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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
September 1, 1999
---------------------------------
(Date of earliest event reported)
MK GOLD COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 0-23042 82-0487047
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
60 East South Temple, Suite 2100
Salt Lake City, Utah 84111
(801) 297-6900
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(Address of principal executive offices and telephone number,
including area code)
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<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Pursuant to a Stock Purchase Agreement dated September 1, 1999 (the "Stock
Purchase Agreement") between MK Gold Company (the "Company") and Leucadia
National Corporation ("Leucadia"), Leucadia has agreed to purchase, subject to
certain conditions, and the Company has agreed to sell, subject to certain
conditions, 18,058,635 shares (the "Shares") of the authorized but unissued
shares of Common Stock of the Company at the price of $0.8753 per share,
representing the book value of the Shares as at June 30, 1999.
The purpose of the sale of the Shares to Leucadia was to provide the
Company with a portion of the funds necessary for the Company to acquire the
entire share capital and subordinated debt of RioMin Exploraciones SA
("Riomin"), as more fully described in Item 2 of this report. Because funding
for this acquisition was required before the sale of the Shares could be
completed, the Company has borrowed $15,806,723 from Leucadia pursuant to a
Promissory Note dated September 1, 1999 (the "Promissory Note"). The Promissory
Note is due September 1, 2001 and bears interest at a rate of 8% per annum for a
period of 60 days, increasing to 12% thereafter. Interest is payable
semi-annually in arrears commencing March 31, 2000. The Promissory Note will be
used by Leucadia to pay the purchase price for the Shares upon issuance of the
Shares.
Upon consummation of the transactions contemplated by the Stock Purchase
Agreement, Leucadia will beneficially own 27,058,635 shares of Common Stock of
the Company, which will represent approximately 72.5% of the Common Stock to be
outstanding at that time. Prior to the purchase of the Shares, Leucadia
beneficially owns 9,000,000 shares of Common Stock of the Company, representing
approximately 46.7% of the Company's outstanding Common Stock.
Leucadia has informed the Company that its source of funding of the
Promissory Note was its working capital. Each party's obligation to consummate
the transactions contemplated by the Stock Purchase Agreement is subject to
certain conditions, including the expiration or termination of applicable
waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended.
The foregoing description is qualified by reference to the Stock Purchase
Agreement and the Promissory Note, which are incorporated by reference as
exhibits to this report.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 1, 1999, pursuant to a Sale and Purchase Agreement, the
Company acquired the entire share capital and subordinated debt of Riomin (the
"Acquisition") from Rio Tinto plc ("Rio Tinto"). Riomin holds the exploration
and mining rights to the Las Cruces copper deposit in the pyrite belt of Spain
(the "Project"). The Project is in the exploration and development phase and no
copper is currently being produced from the Project. Actual mining will be
subject to permitting, engineering and construction.
2
<PAGE>
The aggregate purchase price for the Acquisition was $42 million in cash.
In addition, Rio Tinto will be entitled to receive a 1.5% royalty on any copper
sales from the Project at a price exceeding $0.80 per pound. The Company
obtained funding for the Acquisition through (i) borrowings of $20 million
pursuant to an existing Credit Agreement, dated as of March 1, 1998 (the "Credit
Agreement"), between Leucadia and the Company, (ii) the borrowing from Leucadia
of $15,806,723 in connection with the pending stock purchase described in Item 1
of this report and (iii) $6,193,277 from the Company's working capital. The
aggregate purchase price for the Acquisition was determined pursuant to
negotiations between the Company and Rio Tinto.
In connection with the Acquisition, the Company has granted Straits
Resources Ltd., Sydney, Australia, a one-year option to purchase 35% of Riomin
at the Company's cost, plus interest.
Prior to the sale, there were no material relationships between Riomin or
Rio Tinto and the Company or its affiliates, directors or officers or any
associate of any director or officer of the Company.
The foregoing description is qualified in its entirety by reference to the
Sale and Purchase Agreement, which is incorporated by reference as an exhibit to
this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS.
(a) The Company intends to file financial statements of Riomin no later
than November 15, 1999.
(b) The Company intends to file pro forma financial statements reflecting
its acquisition of Riomin no later than November 15, 1999.
(c) Exhibits
2.1 Sale and Purchase Agreement dated September 1, 1999 between MK
Gold Company and Rio Tinto Metals Limited.
10.1 Stock Purchase Agreement dated September 1, 1999 between MK Gold
Company and Leucadia National Corporation.
10.2 Promissory Note dated September 1, 1999.
10.3 Option Agreement dated August 26, 1999 between MK Gold Company
and Straits Resources Ltd.
Cautionary Statement for Forward-Looking Information
Certain information set forth in this report contains forward-looking
statements that are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Without limitation,
these risks and uncertainties include the ability to receive all necessary
permits and regulatory authorizations, non-performance by contractors, higher
than estimated construction and engineering costs, economic recessions,
fluctuations in copper, gold and other metal prices, risks associated with
closure and reclamation of mines and the ability of the Company to acquire and
fund new mining projects. Readers should review and consider the various
disclosures made by the Company in this report and in its reports to its
shareholders and periodic reports on forms 10-K and 10-Q.
3
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MK GOLD COMPANY
JOHN C. FARMER
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John C. Farmer
Chief Financial Officer
Date: September 13, 1999
4
<PAGE>
INDEX TO EXHIBITS
Exhibits
2.1 Sale and Purchase Agreement dated September 1, 1999 between MK Gold
Company and Rio Tinto Metals Limited.
10.1 Stock Purchase Agreement dated September 1, 1999 between MK Gold
Company and Leucadia National Corporation.
10.2 Promissory Note dated September 1 1999.
10.3 Option Agreement dated August 26, 1999 between MK Gold Company and
Straits Resources Ltd.
Dated September 1, 1999
RIO TINTO METALS LIMITED
- and -
MK GOLD COMPANY
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AGREEMENT
for the sale and purchase of
all of the issued shares and venture loans
of RioMin Exploraciones SA
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Rio Tinto plc
Legal Department
6 St James's Square
London SW1Y 4LD
<PAGE>
THIS AGREEMENT is made on 1999
BETWEEN:-
(1) RIO TINTO METALS LIMITED (No. 147115) whose registered office is at 6, St
James's Square, London, England (the "Vendor"); and
(2) MK GOLD COMPANY of 60 East South Temple, Salt Lake City, Utah 84111 (the
"Purchaser).
RECITALS:
(A) By a transfer deed executed before a notary on 31 December 1998, the Vendor
acquired the Shares in the Company from Rio Tinto International Holdings
Limited. Furthermore, by a transfer deed executed before a Spanish notary
on 25 February 1999, the Vendor acquired the Venture Loans (defined below)
from Rio Tinto International Holdings Limited;
(B) The Company is a wholly owned subsidiary of Rio Tinto Metals Limited and is
the legal and beneficial owner of the Investigation Permits (defined
below);
(C) The Purchaser and the Vendor now wish to enter into this agreement to
record the terms upon which the Purchaser is to acquire the Shares, and the
Venture Loans, from the Vendor.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 In this agreement the following words and expressions and abbreviations
have the following meanings, unless the context otherwise requires:-
"Accounts" means the audited financial statements of the Company,
comprising the balance sheet and profit and loss account of the Company
together with the directors' report and auditors certificate, as at and for
the financial period ended on the Accounts Date;
"Accounts Date" means 31 December 1998;
"Business Day" means a day (excluding Saturdays and Sundays) on which banks
generally are open in London, Seville, Salt Lake City and Sydney for the
transaction of normal banking business;
"Company" means RioMin Exploraciones S.A., a Spanish corporation whose
registered office is located at Ronda de la Exposicion, 39, Seville (Spain)
incorporated for an indefinite period by a deed executed by the Notary
Public Mr Jose-Maria Alvarez Vega, of Madrid, on 19 January 1983. The
articles of association currently in force were signed before the Notary
Public Ms. Maria Isabel Gabarro Miquel, of Barcelona, on 16 November 1998,
with protocol number 3596. The Company is listed in the Companies Register
of Seville,
<PAGE>
Volume 2612, Folio 222, page SE 31598 and with the tax identification
number A-28-814135;
"Completion" means the completion of the sale and purchase of the Shares
and the Venture Loans in accordance with clause 4;
"Completion Date" means the date of execution of this Sale and Purchase
Agreement;
"Confidential Information" means all information relating to the affairs
and activities of the Company including all Technical Data which is not
publicly known;
"Data Room" means the files of documents relating to the Company and its
activities as the same are more particularly described in the Index to the
Data Room Documents in agreed terms;
"Disclosure Letter" means the letter of today's date together with the
attachments thereto addressed by the Vendor to the Purchaser disclosing
exceptions to the Warranties;
"Encumbrance" means any mortgage, charge (fixed or floating), pledge, lien,
hypothecation, trust, right of set off or other third party right or
interest (legal or equitable) including any right of pre-emption,
assignment by way of security, reservation of title or any other security
interest of any kind however created or arising or any other agreement or
arrangement (including a sale and repurchase arrangement) having similar
effect;
"Feasibility Study" means the report prepared by the Company (together with
all supporting documentation and information hereto) on the feasibility of
developing a mine and processing facilities at Las Cruces;
"Investigation Permits" means the investigation permit (number 7532)
granted to the Company on 14 October 1992 by Servicio de Industria, Energia
y Minas as renewed for further terms of 3 years on 15 September 1995 and 25
November 1998 together with the surrounding four investigation permits
registered with numbers 7531, 7533, 7625 and 7626;
"Material Agreements" means all existing agreements to which the Company is
a party and which are material to the Company's activities as currently
carried on true and complete copies of which are in the Data Room and
referred to in the Index to the Data Room Documents in agreed terms;
"Properties" means the properties described in schedule 2 or any part or
parts thereof and "Property" shall mean any one of them;
"Purchaser's Group" means the Purchaser, its holding companies and the
subsidiaries from time to time of such holding companies, all of them and
each of them as the context admits;
<PAGE>
"Related Person" means in relation to any party its holding companies and
the subsidiaries from time to time of such holding companies, all of them
and each of them as the context admits;
"Shares" means all of the issued shares in the capital of the Company
namely 191,500 registered shares, fully paid up with a nominal value of
3254 pesetas each numbers 1 to 191, 500, both included;
"Tax" or "tax" means any tax, and any duty, contribution, impost,
withholding, levy or charge in the nature of tax, whether domestic or
foreign, and any fine, penalty, surcharge or interest connected therewith
and includes corporation tax, advance corporation tax, income tax
(including income tax required to be deducted or withheld from or accounted
for in respect of any payment), national insurance and social security
contributions, capital gains tax, inheritance tax, value added tax, customs
exercise and import duties, stamp duty, stamp duty reserve tax, insurance
premium tax, air passenger duty, rates and water rates, land fill tax,
petroleum revenue tax, advance petroleum revenue tax, gas levy and any
other payment whatsoever which any person is or may be or become bound to
make to any person and which is or purports to be in the nature of
taxation;
"Technical Data" means all plans, results, geological data, drawings,
specifications, operating procedures and other technical data and
information of whatever kind in each case owned by the Company including,
but without limitation, the Feasibility Study, financial analysis and
interpretation of the geological and metallurgical data in respect of the
land the subject of the Investigation Permits;
"Vendor's Group" means the Vendor, its holding companies and the
subsidiaries, excluding the Company, from time to time of such holding
companies, all of them and each of them as the context admits;
"Venture Loans" means the loans granted to the Company amounting, in
aggregate to 5,390,776,662 pesetas pursuant to the assignment of a credit
and venture loan agreement entered into on 25 February 1999, before the
notary Mr Francisco Palop Tordera;
"Warranties" means the warranties set out in schedule 1.
1.2 In this agreement unless otherwise specified, reference to:-
(a) "subsidiary" or "holding company" in respect of the Company it shall be
construed in accordance with article 4 of the Ley del Mercado de Valores
(Stock Exchange Act) and article 42 of the Codigo de Commercio (Mercantile
Code) and in respect of the Vendor, the Vendor's Group, the Purchaser or
the Purchaser's Group, the law of the place of incorporation of the
relevant entity;
(b) a document in the "agreed terms" is a reference to that document in the
form approved and for the purposes of identification signed by or on behalf
of each party;
<PAGE>
(c) a "party" means a party to this agreement and includes its assignees (if
any) and/or the successors in title to substantially the whole of its
undertaking;
(d) a "person" includes any person, individual, company, firm, corporation,
government, state or agency of a state or any undertaking (whether or not
having separate legal personality and irrespective of the jurisdiction in
or under the law of which it was incorporated or exists);
(e) "clauses", "paragraphs" or "schedules" are to clauses and paragraphs of and
schedules to this agreement;
(f) words denoting the singular shall include the plural and vice versa and
words denoting any gender shall include all genders;
(g) any reference to US$ is to the currency of the United States of America.
1.3 The schedules form part of the operative provisions of this agreement and
references to this agreement shall, unless the context otherwise requires,
include references to the schedules.
2. SALE AND PURCHASE
2.1 Upon the terms of this agreement, the Vendor as legal and beneficial owner
shall sell and the Purchaser shall purchase all the Shares and the Venture
Loans with effect from Completion free from any Encumbrance together with
all accrued benefits and rights attached thereto.
2.2 The aggregate consideration for such sale and purchase shall be the total
sum of U$42,000,000 to be satisfied in cash on Completion of which US$
shall be the consideration payable for the Shares and US$ shall be the
consideration payable for the Venture Loans.
2.3 In addition to the consideration referred to in clause 2.2 the Purchaser
shall pay to the Vendor a royalty in accordance with the provisions of
Schedule 3 ("Royalty").
3. CONDITIONS
Completion is conditional upon fulfilment in all respects by the Purchaser
of its obligation to pay the Consideration.
4. COMPLETION
4.1 Completion shall take place at the Company's offices on the Completion
Date.
4.2 On Completion the Vendor shall deliver to or, if the Purchaser shall so
agree, make available to the Purchaser:-
(a) transfers in the agreed form relating to all the Shares and the
Venture Loans duly executed in favour of the Purchaser before a Notary
Public;
<PAGE>
(b) the original of the transfer deed executed on 31 December 1998 before
Spanish Notary Public Maria-Isabel Gabarro Miquel pursuant to which
the Vendor acquired the Shares together with the original of transfer
deed executed on 25 February 1999 pursuant to which the Vendor
acquired the Venture Loans and any reports or documents lodged with
any relevant Spanish foreign investment authority concerning the
Venture Loans;
(c) resignations in the agreed terms duly executed as deeds of Mr John
MacLean and Mr Daniel Roca from their offices as director or secretary
of the Company containing a confirmation that they have no claims
(whether statutory, contractual or otherwise) against the Company for
compensation for loss of office or unpaid emoluments;
(d) the Company's Memorandum and articles of association, Register of
Minutes of meetings of shareholders and directors, Register of
agreements with sole shareholder, Shareholders Register, Companies
House Certificate and cheque books of the Company;
(e) the documents evidencing the Venture Loans, including any cancelled
Loans, the Investigation Permits and all Material Agreements;
(f) the Technical Data and the contents of the Data Room;
(g) the Disclosure Letter duly signed for and on behalf of the Vendor; and
4.3 At or prior to Completion (and prior to the taking effect of the
resignations of the directors referred to in clause 4.2(c) above) the
Vendor shall procure the passing of board and/or shareholder resolutions
(as the case may be) in the agreed terms of the Company approving the sale
of the Shares and the Venture Loans:-
(a) sanctioning for registration of the transfers in respect of the
Shares;
(b) appointing Messrs. G. Frank Joklik, Donald L Babinchak and John C
Farmer to be the directors and Mr Charles Coward, to be secretary of
the Company;
(c) revoking all mandates to bankers (other than any existing mandates in
favour of Mr Mike Doyle, Mr Gobain Ovejero Zappino or any other
employee of the Company) and giving authority in favour of the
directors appointed under clause 4.3(b) above or such other persons as
the Purchaser may nominate to operate the bank accounts thereof; and
(d) revoking all powers of attorney.
4.4 Upon compliance by the Vendor with the provisions of clauses 4.2 and 4.3
the Purchaser shall provide for the transfer by CHAPS of US$42,000,000 to
<PAGE>
the Account of Rio Tinto Finance plc at Chase Manhattan Bank , New York,
ABA No. 021000021, SWIFT CHASUS33, Account No. 910-2-772986.
4.5 If in any respect the obligations of the Vendor (or Purchaser) are not
complied with on Completion the party not in default may:-
(a) defer Completion to a date not more than 28 days after Completion (and
so that the provisions of this clause 4, apart from this clause
4.5(a), shall apply to Completion as so deferred); or
(b) proceed to Completion so far as practicable (without prejudice to its
rights hereunder); or
(c) terminate this agreement without prejudice to the rights and
liabilities which accrued prior to termination which shall continue to
subsist,
by means of a notice to that effect in writing served on the other.
5. WARRANTIES
5.1 The Vendor warrants with the Purchaser in the terms of the Warranties as at
the Completion Date.
5.2 Each of the Warranties shall be construed as a separate Warranty and (save
as expressly provided to the contrary) shall not be limited by the terms of
any of the other Warranties.
5.3 Save in the case of fraud or fraudulent concealment by the Vendor, the
Vendor shall be under no liability in respect of any claim under the
Warranties and any such claim shall be wholly barred and unenforceable
unless written notice of such claim setting out full details of the
relevant claim (including the grounds on which such claim is based and the
amount claimed to be payable in respect thereof) shall have been served
upon the Vendor by the Purchaser:-
(a) in the case of a claim under the Warranties (other than the Warranties
relating to Tax) by not later than 5.00 pm on the date which is 12
months after the date hereof; and
(b) in the case of a claim under the Warranties relating to Tax by not
later than 5.00 pm on the fourth anniversary of the date hereof
and the liability of the Vendor for any claim specified in such notice
shall absolutely determine and cease unless the amount payable in respect
of the relevant claim has been agreed by the Vendor within six months of
the date of such written notice, or
(i) if legal proceedings have not been instituted in respect of such
claim by the due service of process on the Vendor within 3 months
of the date of such written notice; or
<PAGE>
(ii) in the event that the Vendor shall make in respect thereof a
request pursuant to clause 5.12(a)(ii), if legal proceedings have
not been instituted by the Purchaser in respect of such claim by
the due service of process on the Vendor within three months of
the date on which pursuant to clause 5.12(a)(ii) judgement is
given by a court of competent jurisdiction in respect of such
proceedings as shall have been instituted by the Purchaser
pursuant to such request or the date settlement is reached in
such third party proceedings with the consent of the Vendor or on
which the Vendor and the Purchaser agree that proceedings or
other action against the third party shall be abandoned.
For the purpose of this clause 5.3 legal proceedings shall not be deemed to
have been commenced unless they shall have been properly issued and validly
served upon the Vendor.
5.4 Save in the case of fraud or fraudulent concealment the Vendor shall be
under no liability in respect of any claim under the Warranties:-
(a) where the liability of the Vendor in respect of that claim would (but
for this paragraph) have been less than US$25,000;
(b) unless and until and only to the extent that the liability in respect
of that claim (not being a claim for which liability is excluded under
sub-clause 5.4(a) above) when aggregated with the liability of the
Vendor in respect of all other claims shall exceed US$300,000.
5.5 Save in the case of fraud or fraudulent concealment the aggregate liability
of the Vendor in respect of all claims under this Agreement shall not in
any circumstances exceed US$42,000,000.
5.6 The Vendor shall be under no liability whatsoever in respect of any claim
under the Warranties if the facts or circumstances giving rise thereto are
fully and fairly disclosed in the Disclosure Letter, any of the documents
contained in the Data Room or provided for or stated to be exceptions under
the terms of this agreement or are otherwise known to the Purchaser at the
date hereof.
5.7 No liability (whether in contract, tort or otherwise) shall attach to the
Vendor in respect of any claim under the Warranties to the extent that:-
(a) the claim or the events giving rise to the claim would not have arisen
but for an act, omission or transaction of the Purchaser or which
would not have arisen but for any claim, election or surrender or
disclaimer made or omitted to be made or notice or consent given or
omitted to be given by the Purchaser under the provisions of any
statutes relating to Tax;
(b) the claim is based upon a liability which is contingent only, unless
and until such contingent liability becomes an actual liability or
until the same is finally adjudicated;
<PAGE>
(c) provision or reserve in respect of the matter giving rise to the claim
shall have been made in the Accounts or to the extent that the matter
giving rise to the claim shall have been noted in the Accounts;
(d) the claim occurs wholly or partly out of or the amount thereof is
increased as a result of:-
(i) any change in the accounting principles or practices of the
Purchaser introduced or having effect after the date of this
agreement unless the same is introduced to bring the accounting
principles and practices into line with generally accepted
accounting principles and practices in Spain in relation to a
business of the type carried on by the Company; or
(ii) any increase in the rates of taxation made after the date
hereof; or
(iii) any change in law or regulation or in its interpretation or
administration by the Spanish courts, by the Spanish taxation
authorities or by any other fiscal, monetary or regulatory
authority (whether or not having the force of law);
(e) the loss or damage giving rise to the claim is recoverable by the
Purchaser under any policy of insurance or would have been so
recoverable but for any change in the terms of insurance since the
date of this agreement; or
(f) the claim relates to a claim or liability for taxation and would not
have arisen but for any winding-up or cessation after Completion of
any business or trade carried on by the Company or the Purchaser.
5.8 The Purchaser shall promptly:-
(a) inform the Vendor in writing of any fact, matter, event or
circumstance which comes to its notice whereby it appears that the
Vendor is or may be liable to make any payment in respect of any claim
under the Warranties or whereby it appears the Purchaser's Group shall
become or may become entitled to recover from some other person a sum
which is referable to a payment already made by the Vendor in respect
of such a claim; and
(b) thereafter keep the Vendors fully informed of all developments in
relation thereto; and
(c) provide all such information and documentation (no matter how it is
recorded or stored) as the Vendor shall request in connection
therewith and also in connection with any proceedings instituted by or
against the Purchaser's Group under clause 5.12 and which information
or documentation is not the subject to legal professional privilege or
<PAGE>
confidential information created or brought into existence by the
Purchaser's Group since Completion.
5.9 The only remedies available to the Purchaser in respect of this agreement
together with any other documents referred to in this agreement (the
"Transaction Documents") are damages for breach of contract (subject to the
limitations set out in this agreement) and, for the avoidance of doubt, it
does not have any right to rescind or terminate any Transaction Documents
either for breach of contract or for negligent or innocent
misrepresentation or otherwise.
5.10 The Purchaser hereby represents and warrants that it has no knowledge of
any fact which might lead to claims against the Vendor under the
Warranties.
5.11 The Purchaser's Group will take or procure the taking of all such steps and
action as are necessary or as the Vendor may reasonably require in order to
mitigate any claim under the Warranties and the Purchaser's Group shall act
in accordance with such request subject to the Company and the Purchaser
being indemnified and adequately secured to the reasonable satisfaction of
the Purchaser by the Vendor against all reasonable costs and expenses which
may properly be incurred by reason of such action, including reasonable
legal costs and expenses on a full indemnity basis. Nothing in this
agreement shall or shall be deemed to relieve the Purchaser of any common
law or other duty to mitigate any loss or damage incurred by it.
5.12 (a) This clause shall apply in circumstances where:-
(i) any claim is made against the Purchaser which may give rise to
a claim by the Purchaser against the Vendor under the
Warranties; or
(ii) the Purchaser is or may be entitled to make any recovery from
some other person any sum in respect of any facts or
circumstances by reference to which the Purchaser has or may
have a claim against the Vendor under the Warranties; or
(iii) the Vendor shall have paid to the Purchaser an amount in
respect of a claim under the Warranties and subsequent to the
making of such payment the Purchaser becomes or shall become
entitled to recover from some other person a sum which is
referable to that payment.
(b) The Purchaser shall and, where appropriate, the Company shall:-
(i) (prior to taking any action against the Vendor under the
Warranties in the case of clause 5.12(a)(i) and clause
5.12(a)(ii) and subject to the Company and the Purchaser being
indemnified and adequately secured to the reasonable
satisfaction of the Purchaser by the Vendor against all
reasonable costs and expenses which may properly be incurred
<PAGE>
by reason of such action) promptly and diligently take all such
action (including reasonable legal costs and expenses on a full
indemnity basis) as the Vendor may reasonably request including
the institution of proceedings and the instruction of
professional advisers approved by the Vendor (such approval not
to be unreasonably withheld) to act on behalf of the Company
and the Purchaser (as the case may be) to avoid, dispute,
resist, compromise, defend or appeal against any such claim
against the Purchaser as is referred to in clause 5.12(a)(i) or
to make such recovery by the Purchaser as is referred to in
clause 5.12(a)(ii) or clause 5.12(a)(iii), as the case may be,
in accordance with the instructions of the Vendor to the intent
that such action shall be delegated entirely to the Vendor
provided that at all times the Purchaser and the Company shall
continue to be indemnified and secured to the reasonable
satisfaction of the Purchaser provided that, however, either:
(A) the Purchaser and/or the Company (as the case may be)
must consent in writing to the terms and conditions of
any settlement or compromise of any claim or dispute; or
(B) (1) the Purchaser and/or the Company (as the case may
be) must receive a full release, signed by all other
parties to the dispute or claim, releasing the
Purchaser and/or the Company (as the case may be)
from all claims and liability arising out of the
claim or dispute; and
(2) the settlement or compromise of the claim or dispute
must not hinder or impair the ability of the
Purchaser and/or the Company (as the case may be) to
carry on its or their business or businesses.
(ii) so long as the Vendor shall have given adequate security
therefor not settle or compromise any liability or claim to
which such action is referable without the prior written
consent of the Vendor which consent shall not be unreasonably
withheld or delayed; or
(iii) in the case of clause 5.12(a)(iii) only, promptly repay to the
Vendor an amount equal to the amount so recovered or, if lower,
the amount paid by the Vendor to the Purchaser.
5.13 The Vendor hereby agrees to indemnify and keep indemnified the Purchaser
against any loss, liability, cost or expense (including, without
limitation, environmental and rehabilitation liabilities) it may incur as a
direct result of any act or omission of the Vendor and/or the Company prior
to Completion in relation to any investigation permits (other than the
Investigation Permits) held from time to time by the Company.
<PAGE>
6. CONFIDENTIAL INFORMATION
6.1 The Vendor shall:-
(a) not and shall procure that no other member of the Vendor's Group or
any director, officer or employee or adviser or agent of the Vendor's
Group shall use or disclose to any person Confidential Information;
and
(b) use all reasonable endeavours to prevent the use or disclosure of
Confidential Information by any person other than by members of the
Purchaser's Group.
6.2 Clause 6.1 does not apply to:-
(a) disclosure of Confidential Information to or at the written request of
the Purchaser;
(b) use or disclosure of Confidential Information required to be disclosed
by law or the London Stock Exchange;
(c) disclosure of Confidential Information to professional advisers for
the purpose of advising the Vendor; or
(d) Confidential Information which becomes generally known other than by
the Vendor's breach of clause 6.1.
7. ANNOUNCEMENTS
7.1 No party shall disclose the making of this agreement nor its terms (except
those matters set out in the press release in the agreed terms) and each
party shall procure that each of its Related Persons shall not make any
such disclosure without the prior consent of the other party unless
disclosure is:-
(a) to its professional advisers; or
(b) required by law or the rules of the London Stock Exchange or other
regulatory body and disclosure shall then only be made by that party:-
(i) after it has taken all such steps as may be reasonable in the
circumstances to agree the contents of such announcement with
the other party before making such announcement and provided
that any such announcement shall be made only after notice to
the other party/parties; and
(ii) to the person or persons and in the manner required by law or
the London Stock Exchange or as otherwise agreed between the
parties
<PAGE>
provided that this clause 7.1 does not apply to announcements,
communications or circulars made or sent by the Purchaser after Completion
to customers, clients or suppliers of any Group Company to the extent that
it informs them of the Purchaser's acquisition of the Shares or to any
announcements containing only information which has become generally
available.
7.2 The restrictions contained in clause 7.1 shall apply without limit of time
and whether or not this agreement is terminated.
8. COSTS
Unless expressly otherwise provided in this agreement each of the parties
shall bear its own legal, accountancy and other costs, charges and expenses
connected with the sale and purchase of the Shares. All Notaries' costs and
any taxes payable as a result of the implementation of anything
contemplated hereunder shall be paid in accordance with the appropriate
Spanish laws.
9. EFFECT OF COMPLETION
9.1 The terms of this agreement (insofar as not performed at Completion and
subject as specifically otherwise provided in this agreement) shall
continue in force after and notwithstanding Completion.
9.2 The remedies of the Purchaser in respect of any breach of any of the
Warranties shall continue to subsist notwithstanding Completion.
10. FURTHER ASSURANCES
10.1 Following Completion the Vendor shall from time to time forthwith upon
request from the Purchaser at the Vendor's expense do or procure the doing
of all acts and/or execute or procure the execution of all such documents
in a form reasonably satisfactory to the Purchaser for the purpose of
vesting in the Purchaser the full legal and beneficial title to the Shares
and the Venture Loans and otherwise giving the Purchaser the full benefit
of this agreement.
10.2 Without prejudice to the generality of clause 10.1, the Vendor shall for a
reasonable period of time after Completion provide the Purchaser with
reasonable access during normal business hours to those employees of the
Vendor's Group who have worked on the Las Cruces Project. The Purchaser
undertakes to reimburse the Vendor, or the relevant member of the Vendor's
Group, immediately upon production of a invoice, in respect of any costs
and expenses incurred as a result of the Vendor complying with its
obligations hereunder. For the avoidance of any doubt nothing herein shall
oblige the Vendor to comply with its obligations contained in this clause
to the extent that such compliance would have a material adverse effect on
or would otherwise substantially interfere in the ongoing business and
affairs of the Vendor or any other member of the Vendor's Group.
<PAGE>
11. ENTIRE AGREEMENT
Each party on behalf of itself and as agent for each of its Related Persons
acknowledges and agrees with the other party (each such party acting on
behalf of itself and as agent for each of its Related Persons) that:-
(a) this agreement together with any other documents referred to in this
agreement (together the "Transaction Documents") constitute the entire
and only agreement between the parties and their respective Related
Persons relating to the subject matter of the Transaction Documents;
(b) neither it nor any of its Related Persons have been induced to enter
into any Transaction Document in reliance upon, nor have they been
given, any warranty, representation, statement, assurance, covenant,
agreement, undertaking, indemnity or commitment of any nature
whatsoever other than as are expressly set out in the Transaction
Documents and, to the extent that any of them have been, it (acting on
behalf of itself and as agent on behalf of each of its Related
Persons) unconditionally and irrevocably waives any claims, rights or
remedies which any of them might otherwise have had in relation
thereto;
PROVIDED THAT the provisions of this clause 11 shall not exclude any
liability which any of the parties or, where appropriate, their Related
Persons would otherwise have to any other party or, where appropriate, to
any other party's Related Persons or any right which any of them may have
to rescind this agreement in respect of any statements made fraudulently by
any of them prior to the execution of this agreement or any rights which
any of them may have in respect of fraudulent concealment by any of them.
12. VARIATIONS
This agreement may be varied only by a document signed by each of the
Vendor and the Purchaser.
13. WAIVER
13.1 A waiver of any term, provision or condition of, or consent granted under,
this agreement shall be effective only if given in writing and signed by
the waiving or consenting party and then only in the instance and for the
purpose for which it is given.
13.2 No failure or delay on the part of any party in exercising any right, power
or privilege under this agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
13.3 No breach of any provision of this agreement shall be waived or discharged
except with the express written consent of the Vendor and the Purchaser.
<PAGE>
13.4 The rights and remedies herein provided are cumulative with and not
exclusive of any rights or remedies provided by law.
14. NOTICES
14.1 Any notice, demand or other communication given or made under or in
connection with the matters contemplated by this agreement shall be in
writing and shall be delivered personally or sent by fax or prepaid first
class post (air mail if posted to or from a place outside the United
Kingdom):-
In the case of the Purchaser to:-
Fax: 801 297 6940
Attention: G. Frank Joklik
In the case of the Vendor to:-
Fax: 0171 930 3249
Attention: John MacLean
and shall be deemed to have been duly given or made as follows:-
(a) if personally delivered, upon delivery at the address of the relevant
party;
(b) if sent by first class post, two Business Days after the date of
posting;
(c) if sent by air mail, five Business Days after the date of posting; and
(d) if sent by fax, when despatched;
provided that if, in accordance with the above provisions, any such notice,
demand or other communication would otherwise be deemed to be given or made
outside 9.00 a.m. - 5.00 p.m. on a Business Day such notice, demand or
other communication shall be deemed to be given or made at 9.00 a.m. on the
next Business Day.
14.2 A party may notify the other party to this agreement of a change to its
name, relevant addressee, address or fax number for the purposes of clause
14.1 provided that such notification shall only be effective on:-
(a) the date specified in the notification as the date on which the change
is to take place; or
(b) if no date is specified or the date specified is less than five
Business Days after the date on which notice is given, the date
falling five Business Days after notice of any such change has been
given.
15. COUNTERPARTS
This agreement may be executed in any number of counterparts which together
shall constitute one agreement. Any party may enter into this
<PAGE>
agreement by executing a counterpart and this agreement shall not take
effect until it has been executed by all parties.
16. GOVERNING LAW AND JURISDICTION
16.1 This agreement (and any dispute, controversy, proceedings or claim of
whatever nature arising out of or in any way relating to this agreement or
its formation) shall be governed by and construed in accordance with
English law.
16.2 Each of the parties to this agreement irrevocably agrees that the courts of
England shall have exclusive jurisdiction to hear and decide any suit,
action or proceedings, and/or to settle any disputes, which may arise out
of or in connection with this agreement (respectively, "Proceedings" and
"Disputes") and, for these purposes, each party irrevocably submits to the
jurisdiction of the English Courts.
16.3 Without prejudice to any other permitted mode of service the parties agree
that service of any writ, notice or other document ("Documents") for the
purpose of any Proceedings begun in England shall be duly served upon it if
delivered personally or sent by registered post, in the case of:-
(a) the Vendor to Rio Tinto Metals Limited (marked for the attention of
John MacLean); and
(b) the Purchaser to MK Gold Company, 60 East South Temple, Salt Lake
City, Utah 84111(marked for the attention of G. Frank Joklik)
or such other person and address in England and/or Wales as the Vendor
shall notify the Purchaser in writing or vice versa from time to time.
IN WITNESS whereof this agreement has been executed on the date first above
written.
<PAGE>
SCHEDULE 1
----------
The Warranties
For the purposes of this Schedule 1, where a warranty is qualified by the words
"so far as the Vendor is aware" and/or "so far as the Company is aware" then the
Vendor and/or the Company (as appropriate) shall only be deemed to be aware of
those facts within the actual knowledge of either John MacLean, Mike Doyle, Mark
Sawyer or Gobain Ovejero Zappino and no other employee, adviser, consultant or
officer of the Company or any other member of the Rio Tinto Group. Furthermore
it is hereby agreed that the Vendor, the Company and such named individuals
shall be under no obligation whatsoever to make any enquiries, outside of
information actually obtained in the course of performance of their duties, as
to the accuracy of the warranties so qualified.
1. VENDOR'S CAPACITY
1.1 Authorisations
The Vendor has obtained all corporate authorisations and all other applicable
governmental, statutory, regulatory or other consents, licences, waivers or
exemptions required to empower it to enter into and to perform its
obligations under this agreement.
1.2 Proper Execution
The Vendor's obligations under this agreement are enforceable in accordance
with their terms.
1.3 Third Party Rights
The Vendor is able to sell and transfer the Shares and the Venture Loans to
the Purchaser without the consent of any person and free of any pre-emptive
rights or rights of first refusal.
1.4 Vendor's Disclosure Letter accurate
The information in the Disclosure Letter is accurate in all material
respects.
2. THE SHARES AND SUBSIDIARIES
2.1 The Shares
(a) The Vendor is the only legal and beneficial owner of the Shares.
(b) The Company has not allotted any shares other than the Shares and the
Shares are fully paid or credited as fully paid.
(c) There is no Encumbrance in relation to any of the Shares.
<PAGE>
(d) Other than this agreement, there is no agreement, arrangement or
obligation requiring the creation, allotment, issue, sale, transfer,
redemption or repayment of, or the grant to a person of the right
(conditional or not) to require the allotment, issue, sale, transfer,
redemption or repayment of, a share in the capital of the Company
(including an option or right of pre-emption or conversion).
2.2 Venture Loans
(a) The Vendor is the only legal and beneficial owner of the Venture
Loans.
(b) The Company has no debts which individually are in excess of US$20,000
(other than trade debts, amounts owed to employees incurred by the
Company in the ordinary course of the Company's activities or the
Venture Loans).
(c) There is no Encumbrance in relation to any of the Venture Loans.
2.3 Subsidiaries
(a) The Company does not have any subsidiaries.
3. ACCOUNTS
3.1 General
The Accounts have been prepared and audited in accordance with the
standards, principles and practices specified on the face of the Accounts
applied on a consistent basis and subject thereto in accordance with the
law and applicable standards, principles and practices generally accepted
in Spain consistently applied.
3.2 Changes since Accounts Date
Since the Accounts Date:-
(a) the Company has not contractually committed to make capital
expenditure which is outstanding for fixed assets exceeding in total
US$10,000, or contractually committed to incur, a commitment or
connected commitments involving capital expenditure which is
outstanding for fixed assets exceeding in total US$5,000;
(b) the Company has not disposed of any of its assets with a book value of
more than US$5,000;
(c) the Company has not incurred any material liabilities (other than
liabilities incurred in the ordinary course of the Company's
activities) in excess of US$10,000.
<PAGE>
(d) no dividends, bonus issues or other distributions or repayments of
loans (including Venture Loans) have been declared, made or paid by
the Company.
4. ASSETS
4.1 The principal assets of the Company are its right, title and interest in
the Properties, the Investigation Permits, the Technical Data and
associated exploration expenditure ("Sale Assets").
4.2 Title
(a) There are no Encumbrances, nor has the Company agreed to create any
Encumbrances, over the Sale Assets or any part of its undertaking or
assets and each asset used by the Company (tangible or intangible)
is:-
(i) legally and beneficially owned by the Company;
(ii) where capable of possession, in the possession of the Company;
(iii) used solely by the Company; and
(iv) fully paid for or otherwise provided for in the Accounts.
4.3 Intellectual Property Rights
Details of all intellectual property or know-how owned by third parties
(including members of the Vendor's Group) which were used by the Company in
preparing the Feasibility Study are contained in the Data Room.
5. CONTRACTUAL MATTERS
5.1 Material Agreements
(a) Copies of all agreements and contracts to which the Company is a party
or otherwise bound which are material to the activities undertaken by
the Company are contained in the Data Room ("Material Agreements") and
referred to in the Index of Data Room Documents in the agreed terms.
(b) Each Material Agreement constitutes a valid and binding obligation of
the Company and:
(i) is within the ordinary course of ordinary activities of the
Company;
(ii) is at arm's length; and
<PAGE>
(iii) is not with the Vendor or any member of the Vendor's Group.
5.2 No Restrictive Covenants
The Company is not a party to any Material Agreement which prevents it from
engaging in mining or exploration operations.
5.3 Change of Control
The Company is not a party to any Material Agreement under which any party
is entitled or likely, as a result of a change in ownership of the Shares:
(a) to terminate the agreement; or
(b) to require the adoption of terms which are less favourable to the
Company than the current terms.
5.4 No Default
The Company, so far as it is aware is not, and has received no written
notice that it is in default or would be in default, but for the
requirements of notice or lapse of time, or both under any Material
Agreement. So far as the Company is aware, no other party to a Material
Agreement is in default, or would be in default but for the requirement of
notice or lapse of time, or both, under any Material Agreement.
6. INVESTIGATION PERMITS
6.1 Copies of all the Company's current permits, authorisations and consents
including, without limitation, the Investigation Permits which in each case
are material and relevant to its current activities are contained in the
Data Room (collectively referred to as the "Permits").
6.2 The Company has received no written notice that any of the Permits are not
in full force and effect. So far as the Company is aware, each Permit is in
full force and effect.
6.3 No Breach
The Company has received no written notice that it is in breach of, or
default under, any of the Permits. So far as the Company is aware, the
Company is not in breach of, or default under, any of the Permits.
6.4 No Notices
The Company has not received written notice from any third party (including
any government agency) in respect of any Permit and, so far as the Vendor
is aware no proposal has been made:
<PAGE>
(a) in respect of the compulsory acquisition or resumption of any part of
the lands the subject of the Investigation Permits ("the Land"); and
(b) requiring expenditure to be made or in respect of the Land in excess
of US$10,000.
6.5 Royalties
So far as the Vendor is aware, none of the land nor any mineral or metal
production from the Land is or will be subject to any royalty, production
payment or similar right save as or arising under the laws of Spain or this
agreement.
7. LIABILITIES
7.1 Guarantees and Indemnities
The Company is not a party to any guarantee, indemnity or other agreement
(including letters of comfort) to secure or incur a financial or other
obligation with respect to another person's obligation.
8. LITIGATION AND COMPLIANCE WITH LAW
8.1 Litigation
(a) The Company has not during the six years ending on the date of this
agreement been involved, in a civil, criminal or arbitration
proceeding in any jurisdiction and, so far as the Vendor is aware no
such proceedings are pending or threatened by or against the Company.
(b) There is no outstanding judgement, order, decree, arbitral award or
decision of a court, tribunal, arbitrator or governmental agency in
any jurisdiction against the Company.
(c) So far as the Vendor is aware, the Company is not the subject of any
investigation by any governmental agency.
8.2 Corporation Existence
The Company:
(a) is a company organised and existing in accordance with the laws of
Spain; and
(b) has the power to own its assets and carry on its business as it is now
being conducted.
<PAGE>
8.3 Compliance with Constituent Documents
So far as the Vendor is aware, the business affairs of the Company have
been conducted in accordance with its constitution.
9. EMPLOYEES
9.1 Particulars of Offers
The Data Room contains the names and date of commencement of employment of
every employee of the Company.
9.2 Remuneration and Benefits
The particulars of all employees contained in the Data Room show all
remuneration and other benefits:-
(a) actually provided; and
(b) which the Company is bound to provide (whether now or in the future)
to each employee of the Company and are true and complete in all material
respects and include particulars of and details of participation in all
profit sharing, incentive, bonus, commission, share option, medical,
permanent health insurance, directors' and officers' insurance, travel,
car, redundancy and other benefit schemes, arrangements and understandings
(the "Schemes") operated for all or any employees or former employees of
the Company or their dependants whether legally binding on the Company or
not.
10. PROPERTIES
All Property
The Properties comprise all the freehold and leasehold land owned, used or
occupied by the Company.
11. TAXATION
11.1 Payment of Tax
The Company has paid all Tax required to be paid by it as at the date of
this Agreement.
11.2 Provision in Accounts
Adequate provision has been made in the Accounts for any Tax which Vendor
or the Company is aware is payable or may become payable but which is
unpaid.
<PAGE>
11.3 Withholding Tax
Any obligation on the Company under any Tax Law to withhold amounts at
source including but not limited to withholding Tax, PAYE, Tax, value added
tax and royalties has been complied with.
11.4 Documents stamped
Any Duty payable in any Tax Law in relation to any transaction or agreement
to which either the Company is or has been a party to or by which the
Company derives, or has derived a substantial benefit, has been paid.
11.5 Records
So far as the Vendor is aware the Company has maintained proper and
adequate records to enable it to comply with its obligations to:
(a) prepare and submit any information, notices, computations, returns and
payments required in respect of any Tax Law;
(b) prepare any accounts necessary for the compliance of any Tax Law; and
(c) retain necessary records as required by any Tax Law.
11.6 Returns submitted
The Company has submitted any necessary information, notices, computations
and returns to the relevant government agency in respect of any Tax or any
duty relating to its businesses and activities.
11.7 No disputes
There are no disputes with any government agency in respect of any Tax or
duty.
12. SOLVENCY
12.1 No liquidation or winding-up
The Company has not gone into liquidation or passed a winding-up resolution
nor received a notice under any applicable law which will result in the
Company being wound up or otherwise being put into liquidation.
12.2 No petition
No petition or other process for winding-up has been presented or
threatened against the Company .
<PAGE>
12.3 No writ of execution
No writ of execution has been issued and served on the Company.
12.4 No receiver
No receiver or receiver and manager of any part of the undertaking or
assets of the Company has been appointed.
13. POWERS OF ATTORNEY
All current powers of attorney given by the Company and which are currently
in force are contained in the Data Room.
14. SHAREHOLDINGS AND MEMBERSHIPS
14.1 Shareholdings
The Company is not the holder or the beneficial owner of any shares or
other capital or securities convertible into shares or other capital in any
other company.
14.2 Memberships
The Company is not a member of any joint venture, partnership or
unincorporated association (other than a recognised trade association).
14.3 Restrictive trade practices
The Company is not a party to any agreement, contract, arrangement or
understanding whether legally enforceable or not which is in breach of any
restrictive trade practices legislation and has not engaged in any conduct
or practice in breach of that legislation.
<PAGE>
SCHEDULE 2
----------
<TABLE>
<CAPTION>
Properties
===================================================================================
Amount of
Annual notice
Rent (ptas) required to
Identification Address No V.A.T. terminate Term
- -------------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Cartuja Office Americo Vespucio, 10.800.696 3 months 31/12/99
39 Isla Cartuja
41092 Sevilla
Core shed Industrial state 4.183.776 3 months 31/03/00
Navexpo, 35B y 36
Ctra.Santiponce-
Camas KM 4.100
Valenciana de la
Concep. Sevilla
Gerena office Avda. 1(degree)de 900.00 1 month Each month
Mayo, 6
Gerena - Sevilla
Gerena House Urb. Zarzalejos 1.560.000 1 month 24/10/99
C/Paloma Torcaz 59
Gerena - Sevilla
</TABLE>
<PAGE>
SCHEDULE 3
----------
Royalty
1. A Royalty of 1.5% (one and a half per cent) of "Sales Revenue" shall be
paid by Purchaser to Vendor in respect of all sales realised in any
calendar month in which the "Trigger Price" is exceeded. For the purposes
of this Schedule, the "Trigger Price" is exceeded when the official monthly
average LME Cash Settlement price for Grade A copper is equivalent to or
greater than $0.80 per pound of copper.
2. "Sales Revenue" shall mean:-
(A) in the case of sales of copper metal, whichever is the higher of:
either (1) the invoiced volume of metal sold in any month multiplied
by the actual official monthly average LME Cash
Settlement price for Grade A copper for that relevant
month; or
(2) the invoiced volume of metal sold in any month
multiplied by the actual price realised by the Purchaser
(including any premium),
for all metal produced by the Purchaser from ore mined from the land
which is the subject of the Investigation Permits ("the Permit Land")
(B) in the case of sales of copper produced from the Permit Land which is
sold in any form which is partly or not wholly processed, "Sales
Revenue" shall mean whichever is the higher of:
either (1) the actual final invoice value for the volume of partly
processed copper sold in the relevant month. (For these
purposes, final invoice value shall mean the full value
of the cargo as adjusted for final weight, assays and
prices); or
(2) the value for the volume of partly processed copper sold
which would have been invoiced if the copper price used
in calculating the relevant amount was the actual
official monthly LME Cash Settlement price for Grade A
copper for the month in which the final invoice is
settled,
for all partly processed copper produced by the Purchaser and mined
from the land which is the subject of the Permit Land.
In calculating the Sales Revenue for the purposes of paragraphs 2(A) and
(B) above the Purchaser may deduct the following costs and expenditures:
<PAGE>
(a) freight, transportation and insurance costs of copper metal from the
treatment plant and/or refinery to the point of sale;
(b) the amount of any royalties payable to the Spanish government and any
other royalty payable in respect of ore mined, or copper metal
produced from the Permit Land;
(c) sales commissions and other sales representation costs in connection
with the sales of copper metal incurred on an arms-length basis in the
ordinary course of business by the Purchaser,
but such costs and expenditures shall not include operating costs
(including without limitation mining, operating, refining, financing and
related costs, and administration costs).
In addition, in calculating the Sales Revenue for the purposes of paragraph
2(B) above the Purchaser may deduct smelting and refining charges or such
other deductions which are directly related to the further processing of
the product into cathode copper.
3. The Purchaser must maintain proper records of:
(a) tonnes of ore mined;
(b) information or returns regarding the payment of royalties, taxes or
other payments to the Spanish government in respect of mining on the
Permit Land;
(c) all other information necessary to determine "Sales Revenue" and to
allow Royalty to be calculated; and
(d) all amounts paid by the Purchaser to the Vendor under paragraph 4
below,
together called the "Purchaser's Records".
4. On each occasion the Purchaser is obliged to provide a statement under
paragraph 5, and within 12 months thereafter, the Vendor may at its own
expense:
(a) upon reasonable notice to the Purchaser request and have access during
the Company's normal business hours at premises maintained by the
Company in Spain to inspect the Purchaser's Records;
(b) require an audit of the Purchaser's Records to be performed by an
auditor nominated by the Vendor. Any such audit of the Purchaser's
records shall be conducted in accordance with accounting principles
generally applied in Spain;
<PAGE>
(c) if such an audit discloses a discrepancy between the amount paid by
the Purchaser pursuant to paragraph 5 and the amount which should have
been paid pursuant to that paragraph, then if there has been an
underpayment by the Purchaser, the Purchaser must pay the underpayment
immediately, and if there has been an overpayment, then the
overpayment may be set off by the Purchaser against any further
amounts payable to the Vendor pursuant to paragraph 5.
5. Within 21 (twenty one) days of the end of any applicable calendar month in
which the "Trigger Price" has been exceeded, the Purchaser will send to the
Vendor a statement summarising:
(a) the quantity of copper metal (expressed in lbs) produced during the
calendar month in which the "Trigger Price" is effective from ore
mined from the Permit Land;
(b) the Purchaser's calculation of "Sales Revenue" for the respective
calendar month; and
(c) the quantity of copper (metal and concentrate) sold during the
relevant month.
The Purchaser shall at the same time pay the Vendor the relevant Royalty in
US dollars by telegraphic transfer to a bank to be nominated by Vendor.
<PAGE>
Executed by Mr M R Sawyer, duly appointed )
attorney, for and on behalf of )
RIO TINTO METALS LIMITED )
/s/
Attorney
Executed by )
for and on behalf of )
MK GOLD COMPANY )
/s/
Director
STOCK PURCHASE AGREEMENT
BETWEEN
MK GOLD COMPANY
AND
LEUCADIA NATIONAL CORPORATION
Dated as of September 1, 1999
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS............................................................ 1
II. PURCHASE OF SECURITIES................................................. 2
2.1 Purchase of Securities.......................................... 2
III. PURCHASE PRICE AND PAYMENT............................................. 2
3.1 Amount of Purchase Price........................................ 2
3.2 Payment of Purchase Price....................................... 2
IV. THE COMPANY'S REPRESENTATIONS AND WARRANTIES........................... 2
4.1 Organization.................................................... 2
4.2 Due Authorization............................................... 2
4.3 Authorized and Outstanding Shares of Capital Stock.............. 3
4.4 Authorization and Issuance of Securities........................ 3
4.5 Subsidiary Organizations........................................ 3
4.6 No Other Rights................................................. 3
4.7 No Conflicts.................................................... 3
4.8 No Consents..................................................... 4
4.9 Litigation...................................................... 4
V. LUK's REPRESENTATIONS AND WARRANTIES................................... 4
5.1 Organization.................................................... 4
5.2 Due Authorization............................................... 4
5.3 No Conflicts.................................................... 5
5.4 No Consents..................................................... 5
5.5 LUK's Investment Intention...................................... 5
5.6 Access to Data.................................................. 5
VI. COVENANTS.............................................................. 6
6.1 Tax Compliance.................................................. 6
6.2 Registration Rights............................................. 6
VII. CONDITIONS PRECEDENT................................................... 6
7.1 Conditions Precedent to Obligations of LUK...................... 6
7.2 Conditions Precedent to Obligations of the Company.............. 7
VIII. CLOSING................................................................ 8
i
<PAGE>
8.1 Closing Date.................................................... 8
8.2 Specific Performance............................................ 8
IX. SECURITIES LAW MATTERS................................................. 8
9.1 Legends......................................................... 8
X. INDEMNIFICATION AND EXPENSES........................................... 8
10.1 Indemnification by the Company.................................. 8
10.2 Indemnification by LUK.......................................... 8
XI. TERMINATION............................................................ 9
11.1 Termination..................................................... 9
11.2 Effect of Termination........................................... 9
XII. MISCELLANEOUS.......................................................... 9
12.1 Notices......................................................... 9
12.2 Binding Effect; Benefits........................................10
12.3 Waiver..........................................................10
12.4 Amendment.......................................................11
12.5 Assignability...................................................11
12.6 Applicable Law..................................................11
12.7 Section and Other Headings......................................11
12.8 Certain Fees and Expenses.......................................11
12.9 Severability....................................................11
12.10 Counterparts....................................................12
ii
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT, dated as of September 1, 1999, between MK Gold
Company, a Delaware corporation having an office at 60 East South Temple, Salt
Lake City, Utah 84111 (the "Company"), and Leucadia National Corporation, a New
York corporation having an office at 315 Park Avenue South, New York, New York
10010 ("LUK").
W I T N E S S E T H:
WHEREAS, of the issued and outstanding common stock, par value $.01
per share of the Company (the "Common Stock"), 9,000,000 shares representing
46.7% of the Common Stock are beneficially owned by LUK; and
WHEREAS, to enable the Company to make the Acquisition (as defined
below) LUK has agreed (i) to purchase additional shares of Common Stock from the
Company and, because funding of the Acquisition is required prior to
satisfaction of all conditions set forth herein, (ii) to loan the purchase price
for such shares to the Company, upon the terms of the promissory note attached
hereto as Exhibit A (the "Promissory Note").
WHEREAS, simultaneous with the execution of this Agreement, (i) the
Company has borrowed $15,806,723 from LUK as evidenced by the Promissory Note
dated the date hereof in the principal amount of $15,806,723 and has used the
proceeds thereof to fund part of the Purchase Price for the Acquisition and (ii)
the Company has acquired a 100% interest in the Las Cruces Copper Project (the
"Project") from Rio Tinto plc, subject to an option in favor of Straits
Resources Ltd to acquire a 35% interest in the Project, and has entered into
certain related transactions (the "Acquisition"); and
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
I. DEFINITIONS
References to this "Agreement" shall mean this Stock Purchase Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the schedules and
exhibits hereto, as the same may from time to time be amended or
supplemented, and not to any particular section, subsection or clause
contained in this Agreement.
<PAGE>
II. PURCHASE OF SECURITIES
----------------------
2.1 Purchase of Securities. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date (as defined herein) the Company
shall issue, sell and deliver to LUK, free and clear of all liens, and LUK shall
purchase from the Company 18,058,635 shares of Common Stock (the "Securities")
for the consideration specified in Section 3.1.
III. PURCHASE PRICE AND PAYMENT
--------------------------
3.1 Amount of Purchase Price. The aggregate purchase price for the
Securities (the "Purchase Price") shall be $15,806,723, representing a per share
price equal to the $0.8753 per share book value of the Shares as at June 30,
1999.
3.2 Payment of Purchase Price. (a) Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, LUK shall pay to
the Company the Purchase Price and the Company shall deliver to LUK the
Securities issued in the name of LUK or such other person or persons as LUK
shall direct.
(b) Payment of the Purchase Price shall be made by delivery of the
Promissory Note to the Company
IV. THE COMPANY'S REPRESENTATIONS AND WARRANTIES
--------------------------------------------
The Company makes the following representations and warranties to LUK, each
and all of which shall survive the execution and delivery of this Agreement and
the Closing (as defined herein) hereunder:
4.1 Organization. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware with corporate power and authority to own, lease and operate its
properties and to conduct its business as currently being and as proposed to be
conducted. The Company is qualified as a foreign corporation to transact
business in Utah and in any other jurisdiction where it is required to be so
qualified, except where the failure to be so qualified would not have a material
adverse effect on the condition, financial or otherwise, or the results of
operations, business or business prospects of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect").
4.2 Due Authorization. The Company has the requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, assuming that this Agreement has been duly executed and delivered
by LUK, constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity hereunder may be limited by federal or state securities laws and
except as enforceability may be limited by bankruptcy,
2
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insolvency, fraudulent conveyance, moratorium, reorganization and similar laws
relating to or affecting creditors' rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
4.3 Authorized and Outstanding Shares of Capital Stock. The authorized
capital stock of the Company consists of forty million (40,000,000) shares of
Common Stock, of which 19,261,365 shares currently are issued and outstanding as
of the date hereof. Except for 2,500,000 shares issuable under the Company's
Stock Incentive Plan (the "Stock Incentive Plan") and 180,000 shares issuable
under the Company's Stock Option Plan for Non-Employee Directors (the
"Non-Employee Director Plan"), no subscription, warrant, option or other right
to purchase or acquire any shares of any class of capital stock of Company or
securities convertible into such capital stock is authorized or outstanding, and
other than this Agreement or pursuant to outstanding stock options issued under
the Stock Incentive Plan and the Non-Employee Director Plan, there is no
commitment of Company to issue any such shares, warrants, options or other such
rights or securities.
4.4 Authorization and Issuance of Securities. The issuance of the
Securities has been duly authorized and, upon delivery to LUK of certificates
therefor against payment in accordance with the terms hereof, the Securities
will have been validly issued and fully paid and non-assessable, free and clear
of all pledges, liens, encumbrances and preemptive rights.
4.5 Subsidiary Organizations. Each subsidiary of the Company has been duly
organized and is validly existing and in good standing under the laws of their
jurisdictions of incorporation, has corporate power and authority to own, lease
and operate its properties and to conduct its business as currently being and as
proposed to be conducted and is qualified as a foreign entity to transact
business in each other jurisdiction where the failure to do so would have a
Material Adverse Effect. All of the issued and outstanding capital stock of each
such subsidiary has been duly authorized and validly issued, is fully paid and
nonassessable and is owned directly by the Company.
4.6 No Other Rights. The issuance of the Securities is not subject to
preemptive or other similar rights.
4.7 No Conflicts. Neither the Company nor any of its subsidiaries is in
violation of its charter or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any of its subsidiaries is subject, the effect of which
default in performance or observance would have a Material Adverse Effect. None
of the execution and delivery of this Agreement will conflict with or constitute
a breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or
3
<PAGE>
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the certificate of
incorporation or by-laws of the Company or any applicable law, administrative
regulation or administrative or court decree.
4.8 No Consents. Except for filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 as amended (the "HSR Act"), the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act") or state securities or "blue sky" laws, no
authorization, approval or consent of, or filing with, any court or governmental
authority or agency, is necessary or required in connection with the sale of the
Securities hereunder or the transactions contemplated hereby.
4.9 Litigation. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending or, to
the best knowledge of the Company, threatened, against or affecting the Company
or any of its subsidiaries, which is reasonably likely to have a Material
Adverse Effect. There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or, to the best
knowledge of the Company, threatened, which would materially and adversely
affect the consummation of the transactions contemplated by this Agreement.
V. LUK's REPRESENTATIONS AND WARRANTIES
------------------------------------
LUK makes the following representations and warranties to the Company, each
and all of which shall survive the execution and delivery of this Agreement and
the Closing hereunder:
5.1 Organization. LUK has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of New York with
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently being and as proposed to be conducted and to
enter into and perform its obligations under this Agreement. LUK is qualified as
a foreign corporation to transact business in each jurisdiction where it is
required to be so qualified, except where the failure to be so qualified would
not have a material adverse effect on the business, financial condition or
results of operation of LUK and its subsidiaries taken as a whole.
5.2 Due Authorization. LUK has the requisite corporate power and authority
to enter into this Agreement and consummate the transactions contemplated
hereby. This Agreement and the transactions contemplated hereby have each been
duly authorized, executed and delivered by LUK, and this Agreement constitutes a
legal, valid and binding agreement of the Company, enforceable against LUK in
accordance with its terms, except as rights to indemnity hereunder may be
limited by federal or state securities laws and except as enforceability may be
limited by bankruptcy, insolvency,
4
<PAGE>
fraudulent conveyance, moratorium, reorganization and similar laws relating to
or affecting creditors' rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.3 No Conflicts. LUK is not in violation of its certificate of
incorporation or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which LUK is a party or by which it may be bound, or to which any
of the property or assets of LUK or any of its subsidiaries is subject, the
effect of which default in performance or observance would have a material
adverse effect on the condition, financial or otherwise, or the results of
operations, business or business prospects of LUK and its subsidiaries
considered as one enterprise. The execution and delivery of this Agreement will
not conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the LUK or any of its subsidiaries pursuant to any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which LUK or any of its subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of LUK or
any of its subsidiaries is subject, nor will such action result in any violation
of the provisions of the certificate of incorporation or by-laws of LUK or any
applicable law, administrative regulation or administrative or court decree.
5.4 No Consents. Except for filings under the HSR Act and under the
Securities Act and the Exchange Act, no authorization, approval or consent of,
or filing with, any court or governmental authority or agency, or under the
certificate of incorporation of the Company, is necessary or required in
connection with the purchase of the Securities hereunder or the execution,
delivery or performance of this Agreement or the transactions contemplated
hereby.
5.5 LUK's Investment Intention. LUK represents and warrants that it is
purchasing the Securities for its own account, for investment purposes and not
with a view to the distribution thereof, except in compliance with the
provisions of the Securities Act of 1933, as amended (the "Act"). LUK agrees
that it will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any of the Securities (or solicit any offers
to buy, purchase, or otherwise acquire or take a pledge of any of the
Securities), except in compliance with the Act and the rules and regulations
thereunder.
5.6 Access to Data. LUK has had an opportunity to discuss the Company's
business, management, and financial affairs with its management and to review
the Company's records and facilities, and LUK is relying for purposes of this
Agreement upon its own due diligence review of the Company, not on any
representation or warranty of the Company other than as expressly set forth in
this Agreement.
5
<PAGE>
VI. COVENANTS
---------
6.1 Tax Compliance. The Company shall pay all transfer, excise or similar
taxes in connection with the issuance, sale, delivery or transfer by the Company
to LUK of the Securities and shall save LUK harmless without limitation as to
time against any and all liabilities with respect to such taxes. The obligations
of Company under this Section 6.1 shall survive the payment, prepayment or
redemption of the Securities and the termination of this Agreement.
6.2 Registration Rights. At any time after the date hereof, upon the
written request of LUK that the Company effect the registration under the Act
(which shall be a shelf registration if requested by LUK) of all or part of the
shares of Common Stock (including the Securities upon their issuance) owned by
LUK (including any affiliate of LUK) and specifying the intended method or
methods of disposition thereof, the Company shall, at its own cost, cooperate
with LUK and effect the registration under the Act of such shares as soon as
practicable after receipt of such request.
VII. CONDITIONS PRECEDENT
--------------------
7.1 Conditions Precedent to Obligations of LUK. The obligation of LUK to
purchase the Securities and to consummate the transactions contemplated by this
Agreement is subject to satisfaction of the following conditions on or prior to
the Closing Date (unless expressly waived in writing by LUK on or prior to the
Closing Date):
(a) All of the terms, covenants and conditions of this Agreement to be
complied with and performed by the Company on or prior to the Closing Date shall
have been complied with and performed by it in all material respects, and the
representations and warranties made by the Company in this Agreement shall be
true and correct in all material respects on and as of the Closing Date (except
that representations and warranties qualified by the terms "material" or
"Material Adverse Effect" shall be true and correct in all respects) with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except as a result of actions contemplated
or permitted by this Agreement and except that any such representations and
warranties that are given as of a particular date and relate solely to a
particular date or period shall be true and correct as of such date or period.
(b) The Company shall deliver to LUK a certificate dated as of the Closing
Date and signed by an executive officer of the Company certifying that the
conditions specified in this Section have been fulfilled.
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any governmental authority or other legal restraint or
prohibition preventing the consummation of the Closing shall be in effect.
6
<PAGE>
(d) The waiting period (and any extensions thereof) applicable to the
transactions contemplated hereby under the HSR Act shall have been terminated or
shall have otherwise expired.
(e) LUK will have received from the Company a certificate of its Secretary
or Assistant Secretary certifying as to (i) the resolutions of the Board of
Directors of the Company approving this Agreement and authorizing the
consummation of the transactions contemplated hereby and (ii) the incumbency and
signatures of the officers of Seller executing this Agreement.
7.2 Conditions Precedent to Obligations of the Company. The obligation of
the Company to issue the Securities pursuant to this Agreement is subject to
satisfaction of the following conditions on or prior to the Closing Date (unless
expressly waived in writing by the Company on or prior to the Closing Date):
(a) All of the terms, covenants and conditions of this Agreement to be
complied with and performed by LUK on or prior to the Closing Date shall have
been complied with and performed by it in all material respects, and the
representations and warranties made by LUK in this Agreement shall be true and
correct in all material respects on and as of the Closing Date (except that
representations and warranties qualified by the terms "material" or "material
adverse effect" shall be true and correct in all respects) with the same force
and effect as though such representations and warranties had been made on and as
of the Closing Date, except as a result of actions contemplated or permitted by
this Agreement and except that any such representations and warranties that are
given as of a particular date and relate solely to a particular date or period
shall be true and correct as of such date or period.
(b) LUK shall deliver to the Company a certificate dated as of the Closing
Date and signed by an executive officer of LUK certifying that the conditions
specified in this Section 7.2 have been fulfilled.
(c) No temporary restraining order, preliminary or permanent injunction or
other order issued by any governmental authority or other legal restraint or
prohibition preventing the consummation of the Closing shall be in effect.
(d) The waiting period (and any extension thereof) applicable to the
transactions contemplated hereby under the HSR Act shall have been terminated or
shall have otherwise expired.
(e) The Company will have received from LUK a certificate of its Secretary
or Assistant Secretary certifying as to (i) the resolutions of the Board of
Directors of Buyer approving this Agreement and authorizing the consummation of
the transactions contemplated hereby and (ii) the incumbency and signatures of
the officers of LUK executing this Agreement.
7
<PAGE>
VIII. CLOSING
-------
8.1 Closing Date. (a) The closing of the sale and purchase of the Shares
provided for in Article III hereof (the "Closing") shall take place at the
offices of Weil, Gotshal & Manges LLP, New York, New York at 10:00 a.m. (New
York City time) (or at such time and at such place as the parties may designate)
on the second business day following the date on which each of the conditions
specified in Article VII hereof has been fulfilled (or waived by the party
entitled to waive that condition). The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
8.2 Specific Performance. The parties hereto acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement, including the Company's obligation to sell the Securities to LUK, may
be enforced by a decree of specific performance issued by a court of competent
jurisdiction. Such remedy shall, however, not be exclusive and shall be in
addition to any other remedies which any party may have under this Agreement or
otherwise.
IX. SECURITIES LAW MATTERS
----------------------
9.1 Legends. Unless the Securities are the subject of an effective
registration statement, each certificate representing the Securities shall bear
a legend substantially in the following form:
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("THE ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM."
X. INDEMNIFICATION AND EXPENSES
----------------------------
10.1 Indemnification by the Company. The Company agrees to indemnify,
defend and hold LUK and its respective officers, directors, employees, agents
and controlling persons (collectively, the "LUK Indemnitees") harmless from and
against any and all expenses, losses, claims, damages and liabilities which are
incurred by or threatened against the LUK Indemnitees, or any of them,
including, without limitation, reasonable attorneys' fees and expenses, caused
by, or in any way resulting from or relating to the Company's breach of any of
the representations, warranties, covenants or agreements of the Company set
forth in this Agreement.
10.2 Indemnification by LUK. LUK agrees to indemnify, defend and hold
harmless the Company and its respective officers, directors, employees, agents,
partners
8
<PAGE>
and controlling persons (collectively, the "Company Indemnitees") harmless from
and against any and all expenses, losses, claims, damages and liabilities which
are incurred by or threatened against the Company Indemnitees, or any of them,
including, without limitation, reasonable attorneys' fees and expenses, caused
by, or in any way resulting from or relating to LUK's breach of any of the
representations, warranties, covenants or agreements of LUK set forth in this
Agreement.
XI. TERMINATION
-----------
11.1 Termination. This Agreement may be terminated at any time prior to the
Closing: (i) by mutual written consent of the Company and LUK or (ii) by either
LUK or the Company if the Closing shall not have occurred on or before December
31, 1999; provided, however, that the right to terminate this Agreement under
Section 11.1(ii) will not be available to any party whose failure to fulfill any
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
11.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 11.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except with respect to Section 12.8
and except that nothing herein will relieve any party from liability for any
prior breach of this Agreement.
XII. MISCELLANEOUS
-------------
12.1 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or by registered or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback addressed as follows:
If to Company at:
MK Gold Company
60 East South Temple
Salt Lake City, Utah 84111
Attn: Chief Financial Officer
Telecopy Number: (801) 297-6950
9
<PAGE>
With a copy to:
Stoel Rives LLP
201 South Main Street, Suite 1100
Salt Lake City, Utah 84111-4909
Attn: Reed W. Topham
Telecopy Number: (801) 578-6999
If to LUK at:
Leucadia National Corporation
315 Park Avenue South
New York, New York 10010
Attn: Joseph S. Steinberg, President
Telecopy Number: (212) 598-3245
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attn: Andrea A. Bernstein
Telecopy Number: (212) 310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) business days after the same shall have been deposited with the United
States mail.
12.2 Binding Effect; Benefits. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors, transferees and permitted assigns.
Except as expressly set forth herein, nothing in this Agreement, express or
implied, is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors, transferees or
permitted assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
12.3 Waiver. Either party hereto may by written notice to the other (a)
extend the time for the performance of any of the obligations or other actions
of the other party under this Agreement; (b) waive compliance with any of the
conditions or covenants of the other party contained in this Agreement; and (c)
waive or modify performance of any of the obligations of the other party under
this Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without
10
<PAGE>
limitation, any investigation by or on behalf of either party, shall be deemed
to constitute a waiver by the party taking such action, of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by either party hereto of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any preceding or succeeding
breach and no failure by either party to exercise any right or privilege
hereunder shall be deemed a waiver of such party's rights or privileges
hereunder or shall be deemed a waiver of such party's rights to exercise the
same at any subsequent time or times hereunder.
12.4 Amendment. This Agreement may be amended, modified or supplemented
only by a written instrument executed by LUK and the Company.
12.5 Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by Company. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof shall be assignable by LUK
without the prior written consent of the Company; provided, however, that
without the consent of the Company, LUK may assign this Agreement and any or all
rights or obligations hereunder (including, without limitation, LUK's rights to
purchase the Securities and LUK's rights to seek indemnification hereunder) to
any affiliate of LUK. Upon any such permitted assignment, the references in this
Agreement to LUK shall also apply to any such assignee unless the context
otherwise requires; provided, however, that the conditions set forth in Section
7.2 shall continue to apply to LUK.
12.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles thereof regarding conflict of laws. 12.7 Section and Other Headings.
The section and other headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
12.8 Certain Fees and Expenses. Whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including all fees and expenses of agents, representatives, counsel and
accountants shall be paid by the party for whom such costs or expenses were
incurred.
12.9 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
11
<PAGE>
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
[Remainder of Page Intentionally Left Blank]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MK GOLD COMPANY
By: /s/ JOHN FARMER
-------------------------------------
Name: John Farmer
Title: Chief Financial Officer
LEUCADIA NATIONAL CORPORATION
By: /s/ THOMAS E. MARA
-------------------------------------
Thomas E. Mara
Executive Vice President
13
PROMISSORY NOTE
$15,806,723 New York, New York
September 1, 1999
FOR VALUE RECEIVED, the undersigned, MK Gold Company, a Delaware
corporation with offices at 60 East South Temple, Salt Lake City, Utah 84111
(the "Maker"), hereby promises to pay to Leucadia National Corporation, a New
York corporation (the "Payee"), at its offices located at 315 Park Avenue South,
New York, New York 10010, or at such other place as Payee or any holder hereof
may from time to time designate to Maker in writing, the principal sum of
$15,806,723 on September 1, 2001 (the "Maturity Date"). Maker promises to pay
interest in lawful money of the United States on the unpaid principal amount of
this Note from the date hereof until such principal amount is paid in full, at
the interest rate specified in the next sentence. Interest shall accrue on the
unpaid principal balance hereof at an annual rate of 8% per annum for a period
of 60 days from the date hereof, and thereafter at the annual rate of 12% per
annum until payment of this Note in full. Interest hereunder shall be payable
semi-annually in arrears on the last day of September and March, beginning on
March 31, 2000 and on the Maturity Date and shall be computed on the basis of
the actual number of days elapsed over the period of a 360-day year. On any day
on which the Maker is to pay any amount due under this Promissory Note ("Payment
Day"), funds must be received at or before 11:00am New York time. Funds received
after 11:00am on any Payment Day will be treated as having been received on the
next day banks are open for business in New York.
The following shall constitute Events of Default under this Note:
(a) failure by Maker to make any payment of interest required under
this Note and such failure remains unremedied for 5 days;
(b) failure by Maker to make any payment of the principal of this Note
when the same becomes due and payable at maturity, by acceleration or otherwise;
(c) Maker pursuant to or within the meaning of any bankruptcy law:
(i) commences a voluntary case; (ii) consents to the entry of an order
for relief against him in an involuntary case; (iii) consents to the appointment
of a custodian for him or for all or substantially all of his property; (iv)
makes a general assignment for the benefit of his creditors; or (v) admits in
writing his inability generally to pay its debts as the same become due.
Upon the occurrence of an Event of Default specified in clause (c)
above, the principal amount of this Promissory Note, together with all accrued
and unpaid interest thereon and all other amounts owing hereunder, shall become
immediately due and payable, without presentment, demand, notice, protest or
other requirements of any
<PAGE>
kind (all of which are hereby expressly waived by maker). If any other Event of
Default occurs and is continuing, then and in every such case, Payee, by notice
to Maker, may declare the unpaid principal of, and any accrued but unpaid
interest on, this Note to be due and payable. Upon such declaration, the
principal and interest on this Note shall be due and payable immediately.
Maker hereby waives diligence, demand, presentment, protest and
(except as herein provided) notice, and assents to extensions of time of
payments, releases, surrender or forbearance or other indulgence, without
notice.
Maker acknowledges and agrees that Maker's obligation to pay principal
and interest hereunder shall not be subject to any counterclaims, offsets or
defenses against Payee or any holder of this Note that are presently existing or
which may arise in the future.
If this Note is referred to an attorney or other person for
collection, Maker shall be liable for the reasonable fees and expenses of such
attorney or person and the other reasonable expenses and costs of collection.
No failure or delay on the part of Payee to exercise any right, power
or privilege under this Promissory Note and no course or privilege or operate as
a waiver of any default or an acquiescence therein, nor shall any single or
partial exercise of any such right, power or privilege preclude any other right,
power or privilege. The rights and remedies expressly provided for in this Note
are cumulative to, and not exclusive of, any rights or remedies that Payee
otherwise would have.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK AND SHALL BE BINDING UPON THE SUCCESSORS AND
ASSIGNS OF MAKER AND SHALL INURE TO THE BENEFIT OF PAYEE, ITS SUCCESSORS,
ENDORSEES AND ASSIGNS.
Nothing contained in this Note shall be deemed to establish or require
the payment of a rate of interest in excess of the maximum rate legally
enforceable. If the rate of interest called for under this Note at any time
exceeds the maximum rate legally enforceable, the rate of interest required to
be paid hereunder shall be automatically reduced to the maximum rate legally
enforceable. If such interest rate is so reduced and thereafter the maximum rate
legally enforceable is increased, the rate of interest required to be paid
hereunder shall be automatically increased to the maximum rate legally
enforceable, which in no event shall exceed the rate otherwise provided for in
this Note.
Maker hereby irrevocably consents to the jurisdiction of the Courts of
the State of New York and of any Federal Court located in such State in
connection with any action or proceeding arising out of or relating to this
Note. Maker further agrees that Maker will not commence or move to transfer any
action or proceeding, arising out or relating to the provisions of this Note, in
any Court other than one located in the State of New York. In any such
litigation, Maker waives personal service of any summons,
2
<PAGE>
complaint or other process and agrees that the service thereof may be made by
certified mail directed to Maker at the address set forth above or at such other
place as Maker may from time to time designate to Payee in writing.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by Maker and Payee.
At any time and from time to time the holder of this Note, subject to
compliance with applicable securities laws, may transfer this Note and assign
its rights hereunder pursuant to a written instrument of transfer duly executed
by the holder of this Note or its attorney duly authorized in writing.
If any term or provision of this Note shall be held invalid, illegal
or unenforceable, the validity of all other terms and provisions hereof shall in
no way be affected.
MK GOLD COMPANY
By: /s/ JOHN C. FARMER
-------------------------------------
Name: John C. Farmer
Title: Chief Financial Officer
3
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered as of the 26th day of
August, 1999 (the "Effective Date"), by MK Gold Company, a Delaware corporation
("MKG"), the address of which is 60 E. South Temple, Salt Lake City, Utah 84111
and Straits Resources Limited, an Australian Corporation ("SRL"), (ACN # 056 601
417), the address of which is Level 3, Gold Fields House, 1 Alfred Street,
Sydney NSW 2000.
For ten dollars paid by SRL to MKG, the covenants set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the Parties agree as
follows:
RECITALS
MKG and SRL are parties to that certain Heads of Agreement, executed on
July 19, 1999 relating to a possible joint bid by MKG and SRL to acquire Riomin
Exploraciones SA ("Riomin"), a one-hundred percent (100%) owned subsidiary of
Rio Tinto plc ("Rio Tinto"), and its 100% owned Las Cruces Project and its
associated Exploration Package I located near Seville, Spain (the "Project") and
Exploration Package II.
MKG and SRL now desire that MKG shall acquire the Project in accordance
with the agreed bid consideration, subject to SRL's right to receive an option
to purchase 35% interest in the Project in accordance with the terms and subject
to the conditions of this Agreement.
ARTICLE I
DEFINITIONS
1.1 Definitions. The terms defined in Exhibit A and elsewhere shall have
the defined meaning wherever used in this Agreement, including in Exhibits.
ARTICLE II
OPTION
2.1 Option. MKG hereby grants to SRL, or its affiliate, the irrevocable,
exclusive, and non-transferable option ("Option") to purchase an unencumbered
35% interest in Riomin Exploraciones, SA as 100% owners of the Project and
holder of rights associated with Exploration Package II, in accordance with the
terms and conditions of this Agreement; provided, however that SRL's right to
exercise the Option shall be conditional upon MKG's acquisition of the Project.
1
<PAGE>
2.2 Exercise Period. The Option may be exercised at any time during the
period commencing on the date that MKG acquires the Project ("Acquisition Date")
and ending on the date exactly twelve months from the Acquisition Date (the
"Option Period").
2.3 Time and Manner of Exercise. In order to exercise the Option, SRL shall
provide written notice to MKG of its intent to exercise the Option specifying
the proposed closing date for the exercise of the Option (the "Option Closing
Date"), which closing date shall not be less than 14 calendar days from the date
of SRL's exercise notice; provided, however that the Option Closing Date must be
within the Option Period.
2.4 Purchase Price. The price for the purchase of the Option shall be an
amount equal to (i) 35% of MKG's initial up-front payment to Rio Tinto and
direct Project expenditures post acquisition from the date of acquisition to the
date of SRL's exercise of the Option, and (ii) 35% of MKG's direct expenditures
in respect of Exploration Package II, in each case plus annual interest of 8%
thereon ("Purchase Price").
2.5 Deliveries. SRL shall make or cause to be made, payment to MKG of the
Purchase Price on the Option Closing Date by wire transfer of immediately
available funds to an account specified in writing by MKG.
2.6 SRL's Participation in the Project During the Option Period. During the
Option Period, SRL shall have the following rights: (a) to have one (1)
representative present at quarterly Project review meetings; (b) to have one (1)
representative employed by the Project in a senior staff position reporting
directly to the Project manager, and (c) to approve the adoption of an initial
feasibility study. MKG agrees to utilize SRL technical expertise to develop the
project as an open pit SX-EW operation in a mutually agreeable manner.
2.7 Termination. If SRL does not timely exercise the Option within the
Option Period, this Agreement shall expire and be of no further force and
effect; provided, however, that the interest acquired by SRL under Section 5.1
shall survive a termination of this Agreement under this Section 2.7.
ARTICLE III
CLOSING
3.1 Closing Documents. Each Party agrees to execute and deliver at the
Closing such documents as may be necessary to carry out the obligations under
this Agreement or to effectuate the purchase and sale made at the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Both Parties. Each Party warrants and
represents to the other that: (a) it has the capacity to enter into and perform
this
2
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Agreement and all transactions contemplated herein and that all corporate, board
of directors, shareholder and other actions required to authorize it to enter
into and perform this Agreement have been properly taken; and (b) this Agreement
has been duly executed and delivered by it and is valid and binding upon it in
accordance with its terms.
ARTICLE V
FAILURE TO EXERCISE OPTION
5.1 SRL's Failure to Exercise Option. If, and only if, MKG acquires the
Project and SRL does not elect to exercise the Option, SRL shall receive, in
lieu of any other compensation, US$2 Million to be paid upon the earlier of the
commencement of commercial production of the Las Cruces Project or the transfer
by MKG of its beneficial interest in the Project other than to an entity that
remains an affiliate of MKG.
ARTICLE VI
RIGHT TO TERMINATE RELATIONS
6.1 Right to Terminate Relations. If MKG has not acquired the Project
within six (6) months from the Effective Date of this Agreement and if at that
time no negotiations by MKG are ongoing for acquisition of the Project, the
Parties' obligations under this Agreement, and any further relations or
obligations between the Parties shall cease to exist, at the option of either
Party.
ARTICLE VII
OPERATION OF THE PROJECT
If SRL timely exercises the Option and pays the Purchase Price to MKG, the
Parties will jointly operate the Project and the interests in Exploration
Package II, pursuant to the following general terms and conditions:
7.1 Business Entity. The Parties will acquire and hold their interests in
the Project through a corporation or other business entity or arrangement (the
"Company") unless they otherwise mutually agree.
7.2 Definitive Agreement. If SRL timely exercises the Option and pays the
Purchase Price to MKG, the Parties will diligently and in good faith negotiate
and execute one or more definitive agreements setting forth their rights and
obligations in respect of the Project and Exploration Package II and the
Company, which agreement or agreements shall contain the terms and conditions
set forth in this Article VII, together with other terms and conditions as are
customary in the mining industry.
7.3 Initial Ownership Interests. After such time that SRL has exercised the
Option and paid the Purchase Price to MKG, the Parties shall have the following
initial ownership interest in the Project ("Ownership Interests"):
3
<PAGE>
MKG - 65%
SRL - 35%
7.4 Additional Contributions. After SRL's payment of the Purchase Price,
each Party shall be obligated to contribute its pro rata share, based on its
current Ownership Interest, of all approved costs incurred by or for the
Project.
7.5 Adjustment of Ownership Interests. If either Party contributes less
than its pro-rata share of anticipated Project costs, its Ownership Interest
will be proportionately reduced as follows: the reduced Party's Ownership
Interest shall be recalculated by dividing: (X) the sum of (1) the value of the
reduced Party's initial contribution (for SRL- the Purchase Price and for MKG-
total expenditures for the purchase and operation of the project to the Option
Closing Date minus the Purchase Price), (2) the total of all of the reduced
Party's contributions under Section 7.4, and (3) the amount, if any, the reduced
Party contributed to the Project with respect to which the default occurred; by
(Y) the sum of (1), (2) and (3) above for both Parties; and then multiplying the
result by one hundred. The Participating Interest of the other Party shall be
increased by the amount of the reduction in the Ownership Interest of the
reduced Party. A reduced Party whose recalculated Participating Interest becomes
less than ten percent (10%) shall relinquish its entire Ownership Interest to
the other Party and the reduced Participant shall have the right to receive a
ten percent (10%) Net Profits Interest.
7.6 Project Management. The Project will be managed by a committee or board
("Management Committee") to determine overall policies, objectives, procedures,
methods and actions of the Company. The Management Committee shall consist of
two (2) members appointed by MKG and two (2) members appointed by SRL. MKG shall
designate one of its members to serve as the chair of the Management Committee.
7.7 Decisions. Each Party, acting through its appointed member(s) in
attendance at the meeting, shall have the votes on the Management Committee in
proportion to its Ownership Interest. Unless otherwise provided, the vote of the
Party with an Ownership Interest over fifty percent (50%) shall determine the
decisions of the Management Committee. All matters coming before the Management
Committee will be decided by simple majority vote; provided, however, that the
following matters shall require unanimous consent: the approval of annual
programs and budgets (a procedure to break a deadlock with regard to annual
programs and budgets will be contained in the joint venture agreement to be
completed by the Parties), matters regarding the sale of all or a material part
of the Project, the incurring of debt over US$ 5 million for any particular item
by the Company, a significant change of scope for development of the Project as
described by the Feasibility Study, or the entering into by the Joint Venture
Company of any single contract during Mining Operations the value of which
exceeds US$5 million.
7.8 Feasibility Study. At such time as either Party is of the good faith
and reasonable opinion that economically viable Mining Operations may be
possible on the
4
<PAGE>
Project, the Party may propose to the Management Committee that a Feasibility
Study be prepared.
7.9 Project Financing. If the Management Committee determines to develop a
mine at the Project, the Parties will cooperate in seeking to obtain limited
recourse financing for mine construction and development; provided, however,
that each Party will be responsible solely for its own share of any project
financing.
7.10 Transfer of Interest. A Party shall have the right to transfer to a
third party an interest in its Ownership Interest; provided, however that (a)
neither Party shall transfer all or any part of a Party's Ownership Interest
without the consent of the other Party which shall not be unreasonably withheld;
(b) neither Party shall transfer all or any part of its Ownership Interest
without affording the other Party a right of first refusal with respect to the
proposed transfer; and (c) no transferee of all or any part of a Party's
Ownership Interest shall have the rights of a Party unless and until the
transferring Party has provided to the other Party notice of the transfer, and,
the transferee, as of the effective date of the transfer, has committed in
writing to assume and be bound the same extent as the transferring Party. This
Section 7.10(a) and (b) shall not apply to a transfer resulting from the sale of
all or substantially all of the assets of either Party or the merger or
corporate reorganization of either Party, or to a transfer to a wholly-owned
subsidiary or Affiliate of either Party.
7.11 Exploration Package II. If SRL timely exercises the Option and pays
the Purchase Price, SRL shall have an initial ownership interest in Exploration
Package II equal to 35% of MKG's interest in Exploration Package II existing at
the time of exercise. The provisions of Article VII shall apply to the parties'
interests in Exploration Package II mutatis mutandis, it being the intention of
the parties that, so long as no adjustment of ownership interests occurs (as
between MKG and SRL) under the provisions of clause 7.5 hereof, MKG shall have a
65% interest and SRL shall have a 35% interest in whatever rights to Exploration
Package II that MKG would have otherwise possessed if the Option had not been
timely exercised and paid for. In the event of an adjustment under clause 7.5
hereof, the provisions of clause 7.5 shall determine the relative interests of
the parties in Exploration Package II.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Notices. All notices, payments and other required or permitted
communications ("Notices") to either Party shall be in writing, and shall be
addressed respectively as follows:
If to MK Gold Company:
Address: 60 E. South Temple, Suite 2100
Salt Lake City, Utah 84111
5
<PAGE>
Attention: John Farmer
Telephone: 801-297-6900
Facsimile: 801-297-6940
With a Copy to: Frank Joklik
Address: 60 E. South Temple, Suite 2100
Salt Lake City, Utah 84111
Telephone: 801-297-6900
Facsimile: 801-297-6940
If to Straits Resources Limited:
Address: Level 3, Gold Fields House, 1 Alfred Street
Sydney, NSW 2000
Attention: Brian Rear
Telephone: (02) 9252 2011
Facsimile: (02) 9241 2465
All Notices shall be given (a) by personal delivery to the Party, (b)
by electronic communication, capable of producing a printed transmission, (c) by
registered or certified mail return receipt requested; or (d) by overnight or
other express courier service. All Notices shall be effective and shall be
deemed given on the date of receipt at the principal address if received during
normal business hours, and, if not received during normal business hours, on the
next business day following receipt, or if by electronic communication, on the
date of such communication. Either Party may change its address by Notice to the
other Party.
8.2 Waiver. The failure of either Party to insist on the strict performance
of any provision of this Agreement or to exercise any right, power or remedy
upon a breach hereof shall not constitute a waiver of any provision of this
Agreement or limit such Party's right thereafter to enforce any provision or
exercise any right.
8.3 Modification. No modification of this Agreement shall be valid unless
made in writing and duly executed by both Parties.
8.4 Further Assurances. Each of the Parties shall take, from time to time
and without additional consideration, such further actions and execute such
additional instruments as may be reasonably necessary or convenient to implement
and carry out the intent and purpose of this Agreement.
8.5 Entire Agreement; Successors and Assigns. This Agreement contains the
entire understanding of the Parties and supersedes all prior agreements and
understandings between the Parties relating to the subject matter hereof. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the Parties. Neither this Agreement nor any
of the rights, interests
6
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or obligations under this Agreement shall be assignable, in whole or in part, by
operation of law or otherwise by either Party, hereto without the prior written
consent of the other Party, except that MKG shall have the right, without such
consent, to assign this Agreement to any affiliate that holds MKG's interest in
the Project.
8.6 Counterparts. This Agreement may be executed in any number of
counterparts, and it shall not be necessary that the signatures of both Parties
be contained on any counterpart. Each counterpart shall be deemed an original,
but all counterparts together shall constitute one and the same instrument.
8.7 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard for any
conflict of laws or choice of laws principles that would permit or require the
application of the laws of any other jurisdiction.
8.8 Arbitration. All disputes between the Parties arising out of or
relating to this Agreement its interpretation, execution, validity, breach,
application or termination, shall be submitted to final and binding arbitration
as herein provided. The arbitration shall be conducted in accordance with the
rules of the International Chamber of Commerce. The arbitration shall be
conducted in The Hague. Judgment may be entered on any arbitral award by any
court of competent jurisdiction.
8.9 Dispute Resolution. If any arbitration proceeding or other legal action
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or substantially prevailing Party
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
8.10 Public Announcements. Prior to making or issuing any press release or
other public announcement or disclosure of information that is not Confidential
Information, a Party shall furnish a copy of the proposed release to the other
Party at least twenty-four hours prior to its release.
8.11 Expenses. Regardless of whether or not the transactions contemplated
hereby are consummated, each of the Parties will pay its own costs and expenses
incident to preparing for, entering into and carrying out this Agreement and the
Option granted hereunder, and the consummation of the transactions contemplated
hereby.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.
MK Gold Company
By: /s/ G. FRANK JOKLIK
-------------------------------------
Its: Chairman and Chief Executive Officer
------------------------------------
Straits Resources Limited
By: /s/
-------------------------------------
Its: Chief Executive Officer
------------------------------------
8
<PAGE>
EXHIBIT A
TO
OPTION AGREEMENT
BY
MK GOLD COMPANY
AND
STRAITS RESOURCES LIMITED
DEFINITIONS
-----------
"Affiliate" means any person, partnership, limited liability company, joint
venture, corporation, or other form of enterprise which Controls, is Controlled
by, or is under common Control with a Party.
"Confidential Information" means all information, data, knowledge and
know-how (including, but not limited to, formulas, patterns, compilations,
programs, devices, methods, techniques and processes) that derives independent
economic value, actual or potential, as a result of not being generally known
to, or readily ascertainable by, third parties and which is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy,
including without limitation all analyses, interpretations, compilations,
studies and evaluations of such information, data, knowledge and know-how
generated or prepared by or on behalf of either Party.
"Control" used as a verb means, when used with respect to an entity, the
ability, directly or indirectly through one or more intermediaries, to direct or
cause the direction of the management and policies of such entity through (i)
the legal or beneficial ownership of voting securities or membership interests;
(ii) the right to appoint managers, directors or corporate management; (iii)
contract; (iv) operating agreement; (v) voting trust; or otherwise; and, when
used with respect to a person, means the actual or legal ability to control the
actions of another, through family relationship, agency, contract or otherwise;
and "Control" used as a noun means an interest which gives the holder the
ability to exercise any of the foregoing powers.
"Development" means all preparation (other than Exploration) for the
removal and recovery of Products, including construction and installation of a
mill or any other improvements to be used for the mining, handling, milling,
processing, or other beneficiation of Products, and all related Environmental
Compliance.
"Environmental Compliance" means actions performed during or after
Operations to comply with the requirements of all environmental laws or
contractual commitments
Exhibit A - 1
<PAGE>
related to reclamation of the Project or other compliance with applicable
environmental laws.
"Expansion" or "Modification" means (i) a material increase in mining or
production capacity; (ii) a material change in the recovery process; or (iii) a
material change in waste or tailings disposal methods. An increase or change
shall be deemed "material" if it is anticipated to cost more than 25% of
original capital costs attributable to the Development of the mining or
production capacity, recovery process or waste or tailings disposal facility to
be expanded or modified.
"Exploration" means all activities directed toward ascertaining the
existence, location, quantity, quality or commercial value of deposits of
Products, including but not limited to additional drilling required after
discovery of potentially commercial mineralization, and including related
Environmental Compliance.
"Feasibility Study" means a report to be prepared following the direction
of the Management Committee. The Feasibility Study shall be in a form and of a
scope generally acceptable to reputable financial institutions that provide
financing to the mining industry.
"Mining" means the mining, extracting, producing, beneficiating, handling,
milling or other processing of Products.
"Net Profits Interest" means certain amounts calculated as provided in
Exhibit B.
"Operations" means the activities carried out by the Company.
"Party" or "Parties" means MKG or SRL, or any permitted successor or assign
of MKG or SRL under the Agreement.
"Products" means all ores, minerals and mineral resources produced from the
Project.
"Transfer" means, when used as a verb, to sell, grant, assign, create an
Encumbrance, pledge or otherwise convey, or dispose of or commit to do any of
the foregoing, or to arrange for substitute performance by an Affiliate or third
party, either directly or indirectly; and, when used as a noun, means such a
sale, grant, assignment, Encumbrance, pledge or other conveyance or disposition,
or such an arrangement.
Exhibit A - 2
<PAGE>
EXHIBIT B
TO
OPTION AGREEMENT
BY
MK GOLD COMPANY
AND
STRAITS RESOURCES LIMITED
NET PROFITS INTEREST CALCULATION
--------------------------------
9.1 Income and Expenses. Net Profits Interest shall be calculated by deducting
from the Gross Revenue (as defined below) realized, such costs and expenses
attributable to Exploration, Development, Mining, the marketing of Products and
other Operations as would be deductible under generally accepted accounting
principles and practices consistently applied, including without limitation:
(a) All costs and expenses of replacing, expanding, modifying,
altering or changing from time to time the Mining facilities. Costs and expenses
of improvements (such as haulage ways or mill facilities) that are also used in
connection with workings other than the Project shall be charged to the Project
only in the proportion that their use in connection with the Project bears to
their total use;
(b) Ad valorem real property and unsecured personal property taxes,
and all taxes, other than income taxes, applicable to Mining of the Project,
including without limitation all state mining taxes, sales taxes, severance
taxes, license fees and governmental levies of a similar nature;
(c) Allowance for project overhead;
(d) All expenses incurred relative to the sale of Products, including
an allowance for commissions at rates which are normal and customary in the
industry;
(e) All amounts payable to the remaining Party during Mining pursuant
to any applicable operating or similar agreement in force with respect thereto;
(f) The actual cost of investment under the Agreement but prior to
beginning of Mining, which shall include all expenditures for Exploration and
Development of the Project incurred by the non-withdrawing Party both prior and
subsequent to the withdrawing Party acquiring a Net Profits Interest;
Exhibit B - 1
<PAGE>
(g) Interest on monies borrowed or advanced for costs and expenses,
but in no event in excess of the maximum permitted by law (interest on equity
contributions will not be included);
(h) An allowance for reasonable working capital and inventory;
(i) Costs of funding Environmental Compliance;
(j) Actual costs of Operations; and
(k) Rental, royalty, production, and purchase payments.
For purposes hereof, the term "Gross Revenue" shall mean the sum of (i)
gross receipts from sale of Products, less any charges for sampling, assaying,
or penalties; (ii) gross receipts from the sale or other disposition of Assets;
(iii) insurance proceeds; (iv) compensation for expropriation of Assets; and (v)
judgment proceeds.
It is intended that the remaining Party shall recoup from Gross Revenue all
of its on-going contributions for Exploration, Development, Mining, Expansion
and Modification and marketing Products before any Net Profits Interest are
distributed to any person holding a Net Profits Interest. It is the intention of
the parties that in calculating such Net Profits, the remaining party shall be
entitled to recover capital expenditures by depreciating such expenditures over
the life of the Project. If in any year after the beginning of Mining of the
Project an operating loss relative thereto is incurred, the amount thereof shall
be considered as and be included with outstanding costs and expenses and carried
forward in determining Net Profits Interest for subsequent periods. If Products
are processed by the remaining Party, or are sold to an Affiliate of the
remaining Party, then, for purposes of calculating Net Profits Interest, such
Products shall be deemed conclusively to have been sold at a price equal to fair
market value to an arm's length purchaser FOB the concentrator for the Project,
and Net Profits Interest relative thereto shall be calculated without reference
to any profits or losses attributable to smelting or refining.
9.2 Payment of Net Profits Interest. Payments of Net Profits Interest shall
commence in the calendar quarter following the calendar quarter in which Net
Profits Interest are first realized, and shall be made forty-five (45) days
following the end of each calendar quarter during which Net Profits Interest are
realized, and shall be subject to adjustment, if required, at the end of each
calendar year. The recipient of such Net Profits Interest payments shall have
the right to audit such payments following receipt of each payment by giving
notice to the remaining Party and by conducting such audit in accordance with
the terms agreed to by the Parties. Costs of such an audit shall be borne by the
holder of the Net Profits Interest described herein.
9.3 Definitions. All capitalized words and terms used herein have the same
meaning as in the Agreement.
Exhibit B - 2
