The Operator must, on behalf of the Partnership:
|
(a) |
from time to time cause the Product to be smelted, refined or otherwise treated, or beneficiated (as the case may be), transported and sold or
disposed of, and negotiate all agreements pertaining thereto for the best terms and conditions reasonably obtainable, as determined by the Operator; and
|
|
(b) |
ensure the proceeds from time to time received from such sale or disposal are paid to the Partnership Account.
|
|
(a) |
Section 5.10 does not preclude any Partner from placing, for its own account, insurance for greater or other coverage than that placed by the
Operator.
|
|
(b) |
Any insurance effected and maintained by the Operator under Section 5.10 must provide that it is primary and that the insurer waives all rights it
might have in relation to contribution from other insurers of a Partner.
|
|
(a) |
The Operator must in a timely manner
|
|
(i) |
provide each director on the GP Board with a Report within 30 days of the end of each calendar quarter in each Fiscal Year;
|
|
(ii) |
provide each director on the GP Board within 15 Business Days of each calendar month written estimates of (i) production of Product and (ii)
aggregated Expenditures incurred; (iii) net earnings and (iv) safety, environmental and sustainability developments, each during such month;
|
|
(iii) |
promptly provide each director on the GP Board with details of any unexpected material change to the Mining Operations, the Partnership Property or
the Partnership Business;
|
|
(iv) |
promptly provide each director on the GP Board any changes to the life of mine plan for the New Afton Mine;
|
|
(v) |
promptly provide each director on the GP Board all reports of the independent tailings review board;
|
|
(vi) |
upon request by a Partner, supply to that Partner reasonable supporting information or material in relation to such aspects of the Operator's Report
as that Partner may reasonably specify in its request; and
|
|
(vii) |
prepare and file or lodge and copy to the Partners all material reports required by applicable Law to be submitted to any Governmental Authority or
other Person.
|
|
(b) |
Any director on the Operating Board may, upon 10 days’ notice, request to review any material correspondence with a lender, Governmental Authority,
offtaker, royalty holder and First Nation from the Operator.
|
| 5.14 |
Regulatory Requirements
|
Upon request by a Partner, the Operator must promptly provide the Partner with such information,
records or documentation (whether embodied in tangible or electronic form) as the Partner requests (to the extent such is in the Operator's possession or otherwise generally available to it) so as to permit the Partner to comply with
applicable Laws to which the Partner is subject or the rules or regulations of any regulatory or stock exchange having jurisdiction over the Partner or any of its Affiliates.
| 5.15 |
Accounts and Information
|
The Operator must:
|
(a) |
in accordance with applicable generally accepted accounting practice in the mining industry, keep and maintain such books of account and accounting
records in relation to the Partnership as would normally be kept by an Operator under the same or similar circumstances;
|
|
(b) |
at the request and at the expense of a Partner which may not be made more than once in any Fiscal Year, the Operator must allow the books of account
and accounting records (whether embodied in tangible or electronic form) referred to in Section 5.15(a) to be audited by an auditor (which may be the auditor of the Partner concerned) nominated by that Partner provided
that, to the greatest extent possible, such audit must be conducted in conjunction with the Partnership’s annual audit;
|
|
(c) |
prepare, have audited by its auditor and deliver to the Partners a set of accounts (together with the auditor's report on those accounts) for the
Partnership:
|
|
(i) |
in respect of each Fiscal Year; and
|
|
(ii) |
and all costs incurred in the Operator complying with this Section 5.15 will be Expenditures; and
|
|
(d) |
make all technical information (including all samples and drill cores and assay results), data, statistics and reports and insurance policies
(whether embodied in tangible or electronic form) available at all reasonable times for inspection by the Partners and must promptly furnish copies of those documents to a Partner requesting the same, at that Partner's
expense.
|
Except as provided in Section 5.15(d), all costs and expenses incurred by the Operator in complying
with this Section 5.15 will be Expenditures whether or not included in an Approved Program and Budget.
The Operator must open in its own name, but in trust for the Partnership, and maintain a special
purpose bank account (which must be interest-bearing if possible) to be styled the "New Afton Limited Partnership Account" into which account all contributions made by the Partners and all other receipts by the Operator on account of
the Partnership must be deposited and from which all Expenditures will be paid or reimbursed to the Operator. For greater certainty, the Operator shall not use any funds from the Partnership Account except in connection with the
Partnership Business.
| 5.17 |
Interest on Partnership Account
|
All interest earned on the Partnership Account is for the account of the Partnership and must be
held in and applied as part of the Partnership Account.
The Operator must not, except with the prior approval of the GP Board by Ordinary Resolution or
Unanimous Resolution as applicable or except in an Emergency:
|
(a) |
knowingly enter into any contract or arrangement in connection with the Partnership with a Partner or its Affiliate;
|
|
(b) |
except where a description of the goods or services expected to be procured are provided in an Approved Program and Budget, enter into any contract
or subcontract involving a commitment to an Expenditure, whether capital or operating, in excess of $2,000,000;
|
|
(c) |
except where expressly contemplated in an Approved Program and Budget, sell or otherwise dispose of any Partnership Property having an aggregate
market value exceeding $1,000,000;
|
|
(d) |
institute, defend, compromise or settle any court or arbitral proceedings or insurance claim involving an amount in excess of $250,000; or
|
|
(e) |
except as necessary to comply with Law or the requirements of any Governmental Authority having jurisdiction, suspend or curtail mining activities
or any mining operation.
|
| 5.19 |
Voluntary Resignation
|
|
(a) |
The Operator may resign upon not less than 6 months prior notice to the Partners.
|
|
(b) |
Subject to Section 5.3, the replacement Operator shall be appointed by Unanimous Resolution.
|
Subject to Section 5.19, the appointment of an Operator will terminate upon the happening of any
one or more of the following events or occurrences:
|
(a) |
the Operator becomes, or informs the Partners, creditors of the Operator generally or any particular creditor of the Operator that it is, insolvent
or unable to pay its debts as and when they fall due;
|
|
(b) |
a liquidator or provisional liquidator, a receiver or receiver and manager, assignee, custodian, trustee, sequestrator or an analogous Person is
appointed to, or in respect of, the Operator or any of its property;
|
|
(c) |
the Operator has a mortgagee seeking to exercise a right of possession or control over the whole or a part of its property;
|
|
(d) |
the Operator enters into, or calls a meeting of its members or creditors with a view to entering into, a composition, compromise or arrangement
with, or an assignment for the benefit of, any of its members or creditors, or a Court orders that a meeting be convened in respect of a proposed composition, compromise or arrangement between the Operator and its
creditors or any class of its creditors, other than for the purpose of reconstruction or amalgamation;
|
|
(e) |
any application is made or other process commenced (not being an application or process withdrawn, discontinued or dismissed within 20 Business Days
of being filed) seeking an order for the appointment of a provisional liquidator, a liquidator, a receiver or a receiver and manager or an analogous Person to or over the Operator or any of its property;
|
|
(f) |
the Operator is declared bankrupt or has filed for some form of protection from its creditors under applicable Law relating to or governing
bankruptcy;
|
|
(g) |
there is a resolution of creditors or the GP Board, or an order of a court, to place in liquidation or bankruptcy or wind up the Operator;
|
|
(h) |
an event happens analogous to an event specified in Sections 5.20(a) to Section 5.20(g) under applicable Laws;
|
|
(i) |
the Operator commits a Terminable Breach and within 20 Business Days after notice in writing has been given to the Operator by a Partner specifying
such default and demanding that the Operator remedy the same, the Operator does not cure such breach or is not in the process of diligently proceeding to cure such breach;
|
|
(j) |
if the Operator is a Partner and fails to contribute Expenditures in accordance with a Cash Call Notice such that it becomes a Defaulting Partner
and within 20 Business Days after notice in writing has been given to the Operator (in its capacity as a Partner) by a Non-Defaulting Partner specifying such default and demanding that the Operator (in its capacity as a
Partner) remedy the same, the Operator (in its capacity as a Partner) does not cure such default; and
|
|
(k) |
if the Operator is a Partner when appointed as Operator and subsequently ceases to be a Partner.
|
| 5.21 |
Limitation of Reappointment and Voting for Replacement Operator
|
|
(a) |
Any Partner whose appointment as Operator is terminated under Section 5.20 (other than under Section 5.20(j)) may not be reappointed as the Operator
except upon a Unanimous Resolution.
|
|
(b) |
Despite any other provision of the Agreement to the contrary, upon the deemed resignation of the Operator under Section 5.20, the GP Board by
Unanimous Resolution shall promptly designate a replacement Operator provided that the directors on the GP Board appointed by the Partner whose appointment as Operator is terminated under Section 5.20 will not be entitled
to vote in respect of matters relating to the appointment of a new Operator at the meeting of the GP Board to consider the resolution referred to in this Section or any subsequent meeting upon such Section should that
meeting be adjourned.
|
| 5.22 |
Former Operator's Obligations
|
Any Partner ceasing to act as Operator must promptly turn over, transfer and surrender custody and
control of all equipment and all information, books, records, accounts and other documents (whether embodied in tangible or electronic form) and all other Partnership Property held or maintained by that Partner in its capacity as
Operator to the replacement Operator in the manner directed by the resolution of the GP Board appointing the replacement Operator.
| 5.23 |
Access to Partnership Property
|
The duly authorised representatives of each Partner and a consultant engaged by a Partner may, at
the risk of the Partner concerned, have access to the Partnership Property at all reasonable times for the purposes of inspecting the Partnership Property and the Partnership Business being carried out on the Partnership Property.
Each Partner must ensure that its representatives or consultant, as the case may be, cause minimal inconvenience to or interference with the Operator or contractors or subcontractors of the Operator in the conduct of Partnership
Business, do not give any instructions or directions to any Person engaged in the conduct of Partnership Business, and comply strictly with any safety regulations or instructions promulgated or given by or on behalf of the Operator.
Every contract or subcontract entered into by the Operator for the purposes of the Partnership:
|
(a) |
must specifically acknowledge that the Operator enters into the same as agent for the Partnership; and
|
|
(b) |
if it is not entered into on an arm’s length basis or is entered into with an Affiliate of the Operator, must be on terms and conditions the
equivalent of those which might reasonably have been expected to be available to the Operator from an arm’s length contractor or subcontractor.
|
ARTICLE 2
LIABILITY OF THE OPERATOR
| 6.1 |
Indemnification of Operator
|
Where the Operator is not the GP, the Partnership hereby indemnifies and saves harmless the
Operator from and against any liability suffered, sustained or incurred by the Operator in respect of any loss, damage, claim, demand, proceeding, expense, injury or death (including reasonable legal fees) arising out of or as a
consequence of performance by the Operator and/or its officers, employees or agents of the Operator's obligations under the Agreement. This indemnity shall not apply in respect of any liability of the Operator to the Partnership
pursuant to Section 6.2.
| 6.2 |
Apportionment of Liability
|
The Partnership’s liability to indemnify the Operator (whether under Section 6.1 or otherwise) will
be reduced proportionally to the extent that any fraudulent act or omission or gross negligence of the Operator and/or its officers, employees or agents has caused or contributed to any loss, damage, claim, demand, proceeding,
expense, injury or death and if any such fraudulent act or omission or gross negligence of the Operator, or its officers, employees or agents is wholly responsible for any such loss, damage, claim, demand, proceedings, expense, injury
or death, a Partner has no liability to indemnify the Operator.
| 6.3 |
Deeming of No Gross Negligence
|
An act or omission of the Operator or its officers, employees or agents performed or failed to be
performed:
|
(a) |
at the direction of, or with the concurrence of, the GP Board; or
|
|
(b) |
unilaterally and in good faith by the Operator to protect life or property, other than when such actions amount to gross negligence as defined in
Section 6.2,
|
will be deemed not to be gross negligence.
| 6.4 |
No Consequential Damages
|
Except in the case of fraud or gross negligence and despite any other provision of the Agreement to
the contrary, no Partner and its Affiliates (whether in its capacity as Operator or as an owner of a Partnership Interest) will be liable to any other Partner or its Affiliates for or in relation to any indirect or consequential loss,
liability or damage, including:
|
(a) |
loss of use of property which has not been physically lost, damaged or destroyed;
|
|
(b) |
loss of reputation, goodwill or any opportunity;
|
|
(c) |
business interruption, loss of actual or anticipated revenue, income or profits; or
|
|
(d) |
special damages, however arising and despite any knowledge, awareness, expectation, representation, reliance or dependency on the part of either
Party at the time of entry into the Agreement, under or in connection with it.
|
Subject to this Article 6, the Operator shall indemnify each Partner (other than itself where it is
also a Partner) from and against any liability suffered, sustained or incurred by each such Partner in respect of any loss, damage, claim, demand, proceeding, expense, injury or death (including legal fees), not including
consequential damages, arising out of or as a consequence of any fraudulent act or omission, or of gross negligence of the Operator or its officers, employees or agents in connection with the Agreement and if the Operator fails to pay
such amount and the Operator is a Partner, then the amount thereof shall constitute a Default Amount and such Partner shall be deemed to be a Defaulting Partner.
The Operator shall be reimbursed by the Partnership for the Operator's out-of-pocket costs for the
services provided by the Operator’s staff and charges incurred by the Operator in providing such services to the Partnership and properly invoiced, in each case at the Operator’s cost, including a mutually agreed allocation for
overhead (the “Operator’s Costs”).
ARTICLE 3
GOVERNANCE OF THE GP
| 7.1 |
Formation of GP Board
|
|
(a) |
Subject to the provisions of this Agreement and the Business Corporations Act (Ontario) at all times, the board of director on the GP (the “GP Board”)
shall be nominated by the Limited Partners.
|
|
(b) |
Each Partner may appoint one individual to the GP Board (each a “Director”) for each whole 10% Proportionate Share that it has. For example, if there are three Partners holding a 61%, 24% and 15% Proportionate Share, respectively, then the first Partner may
appoint six directors, the second may appoint 2 directors and the third may appoint one director. Initial appointments shall be made by written notice delivered to all Partners and shall contain the name, telephone number
and email address of the appointed directors. Subsequent appointments shall be made or changed by notice to the other Partners prior to the meeting at which the director is to act. Partners shall attend and vote at a
meeting of the GP Board through their representative directors.
|
|
(c) |
If any matter, to be determined by Ordinary Resolution of votes cast by directors, results in a tie, then such matter shall be deemed to be a
Dispute under this Agreement and shall be resolved in accordance with Article 15.
|
|
(d) |
The GP Board shall hold regular meetings, at least quarterly, in accordance with the procedures below to consider the Partnership Business. Any
director may call a special meeting of the GP Board in accordance with the procedures below:
|
|
(i) |
New Gold, as long as its Proportionate Shares is 50% or greater, shall be the chair of the GP Board (the “Chair”). The Chair shall from time to time appoint a secretary (who need not be a director) to attend and prepare minutes of all meetings. The secretary shall
distribute copies of such minutes to each director within 14 days of each meeting. In no circumstances will the Chair, in his or her capacity as Chair, have a casting vote.
|
|
(ii) |
All meetings of the GP Board shall be held in Toronto or such other place as may be consented to by all directors, or by such telephone or other
electronic conference facilities as permit all persons participating in the meeting to communicate with each other simultaneously, on at least 10 Business Days’ prior notice (or such shorter period as may be consented to
by directors) given by the Chair, or by the directors calling the special meeting in the case of a special meeting, to all directors (and to the Chair in the case of a special meeting called by a director) stating therein
the time and place of the meeting and the business to be considered at the meeting in reasonable detail.
|
|
(iii) |
Any documents or other material to be considered at any GP Board meeting shall be delivered to each director by the Chair, or by the director
calling the special meeting in the case of a special meeting called by a director, at least 10 Business Days prior to such meeting.
|
|
(iv) |
A quorum at any meeting of the GP Board shall be a majority of the then total number of directors then sitting on the GP Board provided that a
director nominee representing each Partner is present at the meeting. If at any such meeting a quorum is not present within 30 minutes after the time appointed for the meeting, then the meeting shall be adjourned for five
days and the Chair shall immediately give notice of the adjourned meeting to each director. At such adjourned meeting, the directors attending such meeting shall constitute a quorum thereat and may transact the business
for which the meeting was originally called; provided that matters requiring Unanimous Approval or approval by Special Resolution may not be transacted unless a director nominee representing each Partner is present. If
proper notice has been given, an agenda circulated prior to the meeting and a quorum is present at the commencement of a meeting of the GP Board, then the GP Board will be competent to exercise all of the authorities,
powers and discretions bestowed upon it under the Agreement even if the quorum departs during the meeting provided the business conducted pertains to the said agenda. The GP Board must not transact any business at a
meeting unless a quorum is present at the commencement of the meeting.
|
|
(v) |
The only Persons entitled to attend meetings of the GP Board are the directors, other representatives of the Partnership and the secretary appointed
by the Chair, provided that each Partner shall be entitled to invite not more than two guests per Partner to attend any GP Board meeting provided that such guests must be directors, officers or employees of a Partner or
advisors to a Partner. Any such guests shall be required to execute confidentiality agreements in favour of the Partnership. Any other Person may be admitted to such meetings only with the consent of all directors.
|
|
(vi) |
Meeting attendance costs incurred by directors and guests of a Partner shall be paid for by that Partner.
|
|
(e) |
[New Gold], in its capacity as shareholder of
the General Partner, agrees to vote to elect the directors of the General Partner in accordance with Section 7.1(b).
|
Except for matters required to be determined by Unanimous Resolution and Special Resolution, as
applicable, as set out herein and/or on Schedule B, all matters to be determined by the GP Board shall be determined by Ordinary Resolution.
| 7.3 |
Disqualification — Partner as Operator
|
Despite any other provision of the Agreement to the contrary, if:
|
(a) |
a Partner or an Affiliate of a Partner is the Operator; and
|
|
(b) |
a meeting of the GP Board has been called for the purposes of considering whether to pass a resolution in respect of the enforcement of a provision
of this Agreement against the Operator, in that capacity, where the Operator has, pursuant to a final judicial or arbitral decision, been found to be in breach of any such provision (including enforcement under a right of
termination),
|
then the directors on the GP Board appointed by that Partner will not be entitled to vote at that
meeting of the GP Board or any subsequent meeting pertaining thereto should that meeting be adjourned.
| 7.4 |
Disqualification — Defaulting Partner
|
|
(a) |
Despite any other provision of the Agreement to the contrary, if at any time during the term of the Agreement:
|
|
(i) |
a Partner is a Defaulting Partner for more than 90 days and has not issued a bona fide Dispute Notice disputing that it is a Defaulting Partner; or
|
|
(ii) |
it is adjudged a Defaulting Partner in a final judicial or arbitral decision,
|
then the directors on the GP Board appointed by the Defaulting Partner will not be entitled to vote
at any meeting of the GP Board for so long as that Partner is a Defaulting Partner.
|
(b) |
Despite Section 7.4(a):
|
|
(i) |
a Defaulting Partner will still be entitled to receive any agenda (including any addition to an agenda) or other document prepared for the purposes
of a meeting of the GP Board;
|
|
(ii) |
the director on the GP Board appointed by the Defaulting Partner will be entitled to attend at any meeting of the GP Board by any of the means
permitted by the Agreement;
|
|
(iii) |
a Defaulting Partner will still be entitled to receive any draft or final minutes of a meeting of the GP Board; and
|
|
(iv) |
a Defaulting Partner will be bound by each resolution of the GP Board.
|
|
(c) |
During the period in which Section 7.4(a) applies to a Defaulting Partner:
|
|
(i) |
the director on the GP Board appointed by the Non-defaulting Partner will, despite anything in Section 7.1(e)(i) to the contrary, when attending a
meeting of the GP Board be deemed to be a validly constituted and effective quorum for the purposes of Section 7.1(e)(i); and
|
|
(ii) |
a director on the GP Board appointed by the Non-defaulting Partner will, despite anything in Section 7.1(e)(i) to the contrary, act as chairman of
any meeting of the GP Board.
|
|
(a) |
The GP Board will meet for the consideration of business, adjourn or otherwise regulate its meetings as it thinks fit and the Chair and any Partner
holding a Proportionate Share of at least 10% may call a meeting at any time by at least 10 Business Days (or such shorter time period as may be consented to by the directors) (or if a Unanimous Resolution or Special
Resolution is required on any matter to be considered at the meeting, unless all Partners otherwise agree, 20 Business Days) prior notice to the Partners and the Operator accompanied by an agenda specifying:
|
|
(i) |
the general nature of the business to be attended to with any supporting documentation; and
|
|
(ii) |
the time and place (which may be by electronic conference) of the meeting.
|
|
(b) |
Without limiting Section 7.5(a), the Chair will call a meeting during:
|
|
(i) |
all phases of the Partnership at least twice during each Fiscal Year and will convene a separate meeting once during each Fiscal Year to consider
any programs and budgets for the following Fiscal Year; and
|
|
(ii) |
the reclamation or rehabilitation phase, at least annually.
|
Notice of a meeting will not be required if all the director on the GP Board are present and
unanimously agree upon the agenda.
A Partner may add to an agenda for a meeting of the GP Board by notice to the other Partners and
the Operator given not less than 5 Business Days prior to the date of a proposed meeting.
Meetings of the GP Board shall be conducted in English.
The Chair must cause minutes, written in English, to be kept of each meeting of the GP Board and
must circulate the draft minutes to each of the Partners within 5 Business Days after the date of the meeting.
Unless within 10 Business Days of actual receipt by a Partner of draft minutes or changed draft
minutes of a meeting of the GP Board that Partner requests changes or further changes to those minutes by notice to the other Partners and the Operator, that Partner and its GP Board appointee or appointees will be deemed to have
approved the minutes or changed minutes as a correct record of the meeting to which they relate. Subject to the foregoing, the minutes of a meeting of the GP Board will be binding as a correct record when signed by the chairman at the
next or any subsequent meeting.
| 7.11 |
Circulating Consent Resolution
|
A resolution in writing, signed by all of the directors on the GP Board, will be as valid and
effectual as if it had been a resolution (including a Unanimous Resolution) passed at a meeting of the GP Board duly convened and held and any such resolution in writing may consist of several documents (which may be facsimile or
electronically transmitted copies of signed originals) in like form, each signed by one or more of the director on the GP Board.
Without prejudice to any provision of the Agreement requiring a Unanimous Resolution and without
conferring on the GP Board power to amend the Agreement or to pass any resolution (whether or not a Unanimous Resolution) which is inconsistent with the Agreement, each Partner hereby acknowledges and declares that:
|
(a) |
each of the director on the GP Board appointed by it will have full power to bind the Partner in relation to all matters which are within the power,
authority or discretion of the GP Board or are by the Agreement matters to be determined by resolution of the GP Board; and
|
|
(b) |
it will be bound by each resolution of the GP Board (but if a condition is attached to any such resolution, upon that condition being satisfied)
whether or not the director on the GP Board appointed by it have attended the relevant meeting and whether or not its directors appointees have voted in favour of the resolution concerned.
|
| 7.13 |
Directors’ and Officers’ Insurance
|
The GP will maintain directors’ and officers’ liability insurance for the benefit of all of the
directors on the GP Board and the GP’s officers until such time as the GP Board determines that such insurance should be discontinued.
| 7.14 |
Surrender of Properties
|
|
(a) |
If the GP, at any time and from time to time, considers that a Partnership Property is no longer required for the purposes of the Partnership it
must convene a meeting of the GP Board to obtain its approval by Unanimous Resolution to the surrender of the Partnership Property concerned.
|
|
(b) |
If the GP Board by Unanimous Resolution approves of the surrender of any Partnership Property, any Partner, other than a Partner acting as the GP,
will be entitled to give to the GP, a request to convey that Partnership Property to the Partner, which request must be communicated by way of notice to the GP (which notice must be copied to the other Partners), received
by the GP no later than 20 Business Days prior to the date of the surrender. The requesting Partner (if the only one making a request then alone and if more than one then pro rata in accordance with their respective
Proportionate Shares) will be entitled, in consideration of payment of fair market value as agreed between the Parties and failing agreement determined by dispute resolution hereunder, to a conveyance of any Partnership
Property intended for surrender, together with copies of any programs, assay maps, diamond drill records and factual engineering data (whether embodied in tangible or electronic form) in the GP's possession relating to the
Partnership Property. Any Partnership Property so conveyed will cease to be subject to the Agreement.
|
ARTICLE 4
PROGRAMS AND BUDGETS
| 8.1 |
Preparation and submission
|
Draft annual programs and the budgets with regard to Partnership Business to be conducted for any
Fiscal Year must be prepared and submitted by the Operator to directors on the GP Board no later than October 31st in each year for the next following Fiscal Year.
| 8.2 |
Content of Draft Program
|
Any draft annual program and budget of Partnership Business for any Fiscal Year submitted to the
director on the GP Board in accordance with Section 8.1 must, at a minimum, contain:
|
(a) |
a statement in reasonable detail of the proposed Partnership Business;
|
|
(b) |
an estimate of all Expenditures, including capital Expenditures, to be incurred and an estimate of the time or period during which it will be
incurred, plus a reasonable allowance for contingencies;
|
|
(c) |
such other facts as may be necessary to reasonably illustrate the results intended to be achieved by the proposed program;
|
|
(d) |
an estimate of the quantity and quality of the ore to be mined and the Product or other products and by-products to be produced;
|
|
(e) |
an estimate of revenues and other cash receipts to be received by the Partnership from sales;
|
|
(f) |
an outline of the sources of funding to be used to implement the proposed program including anticipated Cash Calls; and
|
|
(g) |
any other information required by the GP Board.
|
Each draft program will be accompanied by the reports and data that are reasonably necessary for
each Partner to evaluate and assess the Approved Annual Program and Budget for the then current Fiscal Year and the draft program and budget in respect of the next Fiscal Year. Upon request of any Partner the Operator must meet with
that Partner to discuss a draft program and budget and will provide such additional or supplemental information as that Partner may reasonably require.
| 8.3 |
Convening Meeting to Consider
|
The Chair must also convene a meeting of the GP Board for a date not less than 10 nor more than 15
Business Days after the date of submission of a draft program and budget to the directors for the purpose of the GP Board considering and, if thought fit, approving (with or without alteration) the program and budget as so submitted.
Prior to the GP Board meeting scheduled to consider the proposed program and budget, any director may submit to the GP Board and the Operator any proposed modifications to the proposed program and budget, which proposed modifications
shall be considered in good faith by the GP Board. Following such consideration, the Operator shall submit a proposed final annual program and annual budget to the GP Board not less than 30 days prior to the first day of each Fiscal
Year and such annual program and budget, if approved and adopted by the GP Board (such program and budget, so approved and adopted, the “Approved
Annual Program and Budget”), shall be implemented by the Operator for the following Fiscal Year.
|
(a) |
If the GP Board does not approve a program and budget proposed by the Operator in respect of a period during which, in the absence of such approval,
there will be no current program and budget relating to Partnership Business and the Partners do not prior to the commencement of that period reach some contrary agreement or the GP Board does not approve that proposed
program and budget or a revision of the proposed program and budget, then, until such time as a program and budget is approved by the GP Board, the GP Board will be deemed to have approved a program and budget for:
|
|
(i) |
the continuation of the Partnership Business at the level of the last Approved Program and Budget but with:
|
|
(A) |
the budget of Expenditures; and
|
|
(B) |
each item in the budget of Expenditures, comprised in the last Approved Annual Program and Budget escalated at the annual rate of inflation; and
|
|
(ii) |
the replacement of worn out or obsolete plant, machinery and equipment at the discretion of the Operator to an aggregate value of up to 50% of the
average annual Expenditures incurred on such replacements over the 3 preceding Fiscal Years by the Partnership.
|
|
(b) |
For the purposes of this Section 8.4 the "annual rate of inflation" in respect of a Fiscal Year and in respect of each item comprised in a budget of
Expenditures means the movement during the Fiscal Year:
|
|
(i) |
in the case of consumable supplies, in the actual purchase cost of the item concerned; or
|
|
(ii) |
in the case of wages, in the applicable award, collective agreement or other similar agreement; or
|
|
(iii) |
in all other cases (including salaries and benefits), in the Canadian Consumer Price Index which is most appropriate to the item concerned as
published by the Statistics Canada (or in the absence of that index some other periodically published measure of inflation in Canada which as nearly as possible equates to that index agreed upon by the Partners or failing
such agreement selected by the auditor for the time being of the Partnership).
|
The approval of a program and budget by the GP Board will be authority for the Operator to
undertake the Partnership Business specified in and incidental to such program and to incur on behalf of the Partners the Expenditures estimated in and incidental to such budget provided that the Operator may incur such Expenditures
as it considers reasonably necessary:
|
(a) |
subject to Section 8.6, in an Emergency, as reasonably considered such by the Operator;
|
|
(b) |
to effect and maintain insurance as required by Section 5.9; or
|
|
(c) |
as necessary to comply with any applicable Law or requirement of a Governmental Authority having jurisdiction where reference to the GP Board is
impracticable and until such reference becomes practical.
|
| 8.6 |
Emergency Expenditures
|
If the Operator intends to incur, or incurs, any Expenditures under Section 8.5(a), then the
Operator must:
|
(a) |
where practical and possible, provide advance notice to the Partners of such costs and expenses;
|
|
(b) |
be reasonable and fiscally responsible in respect of such costs and expenses; and
|
|
(c) |
promptly notify the Partners of that Expenditures,
|
and the Operator must, if applicable, be reimbursed for that Expenditures by the Partners in
proportion to their Proportionate Shares.
The GP Board may at any time and from time to time of its own volition or on the recommendation of
the Operator amend any Approved Program and Budget and from the date of the amendment, the authority of the Operator under Section 8.5 will, subject to Section 8.8, be varied accordingly.
| 8.8 |
Operator's Rights on Alteration
|
If an alteration of any Approved Program and Budget or an inability of the Operator (due to the
operation of Section 8.5) to proceed with an Approved Program and Approved Budget necessitates the termination of any contract or arrangement entered into by the Operator under an Approved Program and Budget or work is required to be
performed and costs, charges and expenses are required to be incurred in order to properly cease any Partnership Business required to be ceased by either of the circumstances referred to above in this Section 8.8, then termination of
that contract or arrangement and the undertaking of such work will be deemed to be authorised as Partnership Business and the costs, charges and expenses incurred in such termination or such work will be deemed to be Expenditures and
to have been approved by the GP Board.
| 8.9 |
Minimum Program and Budget
|
Unless the GP Board directs otherwise, the Operator must in each Fiscal Year prepare programs and
budgets which are sufficient to ensure compliance with the work and Expenditures requirements arising under applicable Law with respect to the Partnership Property, and the GP Board will be deemed to have approved of the Operator
undertaking sufficient Partnership Business and incurring sufficient Expenditures during each Fiscal Year in order to satisfy those requirements.
| 8.10 |
Capital Works Program and Budgets
|
Despite Section 8.1, if at any time the Operator or the GP Board proposes that any capital works be
undertaken, which is not included in either an Approved Annual Program and Budget and not part of an Approved Expansion Program and Budget, which the Operator or the GP Board considers are unlikely to be completed within the period of
an annual program and budget or considers that it is not desirable to defer such works until the commencement of the next Fiscal Year or to deal with such works by way of alteration to an Approved Annual Program and Budget or Approved
Expansion Program and Budget, as applicable, the Operator may and, if so directed by the GP Board by Ordinary Resolution, must, prepare and submit to the Partners a separate program and budget in respect of the carrying out of such
capital works (“Capital Works Program and Budget”).
| 8.11 |
Application of Provisions
|
This Article 8 will apply to each draft capital works program and budget with all necessary
amendments (except that the period of such Capital Works Program and Budget may be such period as the Operator deems necessary to complete the capital works concerned or the GP Board otherwise directs) and each draft annual program
and budget prepared by the Operator must in accordance with Section 8.1 include or exclude (at the discretion of the Operator) that part of an Approved Capital Works Program and Budget as relates to the period of that draft annual
program and budget.
Unless the Operator is guilty of gross negligence, the Operator shall have no liability for the
payment of any Expenditure incurred in excess the total of the Expenditures estimated or budgeted within an Approved Program and Budget and each Partner shall be responsible for any such excess Expenditure in accordance with their
respective Proportionate Share.
| 8.13 |
Expansion Project Programs and Budgets
|
|
(a) |
The Operator may, at any time and from time to time, prepare and submit to the GP Board a proposed program and budget for an Expansion Project. Any
such proposed program and budget shall be submitted to the GP Board and shall include reasonable detail regarding the proposed Expansion Project including:
|
|
(i) |
the anticipated timing of commencement of the Expansion Project and completion thereof;
|
|
(ii) |
pre-feasibility, feasibility or other study prepared in accordance with industry standards for the proposed Expansion Project;
|
|
(iii) |
the estimated capital cost and budget for the proposed Expansion Project;
|
|
(iv) |
the anticipated increase in annual production of Product expected to result from the proposed Expansion Project; and
|
|
(v) |
any third party debt financing proposed to be obtained in respect of the proposed Expansion Project (including details regarding any Encumbrances
over Partnership Assets anticipated to be required in connection with such third party debt financing).
|
|
(b) |
Within 20 days after submission of a proposed program and budget for an Expansion Project, any director may submit to the GP Board any proposed
modifications to the proposed program and budget, which proposed modifications shall be considered in good faith by the GP Board. Following such consideration, the Operator shall submit a proposed final program and budget
to the GP Board and such program and budget, if approved and adopted by Unanimous Resolution of the GP Board (such program and budget as so approved and adopted, an “Approved Expansion Program and Budget”), shall be implemented by the Operator under the direction of the GP Board.
|
| 8.14 |
Closure Programs and Budgets
|
|
(a) |
In respect of the Partnership Business, the Operator shall update and amend any closure program and budget adopted prior to the date hereof or
prepare any new closure program and budget as may be considered advisable by the GP Board or the Operator from time to time and otherwise as required by Law and shall submit any such updates, amendments or new program and
budget to the GP Board at least 60 days prior to the date any such update, amendment or new program and budget is intended to be implemented or is required by Law or intended to be submitted to Governmental Authorities, as
applicable.
|
|
(b) |
Within 20 days after submission of a proposed closure program and budget, any director may submit to the GP Board any proposed modifications to the
proposed closure program and budget, which proposed modifications shall be considered in good faith by the GP Board. Following such consideration, the Operator shall submit a proposed final closure program and budget to
the GP Board not less than 20 days prior to the day that the Operator intends to, or is required by Law to, implement such program and budget or submit such program and budget to Governmental Authorities, as applicable,
and such closure program and budget, if approved and adopted by the GP Board (such program and budget as so approved and adopted an “Approved Closure Program and Budget”), shall be implemented by the Operator under the direction of the GP Board.
|
ARTICLE 5
CONTRIBUTIONS AND DISTRIBUTIONS
| 9.1 |
Funding and Contributions
|
The Partners acknowledge that it is their intention that to the greatest extent possible
Expenditures shall be financed from revenues generated by the Partnership Business. If in any Fiscal Year, Expenditures pursuant to an Approved Annual Program and Budget or the portion of any other Approved Program and Budget to be
implemented in that Fiscal Year, or otherwise incurred in accordance with this Agreement, are anticipated to require contributions by the Partners, (a “Cash Call”) each Partner must contribute to Expenditures in accordance with its Proportionate Share on each date on which a contribution is required to be made pursuant to Section 9.2.
| 9.2 |
Timing of Contributions
|
If in any Fiscal Year contributions to Expenditures are required to be made by a Partner under this
Agreement, then the Operator must issue a notice to each Partner in accordance with the requirements of this Article 9 (a “Cash Call
Notice”) for each applicable calendar month. Any Cash Call Notice must not be issued less than 30 days or more than 45 days in advance of the calendar month in which the Cash Call Notice relates.
| 9.3 |
Operator’s Cash Call Notices
|
All contributions to Expenditures required to be made by a Partner under this Agreement must be
made by that Partner paying to the Operator, on or before the first day of the month to which the Cash Call Notice relates, the amount stated in the Cash Call Notice as being the amount due to be contributed by that Partner in
accordance with Section 9.1. Every payment made by a Partner will be without prejudice to the right of that Partner to seek an adjustment in respect of any typographical or arithmetic error in a Cash Call Notice.
All payments to be made to the Operator must be made by wire, cheque or draft delivered to the
Partnership Account.
| 9.5 |
Failure to Fund Cash Calls
|
|
(a) |
If a Partner fails to pay to the Operator, on behalf of the Partnership all or any part of its Proportionate Share of required Expenditures as
specified in the Cash Call Notice delivered to it in accordance with Section 10.2, (such amount not paid, the “Default Amount”),
such Partner (the “Defaulting Partner”) shall be in default of such Cash Call (a “Funding Default”) and the Operator shall immediately notify all Partners of such Funding Default (a “Default Notice”) specifying in such Default Notice that each Partner other than the Defaulting Partner (each such Partner a “Funding Partner”) may fund an amount up to its pro rata share of the Default Amount, such pro rata share to be determined based on such Funding
Partner’s Proportionate Share relative to the aggregate Proportionate Shares of all Over Contributing Partners as determined in accordance with Section 9.5(b).
|
|
(b) |
If any Funding Partner wishes to fund an amount (an “Over-Contributing
Partner”) pursuant to Section 9.5, such Over-Contributing Partner must, within 30 days of delivery of the Default Notice, notify
the Operator and each other Funding Partner that it will fund its pro rata share of the Default Amount. The Operator shall, within two Business Days of the last day of such 30 day period, notify all Over-Contributing
Partners of their pro-rata share of the Default Amount to be funded. Each Over-Contributing Partner shall contribute its pro rata share of the Default Amount by no later than the fifth Business Day after the date of its
notice that it intends to so Contribute.
|
|
(c) |
If a Defaulting Partner fails to pay to the Partnership the Default Amount and the Funding Partner (i) elects to fund the Default Amount in
accordance with Section 9.5(a) and (b) or (ii) elects not to fund the Default Amount, then the Proportionate Share of each Partner will be recalculated immediately and the Operator shall deliver a statement setting out the
adjusted Proportionate Amount to each Partner.
|
|
(a) |
The GP Board may, at its discretion determine the amount of any Distributions to be made to Partners. The Operator shall, on such dates as the GP
Board may determine (a “Distribution Payment Date”), cause the Partnership to pay such Distributions as follows:
|
|
(i) |
first, to the General Partner, an amount equal to the lesser of the amount available for Distributions and $1,000; and
|
|
(ii) |
to each Person that is at any time during the Fiscal Year in respect of which such Distributions are made, its Proportionate Share of such
Distribution,
|
provided that if, on any Distribution Payment Date, the Partnership has
insufficient cash to pay such Distributions to Partners, then such Distributions shall be paid on the next earliest date on which the Partnership does have sufficient cash to make such Distributions. Interest shall not accrue on any
unpaid portion of a Distribution.
|
(b) |
The General Partner shall not be entitled to receive any Distributions other than as provided pursuant to Section 9.6(a)(i) and Section 12.3(h).
|
ARTICLE 6
ALLOCATION OF INCOME AND LOSSES AND TAX MATTERS
| 10.1 |
Allocation of Income and Losses
|
In respect of each Fiscal Year of the Partnership, the income and loss of the Partnership as
determined by the Operator, including any assistance or incentive payments received or receivable by the Partnership and any other expense, credit or other amount which is allocable, shall be allocated, as of the last day of the
Fiscal Year of the Partnership, as follows:
|
(i) |
First, as to any income of the Partnership for such Fiscal Year, to the General Partner in an amount equal to the distribution paid to the General
Partner pursuant to Section 9.6(i) in respect of such Fiscal Year; and
|
|
(ii) |
As to the remainder of the income of the Partnership for such Fiscal Year or any loss of the Partnership for such Fiscal Year, to each Person that
was a Limited Partner at any time during such Fiscal Year in accordance with their respective Weighted Average Proportionate Share during such Fiscal Year.
|
| 10.2 |
Computation of Income or Loss for Tax Purposes
|
Unless
otherwise directed by the GP Board, the Operator may, in computing the income or loss of the Partnership for tax purposes, adopt
a method of accounting, adopt different treatments of particular items and make and revoke elections on behalf of the Partnership and the Partners as the Operator may deem in the best interests of the Partners, acting reasonably.
In respect of any Fiscal Year, the Operator shall claim the maximum capital cost allowances in respect of depreciable property of the Partnership, and the maximum amount of other deductions and maximum reserves as permitted under the
Tax Act, provided that, unless otherwise directed by the GP Board, the Operator may claim less than the maximum in any Fiscal Year if it considers that to do so would be in the best interests of the Partners.
| 10.3 |
Allocation of Income and Losses for Income Tax Purposes
|
Any income or loss of the Partnership for a Fiscal Year and any amount not included in computing
the income or loss of the Partnership (except an amount that can only be allocated to a Person that is a Partner at the end of the Fiscal Year, such as “Canadian development expense” and “Canadian exploration expense”) for the
purposes of the Tax Act (and any corresponding provincial income tax legislation) for the Fiscal Year which is separately allocable to the Partners for the purposes of the Tax Act will be allocated as follows:
|
(i) |
First, solely as to any income of the Partnership for such Fiscal Year, to the General Partner in an amount equal to the distribution paid to the
General Partner pursuant to Section 9.6(i) in respect of such Fiscal Year; and
|
|
(ii) |
As to the remainder of the income of the Partnership for such Fiscal Year or any loss of the Partnership for such Fiscal Year and as to any other
amount to be allocated pursuant to this Section 10.3, to each Person that was a Limited Partner at any time during such Fiscal Year in accordance with their respective Weighted Average Proportionate Share during such
Fiscal Year. An amount that can only be allocated to a Person who is a Partner at the end of the Fiscal Year (such as “Canadian development expense” and Canadian exploration expense”) shall be allocated only to those
Persons that are Partners at the end of the Fiscal Year based on their Proportionate Share at that time.
|
The GP shall prepare tax returns in the form prescribed by the MTA as a single
return and the GP shall, to the extent required by the MTA, file an election in order to file such single return on behalf of the Partners for purposes of the MTA.
| 10.5 |
Tax Information and Returns
|
|
(a) |
Each Partner shall duly and timely prepare and file on its own behalf any and all forms of documents required under the Tax Act or any applicable
provincial or territorial tax legislation to be filed by it and shall properly reflect in such forms and documents the Taxable Income or Tax Losses allocated to it pursuant to Article 10 of this Agreement.
|
|
(b) |
On or before 45 days after the end of each Fiscal Year, the GP will send or cause to be sent to each Person who was a Partner at any time in a
particular Fiscal Year all information in draft form relating to such Fiscal Year available at such time which would normally be necessary for such Person to prepare its Canadian federal and provincial income tax or
information returns (the “Draft Tax Package”). Such information shall be provided in the “tax reporting currency” of
such Person as defined in subsection 261(1) of the Tax Act. Each Partner shall provide any comments to the Draft Tax Package within 15 days of receipt of the Draft Tax Package by such Partner. All such comments shall be
considered in good faith by the GP and any objection to the adoption of such comments must be made in writing to the GP Board within 15 days of receipt of such comments. The GP Board shall, by Ordinary Resolution,
determine whether such comments shall be adopted.
|
|
(c) |
As soon as practicable after the end of each Fiscal Year, but in any event no later than 45 days after the end of each Fiscal Year, the GP will send
or cause to be sent to each Person who was a Partner at any time in a particular Fiscal Year all information relating to such Fiscal Year necessary for such Person to prepare its Canadian federal and provincial tax or
information returns in that Person’s tax reporting currency.
|
|
(d) |
the GP shall file or cause to be filed, on behalf of itself, the Partnership (as applicable) and the Partners, annual Partnership information
returns and any other information required to be filed, and within the time limits stated, under the Tax Act and any other applicable tax legislation in respect of Partnership matters and shall prepare and file a single
return under the MTA on behalf of the Partners. A copy of any such filing made on behalf of the Partners shall promptly be delivered by the Operator to the Partners.
|
|
(e) |
No later than 20 days after the beginning of each Fiscal Year, the GP shall provide to each Partner a schedule setting forth, for the prior Fiscal
Year, an estimate of the following amounts calculated in accordance with the Tax Act for the Partnership that will be allocated to such Partner for the prior Fiscal Year:
|
|
(ii) |
Canadian exploration expenses, Canadian development expenses, and other deductions and credits.
|
|
(f) |
No later than 45 days after the beginning of each Fiscal Year, the GP shall provide to each Partner a schedule setting forth, for such Fiscal Year,
a projection of the following amounts calculated in accordance with the Tax Act for the Partnership that will be allocated to such Partner for the Fiscal Year:
|
|
(ii) |
Canadian exploration expenses, Canadian development expenses, and other deductions and credits.
|
|
(g) |
The GP shall prepare and make all Tax Filings which the Partnership is required to complete or which the Operator determines, in its sole discretion
but with regard to the interests of all of the Partners, should be filed on behalf of the Partnership.
|
| 10.6 |
Other Tax Allocations
|
|
(a) |
Notwithstanding Sections 10.1 and 10.3, for accounting purposes and for purposes of the Tax Act (and any correspondent provincial income tax
legislation), “Canadian development expense” and “Canadian exploration expense” and other similar amounts which must be allocated to the Partners by the Partnership for each Fiscal Year pursuant to the Tax Act (“Resource Expenditures”) shall be allocated among the Persons who are Limited Partners at the end of such Fiscal Year based
on their Proportionate Share at that time, except that (i) where the Resource Expenditures arose as a result of the contribution or transfer of property (excluding cash) by a Limited Partner to the Partnership, the
Canadian development expense, or such other amounts incurred by the Partnership as a result of such contribution or transfer such Resource Expenditures will be allocated solely to the Limited Partner that contributed or
transferred such property, (ii) if the Partnership incurs Resource Expenditures in the future which are funded using cash contributed disproportionately by one or more Limited Partners, such Resource Expenditures shall be
allocated to the Limited Partner or Limited Partners that funded the Resource Expenditures in proportion to the amount of funding thereof by such Limited Partner or Limited Partners, and (iii) if the Partnership incurs
Resource Expenditures as a result of acquiring a Substituted Property, such Resource Expenditures shall be allocated to the Limited Partner, or proportionately among the Limited Partners, that who were allocated proceeds
of disposition pursuant to paragraph 10.6(c)(i) or 10.6(c)(ii) in respect of the disposition of the initial property for which the Substituted Property was substituted up to the aggregate amount of the proceeds allocated
to such Limited Partner(s), and the balance if any of the Resource Expenditures in respect of the Substituted Property shall be allocated to the Limited Partners in accordance with the other provisions of this Section.
|
|
(b) |
To the extent that the net income of the Partnership for tax purposes for a particular Fiscal Year exceeds the amount that the net income of the
Partnership for tax purposes would otherwise be for that Fiscal Year but for the fact that a particular Partner contributed property (excluding a “Canadian resource property” or a “foreign resource property”, each as
defined in the Tax Act) to the Partnership on a tax-deferred basis pursuant to subsection 97(2) of the Tax Act (the “Excess
Tax Income Amount”), the Excess Tax Income Amount shall be allocated solely to that particular Partner, and the amount, if any, by which the net income for tax purposes of the Partnership for that Fiscal Year
exceeds the Excess Tax Income Amount shall be allocated amongst the Partners, including the particular Partner, in accordance with Section 10.3.
|
|
(c) |
If the Partnership realizes net proceeds of disposition (after deduction of conveyancing costs or other costs incurred for the purposes of making
such disposition) which must be allocated to the Partners by the Partnership pursuant to the Tax Act as a result of disposing of a “Canadian resource property” which (i) was transferred to the Partnership by a Partner or
was acquired using cash contributed by a Partner in circumstances to which Resource Expenditures relating to the acquisition thereof were allocated in accordance with paragraph 10.6(a)(ii), (ii) was transferred to the
Partnership on a tax-deferred basis pursuant to subsection 97(2) of the Tax Act, or (iii) is a Substituted Property, then such net proceeds of disposition shall be allocated as follows:
|
|
(i) |
if the property is not a Substituted Property, such net proceeds of disposition will shall first be allocated to the Partner(s) that transferred the
property or contributed cash to the Partnership up to an amount equal to the aggregate of (i) the amount of Resource Expenditures allocated to such Partner(s) in the circumstances described in paragraph 10.6(a)(i) or
10.6(a)(ii), and (ii) if such Canadian resource property was contributed to the Partnership by a Partner on a tax-deferred basis pursuant to subsection 97(2) of the Tax Act applicable, the difference between the fair
market value of the property and the elected amount in respect of such property, each as set out in the joint election filed by the Limited Partner under subsection 97(2) of the Tax Act, as the case may be, shall be
allocated to such contributing Partner; or
|
|
(ii) |
if the property is a Substituted Property, such net proceeds of disposition will shall first be allocated to the Partner(s) who transferred the
initial property or contributed cash in respect of the initial property for which the Substituted Property was substituted up to the amount of Resource Expenditures exclusively or disproportionately allocated to such
Partner(s) under paragraph 10.6(a)(i) or 10.6(a)(ii) in respect of the acquisition of the Substituted Property, and the balance, if any, of the such net proceeds of disposition realized by the Partnership on the
disposition of the particular property, shall be allocated amongst the Partners, including the particular Partner, in accordance with paragraph 10.6(b).
|
|
(d) |
For purposes of this Section 10.6, a property of the Partnership will be a “Substituted Property” in the following circumstances:
|
|
(i) |
the Partnership disposes of a property (the “initial property”) which (a) was previously acquired by the Partnership in circumstances to which the
exception to the ordinary pro-rata allocation as set out in [paragraph a] applied to result in an allocation of Resource Expenditures exclusively or disproportionately to a Partner, or (b) was transferred to the
Partnership on a tax deferred basis pursuant to subsection 97(2) of the Tax Act; and
|
|
(ii) |
in the same fiscal year that the initial property is disposed of, the Partnership acquires a new “Canadian resource property” or a “foreign resource
property” in exchange for the initial property or using proceeds realized by the Partnership from the sale of the initial property (such new property being the “Substituted Property”).
|
ARTICLE 7
RECORDS AND REPORTING
|
(a) |
The GP shall maintain and keep the Partnership’s books and records (“Partnership Records”) and, without limitation, shall keep accurate records of:
|
|
(i) |
the Proportionate Share of each Partner;
|
|
(ii) |
the Contributions made by each Partner;
|
|
(iii) |
the Distributions made to each Partner;
|
|
(iv) |
Partner capital accounts (“Capital Accounts”)
which show, at any time, the capital of each Partner in the Partnership calculated as follows:
|
|
(A) |
in respect of each Partner, capital = A + B + C — D — E — F – G
|
where:
A = the aggregate dollar value of all Contributions made by such Partner in consideration for
Partnership Interests before that time;
B = the dollar amount of capital transferred to the Partner as a result of an acquisition of a
Partnership Interest from another Partner before that time;
C = the aggregate dollar value of income of the Partnership allocated to such Partner pursuant to
Section 10.3 before that time;
D = the dollar amount of capital transferred from the Partner as a result of a sale of a
Partnership Interest to another Partner before that time;
E = the aggregate dollar value of losses of the Partnership allocated to such Partner pursuant to
Section 10.3 before that time;
F = the dollar amount of capital disposed of by the Partner as a result of a transfer of a
Partnership Interest to another Person before that time; and
G = the aggregate of all Distributions made to such Partner by the Partnership before that time;
|
(v) |
financial statements and records;
|
|
(vi) |
calculations of taxable income and related exploration and development pools for each Partner;
|
|
(vii) |
taxation records and returns;
|
|
(viii) |
loans to the Partnership made by a Partner, including the principal amount thereof, the interest rate thereon, the date of advance, all interest
accrued thereon and all payments of principal and interest made by the Partnership to the Partner in respect thereof; and
|
|
(ix) |
records of the proceedings of the GP Board and Partners.
|
|
(b) |
Partnership Records required to be kept pursuant to this Article 11
which are required to be maintained by any applicable Law for a stipulated period of time, shall be maintained at a minimum for such stipulated period and otherwise for a period of time consistent with good commercial
practice but, in any event, not less than for a period of seven years after the end of the year to which such record applies.
|
|
(c) |
Each Partner shall have the right at all reasonable times during ordinary business hours to audit the Partnership Records and international controls
and to examine and make copies or extracts of or from Partnership Records. Such right may be exercised through any agent or employee of such Partner thereof designated by it. Each Partner shall bear all expenses incurred
by it in any such examination.
|
|
(d) |
At the request of a Partner made at any time prior to the expiry of the periods referred to in Section 11.1(b), the Partnership will promptly provide that Partner with copies of any Partnership Records, provided that if such records are required for any judicial or regulatory
proceeding a Partner may have the use of originals. The Partnership will provide such copies or originals to the requesting Partner at a nominal cost unless the records requested are voluminous, in which case, the
requesting Partner will reimburse the Partnership any reasonable costs incurred by the Partnership in providing copies or originals of the Partnership Records.
|
| 11.2 |
Financial Statements
|
The GP shall prepare quarterly and annual financial statements of the Partnership in accordance
with IFRS and such other financial information that will enable the Partners to obtain the information necessary for Partners to prepare and maintain accounting, tax and other financial records and to prepare and file applicable Tax
Filings in accordance with this Agreement and as required by applicable Law. The GP shall prepare, or cause to be prepared, and deliver to each Partner:
|
(a) |
for each Fiscal Year, audited financial statements of the Partnership, which comprise the statements of financial position, of earnings, of changes
in Partners’ capital and of cash flows and related notes, prepared in accordance with IFRS. A copy of such audited annual financial statements shall be delivered to each Partner within 60 days after the end of each Fiscal
Year and the Partnership will use its best efforts to provide audit clearance for group reporting purposes within a reasonable time, to be agreed by the partners before the year end. A sample calculation of Income for the
Partnership is set out in Schedule D;
|
|
(b) |
for each quarterly period in each Fiscal Year, unaudited condensed interim financial statements of the Partnership, which comprise the statements of
financial position, of earnings, of changes in Partners’ capital and of cash flows, and selected explanatory notes prepared in accordance with IFRS. A copy of such unaudited condensed interim financial statements shall be
delivered to each Partner within 10 Business Days of the end of each such quarter and the Partnership will use its best efforts to provide audit clearance for group reporting purposes within 15 Business Days; and
|
|
(c) |
such other reports as the Partnership may be required by Law to deliver to Partners.
|
| 11.3 |
Appointment of Auditor and Audits
|
|
(a) |
Unless changed by a Unanimous Resolution, the auditor of the Partnership shall be the auditor of the GP and the Operator, if the Operator is a
Partner and otherwise such Person as is agreed by Unanimous Resolution.
|
|
(b) |
The Operator will cause the Auditor to conduct an audit (the “Annual Audit”) of the accounting and financial records for a Fiscal Year (or other accounting period) within 60 days following the end of any Fiscal Year (or, if the GP Board has adopted an
accounting period other than the Fiscal Year, within 60 days after the end of such period). If requested by the GP Board, the Operator will cause the Auditor to complete an interim review of quarterly financial statements.
The Partners shall have access to the books and records of the Partnership for the purpose of conducting an audit or review of the accounting and financial records of the Partnership. All written exceptions to and claims
upon the Operator for discrepancies disclosed by such audit shall be made not more than three months after receipt of the audit report. Failure to make any such exception or claim within the three month period shall mean
the audit is deemed to be correct and binding upon the Partners. The Annual Audit shall be conducted by the Auditor and the costs thereof shall be charged to the Partnership Account.
|
ARTICLE 8
TERMINATION OF PARTNERSHIP
| 12.1 |
Dissolution and Termination
|
Subject to Section 12.2
and to such filings and recordings as are required by Law, the Partnership shall be automatically dissolved and shall terminate upon the event or events first occurring as set forth below, which shall be the exclusive means for
dissolution and termination of the Partnership:
|
(a) |
the determination of the GP Board to dissolve and terminate the Partnership by Unanimous Resolution;
|
|
(b) |
the Partnership makes an assignment for the benefit of its creditors generally or files a proposal under the Bankruptcy and Insolvency Act (Canada) or a receiving order is made or a petition is filed under the Bankruptcy and Insolvency Act (Canada) against the Partnership;
|
|
(c) |
a judgment or order is issued by any court of competent jurisdiction ordering the winding-up or other liquidation or dissolution of the Partnership;
or
|
|
(d) |
upon one Person holding all the Partnership Interests.
|
Except as specifically provided in this Agreement, no Partner may withdraw from the Partnership or
have the right to ask for the dissolution of the Partnership without the prior written consent of the other Partners.
| 12.2 |
Liquidation of Assets
|
Subject to applicable Law, upon the dissolution of the Partnership for any reason other than
pursuant to Section 12.1(d) whatsoever, the affairs of the Partnership shall be wound up as promptly as practicable by the Partnership or by such liquidator as the GP Board may decide to appoint.
| 12.3 |
Distributions Upon Dissolution
|
Unless otherwise agreed by the Partners, the net proceeds from the liquidation of the Partnership
Assets shall be distributed as follows:
|
(a) |
first, to pay costs involved in the liquidation of the Partnership and in the distribution of the Partnership Assets;
|
|
(b) |
second, to make payments necessary to discharge Encumbrances registered against the Partnership Assets, as the case may be, in respect of
liabilities of the Partnership to creditors;
|
|
(c) |
third, to make payments necessary to satisfy all other debts, liabilities or obligations of the Partnership to creditors, other than debts,
liabilities and obligations to any Partner or debts, liabilities and obligations to be assumed by a Partner in connection with the liquidation of the Partnership;
|
|
(d) |
fourth, to segregate amounts necessary to discharge Continuing Obligations or to purchase for the account of the Partners, all required letters of
credit, surety bonds or other security for the performance of such obligations as may be required by any Governmental Authority having jurisdiction;
|
|
(e) |
fifth, to provide for such reserves as the GP Board (or the liquidator) may deem reasonably necessary to repay any contingent or unforeseen
liabilities or obligations of the Partnership, as determined by the GP Board, other than liabilities and obligations to any Partner or liabilities and obligations to be assumed by a Partner in connection with the
liquidation of the Partnership;
|
|
(f) |
sixth, to make payments necessary to satisfy all debts, liabilities and obligations of the Partnership to the Partners (other than debts,
liabilities and obligations to be assumed by a Partner in connection with the liquidation of the Partnership);
|
|
(g) |
seventh, to provide for such reserves as the GP Board (or the liquidator) may deem reasonably necessary to repay any contingent or unforeseen
liabilities or obligations of the Partnership to the Partners (other than debts, liabilities and obligations to be assumed by a Partner in connection with the liquidation of the Partnership);
|
|
(h) |
eighth, to distribute the Contributions comprising the balance of the GP Interest as of the date of dissolution to the GP; and
|
|
(i) |
ninth, to distribute any balance then remaining to the Partners in accordance with their Proportionate Share as of the date of dissolution.
|
| 12.4 |
Events Not Causing Dissolution
|
Subject to the applicable Law, the Partnership shall not be dissolved or terminated except in
accordance with this Agreement and, in particular, but without limitation, the Partnership shall not be dissolved or terminated by the actual or deemed resignation, removal, bankruptcy, insolvency, receivership or withdrawal of any
Partner or by the Transfer of any Proportionate Share or any other interest in the Partnership.
Subject to Section 12.3,
the GP Board shall use reasonable efforts to cause the dissolution of the Partnership to be effected in a manner that is tax efficient for the Partnership and the Partners, provided that any Distribution of Partnership Assets to any
Partner other than cash shall require a Unanimous Resolution.
| 12.6 |
Operation After Dissolution of Partnership
|
Upon the dissolution of the Partnership pursuant to this Agreement, and notwithstanding the
dissolution, the Partnership Business shall continue to be operated pursuant to this Agreement so far as may be necessary to wind up the affairs of the Partnership, but not otherwise, and any authority which, pursuant to this
Agreement, a Partner may have to bind the Partnership shall continue (except in the case of a Partner who is bankrupt or insolvent) and the other rights and obligations of the Partners under this Agreement shall continue,
notwithstanding the dissolution, for such limited purposes.
| 12.7 |
Termination Not to Affect Rights or Obligations
|
The termination of this Agreement or the dissolution of the Partnership for any cause: (a) shall
not release any Partner from any liability which at the time of dissolution had already accrued to the Partner or which thereafter may accrue in respect of any act or omission prior to completion of the liquidation process; and (b)
shall not affect or prejudice any rights or obligations which have accrued or arisen under this Agreement prior to the time of termination and such liabilities, rights and obligations shall survive the termination of this Agreement.
ARTICLE 9
TRANSFER OF PARTNERSHIP INTEREST
| 13.1 |
Restriction on Transfers of Partnership Interest
|
Unless otherwise approved by Unanimous Resolution, a Partner shall not Transfer, directly or
indirectly, the whole or any part of its Partnership Interest, except as provided in this Article 13 or as otherwise required or permitted by this
Agreement. Any non-complying purported Transfer shall be of no effect.
A Partner (in this Section 13.2, the “Disposer”) may at any time Transfer all or any part of its Partnership Interest to a Wholly-Owned
Affiliate (in this Section 13.2 such Wholly-Owned Affiliate, the “Disposee”) on the condition that such Disposee agrees, in a form acceptable to the GP Board, that if the Disposee ceases to be a Wholly-Owned Affiliate of the Disposer for any reason whatsoever, to
immediately reassign to the Disposer all of the Partnership Interest that had been Transferred to it. For greater certainty, a Transfer by a Partner to a Wholly-Owned Affiliate is not subject to Section 13.3.
| 13.3 |
Right of First Offer
|
|
(a) |
A Partner (the “Selling Party”) may sell all,
but not less than all, of its Partnership Interest (the “Sale Interest”) provided that the Selling Party shall first
offer the Sale Interest to the other Partners in the manner set forth below:
|
|
(i) |
the Selling Party shall deliver a notice in writing to each other Partner offering to sell the Sale Interest to such other Partners (the “ROFO Notice”);
|
|
(ii) |
each of the other Partners shall have 30 days from the date of receipt of the ROFO Notice to submit a detailed written offer to the Selling Party
offering to acquire the Sale Interest including the price, the form of consideration, the conditions precedent contemplated Section 13.6 and any other material terms of the offer (the “ROFO Offer”);
|
|
(iii) |
any ROFO Offer shall be irrevocable and open for acceptance for not less than 10 days after the date on which the ROFO Offer was delivered to the
Selling Party (the “Acceptance Period”);
|
|
(b) |
At any time within the Acceptance Period, the Selling Party Partner may deliver a notice (the “Acceptance Notice”) to the Partner that delivered a ROFO Offer confirming that it wishes to accept the ROFO Offer. If the Selling Party deliver more than one Acceptance
Notice, the Selling Party shall sell to more than one Partner, and such Partners shall purchase, the Sale Interest on a pro-rata basis. Any sale of the Sale Interest pursuant to this paragraph 13.3(b) shall be completed
within 30 days following the expiry of the Acceptance Period.
|
|
(c) |
If the Selling Party does not deliver an Acceptance Notice to any Partner within the Acceptance Period, the rights of the other Partners to purchase
the Sale Interest shall terminate and the Selling Party may sell the Sale Interest to any other Person provided that:
|
|
(i) |
the sale is completed within 90 days of the expiry of the Acceptance Period (other than in circumstances where the Selling Party requires regulatory
approval(s) in order to complete the sale, in which case, the Selling Party will have an additional 90 days in which to complete the sale); and
|
|
(ii) |
such sale is completed on terms that are more favourable to the Selling Party than the terms contained in the ROFO Offer.
|
|
(d) |
If the Selling Party does not complete the sale of the Sale Interest to a third Person within the timeframe provided by Section 13.3(c)(i), the
obligations set out in this Section 13.3 shall again apply with respect to any such sale.
|
|
(e) |
In the case of a sale by New Gold, if a third party purchaser acquiring the Sale Interest is not a Pre-Approved Purchaser, OTPP shall have the right
to sell, and such Person shall be obligated to purchase, all, but not less than all, of OTPP’s Partnership Interests at a cash purchase price equal to the greater of: (i) an amount that results in [Internal rate of return calculation redacted]; and (ii) an amount equal to the FMV of the Partnership Interests as determined by a Third
Party Valuator.
|
If a Selling Party completes a sale to a third party pursuant to Section 13.3, the Selling Party and the third-party purchaser shall provide a certificate to the other Partners that the third party sale has been completed, in
all respects, in accordance with Section 13.3, as applicable. For a period of 30 days following receipt of such certificate (the “Sale Review Period”), any Partner shall be permitted on request notice to the Selling Party and the third-party purchaser to be
provided with reasonable access to the closing documentation relating to such third-party sale.
| 13.5 |
No Obligation to See to the Execution of Trust or Equity
|
Except as provided in this Article 13, the Partnership shall not be bound to recognize or see to the execution of any trust, whether express, implied or constructive, or any Encumbrance or equity, to which any Partnership Interest is subject,
nor to ascertain or inquire whether any sale or transfer of any Partnership Interest or any interest therein by a Partner is authorized by such trust, Encumbrance or equity, nor to recognize any Person as having any interest in, or rights of an owner of, a Partnership Interest other than the Partner recorded in the Partnership Records as the holder of a
Partnership Interest.
| 13.6 |
Conditions Precedent to Sales and Assignments
|
Unless otherwise agreed by all the Partners, any Transfer by a Partner (in this Section 13.6, the “Disposer”) of the whole or any part of
its Partnership Interest, whether pursuant to this Article or otherwise pursuant to this Agreement, which is made otherwise than to or in favour of an existing Partner (in this Section 13.6, the “Disposee”) shall be subject to satisfaction of the following conditions
precedent:
|
(a) |
the Disposee entering into a deed with the Partners in form and substance acceptable to the Partners whereby the Disposee acknowledges having
received a true copy of this Agreement, makes the representations, warranties and covenants contained in Section 3.1, and becoming a
signatory to and being bound by this Agreement and to perform the Disposer’s obligations thereunder;
|
|
(b) |
the Disposee obtaining all necessary authorizations of Governmental Authorities and any other Persons either unconditionally or subject only to
conditions as do not adversely affect the Partnership Business or Partnership Interest of any Partner (and in particular, but without limitation, which do not require the Partnership or any Partner other than the Disposer
to divest the whole or any part of the Partnership Business or its Partnership Interest or to restructure the ownership control of its Partnership Interest);
|
|
(c) |
no Transfer shall relieve the Disposer of its share of any liability, whether accruing before or after such Transfer, which arises out of operating
the Partnership Business or the Partnership Assets prior to such Transfer;
|
|
(d) |
no Transfer may be made that will violate, or any result in the cancellation of, any material permits, licenses or similar authorization or any
material contract or any other material right or interest included in Partnership Assets;
|
|
(e) |
the transferring Partner shall bear all tax consequences of the Transfer;
|
|
(f) |
prior to or upon settlement of that Transfer, the Disposee paying to each other Partner all amounts which the Disposer is obliged to pay to the
other Partner under the terms of this Agreement (unless those amounts have previously been paid by or on behalf of the Disposee); and
|
|
(g) |
the identity of the Disposee being acceptable to the Partners, acting reasonably.
|
Subject always to the provisions of this Agreement, a Partner (in this Section 13.7 referred to as the “Charging Partner”) may,
after first notifying each of the other Partners in writing, create or grant a mortgage, charge or other similar security interest over or in respect of the whole or any part of its Partnership Interest (including, without limitation,
any or all of its rights under this Agreement) in order to secure any loan or other financial accommodation provided to it for purposes directly related to the conduct of the Partnership Business, if and only if the following
conditions precedent are satisfied (unless waived or modified by Unanimous Resolution):
|
(a) |
all costs and expenses (including any Taxes payable) in connection with any Encumbrance so granted or created (in this Section 13.7 referred to as a “Permitted Charge”)
shall be borne and paid by the Charging Partner;
|
|
(b) |
the Permitted Charge shall be in writing and the instrument by which it is granted or created shall incorporate any provisions as shall be necessary
to give effect to this Agreement;
|
|
(c) |
each person entitled to the benefit of the Permitted Charge (in this Section 13.7 referred to as a “Permitted Chargee”) and any Person claiming through the Permitted Chargee or
under the Permitted Charge (including, without limitation, any receiver or receiver and manager appointed under or pursuant to the Permitted Charge) shall, in the enforcement circumstances described in Section 13.7(g), be made expressly subject to and shall be required to comply with the provisions of this Agreement;
|
|
(d) |
the Permitted Chargee and any Person claiming through the Permitted Chargee or under the Permitted Charge is and shall be a resident of Canada for
purposes of the Tax Act or, if a partnership, is a “Canadian Partnership” for purposes of the Tax Act;
|
|
(e) |
the Permitted Charge shall rank in point of security after any security the Partners grant in favour of each other to secure the performance of this
Agreement;
|
|
(f) |
the Permitted Chargee shall have duly executed and delivered to each Partner and the Partnership an agreement reasonably acceptable to the Partners
to effect this Section 13.7 and ensure confidentiality is maintained;
|
|
(g) |
the Permitted Charge shall expressly provide that the Permitted Chargee in the exercise or enforcement (in consequence of any default of the
Charging Partner or of any other event causing the security of that charge to become enforceable) of any power of sale or other power of enforcement of its security conferred upon the Permitted Chargee shall be subject to
the provisions of this Agreement;
|
|
(h) |
the Permitted Charge shall expressly deny the Permitted Chargee the right to foreclose upon any Partnership Assets;
|
|
(i) |
the Permitted Charge shall provide that the Permitted Chargee and any person claiming through or under the Permitted Chargee shall not seek
partition or the establishment of a trust for sale or take any action (whether by any court or otherwise) for partition or sale in lieu of partition during the continuance of this Agreement of any Partnership Assets or any
other property in which the Charging Partner has an interest with any other Partner under this Agreement; and
|
|
(j) |
the Permitted Charge shall provide that the Permitted Chargee and any person claiming through or under the Permitted Chargee shall not without the
prior consent of the Partners (other than the Charging Partner) waive, release, surrender or forfeit or permit to be waived, released, surrendered or forfeited any mining or mineral interests or any part of any of them.
|
The creation of a Permitted Charge in accordance with this Section 13.7 shall not constitute a Transfer for the purposes of this Agreement, provided that the eventual enforcement of such Permitted Charge as contemplated in Section 13.7 shall constitute a “Transfer” for the purposes of this Agreement and be subject to the restrictions on Transfers set forth in this Agreement,
including those set forth in Sections 13.3, 13.4 and 13.7.
A Change of Control of a Partner shall be deemed to be a “Transfer” of such Partner’s Partnership
Interest for the purposes of this Agreement and such deemed Transfer shall be subject to the restrictions on Transfers set forth in the Agreement, including those set forth in Sections 13.3, 13.4 and 13.7 Notwithstanding the foregoing, any take-over, amalgamation, plan of arrangement or
other similar transaction in respect of any such Person which is a publicly traded entity shall not constitute a Transfer for the purposes of this Agreement; provided that, in the event that a third-party purchaser acquiring Control
of New Gold, or any publicly-traded successor thereof, is not a Pre-Approved Purchaser, OTPP shall have the right to sell, and such Person shall be obligated to purchase, all, but not less than all, of OTPP’s Partnership Interests at
a cash purchase price equal to the greater of: (i) an amount that results in [Internal rate of return calculation redacted]; and
(ii) an amount equal to the FMV of the Partnership Interests as determined by a Third Party Valuator.
| 13.9 |
Compulsory Acquisition Option on Insolvency
|
If any Partner becomes an Insolvent Partner, the other Partners or their nominees shall have an
option to acquire the Partnership Interest of such Insolvent Partner, on a pro rata basis if more than one Partner elects to acquire such Partnership Interest, for a cash purchase price determined by agreement with the Insolvent
Partner or its legal representatives to be FMV. The other Partners may exercise such option to purchase its pro rata share of the Partnership Interest by written notice to the Insolvent Partner and/or its legal representatives given
within 30 days of first becoming aware of the Partner becoming an Insolvent Partner. If no agreement is reached on the FMV of the Partnership Interest held by the Insolvent Partner within 30 days of giving such notice, the matter
shall be deemed to be a Dispute under this Agreement and shall be resolved in accordance with Article 15.
Nothing in Article 13 shall prevent or restrict New Gold from Transferring its Partnership Interest
by creating or granting a charge, mortgage or other similar security interest over all or any part of its Partnership Interest and in particular, the provisions of Section 13.7 shall not apply to New Gold. The Partners acknowledge and agree that New Gold has at the date hereof charged its Partnership Interest in favour of its lenders as security in respect of lending facilities
which relate to all of New Gold’s operations.
A Partner contemplating a potential sale of all, but not less than all, of its Partnership Interest
may, at the risk of such Partner, grant access to the Partnership Property to any third party to whom such Partner bona fide contemplates such potential sale that agrees to comply with customary confidentiality obligations in favour
of each Partner provided that such Partner first provides reasonable advance notice in writing to the other Partner. Access to such third party shall occur during reasonable working hours for the purposes of due diligence in respect
of the Partnership Property. The selling Partner must ensure that such third party causes minimal inconvenience to or interference with the Operator or contractors or subcontractors of the Operator in the conduct of Partnership
Business and strictly complies with all safety regulations or instructions promulgated or given by or on behalf of the Operator. The Operator shall cooperate with the selling Partner in connection with such diligence activities and
shall cause its personnel to be available during such reasonable working hours for informational sessions with such third party.
ARTICLE 10
CONFIDENTIALITY
The terms of this Agreement and all information obtained in connection with the performance of this
Agreement and relating to the Partnership Business shall be the exclusive property of the Partners and, except as provided in Section 14.2, shall not
be disclosed to any third party or the public without the prior written consent of all Partners, which consent may be arbitrarily withheld.
The consent required by Section 14.1 shall not apply to any disclosure of confidential information:
|
(a) |
to an Affiliate, advisor, consultant, contractor or subcontractor that has a legitimate business need to know;
|
|
(b) |
to any third party to whom the disclosing Partner bona fide contemplates a Transfer of all or any part of its interest in or to this Agreement, or
all or any part of its Partnership Interest, and such third party has a legitimate business need to know and agrees to comply with customary confidentiality obligations in favour of each Partner;
|
|
(c) |
to a Governmental Authority or to the public which the disclosing Partner believes in good faith is required by applicable Law or the rules of any
relevant stock exchange; or
|
|
(d) |
to any actual or potential lender or underwriter that has a legitimate business need to know.
|
In any case to which Section 14.2(b), Section 14.2(c) or Section 14.2(d) is
applicable, the disclosing Partner shall give notice to all the other Partners concurrently with the making of such disclosure specifying the entity receiving the information and the reason for the disclosure. This notice shall
include a summary of the information disclosed and, if requested by any other Partner, copies of all confidential information delivered by the disclosing Partner. Prior to any disclosure pursuant to Section 14.2(b) or Section 14.2(d), the Person to whom disclosure is proposed to be made shall
first agree in writing to protect the confidential information from further disclosure to the same extent as the Partners are obligated under this Article
14.
| 14.3 |
Duration of Confidentiality
|
The provisions of this Article 14 shall apply during the term of this Agreement and for two years following termination of this Agreement and shall continue to apply to any Partner who withdraws, who is deemed to have withdrawn, or who
Transfers its Partnership Interest, for two years following the date of such withdrawal or Transfer.
| 14.4 |
Internal Proprietary Information
|
|
(a) |
Subject to (b) below, all intellectual property rights of a Partner will remain the property of such Partner.
|
|
(b) |
All intellectual property rights in any new invention, technological developments or improvement to an existing invention created or developed in
connection with or for the purposes of the Partnership will become and remain the property of the owner of the original property rights.
|
|
(c) |
A Partner that is the owner of intellectual property rights licensed or used pursuant to this Agreement shall indemnify and save the other Partners
harmless from all claims and related costs and damages based on an allegation that any of the intellectual property rights infringes the proprietary rights of any third party.
|
|
(d) |
If a Partner ceases to be entitled to use any intellectual property rights it has made available for use in the Partnership Business, it shall
immediately notify the other Partners and will not be liable in respect of any infringement claim for the unauthorized use of such intellectual property rights from the date of notification.
|
| 14.5 |
Public Announcements
|
Except as provided in Section 14.2, each Partner shall consult with and obtain the consent of the other Partner or Partners (which consent is not to be unreasonably withheld) prior to making or issuing any public announcement, press release, or
similar publicity or disclosure with respect to this Agreement or any agreement entered into contemporaneously herewith or with respect to any activities under this Agreement or any such other agreements. As early as practicable, and
not less than 24 hours, before a Partner makes any public announcement concerning this Agreement or activities undertaken pursuant hereto (unless the disclosing Partner demonstrates that earlier disclosure is required by Law), such
Partner shall first give the other Partners notice of the intended announcement, including a copy of such proposed announcement, and the other Partner shall have the right to comment on such announcement. If a Partner is required by
Law to make earlier disclosure, it will provide a copy of such disclosure to the other Partners as soon as practicable thereafter.
ARTICLE 11
DISPUTES
Any dispute, controversy or claim arising out of or relating to this Agreement (“Dispute”), including any question regarding its existence, interpretation, validity, breach or termination or the business relationship
created by it shall be resolved as follows:
|
(a) |
Any Dispute shall first be referred to the GP Board for resolution.
|
|
(b) |
In the event the GP Board is unable to resolve the Dispute within 30 days of the Dispute being referred to it, then the matter in Dispute shall be
referred to the senior officers of the Partners (or the parent corporation of a Partner, if applicable), specifying in detail the Dispute, and such senior officers shall meet and use reasonable efforts to resolve the
Dispute.
|
|
(c) |
If the senior officers of the Partners are unable to resolve the Dispute within 10 Business Days of the matter being referred to them, or if any
senior officer refuses or is unable to participate in a meeting to resolve the Dispute within such 10 Business Days, then the Dispute shall be settled using the arbitration provisions described below.
|
|
(d) |
The Partners will engage a third party to resolve Disputes that are not resolved using the procedures set out above. The Partners intend that
Disputes solely relating to the operation of the Partnership Business involving the exercise of commercial or financial judgment be resolved promptly and informally provided that any Partner may, by written notice to the
other Partners, require a formal arbitration proceeding be adopted. Disputes involving legal rights of the Partners shall be resolved using formal arbitration procedures.
|
|
(e) |
The third party shall be qualified by experience and skill in the area(s) covered by the Dispute and, unless all Partners agree in writing following
full disclosure of any facts giving rise to a possible conflict, free from legal or business conflicts of interest in relation to the Partners and the Partnership.
|
|
(f) |
The third party will have the powers of an arbitrator under the provisions of the ADRIC Arbitration Rules of the ADR Institute of Canada Inc. then
in effect, and shall be entitled to finally determine the Dispute, including all procedures, and questions of law, fact and mixed fact and law without reference or appeal to any court. The arbitration will be governed by
the laws of Ontario and the laws of Canada applicable therein, and judgment upon the award rendered by the third party arbitrator may be entered in any court having jurisdiction. The place of arbitration shall be Toronto,
Ontario and the arbitration will be conducted in English. The decisions of the third party shall be final and binding on the Partners.
|
|
(g) |
Any of the Partners may propose in writing the appointment of the third party to resolve the Dispute. Within 10 Business Days after a Partner has
identified in writing the proposed third party, the proposed third party will be appointed unless any other Partner objects in writing to the appointment, in which case the Partners must, within the 10 Business Day period,
agree on an individual to be appointed as the third party. If the Partners do not agree upon the selection of the third party within such 10 Business Day period, any Partner may apply to a court of competent jurisdiction
in British Columbia for the appointment of the third party.
|
|
(h) |
Within 10 Business Days following the appointment of the third party, each of the Partners will submit to the third party, and to the other Partner,
a brief written summary of the Dispute, the specific remedy, decision or relief sought, and the proposed procedures, if any, to be followed by the third party in resolving the Dispute.
|
|
(i) |
The third party shall then confer with the Partners and either resolve the Dispute without further procedures or formalities, or set out the
procedures to be followed in resolving the Dispute. Any substantive or procedural decision of the third party shall be in writing, with copies provided to the Partners and their legal counsel.
|
|
(j) |
Any conferences, meetings or hearings shall take place in Toronto, Ontario or in such other place as the Partners shall agree upon in writing,
provided, however, that the third party may confer with the Partners and their counsel by telephone conference call. Any conferences, meetings or hearings shall be conducted in English unless otherwise agreed by the
Partners. All conferences, meetings and hearings will be in private unless the Partners otherwise agree. Any Partner may be represented at any conferences, meetings or hearings by legal counsel.
|
The provisions of this Agreement providing for the resolution of Disputes shall not operate to
prevent recourse to the court by any Partner as permitted by applicable law with respect to injunctions, receiving orders and orders regarding the detention, preservation and inspection of property, or whenever enforcement of an
arbitration award reasonably requires access to any remedy which an arbitrator has no power to award or enforce.
ARTICLE 12
GENERAL PROVISIONS
All notices, payments and other required communications pursuant to this Agreement (“Notices”) shall be in writing, and shall be delivered or sent by electronic communications, addressed respectively as follows:
|
(a) |
in the case of a Notice to the Partnership and the Operator at:
|
New
Afton Limited Partnership
181 Bay St #3320
Toronto, ON M5J 2T3
Attention: ●
Email: ●
with a copy to each Partner addressed as set out below.
|
(b) |
in the case of a Notice to New Gold at:
|
New
Gold Inc.
181 Bay St #3320
Toronto, ON M5J 2T3
Attention: General Counsel
Email: general.counsel@newgold.com
|
(c) |
in the case of a Notice to OTPP at:
|
●
Attention: ●
Email: ●
All Notices shall be given (i) by personal delivery to the Partner if delivered during normal
business hours, or (ii) by electronic communication, with a confirmation sent by registered or certified mail return receipt requested, or (iii) by registered or certified mail return receipt requested. All Notices shall be effective
and shall be deemed delivered (i) if by personal delivery on the date of delivery if delivered during normal business hours, and, if not delivered during normal business hours, on the next Business Day following delivery, (ii) if sent
electronically: 1) at the time shown in the delivery confirmation report generated by the sender's email system; or 2) if the sender's email system does not generate a delivery confirmation report within 12 hours after the time the
email is sent, unless the sender receives a return email notification that the email was not delivered, undeliverable or similar, at the time which is 12 hours from the time the email was sent, and (iii) if solely by mail on the next
Business Day after actual receipt. A Partner may change its address by Notice to the other Partner.
The failure of a Partner 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 the Partner’s right thereafter to enforce any provision or exercise any right.
No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed
in writing by all Partners and, unless otherwise specified, no consent or approval by any Partner, shall be binding unless executed in writing by the Partner to be bound thereby.
|
(a) |
Except for any obligation to make payments when due hereunder, and except for the obligations of the Operator to continue operations to the extent
appropriate in the circumstances to preserve the Partnership Assets, the cost of which will be borne by the Partnership, the obligations of a Partner shall be suspended to the extent and for the period that performance is
prevented by any cause, whether foreseeable or unforeseeable, that is beyond its reasonable control, including: labour disputes (however arising and whether or not employee demands are reasonable or within the power of the
Partner to grant); acts of God; laws, regulations, orders, proclamations, instructions or requests of any Governmental Authority; judgments or orders of any court; inability to obtain on reasonably acceptable terms any
public or private license, permit or other authorization; curtailment or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of federal, provincial or territorial or local
environmental standards; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot, civil strife, insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink
holes, drought or other adverse weather conditions; delay or failure by suppliers or transporters of materials, parts, supplies, services or equipment or by contractors’ or subcontractors’ shortage of, or inability to
obtain, labour, transportation, materials, machinery, equipment, supplies, utilities or services; accidents; breakdown of equipment, machinery or facilities; actions by native rights, environmental or local community
pressure groups; or any other cause whether similar or dissimilar to the foregoing. The affected Partner shall promptly give notice to the other Partners of the suspension of performance, stating therein the nature of the
suspension, the reasons therefor, and the expected duration thereof. The affected Partner shall resume performance as soon as reasonably possible and, in any event, upon the termination of the event of force majeure.
Commercial frustration, commercial impracticability or the occurrence of unforeseen events rendering performance hereunder uneconomical shall not constitute an excuse of performance of any obligation imposed hereunder.
|
|
(b) |
In the event that any Partner asserts that an event of force majeure has occurred, it shall give notice in writing to the other Partners specifying
the following:
|
|
(i) |
the cause and nature of the alleged event of force majeure;
|
|
(ii) |
a summary of the action it or its representatives, agents, contractors or employees have taken to the date of such notice to correct or terminate
the alleged event of force majeure; and
|
|
(iii) |
the reasonably expected duration of the period of force majeure.
|
|
(c) |
Any Partner asserting an event of force majeure shall provide ongoing periodic notice in writing to the other Partners with respect to such events
of force majeure, including the matters set out in Section (b) above, within 15 days of the end of each calendar month during the period of force majeure and shall provide prompt notice in writing to the other Partners
upon the termination of the event of force majeure.
|
The Partners shall with reasonable diligence do all such things and provide all such reasonable
assurances as may be required to consummate the transactions contemplated by this Agreement, and each Partner shall provide such further documents or instruments required by any other Partner as may be reasonably necessary or
desirable to effect the purpose of this Agreement and carry out its provisions.
| 16.6 |
Survival of Terms and Conditions
|
The following Sections shall survive the termination of this Agreement to the full extent necessary
for their enforcement and the protection of the Partner in whose favour they run: Sections 3.4, 3.5, 3.6 and Articles 12, 14 and 15.
| 16.7 |
Successors and Assigns
|
This Agreement may not be assigned by a Partner without the consent of the other Partners. This
Agreement shall be binding upon and enure to the benefit of the Partners and their respective successors (including any successor by reason of amalgamation of any Partner) and permitted assigns.
| 16.8 |
Waiver of Rights of Partition and Sale
|
Each Partner hereby waives and releases all rights of partition or of sale in lieu thereof
(judicial or otherwise), or other division of Partnership Assets, including any such rights provided by statute and all similar rights applicable in British Columbia, any jurisdiction where the Partnership Property is located or any
other applicable jurisdiction.
| 16.9 |
Expense and Commissions
|
Each Partner shall pay its own legal and other costs and expenses incurred in connection with this
Agreement and agrees to save harmless each other Partner from and against any and all claims whatsoever for any commissions or other remuneration payable or alleged to be payable to anyone acting on its behalf.
| 16.10 |
Execution and Delivery
|
This Agreement may be executed by the Partners in counterparts and may be executed and delivered by
facsimile, and all such counterparts and facsimiles shall together constitute one and the same agreement.
IN
WITNESS WHEREOF the Partners have executed this Agreement as of the date first above written.
| |
|
NEW GOLD INC.
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
| |
|
[OTPP]
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
SCHEDULE A
AREA OF INTEREST
SCHEDULE B
GP BOARD APPROVAL MATTERS
The following matters require unanimous approval of the GP Board:
| (a) |
the determination to carry on the Partnership Business other than that described in Section 2.10 of the Agreement;
|
| (b) |
a reorganization of the structure of the Partnership in a manner that would disproportionately materially adversely affect the tax or financial
consequences to a Partner;
|
| (c) |
issuances of Partnership Interests other than as contemplated in the Agreement;
|
| (d) |
all other matters expressly noted in the Agreement as requiring approval by a Unanimous Resolution;
|
| (e) |
a merger, arrangement, or other similar transaction involving substantially all of the Partnership Assets or Partnership Business;
|
| (f) |
a voluntary bankruptcy/insolvency proceeding or steps for the appointment of a receiver in respect of any material part of the Partnership Assets or
Partnership Business;
|
| (g) |
the liquidation of the Partnership’s assets or dissolution of the Partnership;
|
| (h) |
a decision to continue the Partnership if the Partnership is terminated by operation of law;
|
| (i) |
any change in the Auditor;
|
| (j) |
any change to the Fiscal Year of the Partnership;
|
| (k) |
annual capital or operating Expenditures not included in an Approved Annual Program and Budget then in effect in excess of $10 million;
|
| (l) |
the granting of any royalty, Product streaming agreement or other third-party burden on account of the production or sale of Products by the
Partnership other than use existing royalties;
|
| (m) |
the undertaking by the Partnership of hedging transactions for concentrate sales, if any;
|
| (n) |
the approval of any Expansion Project; and
|
| (o) |
any borrowings on behalf of the Partnership in excess of $5 million; and
|
| (p) |
any transactions between the Operator and an Affiliate of the Operator not included in an Annual Program or Budget in excess of $200,000;
|
The following matters require approval by a Special Resolution vote of the GP Board:
| (a) |
the approval of the draft program and budget of Partnership Business for each Fiscal Year;
|
| (b) |
the Partnership’s Distributions to be made to Partners; and
|
| (c) |
all other matters expressly noted in the Agreement as requiring approval by a Special Resolution.
|
SCHEDULE C
RESIDUAL PROPERTY RIGHTS
[To be completed at the Option Closing Date and to include existing royalties.]
SCHEDULE D
SAMPLE INCOME TAX ALLOCATION
Definitions
|
(a) |
“allowable capital losses” has the meaning
given to that term in the Tax Act;
|
|
(b) |
“capital property” has the meaning given to
that term in the Tax Act;
|
|
(c) |
“CCA” means the deduction permitted by
paragraph 20(1)(a) of the Tax Act in computing income;
|
|
(d) |
“CDE” has the meaning given to the term
“Canadian development expense” in the Tax Act;
|
|
(e) |
“CEE” has the meaning given to the term
“Canadian exploration expense” in the Tax Act;
|
|
(f) |
“cost amount” has the meaning given to that
term in the Tax Act;
|
|
(g) |
“depreciable property” has the meaning given
to that term in the Tax Act;
|
|
(h) |
“income” for a particular Partnership
Taxation Year means the income, if any, of the Partnership from all sources (other than taxable capital gains and allowable capital losses from the disposition of property) computed in accordance with paragraph 96(1)(a)
and subparagraph 96(1)(c)(ii) of the Tax Act for that Partnership Taxation Year;
|
|
(i) |
“loss” for a particular Partnership Taxation
Year means the loss (other than allowable capital losses from the disposition of property), if any, of the Partnership computed in accordance with paragraph 96(1)(a) and subparagraph 96(1)(c)(ii) of the Tax Act for that
Partnership Taxation Year;
|
|
(j) |
“Partnership Taxation Year” means any
taxation year of the Partnership determined in accordance with paragraph 96(1)(b) of the Tax Act;
|
|
(k) |
“taxable capital gains” has the meaning given
to that term in the Tax Act;
|
|
(l) |
“Taxation Year” has the meaning given to that
term in the Tax Act;
|
|
(m) |
“UCC” has the meaning given to the term
“undepreciated capital cost” in the Tax Act;
|
Income Tax
| 2. |
The Partnership shall, in computing its income or loss for each Partnership Taxation Year, claim the maximum amount of CCA and maximum amount of all
other deductions, expenses and reserves as permitted by the Tax Act, unless the Operator Board, by way of an Unanimous Resolution, determines otherwise.
|
| 3. |
The Partnership shall allocate CEE, CDE, losses and income arising in a particular Partnership Taxation Year on the basis of the Partner's
Proportionate Share, unless otherwise required pursuant to Section 10.6 of the Agreement in which case such allocation shall be made as required pursuant to Section 10.6 of the Agreement.
|
| 4. |
The Partnership shall allocate the following amounts amongst all of the Partners in proportion to their Proportionate Share during the particular
Partnership Taxation Year, unless otherwise required pursuant to Section 10.6 of the Agreement in which case such allocation shall be made as required pursuant to Section 10.6 of the Agreement:
|
|
(a) |
taxable capital gains and allowable capital losses arising in a particular Partnership Taxation Year, and
|
|
(b) |
subject to Section 4 and Section 5, all other amounts not included in computing income or loss but which are allocable to the Partners for the
purposes of the Tax Act with respect to the particular Partnership Taxation Year.
|
| 5. |
Any Partner wishing to make a functional currency election under section 261 of the Tax Act shall not make such election without the prior consent
of the other Partners, which consent shall not to be unreasonably withheld.
|
EXHIBIT “C”
STEP PLAN
| 1. |
New Gold grants the FCF Royalty to OTPP for cash consideration of $300 million.
|
| 2. |
New Gold incorporates a new Canadian corporation (“GP Co”) and New Gold subscribes for 100 newly issued common shares of GP Co for $100.
|
| 3. |
New Gold contributes the New Afton Transferred Assets to the Partnership in consideration for the Partnership assuming the New Afton Obligations and
a 54% Partnership Interest.
|
| 4. |
GP Co contributes $10 in cash to the Partnership in consideration for a 100% GP Interest.
|
| 5. |
OTPP contributes the FCF Royalty Agreement to the Partnership in consideration for a 46% Partnership Interest.
|
| 6. |
FCF Royalty Agreement is cancelled by operation of law and is of no further force and effect.
|
| 7. |
OTPP discharges any filed notices of royalty on the Properties.
|
EXHIBIT “D”
CONTRIBUTION AGREEMENT
THIS AGREEMENT is
made as of the ____ day of ______________, 202___,
BETWEEN:
NEW GOLD INC., a corporation existing under the laws of the Province of British Columbia
(“New Gold”)
AND:
[OTPP LP],
(“OTPP”)
AND:
New Afton Limited Partnership, a limited partnership formed under the laws of
the Province of Ontario among New Gold, OTPP and ●, by its general partner
(the “Partnership”)
WHEREAS:
| A. |
Pursuant to the FCF Royalty Agreement and the Purchase Agreement, New Gold and OTPP agreed to form the Partnership and have concurrently with the
execution of this Agreement, formed the Partnership pursuant to a limited partnership agreement dated ● among New Gold, OTPP and ● (the “Partnership Agreement”);
|
| B. |
[New Gold has delivered to OTPP, a statement setting out the Reimbursed Capital Costs in the amount of $________________,
pursuant to Section 3.2 of the Purchase Agreement;]
|
| C. |
[OTPP has provided its election pursuant to Section 3.7 of the Purchase Agreement for the Cherry Creek Properties to be
contributed by New Gold to the Partnership and the amount of Exploration Costs is $______________________;]
|
| D. |
New Gold as the owner of the New Afton Assets and the Operations wishes to contribute the New Afton Assets and the Operations to the Partnership, on
the terms and conditions set forth in this Agreement;
|
| E. |
OTPP is the holder of the FCF Royalty Agreement and wishes to contribute the FCF Royalty Agreement, [an amount equal to the Reimbursed Capital Costs,] [and an
amount equal to 46% of the Exploration Costs] to the Partnership on the terms and conditions set forth in this Agreement; and
|
| F. |
The Partnership has concurrently with the execution of this Agreement entered into an Assignment and Assumption Agreement with New Gold whereby the
Partnership has assumed the [New Afton Assumed Obligations], including New Gold’s obligations under the FCF Royalty
Agreement;
|
NOW THEREFORE THIS
AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the
Parties, the Parties hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
In this Agreement, unless there is something in the subject matter or context inconsistent therewith, the following
terms shall have the following meanings respectively:
|
(a) |
“Affiliate” has the meaning given to that
term in the Partnership Agreement;
|
|
(b) |
“Agreement” means this Contribution
Agreement, including all schedules thereto, as may be amended, modified or restated from time to time;
|
|
(c) |
“Business Day” has the meaning given to that
term in the Partnership Agreement;
|
|
(d) |
“Cherry Creek Properties” has the meaning
given to that term in the Purchase Agreement;
|
|
(e) |
“Contribution” has the meaning given to that
term in the Partnership Agreement;
|
|
(f) |
“Damages” means, whether or not involving a
third party claim, any loss, cost, liability, claim, obligation, charge, interest, fine, penalty, assessment, Taxes, damage or expense (including fees and expenses of legal counsel);
|
|
(g) |
“Effective Date” means the date first written
above on the first page of this Agreement;
|
|
(h) |
“Effective Time” means on the Effective Date
or such other time on the Effective Date as the Parties may agree to;
|
|
(i) |
“Encumbrance” has the meaning given to that
term in the Partnership Agreement;
|
|
(j) |
“Excise Tax Act” means the Excise Tax Act (Canada), as amended;
|
|
(k) |
[“Exploration Costs” has the meaning given to that term in the Purchase Agreement;]
|
|
(l) |
“FCF Royalty Agreement” has the meaning given
to that term in the Purchase Agreement;
|
|
(m) |
“General Partner” means the general partner
of the Partnership;
|
|
(n) |
“New Afton Assets” means all of the assets,
property and undertaking owned legally or beneficially by New Gold exclusively in respect of the Operations or related to, or ancillary to, the ownership of the New Afton Mine as at the Effective Date, but for greater
certainty only the real property, mineral rights or mineral claims which are included are the Properties, excluding (i) any properties subject to any Relinquishment Event (as defined in the Purchase Agreement), [and (ii) the Cherry Creek Properties];
|
|
(o) |
“New Afton Mine” means the New Afton gold
mine located near Kamloops, British Columbia operating on the Properties (as defined in the Purchase Agreement);
|
|
(p) |
“Non-Assignable Right” has the meaning given
to that term in Section 4.5;
|
|
(i) |
“Operations” has the meaning given to that
term in the Purchase Agreement;
|
|
(q) |
“Parties” means the parties to this
Agreement, and “Party” means any one of them;
|
|
(r) |
“Partners” means the Persons who are from
time to time partners in the Partnership in accordance with the terms of the Partnership Agreement;
|
|
(s) |
“Partnership” means the New Afton Limited
Partnership, a limited partnership existing under the laws of Ontario;
|
|
(t) |
“Partnership Agreement” has the meaning given
to that term in the recitals hereto;
|
|
(u) |
“Partnership Indemnified Parties” has the
meaning given to that term in Section 4.4;
|
|
(v) |
“Permitted Lien” has the meaning given to
that term in the Purchase Agreement, provided that each subsection of the definition shall be read for the purpose of this Agreement with reference to any and all of the New Afton Assets as at the Effective Time, rather
than any particular “New Afton Asset” (as that term is defined in the Purchase Agreement) as at the date of the Purchase Agreement;
|
|
(w) |
“Person” has the meaning given to that term
in the Partnership Agreement;
|
|
(x) |
“Properties” means [NTD: Current list to be scheduled with notation re lapsed properties in the interim period.]
|
|
(y) |
“Reimbursed Capital Costs” has the meaning
given to that term in the Purchase Agreement;
|
|
(z) |
“Tax Act” means the Income Tax Act (Canada), as amended;
|
|
(aa) |
“Taxes” includes, without limitation, and
with respect to any Person, all supranational, national, federal, provincial, state, local or other taxes, duties, fees, premiums, assessments, imposts, levies and other charges of any kind whatsoever, including income
taxes, branch taxes, profits taxes, capital gains taxes, gross receipts taxes, corporate taxes, windfall profits taxes, value added taxes, severance taxes, ad valorem taxes, property taxes, capital taxes, net worth taxes,
production taxes, mineral taxes, sales taxes, use taxes, business taxes, licence taxes, excise taxes, franchise taxes, environmental taxes, real or personal property taxes, transfer taxes, land transfer taxes, withholding
or similar taxes, payroll taxes, employment taxes, employer health taxes, government pension plan premiums and contributions, social security premiums, workers’ compensation premiums, employment/unemployment insurance or
compensation premiums and contributions, stamp taxes, occupation taxes, premium taxes, alternative or add-on minimum taxes, GST/HST, customs duties or other taxes of any kind whatsoever imposed or charged by any
governmental authority and any instalments in respect thereof, together with any tax indemnity obligation, interest, penalties, or additions with respect thereto and any interest in respect of such additions or penalties,
whether disputed or not, and “Tax” means any one of such Taxes; and
|
|
(bb) |
“Transfer Taxes” has the meaning given to
that term in Section 3.2.
|
Any capitalized term used in this Agreement but not otherwise defined herein shall have the meaning given to such term
in the Partnership Agreement.
| 1.2 |
Certain Rules of Interpretation
|
In this Agreement:
|
(a) |
Currency. Unless otherwise specified, all
references to money amounts are to lawful currency of the United States of America.
|
|
(b) |
Governing Law. The Agreement is a contract
made under and shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
|
|
(c) |
Headings. Headings of Articles and Sections
are inserted for convenience of reference only and shall not affect the construction or interpretation of the Agreement.
|
|
(d) |
Including. Where the words “including” or
“includes” are used in the Agreement, it means “including (or includes) without limitation”.
|
|
(e) |
No Strict Construction. The language used in
the Agreement is the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
|
|
(f) |
Number and Gender. Unless the context
otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders.
|
|
(g) |
Statutory References. A reference to a
statute includes all regulations made pursuant to such statute and, unless otherwise specified, the provisions of any statute or regulation which amends, supplements or supersedes any such statute or any such regulation.
|
|
(h) |
Time. Time is of the essence in the
performance of the Parties' respective obligations.
|
|
(a) |
Assignment. No Party may assign this
Agreement or any rights or obligations under this Agreement without the prior written consent of the other Party.
|
|
(b) |
Enurement. The Agreement shall enure to the
benefit of and be binding upon the Parties and their respective successors (including any successor by reason of amalgamation of any Party) and permitted assigns.
|
|
(c) |
Further Assurances. The Parties shall with
reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by the Agreement, and each Party shall provide such further documents or
instruments required by any other Party as may be reasonably necessary or desirable to effect the purpose of the Agreement and carry out its provisions.
|
|
(d) |
Waiver. A waiver of any default, breach or
non-compliance under this Agreement shall not be effective unless in writing and signed by the Party to be bound by the waiver, and then only in the specific instance and for the specific purpose for which it has been
given. No waiver shall be inferred from or implied by any failure to act or delay in acting by a Party in respect of any default, breach or non-observance or by anything done or omitted to be done by the other Party. The
waiver by a Party of any default, breach or non-compliance under this Agreement will not operate as a waiver of that Party’s rights under this Agreement in respect of any continuing or subsequent default, breach or
non-observance (whether of the same or any other nature).
|
|
(e) |
Execution and Delivery. The Agreement may be
executed by the Parties in counterparts and may be executed and delivered by facsimile or other electronic format and all such counterparts and facsimiles shall together constitute one and the same agreement.
|
ARTICLE 2.
CONVEYANCE AND CONSIDERATION
| 2.1 |
Transfer and Conveyance of the New Afton Assets
|
In accordance with the Purchase Agreement, New Gold hereby assigns, transfers, conveys and contributes to the General
Partner, for and on behalf of and to be held in trust for the Partnership, and the General Partner, in its capacity as general partner of the Partnership, hereby agrees to accept from New Gold, at the Effective Time, 100% of the
direct or indirect legal and beneficial title held by New Gold in the New Afton Assets and the Operations, free and clear of all Encumbrances (other than Permitted Liens and any purchase money security interests or similar security
interests attaching to any equipment forming part of the New Afton Assets and transferred to the Partnership) and on the terms and conditions set forth in this Agreement.
| 2.2 |
Transfer and Conveyance of the FCF Royalty Agreement
|
In accordance with the Purchase Agreement, OTPP hereby assigns, transfers, conveys and contributes to the General
Partner, for and on behalf of and to be held in trust for the Partnership, [and in the case of Sections 2.2(b) and 2.2(c), OTPP hereby
agrees to pay to the Partnership,] and the Partnership hereby agrees to accept from OTPP, at the Effective Time:
|
(a) |
its rights under the FCF Royalty Agreement;
|
|
(b) |
[$_____________-_____, being the amount equal to the Reimbursed Capital Costs;] and
|
|
(c) |
[$___________________, being an amount equal to 46% of all Exploration Costs,]
|
free and clear of all Encumbrances and on the terms and conditions set forth in this Agreement. [OTPP shall make the payments contemplated by Sections 2.2(b) and 2.2(c) by wire transfer in immediately available funds to a bank account
designated by the Partnership in writing.]
The Partnership hereby confirms that:
|
(a) |
the assignment, transfer and conveyance by New Gold to the Partnership, of the New Afton Assets and the Operations pursuant to this Agreement shall
constitute a Contribution by New Gold to the capital of the Partnership in accordance with the Partnership Agreement, and that such Contribution has been authorized and approved by the Partnership and has a fair market
value of $ as of the Effective Date; and
|
|
(b) |
the assignment, transfer and conveyance by OTPP to the Partnership of the FCF Royalty Agreement [and the payments contemplated by Sections 2.2(b) and 2.2(c)], pursuant to this Agreement shall constitute a Contribution by OTPP to the capital of the Partnership in
accordance with the Partnership Agreement, and that such Contributions has been authorized and approved by the Partnership and have a fair market value of $ as of the Effective Date; and
|
|
(c) |
upon New Gold and OTPP making such respective Contributions, the Proportionate Share and the Capital Account of each Limited Partner shall be as
follows:
|
|
Partner
|
Proportionate Share
|
Capital Account Balance
|
|
New Gold
|
54%
|
$
|
|
OTPP
|
46%
|
$
|
ARTICLE 3.
TAXES AND TAX ELECTIONS IN RESPECT OF TRANSFER
The Partnership and each Partner hereby agrees to make a joint election under subsection 97(2) of the Tax Act (and any
equivalent or corresponding provisions under applicable provincial or territorial tax legislation), within the prescribed time and in the prescribed manner, in respect of the transfer and assignment of the New Afton Assets and the
Operations by New Gold to the Partnership at an agreed amount, in respect of each property so transferred, which shall be determined by New Gold in its sole discretion, which agreed amount shall not be less than the least amount that
the agreed amount may be in accordance with the rules in subsection 97(2) of the Tax Act (and any equivalent or corresponding provisions under applicable provincial or territorial tax legislation). The Partnership and each Partner
hereby agrees to make a joint election under subsection 97(2) of the Tax Act (and any equivalent or corresponding provisions under applicable provincial or territorial tax legislation), within the prescribed time and in the prescribed
manner, in respect of the transfer and assignment of the FCF Royalty Agreement by OTPP to the Partnership at an agreed amount, in respect of each property so transferred, which shall be determined by OTPP in its sole discretion, which
agreed amount shall not be less than the least amount that the agreed amount may be in accordance with the rules in subsection 97(2) of the Tax Act (and any equivalent or corresponding provisions under applicable provincial or
territorial tax legislation).
The Partnership shall pay all value-added, sales, transfer, land transfer and similar taxes exigible under applicable
laws (“Transfer Taxes”) arising from the transfer and assignment of the New Afton Assets and Operations and the FCF Agreement to
the Partnership unless the Partnership qualifies for an exemption from any such applicable Transfer Taxes, in which case Partnership shall, in lieu of payment of such applicable Transfer Taxes, deliver such certificates, elections, or
other documentation required by Law or the administration thereof to substantiate and effect the exemption claimed by Partnership. Notwithstanding the preceding sentence, the Partnership, the General Partner and New Gold, as
applicable, shall jointly make the election under subsection 167(1) of Part IX of the Excise Tax Act, in prescribed form,and shall apply and properly claim all applicable exemptions available under provincial legislation imposing a
Transfer Tax, including but not limited to all related party exemptions on production machinery and equipment exemptions available under such legislation, in order to exempt the transfer of the New Afton Assets and the Operations to
the Partnership from tax under Part IX of the Excise Tax Act and any other provincial value-added, provincial sales or transfer tax, and shall file each such joint election or exemption in compliance with the requirements of the
Excise Tax Act and the corresponding provisions of any other applicable provincial legislation, as applicable.
New Gold, OTPP and the General Partner shall, to the extent permitted by the Mineral Tax Act, file a joint election in
the form and within the time prescribed under the Mineral Tax Disposition of a Mine Regulation to the Mineral Tax Act. To the
extent that New Gold has an unclaimed balance in its Exploration Account (under section 10 of Mineral Tax Act), New Gold shall take steps, including filing the necessary election as required under the Mineral Tax Act and its
Regulations, to allocate such unclaimed balance to the New Afton Mine such that any Exploration Account balance forms part of the balances transferred under the joint election in this Section 3.3.
ARTICLE 4.
ADDITIONAL PROVISIONS REGARDING CONTRIBUTIONS
| 4.1 |
Substitution and Subrogation
|
Insofar as is possible, the Partnership shall have full right of substitution and subrogation in and to all covenants,
representations and warranties by others previously given or made in respect of the New Afton Assets and the Operations or any part thereof.
| 4.2 |
Non-Assignable Rights
|
Nothing in this Agreement shall be construed as an assignment of, or an attempt to assign to the Partnership, any
contract, instrument, option, licence, permit, order-in-council, decree, lease, certificate of authorization, authorization, agreement, commitment, interest, entitlement or engagement which, as a matter of law or by its terms, is (i)
not assignable, or (ii) not assignable without the approval or consent of the issuer thereof or the other party or parties thereto, without first obtaining such approval or consent (collectively, “Non-Assignable Rights”). In connection with such Non-Assignable Rights, New Gold shall:
|
(a) |
co-operate with the Partnership to use its commercially reasonable efforts to obtain any necessary approvals or consents, where relevant;
|
|
(b) |
co-operate with the Partnership in any reasonable arrangements designed to provide the benefits of such Non-Assignable Rights to the Partnership,
including holding any such Non-Assignable Rights in trust for the Partnership or acting as agent for the Partnership;
|
|
(c) |
enforce any rights of New Gold arising from such Non-Assignable Rights;
|
|
(d) |
take all such actions and do, or cause to be done, all such things at the request of the Partnership as shall reasonably be necessary in order that
the value of any Non-Assignable Rights shall be preserved and shall enure to the benefit of the Partnership; and
|
|
(e) |
pay over to the Partnership, all monies collected by or paid to New Gold in respect of such Non-Assignable Rights.
|
| 4.3 |
Assets to be Held in Trust
|
For any New Afton Assets to be transferred to the Partnership by New Gold where the Partnership is restricted from
holding legal title, New Gold shall hold such assets in trust for the benefit of the Partnership and legal title shall remain with New Gold, as agent and trustee for the Partnership, and New Gold shall provide such documents and enter
into such agreements as may be reasonably required by the Partnership to confirm such arrangement, provided that New Gold may in its sole discretion transfer legal title to any such assets to the Partnership at any time that any such
restriction is no longer in place.
The Partnership hereby indemnifies and saves harmless, the Vendor from and against, and will reimburse the Vendor for,
any Damages incurred by the Vendor in connection with, arising from, or related in any manner whatsoever with, the Vendor continuing to hold legal title to certain assets as detailed in Sections 4.2 and 4.3 above, and any actions
required, or requested to be taken by the Vendor on behalf of the Partnership in such capacity.
| 4.5 |
Representations and Warranties
|
|
(a) |
New Gold hereby represents and warrants to and in favour of the Partnership that New Gold is duly registered under Subdivision (d) of Division V of
Part IX of the Excise Tax Act with respect to the goods and services tax and its registration number is .
|
|
(b) |
The Partnership hereby represents and warrants to and in favour of New Gold that the Partnership is duly registered under Subdivision (d) of
Division V of Part IX of the Excise Tax Act with respect to the goods and services tax and its registration number is .
|
|
(c) |
Each of New Gold, OTPP and the Partnership hereby represent and warrant to the other that this Agreement has been duly executed and delivered by
each of them, and constitutes a legal, valid and binding agreement of it enforceable against it in accordance with the its terms subject only to any limitation under bankruptcy, insolvency or other Laws affecting the
enforcement of creditors’ rights generally and the discretion that a court may exercise in the granting of equitable remedies such as specific performance and injunction.
|
NOTWITHSTANDNG ANYTHING HEREIN TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF THE PARTIES HERETO THAT NEITHER NEW GOLD
NOR ANY OF ITS AFFILIATES IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY OR REPRESENTATION AS TO THE VALUE, CONDITION, MERCHANTABILITY OR SUITABILITY OF ANY OF THE NEW GOLD
ASSETS OR OPERATIONS), EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 4.4(a), 4.4(b) and 4.4(c).
ARTICLE 5.
NOTICES
|
(a) |
Any notice, direction, certificate, consent, determination or other communication required or permitted to be given or made under this Agreement
shall be in writing and shall be effectively given and made if (a) delivered personally, or (b) sent by e-mail, in each case to the applicable address set out below:
|
if to the Vendor to:
New Gold Inc.
181 Bay Street,
Suite 3320
Toronto, ON M5J 2T3
Attention: General Counsel
Email: general.counsel@newgold.com
with a copy (which shall not constitute notice) to:
Cassels Brock & Blackwell LLP
2100 Scotia Plaza
40 King Street West
Toronto, ON M5H 3C2
Attention: Ann Watterworth
Email: [Redacted]
if to OTPP to:
Ontario Teachers’ Pension Plan Board
Investment Division
5650 Yonge Street
Toronto, ON M2M 4H5
Attention: Christopher Metrakos and James Sikora
Email: [Redacted]
with a copy (which shall not constitute notice) to:
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, ON M5L 1B9
Attention: Jeffrey Singer
Email: [Redacted]
|
(b) |
Any such communication so given or made shall be deemed to have been given or made and to have been received on the day of delivery if delivered, or
on the day of e-mailing or sending by other means of recorded electronic communication, provided that such day in either event is a Business Day and the communication is so delivered, e-mailed or sent before 4:30 p.m.
(Eastern Time) on such day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the next following Business Day. Any such communication sent by mail shall be deemed to
have been given and made and to have been received on the fifth Business Day following the mailing thereof; provided however that no such communication shall be mailed during any actual or apprehended disruption of postal
services. Any such communication given or made in any other manner shall be deemed to have been given or made and to have been received only upon actual receipt.
|
[Signature page
follows]
IN WITNESS WHEREOF
the Parties have executed this Agreement as of the date first written above.
NEW GOLD INC.
Per: __________________________________
(Authorized Signatory)
NEW AFTON LIMITED
PARTNERSHIP
By its General Partner:
Per: __________________________________
(Authorized Signatory)
Per: __________________________________
(Authorized Signatory)
[OTPP LP], by its general partner
Per: __________________________________
(Authorized Signatory)
EXHIBIT “E”
FCF ROYALTY AGREEMENT
THIS
FREE CASH FLOW ROYALTY AGREEMENT (this “Agreement”) dated as of [●], 2020.
BETWEEN:
NEW GOLD INC., a corporation existing under the laws of the Province of British
Columbia
(the “Owner”)
- and -
[●], a limited partnership formed under the laws of
the Province of Ontario by [●] as general partner for and on behalf of [●]
(the “Holder”)
RECITALS:
| A. |
The Owner is the owner and operator of the New Afton Mine (as hereinafter defined).
|
| B. |
The Owner and the Holder entered into a purchase agreement dated February 24, 2020 (the “Purchase Agreement”) pursuant to which, among other things, the Owner agreed to enter into this Agreement with the Holder to provide for the grant by the Owner to the
Holder of the FCF Royalty (as hereinafter defined).
|
NOW, THEREFORE,
in consideration of the premises and mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by each of the Parties hereto, the Parties
mutually agree as follows:
|
(a) |
“Acceptance Notice” has the meaning set out
in Section 6(c).
|
|
(b) |
“Acceptance Period” has the meaning set out
in Section 6(b)(iii).
|
|
(c) |
“Additional Capital Project” means a proposed
capital project on the Properties with a cost greater than $25 million which is not set out in the LOM Plan. For
greater certainty, an “Additional Capital Project” will not include (i) any exploration costs or expenses related to a capital project on the Properties and (ii) any additional costs and/or cost overruns associated with
capital projects currently set out in the LOM Plan.
|
|
(d) |
“Advisory Committee” has the meaning set out
in Section 7(a).
|
|
(e) |
“Affiliate” has the meaning ascribed to that
term in the Purchase Agreement.
|
|
(f) |
“Agreed Capital Project” has the meaning set out in
Section 7(f).
|
|
(g) |
“Agreement” means this Free Cash Flow Royalty Agreement and the schedules hereto, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.
|
|
(h) |
“Approval Matter” has the meaning set out in
Section 7(g).
|
|
(i) |
“Approved Annual Program and Budget” has the
meaning set out in Section 8(c).
|
|
(j) |
“Approved Model” means the model in respect
of the New Afton Mine with the file name “Project Bear – New Afton Financial Model (Phase II updated)” provided in section 2.1.3.2.1 of the Data Room.
|
|
(k) |
“Closure Date” has the meaning set out in
Section 7(g).
|
|
(l) |
“Confidential Information” has the meaning
set out in Section 13(a).
|
|
(m) |
“Concentrate Sales Process Hedges” has the
meaning set out in Section 11(b).
|
|
(n) |
“Control” (including, with correlative
meanings, the terms “Controlling”, “Controlled by” and “under common Control with”) as applied to any Person, means the possession, directly or indirectly of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by contract, voting trust or otherwise.
|
|
(o) |
“Credit Rating” means the rating assigned by
the relevant rating agency to the unsecured, senior, long term debt or deposit obligations of the relevant entity (unsupported by third party credit enhancement).
|
|
(p) |
“Data Room” means the virtual data room set
up by the Owner and the contents thereof as of 5:00 p.m. (Eastern Time) on February 19, 2020, the index of documents of which is appended to the Disclosure Letter.
|
|
(q) |
“Designated Stock Exchange” means any of the
Toronto Stock Exchange, TSX Venture Exchange, the New York Stock Exchange, the NASDAQ Stock Market, the NYSE American Exchange, the London Stock Exchange, the AIM Stock Exchange, Johannesburg Stock Exchange and the
Australian Stock Exchange.
|
|
(r) |
“Disclosure Letter” has the meaning set out
in the Purchase Agreement.
|
|
(s) |
“Expenditures” means cash expenditures and
all costs, obligations and liabilities incurred or properly accrued (but not yet met) with respect to Operations including, without limitation, cash expenditures and all costs, obligations and liabilities incurred or
accrued:
|
|
(i) |
costs and expenses in exploring for, developing, mining, extracting, removing, and transporting to any processing site Minerals, such costs and
expenses shall include, without limitation, those incurred for labor, machinery operations, fuel, explosives and other materials, developmental or ore delineation drilling;
|
|
(ii) |
costs and expenses for milling, treating or processing and transportation costs, all costs, charges and expenses for treatment in the smelting and
refining process (including handling, processing, deductions, tolling charges); and sales and brokerage costs, and actual costs of transportation (including insurance, storage, warehousing, port demurrage, delay and
forwarding expenses) of Minerals or other products from the New Afton Mine to the place of treatment and then to the place of sale, without duplication;
|
|
(iii) |
general and administrative costs and expenses of the production of Minerals and operation of the New Afton Mine, including without limitation, all
royalties, production royalties, or other payments of any nature whatsoever payable to third parties having an interest in the any of the Properties;
|
|
(iv) |
costs and expenses incurred in connection with the marketing of the Minerals and the delivery of Minerals to points of ultimate delivery to
customers, including without limitation, all shipping and delivery costs, agency fees, and storage charges, without duplication;
|
|
(v) |
in holding each Properties in full force and effect (including land maintenance costs and any monies expended as required to comply with applicable
laws, such as the payment of annual maintenance fees, the completion and submission of assessment work and filings required in connection with any assessment work or annual maintenance fees), in curing title defects and in
acquiring and maintaining surface and other ancillary rights;
|
|
(vi) |
in preparing for and in the application for and acquisition of environmental and other permits necessary or desirable to commence and complete
exploration, development and operation activities (including in direct connection with the Properties, payment to charities, contributions, government programs, lobbying costs pertaining thereto);
|
|
(vii) |
in undertaking geophysical, geochemical and geological or technical surveys, drilling, assaying and metallurgical testing, including costs of
assays, metallurgical testing and other tests and analyses to determine the quantity and quality of Minerals, water and other materials or substances;
|
|
(viii) |
in the preparation of work programmes and the presentation and reporting of data including any program for the preparation of a feasibility study or
other evaluation of a Property;
|
|
(ix) |
in connection with the protection of the environment in relation to the Properties including environmental remediation, rehabilitation,
decommissioning and long-term care and monitoring, whether or not a mine reclamation trust fund has been established;
|
|
(x) |
in acquiring facilities, equipment or machinery, or the use of any of the foregoing things, and for all parts, supplies and consumables;
|
|
(xi) |
for salaries and wages, including actual labour overhead expenses for employees assigned to exploration and development activities;
|
|
(xii) |
travelling expenses and fringe benefits (whether or not required by Law) of all Persons engaged in work with respect to and for the benefit of the
Operations including for their food, lodging and other reasonable needs;
|
|
(xiii) |
payments to contractors or consultants for work done, services rendered or materials supplied;
|
|
(xiv) |
all Taxes levied against or in respect of any Property, or activities on the Properties, and the costs of insurance premiums and performance bonds
or other security;
|
|
(xv) |
in connection with any impact benefit or other agreements between the Owner and Indigenous Groups;
|
|
(xvi) |
in connection with any other agreements between the Owner and any other Person;
|
|
(xvii) |
any and all royalties payable on or in respect of any Property; and
|
|
(xviii) |
any Tax payable pursuant to a return filed under the Mineral Tax Act [RSBC 1996] Chapter 291.
|
|
(t) |
“FCF Payments” has the meaning set out in
Section 2.
|
|
(u) |
“FCF Royalty” means the free cash flow
royalty granted to the Holder by the Owner pursuant to this Agreement.
|
|
(v) |
“FMV" means the fair market value determined
based on the consideration that would be received on the day of the event that gave rise to the valuation request in a single transaction in an open and unrestricted market between prudent parties, acting at arm's length,
without any discount for a minority interest or premium for Control.
|
|
(w) |
“Fourth Anniversary Date” means [●], 2024.
|
|
(x) |
“Free Cash Flow” has the meaning set out in
Schedule “B”.
|
|
(y) |
“Guaranteed FCF Amount” means the lesser of
(i) $60,000,000 and (ii) the amount expressed in United States dollars that is the product of (x) the aggregate amount of “Free
Cash Flow (Post-Tax)” on Line 217 of tab “New Afton Model” in the Approved Model shown as having been generated by the New Afton Mine during the Guaranteed FCF Period calculated using the Approved Model (on the
basis that any years of negative free cash flow from production shall be deemed to be one dollar ($1.00) and excluding any and all federal or provincial income taxes) and after adjustment to the Approved Model to reflect
the actual realized commodity prices (excluding the effect of any Trading Activities) and exchange rates during the Guaranteed FCF Period multiplied by (y) 46.0% multiplied by (z) the Guaranteed FCF Percentage.
|
|
(z) |
“Guaranteed FCF Percentage” means 55%.
|
|
(aa) |
“Guaranteed FCF Period” means the period
commencing on [April 1], 2020 and terminating on the Fourth Anniversary Date.
|
|
(bb) |
“Holder” has the meaning set out in the
recitals to this Agreement.
|
|
(cc) |
“IFRS” means International Financial
Reporting Standards as issued by the International Accounting Standards Board and as applicable to entities that are publicly accountable in Canada.
|
|
(dd) |
“Indigenous Group” means any band, band
council, tribal council or other governing body, however organized, that is established by aboriginal peoples of Canada within the meaning section 35(2) of the Constitution Act, 1982, within their asserted traditional territory in British Columbia.
|
|
(ee) |
“ITRB” has the meaning set out in Section
7(b).
|
|
(ff) |
“LOM Plan” means the Owner’s life of mine
model in respect of the New Afton Mine provided in the Data Room.
|
|
(gg) |
“Losses” means all damages, claims, losses,
liabilities, fines, penalties and expenses.
|
|
(hh) |
“Member” has the meaning set out in Section
7(a).
|
|
(ii) |
“Mineral Rights” has the meaning set out in
Section 13(c).
|
|
(jj) |
“Minerals” means all marketable naturally
occurring metallic and non-metallic minerals or mineral bearing material in whatever form or state in or under the Properties which are owned by the Owner or to which the Owner is entitled, including, without limitation,
any precious metal or any base metal, owned by the Owner or to which the Owner is entitled and that is mined, extracted, removed, produced or otherwise recovered from the Properties (other than any rock, sand, gravel or
aggregate used in connection with the conduct of the Operations by the Owner), whether in the form of ore, doré, concentrates, refined metals or any other beneficiated or derivative products thereof and including any such
minerals or mineral bearing materials or products derived from any processing or reprocessing of any tailings, waste rock or other waste products originally derived from the Properties (to the extent that the same are
owned by the Owner or to which the Owner is entitled).
|
|
(kk) |
“New Afton Mine” means the gold mine owned and operated by New Gold in Kamloops, British Columbia on the area comprised by the Properties.
|
|
(ll) |
“North Surface Land” means PID 014-421-666,
being that part of the North ½ of Section 35 which lies to the North of Savona and Kamloops Wagon Road Township 19 Range 19 West of the 6th Meridian Kamloops Division Yale District except Plan 27151.
|
|
(mm) |
“Operations” means the operations of the New
Afton Mine.
|
|
(nn) |
“Option Exercise Period” has the meaning set
out in Section 4.
|
|
(oo) |
“Option Closing Date” means the date upon
which the Partnership Option Closing takes place.
|
|
(pp) |
“Option Expiry Date” has the meaning set out
in Section 4.
|
|
(qq) |
“Owner” has the meaning set out in the
recitals to this Agreement.
|
|
(rr) |
“Partnership” has the meaning set out in
Section 4.
|
|
(ss) |
“Partnership Option” has the meaning set out
in Section 4.
|
|
(tt) |
“Partnership Option Closing” has the meaning
set out in the Purchase Agreement.
|
|
(uu) |
“Party” means any of the Holder and the Owner
and “Parties” means the Holder and the Owner collectively.
|
|
(vv) |
“Person” means any individual, sole
proprietorship, partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, government authority and, where the context requires, any of the
foregoing when they are acting as trustee, executor, administrator or other legal representative.
|
|
(ww) |
“Pre-Approved Purchaser” means a Person that
(i) operates, directly or indirectly a producing mining operation; (ii) has a direct and primary listing on a Designated Stock Exchange; (iii) has a head office located in one of Canada, the United States, the United
Kingdom, the European Union, Switzerland, South Africa or Australia; and (iv) has a Credit Rating at the time of the potential purchase that is equal to or greater than the Owner’s Credit Rating on the date of the Purchase
Agreement or, if a Person does not have a Credit Rating, a market capitalization that is equal to or greater than the Owner on the date of the Purchase Agreement.
|
|
(xx) |
“Prime” means at any particular time, the
rate of interest, expressed as a rate per annum, that the Bank of Nova Scotia establishes as its prime rate of
interest with respect to short term loans to its most credit worthy customers.
|
|
(yy) |
“Properties” means the properties set out on
Schedule ”A”.
|
|
(zz) |
“Purchase Agreement” has the meaning set out
in the recitals to this Agreement.
|
|
(aaa) |
“Released Properties” has the meaning
set out in Section 15(b).
|
|
(bbb) |
“Relinquishment Event” has the meaning
set out in Section 15(b).
|
|
(ccc) |
“Repurchase” has the meaning set out in
Section 5(a).
|
|
(ddd) |
“Repurchase Closing Date” has the
meaning set out in Section 5(b).
|
|
(eee) |
“Repurchase Notice” has the
meaning set out in Section 5(a).
|
|
(fff) |
“ROFO Notice” has the meaning set
out in Section 6(b).
|
|
(ggg) |
“ROFO Offer” has the meaning set
out in Section 6(b).
|
|
(hhh) |
“Sale Interest” has the meaning
set out in Section 6(b).
|
|
(iii) |
“Selling Party” has the meaning
set out in Section 6(b).
|
|
(jj) |
“Tailings Projects Budget” means
the Owner’s budget in respect of tailings projects and related capital expenditures for the Mine appended as Schedule “D” to this Agreement.
|
|
(kkk) |
“Tax” has the meaning set out in
Section 3(c).
|
|
(lll) |
“Termination Date” means the date
upon which the Partnership Option transaction is terminated in accordance with Article 3 of the Purchase Agreement.
|
|
(mmm) |
“Third Party Valuator” means a
Canadian bank-owned investment bank that is independent of the Parties and that has experience in mining valuations that is mutually agreed by the Parties.
|
|
(nnn) |
“Transfer” means, with respect to
this Agreement, any sale, exchange, transfer, assignment, gift, alienation or other transaction, whether voluntary, involuntary or by operation of law, by all or, in the case of the Owner, a portion of the
legal or beneficial ownership of, or any security interest or other interest in, this Agreement passes from the Holder or the Owner, as applicable, to another Person, whether or not for value, and “to
Transfer”, “Transferred” and similar expressions shall have corresponding meanings.
|
|
(ooo) |
“Trading Activities” has the
meaning set out in Section 11(a).
|
|
(ppp) |
“Unapproved Additional Capital Project”
has the meaning set out in Section 7(f).
|
| 2. |
Grant of Free Cash Flow Royalty
|
Subject to the terms of this Agreement, effective as of the date hereof, the Owner hereby grants
and agrees to pay to the Holder the FCF Royalty, being the right to receive Free Cash Flow payments calculated in accordance with Schedule “B” (the “FCF Payments”) calculated annually (or for the period from [April 1, 2020] to December 31, 2020 for
the first calendar year) at the following rates and in the following manner:
(a) At the rate of 46.0% of Free Cash Flow during the period commencing on [April 1, 2020] and terminating on (i) the Option Expiry Date if the Holder does not exercise the Partnership Option in accordance with Article 3 of the Purchase
Agreement; or (ii) on the earlier of (x) the Option Closing Date; and (y) the Termination Date, if the Holder exercises the Partnership Option in accordance with Article 3 of the Purchase Agreement;
(b) If the Holder does not exercise the Partnership Option in accordance with Article 3 of the Purchase Agreement, the FCF
Payments from and after the Option Expiry Date shall be calculated at the rate of 42.5% of Free Cash Flow;
(c) If the Partnership Option transaction is terminated in accordance with Article 3 of the Purchase Agreement, the FCF
Payments from and after the Termination Date shall be calculated at the rate of 42.5% of Free Cash Flow; and
(d) If in any calendar year during which the Owner is implementing an Agreed Capital Project(s) the Free Cash Flow for
such calendar year is less than zero ($0), the Holder’s proportionate share of such loss up to the value of the total capital expenditure of such Agreed Capital Project(s), being 46.0% or 42.5% (as applicable), shall be either (i)
set off against any future FCF Payments paid to the Holder, including without limitation the Guaranteed FCF Amount, or (ii) paid to the Owner on the Partnership Closing Date, whichever is earlier.
| 3. |
Time and Manner of FCF Payments
|
(a) The FCF Payments shall be calculated on a calendar year basis (except in the first year when they will be calculated
for the period from [April 1, 2020] to December 31, 2020) and shall become due and payable sixty (60) days following the last
day of such calendar year. FCF Payments shall be made by wire transfer of immediately available funds to such account as the Holder may designate to the Owner in writing not less than ten business days prior to the dates upon which
such payments are to be made, and shall be accompanied by a settlement sheet showing in reasonable detail the proceeds of sale, costs and other deductions in accordance with the methodology provided in Schedule “B”, together with
any other pertinent information in sufficient detail to explain the calculation of the FCF Payments.
(b) All FCF Payments shall be considered final and in full satisfaction of all obligations of the Owner with respect
thereto, unless the Holder gives the Owner written notice describing and setting forth a specific objection to the calculation thereof within sixty (60) days after receipt by the Holder of the annual statement provided for in
Section 3(a). If the Holder objects to a particular annual statement as herein provided, the Holder shall, for a period of thirty (30) days after the Owner’s receipt of notice of such objection, have the right, upon reasonable
notice and at a reasonable time, to have the Owner’s accounts and records relating to the calculation of the FCF Payments in question audited by a third party accountant acceptable to each of the Holder and to the Owner. If such
audit determines that there has been a deficiency or an excess in the payment made to the Holder such deficiency or excess shall be resolved by adjusting the next annual FCF Payment due hereunder. The Holder shall pay all costs of
such audit unless a deficiency of five percent (5%) or more of the amount due is determined to exist. The Owner shall pay the reasonable costs of such audit if a deficiency of five percent (5%) or more of the amount due is
determined to exist together with interest on the amount of such deficiency at the rate of Prime plus two percentage points calculated from the date that such deficient amount was due and payable. The Owner’s books and records shall
be kept in accordance with IFRS. Failure on the part of the Holder to deliver written notice of an objection to the calculation in such 60-day period shall establish the correctness of such FCF Payments and preclude the Holder from
any objections with respect thereto or making any claims for adjustment thereon, absent manifest error.
(c) All FCF Payments, including interest and penalties, if any, will be made subject to withholding or deduction in
respect of the FCF Payments for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (collectively, “Tax”) imposed or levied by or on behalf of any government having power and jurisdiction to tax and for which the Owner is obligated in law to withhold or deduct and remit to such taxing authority
having such power and jurisdiction.
(d) Within ninety (90) days of the Fourth Anniversary Date (or such other date as is mutually agreed by the Owner and the
Holder in writing), the Owner shall deliver to the Holder a statement setting out the aggregate amount of FCF Payments paid or payable to the Holder relating the period from the date hereof to the Fourth Anniversary Date and a draft
calculation of the Guaranteed FCF Amount based on the Approved Model (together with any other pertinent information in sufficient detail to explain the Owner’s calculation of the Guaranteed FCF Amount).
(e) The Owner’s calculation of the Guaranteed FCF Amount shall be considered final and in full satisfaction of all
obligations of the Owner with respect thereto, unless the Holder gives the Owner written notice describing and setting forth a specific objection to the calculation thereof within thirty (30) days after receipt by the Holder of the
draft calculation of the Guaranteed FCF Amount referred to above. If the Holder objects to the draft calculation of the Guaranteed FCF Amount, the Holder shall, for a period of thirty (30) days after the Owner’s receipt of notice of
such objection, have the right, upon reasonable notice and at a reasonable time, to have the Owner’s accounts and records relating to the calculation of the Guaranteed FCF Amount audited by a Third Party Valuator who, acting as
experts and not arbitrators, shall make any required adjustments to the calculation of the Guaranteed FCF Amount to reflect their determination of the Guaranteed FCF Amount. The Parties hereto agree that all adjustments shall be
made without regard to materiality. The Third Party Valuator shall only decide the specific items under dispute by the Owner and the Holder and its decision for any disputed portions of the calculation of the Guaranteed FCF Amount.
The Owner and the Holder shall each bear their own fees and expenses in preparing or reviewing, as the case may be, the draft calculation of the Guaranteed FCF Amount. The fees and expenses of the Third Party Valuator shall be paid
by the Holder unless a deficiency of five percent (5%) or more of the amount due is determined to exist. The Owner shall pay the reasonable costs of the Third Party Valuator if a deficiency of five percent (5%) or more of the amount
due is determined to exist. The Third Party Valuator shall make a determination as soon as practicable within fifteen (15) days (or such other time as the Owner and the Holder shall agree in writing) after their engagement, and its
determination of the Guaranteed FCF Amount shall be conclusive and binding upon the Parties hereto and will not be subject to appeal, absent manifest error. The final, binding and conclusive calculation of the Guaranteed FCF Amount
based upon the agreement or deemed agreement of the Owner and the Holder or the written determination delivered by the Third Party Valuator, in either case in accordance with this Section 3(e), shall be deemed to be the Guaranteed
FCF Amount for purposes of this Agreement.
(f) If the aggregate amount of FCF Payments paid or payable by the Owner to the Holder on or before the Fourth Anniversary
Date is less than the Guaranteed FCF Amount, the Owner shall pay to the Holder, contemporaneously with the delivery of such statement, by wire transfer to the account designated by the Holder in writing to the Owner in respect of
FCF Payments, the amount of any such shortfall within ten (10) days of the date of the final determination referred to in Section 3(e) above.
| 4. |
Option to Contribute the Free Cash Flow Royalty for a Partnership Interest
|
At any time during the period (the “Option Exercise Period”) commencing on the Fourth Anniversary Date and expiring at 5:00 p.m. (Eastern time) on the date which is 60 days after the Fourth Anniversary Date (the “Option Expiry Date”) the Holder may
elect by notice in writing to the Owner to require the Owner to form an Ontario limited partnership (the “Partnership”) and form a
corporation (wholly-owned by the Owner) to act as the sole general partner of the Partnership, and to contribute this Agreement to the Partnership in exchange for a 46.0% limited partnership interest (the “Partnership Option”), all on the terms and subject to the conditions set out in Article 3 of the Purchase Agreement.
| 5. |
FCF Payment Repurchase Rights
|
(a) The Owner may, at any time during the Option Exercise Period, by notice in writing to the Holder (the “Repurchase Notice”), whether or not the Holder has exercised the Partnership Option, elect to repurchase and cancel this Agreement
(the “Repurchase”) for a purchase price determined pursuant to Article 3 of the Purchase Agreement payable in immediately
available funds at the closing of the Repurchase on the Repurchase Closing Date.
(b) The Repurchase Notice shall designate the date for completion of the Repurchase, which completion date shall be no
later than 30 days following the date of the Repurchase Notice (such date, the “Repurchase Closing Date”). Notwithstanding the
completion of the Repurchase and cancellation, the Owner shall pay to the Holder a prorated FCF Payment for the period commencing on the first day of the calendar year in which the Repurchase occurs and ending as at the opening of
business on the Repurchase Closing Date.
(c) If the Owner elects to complete the Repurchase as set out in this Section 5, all rights of the Holder to contribute
this Agreement in exchange for a 46.0% limited partnership interest as set out in Section 4 above and Article 3 of the Purchase Agreement shall terminate, whether or not the Holder has exercised the Partnership Option.
| 6. |
Transfers; Rights of First Offer
|
(a) Subject to Section 16, a Party shall not Transfer, directly or indirectly, the whole or any part of its interest in
this Agreement (and the corresponding rights in the Purchase Agreement), the Owner shall not Transfer the Properties, except as provided in this Section 6 or as otherwise required or permitted by this Agreement. Any
non-complying purported Transfer shall be of no effect.
(b) The Holder may sell all, but not less than all, of its interest in this Agreement (and the corresponding rights in the
Purchase Agreement), and the Owner may sell all, but not less than all, of the Properties together with its interest in this Agreement and the corresponding rights in the Purchase Agreement, (each respectively, the “Sale Interest” and the Holder or the Owner, as applicable, the “Selling Party”) provided that the Selling Party shall first offer the Sale Interest to the other Party in the manner set forth below:
|
(i) |
the Selling Party shall deliver a notice in writing to the other Party offering to sell the Sale Interest to such other Party (the “ROFO Notice”);
|
|
(ii) |
the other Party shall have 30 days from the date of receipt of the ROFO Notice to submit a detailed written offer to the Selling Party offering to
acquire the Sale Interest including the price, the form of consideration, the conditions precedent and any other material terms of the offer (the “ROFO Offer”); and
|
|
(iii) |
any ROFO Offer shall be irrevocable and open for acceptance for not less than 10 days after the date on which the ROFO Offer was delivered to the
Selling Party (the “Acceptance Period”);
|
The Holder acknowledges that the North Surface Land forming part of the Properties is subject to a right of first
refusal in favour of the Secwépemc Nation and that any sale of the North Surface Land, including hereunder, is subject to such right of first refusal.
(c) At any time within the Acceptance Period, the Selling Party may deliver a notice (the “Acceptance Notice”) to the Party that delivered a ROFO Offer confirming that it wishes to accept the ROFO Offer. Any sale of the Sale Interest pursuant to
this Section 6 shall be completed within 30 days following the expiry of the Acceptance Period.
(d) If the Selling Party does not deliver an Acceptance Notice to the other Party within the Acceptance Period, the rights
of the other Party to purchase the Sale Interest shall terminate and the Selling Party may sell the Sale Interest to any other Person provided that:
|
(i) |
the sale is completed within 90 days of the expiry of the Acceptance Period (other than in circumstances where the Selling Party requires regulatory
approval(s) in order to complete the sale, in which case, the Selling Party will have an additional 90 days in which to complete the sale); and
|
|
(ii) |
such sale is completed on terms that are more favourable to the Selling Party than the terms contained in the ROFO Offer.
|
(e) If the Selling Party does not complete the sale of the Sale Interest to a third Person within the timeframe provided
by Section 6(d)(i), the obligations set out in this Section 6 shall again apply with respect to any such sale.
(f) In the case of a Transfer by the Owner, if a third party purchaser acquiring the Sale Interest is not a Pre-Approved
Purchaser, the Holder shall have the right to sell, and such Person shall be obligated to purchase prior to consummation of any such transaction, the FCF Royalty at a cash purchase price equal to the greater of: (i) an amount that
results in [Internal rate of return calculation redacted]; and (ii) an amount equal to the FMV of the FCF Royalty as determined
by a Third Party Valuator.
(g) If a Selling Party completes a sale to a third party pursuant to this Section 6, the Selling Party and the third-party
purchaser shall provide a certificate to the other Party that the third party sale has been completed, in all respects, in accordance with Section 6, as applicable. For a period of 30 days following receipt of such certificate, any
Party shall be permitted on request notice to the Selling Party and the third-party purchaser to be provided with reasonable access to the closing documentation relating to such third-party sale.
(h) A change of Control of a Party shall be deemed to be a “Transfer” by such Party prohibited pursuant to Section 6(a)
and such deemed Transfer shall be subject to the restrictions on Transfers set forth in the Agreement, including those set forth in this Section 6. Notwithstanding the foregoing, any take-over, amalgamation, plan of arrangement or
other similar transaction in respect of a publicly traded entity shall not constitute a Transfer for the purposes of this Agreement; provided that, in the event that a third-party purchaser acquiring Control of the Owner, or any
publicly-traded successor thereof, is not a Pre-Approved Purchaser, the Holder shall have the right to sell, and the Owner shall be obligated prior to consummation of any such transaction to repurchase the FCF Royalty at a cash
purchase price equal to the greater of: (i) an amount that results in [Internal rate of return calculation redacted]; and (ii)
an amount equal to the FMV of the FCF Royalty as determined by a Third Party Valuator.
(i) A Party contemplating a Transfer pursuant to this Section 6 may, at the risk of such Party, grant access to the Mine
to any third party to whom such Party bona fide contemplates such potential sale that agrees to comply with customary confidentiality obligations in favour of each Party provided that such Party first provides reasonable advance
notice in writing to the other Party. Access to such third party shall occur during reasonable working hours for the purposes of due diligence in respect of the Properties. The Selling Party must ensure that such third party causes
minimal inconvenience to or interference with the Owner or contractors or subcontractors of the Owner in the conduct of Operations and strictly complies with all safety regulations or instructions promulgated or given by or on
behalf of the Owner. The Owner shall cooperate with the Selling Party in connection with such diligence activities and shall cause its personnel to be available during such reasonable working hours for informational sessions with
such third party.
(j) Notwithstanding any other provision of this Agreement to the contrary, if the Holder does not exercise the Option, in
the event the Holder Transfers this Agreement at any time following the Option Expiry Date, to any transferee of the Holder which is not an Affiliate of the Holder, such transferee shall be entitled, upon notice in writing to the
Owner delivered on or prior to the date which is thirty (30) days following the date of such Transfer, to elect to request the Owner to form the Partnership and to contribute this FCF Royalty Agreement to the Partnership in exchange
for a 42.5% limited partnership interest in the Partnership, all on the terms and subject to the conditions set out in Article 3 of the Purchase Agreement, mutatis mutandis.
| 7. |
Formation of Advisory Committee
|
(a) Subject to the provisions of this Agreement at all times, promptly following the date of this Agreement, the Owner
shall form an advisory committee (the “Advisory Committee”) comprised of four representatives of the Holder and four
representatives of the Owner (each a “Member”) for the purpose of keeping the Holder advised of material matters in respect of
the Operations and to allow the Holder to make suggestions regarding the Operations, which the Owner will consider in good faith.
(b) The Advisory Committee shall hold quarterly meetings, in accordance with the procedures below, at which the New Afton
Mine General Manager, a representative of the Owner’s senior management and such other Owner representatives as the Owner in its discretion considers necessary (to the extent any such individuals are not the Members) or which the
Holder may reasonably request, shall be present. The Owner may also call additional Advisory Committee meetings from time to time for the purpose of approving an Additional Capital Project or any of the matters referred to in
Section 7(g) on at least 10 or 15 days’ prior notice (or such shorter period as may be consented to by all the Members). The Holder’s Members shall also be entitled to receive notice of and to attend all meetings of the New Afton
Mine Independent Tailings Review Board (the “ITRB”) and to receive all reports of the ITRB or otherwise prepared in connection
with meetings of the ITRB.
(c) The Owner shall be entitled to appoint the chair of the Advisory Committee. All meetings of the Advisory Committee
shall be held in Kamloops, British Columbia or such other place as may be consented to by the Owner and the Holder, or by such telephone or other electronic conference facilities as permit all persons participating in the meeting to
communicate with each other simultaneously, on at least ten days’ prior notice (or such shorter period as may be consented to by all the Members) given by the chair of the Advisory Committee, to all Members stating therein the time
and place of the meeting and the agenda for the meeting with supporting materials. Materials to be provided for each meeting shall at a minimum include a discussion of all material developments in respect of the Operations at the
New Afton Mine in the previous quarter.
(d) Any documents or other material to be considered at any Advisory Committee meeting shall be delivered to each Member
by the chair of the Advisory Committee at least 10 days prior to such meeting (except for materials with respect to an Additional Capital Project pursuant to Section 7(f) or any of the matters referred to in Section 7(g) or Section
7(h)).
(e) The only Persons entitled to attend meetings of the Advisory Committee are the Members or other representatives of the
Owner, provided that the Holder shall be entitled to invite not more than two guests to attend any Advisory Committee meeting provided that such guests must be directors, officers, employees or consultants of the Holder. Any other
Person may be admitted to such meetings only with the consent of all Members. Any guests of the Holder shall execute confidentiality agreements in favour of the Owner with respect to the meeting of the Advisory Committee. Meeting
attendance costs incurred by Members appointed by the Holder and any guests of the Holder shall be paid for by the Holder.
(f) If the Owner wishes to undertake an Additional Capital Project, the Owner shall present a detailed description and
financial model (the “Additional Capital Project Supporting Material”) of the Additional Capital Project to each of the Members.
The chair of the Advisory Committee must convene a meeting of the Advisory Committee for a date not less than 30 days after the date of the Owner’s submission of the Additional Capital Project Supporting Material for the purpose of
the Advisory Committee considering the Additional Capital Project as so submitted. The Holder’s Members shall confer with the Holder and the Holder shall provide a decision in writing with respect to the Additional Capital Project
within 10 days of such meeting. If the Holder does not provide a decision in writing with respect to the Additional Capital Project within 10 days of such meeting, the Additional Capital Project shall be deemed to be approved. If
the Holder approves of the Additional Capital Project in writing, or is deemed to have approved of the Additional Capital Project, such Additional Capital Project shall thereafter be deemed to be an “Agreed Capital Project” with its revenue and costs included in the FCF Payment calculation for the applicable period(s) in accordance with Schedule “B”. In
the event that the Holder does not approve an Additional Capital Project presented to the Advisory Committee for approval in accordance with this Section 7(f), the Owner shall be free to implement such Additional Capital Project
which is not an Agreed Capital Project (each, an “Unapproved Additional Capital Project”) in its discretion, and the revenue and
costs of any such Unapproved Additional Capital Project will not be included in the FCF Payment calculation for the applicable period(s) in accordance with Schedule “B”.
(g) Notwithstanding any other provision of this Agreement to the contrary, until the New Afton Mine ceases commercial
production (the “Closure Date”) the following matters (each such matter, together with the matters set out in Section 7(h), an “Approval Matter”) shall require the approval of the Holder:
|
(i) |
only during the period commencing on the date of this Agreement and ending on the earlier of the Option Expiry Date and the Termination Date, as
applicable:
|
|
(a) |
annual capital or operating expenditures (excluding any Additional Capital Projects, Approved Capital Projects and/or expenditures contained in the
Tailings Projects Budget) not included in a previous Approved Annual Program and Budget for the Mine then in effect in excess of $35 million; and
|
|
(b) |
any decreases to the expenditures contained in the Tailings Projects Budget that, individually or in the aggregate, are in excess of $15 million;
|
|
(ii) |
the granting of any royalty, product streaming agreement or other third-party burden on account of the production or sale of Minerals other than
existing royalties and other than payments of any nature made to any Indigenous Group; and
|
|
(iii) |
any borrowings in respect of the New Afton Mine that would result in the incurrence of new “Interest Costs” for purposes of the calculation of Free
Cash Flow pursuant to Schedule “B” hereof.
|
(h) During the period commencing on the earlier of the Option Expiry Date and the Termination Date, as applicable, and
ending on the Closure Date, in addition to the Approval Matters set out in Section 7(g)(ii) and Section 7(g)(iii), the Holder shall be entitled to approve:
|
(i) |
the draft annual program and budget in respect of the New Afton Mine for each financial year (but for greater certainty, excluding Additional
Capital Projects); and
|
|
(ii) |
annual capital or operating expenditures (excluding any Additional Capital Projects and/or Agreed Capital Projects) not included in a previous
Approved Annual Program and Budget for the New Afton Mine then in effect in excess of $15 million.
|
If the Holder Transfers its rights in this Agreement (other than a Transfer to an Affiliate of the Holder), the
approval rights of the Holder set out in Section 7(h)(i) and Section 7(h)(ii) above and Section 8, and the right to indemnity by the Owner set out in Article 19, at the applicable date of Transfer, shall terminate immediately.
(i) With respect to any other Approval Matter (other than annual programs and budgets and Additional Capital Projects),
the Owner shall present a detailed description and supporting material (the “Approval Matter Supporting Material”) of each
Approval Matter to each of the Members. The chair of the Advisory Committee must convene a meeting of the Advisory Committee for a date not less than 30 days after the date of the Owner’s submission of the Approval Matter
Supporting Material for the purpose of the Advisory Committee considering the Approval Matter as so submitted. The Holder’s Members shall confer with the Holder and the Holder shall provide a decision in writing with respect to the
Approval Matter within 10 days of such meeting. If the Holder does not provide a decision in writing with respect to the Approval Matter within 10 days of such meeting, the Approval Matter shall be deemed to be approved.
(a) During a period, if any, when the Holder is entitled to approve annual programs and budgets pursuant to Section
7(h)(i), draft annual programs and the budgets with regard to Operations to be conducted for any fiscal year shall be prepared and submitted by the Owner to the Members of the Advisory Committee no later than October 31st
in each year for the next following fiscal year.
(b) Any draft annual program and budget of Operations for any fiscal year submitted to the Members of the Advisory
Committee must, at a minimum, contain:
|
(i) |
a statement in reasonable detail of the proposed Operations;
|
|
(ii) |
an estimate of all Expenditures, including capital Expenditures, to be incurred and an estimate of the time or period during which it will be
incurred, plus a reasonable allowance for contingencies;
|
|
(iii) |
such other facts as may be necessary to reasonably illustrate the results intended to be achieved by the proposed program;
|
|
(iv) |
an estimate of the quantity and quality of the ore to be mined and the Minerals and by-products to be produced;
|
|
(v) |
an estimate of revenues and other cash receipts to be received by the Owner from sales of Minerals;
|
|
(vi) |
an outline of the sources of funding to be used to implement the proposed program; and
|
|
(vii) |
any other information reasonably required by the Members.
|
Each draft program will be accompanied by the reports and data that are reasonably necessary for
each Member to evaluate and assess the Approved Annual Program and Budget for the then current fiscal year and the draft program and budget in respect of the next fiscal year. Upon request of any Member, the Owner must meet with that
Member to discuss a draft program and budget and will provide such additional or supplemental information as that Member may reasonably require.
(c) The Chair must also convene a meeting of the Advisory Committee for a date not less than 10 nor more than 15 business
days after the date of submission of a draft program and budget to the Members for the purpose of the Holder’s Members considering the program and budget as so submitted. The Holder’s Members shall confer with the Holder and the
Holder shall provide a decision in writing with respect to the draft program and budget within 10 days of such meeting. If the Holder does not provide a decision in writing, within 10 days of such meeting the program and budget
shall be deemed to have been approved. Any budget and program which has been approved by the Holder shall be submitted to the board of directors of the Owner for review and approval. If such budget and program is approved with no
material changes, (such program and budget, so approved and adopted, the “Approved Annual Program and Budget”), it shall be
implemented by the Owner for the following fiscal year. If the board of directors of the Owner approves the budget and program with material changes, the Owner shall resubmit such amended program and budget to the Holder for
approval in accordance with this paragraph.
(d) If the Holder does not approve a program and budget proposed by the Owner in respect of a period during which, in the
absence of such approval, there will be no current program and budget relating to Operations and the Holder and the Owner do not prior to the commencement of that period reach some contrary agreement or the Holder does not approve
that proposed program and budget or a revision of the proposed program and budget, then, until such time as a program and budget is approved by the Holder, the Holder will be deemed to have approved a program and budget for:
|
(i) |
the continuation of the Operations at the level of the last Approved Program and Budget but with:
|
|
(a) |
the budget of Expenditures; and
|
|
(b) |
each item in the budget of Expenditures, comprised in the last Approved Annual Program and Budget escalated at the annual rate of inflation; and
|
|
(ii) |
the replacement of worn out or obsolete plant, machinery and equipment at the discretion of the Owner to an aggregate value of up to 50% of the
average annual Expenditures incurred on such replacements over the three preceding fiscal years by the Owner.
|
(e) For the purposes of Section 8(d) the "annual rate of inflation" in respect of a fiscal year and in respect of each
item comprised in a budget of Expenditures means the movement during the fiscal year:
|
(i) |
in the case of consumable supplies, in the actual purchase cost of the item concerned; or
|
|
(ii) |
in the case of wages, in the applicable award, collective agreement or other similar agreement; or
|
|
(iii) |
in all other cases (including salaries and benefits), in the Canadian Consumer Price Index which is most appropriate to the item concerned as
published by the Statistics Canada (or in the absence of that index some other periodically published measure of inflation in Canada which as nearly as possible equates to that index agreed upon by the Owner and the Holder
or failing such agreement selected by the auditor for the time being of the Owner).
|
(a) This Agreement shall commence the date hereof and continue in perpetuity unless: (i) the Holder exercises the
Partnership Option and the Partnership Option transaction is closed in accordance with Article 3 of the Purchase Agreement, in which case this Agreement shall be cancelled on the Option Closing Date; or (ii) the Owner exercises the
Repurchase and the Repurchase transaction is closed in accordance with Article 3 of the Purchase Agreement, in which case this Agreement shall be cancelled on the Repurchase Closing Date.
(b) If any right, power or interest of either Party under this Agreement would violate the rule against perpetuities, then
such right, power or interest will terminate at the expiration of twenty (20) years after the death of the last survivor of all the lineal descendants of Her Majesty, Queen Elizabeth II of England, living on the date of this
Agreement.
The Owner shall have the right to commingle any ores, Minerals from the Properties with ores,
minerals and mineral products produced from other properties, provided that such commingling is accomplished after such Minerals have been weighed or measured and sampled in accordance with sound mining and metallurgical practices
(detailed records of which shall be kept by Owner) and further provided that the Owner and the Holder shall agree (each acting reasonably and in good faith) upon a weighing/measurement/sampling protocol prior to any commingling
occurring. Any FCF Payment due hereunder shall be determined by equitable allocation between Minerals from the Properties and ores, minerals and mineral products from other properties in accordance with sound accounting and
metallurgical practice. The Holder will have the right, during reasonable business hours and upon reasonable prior notice to the Owner, to enter upon the Properties and to inspect the plant and procedures followed by the Owner with
respect to allocations made under this Section 10, provided that such entry will be at the sole risk and cost of the Holder, and in compliance with applicable safety rules and regulations.
(a) The Holder acknowledges that the Owner shall have the right to market and to sell to third parties the Minerals, and
any other minerals and mineral products produced from the Properties in any manner. The Holder further acknowledges that the Owner may from time to time undertake forward sale and/or purchase contracts, spot-deferred contracts, and
option and/or other price hedging and price protection arrangements and mechanisms and speculative purchases and sales of forward, futures and option contracts, both on and off commodity exchanges (collectively, “Trading Activities”) in connection with precious metals derived completely from Minerals products produced from the Properties.
Except for Concentrate Sales Process Hedges, such Trading Activities and the profits and losses generated thereby, shall not, in any manner, be taken into account in the calculation of FCF Payments due the Holder, whether in
connection with the determination of price, the date of sale, or the date any FCF Payments is due.
(b) Where, in the ordinary course of business and in respect of metals derived completely from Minerals produced from the
Properties, a gold or copper swap contract relating to the quantity of a single concentrate shipment and for a period of no more than one year is entered into by the Owner for the purpose of reducing exposure to gold and copper
prices in the period between provisional and final assays in the sale of a concentrate shipment (“Concentrate Sales Process Hedges”),
the gains or losses from such Concentrate Sales Process Hedges will be included in Treatment and Refining Charges (as such term is defined in Schedule “B”) in the FCF Payments calculation.
| 12. |
Representations and Warranties of the Owner
|
(a) The Owner hereby represents and warrants to the Holder as follows:
|
(i) |
it is duly incorporated, organized, validly existing and in good standing under the laws of its governing jurisdiction;
|
|
(ii) |
it has all necessary corporate power and authority to enter into and perform its obligations under this Agreement and to own the Properties and to
carry on its business as conducted and as proposed to be conducted in respect of in the Properties;
|
|
(iii) |
neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated herein nor the compliance with the terms,
conditions and provisions of this Agreement will conflict with or result in a breach of any terms, conditions or provisions of the charter documents or by-laws of the Owner, any law, rule or regulation having the force of
law, any contractual restrictions that are binding upon the Owner, or any writ, judgment, injunction, determination or award that is binding upon the Owner;
|
|
(iv) |
this Agreement has been duly executed and delivered by the Owner and constitutes a valid and legally binding obligation of the Owner; and
|
|
(v) |
the Owner possesses or will possess all material licences, approvals and consents of all governments and regulatory authorities that are required to
properly conduct its mining business on the Properties.
|
(b) All representations, warranties, covenants and agreements of the Owner set forth in this Agreement shall survive the
creation of the FCF Royalty and shall continue in full force and effect for the benefit of the Holder for the duration of the term of the FCF Royalty.
| 13. |
Confidentiality; Area of Interest
|
(a) All information, data, reports, records, analyses, economic and technical studies and test results relating to the
Properties and the activities of the Owner or any other party thereon and the terms and conditions of this Agreement (all of which will hereinafter be referred to as “Confidential Information”) will be treated by the Holder as confidential and will not be disclosed to any person not a party to this Agreement, except in the following circumstances:
|
(i) |
the Holder may disclose Confidential Information to its auditors, legal counsel, institutional lenders, brokers, underwriters and investment
bankers, provided that such non-party users are first advised of the confidential nature of the Confidential Information, undertake to maintain the confidentiality thereof and are strictly limited in their use of the
Confidential Information to those purposes necessary for such non-party users to perform the services for which they were retained by the Holder;
|
|
(ii) |
the Holder may disclose Confidential Information to prospective purchasers of the Holder's right to receive the FCF Royalty, provided that each such
prospective purchaser first agrees in writing to hold such information confidential in accordance with this Section 13(a) and to use it exclusively for the purpose of evaluating its interest in purchasing such FCF Royalty
right;
|
|
(iii) |
the Holder may disclose Confidential Information where that disclosure is necessary to comply with any requirements under applicable law, rules or
regulations, and the Owner agrees to promptly provide to the Holder all such information as the Holder, acting reasonably, determines is necessary or desirable to fulfill the Holder's disclosure obligations and
requirements under applicable laws, provided that prior to making any such disclosure the Holder shall give the Owner five (5) business days’ prior written notice and the opportunity to comment on such disclosure; or
|
|
(iv) |
with the prior written approval of the Owner.
|
The Holder shall ensure that its, and its affiliates’, employees, directors, officers and agents
and those persons listed in Section 13(a)(i) and Section 13(a)(ii) are made aware of this Section 13 and comply with the provisions of this Section 13. The Holder shall be liable to the Owner for any improper use or disclosure of such
terms or information by such persons.
Any Confidential Information that becomes a part of the public domain by no act or omission in
breach of this Section 13(a) will cease to be Confidential Information for the purposes of this Section 13(a).
(b) The Holder acknowledges that Confidential Information may include material non-public information and that applicable
securities laws impose restrictions on trading securities when in possession of such information.
(c) During the term of this Agreement, the Holder agrees that it will not acquire or agree to acquire any interest in any
mineral rights (including without limitation any exploration or prospecting permit, mineral lease, mining lease, surface lease or similar tenure) (collectively, “Mineral Rights”) located within five (5) kilometres of the outermost external boundaries of the Properties, and the Holder further agrees that neither the Holder nor any of its Affiliates acting
on its behalf or at its direction, will acquire or agree to acquire any interest in an entity that, either directly or through Affiliates, derives more than 20% of its value from the ownership of Mineral Rights located within five
(5) kilometers of the outermost external boundaries of the Properties.
All tailings relating to the Minerals shall be subject to the FCF Payments if such tailings are
processed by or behalf of the Owner in the future and result in the production of Minerals. If commingling of the tailings occurs, the amount of such tailings subject to the FCF Payments shall be based upon the estimated weight of
such tailings multiplied by the estimated grade of such tailings in accordance with sound accounting and metallurgical practice.
| 15. |
Maintenance of Properties
|
(a) The Owner shall do or cause to be done all things and make all payments necessary or appropriate to maintain the
right, title and interest of the Owner in the Properties and to maintain the Properties in good standing, provided that the Owner shall in its sole discretion be: (i) entitled to abandon or surrender or allow to lapse or expire any
part or parts of the Properties if the Owner determines, acting reasonably, that such part or parts are not economically viable or otherwise have insufficient value to warrant continued maintenance; and (ii) permitted to Transfer
the Properties as permitted under this Agreement. For greater certainty, a Relinquishment Event (as defined below) does not constitute a Transfer and is not subject to Article 6.
(b) Notwithstanding Section 15(a), if the Owner or an Affiliate of the Owner wishes to abandon surrender, allow to lapse
or expire (the “Relinquishment Event”) all or any portion of the Properties (the “Released Properties”), then the Owner shall provide the Holder with a minimum of 30 days’ prior written notice of such intended Relinquishment Event. Upon receipt of the
said notice, the Holder shall have a period of 10 days within which to advise the Owner in writing that it desires to acquire the Released Properties, by quitclaim deed or equivalent legal instrument, for consideration equal to
$10.00. If the Holder shall forward such written notice to the Owner within the said 10-day period, the Owner shall thereafter do all such acts and things or shall cause all such acts and things to be done, at the Holder’s own sole
cost and expense, to assign or convey, as appropriate, the Released Properties to the Holder for the said $10.00 and to have the Released Properties recorded or registered into the name of the Holder (at the sole cost of the
Holder). If the Holder does not forward the said written notice to the Owner within the said 10-day period, then the Owner or the Affiliate of the Owner shall have the right to complete the Relinquishment Event with respect to the
applicable Released Properties. If a Relinquishment Event is completed and thereafter, the Owner or any Affiliate of the Owner subsequently reacquires a direct or indirect beneficial interest in the Released Properties then such
Released Properties will once again be subject to the obligation to pay the FCF Royalty pursuant to this Agreement with respect thereto.
Subject to Section 6, the Owner shall be entitled to Transfer the Properties and its rights and
obligations under this Agreement, provided the following conditions are satisfied, and upon such conditions being satisfied in respect of any Transfer only the Owner shall be released from all obligations under this Agreement:
(a) any purchaser, transferee, lessee or assignee of the Properties or this Agreement (other than a mortgagee, charge,
lessee, assignee or encumbrancer) agrees in writing in favour of the Holder to be bound by the terms of this Agreement;
(b) any purchaser, transferee or assignee of this Agreement (other than a mortgagee, charge, lessee, assignee or
encumbrancer) has simultaneously acquired the Owner’s right, title and interest in and to the Properties; and
(c) any mortgagee, chargee, lessee, assignee or encumbrancer of the Properties or this Agreement agrees in advance in
writing in favour of the Holder to be bound by and subject to the terms of this Agreement in the event it takes possession of or forecloses on all or part of the Properties and undertakes to obtain an agreement in writing in favour
of the Holder from any subsequent purchaser, lessee, assignee or transferee of such mortgagee, chargeholder, lessee or encumbrancer that such subsequent purchaser, lessee, assignee or transferee will be bound by the terms of this
Agreement including, without limitation, this Section 16.
| 17. |
Conduct of Operations
|
(a) All decisions concerning methods, the extent, times, procedures and techniques of any exploration, development,
mining, milling, processing, extraction treatment, if any, and the materials to be introduced into the Properties or produced therefrom, and all decisions concerning the sale or other disposition of Minerals (including, without
limitation, decisions as to buyers, times of sale, whether to store or stockpile Minerals for a reasonable length of time without selling the same) shall be made by the Owner, in its sole discretion, provided that if the Owner
determines to stockpile Minerals it shall first take commercially reasonable steps to secure such Minerals from loss, theft, tampering and contamination.
(b) The Owner shall not be responsible for nor obliged to make any FCF Payments which account for the value of any
Minerals lost in any mining or processing of the Minerals.
(c) The duly authorised representatives of the Holder and a consultant engaged by the Holder may, at the risk of the
Holder, have access to the Properties twice per calendar year (and such other time(s) as the Owner may agree) for the purposes of inspecting the Properties and the Operations being carried out on the Properties. The Holder must
ensure that its representatives or consultant, as the case may be, cause minimal inconvenience to or interference with the Owner or contractors or subcontractors of the Owner in the conduct of the Operations, do not give any
instructions or directions to any Person engaged in the conduct of the Operations, and comply strictly with any safety regulations or instructions promulgated or given by or on behalf of the Owner.
| 18. |
Books; Records; Inspections
|
The Owner shall keep true, complete and accurate books and records of all of its operations and
activities with respect to the Properties, including the mining of Minerals therefrom and the mining, treatment, processing, refining and transportation of Minerals, prepared in accordance with IFRS, consistently applied. Subject to
complying with the confidentiality provisions in Section 13(a) of this Agreement, the Holder and/or its authorized representatives shall be entitled, upon delivery of thirty (30) business days advance notice, and during the normal
business hours of the Owner, to perform audits or other reviews and examinations of the Owner’s books and records relevant to the calculation and payment of the FCF Payments pursuant to this Agreement no more than once per calendar
year to confirm compliance with the terms of this Agreement. All expenses of any audit or other examination permitted hereunder shall be paid by the Holder, unless the results of such audit or other examination permitted hereunder
disclose a deficiency in respect of any FCF Payments paid to the Holder hereunder in respect of the period being audited or examined in an amount greater than five percent (5%) of the amount of the FCF Payments properly payable with
respect to such period, in which event all expenses of such audit or other examination shall be paid by the Owner.
(a) The Owner does hereby agree to defend, indemnify, reimburse and hold harmless the Holder, its Affiliates, and their
respective officers, directors, employees, agents and their successors and assigns (collectively, “Holder Indemnified Parties”),
and each of them, from and against any and all Losses that the Holder Indemnified Parties may sustain, suffer or incur as a result of:
|
(i) |
any Operations conducted on or in respect of the Properties by or on behalf of the Owner that result from or relate to Losses, in any way arising
from or connected with any non-compliance by the Owner with any present or future environmental laws; and
|
|
(ii) |
any failure by the Owner to timely and fully perform all abandonment, restoration, remediation and reclamation required by all governmental
authorities pertaining or related to the Operations or activities by or on behalf of the Owner on or with respect to the Properties.
|
(b) The Parties acknowledge that the Holder is acting as agent and trustee for and on behalf of each other Holder
Indemnified Party with respect to any rights pursuant to Section 19(a) but the Owner and the Holder agree that they may amend, terminate, revise or replace this Agreement at any time and in any manner whatsoever, notwithstanding any
such rights granted pursuant hereto to any such Holder Indemnified Party, without notice to, consent of, or any other obligation whatsoever to, such Holder Indemnified Party.
Any matter in this Agreement in dispute between the Parties which has not been resolved by the
Parties within thirty (30) days of the delivery of notice by either Party of such dispute shall be referred to binding arbitration. Such referral to binding arbitration shall be to a qualified single arbitrator pursuant to the Arbitrations Act, 1991 (Ontario), which Act shall govern such arbitration proceeding in accordance with its terms except to the extent
modified by the rules for arbitration set out in Schedule ”C”. The determination of such arbitrator shall be final and binding upon the Parties hereto and the costs of such arbitration shall be as determined by the arbitrator. The
Parties covenant that they shall conduct all aspects of such arbitration having regard at all times to expediting the final resolution of such arbitration.
(a) Interest in Land; Registration of Interest
|
(i) |
The Parties intend that, subject to the provisions of Section 15(b), the FCF Royalty on the Properties will be a covenant running with the
Properties, will be enforceable as an in rem interest in land which shall run with the Properties (provided that such
interest shall be satisfied only by the payment to the Holder of the FCF Payments). Any conveyance by the Owner of the Properties shall include a provision requiring the transferee to pay the FCF Royalty on the Properties.
Subject to compliance with Section 16, upon a conveyance by the Owner of the Properties and this Agreement, the Owner shall automatically be released from, and shall have no obligations to the Holder in respect of, any
obligations hereunder that accrue following the date of such transfer.
|
|
(ii) |
It is the express intention of the Parties that to the fullest extent permissible at law, the FCF Royalty on the Properties shall be registerable or
otherwise recordable in all public places where interests in a royalty are recordable, and accordingly, the Holder will have the right from time to time after the date hereof, at its own cost and expense, to make any
additional registrations or records of notice of this Agreement and the FCF Royalty, any other documents relating to or contemplated by the foregoing and any caution or other title document, against title to the Properties
or elsewhere, and the Owner will cooperate with all such registrations and recordings and provide its written consent or signature to any documents and do such other things from time to time as are necessary or desirable
to effect all such registrations or recordings or otherwise to protect the interests of the Holder in the FCF Royalty as contemplated hereunder.
|
(b) No Partnership, etc.
This Agreement is not intended to, and will not be deemed to, create (expressly or by implication)
any partnership relation between the Parties including, without limitation, a joint venture, mining partnership, commercial partnership or other partnership relationship between the Owner and the Holder, and in this regard the Parties
acknowledge and agree that the Holder is neither an owner nor operator of the New Afton Mine. The obligations and liabilities of the Parties will be several and not joint and neither of the Parties will have or purport to have any
authority to act for or to assume any obligations or responsibility on behalf of another Party. Nothing herein contained will be deemed to constitute a Party the partner, agent, joint venturer or legal representative of another Party,
nor shall anything in this Agreement be construed to create, expressly or by implication, a fiduciary relationship between the Parties.
(c) Further Assurances
Each Party shall with reasonable diligence execute all such further instruments and documents and
do all such further actions as may be reasonably necessary or desirable to effectuate the documents and transactions contemplated in this Agreement, in each case at the cost and expense of the Party requesting such further document or
action, unless expressly indicated otherwise.
(d) Binding Effect
All covenants, conditions, and terms of this Agreement shall bind and enure to the benefit of the
Parties hereto and their respective successors (including any successor by reason of amalgamation of any Party) and permitted assigns.
(e) Governing Law
This Agreement shall be governed by and construed under the laws of the Province of Ontario and the
federal laws of Canada applicable therein.
(f) Time of Essence
Time is of the essence in this Agreement.
(g) Waiver
The failure of a 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 the Party’s right thereafter to enforce any provision or exercise any right.
(h) Amendment
No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed
in writing by all Parties and, unless otherwise specified, no consent or approval by any Party, shall be binding unless executed in writing by the Party to be bound thereby.
(i) Severability
If any provision of this Agreement is wholly or partially invalid, this Agreement shall be
interpreted as if the invalid provision had not been a part hereof so that the invalidity shall not affect the validity of the remainder of the agreement which shall be construed as if the agreement had been executed without the
invalid portion. It is hereby declared to be the intention of the Parties that this Agreement would have been executed without reference to any portion which may, for any reason, hereafter be declared or held invalid.
(j) Accounting Principles
All calculations hereunder shall be made in accordance with IFRS.
(k) Currency
All dollar amounts or references to $ herein are in United States dollars.
(l) Assignment to Affiliates
Notwithstanding the provisions of Section 6, a Party may at any time Transfer all or any part of
its interest in this Agreement (and the corresponding rights contained in the Purchase Agreement) to an Affiliate provided such Affiliate shall agree in advance in writing with the other Party to be bound by any obligations of such
Party to be performed hereunder and further provided that such Party shall remain liable for the due performance of any of its obligations hereunder.
(m) Notices
All notices delivered under this Agreement shall be delivered in accordance with the notice
provisions set out in Section 10.3 of the Purchase Agreement.
(n) Entire Agreement
This Agreement, together with the Purchase Agreement, constitutes the entire agreement between the
Parties pertaining to the subject matter hereof and supersedes all prior agreements, negotiations, discussions and understandings, written or oral, between the Parties. Except as may be specifically set forth in this Agreement, there
are no representations, warranties, conditions, or other agreements or acknowledgments, whether direct or collateral, express or implied, that form part of or affect this Agreement, or which induced any Party to enter into this
Agreement or on which reliance is placed by either Party.
(o) Execution and Delivery
This Agreement may be executed by the Parties in counterparts and may be executed and delivered by
facsimile, .pdf or other electronic means, and all such counterparts shall together constitute one and the same agreement.
[Remainder of page left intentionally blank.]
IN
WITNESS WHEREOF the Parties hereto have executed this Agreement as of the day and year first above written.
| |
|
NEW GOLD INC.
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
| |
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
| |
|
[●], by its general partner [●]
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
| |
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
SCHEDULE “A”
Properties
[Description of the Properties Redacted]
SCHEDULE “B”
Determination of Free Cash Flow
| 1. |
Determination of FCF Payments.
|
(a) As used herein, “Free
Cash Flow” for any period means the following based on incurred or accrued in that period:
|
A. |
Revenues for such period; less
|
|
B. |
The sum of each of the following, for the period (without duplication):
|
|
i. |
Treatment and Refining Costs;
|
|
v. |
Taxes (excluding any and all federal or provincial income taxes);
|
|
vi. |
Change in Working Capital (which may be a positive or negative number);
|
|
ix. |
solely in periods after the earlier of the Option Expiry Date or Termination Date, as applicable, Allowance for Future Reclamation Costs,
|
Subject to the application of Section 2(d) of the Agreement, in the event that Free Cash Flow is
a negative number, “Free Cash Flow” shall be deemed to be one dollar ($1.00).
(b) “Revenues”
means, for any period, the sum of the following revenues:
|
i. |
proceeds received by the Owner from the sale of all Minerals (less any proceeds from the sale of Minerals from Unapproved Additional Capital
Projects); and
|
|
ii. |
Concentrate Sales Process Hedges.
|
(c) “Treatment and
Refining Charges” shall mean all costs related to third party smelting, refining, penalty and transport costs of Minerals (except Minerals from Unapproved Additional Capital Projects) and net cash gains/losses from
Concentrate Sales Process Hedges.
(d) “Operating Costs”
shall mean all operating costs and expenses related with the mining, processing or treatment of Minerals from the Properties (excluding operating costs and expenses from Unapproved Additional Capital Projects), including without
limitation, all of the following (determined without duplication) Mining Costs, Milling and Processing Costs, General and Administrative Costs, Royalties and Selling and Delivery Costs:
|
i. |
“Mining Costs” shall mean costs and expenses
in the period incurred in respect of exploring for, developing, mining, extracting, removing, and transporting to any processing site Minerals. Such costs and expenses shall include, without limitation, those incurred for
labor, machinery operations, fuel, explosives and other materials, developmental or ore delineation drilling;
|
|
ii. |
“Milling and Processing Costs” shall mean
costs and expenses incurred in respect of: (x) milling, treating or processing and transportation costs, all costs, charges and expenses for treatment in the smelting and refining process (including handling, processing,
deductions, tolling charges); and (y) sales and brokerage costs, and actual costs of transportation (including insurance, storage, warehousing, port demurrage, delay and forwarding expenses) of Minerals or other products
from the Properties to the place of treatment and then to the place of sale, without duplication;
|
|
iii. |
“General and Administrative Costs” shall mean
costs and expenses incurred in respect of the Properties during the calendar year and the production of ores and Minerals therefrom;
|
|
iv. |
“Royalties” means all royalties or production
royalties or royalties of any nature incurred in respect of the Properties (other than the FCF Payments pursuant to the FCF Royalty) or other payments of any nature whatsoever payable to third parties having an interest in
the Properties and includes payments to any Indigenous Group pursuant to any impact benefit, participation or other similar agreement; and
|
|
v. |
“Selling and Delivery Costs” shall mean costs
and expenses incurred in respect of the production of Minerals from Properties during the calendar year in or in connection with the marketing of Minerals and the delivery of such Minerals to points of ultimate delivery to
customers, including without limitation, all shipping and delivery costs, agency fees, and storage charges, without duplication.
|
For greater certainty, in the event of any Unapproved Additional Capital Projects, the exclusion
of operating costs and expenses from Unapproved Additional Capital Projects for purposes of the calculation of Mining Costs, Milling and Processing Costs, General and Administrative Costs, Royalties and Selling and Delivery Costs for
purposes of the calculation of Free Cash Flow shall be allocated on a proportionate basis and in accordance with generally accepted practices in the mining industry, and in a manner mutually satisfactory to the Owner and the Holder
(each acting reasonably and in good faith).
(e) “Exploration Costs”
shall mean exploration costs incurred in respect of the Properties with the objective of identifying new mineralization or additional mineral reserves or mineral resources, or improving confidence in or understanding of existing
mineral reserves or mineral resources, within the Properties.
(f) “Interest Costs”
shall mean any interest cost actually incurred during the period in respect of the Properties (including but not limited to, interest on instruments issued for reclamation bonding, interest on advance payments receipts and interest
on leased assets) net of any interest income earned solely in respect of the Properties during such period.
(g) “Taxes” shall
mean all taxes, levies, duties, royalties, charges, fees and assessments whatsoever, of any federal, provincial, municipal or local government, domestic and foreign, or any subdivision thereof, whether now or in the future that are
imposed on or levied against, or allocated to, any mining, milling, or other operations on the Properties, purchases with respect to such operations, and/or any production or sales of products from the Properties, including without
limitation, any Tax payable pursuant to a return filed under the Mineral Tax Act [RSBC 1996] Chapter 291, all value added
taxes, any payroll taxes, severance taxes, sales and use taxes, customs duties, import fees, government royalties, net proceeds of mines taxes, excluding only federal and provincial income tax payable by the Owner and any value
added taxes and sales and use taxes recoverable by the Owner from a Governmental Authority through any refund, rebate, credit or similar means. Taxes shall also include the cost or benefit resulting from an adjustment following the
audit and/or reassessment of any Taxes relating to the time period in which the Holder receives FCF Payments.
(h) “Change in Working
Capital” shall mean, for a period, the amount equal to the sum of the accounts receivable, accounts payable, inventory cash costs and prepaid expenses, all in respect of the Properties, as of the end of the period, less the
sum of those same amounts at the end of the preceding period, such working capital to be managed by the Owner in good faith.
(i) “Lease Payments”
shall mean all payments, without duplication, related to the leasing of assets for use at the Properties.
(j) “Capital Costs”
shall mean all capitalized costs for the period in respect of the Properties and include capitalized costs related to exploration, development (including construction) or mining of the Properties, permitting and the purchase of
equipment, buildings and infrastructure for the Properties, but not including capital costs relating to Unapproved Additional Capital Projects.
(k) “Allowance for Future
Reclamation Costs” shall mean the amortization of assets recognized for a provision for future costs anticipated to be incurred by the Owner in reclaiming the Properties in accordance with applicable laws, regulations and
agreements and accretion charges incurred in the period related to the associated liability.
| 2. |
Affiliate Operating Costs.
|
Where any Operating Costs are incurred with respect to the mining, milling, processing, selling, or
delivering of ores and Minerals produced from the Properties in conjunction with the mining, milling, processing, selling, or delivering of ores and minerals produced from other properties controlled by the Owner or its Affiliates,
such Operating Costs shall be allocated and apportioned in accordance with generally accepted practices in the mining industry and in a manner mutually satisfactory to the Owner and the Holder (each acting reasonably and in good
faith).
SCHEDULE “C”
Rules for Arbitration
The following rules and procedures shall apply with respect to any matter to be arbitrated by the parties under the terms
of the Agreement.
| 1. |
Initiation of Arbitration Proceedings
|
(a) If any Party to this Agreement wishes to have any matter under this Agreement arbitrated in accordance with the
provisions of this Agreement, it shall give notice to the other Party hereto specifying particulars of the matter or matters in dispute and proposing the name of the person it wishes to be the single arbitrator. Within five days
after receipt of such notice, the other Party to this Agreement shall give return notice to the first party advising whether such Party accepts the arbitrator proposed by the first Party and if such Party does not accept the
arbitrator proposed by the first Party, proposing the name of the person it wishes to be the single arbitrator. If such return notice is not given by the other Party within such five-day period, it shall be deemed to have accepted
the arbitrator proposed by the first Party. If such return notice is given within such five day period and does not accept the proposed arbitrator of the first Party and proposes another person to be arbitrator, the first Party
shall, within five days after receipt of such return notice, give notice to the other Party advising whether such first party accepts the arbitrator proposed by the other Party. If the parties do not agree upon a single arbitrator
within such second five-day period, the single arbitrator shall be chosen in accordance with the Arbitrations Act, 1991
(Ontario).
(b) The individual selected as Arbitrator shall be qualified by education and experience to decide the matter in dispute.
The Arbitrator shall be at arm’s length from both Parties and shall not be a member of the audit or legal firm or firms who advise either Party, nor shall the Arbitrator be a person who is otherwise regularly retained by either of
the Parties.
| 2. |
Submission of Written Statements
|
(a) Within five days of the appointment of the Arbitrator, the Party initiating the arbitration (the “Claimant”) shall send the other Party (the “Respondent”) a statement of claim setting out in sufficient detail the facts and any contentions of law on which it relies, and the relief that it claims.
(b) Within 10 days of the receipt of the statement of claim, the Respondent shall send the Claimant a statement of defence
stating in sufficient detail which of the facts and contentions of law in the statement of claim it admits or denies, on what grounds, and on what other facts and contentions of law he relies.
(c) Within five days of receipt of the statement of defence, the Claimant may send the Respondent a statement of reply.
(d) All statements of claim, defence and reply shall be accompanied by copies (or, if they are especially voluminous,
lists) of all essential documents on which the Party concerned relies and which have not previously been submitted by any Party, and (where practicable) by any relevant samples.
(e) After submission of all the statements, the Arbitrator will give directions for the further conduct of the
arbitration.
(a) The arbitration shall take place in the City of Toronto, or in such other place as the Claimant and the Respondent
shall agree upon in writing. The arbitration shall be conducted in English. Subject to any adjournments which the Arbitrator allows, the final hearing will be continued on successive working days until it is concluded.
(b) All meetings and hearings will be in private unless the parties otherwise agree.
(c) Any Party may be represented at any meetings or hearings by legal counsel.
(d) Each Party may examine, cross-examine and re-examine all witnesses at the arbitration.
(a) The Arbitrator will make a decision in writing and, unless the parties otherwise agree, will set out reasons for
decision in the decision.
(b) The Arbitrator will send the decision to the parties as soon as practicable after the conclusion of the final hearing,
but in any event no later than 10 days thereafter, unless that time period is extended for a fixed period by the Arbitrator on written notice to each Party because of illness or other cause beyond the Arbitrator’s control.
(c) The decision shall determine and award costs to the successful Party in the arbitration.
(d) The decision shall be final and binding on the parties and shall not be subject to any appeal or review procedure
provided that the Arbitrator has followed the rules provided herein in good faith and has proceeded in accordance with the principles of natural justice. In the event either Party initiates any court proceeding in respect of the
decision of the Arbitration or the matter arbitrated, such Party shall, if unsuccessful in the court proceeding, pay the other parties costs on a solicitor/client basis plus all other reasonable expenses incurred by such other Party
from the date of delivery of the notice commencing arbitration to the date of determination of such court proceeding.
| 5. |
Jurisdiction and Powers of the Arbitrator
|
(a) By submitting to arbitration under these Rules, the parties shall be taken to have conferred on the Arbitrator the
following jurisdiction and powers, to be exercised at the Arbitrator’s discretion subject only to these Rules and the relevant law with the object of ensuring the just, expeditious, economical and final determination of the dispute
referred to arbitration.
(b) Without limiting the jurisdiction of the Arbitrator at law, the parties agree that the Arbitrator shall have
jurisdiction to:
|
(i) |
determine any question of law arising in the arbitration;
|
|
(ii) |
determine any question as to the Arbitrator’s jurisdiction;
|
|
(iii) |
determine any question of good faith, dishonesty or fraud arising in the dispute;
|
|
(iv) |
order any Party to furnish further details of that Party’s case, in fact or in law;
|
|
(v) |
proceed in the arbitration notwithstanding the failure or refusal of any Party to comply with these Rules or with the Arbitrator’s orders or
directions, or to attend any meeting or hearing, but only after giving that Party written notice that the Arbitrator intends to do so;
|
|
(vi) |
receive and take into account such written or oral evidence tendered by the parties as the Arbitrator determines is relevant, whether or not
strictly admissible in law;
|
|
(vii) |
make one or more interim awards;
|
|
(viii) |
hold meetings and hearings, and make a decision (including a final decision) in Toronto, Ontario or elsewhere with the concurrence of the parties
thereto;
|
|
(ix) |
order the parties to produce to the Arbitrator, and to each other for inspection, and to supply copies of, any documents or other evidence or
classes of documents in their possession or power which the Arbitrator determines to be relevant; and
|
|
(x) |
make interim orders to secure all or part of any amount in dispute in the arbitration.
|
SCHEDULE “D”
Tailings Budget
[Tailings Budget Redacted]
EXHIBIT “F”
CHERRY CREEK PROPERTIES
[Cherry Creek Property Description Redacted]
EXHIBIT “G”
OPINION PROPERTIES
[Description of Opinion Properties Redacted]
EXHIBIT “H”
SUGARLOAF AND NORTHLAND PROPERTIES
[Description of Sugarloaf and Northland Properties Redacted]
H-1
