questions and answers The answers to questions Dgh had about a week ago.
" At the beginning of the proxy contest, Mount Kellett stated that it was aware that there were provisions in place in the event of a change of control. This was the first time I read about this issue. Mount Kellett went on to say that they had no intentions to trigger these change of control convenants.
Is there anyone on this board who can tell us anything about these convenants?
1. Do the change of control provisions apply to MMB or the Baja Mining Corp?"
It applies to both entities.
2. What happens if the change of control provisions come into play? For example, would the loans to MMB become immediately payable on demand?
At the discretion of the lenders, all the loans can become payable.
3. Where are the provisions located: in the debt financing instruments, in the off-take agreement, in the sale of 30% of MMB to the Koreans?
In the debt financing agreement.
4. Are the convenants in all or some of the MMB debt instruments?
In the entire debt financing agreement.
5. How long do the convenants remain in place? When do the convenants cease to exists? Is there a time limit/ loan repayment limit/or other cuttoff limit?
No change in control can occur in Baja until economic completion.
Baja needs to maintain control of MMB until the entire debt has been repaid.
6. How is "change of control" defined? Is it in regards to Baja management retention threshold levels? Is it in regards to Baja BOD membership threshold retention levels? Is it with regards to ownership composition of MMB? Is it with regards to the number/percentage ownership of Baja common shares?
The change of control applies to shares ownership as well as Board control.
7. Have the actual change of control provisions been made public? Are they on SEDAR, are they on the Baja website? Is there an embedded confidentiality provision that restricts their public release?
The “Common Terms of Agreement” is available on SEDAR (Apr 7 2011, Material Document)
These provisions are standard lending provision.
8. What would Mount Kellett have to do in order to have the change of control provisions come into play?
Mount Kellett could trigger that clause in a number of ways as specified in the loan documentation.
It seems to me that the above are crucial questions to ask, and have answered, during a proxy contest. Particularly where the dissident shareholder states that it has no intentions to trigger the change of control provisions. Are these provisions an abatross around the neck of Mount Kellett?
We already know that 30% of all Boleo product output can go to the Koreans on a first call basis; that there is a ten-year off-take agreement for copper and cobalt with Louis Dreyfus; and that Mount Kellett is (itself) not in the metals business. I therefore assume that Mount Kellet and its supporters do not have their sights aimed at the products to be produced at the Boleo project. MK must only be interested in the future monetary value of Baja Mining Corporation. The more I consider these issues the more I want to know about the change of control provisions. Please, who knows what? -- anyone please!