any proceedings
may be served in the manner in which notices and other written
communications may be given under the Common Terms Agreement.
15 INVALIDITY
Any provision of this Agreement which is or becomes prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent thereof without invalidating any other
provision of this Agreement, and any such prohibition or
unenforceability shall not invalidate such provision in any other
jurisdiction.
9
Signed by )
a duly authorised representative of )
and for and on behalf of WEXFORD )
GOLDFIELDS LIMITED )
Address: x/x Xxxxxx-Xxxxxxx & Xxxxx
0xx Xxxxx, Xxxxxxxx Xxxx Annex
Education Loop (off Xxxxxx Xxxx)
X.X. Xxx 0000
Xxxxx, Xxxxx
Attention: The directors
S-1
The Common Seal of
THE LAW DEBENTURE
TRUST CORPORATION P.L.C.
was hereunto affixed in the
presence of:
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Name Printed:
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Title:
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and
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Name Printed:
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Title:
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Address for Notices: 000 Xxxx Xxxxxx
Xxxxxx
XX0X 0XX
Attention: Xxxxx Xxxxxxxxx-Xxxxx
X-0
SCHEDULE 1
ROYALTY RATE
AVERAGE GOLD PRICE ROYALTY RATE
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Less than or equal to US$280 US$7.00
Greater than US$280 but less than or equal to US$290 US$8.00
Greater than US$290 but less than or equal to US$300 US$9.00
Greater than US$300 but less than or equal to US$310 US$10.00
Greater than US$310 but less than or equal to US$320 US$11.00
Greater than US$320 but less than or equal to US$330 US$12.00
Greater than US$330 but less than or equal to US$340 US$13.00
Greater than US$340 but less than or equal to US$350 US$14.00
Greater than US$350 US$15.00
"AVERAGE GOLD PRICE" means, on any date, the simple average of the market price
for 1 xxxx ounce of gold denominated in US dollars (London Bullion Market, P.M.
fix) for all the trading days in the previous three months.
SS-1
