SUBSCRIPTION AGREEMENT
Exhibti 99.2
This
Subscription Agreement is made as of the 19th day of
March, 2009
BETWEEN:
XXXXX
XXXXXXX DIAMOND CORPORATION
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KINROSS
GOLD CORPORATION
WHEREAS the Purchaser has
agreed to subscribe for, and the Corporation has agreed to issue to the
Purchaser, 15,200,000 Common Shares on a private placement basis, representing
approximately 19.9% of the issued and outstanding Common Shares following
Closing, for an issue price of U.S.$45,600,000;
AND WHEREAS the Purchaser has
agreed to subscribe for, and the Corporation has agreed to cause to be issued to
the Purchaser, (i) a 22.5% interest in the Partnership, for an issue price equal
to the Subscription Price and (ii) 225 Special Voting Shares, representing a
pro rata
non-participating voting interest in HWDM, for an issue price of
U.S.$2.25;
NOW THEREFORE in consideration
of the mutual premises, covenants and agreements herein contained, the parties
hereby agree as follows:
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1.
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Defined
Terms.
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In this
Agreement the following terms have the meanings set out below, unless the
context requires otherwise:
“Agreement” means this
Subscription Agreement and all schedules hereto;
“Business Day” means any day
other than a Saturday, Sunday or any day on which banks are generally not open
for business in the City of Toronto;
“Change of Control” means, with
respect to any person (the “first person”), the
acquisition by any person, or group of persons acting jointly or in concert,
of: (a) the power to direct or cause the direction of management and
policies of such first person, or to elect or appoint a majority of the board of
directors of such first person, whether through ownership of voting securities,
by contract or otherwise, and, for greater certainty, absence of any evidence to
the contrary, the acquisition of voting control or direction over more than 30%
of the votes attaching, collectively, to all outstanding voting securities of
such first person shall constitute a “Change of Control” for the purposes of
this Agreement; or (b) all or substantially all of the assets of such first
person; provided for greater certainty that no Change of Control shall be deemed
to have occurred with respect to the Corporation as a result of any action by
the Purchaser or any of its affiliates (including through the acquisition of
voting securities);
“Closing” means the closing of
the Transactions on the Closing Date;
“Closing Date” means the
earlier of: (a) the Business Day which is as soon as reasonably practicable
after the satisfaction or waiver of the conditions set forth in Sections 3, 4
and 5 (other than the delivery of items to be delivered on such date and the
satisfaction of those conditions that, by their terms, cannot be satisfied until
such date); and (b) such date as is mutually agreed to in writing by the
Corporation and the Purchaser;
“Common Share” means a common
share in the capital of the Corporation;
“Consulting Agreement” means
the Consulting and Professional Services Agreement made as of February 1, 2001
between HWDM (then Aber Diamond Mines Ltd.) and the Corporation (then Aber
Diamond Corporation), as amended and restated as contemplated by this
Agreement;
“Convertible Securities” means
any securities issued by the Corporation that are convertible into or
exercisable or exchangeable for Common Shares;
“Corporation” means Xxxxx
Xxxxxxx Diamond Corporation and, where applicable, includes its subsidiaries and
affiliates;
“Credit Agreement” means the
Second Amended and Restated Credit Agreement dated as of September 28, 2006
among HWDM (then Aber Diamond Mines Ltd.), the Corporation (then Aber Diamond
Corporation), the Partnership (then Aber Diamond Limited Partnership), Aber
Quebec Inc., 0000000 Canada Inc., The Bank of Nova Scotia, the Bank of Montreal
and the Canadian Imperial Bank of Commerce and certain other banks and financial
institutions, as amended from time to time;
“Credit Facilities” means the
credit facilities of the Corporation and HWDM, as applicable, established in
connection with the Credit Agreement;
“Current Value of the
Partnership” means [REDACTED], being the gross
value of the Partnership (before deducting the Intercompany Liabilities) as
agreed upon by the parties;
“Diavik Diamond Mine” means the
Diavik diamond mine located in the Northwest Territories;
“Diavik Joint Venture” means
the joint venture between DDMI and the Partnership formed pursuant to the JV
Agreement;
“DDMI” means Diavik Diamond
Mines Inc.;
“Excluded Issuance” means: (i)
the issuance of Common Shares or Convertible Securities pursuant to a rights
offering by the Corporation; (ii) the issuance of Common Shares or Convertible
Securities pursuant to or in connection with (A) the subdivision of the Common
Shares or Convertible Securities, (B) stock dividends or payments in kind, or
(C) similar transactions; (iii) the issuance of options pursuant to any Option
Plan; and (iv) the issuance of Common Shares or Convertible Securities upon the
exercise or conversion of any Convertible Securities, including any options
issued pursuant to any Option Plan;
-2-
“Governmental Authorities”
means governments, regulatory authorities, governmental departments, agencies,
commissions, bureaus, officials, ministers, Crown corporations, courts, bodies,
boards, tribunals or dispute settlement panels or other law, rule or
regulation-making organizations or entities: (a) having or purporting to have
jurisdiction on behalf of any nation, province, territory or state or any other
geographic or political subdivision of any of them, or (b) exercising, or
entitled or purporting to exercise any administrative, executive, judicial,
legislative, policy, regulatory or taxing authority or power;
“HWDM” means Xxxxx Xxxxxxx
Diamond Mines Ltd.;
“Intercompany Liabilities”
means the amount of indebtedness of the Partnership to the Corporation, HWDM and
the Selling Entities immediately prior to Closing, as certified to the Purchaser
by the Partnership;
“JV Agreement” means the Joint
Venture Agreement between DDMI (as successor in name to Kennecott Canada Inc.)
and the Partnership (as the successor in interest to HWDM, who in turn was
successor in interest to the Corporation) made as of March 23, 1995, as amended
from time to time;
“Net Value of the Partnership”
has the meaning set out in Section 2;
“NYSE” means the New York Stock
Exchange;
“Option Plan” means any stock
option plan that may be established or amended from time to time by the
Corporation and approved in accordance with all applicable laws and the rules
and policies of any stock exchange on which the Common Shares are listed,
pursuant to which the Corporation may issue options to purchase Common Shares to
directors, officers, employees and bona fide consultants;
“Participating Interest” has
the meaning ascribed thereto in the JV Agreement;
“Participation Period” means
the period commencing immediately after Closing and ending on the date that is
the earliest of any of the following dates:
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(i)
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the
date that is two years from the Closing Date;
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(ii)
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the
date that the Purchaser no longer beneficially owns the entirety of the
Purchased Units; and
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(iii)
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the
date that the Purchaser beneficially owns less than 10% of the Common
Shares, on a non-diluted basis and, for greater certainty, without
assuming the conversion in accordance with their terms of any Convertible
Securities;
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-3-
“Partnership” means Xxxxx
Xxxxxxx Diamond Limited Partnership, a limited partnership formed under the
Partnership Act
(Northwest Territories);
“Partnership Agreement” means
the partnership agreement dated March 1, 2005 governing the Partnership, as
amended as contemplated by this Agreement;
“Partnership Investment” means
the issuance to the Purchaser of the Purchased Units and the Purchased Special
Voting Shares;
“Period End” has the meaning
set out in Section 2;
“person” includes an
individual, a natural person, a firm, a corporation, a partnership, a trust, an
unincorporated organization, the government of a country or any political
subdivision thereof, or any agency or department of any such government, and the
executors, administrators or other legal representatives of an individual in
such capacity;
“Purchased Securities” means,
collectively, the Purchased Shares, Purchased Units and the Purchased Special
Voting Shares issued to the Purchaser;
“Purchased Shares” means an
aggregate of 15,200,000 Common Shares;
“Purchased Special Voting
Shares” means an aggregate of 225 Special Voting Shares;
“Purchased Units” means an
aggregate of 58,064,806.452 Units;
“Purchaser” means, as
applicable, Kinross Gold Corporation or, subject to Section 26, an affiliate of
Kinross Gold Corporation;
“Put Option” has the meaning
set out in Section 12;
“Rio Tinto” means Rio Tinto
PLC;
“Selling Entities” means,
collectively, Xxxxx Xxxxxxx Technical Services Inc., Xxxxx Xxxxxxx Diamond
(India) Private Limited, Xxxxx Xxxxxxx Diamond (Israel) Ltd. and Xxxxx Xxxxxxx
Diamond International N.V.;
“Special Voting Shares” means a
new class of special voting shares in the capital of HWDM of which the maximum
authorized number will be unlimited, and which will: (a) carry no entitlement to
dividends or other distributions; (b) a fixed entitlement limited to $0.01 per
special voting share on any liquidation or winding up of HWDM; (c) a voting
entitlement of one vote per special voting share; and (d) vote as a single class
with the existing voting shares in the capital of HWDM (other than as required
by applicable law);
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“Specified Permitted Adjusting
Distributions” means the distributions by the Partnership prior to or on
the Closing Date that are required to ensure that all bank balances of the
Partnership at Closing are zero, before payment of Intercompany Liabilities
(which shall be paid out of the Subscription Price) but after giving effect to
certain transfer price adjustments, receipts for goods shipped on or about March
20, 2009, and cash calls paid to DDMI, in each case after the date hereof but
prior to the Closing, all in accordance with the illustrative calculation
provided in Schedule 19(e) but based on the actual transfer price adjustments,
receipts, costs and foreign exchange rates;
“Subscription Price” has the
meaning set out in Section 2;
“subsidiaries” with respect to
the Corporation, includes any person in which the Corporation, directly or
indirectly, has the power to direct or cause the direction of management and
policies of such person, or to elect or appoint a majority of the board of
directors of such person, whether through ownership of voting securities, by
contract or otherwise;
“Tax Returns” includes all
returns, reports, declarations, elections, notices, filings, forms, statements
and other documents (whether in tangible, electronic or other form) and
including any amendments, schedules, attachments, supplements, appendices and
exhibits thereto, made, prepared, filed or required to be made, prepared or
filed by law in respect of Taxes;
“Taxes” includes any taxes,
duties, fees, premiums, assessments, imposts, levies and other charges of any
kind whatsoever imposed by any Governmental Authority, including all interest,
penalties, fines, additions to tax or other additional amounts imposed by any
Governmental Authority in respect thereof, and including those levied on, or
measured by, or referred to as, income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, harmonized sales, use,
value-added, excise, stamp, withholding, insurance premium, business,
franchising, property, development, occupancy, employer health, payroll,
employment, health, social services, education and social security taxes, all
surtaxes, all customs duties and import and export taxes, countervail and
anti-dumping, all licence, franchise and registration fees and all employment
insurance, health insurance and Canada, Québec and other government pension plan
premiums or contributions;
“Transactions” means,
collectively, the issuance of the Purchased Shares to the Purchaser and the
Partnership Investment, all on the terms and conditions of this
Agreement;
“TSX” means the Toronto Stock
Exchange;
“Unit” means a Partnership Unit
as defined in the Partnership Agreement; and
“United States” means the
United States of America, its territories and possessions, any State of the
United States, and the District of Columbia.
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2.
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Purchase
of the Purchased Securities.
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The
Purchaser hereby subscribes for and agrees to purchase from the Corporation, and
the Corporation hereby agrees to issue or cause to be issued to the Purchaser on
the Closing Date:
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(a)
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the
Purchased Shares at a price of U.S.$3.00 per Common Share for aggregate
consideration equal to U.S.$45,600,000;
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(b)
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the
Purchased Units at a subscription price (the “Subscription Price”)
such that the value of the Purchased Units will represent 22.5% of the Net
Value of the Partnership immediately following Closing calculated in the
same manner as specified in the example below; and
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(c)
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the
Purchased Special Voting Shares at a price of U.S.$0.01 per Special Voting
Share for aggregate consideration equal to
U.S.$2.25;
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all on
the terms and conditions set forth in this Agreement.
For the
purposes of this Agreement, the “Net Value of the Partnership”
prior to Closing means the Current Value of the Partnership, less all
Intercompany Liabilities of the Partnership (which will be fully repaid on
Closing to the Corporation, HWDM, and the Selling Entities, as
applicable).
As an
example of the calculation of the Subscription Price, assuming the Partnership
has Intercompany Liabilities of [REDACTED], the Subscription
Price will be U.S.$125,700,000, determined as follows:
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U.S.$
(millions)
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Current
Value of the Partnership
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[REDACTED]
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Intercompany
Liabilities
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[REDACTED]
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Net
Value of the Partnership
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[REDACTED]
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Net
Value of the Partnership immediately following Closing (1)
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[REDACTED]
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Subscription
Price (2)
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[REDACTED]
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(1) [REDACTED] being equal to 77.5% of
the Net Value of the Partnership immediately following Closing.
(2) The Subscription price is equal to
22.5% of the Net Value of the Partnership immediately following
Closing.
The
Corporation and the Purchaser agree that the Subscription Price will be adjusted
upwards or downwards to reflect 22.5% of any changes in working capital of the
Partnership from the balance sheet of the Partnership dated January 31, 2009
(reflecting the audited balance sheet of DDMI as at December 31, 2008) to the
balance sheet dated the last calendar day of the month in which Closing occurs
(the “Period End”), but
excluding from such adjustment: (i) any changes in the cash position of the
Partnership to the extent that such cash is held directly by the Partnership
rather than by DDMI on behalf of the Partnership; and/or (ii) any non-cash
adjustments to DDMI’s working capital position, provided there are no funds
flowing from the holders of Units into or out of the Partnership between Closing
and the Period End (except for the repayment of all Intercompany Liabilities as
contemplated above and the payment of Specified Permitted Adjusting
Distributions). Subject to the remainder of this Section, the amount
of any such adjustment, if any, shall be paid by the Partnership to the
Purchaser as a reduction of the Subscription Price, or the Purchaser to the
Partnership as an addition to the Subscription Price, as applicable, within five
Business Days following determination thereof and delivery in writing by the
Corporation to the Purchaser of the adjustment amount of, if any, and the
related calculations (the “Notice of Adjustment”), which
such determination and delivery shall not occur later than the fifth Business
Day after receipt by the Corporation of the necessary information from DDMI to
allow the determination thereof.
-6-
If the
Purchaser objects in good faith to the adjustment amount as a result due to its
calculation, the Purchaser shall so advise the Corporation by delivering to the
Corporation a written notice (the “Objection Notice”) within five
Business Days after delivery to the Purchaser of the Notice of
Adjustment. The Corporation shall give the Purchaser and its
accountants sufficient access to the books and records and working papers of the
Partnership used in the preparation of the Notice of Adjustment. The Purchaser
and the Corporation shall attempt to resolve all of the items in dispute set out
in any Objection Notice within 10 Business Days of receipt of the Objection
Notice by the Purchaser. Any items in dispute not resolved within such 10
Business Day period shall be referred as soon as possible thereafter by the
Corporation and the Purchaser to a nationally recognized accounting firm that
does not perform an external audit function for either party (the “Independent Auditor”). The
Independent Auditor shall act as expert and not as arbitrator and shall be
required to determine the items in dispute that have been referred to it as soon
as reasonably practicable but in any event not later than 10 Business Days after
the date of referral of the dispute to it. In making its determination, the
Independent Auditor will only consider the issues in dispute placed before it.
The Corporation and the Purchaser shall provide or make available all documents
and information as are reasonably required by the Independent Auditor to make
its determination. The determination of the Independent Auditor shall be final
and binding on the Parties and the Subscription Price shall be (or not be)
adjusted in accordance with such determination. The fees and expenses
of the Independent Auditor in acting in accordance with this Section 2 shall be
paid by the Purchaser unless there is a reduction of more than [REDACTED] between the amount
of the adjusted Subscription Price (adjusted as determined by the Independent
Auditor) from the amount of the adjusted Subscription Price (as
determined by the Corporation based on its Notice of Adjustment), in which case
the Corporation shall pay such fees and expenses. Within five
Business Days after resolution, by agreement of the Parties, of the dispute
which was the subject of the Objection Notice or, failing such resolution,
within five Business Days after the final determination of the Independent
Auditor, the Partnership or the Purchaser, as the case may be, shall pay to the
other the amount owing as a result of such resolution or final
determination.
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3.
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Conditions
of Closing of the Transactions for the Benefit of the
Corporation.
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The
Purchaser acknowledges and agrees that the Corporation’s obligation to issue and
sell the Purchased Securities to the Purchaser is subject to the following
conditions, which conditions are for the exclusive benefit of the Corporation
and may be waived, in whole or in part, by the Corporation in its sole
discretion:
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(a)
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the
issue and sale of the Purchased Securities being exempt from the
requirement to file a prospectus or registration statement and the
requirement to deliver an offering memorandum under Ontario securities
laws relating to the sale of the Purchased Securities;
and
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(b)
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the
representations, warranties and acknowledgements of the Purchaser being
true and correct in all material respects as at the Closing, with the same
force and effect as if made by the Purchaser as at the
Closing.
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4.
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Conditions
of Closing of the Transactions for the Benefit of the
Purchaser.
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The
Corporation acknowledges and agrees that the Purchaser’s obligation to purchase
the Purchased Securities from the Corporation is subject to the following
conditions, which conditions are for the exclusive benefit of the Purchaser and
may be waived, in whole or in part, by the Purchaser in its sole
discretion:
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(a)
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there
not having occurred a material adverse change with respect to any of: (1)
the Corporation on a consolidated basis; (2) the Diavik Joint Venture; or
(3) the Partnership, in each case, between the date of this Agreement and
the Closing Date. For the purposes of this Agreement, a “material adverse change”
means, with respect to an entity (or entities on a consolidated basis),
any change in the condition (financial or otherwise), operations, assets,
liabilities or business of such entity (or entities on a consolidated
basis) as applicable, that is, or would reasonably be expected to be,
materially adverse to such entity (or entities on a consolidated basis),
other than a change:
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(i)
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relating
to general economic, financial, currency exchange, securities or commodity
market conditions in Canada, the United States or
elsewhere;
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(ii)
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affecting
the worldwide diamond mining or luxury retail jewellery industries in
general, provided such effect does not have a materially disproportionate
effect on the Corporation and its subsidiaries and affiliates, considered
as a whole;
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(iii)
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resulting
from changes in the price of rough or polished diamonds;
or
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(iv)
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in
the market price of the Common Shares following and reasonably
attributable to the disclosure of the
Transactions,
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and
“material adverse
effect” shall have an analogous meaning;
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(b)
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no
third party having publicly announced or commenced a bona fide take-over
bid, business combination or similar transaction involving the
Corporation;
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(c)
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the
Corporation having made arrangements, satisfactory to the Purchaser,
acting reasonably, to repay, contemporaneously with Closing, all
outstanding amounts owed by the Corporation or its subsidiaries in
connection with the Credit Facilities, and to discharge all related
security interests affecting the JV Agreement, the Diavik Joint Venture
and the Partnership;
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(d)
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the
Purchaser shall have received an opinion dated the Closing Date from
counsel to the Corporation (including applicable local counsel, as
necessary) with respect to the matters set out in Schedule
“E”;
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(e)
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the
Purchaser shall have received a copy of the certificate and articles of
amendment of HWDM creating the Special Voting Shares in its authorized
capital and removing the voting rights attached to its Class A
shares;
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(f)
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the
representations and warranties of the Corporation being true and correct
in all material respects as at the Closing, with the same force and effect
as if made by the Corporation as at the
Closing.
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5.
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Conditions
of Closing of the Transactions for the Mutual Benefit of the Corporation
and the Purchaser.
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Each of
the Corporation and the Purchaser acknowledges and agrees that the Corporation’s
obligation to issue and sell the Purchased Securities to the Purchaser and the
Purchaser’s obligation to purchase the Purchased Securities from the Corporation
are subject to the following conditions, which conditions are for the mutual
benefit of the Corporation and the Purchaser, respectively, and may be waived
only by the mutual consent of the Corporation and the Purchaser:
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(a)
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the
receipt of all third party and regulatory approvals or consents required
by the Corporation for the completion of the Transactions, including
customary TSX and NYSE share listing approval with respect to the
Purchased Shares and all consents or approvals of the lenders required in
connection with the Credit Facilities, all of which having been obtained
on terms and conditions acceptable to the parties, each acting
reasonably;
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(b)
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each
of the Corporation and the Purchaser having executed and delivered, or
caused to have been executed and delivered, as applicable, (i) an amended
Partnership Agreement in accordance with the terms and conditions attached
at Schedule “A“, (ii) a shareholders agreement between the Corporation,
the Purchaser and HWDM in accordance with the terms and conditions
attached at Schedule “B”, (iii) an
amended and restated Consulting Agreement, in order to provide for the
payment of a management fee from the Partnership to reflect the
Corporation’s overhead costs exclusive of costs resulting from the
Corporation being a public company and those attributable to the retail
business, as more particularly set forth in Schedule “F”; and (iv) an
equalization payment agreement between the Purchaser and the Selling
Entities, pursuant to which: (1) Kinross will be entitled to receive from
the Selling Entities an additional equalization payment, which is
proportionate to Kinross’s interest in the Partnership at the time of
payment, in respect of any net profit realized by any of the Selling
Entities that is attributable to diamond production from the Diavik
Diamond Mine; (2) Kinross will be required to make to the Selling Entities
an additional equalization payment, which is proportionate to Kinross’s
interest in the Partnership at the time of payment, in respect of any net
loss realized by any of the Selling Entities that is attributable to
diamond production from the Diavik Diamond Mine and (3) if Kinross becomes
the direct or indirect owner of 100% of Diavik Joint Venture, Kinross
shall have the right to terminate any agreements entered into between the
Partnership, on one hand, and the Corporation, the Selling Entities or any
their respective affiliates, on the other;
and
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(c)
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there
being no actions, suits or proceedings to prohibit, condition or
materially limit the ownership or full rights of ownership of any of the
Purchased Securities and no order, ruling or determination having the
effect of suspending the issuance or ceasing the trading of any of the
Purchased Securities having been issued or made by any stock exchange,
securities commission, court or other regulatory authority and be
continuing in
effect.
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6.
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Delivery
and Payment.
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Not less
than one Business Day prior to the Closing Date, the Partnership shall deliver
to the Purchaser a certificate of the Corporation, signed on behalf of the
Corporation, without personal liability, by the Chief Financial Officer,
addressed to the Corporation certifying the amount of the Intercompany
Liabilities and the resulting Subscription Price.
The
Purchaser shall deliver the following to the Corporation at or prior to
Closing:
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(a)
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any
documentation as may be required by applicable securities laws (including
the rules and requirements of the TSX and the NYSE, as applicable) in
connection with the purchase by the Purchaser of the Purchased
Shares;
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(b)
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a
wire transfer in United States funds to the account of the Corporation,
with respect to the Purchased Shares and the Purchased Special Voting
Shares, in accordance with the wire transfer instructions set out in
Schedule “C”, in the aggregate amount of
U.S.$45,600,002.25;
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(c)
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a
wire transfer in United States funds to the account of the Partnership,
with respect to the Purchased Units, in accordance with the wire transfer
instructions set out in Schedule “C”, in the amount of the Subscription
Price (as set forth in the foregoing certificate);
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(d)
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a
certificate of the Purchaser, signed on behalf of the Purchaser, without
personal liability, by the Chief Financial Officer, the Executive Vice
President and Chief Legal Officer of the Purchaser or such other senior
officer of the Purchaser as may be acceptable to the Corporation, acting
reasonably, addressed to the Corporation and dated the Closing Date
certifying that: (i) the representations, warranties and acknowledgements
of the Purchaser are true and correct in all material respects as at the
Closing, with the same force and effect as if made by the Purchaser as at
the Closing; and (ii) all covenants of the Purchaser under this
Agreement to be performed on or before the Closing have been duly
performed by the Purchaser in all material respects;
and
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(e)
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the
agreements contemplated by Section
5(b).
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Closing
will take place at 10:00 a.m. (Toronto time) on the Closing Date at the offices
of Stikeman Elliott LLP, Suite 5300, 000 Xxx Xxxxxx, Xxxxxxx, Xxxxxxx, or at
such other time on the Closing Date or such other place as may be agreed upon
orally or in writing by the parties. At Closing, the Corporation shall deliver
or cause to be delivered:
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(f)
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a
certificate representing the Purchased Shares against payment by the
Purchaser of U.S.$45,600,000;
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(g)
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a
certificate representing the Purchased Units against payment by the
Purchaser of the Subscription Price;
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(h)
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a
certificate representing the Purchased Special Voting Shares against
payment by the Purchaser of U.S.$2.25;
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(i)
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a
certificate of the Corporation, signed on behalf of the Corporation,
without personal liability, by the Chief Executive Officer, Chief
Financial Officer of the Corporation or such other senior officer of the
Corporation as may be acceptable to the Purchaser, acting reasonably,
addressed to the Purchaser and dated the Closing Date certifying that (i)
the representations and warranties of the Corporation are true and correct
in all material respects as at the Closing, with the same force and effect
as if made by the Corporation as at the Closing; and (ii) all
covenants of the Corporation under this Agreement to be performed on or
before the Closing have been duly performed by the Corporation in all
material respects;
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(j)
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the
agreements contemplated by Section 5(b); and
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(k)
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the
opinion contemplated by Section
4(d).
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The
Purchaser and the Corporation agree that if Closing has not occurred on or prior
to the date that is 25 days from the date of this Agreement or such other date
that the Purchaser and the Corporation may agree to in writing (the “Outside Date”), then either
party may terminate this Agreement, except that the right to terminate this
Agreement will not be available to any party whose failure to fulfill any of its
obligations has been the cause of, or resulted in, the failure of Closing to
occur by such date. If this Agreement is properly terminated pursuant to the
foregoing, then there shall be no further liability of the parties hereunder.
Nothing in this Section 6 will relieve any party from liability for any breach
of this Agreement.
-11-
|
7.
|
Participation
Right.
|
|
(a)
|
The
Corporation agrees that if, during the Participation Period the
Corporation issues any Common Shares or Convertible Securities other than
pursuant to an Excluded Issuance (any such issuance, a “Subsequent Offering”),
then the Corporation shall provide a written notice of such Subsequent
Offering (the “Subsequent
Offering Notice”) to the Purchaser at least five Business Days
prior to the public announcement of such Subsequent Offering, setting out:
(i) the number of Common Shares or Convertible Securities issued or to be
issued; (ii) the material terms and conditions of any Convertible
Securities issued or to be issued and (iii) the subscription price per
Common Share or Convertible Security issued or to be issued by the
Corporation under such Subsequent Offering, as
applicable..
|
|
|
(b)
|
The
Corporation agrees that, subject to Section 7(c), the Purchaser has the
right (the “Participation
Right”), but only during the Participation Period (which, for
greater certainty, shall be extended for the duration of the Notice Period
(as defined below) in the event the Participation Period will end pursuant
to clause (iii) under the definition of Participation Period as a result
of the completion of the Subsequent Offering), upon receipt of a
Subsequent Offering Notice, to subscribe for and to be issued, on a
private placement basis and at the subscription price per Common Share or
Convertible Security, as applicable, as set out in the applicable
Subsequent Offering Notice, up to that number of Common Shares or
Convertible Securities, as applicable, that will result in the Purchaser
beneficially owning 19.9% of the outstanding Common Shares following such
subscription and issuance, such number of Common Shares to be calculated
without assuming the conversion in accordance with their terms of any
Convertible Securities except that for the purposes of such calculation in
a Subsequent Offering of Convertible Securities, all of the Convertible
Securities so offered (including pursuant to the Participation Right) will
be deemed to have been converted into Common Shares.
|
|
|
(c)
|
If
the Purchaser wishes to exercise the Participation Right in respect of a
particular Subsequent Offering, the Purchaser shall give written notice to
the Corporation (the “Exercise Notice”) of the
exercise of such right and of the number of Common Shares or Convertible
Securities, as applicable, the Purchaser wishes to purchase (subject to
the limits prescribed by Section 7(b)), within the earlier of (i) 10
Business Days after the date of receipt of the Subsequent Offering Notice
or (ii) the date which is 3 Business Days prior to the completion of the
Subsequent Offering (the “Notice Period”), failing
which the Purchaser will not be entitled to exercise the Participation
Right in respect of such Subsequent Offering.
|
|
|
(d)
|
If
the Corporation receives an Exercise Notice from the Purchaser within the
Notice Period, then the Corporation shall, subject to the receipt of all
required regulatory approvals (including the approval of the TSX) on terms
and conditions satisfactory to the Corporation, acting reasonably, which
approvals the Corporation shall use reasonable commercial efforts to
promptly obtain, and subject to the limits prescribed by Section 7(b),
issue to the Purchaser, against payment of the subscription price payable
in respect thereof, that number of Common Shares or Convertible
Securities, as applicable, set forth in the Exercise Notice, provided that
such issuance can be legally effected on a private placement basis and
without the requirement to file a prospectus or registration statement or
the requirement to deliver an offering memorandum under applicable
securities laws.
|
-12-
|
(e)
|
The
closing of any private placement pursuant to an exercise of the
Participation Right by the Purchaser will take place on the date of
completion of the Subsequent Offering, unless all filings, notices,
approvals and authorizations necessary to complete the closing of such
private placement have not been made, given or obtained by that date, in
which case the closing will be extended for up to 10 Business Days. If the
closing of such private placement has not been completed by such date (or
such earlier or later date as the parties may agree to orally or in
writing) through no fault of the Corporation, then the Exercise Notice
will be deemed to have been irrevocably withdrawn and the Corporation will
have no obligation to issue any Common Shares or Convertible Securities
pursuant to such exercise of the Participation
Right.
|
|
8.
|
Board
Representation.
|
The
Corporation agrees that it shall appoint one individual legally qualified to be
nominated by the Purchaser (a “Nominee”) to the Board of
Directors of the Corporation (the “Board”) immediately following
Closing.
The
Corporation further agrees that, provided that the Purchaser has not exercised
the Put Option, and subject at all times to Section 14, during the period
commencing immediately after Closing and ending on the date that is the earliest
of the date that the Purchaser:
|
(i)
|
ceases
to hold at least 10% of the outstanding Common Shares, such number of
Common Shares to be calculated without assuming the conversion in
accordance with their terms of any Convertible Securities;
and
|
|
|
(ii)
|
no
longer beneficially owns the Purchased
Units;
|
the
Corporation shall:
|
(a)
|
nominate
a Nominee for election to the Board at each meeting of shareholders of the
Corporation at which directors are to be elected; and
|
|
|
(b)
|
if
any Nominee appointed or elected to the Board pursuant to the foregoing
provisions ceases to be a director for any reason whatsoever, (i) appoint
a Nominee to the Board as soon as reasonably practical, in the event such
vacancy may be filled by appointment or (ii) nominate a Nominee for
election to the Board at the next meeting of shareholders of the
Corporation at which directors are to be elected, in the event such
vacancy is required by applicable law or the constating documents of the
Corporation to be filled by election by
shareholders.
|
-13-
The
Purchaser agrees that, in the event the Purchaser ceases to have any nomination
rights pursuant to the foregoing, the Purchaser shall use all commercially
reasonable efforts to cause its Nominee to resign from the Board
immediately.
|
9.
|
Financial
Consultation Rights.
|
The
Corporation agrees that, during the Participation Period, the Corporation and
its subsidiaries shall not:
|
(a)
|
amend
the Corporation’s articles or bylaws in any manner that could materially
and adversely impact the rights granted to the Purchaser pursuant this
Agreement or any agreement contemplated by Section
5(b);
|
|
|
(b)
|
incur
any indebtedness for borrowed money, other than (i) in connection with the
refinancing of indebtedness outstanding on the date of this Agreement or
incurred subsequent to the date of this Agreement in accordance with the
terms hereof (including the U.S.$75,000,000 of indebtedness outstanding in
connection with the Credit Facilities as of Xxxxx 00, 0000), (xx) in
connection with any acquisition involving the Corporation or any of its
subsidiaries or affiliates or (iii) indebtedness owing by one subsidiary
of the Corporation to the Corporation or another subsidiary of the
Corporation, or of the Corporation to a subsidiary of the
Corporation;
|
|
|
(c)
|
provide
any additional support, capital or funding beyond that currently being
provided as of the date hereof to the retail business of the Corporation
(other than as generated or supported by the operations of such retail
business) in excess of [REDACTED], provided
that this restriction will not prevent or prohibit the reinvestment in
such retail business of any amounts generated by such retail business;
or
|
|
|
(d)
|
declare
or pay any dividend to holders of the Common
Shares;
|
without
the prior approval of the Purchaser, such approval not to be unreasonably
withheld, conditioned or delayed, provided that nothing in this Section 9 will
place any limitations (including any requirement for the Corporation to seek or
obtain the approval of the Purchaser on any monetary limits or any use of
proceeds) on the Corporation’s ability to issue equity or equity-linked
securities for any purpose (subject, for greater certainty, to the Participation
Right).
-14-
|
10.
|
Governance
Rights in the Partnership.
|
The
Corporation and the Purchaser agree to negotiate in good faith to settle the
terms of the definitive documentation with respect to the Partnership
Investment, which documentation shall include the terms set out in Schedule “A“
and Schedule “B”
and such additional terms not inconsistent therewith as are customary and
reasonable in the circumstances.
|
11.
|
Future
Acquisitions.
|
The
Purchaser and the Corporation agree that during the period commencing
immediately after Closing and ending on the date that is the earliest of any of
the following dates:
|
(i)
|
the
date that is two years from the Closing Date;
|
|
|
(ii)
|
the
date that the Purchaser no longer beneficially owns the Purchased Units;
and
|
|
|
(iii)
|
the
date that there is a Change of Control of the Corporation or the
Purchaser;
|
the
parties shall consider, on a case-by-case basis, further diamond acquisition
opportunities on a joint venture basis. The parties acknowledge that any such
additional acquisition or related joint venture will be on terms and conditions
as either party may agree.
|
12.
|
Put
Option.
|
[PUT
OPTION PROVISIONS REGARDING KINROSS’ INTEREST IN CERTAIN CIRCUMSTANCES
REDACTED]
|
13.
|
Call
Option.
|
[CALL
OPTION PROVISIONS REGARDING KINROSS’ INTEREST IN CERTAIN CIRCUMSTANCES
REDACTED]
|
14.
|
Non-Competition.
|
None of
the Purchaser or any of its subsidiaries shall, directly or
indirectly, compete in the sorting and/or marketing of rough diamonds prior to
the date that any of the following events has occurred: (a) the Purchaser does
not have a Nominee appointed or elected to the Board pursuant to Section 8
(whether as a result of the resignation of a Nominee, the choice of the
Purchaser not to exercise its rights under Section 8 or the expiry of the
Purchaser’s rights under Section 8 provided that if the Purchaser or any of its
subsidiaries shall directly or indirectly compete as aforesaid, the Purchaser’s
nomination rights pursuant to Section 8 shall forthwith expire and be of no
further effect whether or not they have otherwise expired); (b) a Change of
Control of the Corporation; (c) the bankruptcy or insolvency of the Corporation,
the Partnership or HWDM; (d) the conviction of the Corporation, HWDM, the
Partnership or any of the Selling Entities of an offence involving material and
adverse reputational consequences for the Corporation; or (e) a material default
on the part of the Corporation, HWDM, the Partnership or any of the Selling
Entities in performing marketing and/or sorting obligations (after 45 day cure
period has expired in respect thereof).
-15-
In
addition, during the Participation Period, neither the Purchaser nor the
Corporation shall, directly or indirectly (including through any of its
subsidiaries), solicit the employment or retainer of any current director or
officer of the other party or any of its subsidiaries or, in the case of the
Purchaser, any of the employees of Xxxxx Xxxxxxx Technical Services Inc.
(Canada). For greater certainty, for the purposes of this Section 14,
solicitation will not include solicitation of directors or officers where such
solicitation is solely through advertising in periodicals of general circulation
or an employee search firm, so long as such party and/or its representatives do
not direct or encourage such search firm to solicit a specifically named
director or officer of the other party.
|
15.
|
Use
of Proceeds.
|
The
Corporation agrees that the net proceeds from the Transactions shall
be:
|
(a)
|
first,
used to repay all existing amounts owing or payable in respect of the
Credit Facilities and the Intercompany Liabilities contemporaneously with
Closing, in full satisfaction of the obligations of the Corporation and
its affiliates thereunder; and
|
|
|
(b)
|
then
the balance, if any, for general corporate purposes (subject to the
obligations of the Corporation and its subsidiaries and affiliates
pursuant to the JV Agreement); provided that, in this case, the net
proceeds received from purchase and sale of the Purchased Units shall only
be used to fund expenditures relating to the Partnership or the Diavik
Joint Venture.
|
|
16.
|
Purchaser’s
Acknowledgements and Covenants.
|
The
Purchaser acknowledges and covenants, as applicable, that:
|
(a)
|
the
Purchaser shall execute and deliver all documentation as may be required
by applicable securities laws in connection with the
Transactions;
|
||
|
(b)
|
the
Corporation is required to disclose to applicable securities regulatory
authorities the identity of the Purchaser, and in that respect the
Purchaser acknowledges that, and consents and
authorizes:
|
||
|
(i)
|
the
Corporation to collect the Purchaser’s personal information for the
purpose of this Agreement;
|
||
|
(ii)
|
the
Corporation to retain the personal information for as long as permitted or
required by applicable law or business
practices;
|
||
-16-
|
(iii)
|
the
Corporation to deliver to the Ontario Securities Commission and any other
securities commission or similar regulatory authority personal information
(such as full name, residential address and telephone number) pertaining
to the Purchaser and further acknowledges and consents to the fact that
the Corporation may be required by applicable securities laws and stock
exchange rules to provide regulatory authorities any personal information
provided by the Purchaser respecting itself and acknowledges that this
information is being collected indirectly by the Ontario Securities
Commission (as applicable), and may be collected, used and disclosed by
other securities regulators (as applicable), under the authority granted
to it in applicable securities laws; and
|
||
|
(iv)
|
that
this information is being collected for the purposes of the administration
and enforcement of the securities legislation of Ontario and acknowledges
that the public official in Ontario who can answer questions about the
Ontario Securities Commission’s indirect collection of such information is
the Administrative Assistant to the Director of Corporate Finance, Xxxxx
0000, Xxx 00, 00 Xxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx X0X 0X0, who may be
contacted at (000) 000-0000;
|
||
|
(c)
|
the
Purchased Securities are subject to resale restrictions under applicable
securities laws, rules, regulations and policies and the Purchaser shall
comply with all relevant securities laws, rules, regulations and policies
concerning any resale of the Purchased Securities and shall consult with
its own legal advisers with respect to complying with all restrictions
applying to any such resale;
|
||
|
(d)
|
the
certificates representing the Purchased Shares will bear the following
legends, and the Purchaser agrees to comply with the terms of such
legends:
|
||
“UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE
JULY l, 2009.”
“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID
SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON THE
TSX.”;
|
(e)
|
the
Purchased Securities have not been and will not be registered under the
United States Securities Act of 1933, as amended, and may not be offered
or sold in the United States or to U.S. persons unless registered under
such Act or an exemption from the registration requirements of such Act is
available;
|
-17-
|
(f)
|
the
Transactions are being conducted on a non-brokered private placement basis
and no agents or underwriters are involved in the sale, distribution or
marketing of the Purchased Securities;
|
|
|
(g)
|
the
Purchaser shall do all that is reasonably required to assist the
Corporation with respect to all necessary filings, approvals and consents
as may be required by applicable law; and
|
|
|
(h)
|
the
Purchaser has not been provided with an offering memorandum (as defined in
any applicable Canadian securities laws) or any similar document in
connection with its subscription for the Purchased Securities, and the
decision to execute this Agreement and to purchase the Purchased
Securities has not been based upon any verbal or written representations
as to fact or otherwise made by or on behalf of the Corporation, other
than such written representations as are expressly contained in this
Agreement.
|
|
17.
|
Purchaser’s
Representations and Warranties.
|
The
Purchaser hereby represents and warrants to the Corporation, and acknowledges
that the Corporation is relying upon such representations and warranties in
connection with the issue and sale of the Purchased Securities,
that:
|
(a)
|
the
Purchaser has the requisite corporate power, authority and capacity to
enter into this Agreement and to perform the transactions contemplated
herein;
|
|
|
(b)
|
this
Agreement has been duly authorized, executed and delivered by the
Purchaser and constitutes a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as enforcement hereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and except as
limited by the application of equitable principles when equitable remedies
are sought;
|
|
|
(c)
|
the
execution and delivery of this Agreement and the performance by the
Purchaser of its obligations under this Agreement will not result in any
material breach or violation of, or be in material conflict with, or
constitute a material default under, or create a state of facts which
after notice or lapse of time, or both, would constitute a material
default under, any term or provision of the charter documents or by-laws
of the Purchaser or any resolution of the directors or shareholders of the
Purchaser;
|
|
|
(d)
|
none
of the Purchaser or any of its subsidiaries or affiliates beneficially
owns any Common Shares;
|
|
|
(e)
|
the
Purchaser is purchasing the Purchased Securities as
principal;
|
-18-
|
(f)
|
the
Purchaser is purchasing the Purchased Securities for investment purposes
only, and not in a transaction or series of transactions involving a
purchase and sale or a repurchase and resale in the course of or
incidental to a distribution;
|
|
|
(g)
|
the
Purchaser is not a “U.S. person” (as such term is defined in Rule 902(k)
of Regulation S under the United States Securities Act of 1933, as
amended); and
|
|
|
(h)
|
other
than BMO Xxxxxxx Xxxxx and Xxxxxx Xxxxxxx (the fees of which are payable
by the Purchaser), there is no person acting or purporting to act on the
Purchaser’s behalf in connection with the transactions contemplated herein
who is entitled to any brokerage or finder’s fee, and if any person
establishes a claim that any fee or other compensation is payable in
connection with this subscription by the Purchaser for the Purchased
Securities (other than as expressly agreed to in advance by the
Corporation), the Purchaser shall indemnify and hold harmless the
Corporation with respect thereto and with respect to all costs reasonably
incurred in the defence
thereof.
|
|
18.
|
Representations
and Warranties of the Corporation.
|
The
Corporation represents and warrants to the Purchaser, and acknowledges that the
Purchaser is relying upon such representations and warranties in purchasing the
Purchased Securities, that:
|
(a)
|
the
Corporation is a corporation duly continued, organized and validly
existing under the laws of Canada and is properly registered under the
laws of all jurisdictions in which its business is carried on except where
the failure to be so registered would not have a material adverse effect
on the business or operations of the Corporation;
|
|
|
(b)
|
the
Corporation has authorized share capital consisting of an unlimited number
of Common Shares of which, as of the date hereof, 61,372,092 Common Shares
and no more are validly issued and outstanding as fully paid and
non-assessable shares in the capital of the
Corporation;
|
|
|
(c)
|
HWDM
has authorized share capital consisting of an unlimited number of Class A
shares and an unlimited number of Class B shares of which, as of the date
hereof, 25,980,002 Class A shares and no Class B shares and no more are
validly issued and outstanding as fully paid and non assessable shares in
the capital of HWDM, all of which are owned of record and beneficially by
the Corporation, and, as of the Closing Date (and immediately prior to
Closing), HWDM will have authorized share capital consisting of an
unlimited number of Class A shares, an unlimited number of Class B shares
and an unlimited number of Special Voting Shares, of which 25,980,002
Class A shares (the terms of which will be amended to remove the voting
rights therefrom), no Class B shares and 775 Special Voting Shares will be
validly issued and outstanding as fully paid and non-assessable shares in
the capital of HWDM, all of which are owned of record and beneficially by
the Corporation;
|
-19-
|
(d)
|
the
Partnership has authorized capital consisting of an unlimited number of
units of which, as of the date hereof, 200,001,000 Units and no more are
validly issued and outstanding as fully paid and non-assessable Units,
and, as of the Closing Date (and immediately prior to Closing), the
Partnership will have 200,001,000 Units, which are validly issued and
outstanding as fully paid and non-assessable units of the Partnership and
of which 198,000,990 will be owned of record and beneficially by HWDM and
the remainder will be owned of record and beneficially by 6355137 Canada
Inc., a wholly-owned subsidiary of HWDM;
|
|
|
(e)
|
except
for 1,589,338 options granted and issued pursuant to any Option
Plan, which are exercisable for 1,589,338 Common Shares, no
person has any option, warrant, right, call, commitment, conversion right,
right of exchange or other agreement or any right or privilege (whether by
law, pre emptive or contractual) capable of becoming an option, warrant,
right, call, commitment, conversion right, right of exchange or other
agreement for the purchase from the Corporation or any of its subsidiaries
of: (i) any equity securities in the capital of the Corporation or the
Partnership; or (ii) any voting securities in the capital of
HWDM;
|
|
|
(f)
|
the
operations of the Corporation and its subsidiaries have been and are now
conducted in compliance with all laws of each jurisdiction, of which have
been and are now applicable to the operations of the Corporation or of any
of its subsidiary, except for non-compliance which does not have a
material adverse effect, and none of the Corporation or any of its
subsidiaries has received any notice of any alleged violation of any such
laws;
|
|
|
(g)
|
the
Corporation is a reporting issuer not in default in any material respect
of any requirement under Canadian securities laws;
|
|
|
(h)
|
no
order, ruling or decision granted by a securities commission, court of
competent jurisdiction or regulatory or administrative body having
jurisdiction is in effect, pending or (to the best of the Corporation’s
knowledge) threatened that restricts any trades in any securities of the
Corporation as of the date hereof including any cease trade
orders;
|
|
|
(i)
|
the
current issued and outstanding Common Shares are listed on the TSX and the
NYSE, and the Corporation will use commercially reasonable efforts to
obtain the listing of the Purchased Shares on the TSX and the
NYSE;
|
|
|
(j)
|
the
Purchased Shares, when issued in consideration for the purchase price
therefor, will be duly and validly issued as fully paid and non-assessable
Common Shares, and will represent approximately 19.9% of the outstanding
Common Shares as at the Closing Date;
|
-20-
|
(k)
|
the
Purchased Units, when issued in consideration for the purchase price
therefor, will be duly and validly issued as fully paid and non-assessable
Units, and will represent 22.5% of the outstanding Units as at the Closing
Date;
|
|
|
(l)
|
the
Purchased Special Voting Shares, when issued in consideration for the
purchase price therefor, will be duly and validly issued as fully paid and
non-assessable Special Voting Shares, and will represent 22.5% of the
outstanding Special Voting Shares and 22.5% of the outstanding voting
securities in the capital of HWDM as at the Closing
Date;
|
|
|
(m)
|
subject
to and assuming the accuracy of the representations and warranties of the
Purchaser set forth in Section 17(e), 17(f) and 17(g), the offer,
issuance, sale and delivery of the Purchased Securities as contemplated by
this Agreement is exempt from the prospectus, registration and/or
qualification requirements, as applicable, under applicable securities
laws;
|
|
|
(n)
|
the
Corporation has the requisite corporate power, authority and capacity to
enter into this Agreement and to perform the transactions contemplated
herein;
|
|
|
(o)
|
this
Agreement has been duly authorized, executed and delivered by the
Corporation and constitutes a valid and binding obligation of the
Corporation, enforceable in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and except as limited by the application of equitable
principles when equitable remedies are
sought;
|
|
|
(p)
|
the
Corporation and each of its subsidiaries has the requisite power,
authority and capacity to own, lease and to operate its respective
property and assets including licenses or other similar rights and to
carry on the business customarily carried on by it and has all the
requisite power and authority to carry on its respective business as
currently carried on or as currently proposed to be carried
on;
|
|
|
(q)
|
the
Corporation and each of its subsidiaries are conducting their respective
businesses in compliance with all applicable laws, rules and regulations
of each jurisdiction in which business is carried on and is duly licensed,
registered or qualified in all jurisdictions in which it owns, leases or
operates its property or carries on business to enable its business to be
carried on as now conducted and its property and assets to be owned,
leased and operated except where such non-compliance or failure to obtain
such license, registration or qualification would not have a material
adverse effect on the business or operations of the Corporation and its
subsidiaries, on a consolidated basis;
|
-21-
|
(r)
|
to
the knowledge of the Corporation, none of the disclosure documents that
have been publicly filed by the Corporation pursuant to the requirements
of applicable securities laws since January 31, 2008 contained, as of
their respective dates of filings, an untrue statement of a material fact
or omitted to state a material fact that was required to be stated or that
was necessary to make a statement contained therein not misleading in the
light of the circumstances in which it was made;
|
|
|
(s)
|
there
is no action, proceeding or investigation pending or, to the knowledge of
the Corporation, threatened against the Corporation or any of its
subsidiaries or any of their respective assets (including the
Partnership’s Participating Interest in the Diavik Joint Venture) before
or by any federal, provincial, municipal or other governmental department,
commission, board or agency, domestic or foreign, which is reasonably
expected to result in any material adverse change, and neither the
Corporation nor its subsidiaries nor their respective assets (including
the Partnership’s Participating Interest in the Diavik Joint Venture) is
subject to any material judgment, order, writ, injunction or
decree;
|
|
|
(t)
|
except
as disclosed in Schedule 18(t), neither the Corporation nor
any of its subsidiaries is in material violation of, and the execution and
delivery of this Agreement and the performance by the Corporation of its
obligations under this Agreement will not result in any material breach or
violation of, or be in material conflict with, or constitute a material
default under, or create a state of facts which after notice or lapse of
time, or both, would constitute a material default under, any term or
provision of the charter documents or by-laws of the Corporation or any of
its subsidiaries or any resolution of the directors or shareholders of the
Corporation or any of its subsidiaries or any contract, mortgage, note,
indenture, joint venture or partnership arrangement, agreement (written or
oral), instrument, lease, judgment, decree, order, statute, rule, license
or regulation applicable to the Corporation or any of its subsidiaries
which is in each case material to the Corporation or any of its
subsidiaries, and all such material contracts, agreements or arrangements
(including all material joint venture agreements) are in good standing,
and no event has occurred which with notice or lapse of time or both would
constitute such a material default by the Corporation or a
subsidiary;
|
|
|
(u)
|
the
consolidated financial statements of the Corporation, including the notes
thereto, for the year ended January 31, 2008 and the nine months ended
October 31, 2008 have been prepared in conformity with Canadian generally
accepted accounting principles applied on a consistent basis and present
fairly, in all material respects, the financial position of the
Corporation as of the respective dates thereof;
|
|
|
(v)
|
neither
the Corporation nor any of its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or
otherwise, except for: (a) liabilities and obligations that are
specifically disclosed on the audited consolidated balance sheet of the
Corporation as of January 31, 2008 or in the notes thereto (the “Balance Sheet”); or (b)
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since January 31, 2008, that are not and
would not, individually or in the aggregate with all other liabilities and
obligations of the Corporation and its subsidiaries (other than those
disclosed on the Balance Sheet), have or reasonably be expected to have a
material adverse effect, or, as a consequence of the consummation of the
Transactions, have a material adverse
effect;
|
-22-
|
(w)
|
the
auditors of the Corporation who audited the consolidated financial
statements of the Corporation most recently delivered to the
securityholders of the Corporation and delivered their report with respect
thereto are independent public accountants as required by Canadian
securities laws;
|
|
|
(x)
|
the
Corporation and subsidiaries are in material compliance with
all applicable environmental laws, and neither the Corporation
nor any of its subsidiaries has received any notice of, or been prosecuted
for an offence alleging, non-compliance with any environmental law, and
neither the Corporation nor any of its subsidiaries has settled any
allegation of non-compliance short of prosecution;
|
|
|
(y)
|
DDMI
owns, controls or has legal rights to, through mining tenements of various
types and descriptions, all of the rights, titles and interests materially
necessary or appropriate to authorize and enable DDMI to carry on the
material mineral exploration and/or mining activities as currently being
undertaken by it at the Diavik Diamond Mine, except for such defects in
title which would not reasonably be expected to result in a material
adverse effect, and is not in material default of such rights, titles and
interests;
|
|
|
(z)
|
all
mining claims and mining rights with respect to the Diavik Diamond Mine
are in good standing in all material respects as of the date hereof except
for such defects in title which would not reasonably be expected to result
in a material adverse effect;
|
|
|
(aa)
|
to
the knowledge of the Corporation, all mining operations at the Diavik
Diamond Mine have been conducted in all respects in accordance with good
mining and engineering practices and all applicable workers’ compensation
and health and safety and workplace laws, regulations and policies have
been duly complied with;
|
|
|
(bb)
|
with
respect to the Diavik Diamond Mine and all mining operations related
thereto, DDMI is in compliance with all applicable environmental laws,
except for any such non-compliance which would not reasonably be expected
to result in a material adverse effect, and, to the knowledge of the
Corporation, DDMI has not received any notice of, or been prosecuted for
an offence alleging, non-compliance with any environmental law, and, to
the knowledge of the Corporation, DDMI has settled not any allegation of
non-compliance short of
prosecution;
|
-23-
|
(cc)
|
except
as granted to DDMI pursuant to the JV Agreement, no person has any written
or oral agreement, option, understanding or commitment, or any right or
privilege capable of becoming such for the purchase from the Corporation
of its indirect interest in the Diavik Joint Venture (through, without
limitation, the purchase of: (i) shares in the capital of HWDM; (ii)
Units; or (iii) the Partnership’s Participating
Interest);
|
|
|
(dd)
|
to
the knowledge of the Corporation: (i) there are no outstanding aboriginal
land claims with respect to any of the lands included in the Diavik Joint
Venture; and (ii) the Diavik Joint Venture will have quiet enjoyment of
such lands for the expected lifetime of the Diavik Diamond
Mine;
|
|
|
(ee)
|
the
JV Agreement and, to the knowledge of the Corporation, each of the five
participation agreements with respect to the Diavik Diamond Mine that have
been previously disclosed in the disclosure documents that have been
publicly filed by the Corporation pursuant to the requirements of
applicable securities laws, are in full force and effect, and there exists
no default or event of default or event, occurrence, condition or act
(including the completion of the Transactions) which, with the giving of
notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default
thereunder. The Partnership has not violated or breached, in
any material respect, any of the terms or conditions of the JV Agreement,
and to knowledge of the Corporation, all the covenants that are to be
performed by the date of this Agreement by DDMI have been fully
performed. To the knowledge of the Corporation, DDMI has
not violated or breached, in any material respect, any of the terms or
conditions of the foregoing participation agreements all the covenants
that are to be performed by the date of this Agreement under such
agreements by DDMI have been fully performed;
|
|
|
(ff)
|
each
of the Corporation and its subsidiaries has duly and timely made or
prepared all Tax Returns required to be made or prepared by it, has duly
and timely filed all Tax Returns required to be filed by it with the
appropriate Governmental Authority and has duly, completely and correctly
reported all income and all other amounts and information required to be
reported thereon;
|
|
|
(gg)
|
except
as disclosed in Schedule 18(gg), each of the Corporation and its
subsidiaries has duly and timely paid all Taxes, including all instalments
on account of Taxes for the current year, that are due and payable by it
whether or not assessed by the appropriate Governmental Authority, and
provision has been made on the financial books and records of the
Corporation and its subsidiaries for amounts at least equal to the amount
of all Taxes owing by any one of them that will not be due and payable by
the Closing Date and that relate to periods ending on or prior to the
Closing Date; and
|
-24-
|
(hh)
|
the
Partnership is a “Canadian partnership” within the meaning of the Income Tax Act
(Canada).
|
|
19.
|
Covenants
of the Corporation
|
|
(a)
|
During
the period from the date of this Agreement to Closing, the Corporation
shall:
|
||
|
(i)
|
conduct
its business in the ordinary course, consistent with past practice and
not, without the prior written consent of the Purchaser, enter into any
transaction which, if effected before the date of this Agreement, would
constitute a breach of the representations, warranties or agreements of
the Purchaser contained in this Agreement; and
|
||
|
(ii)
|
promptly
advise the Purchaser orally and, if then requested, in writing of any
material adverse change or any breach by the Purchaser of any covenant or
agreement contained in this Agreement.
|
||
|
(b)
|
Forthwith
after the Closing, the Corporation shall file such forms and documents as
may be required under applicable securities laws.
|
||
|
(c)
|
The
Corporation shall take all required actions to satisfy the conditional
listing requirements of the TSX with respect to the listing of the
Purchased Shares promptly after the Closing, and in any event within the
time period prescribed by the TSX, to satisfy such
requirements.
|
||
|
(d)
|
For
the Participation Period, the Corporation hereby covenants, undertakes and
agrees:
|
||
|
(i)
|
to
use its reasonable commercial efforts to maintain its status as a
“reporting issuer” and not to be in material default of any requirement of
the applicable securities laws; and
|
||
|
(ii)
|
to
use its reasonable commercial efforts to maintain the listing of the
Common Shares on the TSX and the NYSE.
|
||
|
(e)
|
The
Corporation shall cause the Partnership not to make distributions until
the Period End other than the Specified Permitted Adjusting
Distributions.
|
||
|
20.
|
Satisfaction
of Conditions
|
Each of
the parties shall take all such actions as are within its power to control, and
use reasonable commercial efforts to cause other actions to be taken which are
not within its power to control, so as to ensure compliance with each of the
conditions and covenants set forth in Sections 3, 4 and 5 which are for the
benefit of any other party.
-25-
|
21.
|
Indemnity
and Survival.
|
The
representations, warranties, acknowledgments and covenants of the Purchaser
contained in this Agreement are made by the Purchaser with the intent that they
may be relied upon by the Corporation and will survive the Closing for the
benefit of the Corporation. The Purchaser hereby agrees to indemnify
the Corporation against all losses, claims, costs, expenses and damages or
liabilities (each, a “Claim”), on an after-Tax
basis, which the Corporation may suffer or incur caused or arising from any
breach by the Purchaser of any of its representations, warranties or covenants
contained in this Agreement.
The
representations, warranties and covenants of the Corporation contained in this
Agreement are made by the Corporation with the intent that they may be relied
upon by the Purchaser and will survive the Closing for the benefit of the
Purchaser. The Corporation hereby agrees to indemnify the Purchaser
against all Claims which the Purchaser may suffer or incur caused or arising
from the from any breach by the Corporation of any of its representations,
warranties or covenants contained in this Agreement.
|
22.
|
Governing
Law.
|
This
Agreement is governed by and construed in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable therein, and the
Purchaser hereby irrevocably attorns to the non-exclusive jurisdiction of the
courts of the Province of Ontario with respect to any matters arising out of
this Agreement.
|
23.
|
Knowledge
of the Corporation.
|
When used
in this Agreement, the phrase “to the knowledge of the Corporation” or any other
like phrase means the actual knowledge of any of the senior officers of the
Corporation, following due inquiry.
|
24.
|
Notices.
|
Any
notice or other communication that is required or permitted to be given pursuant
to this Agreement shall be in writing and will be validly given if delivered in
person (including by courier service) or transmitted by electronic delivery as
follows.
|
if
to the Purchaser:
|
Kinross
Gold Corporation
52nd
Floor, Scotia Plaza
00
Xxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx
X0X
0X0
|
|
|
Attention:
Email:
|
Tye
Burt
xxx.xxxx@xxxxxxx.xxx
|
|
-26-
|
with
a copy to:
|
Osler,
Xxxxxx & Harcourt LLP
000
Xxxx Xxxxxx Xxxx
1
First Canadian Place
Suite
6100, X.X. Xxx 00
Xxxxxxx,
Xxxxxxx
X0X
0X0
|
||
|
Attention:
Email:
|
Xxxxxxx
X. Xxxxx
xxxxxx@xxxxx.xxx
|
||
|
if
to the Corporation:
|
Xxxxx
Xxxxxxx Diamond Corporation
X.X.
Xxx 0000, Xxxxxxx X
Xxxxxxx,
Xxxxxxx
X0X
0X0
|
||
|
Attention:
Email:
|
Xxxxxx
X. Xxxxxxxxx
xxxxxxxxxx@xxxxxxxxxxxx.xxx
|
||
|
with
a copy to:
|
Stikeman
Elliott LLP
0000
Xxxxxxxx Xxxxx Xxxx
000
Xxx Xxxxxx
Xxxxxxx,
Xxxxxxx X0X 0X0
|
||
|
Attention:
Email:
|
Xxx
Xxxxxxxx/Xxxx Xxxxxxxxx
xxxxxxxxx@xxxxxxxx.xxx
xxxxxxxxxx@xxxxxxxx.xxx
|
||
Any such
notice or other communication will be deemed to have been given and received on
the day on which it was delivered or transmitted by electronic delivery (or, if
such day is not a Business Day, on the next following Business Day). Any party
may at any time change its address for service from time to time by giving
notice to the other parties in accordance with this Section 22.
|
25.
|
Business
Days.
|
In the
event that any action is required or permitted to be taken under this Agreement
on or by a date that is not a Business Day, such action may be taken on or by
the Business Day immediately following such date.
|
26.
|
Assignment.
|
This
Agreement is not transferable or assignable by the parties, except that the
Purchaser may assign this Agreement or any rights or obligations of the
Purchaser hereunder to an affiliate of the Purchaser without the consent of the
Corporation provided that any such assignment will not relieve the Purchaser of
any of the obligations of the Purchaser (financial or otherwise) pursuant to
this Agreement.
-27-
|
27.
|
Amendment.
|
No
amendment, supplement, modification or waiver or termination of this Agreement
and, unless otherwise specified, no consent or approval by any party to this
Agreement, is binding unless executed in writing by the party to be bound
thereby.
|
28.
|
Entire
Agreement.
|
This
Agreement contains the entire agreement of the parties relating to the subject
matter hereof and there are no representations, covenants or other agreements
relating to the subject matter hereof except as stated or referred to herein or
therein. This Agreement may not be amended or modified in any respect except by
written instrument executed by each of the parties.
|
29.
|
Expenses.
|
All costs
and expenses (including the fees and disbursements of legal counsel and other
professional advisors) incurred in connection with this Agreement and the
transactions contemplated herein shall be paid by the party incurring such
expenses.
|
30.
|
Currency.
|
All
amounts in this Agreement referred to by “$” mean Canadian currency and all
amount referred to by “U.S.$” means United States currency.
|
31.
|
Enurement.
|
This
Agreement is binding upon and enures to the benefit of the parties and their
respective successors and assigns.
|
32.
|
Severability.
|
If any
provision of this Agreement is determined by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such determination shall
not impair or affect the validity, legality or enforceability of the remaining
provisions hereof, and each provision is hereby declared to be separate,
severable and distinct.
|
33.
|
Interpretation.
|
In this
Agreement:
|
(a)
|
the
term person is to be broadly interpreted and is not limited to the
categories enumerated in the definition of such term in Section
1;
|
|
|
(b)
|
“including”
means including without limitation;
|
|
|
(c)
|
words
importing the singular number only shall include the plural and vice versa
and words importing any gender shall include all
genders
|
-28-
|
(d)
|
a
person is deemed to be an affiliate of another person if one is a
subsidiary of the other, or if both are subsidiaries of the same person,
or if each of them is controlled by the same person;
|
|
|
(e)
|
a
person is deemed to be a subsidiary of another person if it is controlled
directly or indirectly by that person, and includes a subsidiary of that
subsidiary; and
|
|
|
(f)
|
control
means control in any manner that results in control in fact, whether
directly through the ownership of securities or indirectly through a
trust, an agreement or arrangement or
otherwise
|
|
34.
|
Further
Assurances.
|
Each of
the parties upon the request of the other, whether before or after Closing,
shall do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts, deeds, documents, assignments,
transfers, conveyances, powers of attorney and assurances as may reasonably be
necessary or desirable to complete the transactions contemplated
herein.
|
35.
|
Time
of Essence.
|
Time is
of the essence of this Agreement.
|
36.
|
Headings.
|
The
headings contained herein are for convenience only and will not affect the
meaning or interpretation of this Agreement.
|
37.
|
Execution
by Electronic Delivery.
|
The
Corporation may rely on delivery by electronic delivery of an executed copy of
this Agreement, any attachments hereto, and acceptance by the Corporation of
such electronic copy is legally effective to create a valid and binding
agreement between the Corporation and the Purchaser in accordance with the terms
of this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]
-29-
IN WITNESS WHEREOF this
Agreement has been executed by the parties as of the date first written
above.
| KINROSS GOLD CORPORATION | |||
| By: | “Xxx X. Xxxx” | ||
|
Name: Xxx
X. Xxxx
|
|||
|
Title: President
and Chief ExecutiveOfficer
|
|||
|
XXXXX
XXXXXXX DIAMOND CORPORATION
|
|||
|
By:
|
“Xxxxxx
X. Xxxxxxxxx”
|
||
| Name: Xxxxxx X. Xxxxxxxxx | |||
|
Title:
Chairman & Chief Executive
Officer
|
|||
-30-
SCHEDULE
“A“
TERM
SHEET FOR AMENDED PARTNERSHIP AGREEMENT
Unless
the context otherwise requires, terms not otherwise defined herein will have the
meanings set forth in the Agreement.
|
Partnership
Agreement:
|
The
Purchaser will be admitted to the Partnership as a partner, and the
Partnership Agreement will be amended to reflect such admission, and shall
contain terms and conditions customary for transactions of this nature,
including, without limitation, the following:
|
|
|
|
|
|
|
|
(a)
|
Management – HWDM shall
continue to act as general partner of the Partnership and be responsible
for management of the business and affairs of the Partnership. In addition
to the Units already owned by HWDM, HWDM shall subscribe for a nominal
general partner interest in the Partnership for a nominal purchase
price.
|
|
|
|
|
|
|
(b)
|
Cash Calls – HWDM, as
general partner of the Partnership, shall be entitled to request that the
partners of the Partnership advance funds to the Partnership pro rata
based on their holdings of Units for the purpose of satisfying the
Partnership’s obligations under any of the agreements listed in Appendix
“B-1” to Schedule “B”. The partners may unanimously determine to fund any
cash call by way of loan rather than equity contribution. If a partner
fails to contribute its proportion of funds with respect to a cash call,
the non-defaulting partner(s) shall have the option, but not the
obligation, to fund the defaulting partner’s portion of the cash call by
way of equity contribution or loan or a combination of the two; provided
that if an equity contribution is made, the non-defaulting partner’s
interest in the Partnership shall be increased proportionately through the
issuance of additional Units, at a price per Unit calculated based on the
fair market value of a Unit as at the time of effective date of issuance
of such Units.
|
|
|
|
|
|
|
(c)
|
Distributions – HWDM,
as general partner of the Partnership, shall make distributions to the
partners on a monthly basis or such other basis as the partners may agree.
The repayment of any loans made by the partners to the Partnership shall
be in priority to other distributions. All distributions shall be made in
cash; provided that, in the event of: (i) a Change of Control of the
Corporation; (ii) the bankruptcy or insolvency of the Corporation, the
Partnership or HWDM; (iii) the conviction of the Corporation, HWDM, the
Partnership or any of the Selling Entities of an offence involving
material and adverse reputational consequences for the Corporation; or
(iv) a material default on the part of the Corporation, HWDM, the
Partnership or any of the Selling Entities in performing marketing and/or
sorting obligations (after a 45 day cure period has expired in respect
thereof), the Purchaser shall have the option to receive physical diamonds
in lieu of receiving distributions from the
Partnership.
|
|
(d)
|
No Return of Capital –
A partner shall not be entitled to demand a return of such partner’s
aggregate capital contribution to the Partnership.
|
||
|
(e)
|
Restrictions on
Transfer – Except as otherwise contemplated by this Schedule “A”,
no partner shall sell, transfer or otherwise dispose of any Units which it
owns except to a related party of such partner for as long as they remain
related. A partner may encumber its Units in the Partnership; provided
that such encumbrance is subordinate to transfer rights afforded to the
partners, as contemplated by this Schedule “A”.
|
||
|
(f)
|
Right of First Refusal
– Subject to the pre-emptive right under section 15.3 of the Diavik JV
Agreement (the “Pre-Emptive Right”) and
a permitted transfer contemplated in (e) above, each partner will receive
a customary right of first refusal with respect to any proposed transfer
of any other partner’s Units.
|
||
|
(g)
|
Co-Sale Right – Any
partner and its related parties who are partners, taken as a whole,
holding in aggregate less than 35% of the outstanding Units will be
entitled to receive customary co-sale rights with respect to any transfer
of Units that is subject to a right of first refusal.
|
||
|
(h)
|
No Restriction on Competition
– Subject to the non-competition and non-solicitation provisions of
Section 14 of the Agreement, none of the partners or their related
entities shall be: (i) restricted from engaging in or otherwise being
involved with any, or investing in any person engaged in a, business that
is similar or competitive with the business of the Partnership; or (ii)
required to bring any business opportunity to the
Partnership.
|
||
-2-
|
(i)
|
Matters Requiring Unanimous
Approval – The following matters will require unanimous approval of
the partners: (i) any change to the financial year of the Partnership;
(ii) the dissolution of the Partnership; (iii) the transfer or encumbrance
of the nominal general partner interest to be issued to HWDM; (iv)
replacing HWDM as the general partner of the Partnership; or (v) the
Partnership entering into any contractual arrangement with any partner or
related entity of any such partner.
|
||
|
(j)
|
Exercise of Pre-Emptive Right
under the Diavik Joint Venture Agreement – [PROVISIONS RELATED TO THE
EXERCISE OF RIGHTS UNDER THE JV AGREEMENT
REDACTED]
|
||
|
(k)
|
Event of Default - If a
partner: (i) fails to contribute its proportion of funds with respect to a
cash call (other than in connection with the exercise of the pre-emptive
rights under the Diavik Joint Venture Agreement (as defined in Appendix
“B-1”)); or (ii) experiences an insolvency or bankruptcy event, the
non-defaulting partner(s) may purchase all (but not less than all) of the
defaulting partner’s Units for a purchase price equal to 80% of the fair
market value of such interest, at any time within 180 days of the
determination of the fair market value.
|
||
|
(l)
|
Dissolution - Upon
dissolution of the Partnership, the general partner of the Partnership
shall commence the orderly liquidation of the Partnership’s property and
assets and each partner shall be entitled to its pro rata share of the
proceeds of such liquidation based on the number of Units
held. Notwithstanding the foregoing, if the partners agree, the
Partnership may be dissolved in a manner to comply with subsections 85(3),
98(3) or 98(5) of the Income Tax Act (Canada)
or in such other tax-efficient manner as the parties may
agree.
|
||
|
(m)
|
Income/Loss Allocation
– Except to the extent the partners otherwise unanimously agree, acting
reasonably, the allocation of the income or loss of the Partnership for
tax purposes for the fiscal year of the Partnership in which the Purchaser
becomes a partner of the Partnership shall be made amongst the partners as
though the Partnership’s fiscal year had ended immediately prior to the
Purchaser becoming a partner (the “Deemed Year End”) and
such that any income of the Partnership from the beginning of its fiscal
year until the Deemed Year End, giving effect to deductions that would be
available had there been a fiscal period ended at the time of the Deemed
Year End, will be allocated to the partners, other than the Purchaser, pro
rata based on each such partner’s Units at the time of the Deemed Year
End, and any income earned by the Partnership for the balance of such
fiscal year will be allocated amongst the partners, including the
Purchaser, pro rata based on each such partner’s Units at the end of the
fiscal period of the Partnership. Notwithstanding the Closing Date, it is
the currently the intent of the parties that the Deemed Year End will be
March 31, 2009.
|
||
-3-
|
(n)
|
Pre-Acquisition Tax
Exposures – If and to the extent any tax assessment, reassessment
or determination (a “Tax
Determination”) is made with respect to the operations, activities
or property of the Partnership in respect of any period prior to the time
the Purchaser becomes a partner of the Partnership, the tax consequences
of such Tax Determination shall be borne solely by the partners of the
Partnership, other than the Purchaser (the “Current Partners”) and
the Current Partners shall indemnify and save harmless the Purchaser in
respect of any such tax consequences.
|
||
|
(o)
|
Financial Statements –
HWDM, as general partner of the Partnership, shall provide to the
partners:
|
||
|
(i)
|
quarterly
unaudited financial statements of the Partnership, including a discussion
of variances from the annual budget, within 60 days of the end of each
quarter;
|
||
|
|
|||
|
(ii)
|
annual
audited financial statements of the Partnership, including balance sheet
and statements of income, retained earnings and changes in financial
position, within 90 days of the end of each fiscal
year.
|
||
|
(p)
|
Accounting, Financing and
Other Information - HWDM shall provide or cause to be provided to
any partner such additional accounting, financial and other information as
may be required by such partner or its related entities from time to time
to comply with any continuous disclosure requirements pursuant to
applicable securities laws.
|
||
-4-
|
(q)
|
Authority of the General
Partner – Subject to the prior approval of each of the partners,
HWDM shall have the full power to make, execute, amend or revoke any tax
filing on behalf of the Partnership and/or relevant partners to the extent
the tax filing relates to the Partnership.
|
||
|
(r)
|
Dispute Resolution –
Any disputes, disagreements, controversies, questions or claims shall be
settled by way of
arbitration.
|
||
-5-
SCHEDULE
“B”
TERM
SHEET FOR SHAREHOLDERS AGREEMENT
Unless
the context otherwise requires, terms not otherwise defined herein will have the
meanings set forth in the Agreement.
|
Shareholders
Agreement:
|
The
Purchaser, the Corporation and HWDM will enter into a shareholders
agreement with respect to HWDM, containing terms and conditions customary
for transactions of this nature, including, without limitation, the
following:
|
||
|
(a)
|
Board of Directors –
The shareholder(s) holding a majority of voting securities shall be
entitled to: (i) determine the size of the board of directors of HWDM; and
(ii) nominate all directors.
|
||
|
(b)
|
Approval Rights – In
addition to the consents and approvals required at law, HWDM shall obtain
the Purchaser’s consent (not be unreasonably withheld in respect of
matters in subparagraphs (vi) and (vii) below with respect to the Related
Agreements (as defined below) listed in Part 2 of Appendix “B-1”) before
HWDM, as the general partner on behalf of the Partnership, or, in the
case, of subparagraphs (i), (iii), (v), (xi), (xvi) or (xix) below, on its
own behalf, takes any action to:
|
||
|
(i)
|
amend
or otherwise change the constating documents of HWDM or the
Partnership;
|
||
|
(ii)
|
issue
any equity securities, including warrants, options, convertible debt and
other rights to purchase securities in the capital of the
Partnership;
|
||
|
(iii)
|
issue
any voting securities in the capital of HWDM;
|
||
|
(iv)
|
redeem
or purchase for cancellation any outstanding Units;
|
||
|
(v)
|
redeem
or purchase for cancellation any outstanding voting securities in the
capital of HWDM;
|
||
|
(vi)
|
amend,
restate, terminate, waive any material term under or assign (or otherwise
transfer any of the rights under) any of the agreements listed in Appendix
“B-1” (the “Related
Agreements”);
|
||
|
(vii)
|
have
the Partnership make any expenditure or incur any obligation other than as
explicitly required by the Related Agreements;
|
||
|
(viii)
|
have
the Partnership borrow money from any party;
|
||
|
(ix)
|
grant
any security interest over any assets of the
Partnership;
|
||
|
(x)
|
have
the Partnership provide loans to, or guarantees the obligations of, any
party other than as explicitly required by the Related
Agreements;
|
||
|
(xi)
|
engage
in any transaction outside the normal course of business (including
acquiring or establishing any new business or terminating any part of
HWDM’s or the Partnership’s current business);
|
||
|
(xii)
|
the
purchase any shares in the capital of any corporation or an interest in
any partnership, joint venture or similar entity;
|
||
|
(xiii)
|
engage
in any transaction with any person with whom the Partnership does not deal
at arm’s length;
|
||
|
(xiv)
|
agree
to sell any material assets of the Partnership
|
||
|
(xv)
|
merge
or enter into a joint venture with any other entity;
|
||
|
(xvi)
|
take
any steps to wind up, dissolve or reorganize HWDM or the
Partnership;
|
||
|
(xvii)
|
admit
any person as a partner of the Partnership except as explicitly required
by the Partnership Agreement (i.e. in the context of a permitted
transfer);
|
-2-
|
(xviii)
|
admit
any new or additional general partner of the
Partnership;
|
||
|
(xix)
|
enter
into any agreement whereby HWDM delegates all or substantially all of its
duties as the general partner of the Partnership;
|
||
|
(xx)
|
except
in the circumstances set forth in Schedule “A”, making of any distribution
from the Partnership in any form except cash;
|
||
|
(xxi)
|
any
change in the fiscal year of the Partnership;
|
||
|
(xxii)
|
any
material change to the Corporation’s marketing and sorting operations, as
set forth in Appendix “B-2”, including any change to the current transfer
price of diamonds used by the Partnership when selling diamonds to the
Selling Parties, which is currently 97% of the amount received by the
Selling Entity from an arm’s length customer on the last sale made by that
Selling Entity prior to the purchase from the Partnership of a
substantially similar parcel of rough diamonds; or
|
||
|
(xxiii)
|
commit
or agree to do any of the foregoing.
|
||
|
Without
limiting the foregoing, for greater certainty:
|
|||
|
(A)
HWDM will not be prohibited from pledging or encumbering its own assets,
including the Units held by HWDM or any pledge of shares in HWDM held by
the Corporation or any of its subsidiaries, in connection with the
implementation of any secured financing of the Corporation and its
subsidiaries, provided such financing is consistent with and subject to
the provisions of Section 9 of the Agreement; and
|
|||
|
(B)
no property or assets of the Partnership shall be pledged or encumbered in
connection with the implementation of any such secured financing, except
as otherwise may be agreed by the parties.
|
|||
|
(c)
|
Information Rights –
HWDM shall provide to each shareholder:
|
||
|
(i)
|
the
final annual capital and operating budgets (the “Annual Budget”) for each
subsequent fiscal year of the Partnership within a reasonable period after
receiving financial information from Diavik Diamond Mines Inc. (“DDMI”);
|
||
-3-
|
(ii)
|
all
notices delivered on behalf of and received by the Partnership under the
Related Agreements (including management committee reports under the JV
Agreement and notice of non-compliance, breach or default under the
Related Agreements);
|
||
|
(iii)
|
all
notices of board meetings, all materials disseminated to the board of
directors and all board resolutions; and
|
||
|
(iv)
|
such
other financial and business information with respect to the Partnership
or the Related Agreements as may be reasonably requested from time to
time; provided that information relating to the marketing, sorting and
selling of rough diamonds shall only provided to the Purchaser is not
competing, directly or indirectly, in the marketing and selling of rough
diamonds.
|
||
|
(d)
|
Partnership Budget
Consultation - Within a reasonable period prior to the end of each
fiscal year, subject to receipt of all financial information with respect
to the Diavik Diamond Mine (including any updated information or
forecast), HWDM shall provide to the Purchaser the proposed Annual Budget
for the upcoming fiscal year. The Purchaser shall have a reasonable period
of time to review the proposed Annual Budget and HWDM shall respond to any
reasonable questions and consider any comments that the Purchaser may have
on the proposed Annual Budget. The board of HWDM shall review each
proposed Annual Budget and either approve it or require further revisions
to it.
|
||
|
(e)
|
Ability to Cure - The
Purchaser, for as long as the Purchaser exercises direction or control
over any shares in the capital of HWDM, shall be permitted to cure, on
behalf of HWDM in respect of the Partnership, any breach by the
Partnership of its obligations under the Related Agreements subject to the
applicable cure periods in such Related
Agreements.
|
||
-4-
|
(f)
|
Restrictions on
Transfer – Neither HWDM nor the Purchaser may transfer any shares
in the capital of HWDM unless such transfer occurs concurrently with, in
the same proportion and to the same transferee (or a related entity) as a
transfer of such party’s interests in the Units of the
Partnership.
|
||
|
(g)
|
Concurrence of Interests –
At all times the Purchaser and its related entities, on one hand,
and the Corporation and its related entities, on the other, shall have a
proportionate number of Special Votes Shares in relation to the percentage
of outstanding Units held by such party and its related
entities.
|
||
|
(h)
|
Exercise of Pre-Emptive Rights
under the Diavik Joint Venture Agreement – [PROVISIONS RELATED TO THE
EXERCISE OF RIGHTS UNDER THE JV AGREEMENT
REDACTED]
|
||
|
(i)
|
Dispute Resolution –
Any disputes, disagreements, controversies, questions or claims shall be
settled by way of
arbitration.
|
||
-5-
APPENDIX
“B-1”
RELATED
AGREEMENTS
PART
1
|
1.
|
Diavik
Joint Venture Agreement dated March 23, 0000 xxxxxxx Xxxxxxxxx Xxxxxx Inc.
and Aber Resources Limited (the predecessor name of the Corporation), as
amended by amending agreement dated December 1, 1996 between the same
parties, as subsequently assigned by Kennecott Canada Inc. to DDMI and by
Aber Resources Limited to Aber Diamond Mines Ltd. (“ADM”) (the predecessor
name of HWDM), and as amended by an amending agreement (no.2) dated
January 17, 2002 between DDMI and ADM and by an amending agreement (no.3)
dated March 3, 2004 between DDMI and ADM, as subsequently assigned by ADM
to the Partnership (then named Aber Diamond Limited Partnership) pursuant
to an assignment agreement dated March 11, 2005 between ADM and the
Partnership (the “Diavik
Joint Venture Agreement”).
|
|
2.
|
Sorting
and Handling Agreement dated October 1, 2001 between ADM and Aber
Technical Services Inc., as subsequently assigned by ADM to the
Partnership (then named Aber Diamond Limited Partnership) pursuant to an
assignment agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
3.
|
Marketing
Services Agreement dated February 27, 2004 between ADM and Aber
International N.V. (the predecessor name of Xxxxx Xxxxxxx Diamond
International N.V.), as subsequently assigned by ADM to the Partnership
(then named Aber Diamond Limited Partnership) pursuant to an assignment
agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
4.
|
Aber
Overseas Rough Diamond Supply Agreement dated May 8, 2003 between ADM and
Aber Overseas N.V. (the predecessor name of Aber International N.V.)
terminated October 29, 2007. Aber International Rough Diamond Supply
Agreement dated October 29, 2007 between the Partnership and Aber
International N.V. (the predecessor name of Xxxxx Xxxxxxx Diamond
International N.V.), and as amended by an amending agreement dated January
30, 2009.
|
|
5.
|
Aber
India Rough Diamond Supply Agreement dated October 30, 2007 between the
Partnership and Aber India Private Limited. (the predecessor name of Xxxxx
Xxxxxxx Diamond (India) Private Limited) and as amended by an amending
agreement dated January 30, 2009.
|
|
6.
|
Repadre
Royalty Agreement dated September 30, 2003 between ADM, DDMI and Repadre
Capital Corporation, as subsequently assigned by ADM to the Partnership
(then named Aber Diamond Limited Partnership) pursuant to an assignment
agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
7.
|
Letter
Agreement dated September 30, 2003 between ADM and Repadre Capital
Corporation, as subsequently assigned by ADM to the Partnership (then
named Aber Diamond Limited Partnership) pursuant to an assignment
agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
8.
|
Xxxxxxxx
Royalty Agreement dated September 30, 2003 between ADM, DDMI and
Xxxxxxxxxxx Xxxxxxxx, as subsequently assigned by ADM to the Partnership
(then named Aber Diamond Limited Partnership) pursuant to an assignment
agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
9.
|
Letter
Agreement dated September 30, 2003 between ADM and Xxxxxxxxxxx Xxxxxxxx,
as subsequently assigned by ADM to the Partnership (then named Aber
Diamond Limited Partnership) pursuant to an assignment agreement dated
March 11, 2005 between ADM and the Partnership.
|
|
10.
|
Mutual
Consent To Release Of Information dated September 22, 2003 between ADM and
DDMI, as subsequently assigned by ADM to the Partnership (then named Aber
Diamond Limited Partnership) pursuant to an assignment agreement dated
March 11, 2005 between ADM and the
Partnership.
|
PART
2
|
11.
|
Diamond
Supply Agreement dated March 10, 2003, as amended by an amending agreement
dated December 6, 2004 and a side letter dated March 10, 2003, each
between ADM and Xxxxxxx and Company, as subsequently assigned by ADM to
the Partnership (then named Aber Diamond Limited Partnership) pursuant to
an assignment agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
12.
|
Agreement
To Establish A Protocol For Diamond Production Splitting dated January 7,
2003 between ADM and DDMI, as subsequently assigned by ADM to the
Partnership (then named Aber Diamond Limited Partnership) pursuant to an
assignment agreement dated March 11, 2005 between ADM and the
Partnership.
|
|
13.
|
Consulting
and Professional Services Agreement dated February 1, 2001 between ADM and
Aber Diamond Corporation (the predecessor name of the Corporation), as
subsequently assigned by ADM to the Partnership (then named Aber Diamond
Limited Partnership) pursuant to an assignment agreement dated March 11,
2005 between ADM and the Partnership and as amended by an amending
agreement dated May 1,
2005.
|
-2-
APPENDIX
“B-2”
SUMMARY
OF BUSINESS DESCRIPTION – SORTING AND MARKETING OPERATIONS
The
companies referenced in this summary are set out on the attached organization
chart dated December 5, 2008.
The
entities involved in the sorting and sale of rough diamonds are:
|
1.
|
Xxxxx
Xxxxxxx Technical Services Inc.;
|
|
2.
|
Xxxxx
Xxxxxxx Diamond Limited Partnership;
|
|
3.
|
Xxxxx
Xxxxxxx Diamond (India) Private Limited;
|
|
4.
|
Xxxxx
Xxxxxxx Diamond International N.V.; and
|
|
5.
|
Xxxxx
Xxxxxxx Diamond Mines
Limited.
|
Xxxxx
Xxxxxxx Diamond Mines Limited is a holding company that pays for a
director/consultant in the North West Territories.
Xxxxx
Xxxxxxx Diamond (Israel) Ltd. will cease to do business on March 31,
2009.
Aber
Quebec Inc. is a financing vehicle.
6019838
Canada Inc. owns the building at 000 Xxxxxxxxxx Xxxxxx.
[SUMMARY
OF BUSINESS DESCRIPTION REDACTED]
ORGANIZATIONAL
CHART
-2-
SCHEDULE
“C”
WIRE
TRANSFER INSTRUCTIONS
[WIRE TRANSFER INSTRUCTIONS
REDACTED]
SCHEDULE
“D”
DETERMINATION
OF FAIR MARKET VALUE
|
1.1
|
Meaning
of Fair Market Value.
|
|
(1)
|
For
purposes of this Agreement, “Fair Market Value” means
the price per Unit that would be received if all of the issued and
outstanding Units were sold as determined pursuant to this Schedule. In
determining the Fair Market Value, any Valuator appointed shall be
considered an expert and is not acting as an arbitrator within the meaning
of the Arbitration Act,
1991 (Ontario).
|
|
(2)
|
Fair
Market Value is determined on the basis that the sale of the Units takes
place in a single transaction in an open and unrestricted market between
prudent parties, acting at arm’s length and under no compulsion to act,
and having reasonable knowledge of all relevant facts concerning the
Partnership.
|
|
(3)
|
Fair
Market Value is determined on the basis that the Partnership is a “going
concern” (except to the extent that market, financial, economic, business
or other conditions shall dictate different criteria in the reasonable
judgment of the Valuator) without any discount for a minority interest or
any premium for control. The value of the Units is not diminished because
(i) the Units are not publicly traded or (ii) the vendor owns a minority
interest in the Partnership.
|
|
1.2
|
Estimate
of Fair Market Value.
|
|
(1)
|
Immediately
following the receipt of notice of exercise of the Put Option, the parties
shall negotiate expeditiously and in good faith during the 10 day period
following delivery of such notice to arrive at a mutually agreeable Fair
Market Value. If such agreement is reached, the agreed amount becomes the
Fair Market Value.
|
|
(2)
|
If
the parties are unable to agree on the Fair Market Value within such 10
day period, each party may immediately designate a person who is at arm’s
length to the parties as its representative and the persons so selected
will jointly appoint an additional person who is at arm’s length to the
parties and their selected representatives. The persons so chosen will
select an independent qualified business valuator by majority decision (a
“Valuator”) for a
final determination as to the Fair Market Value.
|
|
(3)
|
The
Valuator will determine the Fair Market Value as quickly as practicable
after the date of its selection having regard to the factors identified in
Section 1.1. The Valuator may also have regard to any written
representations which any of the parties wish to make, any such
representations to be no later than 10 days after the selection of the
Valuator. The Valuator will deliver its report concerning the Fair Market
Value (the “FMV
Report”) to the parties and the Fair Market Value set out in that
report will be conclusive and binding. The Fair Market Value in the FMV
Report will be the Fair Market Value for purposes of this
Agreement.
|
|
(4)
|
The
costs and expenses of the Valuator incurred in connection with preparation
of the FMV Report will be shared equally by the
parties.
|
SCHEDULE
“E”
FORM
OF OPINION
“Agreements” means this
Agreement, the shareholders agreement with respect to HWDM and the amended
Partnership Agreement;
|
1.
|
The
Corporation is a corporation existing under the laws of
Canada.
|
|
|
2.
|
HWDM
is a corporation existing under the laws of the Northwest
Territories.
|
|
|
3.
|
The
Partnership is a limited partnership under the laws of the Northwest
Territories.
|
|
|
4.
|
There
are no restrictions on the corporate power and capacity of the
Corporation, HWDM or the Partnership to own their respective property and
assets and to carry on business.
|
|
|
5.
|
There
are no restrictions on the corporate power and capacity of the Corporation
or HWDM to enter into the Agreements to which they are a party or for the
Corporation and HWDM to carry out their respective obligations thereunder,
including the issuance of the Purchased Securities. The
execution and delivery by the Corporation and HWDM of the Agreements to
which they are a party and the respective performance of their obligations
under the Agreements to which they are a party have been duly authorized
by all necessary action on the part of such party.
|
|
|
6.
|
The
authorized capital of the Corporation consists of an unlimited number of
Common Shares.
|
|
|
7.
|
The
authorized capital of HWDM consists of an unlimited number of Class A
shares, an unlimited number of Class B shares and an unlimited number of
Special Voting Shares, of which 25,980,002 Class A shares, no Class B
shares and 1,000 Special Voting Shares are outstanding.
|
|
|
8.
|
The
authorized capital of the Partnership consists of an unlimited number of
Units, of which 258,065,806.45 Units are outstanding.
|
|
|
9.
|
The
Agreements (other than the amended Partnership Agreement) have been duly
executed and delivered by the Corporation and are enforceable against the
Corporation in accordance with their respective terms, subject to usual
opinion qualifications.
|
|
|
10.
|
The
Agreements (other than this Agreement) have been duly executed and
delivered by HWDM and are enforceable against HWDM in accordance with
their respective terms, subject to usual opinion
qualifications.
|
|
|
11.
|
The
Purchased Securities have been duly authorized and validly issued and the
Purchased Shares are fully-paid and non-assessable.
|
|
|
12.
|
The
listing of the Purchased Shares on the TSX has been approved by the TSX,
subject only to the Corporation fulfilling the requirements specified in
the letter from the TSX to the Corporation dated l, 2009 regarding
the listing of the Purchased Shares on or before l,
2009.
|
|
|
13.
|
The
execution and delivery of by the Corporation and HWDM of the Agreements to
which they are a party, and the performance of their respective
obligations, including the issuance, sale and delivery of the Purchased
Securities do not or will not violate, contravene or breach any provision
of: (a) the constating documents of the Corporation, HWDM or the
Partnership; and (b) the laws of the Province of Ontario and the federal
laws of Canada applicable in the Province of Ontario.
|
|
|
14.
|
The
offering, issuance, sale and delivery of the Purchased Securities to the
Purchaser in accordance with this Agreement are exempt from the prospectus
and registration requirements of securities laws applicable in the
Province of Ontario and no prospectus is required nor are other documents
required to be filed, proceedings taken or approvals, permits, consents or
authorizations of regulatory authorities obtained under securities laws
applicable in the Province of Ontario to permit the offering, issuance,
sale and delivery of the Purchased Securities to the
Purchaser. We note that the Corporation, HWDM and the
Partnership are required to file a report with the OSC on Form 45-106F1
prepared and executed in accordance with NI 45-106 within 10 days from the
date of this letter, accompanied by any applicable prescribed
fees.
|
|
|
15.
|
No
prospectus is required nor are other documents required to be filed,
proceedings taken, or approvals, permits, consents or authorizations of
regulatory authorities obtained under securities laws applicable in the
Province of Ontario to permit a holder of Purchased Shares to trade those
securities, either through registrants or dealers registered under
applicable laws who comply with those applicable laws or in circumstances
in which there is an exemption from the registration requirements of the
securities laws applicable in the Province of Ontario, provided
that:
|
|
|
(a)
|
the
Corporation is, and has been, a reporting issuer in a jurisdiction of
Canada for the four months immediately preceding the
trade;
|
|
|
(b)
|
at
the time of the trade, at least four months have elapsed from the date of
this letter;
|
|
|
(c)
|
the
certificates representing the Purchased Shares carried a legend in the
form prescribed by National Instrument 45-102 Resale of Securities
(“NI 45-102”)
stating that, unless permitted under securities legislation, the holder
shall not trade that security before the date which is four months and one
day from the date of this letter;
|
|
|
(d)
|
the
trade is not a control distribution within the meaning of NI
45-102;
|
|
|
(e)
|
no
unusual effort is made to prepare the market or to create a demand for the
securities that are the subject of the
trade;
|
|
-2-
|
(f)
|
no
extraordinary commission or consideration is paid to a person or company
in respect of the trade; and
|
|
|
(g)
|
if
the holder is an insider or officer of the Corporation, the holder has no
reasonable grounds to believe that the Corporation is in default of
securities
legislation.
|
-3-
SCHEDULE
“F”
AMENDED
AND RESTATED CONSULTING AGREEMENT
|
●
|
On
a monthly basis, the Partnership will pay the Corporation, in arrears, a
management fee to cover administrative costs that are not attributable to
or for the benefit of (i) the public company and (ii) the retail
division.
|
|
●
|
On
an annual basis, as part of the Partnership budgeting process, the
Corporation’s administrative costs for the following year would be agreed
to by the parties, acting reasonably.
|
|
●
|
An
initial monthly fee of [REDACTED] (the “Preliminary fee”) shall
be paid by the Partnership in each of the first two full calendar months
that occur following Closing (the “Initial Period”), unless
the parties otherwise agree prior to or following
Closing.
|
|
●
|
Following
execution of the Subscription Agreement, the parties will negotiate in
good faith to establish the appropriate monthly fee payable for the
balance of fiscal 2010 following expiry of the Initial Period, and
properly reflect the appropriate allocation of the corporate selling,
general and administrative costs to be borne by the Partnership to reflect
the principle set forth in the first bullet above.
|
|
●
|
In
the event that the parties have been unable to agree on the amount of such
fee prior to the expiry of the Initial Period, the issue will be resolved
by final and binding arbitration on terms and conditions set out in the
definitive Partnership Agreement. The Preliminary Fee will remain payable
on a monthly basis until the arbitration decision is rendered. The
Preliminary Fee will be retroactively adjusted (pro rata to each partner’s
interest) for the period commencing from the expiry of the Initial Period
until the date of the arbitration
decision.
|
SCHEDULE
18(t)
MATERIAL
DEFAULTS
[DESCRIPTION
OF MATERIAL DEFAULTS REDACTED]
SCHEDULE
18(gg)
TAXES
[DESCRIPTION
OF TAXES REDACTED]
SCHEDULE
19(e)
SPECIFIED
PERMITTED ADJUSTING DISTRIBUTION
|
Xxxxx Xxxxxxx Diamond
Limited
Partnership (the
“Partnership”)
|
|||||||
|
HWDLP
|
Currency
|
||||||
|
Bank
Balance as of March 18, 2009 of the Partnership
|
285,319.00
|
USD
|
|||||
|
Bank
Balance as of March 18, 2009 of the Partnership
|
12,872,212.00
|
CAD
|
|||||
|
1.
|
Xxxxx
Xxxxxxx Diamond (India) Private Ltd. (“HW India”) pays FY2008
Transfer price adjustment to the Partnership
|
2,745,000.00
|
USD
|
||||
|
2.
|
HW
India pays March FY2008 transfer price adjustment to the
Partnership
|
249,000.00
|
USD
|
||||
|
3.
|
The
Partnership pays FY2009 transfer price adjustment to HW
India
|
(1,390,000.00
|
)
|
USD
|
|||
|
4.
|
The
Partnership pays HW India various outstanding credit memos
|
(493,354.62
|
)
|
USD
|
|||
|
5.
|
Receipt
of payments for shipments sent to Xxxxx Xxxxxxx Diamond International NV
(Based on estimate / Actual value should be available on March 20,
2009)
|
3,780,992.00
|
USD
|
||||
|
6.
|
The
Partnership converts USD to CAD to make cash call to DDMI
|
(902,230.40
|
)
|
USD
|
|||
|
7.
|
The
Partnership converts USD to CAD to make cash call to DDMI
|
1,127,788.00
|
CAD
|
||||
|
8.
|
Payment
of cash call (March 26, 2009) to DDMI
|
(14,000,000.00
|
)
|
CAD
|
|||
|
9.
|
Distribution
out to HWDM immediately prior to closing of transaction
|
(4,274,725.98
|
)
|
USD
|
|||
|
Bank
Balance as of the Closing Date of the Partnership
|
0.00
|
USD
|
|||||
|
Bank
Balance as of Closing Date of the Partnership
|
0.00
|
CAD
|
|||||
