20-F

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 or
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2002, or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission File No.: 1-4192

MFC BANCORP LTD.

(Exact Name of Registrant as Specified in Its Charter)

Yukon Territory, Canada

(Jurisdiction of Incorporation or Organization)

Floor 21, Millennium Tower, Handelskai 94-96, A-1200, Vienna, Austria

(Address of Office)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Common Shares without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

          Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

12,831,854 Common Shares without par value

          Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x     No o

          Indicate by check mark which financial statement item the registrant has elected to follow.     Item 17 o     Item 18 x

TABLE OF CONTENTS

TABLE OF CONTENTS
PART I
	ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
	ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
	ITEM 3. KEY INFORMATION
		Cautionary Statement Regarding Forward-Looking Statements
		Exchange Rates
		Selected Financial Data
	ITEM 4. INFORMATION ON THE COMPANY
		History and Development of the Company
		Overview
	ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
		Operating Results
		Liquidity and Capital Resources
		Foreign Currency
		Derivative Instruments
		Inflation
		Application of Critical Accounting Policies
	ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
		Directors and Senior Management; Board Practices
		Compensation
		Employees
		Share Ownership
	ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
		Major Shareholders
		Related Party Transactions
	ITEM 8. FINANCIAL INFORMATION
	ITEM 9. THE OFFER AND LISTING
	ITEM 10. ADDITIONAL INFORMATION
		Articles and Bylaws
		Material Contracts
		Exchange Controls
		Taxation
		Documents on Display
	ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
		Derivative Instruments
		Interest Rate Risk
		Foreign Currency Exchange Rate Risk
		Equity Price Risk
	ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
	ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
	ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
	ITEM 15. CONTROLS AND PROCEDURES
	ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
	ITEM 16B. CODE OF ETHICS
	ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART III
	ITEM 17. FINANCIAL STATEMENTS
	ITEM 18. FINANCIAL STATEMENTS
		Index to Financial Statements and Schedules
MFC BANCORP LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2002, 2001 and 2000 (Canadian Dollars, In Thousands)
INDEPENDENT AUDITORS’ REPORT
SCHEDULE I: CONDENSED FINANCIAL INFORMATION OF REGISTRANT
	ITEM 19. EXHIBITS
SIGNATURES
CERTIFICATION
Share Sale Agreement dated August 7,2002
Royalty Deed dated August 7, 2002
Arrangement Agreement
Stock Purchase Agreement dated July 23,2002
Subsidiaries of MFC
Certification of Periodic Report

MFC BANCORP LTD.

FORM 20-F

TABLE OF CONTENTS

		Page No.
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		3
ITEM 3.	KEY INFORMATION		3
	Cautionary Statement Regarding Forward-Looking Statements		3
	Exchange Rates		4
	Selected Financial Data		5
	Risk Factors		7
ITEM 4.	INFORMATION ON THE COMPANY		13
	History and Development of the Company		13
	Overview		13
	Organizational Structure		17
	Property, Plants and Equipment		17
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		19
	Operating Results		19
	Liquidity and Capital Resources		21
	Foreign Currency		23
	Derivative Instruments		23
	Inflation		23
	Application of Critical Accounting Policies		24
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		26
	Directors and Senior Management; Board Practices		26
	Compensation		27
	Employees		29
	Share Ownership		29
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		30
	Major Shareholders		30
	Related Party Transactions		30
ITEM 8.	FINANCIAL INFORMATION		31
	Consolidated Statements and Other Financial Information		31
	Significant Changes		31
	Legal Proceedings		31
	Dividend Information		31
ITEM 9.	THE OFFER AND LISTING		32
	Markets and Price History		32
ITEM 10.	ADDITIONAL INFORMATION		33
	Articles and Bylaws		33
	Material Contracts		34
	Exchange Controls		35
	Taxation		36
	Documents on Display		39
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		40
	Derivative Instruments		40
	Interest Rate Risk		41
	Foreign Currency Exchange Rate Risk		42
	Equity Price Risk		43
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		43
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		44
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		44
ITEM 15.	CONTROLS AND PROCEDURES		44
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT [Reserved]		44
ITEM 16B.	CODE OF ETHICS [Reserved]		44
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES [Reserved]		44
PART III
ITEM 17.	FINANCIAL STATEMENTS		45
ITEM 18.	FINANCIAL STATEMENTS		45
ITEM 19.	EXHIBITS		75
SIGNATURES			77

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      In this annual report, please note the following:

•  references to “we”, “our”, “us” or “MFC” mean MFC Bancorp Ltd. and its subsidiaries, unless the context of the sentence clearly suggests otherwise;

•  all references to monetary amounts are in Canadian dollars, unless otherwise indicated;

•  the information set forth in this annual report is as at December 31, 2002, unless an earlier or later date is indicated; and

•  selected financial information has been provided in U.S. dollars for informational purposes only using an exchange rate of one Canadian dollar being equal to U.S.$0.6329, being the Federal Reserve Bank of New York rate of conversion for Canadian dollars to U.S. dollars as at December 31, 2002.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

      Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

      Not applicable.

ITEM 3. KEY INFORMATION

Cautionary Statement Regarding Forward-Looking Statements

      The statements in this annual report that are not based on historical facts are called “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements appear in a number of different places in this annual report and can be identified by words such as “estimates”, “projects”, “expects”, “intends”, “believes”, “plans”, or their negatives or other comparable words. Also look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include statements regarding the outlook for our future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves, or other business plans. You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to actual facts differing from the assumptions underlying our predictions. Some of these risks and assumptions are set out under “Risk Factors” below and include, but are not limited to:

•  transaction risks;

•  credit and counterparty risks;

•  market risks;

•  competition risks;

•  legal and regulatory risks;

•  employment risks;

•  general economic and business conditions, including changes in interest rates;

•  prices and other economic conditions;

•  natural phenomena;

•  actions by government authorities, including changes in government regulation;

•  uncertainties associated with legal proceedings;

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•  technological development;

•  future decisions by management in response to changing conditions;

•  our ability to execute prospective business plans; and

•  misjudgments in the course of preparing forward-looking statements.

      We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changes in expectations. However, you should carefully review the reports and documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including our current reports on Form 6-K.

Exchange Rates

      The following table sets out exchange rates, based on the noon buying rates in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”), for the conversion of Canadian dollars into U.S. dollars in effect at the end of the following periods, the average exchange rates during such periods (based on daily Noon Buying Rates) and the range of high and low exchange rates for such periods:

	Years Ended December 31,
	2002		2001		2000		1999		1998
End of period		0.6329		0.6279		0.6666		0.6925		0.6504
High for period		0.6619		0.6697		0.6984		0.6925		0.7105
Low for period		0.6200		0.6241		0.6397		0.6535		0.6341
Average for period		0.6368		0.6457		0.6732		0.6744		0.6714

      The following table sets out the high and low exchange rates, based on the Noon Buying Rate for the conversion of Canadian dollars into U.S. dollars, for the following periods:

	High		Low
2002
October		0.6407		0.6272
November		0.6440		0.6288
December		0.6461		0.6332
2003
January		0.6570		0.6349
February		0.6720		0.6530
March		0.6822		0.6709
April 1 to April 16		0.6889		0.6737

      On April 16, 2003, the Noon Buying Rate for the conversion of Canadian dollars into U.S. dollars was U.S.$0.6867 per Canadian dollar.

      The presentation of selected information in our financial statements in U.S. dollars is for informational purposes only and information in our financial statements is translated to U.S. dollars for convenience using year-end exchange rates, as required by Regulation S-X.

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Selected Financial Data

      The following table summarizes selected consolidated financial data for MFC prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). Additional information is presented to show the difference which would result from the application of United States generally accepted accounting principles (“U.S. GAAP”) to MFC’s financial information. For a description of the differences between Canadian GAAP and U.S. GAAP, see Note 18 to our consolidated financial statements included in this annual report. The information in the table was extracted from the more detailed consolidated financial statements and related notes included in this annual report and should be read in conjunction with such financial statements and with the information appearing under the heading, “Item 5. Operating and Financial Review and Prospects”.

Canadian GAAP

		Years Ended December 31,
		2002		2001		2000		1999		1998
		(in thousands, other than per share amounts)
Revenues		$	284,339	$	214,246	$	156,220	$	125,526	$	123,310
Income from continuing operations			50,755		45,288		39,163		36,328		30,235
Income from continuing operations per share
	Basic		3.93		3.59		3.24		3.00		2.48
	Diluted		3.70		3.35		3.03		2.83		2.30
Net income			50,755		45,288		39,163		31,389		30,235
Net income per share
	Basic		3.93		3.59		3.24		2.59		2.48
	Diluted		3.70		3.35		3.03		2.46		2.30
Total assets			446,574		394,639		332,063		270,107		238,109
Net assets			291,041		249,118		216,915		173,773		156,808
Debt			68,798		98,000		35,421		30,917		40,091
Shareholders’ equity			285,290		245,997		213,134		170,811		154,396
Capital stock			70,269		76,673		65,138		65,498		65,706
Cash dividends(1)			—		—		—		—		369
Cash dividends per share(1)			—		—		—		—		0.03
Cash dividends (U.S.$)(1)			—		—		—		—		251
Cash dividends per share (U.S.$)(1)			—		—		—		—		0.02
Weighted average common stock outstanding, fully diluted (in thousands of shares)			14,170		14,002		13,438		13,422		13,706

(1)  Paid on MFC’s common shares.

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U.S. GAAP

		Years Ended December 31,
		2002		2001		2000		1999		1998
		(in thousands, other than per share amounts)
Revenues		$	284,339	$	212,000	$	162,694	$	128,270	$	118,842
Income from continuing operations			50,755		43,211		45,637		40,313		31,922
Income from continuing operations per share
	Basic		3.93		3.42		3.78		3.33		2.62
	Diluted		3.70		3.20		3.51		3.12		2.42
Net income			50,755		43,211		45,637		35,374		31,922
Net income per share
	Basic		3.93		3.42		3.78		2.92		2.62
	Diluted		3.70		3.20		3.51		2.75		2.42
Total assets			445,342		391,489		336,523		265,658		229,529
Net assets			289,809		245,968		221,375		169,325		149,381
Debt			68,798		98,000		35,421		30,917		40,091
Shareholders’ equity			284,058		242,847		217,594		166,363		146,969
Capital stock			70,269		76,673		65,138		65,498		65,706
Cash dividends(1)			—		—		—		—		369
Cash dividends per share(1)			—		—		—		—		0.03
Cash dividends (U.S.$)(1)			—		—		—		—		251
Cash dividends per share (U.S.$)(1)			—		—		—		—		0.02
Weighted average common stock outstanding, fully diluted (in thousands of shares)			14,170		14,002		13,438		13,422		13,706

(1)  Paid on MFC’s common shares.

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Risk Factors

      Our primary risks are transaction risks, credit or counterparty risks and market risks. In addition, we have been and may continue to be affected by many other factors, including, but not limited to: (i) economic and market conditions, including the liquidity of capital markets; (ii) the volatility of market prices, rates and indices; (iii) the timing and volume of market activity; (iv) competition; (v) legal and regulatory risks; (vi) inflation; (vii) the cost of capital, including interest rates; (viii) political events, including legislative, regulatory and other developments; (ix) competitive forces, including our ability to attract and retain personnel; (x) support systems; and (xi) investor sentiment. In determining whether to make an investment in our shares, you should consider carefully all of the information set forth in this annual report and, in particular, the following risk factors:

Transaction Risks

We are subject to transaction risks.

      We manage transaction risks through allocating and monitoring our capital investments, only underwriting securities in circumstances where the risk to our capital is minimal, carefully screening clients and transactions, and engaging qualified personnel to manage transactions. Nevertheless, transaction risks can arise from, among other things, our banking, finance and advisory services, trading and proprietary investing activities and relate to the risks of the proposed transaction. These risks include market and credit risks associated with our role in providing advisory services.

      We often make investments in highly unstructured situations and in companies undergoing severe financial distress. Such investments often involve severe time constraints. These investments may expose us to significant transaction risks. An unsuccessful investment may result in the total loss of such an investment and may have a material adverse effect on our business, results of operations, financial condition and cash flow.

We may face a lack of suitable acquisition or merger or other proprietary investment candidates.

      In order to grow our business, we may seek to acquire or merge with or invest or make proprietary investments in new companies or opportunities. Our failure to make acquisitions or investments may limit our growth. In pursuing acquisition and investment opportunities, we may be in competition with other companies having similar growth and investment strategies. Competition for these acquisitions or investment targets could result in increased acquisition or investment prices and a diminished pool of businesses, services or products available for acquisition or investment.

Credit or Counterparty Risks

Counterparties or others may default on their obligations.

      We manage credit risk on an individual transaction, counterparty level and on a portfolio basis. Credit limits for clients and counterparties are established by our credit officers and management with knowledge of the client’s creditworthiness. In addition, we have policies and limitations with respect to our securities lending practices. Our management also reviews and monitors exposure concentrations at a portfolio level. Nevertheless, we are exposed to the risk that parties owing us money, securities or other assets will not perform their obligations. These parties include our trading counterparties, clients, clearing agents, exchanges and other financial intermediaries, as well as issuers whose securities we hold. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. These counterparty obligations may arise, for example, from placing money market deposits, the extension of credit in trading and investment activities, and participation in payment, securities and commodity trade transactions on our behalf and as an agent on behalf of our clients.

We may not obtain sufficient or accurate credit risk information.

      To reduce credit risk, we only place money market deposits with banks selected for their financial strength and reliability. Further, we otherwise attempt only to deal with creditworthy counterparties and

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obtain collateral where appropriate. However, although we regularly review our credit exposure to specific clients and counterparties and to specific industries, countries and regions that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud. We may also fail to receive full information with respect to the trading risks of a counterparty. In addition, in cases where we have extended credit against collateral, we may find that we are undersecured, for example, as a result of sudden declines in market values that reduce the value of collateral.

Market Risks

      Market risks relates to fluctuations in the liquidity of securities and commodities, as well as volatility in market conditions generally. The markets for securities, commodities and other related products are affected by many factors over which we have little or no control. These factors include the financial performance and prospects of specific companies and industries, world markets and economic conditions, the availability of credit and capital, political events and perceptions of market participants.

We are exposed to the risk of a market downturn.

      As a merchant banking company, our business is materially affected by conditions in the financial markets and economic conditions generally. In the event of a market downturn, our business, results of operations and financial condition could be adversely affected. In addition, you cannot be assured that an active public market for our securities will continue.

      A market downturn could lead to a decline in the number and size of the transactions that we execute for our clients, including transactions in which we provide financial advisory and other services, and to a corresponding decline in the revenues we receive from fees.

      A downturn in a market could further result in losses to the extent that we own assets in such market. Conversely, to the extent that we have sold assets we do not own (i.e. if we have short positions) in any market, an upturn in such market could expose us to potentially unlimited losses as we attempt to cover our short positions by acquiring assets in a rising market.

      Revenues from certain of our proprietary investments may be significantly affected by changes in prices for iron ore, cobalt and aluminum. The prices for these commodities can fluctuate widely as a result of various factors beyond our control such as supply and demand, exchange rates, inflation, changes in global economics, and political, social and other factors. Our ability, therefore, to maintain or develop revenues or realize upon such investments may be adversely affected by a sustained material reduction in the price of such materials.

      Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility.

We are exposed to political, economic, legal, operational and other risks as a result of our global operations.

      In conducting our business in major markets around the world, we are subject to political, economic, legal, operational and other risks that are inherent in operating in other countries. These risks range from difficulties in settling transactions in emerging markets to possible nationalization, expropriation, price controls and other restrictive governmental actions, and terrorism. We also face the risk that exchange controls or similar restrictions imposed by foreign governmental authorities may restrict our ability to convert local currency received or held by us in their countries into Swiss francs, Canadian dollars, U.S. dollars, Euro or other currencies, or to take those other currencies out of those countries.

Fluctuations in interest rates and foreign currency exchange rates may affect our results.

      Fluctuations in interest rates may affect the fair value of our financial instruments sensitive to interest rates. An increase in market interest rates may decrease the fair value of our fixed interest rate financial instrument assets and a decrease in market interest rates may decrease the fair value of our fixed interest rate financial instrument liabilities, thereby resulting in a reduction in the fair value of our equity. See “Item 11.

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Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk” for additional information with respect to our exposure to interest rate risk.

      Similarly, fluctuations in foreign currency exchange rates may affect the fair value of our financial instruments sensitive to foreign currency exchange rates. Our reporting currency is the Canadian dollar. We hold financial instruments primarily denominated in U.S. dollars, Euros and Swiss francs. A depreciation of such currencies against the Canadian dollar will decrease the fair value of our financial instrument assets denominated in such currencies and an appreciation of such currencies against the Canadian dollar will increase the fair value of our financial instrument liabilities denominated in such currencies, thereby resulting in a reduction in our equity. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Exchange Rate Risk” for additional information with respect to our exposure to foreign currency exchange rate risk.

Our risk management strategies leave us exposed to unidentified or unanticipated risks.

      We use a variety of instruments and strategies to manage exposure to various types of risks. For example, we use derivative foreign exchange contracts to manage our exposure and our clients’ exposure to foreign currency exchange rate risks. If any of the variety of instruments and strategies we utilize to manage our exposure to various types of risk are not effective, we may incur losses. Many of our strategies are based on historical trading patterns and correlations. However, these strategies may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Unexpected market developments may affect our risk management strategies during this time, and unanticipated developments could impact our risk management strategies in the future.

A rise in inflation may affect our results.

      We do not believe that inflation has had a material impact on our revenues or income over the past three fiscal years. In addition, since our assets to a large extent are liquid in nature, they are not significantly affected by inflation. However, increases in inflation could result in increases in our expenses, which may not be readily recoverable in the price of services provided to our clients. To the extent inflation results in rising interest rates and has other adverse effects on capital markets, it could adversely affect our business, results of operations and financial condition.

Market risks may increase the other risks that we face.

      In addition to the market risks described above, market risks could exacerbate the other risks that we face. For example, if we incur substantial trading losses, our need for liquidity could rise sharply while our access to liquidity could be impaired. In addition, in conjunction with a market downturn, our clients and counterparties could incur substantial losses of their own, thereby weakening their financial condition and increasing our credit risk.

Our risk management policies and procedures may not prevent losses.

      We have adopted risk management processes to facilitate, control and monitor risk taking. Nonetheless, the policies and procedures we rely on to identify, monitor and manage risks may not be fully effective. Some of our methods for managing risks are based upon our observance of historical market behaviour. We cannot assure you that these methods will accurately predict future market behaviour. As a result, our future risk exposure could be significantly greater than the historical measures indicate.

      Other risk management methods that we use depend upon the evaluation of information regarding markets, clients or other matters that is publicly available or otherwise accessible by us. This information may not in all cases be accurate, complete, up-to-date or properly evaluated. Management of operational, legal and regulatory risk requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective.

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Competition Risks

          We face significant global competition.

      We conduct our business in a global environment that is highly competitive and unpredictable. Many of our competitors are national or international companies with far greater resources, capital and access to information than us. Competition includes firms traditionally engaged in financial services such as banks, broker-dealers and investment dealers, along with other companies offering financial services such as insurance companies, mutual fund groups, merchant banks and trading and trade finance companies. Increased competition may lead us to become involved in transactions with more risk. In addition, many non-bank competitors are not subject to the same extensive regulations that govern us.

Legal and Regulatory Risks

          We are exposed to legal liability.

      We are exposed to legal risks in our business and the volume and amount of damages claimed in litigation against financial intermediaries are increasing. These risks include potential liability under securities or other laws for materially false or misleading statements made in connection with securities and other transactions, potential liability for advice we provide to participants in corporate transactions and disputes over the terms and conditions of complex trading arrangements. We also face the possibility that counterparties in complex or risky trading transactions will claim that we improperly failed to tell them of the risks involved or that they were not authorized or permitted to enter into these transactions with us and that their obligations to us are not enforceable. During a prolonged market downturn, we would expect these types of claims to increase. We are also exposed to legal risks in our proprietary investing activities. We seek to invest in undervalued businesses or assets often as a result of financial, legal, regulatory or other distress affecting them. Investing in distressed businesses and assets can involve us in complex legal issues relating to priorities, claims and other rights of stakeholders.

      These risks are often difficult to assess or quantify and their existence and magnitude often remains unknown for substantial periods of time. We incur significant legal expenses every year in defending against litigation, and we expect to continue to do so in the future. See “Item 8. Financial Information — Legal Proceedings” for additional information with respect to our legal and regulatory proceedings.

Extensive regulation of our business limits our activities.

      The financial services industry is subject to extensive regulation. Our banking operations are subject to various Swiss regulatory requirements, including capital requirements administered by the Swiss Federal Banking Commission (the “SFBC”). The SFBC is our primary banking regulator and establishes minimum capital requirements for our banking subsidiary. Our failure to meet minimum capital requirements can result in mandatory, and possibly additional discretionary, action by the SFBC that, if undertaken, could have a direct materially adverse effect on us. Under risk-based capital adequacy guidelines established by the SFBC, banks in Switzerland must meet specific capital guidelines that involve quantitative measures of assets, liabilities and other off-balance sheet items, as calculated under Swiss regulatory accounting practices. Our banking operations are required to file certain reports with the SFBC and we are subject to their examination. Our banking subsidiary is subject to restrictions on loans and extensions of credit to, and on certain other types of transactions with, affiliates.

      The requirements imposed by our regulators are designed to ensure the integrity of the financial markets and to protect customers and other third parties which deal with us and are not designed to protect our shareholders. Consequently, these regulations often serve to limit our activities, including through net capital, customer protection and market conduct requirements.

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Employment Risks

We are dependent on the services of certain key employees.

      Our future success depends, in significant part, upon the continued service and performance of our senior management and other key employees. Losing the services of some or all of these individuals could impair our ability to manage our company, obtain new or maintain existing client engagements and complete new proprietary investments.

Enforcement Risks

          You may be unable to enforce civil liabilities.

      The enforcement of civil liabilities by investors under applicable U.S. federal and state securities laws will be adversely affected because we are organized under the laws of the Yukon Territory, Canada, most or all of our officers or directors are not residents of the U.S., and substantially all of our assets are located outside of the U.S.

      As a result, it may be difficult or impossible for U.S. investors to effect service of process upon us or our officers or directors within the United States. It may also be difficult to realize against us or them, in the United States, upon judgments of U.S. courts for civil liabilities under applicable U.S. federal and state securities laws. Courts in Canada or elsewhere may not enforce: (i) judgments of U.S. courts obtained in actions against us or our officers or directors predicated upon the civil liability provisions of applicable U.S. federal and state securities laws; and (ii) in original actions, liabilities against us or our officers or directors predicated upon such laws.

You may have trouble enforcing U.S. bankruptcy laws and other laws in Canada or elsewhere.

      We are organized under the laws of the Yukon Territory, Canada and our principal operating assets are located outside of the United States. Under bankruptcy laws in the United States, courts typically have jurisdiction over a debtor’s property, wherever it is located, including property situated in other countries. Courts outside of the United States may not recognize the U.S. bankruptcy court’s jurisdiction. Accordingly, you may have trouble administering a U.S. bankruptcy case involving a Canadian debtor with property located outside of the United States. Any orders or judgments of a bankruptcy court in the United States may not be enforceable.

Environmental Risks

Certain of our proprietary investments are subject to stringent environmental standards.

      We have invested, and may further invest, in operations that are subject to extensive environmental laws and regulations. These laws and regulations impose stringent standards on us regarding, among other things, air emissions, effluent discharges and remediation of environmental contamination. We may incur substantial costs to comply with current requirements or new environmental laws that might be adopted. In addition, we may discover currently unknown environmental problems or conditions in the future and may incur substantial costs in correcting such problems or conditions.

Other Risks

Certain factors may inhibit a takeover that our shareholders may consider favourable.

      Certain provisions of our charter documents and the corporate legislation which governs us may discourage, delay or prevent a change of control or changes in our management that shareholders may consider favourable. Such provisions include authorizing the issuance by our board of directors of preferred stock in series, providing for a classified board of directors with staggered, three-year terms and limiting the persons who may call special meetings of shareholders. We currently have a shareholder protection rights plan designed to protect us and our shareholders from unfair, abusive or coercive acquisition tactics and intend to

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reconfirm same upon its expiration. For more information, see “Item 10. Additional Information — Articles and Bylaws”.

      In addition, the Investment Canada Act (the “ICA”) imposes limitations on the rights of non-Canadians to acquire our common shares. For more information, see “Item 10. Additional Information — Exchange Controls”.

      If a change of control or change in management is delayed or prevented, the market price of our common stock could decline.

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ITEM 4.     INFORMATION ON THE COMPANY

History and Development of the Company

      MFC is a corporation organized under the laws of the Yukon Territory in Canada. We were originally incorporated in June 1951 by letters patent. We were continued under the Canada Business Corporations Act in March 1980 and under the Business Corporations Act (Yukon) in August 1996. Our name was changed to “MFC Bancorp Ltd.” in February 1997. Our registered office is located at Suite 300, 204 Black Street, Whitehorse, Yukon Y1A 2M9 and we have an office located at Floor 21, Millennium Tower, Handelskai 94-96, A-1200, Vienna, Austria (Tel: 43 1 240 250).

Overview

      We are an international merchant banking company. Merchant banking encompasses a broad spectrum of activities related to the integrated combination of banking, trading and financing commercial trade and proprietary investing.

      Our merchant banking activities provide specialized banking and corporate finance services and advise clients on corporate strategy and structure, including mergers and acquisitions and capital raising. They also include proprietary trading in commodities and natural resources and proprietary investing of our own capital in enterprises to realize long-term or trading gains. Such investing is generally in businesses or assets whose intrinsic value is not properly reflected in their share or other price, often as a result of financial or other distress affecting them. Such proprietary investing is generally not passive and we seek investments where our financial expertise and management can add or unlock value. Proprietary investments are generated and made as part of our overall merchant banking activities and are realized upon over time.

      We conduct our merchant banking business in a highly integrated and coordinated manner. This permits us to utilize a total integrated approach with our business partners and as we pursue opportunities. Such an integrated approach permits substantial cross-selling opportunities and broadens the kind and scope of business conducted. Having multiple revenue sources provides us with substantial flexibility in structuring business relationships, revenues and transactions. As a result, we are able to generate higher revenues from particular business partners or opportunities than would otherwise be the case. Through our fully integrated business approach, our banking and finance advisory services often lead to commodity and natural resources trading with clients and vice versa. Both such activities often result in proprietary investments wherein we utilize our own capital to help restructure businesses, acquire interests therein or refinance obligations. Further, our proprietary investment strategy is enhanced by our trading and corporate finance capabilities.

      Our merchant banking business generates revenues through fees, interest income, trading revenue and realizations on our proprietary investments. We earn advisory and service fees by providing banking and financial advice to clients. We earn interest income on our own capital. Trading revenue is earned both from our commodities and natural resources trading and securities trading. Realizations on proprietary investments are generated through sales, equity and debt restructuring or other forms of divestment.

      We currently employ approximately 206 people and our operations are primarily conducted in Europe and North America. The following is a summary of our revenues by geographic region for the three most recently completed fiscal years:

	2002		2001		2000
	(in thousands)
Europe	$	254,564	$	192,714	$	136,671
Canada		26,006		17,183		10,459
United States		3,559		4,349		9,090
Other		210		—		—
	$	284,339	$	214,246	$	156,220

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Description of Merchant Banking Business

      Our merchant banking operations provide innovative finance and advisory services for corporate finance transactions and capital raising. We counsel clients on business and financing strategy and the execution of transactions that advance their strategic goals, including mergers, acquisitions, reorganizations and divestitures, and assist in structuring and raising capital. We focus on meeting the financial needs of small to mid-sized companies and other business enterprises primarily in Europe and North America. We believe that many of these clients, particularly in Europe, are underserviced by the large global investment banks and financial service providers. We specialize in advising and structuring business enterprises involved in unstructured and novel situations where a strong financial partner is needed and traditional, off-the-shelf solutions are not workable. In addition, we generate fee income by acting as an arranger and/or provider of bridge or interim financing to business enterprises pending reorganization, prior to their going public, as a complement to our proprietary commodities and natural resources trading or investment strategy. In furtherance of such banking and advisory services, we often advise and help restructure enterprises that are undergoing financial distress or have, or are near, debt defaults.

      Our experience and operating structure permit us to respond more rapidly to our clients’ needs than many of our larger competitors. These traits are important to small and mid-sized business enterprises, many of which do not have large internal corporate finance departments to handle their capital requirements. We develop a partnership approach to assist clients. This often permits us to develop multiple revenue sources from the same client. For example, in addition to providing banking and advisory services, we may purchase and sell a client’s products or commit our own capital to make a proprietary investment in its business or capital structure.

      These banking, finance and advisory activities are conducted through our wholly-owned subsidiary, MFC Merchant Bank S.A. (“MFC Bank”), a licensed full-service Swiss bank. In 2002, our banking operations were relocated from Geneva to Herisau, Switzerland. Since 1999, our banking operations have outsourced and placed substantially all of their client deposits with other major financial institutions on a fiduciary or trust basis and earn a fee on the amount of money received from the counterparty. This is in contrast to most North American banks, which generate revenue from the spread between their cost of funds and the credit received. These fiduciary or trust deposits are off-balance sheet items and permit us to generate revenues without committing or tying up significant amounts of capital. These arrangements also let us maintain key client relationships and mandates where we can provide value-added advisory services and yet offer clients the capability and economies of scale of a large banking institution.

      Our banking operations are subject to various Swiss regulatory requirements, including capital requirements administered by the SFBC. The SFBC is our primary banking regulator and establishes minimum capital and other requirements for MFC Bank. Our failure to meet minimum capital and other requirements can result in mandatory, and possibly additional discretionary, action by the SFBC that, if undertaken, could have a direct material effect on us. Under risk-based capital adequacy guidelines established by the SFBC, banks in Switzerland must meet specific capital guidelines that involve quantitative measures of assets, liabilities and other off-balance sheet items, as calculated under Swiss regulatory accounting practices. Our banking operations are required to file certain reports with the SFBC and we are subject to their examination. MFC Bank is subject to restrictions on loans and extensions of credit to, and on certain other types of transactions with, affiliates. We believe that the capital of our banking operations is sufficient for its current and reasonably foreseeable operations.

      Our merchant banking operations trade, principally for our own account, commodities and natural resources. Such activities include purchasing, selling and product swaps of such items. To a lesser extent, we also act as a trading agent for clients. Our trading operations currently employ approximately 77 people. Our trading activities often utilize innovative and sophisticated trading strategies and structures. We currently trade with commodity and other producers who are unable to effectively realize sales because of credit, insurance or currency issues affecting them or their principal customers. Generally we purchase the underlying commodity and resell it to an end buyer or further trade it for another commodity which will subsequently be sold. As a result of our relative financial strength, ability to arrange credit (including letters of credit) and

14

insurance, we are often able to facilitate purchases, sales and trades of commodities with more efficient and effective execution than many producers and customers could on their own. Commodity producers and end customers often work with us to better manage their internal supply, distribution risk, currency and capital requirements. In such trading activities, we try to capture various trading, financing and currency spreads. Through our trading activities, we have been able to develop ongoing relationships with commodity producers, end customers and trade financiers and insurers that are an important part of our operations.

      We conduct our commodity and natural resources trading primarily through our subsidiary, MFC Commodities GmbH (“MFC Commodities”), which is based in Vienna, Austria. We have historically focused our trading activities primarily in Europe. We believe that the trade, finance and insurance infrastructure necessary to support the purchase and sale of commodities and natural resources in Central and Eastern Europe is not as developed as in Western Europe and North America. Our central location in Vienna and our trading professionals permit us to effectively pursue trading opportunities in Europe and, in particular, participate in trade flows between Western and Central Europe.

      We intend to increase the volumes, products traded and the geographic regions in which we operate. In 2003, our commodity and natural resources trading operations will include the Far East and Southern Asia. As we expand our trading operations, we often seek to acquire interests or establish relationships with commodity producers to realize upon potential synergies. Such interests can be acquired through purchases of, or investments in, commodity producers, or through contractual arrangements with them, including off-take agreements. Such investments broadened our trading line to include aluminum foil and, when markets improve, cobalt. The investments we make in commodity producers are part of our proprietary investing strategy.

      Our merchant banking activities include making proprietary investments through investing our own capital and utilizing our expertise to capture investment opportunities. We seek to invest in businesses or assets whose intrinsic value is not properly reflected in their share or other price. Often such investments are in companies or assets that are under financial, legal or regulatory distress and our services include resolving such distress. Our investing takes many forms and can include acquiring entire businesses or portions thereof, investing in equity, investing in the existing indebtedness (secured and unsecured) of a business or in new equity or debt issues. Our investing is generally not passive and we invest where we believe our expertise in financial restructuring and management and complementary trading and corporate finance capabilities can add or unlock value. Our investing in distressed businesses and/or assets can result in complex and intricate legal issues relating to priorities, claims and other rights of stakeholders. Such issues can result in our being involved in legal and other claims as part of our overall proprietary investment strategy. Our proprietary investments are often made as a part of, or complementary to, our banking, advisory and commodity and natural resources trading activities.

      We invest globally and our objective is to maximize total return measured through both long-term appreciation and recognized gains either through sales or other forms of divestment. We realize upon our portfolio of proprietary investments from time to time based upon management’s view of the value of the investment, the form and structure of divestment, timing and our overall capital requirements.

      One of our key proprietary investments is an indirect interest in a mineral royalty (the “royalty interest”) in the Wabush Iron Ore Mine (the “Wabush Mine”) located in the Province of Newfoundland, Canada. It has provided an uninterrupted source of fairly predictable revenue for over 30 years, which we have used to finance other proprietary investments. The royalty interest consists of a mining sub-lease of the lands upon which the Wabush Mine is situated that commenced in 1956 and expires in 2055. Pursuant to the terms of the mining sub-lease, revenues from the royalty interest are based upon the price levels for iron ore and the amount of iron ore shipped from the Wabush Mine in a particular period, subject to a minimum annual royalty amount of $3.25 million. The mining sub-lease does not provide for renewal. For more information, see “Property, Plants and Equipment” below.

      Other proprietary investments include an indirect interest in a portfolio of real estate assets which are primarily located in the State of Washington, U.S.A. We are conducting pre-development work relating to infrastructure, rezoning, subdivision and permitting on a substantial portion of the properties to the extent

15

necessary to protect or enhance their value. We intend to divest or otherwise monetize these real estate assets and redeploy the proceeds in our merchant banking activities.

      To complement our commodities and natural resources trading, in 2002, as part of our overall investment strategy, we made proprietary investments in two commodity producers to capture potential synergies through distributing and trading their end products.

      In August 2002, we acquired approximately 85% of the issued and outstanding shares and certain indebtedness of Banff Resources Ltd. (“Banff”) for nominal consideration and the provision of a contingent royalty interest to the vendor in the future cobalt production of the cobalt processing plant operated by Kasese Cobalt Company Limited (“Kasese”), a 75% owned subsidiary of Banff, up to a maximum of approximately U.S.$10.0 million. The balance of the shares of Kasese are owned by the Ugandan government. Kasese owns and operates a cobalt processing plant located in Southwest Uganda. As part of our acquisition of Banff, the cobalt processing plant has been put on a care and maintenance program because of the current weakness in cobalt markets. We expect to recommence processing cobalt at the plant when cobalt markets improve as part of our realization of such investment and we intend to handle the sales and distribution of such cobalt production. In the interim, we are selling the hydro-electricity produced by the plant’s dedicated 9 megawatt hydro-electric power plant. For more information, see “Property, Plants and Equipment” below and “Item 10. Additional Information — Material Contracts”.

      In October 2002, we leased the operations of an aluminum rolling mill located in Merseburg, Germany. The mill produces aluminum foil and has an annual production capacity of approximately 9,000 tonnes. The lease commenced in October 2002 and runs until September 2010. We can terminate the lease at our option after September 2007. Our lease payments amount to €21,500 per month including a flat rate for additional costs. We have an option to acquire the property and fixed assets subject to the lease for a purchase price of €3.4 million which option to purchase expires in September 2007. We are currently handling the sales and distribution of the mill’s aluminum foil. For more information about the mill, see “Property, Plants and Equipment” below.

      In July 2002, we acquired all of the outstanding minority interest of our 53% owned subsidiary, Trimble Resources Corporation (“Trimble”), in consideration of 25,071 of our common shares and approximately $205,000 in cash. In December 2002, we restructured Trimble’s outstanding indebtedness of approximately $16.5 million in consideration for approximately $3.3 million of newly issued indebtedness guaranteed by us. We initially acquired our 53% interest in Trimble in October 2001, for approximately $1.0 million. For more information, see “Item 10. Additional Information — Material Contracts”.

      In August 2002, we acquired approximately 93% of the outstanding shares of Euro Trade & Forfaiting, Inc. (“Euro Trade”) for approximately $42.9 million. Euro Trade is engaged primarily in merchant banking in Europe.

      In July 2002, we sold our proprietary investment in an oil joint venture for proceeds of approximately $25.9 million. For more information, see “Item 10. Additional Information — Material Contracts”.

      In August 2002, we divested our investment in Mymetics Corporation (“Mymetics”) through a stock dividend of 0.95 common shares of Mymetics for each common share of MFC held by shareholders of record as of August 13, 2002. Approximately 12,206,957 Mymetics shares were distributed to MFC shareholders under the dividend. As a result of the dividend, MFC shareholders became direct shareholders of Mymetics. Mymetics is an international biotechnology company focused on developing tools and techniques to disarm retroviruses.

      We intend to increase our assets and earnings by expanding our merchant banking operations internationally through both internal growth and acquisitions. We expect to grow internally by expanding our finance and advisory services and increasing our commodity and natural resources trading activities. Growth through acquisitions will continue to focus on undervalued assets that may be complementary to our other operations and where our financial expertise and management can add or unlock value.

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Competition

      We conduct our business in a global environment that is highly competitive and unpredictable. We encounter intense competition in all aspects of our business and compete directly with other financial services companies, brokerage firms, investment banks, merchant banks, trading houses and other investment managers. We face competition in Switzerland from other banks, asset managers and a range of non-bank financial institutions and internationally from investment banks and securities dealers. Many of our competitors are national or international companies with far greater resources, capital and access to information than us. As a result, we may become involved in transactions with more risk. For more information, see “Item 3. Key Information — Risk Factors”.

Organizational Structure

      Our significant subsidiaries, their jurisdictions of organization and our shareholdings are as follows:

	Jurisdiction of		Shareholding at
Name of Subsidiary	Incorporation or Organization		April 16, 2003
MFC Merchant Bank S.A.		Switzerland		100%
TriMaine Holdings, Inc.		U.S.A.		83%
Constitution Insurance Company of Canada		Canada		100%
Drummond Financial Corporation		U.S.A.		96%
Trimble Resources Corporation		Turks & Caicos Islands		100%
MFC Commodities GmbH		Austria		95%
Eurotrade & Forfaiting Inc.		U.S.A.		93%
MFC Aluminiumfolie Merseburg GmbH		Germany		100%
Kasese Cobalt Company Limited(1)		Uganda		75%

(1)  Our interest in Kasese is held through Banff, our 85% owned subsidiary.

Property, Plants and Equipment

      Our main offices are located in Vienna, Austria, Herisau, Switzerland and Berlin, Germany. All of our premises are leased.

      We indirectly participate in a royalty interest. The royalty interest consists of a mining sub-lease of the lands upon which the Wabush Mine is situated that commenced in 1956 and expires in 2055. The lessor is Knoll Lake Minerals Limited (“Knoll Lake”), which holds a mining lease from the Province of Newfoundland, Canada. The lease requires the payment of royalties to Knoll Lake of $0.22 per ton on shipments of iron ore from the Wabush Mine. Iron ore is shipped from the Wabush Mine to Pointe Noire, Quebec, Canada, where it is pelletized. In 2002, 2001 and 2000, 4.5 million, 4.6 million and 5.9 million tons of iron ore, respectively, were shipped from the Wabush Mine.

      The Wabush Mine is operated by an unincorporated joint venture consisting of Wabush Iron Company Limited (U.S.A.), Steel Company of Canada Limited (Canada) and Dominion Foundries & Steel Limited (Canada) (collectively, the “Consortium”), which pays royalties to the holder of the royalty interest based upon the amount of iron ore shipped from the Wabush Mine. Pursuant to the terms of the mining sub-lease, this royalty payment by the Consortium is not to be less than $3.25 million per annum until the expiry of the mining sub-lease in 2055. In 1987, the royalty rate specified in the base price was amended to require a base royalty rate of $1.685 per ton with escalations as defined by agreement. Iron ore is typically sold either as a concentrate, whereby the iron ore is in granular form, or as a pellet, whereby iron ore concentrate has been mixed with a binding agent, formed into a pellet and then fired in a furnace. Iron ore pellets can be charged directly into blast furnaces without further processing and are primarily used to produce pig iron which is subsequently transformed into steel. As such, the demand and, consequently, the pricing of iron ore is dependent upon the raw material requirements of integrated steel producers. Demand for blast furnace steel is in turn cyclical in nature and is influenced by, among other things, the level of general economic activity.

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Although no assurance as to the future production levels can be provided, since the operator of the Wabush Mine is owned by the Consortium of steel producers, production from the mine has been generally maintained at relatively consistent levels.

      We also indirectly own approximately 47 acres of undeveloped real property which is annexed to the City of Gig Harbor, Washington, U.S.A. Of the total acreage, 29 acres are zoned for medium density residential use and 18 acres are zoned for business park/professional office use. We may develop all or part of the land through partnerships, joint ventures or other economic associations with local developers. Our current involvement with the property is limited to pre-development work, including infrastructure (roads, sewer and water services), preliminary permits, market studies, feasibility studies and related activities. All utilities are available to the property and the City of Gig Harbor has completed work on an extension of a street through the property.

      We also indirectly, through Banff, hold a 75% interest in the cobalt processing plant in Kasese, Uganda, which extracts cobalt from an existing cobalt concentrate stockpile. The cobalt concentrate stockpile contained, as at May 2001, approximately 593,616 tonnes of material with an average grade of 1.39% cobalt. Kasese also has an option to acquire 65% of the tailings owned by Kilembe Mines Limited, comprising 5.5 million tonnes of material averaging 0.114% cobalt. The cobalt processing plant has a production capacity of 720 tonnes of cobalt per annum with a product quality of 99.9% cobalt in crushed cobalt cathode form. Kasese’s dedicated hydro-electric power station comprises three hydro-electric generation units with a capacity of 9 megawatts. Power is also available on an as needed basis from the Ugandan Electricity Board’s national grid. Backup power is provided by four 1 megawatt diesel generators located at the plant. The plant recovers cobalt metal from stockpiles of cobalt concentrate using a combination of bioleaching, solvent extraction and electro-winning. Site construction of the plant commenced in November 1997 and was completed on July 1, 1999. Plant commissioning ran into various difficulties which continued from completion until June 30, 2001. Accordingly, July 1, 2001 represented the start of commercial operations. In connection with our acquisition of Banff, the plant was placed into a care and maintenance program under which all cobalt production ceased by September 2002 as a result of weak cobalt markets. The plant is maintained in such a condition so as to enable it to resume production as soon as the price of cobalt reaches an economically feasible level. In its current state, the plant employs 55 people.

      We lease the equipment, operations and underlying real property of an aluminum rolling mill located in Merseburg, Germany. The mill manufactures and sells aluminum foil with approximately 65% of its customer base being located within Germany and the remaining 35% located in the rest of Europe. For the last two and one-half months of 2002, the net sales of the mill were approximately €4.5 million. The raw materials needed for the production of aluminum foil at the mill are obtained from German suppliers. Aluminum foil is a very thin sheet of rolled aluminum supplied in its pure form or in a variety of alloys and tempers which give a wide choice of tensile properties. The thickness of foils ranges from 0.0065mm to 0.2mm. Material thicker than 0.2mm is defined as sheet or strip. Aluminum foils comprise 75% of aluminum processing and the market for aluminum foil and strip in Germany has grown over the last six years at an average rate of approximately 3.5%. The growth is driven by an increased demand for packaging materials, particularly in the food industry. Due to a special mix of packaging demands, aluminum foil has been an essential material in the packaging and distribution of dairy products, as well as an efficient way to store liquid food over long periods. The aluminum foil industry is largely structured with companies that have annual production capacities in excess of 50,000 tonnes. Our processing plant, with an annual production capacity of 9,000 tonnes, occupies a niche position characterized by high flexibility in terms of small volumes. Our mill currently employs approximately 42 persons working in three shifts. Five work in machine maintenance, 29 in production, three in sales and five in administration.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

      The following discussion and analysis of our financial condition and results of operations for the three years ended December 31, 2002 should be read in conjunction with our consolidated financial statements and related notes included in this annual report. Our financial statements included in this annual report were prepared in accordance with Canadian GAAP. For a reconciliation of our financial statements included in this annual report to U.S. GAAP, see Note 18 to the financial statements. We have made certain reclassifications to the prior periods’ financial statements to conform to the current period’s presentation.

Operating Results

      We are a highly integrated international financial services company that focuses on merchant banking. We provide specialized banking and corporate finance services internationally. These activities are primarily conducted through our wholly-owned subsidiary, MFC Bank. Our merchant banking activities include a European trading group focused on trading commodities and natural resources which we acquired in October 2001. We also commit our own capital to promising enterprises and invest and otherwise trade to capture investment opportunities for our own account. We seek to invest in businesses or assets whose intrinsic value is not properly reflected in their share price or value. Our investing is generally not passive. We seek investments where our financial expertise and management can add or unlock value.

      Our results of operations have been and may continue to be affected by many factors of a global nature, including economic and market conditions, the availability of capital, the level and volatility of equity prices and interest rates, currency values, commodity prices and other market indices, technological changes, the availability of credit, inflation and legislative and regulatory developments. Our results of operations may also be materially affected by competitive factors. Competition includes firms traditionally engaged in financial services such as banks, broker-dealers and investment dealers, along with other sources such as insurance companies, mutual fund groups, other companies offering financial services in Europe and globally and other trade and finance companies.

      Our results of operations for any particular period may also be affected by our realization on proprietary investments. These investments are made to maximize total return through long-term appreciation and recognized gains on divestment. We can realize on our proprietary investments through a variety of methods including sales, capital restructuring or other forms of divestment.

      The international and integrated nature and focus of our business has resulted in a relatively low net rate of income tax. In 2002 and 2001, we had a net tax recovery, and in 2000 our effective consolidated tax rate was approximately 4.0%.

      In recent years, the financial services industry has experienced consolidation and convergence as financial institutions involved in a broad spectrum of services have merged or combined. The trend to consolidate is expected to continue and produce global financial institutions with much greater capital and other resources than we have. As a result of the economic and competitive factors discussed above, our results of operations may vary significantly from period to period. We intend to manage our business for the long-term and to mitigate the effects of such factors by focusing on our core operations.

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Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

      The following table provides selected quarterly financial information for 2002 for MFC:

	2002
	December 31		September 30		June 30		March 31
	(in thousands, other than per share amounts)
Revenues	$	124,574	$	52,169	$	53,364	$	54,232
Expenses		98,927		49,153		44,890		44,189
Net income		28,864		1,854		10,049		9,988
Diluted earnings per share		2.10		0.14		0.72		0.72
Total assets		446,574		494,179		434,487		396,225
Shareholders’ equity		285,290		252,907		244,368		250,969

      In 2002, our revenues increased by 32.7% to $284.3 million from $214.2 million in 2001, primarily as a result of the inclusion of the results of our trading operations for the full year in 2002, instead of only three months in 2001. In 2002, we expanded our trading operations by hiring additional trade professionals and expanding the breadth of products that we trade. We are also expanding geographically into the Far East and Southern Asia. Such geographic expansion of our merchant banking activities is being undertaken, in part, as we expect that over the next several years the integration of several central European countries into the European Union will result in increased competition and put downward pressure on operating margins.

      In 2002, expenses increased by approximately 39.3% to $237.2 million from $170.2 million in 2001, primarily as a result of the expansion of our trading operations in 2002. In 2002, expenses increased by approximately 22.9% to $175.8 million from $143.1 million in 2001. General and administrative expenses increased to $35.8 million in 2002 from $21.8 million in 2001. The increases in financial services and general and administrative expenses related primarily to the inclusion of the results of our trading operations for the full year in 2002 versus only three months in 2001.

      In 2002, we recorded a loss for goodwill impairment of approximately $16.1 million relating to the goodwill associated with previously acquired subsidiaries as we determined that the carrying value of such goodwill exceeded its fair value. See “Critical Accounting Policies — Goodwill Impairment” below for more information. There was no similar charge in 2001. In 2002, we recognized a $19.7 million gain on indebtedness of a subsidiary and a $49.1 million gain on debt extinguishment. In 2001, we recognized a $22.4 million gain on indebtedness of a subsidiary. In 2002, interest expense increased to approximately $9.5 million from approximately $5.4 million in 2001, primarily as a result of the inclusion of the consolidated indebtedness of Banff, in which we acquired an approximately 85% interest in August 2002.

      In 2002, we recorded a recovery of income tax of $3.5 million as a result of the reversal of a tax accrual due to the sale of an indirect oil royalty interest during the year. In 2001, we had an income tax recovery of $0.8 million.

      In 2002, our net earnings increased to $50.8 million, or $3.93 per share on a basic basis ($3.70 per share on a diluted basis), from $45.3 million, or $3.59 per share on a basic basis ($3.35 per share on a diluted basis), in 2001.

20

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

      The following table provides selected quarterly financial information for 2001 for MFC:

	2001
	December 31		September 30		June 30		March 31
	(in thousands, other than per share amounts)
Revenues	$	89,878	$	33,478	$	46,888	$	44,002
Expenses		71,095		25,958		37,349		35,830
Net income		19,876		7,786		9,543		8,083
Diluted earnings per share		1.40		0.58		0.72		0.63
Total assets		394,639		298,760		280,423		297,823
Shareholders’ equity		245,997		251,398		229,446		221,767

      In 2001, our revenues increased by 37.1% to $214.2 million from $156.2 million in 2000, primarily as a result of the acquisition of our trading operations in October 2001 and increased investment activities. In 2001, revenues included a recognition of a non-cash gain on indebtedness of a subsidiary of $22.4 million. Expenses from continuing operations increased by 48.8% to $170.2 million in 2001 from $114.4 million in 2000, primarily as a result of the acquisition of our trading operations and higher investment expenses. In 2001, financial services expenses increased by 61.2% to $143.1 million from $88.7 million in 2000. General and administrative expenses increased marginally to $21.8 million in 2001 from $21.4 million in 2000. Interest expense increased by 27.3% to $5.4 million in 2001 from $4.2 million in 2000, primarily as a result of a net increase in our total indebtedness resulting from acquisitions completed in 2001. At December 2001, we recorded a loss on the change in the fair value of foreign exchange hedging of $1.1 million.

      In 2001, net earnings were $45.3 million, or $3.59 per share on a basic basis ($3.35 per share on a diluted basis) from $39.2 million, or $3.24 per share on a basic basis ($3.03 per share on a diluted basis) in 2000.

Liquidity and Capital Resources

      The following table is a summary of selected financial information concerning MFC for the periods indicated:

	December 31,				December 31,
	2002		2001		2002		2001
	(U.S. Dollars in				Canadian Dollars in
	thousands)				thousands)
Cash and cash equivalents	$	64,835	$	48,453	$	102,413	$	77,166
Securities		39,661		47,598		62,649		75,805
Total assets		282,712		247,796		446,574		394,639
Debt		43,554		61,535		68,798		98,000
Shareholders’ equity		180,608		154,462		285,290		245,997

      We maintain a high level of liquidity, with a substantial amount of our assets held in cash and cash equivalents, securities and customer loans collateralized by marketable securities. The highly liquid nature of these assets provides us with flexibility in managing our business and financing. We also use this liquidity in client related services where we act as a financial intermediary for third parties and in our own proprietary investing activities.

      At December 31, 2002, our cash and cash equivalents were $102.4 million, compared to $77.2 million at December 31, 2001. At December 31, 2002, we had securities of $62.6 million, compared to $75.8 million at December 31, 2001.

      At December 31, 2002, our debt was $68.8 million, compared to $98.0 million at December 31, 2001 and were denominated in U.S. dollars and Euros.

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      As part of our merchant banking activities, we establish, utilize and maintain various kinds of credit lines and facilities with other banks, insurers, and trade finance providers. Most of these facilities are short-term. These facilities are primarily used for structured trade financing, accounts receivable financing and letters of credit. Such facilities are drawn upon and used for specific trading transactions. These credit facilities are generally secured by the subject matter of a proposed transaction, being either a receivable or the underlying commodity or natural resource being traded. We often further enhance the credit of such facilities through credit and/or performance insurance provided by governmental and/or private insurers. Such trade finance insurance is often layered with varying limitations and exceptions. The amounts drawn under the credit facilities fluctuate with the kind and level of commodities and natural resources trading transactions being undertaken by us. As such transactions are settled, proceeds are generally applied to first settle amounts drawn under such credit facilities.

      At December 31, 2002, we had approximately ten separate credit lines and facilities used for commodities and natural resources trading aggregating approximately $64.0 million, of which approximately $25.0 million was outstanding. In April 2003, we established two additional credit lines and facilities to increase the aggregate available amount of such credit lines and facilities to $approximately $84.2 million of which approximately $39.8 million was outstanding. The kind, amount and number of credit facilities we utilize and amounts drawn thereunder fluctuate from time to time based upon the nature, level and location of, and counterparties with, whom we conduct our commodities and natural resources trading activities.

      We have debt maturities of $30.5 million in 2003 and $4.5 million in 2004. We expect such maturing debt to be satisfied primarily through the settlement of underlying commodities and natural resource trading transactions, cash on hand and cash flow from operations. Much of such maturing debt may either subsequently be made re-available to us by the applicable financial institution or we may replace such facilities with similar facilities depending upon our trading and capital requirements. For more information, see Note 9 to our consolidated financial statements included in this annual report.

Operating Activities

      In 2002, changes in securities provided cash of $12.2 million compared to $1.8 million in 2001. A decrease in receivables provided cash of $1.6 million in 2002, compared to $48.3 million in 2001 which included $12.9 million cash provided from a decrease in amounts due from investment dealers resulting primarily from the outsourcing of our private bank clients. An increase in commodity investments used cash of $6.0 million in 2002, compared to nil in 2001, resulting primarily from the expansion of our commodities and natural resources trading operations. A decrease in properties held for sale provided cash of $13.5 million in 2002, compared to an increase in same using cash of $0.4 million in 2001. An increase in accounts payable and accrued expenses provided cash of $3.8 million in 2002, compared to a decrease in same using cash of $8.5 million in 2001. Operating activities provided cash of $20.8 million in 2002, compared to $64.5 million in 2001. We expect to generate sufficient cash flow from operations to meet our working capital and other requirements.

Investing Activities

      In 2002, a net increase in loans used cash of $4.8 million, compared to a net decrease in loans providing cash of $25.1 million in 2001. The net purchase of long-term securities used cash of $5.4 million in 2002 compared to $4.8 million in 2001. In 2002, the sale of an equity method investment, being our indirect oil royalty interest, provided cash of $25.9 million. In 2002, purchases of subsidiaries, net of cash acquired, used cash of $35.0 million, compared to $1.0 million in 2001. Investing activities used cash of $19.1 million in 2002, compared to providing cash of $18.8 million in 2001.

Financing Activities

      Net debt repayments used cash of $13.3 million in 2002, compared to $25.3 million in 2001. In 2002, a net increase in deposits provided cash of $33.9 million, compared to a net decrease in deposits using cash of $62.4 million in 2001. The net repurchase of common shares in 2002 used cash of $7.0 million, compared to

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the net issuance of common shares providing cash of $11.5 million in 2001. Net cash provided by financing activities was $13.5 million in 2002, compared to net cash used by financing activities of $76.1 million in 2001.

      We had no material commitments to acquire assets or operating businesses at December 31, 2002. We anticipate that there will be acquisitions of businesses or commitments to projects in the future. To achieve our long-term goals of expanding our assets and earnings, including through acquisitions, we will require substantial capital resources. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against our assets, sales of proprietary investments or the issuance of securities.

Foreign Currency

      Substantially all of our operations are conducted in international markets and our consolidated financial results are subject to foreign currency exchange rate fluctuations.

      We translate foreign assets and liabilities into Canadian dollars at the rate of exchange on the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the period. Unrealized gains or losses from these translations are recorded as shareholders’ equity on the balance sheet and do not affect our net earnings. As a substantial amount of our revenues are received in Swiss francs, our financial position for any given period, when reported in Canadian dollars, can be significantly affected by the exchange rate for Swiss francs prevailing during that period. In the year ended December 31, 2002, we reported approximately a net $14.3 million foreign exchange translation gain and, as a result, our cumulative foreign exchange translation gain at December 31, 2002 was $18.7 million, compared to a $4.5 million gain at December 31, 2001.

      We use derivative foreign exchange contracts to manage our exposure and our clients’ exposure to foreign currency exchange rate risks. At December 31, 2002, we did not hold any forward foreign exchange contracts for our own account. At December 31, 2001, we held four forward foreign exchange contracts in the aggregate notional amount of $24.7 million which covered the period through May 31, 2002. We entered into these contracts for our own account to manage our exposure to foreign currency exchange risks. For more information, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk — Derivative Instruments”.

      Based upon the period average exchange rates in 2002, the Canadian dollar decreased by approximately 9.2% in value against the Swiss franc and by approximately 1.4% in value against the U.S. dollar, compared to the period average exchange rates in 2001. As at December 31, 2002, the Canadian dollar decreased by approximately 16.0% in value against the Swiss franc and by approximately 0.8% in value against the U.S. dollar since December 31, 2001.

Derivative Instruments

      Derivatives are financial instruments, the payments of which are linked to the prices, or relationships between prices, of securities or commodities, interest rates, currency exchange rates or other financial measures. Derivatives are designed to enable parties to manage their exposure to interest rates and currency exchange rates, and security and other price risks. We use derivatives to provide products and services to clients and to manage our foreign currency exchange exposure for our own account. For more information, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk — Derivative Instruments”.

Inflation

      We do not believe that inflation has had a material impact on our revenues or income over the past three fiscal years. Because our assets to a large extent are liquid in nature, they are not significantly affected by inflation. However, increases in inflation could result in increases in our expenses, which may not be readily recoverable in the price of services provided to our clients. To the extent inflation results in rising interest rates and has other adverse effects on capital markets, it could adversely affect our financial position and profitability.

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Application of Critical Accounting Policies

      The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

      Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex. We have identified certain accounting policies, described below, that are the most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements included in this annual report.

Revenue Recognition

      Merchant banking revenues for banking and services are recognized as they are performed, and from commodities and natural resources trading and the sale of proprietary investments as they are completed and when the amounts of the revenues are fixed, agreed or determinable and collectibility is reasonably assured.

Allowance for Credit Losses

      Our allowance for credit losses is to be maintained at an amount considered adequate to absorb estimated credit-related losses. Such allowances reflect management’s best estimate of the probable losses in our credit portfolio and judgments about both macro- and micro-economic conditions. The evaluation process involves estimates and judgments, which could change drastically in the near-term, and could result in a significant change to a recognized allowance. Credit losses arise primarily from loans but may also relate to other credit instruments such as guarantees and letters of credit. An allowance for credit losses may be increased by provisions which are charged to income and reduced by write-offs net of any recoveries.

      We review our loan portfolio and receivables on a regular basis. Specific provisions are established on a loan-by-loan or receivable basis. In determining whether a specific provision is required or not, we consider, but such consideration is not limited to, the following factors:

•  repayment history of the borrower;

•  overall financial position and results of the borrower;

•  the nature and quality of collateral and guarantee;

•  business plan and outlook of the borrower;

•  secondary market value of the loan and the collateral; and

•  our business plan or strategy to divest or restructure the debt.

      A general provision may be established to absorb potential credit losses attributable to the deterioration of credit quality on aggregate exposures for which specific provisions cannot yet be determined. A country risk provision may be made based on exposures in less developed countries and on management’s overall assessment of the underlying economic conditions in those countries. A market risk provision may be made based on the macro-economic factors which are specific to a particular region or industry and the micro-economic factors which are specific to a particular borrower. Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and there is no realistic prospect of recovery.

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Goodwill Impairment

      A goodwill impairment loss should be recognized when the carrying amount of the goodwill exceeds the fair value of the goodwill. An impairment loss should not be reversed if the fair value subsequently increases. We consider, but such consideration is not limited to, the following factors to determine the goodwill impairment:

•  a significant adverse change in legal factors or in the business climate;

•  an adverse action or assessment by a regulator;

•  unanticipated competition;

•  loss of key personnel;

•  a more-likely-than-not expectation that a significant portion or all of a reporting unit will be sold or otherwise disposed of;

•  the testing for write-down or impairment of a significant asset group within a reporting unit; or

•  the recognition of a goodwill impairment loss in its separate financial statements by a subsidiary that is a component of the reporting unit.

Valuation of Securities

      Trading account securities held by MFC Bank are stated at current market value, with the unrealized gain or loss included in the results of operations. Other short-term securities are carried at the lower of aggregate cost or current market value, with the realized loss included in the results of operations.

      When there has been a loss in value of a long-term security that is other than a temporary decline, the security will be written down to recognize the loss. The write-down is included in the determination of income.

      A decline in market value may be only temporary in nature or may reflect conditions that are more persistent. Declines may be attributable to general market conditions, either globally or regionally, that reflect prospects of the economy as a whole or prospects of a particular industry or a particular company. Such declines may or may not indicate the likelihood of ultimate recovery of the carrying amount of a security. We regularly review our portfolio position to determine whether an other than temporary decline exists.

      In determining whether the decline in value is other than temporary, quoted market price is not the only deciding factor, particularly for thinly traded securities, large block holdings and restricted shares. We consider, but such consideration is not limited to, the following factors:

•  trend of the quoted market price and trading volume;

•  financial position and results for a period of years;

•  liquidity or going concern problems of the investee;

•  changes in or reorganization of the investee and/or its future business plan;

•  outlook of the investee’s industry;

•  the current fair value of the investment (based upon an appraisal thereof) relative to its carrying value; and

•  our business plan and strategy to divest the security or to restructure the investee.

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ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management; Board Practices

      Our Articles provide for three classes of directors with staggered terms. Each director holds office until the expiry of the director’s term or until a successor is elected or appointed, unless the office is earlier vacated in accordance with our Bylaws or with the provisions of the Business Corporations Act (Yukon). At each annual meeting of shareholders of MFC, a class of directors is elected to hold office for a three-year term. Successors to the class of directors whose terms expire are identified as being of the same class as the directors they succeed and are elected to hold office for a term expiring at the third succeeding annual meeting of shareholders. A director appointed or elected to fill a vacancy on the board of directors holds office for the unexpired term of his predecessor. Officers of MFC serve at the discretion of the board of directors.

      The following table sets out certain information concerning our directors and executive officers:

			Date of		Expiration
	Present		Commencement		of Term
	Position with		of Office with		of Office with
Name	MFC	Principal Occupation	MFC		MFC
Michael J. Smith	Director and President	President, Chief Executive Officer and Director of MFC		1986 1996		2005 N/A
Sok Chu Kim(1)	Director	Senior Vice-President, Korea Exchange Bank, 1967 to 1985; President of Korea International Merchant Bank, 1985 to 1989; Advisor to Sukura Bank (Seoul, Korea); Director of Korea Liberalization Fund Ltd.		1996		2004
Oq-Hyun Chin(1)	Director	Business Advisor, The Art Group Architects & Engineers Ltd.		1994		2004
Dr. Stefan Feuerstein	Director and Vice- President	Director and Vice-President of MFC; Managing Director, MFC Capital Partners AG; Managing Director of the Industrial Investment Council of the New German States; President of the Thuringian Economic Development Corporation (Germany) from 1992 to 2001		2000 2000		2003 N/A
Silke Brossmann(1)	Director	Consultant, Head of Client Relations, Prokurist and Head of Central Administration, Koidl & Cie. Holding AG from 1999 to 2002		2003		2005
Roy Zanatta	Secretary	Secretary of MFC		1996		N/A
Claudio Morandi	Managing Director of MFC Bank	Managing Director of MFC Bank		1997		N/A
John Musacchio	Vice- President	Vice-President of MFC; Chief Operating Officer, Chief Financial Officer and Director of Mymetics		1999		N/A

(1) Member of the Audit Committee.

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     There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a director or executive officer, nor are there any family relationships between any of the persons referred to above.

      Our board of directors has established an Audit Committee. The Audit Committee operates pursuant to a charter adopted by the board of directors. The Audit Committee is appointed by and generally acts on behalf of the board of directors. The Audit Committee is responsible primarily for monitoring: (i) the integrity of our financial statements; (ii) compliance with legal and regulatory requirements; and (iii) the independence and performance of our internal and external auditors. The members of the Audit Committee are Sok Chu Kim, Oq-Hyun Chin and Silke Brossmann.

      We do not have a Remuneration Committee of our board of directors. Our executive compensation program is administered by our Chief Executive Officer under the supervision of our board of directors.

Employment Agreements and Termination of Employment or Change of Control

      Mr. Smith entered into an amended and restated employment agreement with MFC in 2000. The agreement generally provides, subject to certain termination provisions, for the continued employment of Mr. Smith for a period of 36 months with automatic one month renewals, so that the agreement at all times has a remaining term of 36 months. The agreement provides for an annual base salary and other compensation to be paid to Mr. Smith as determined by our board of directors. In the event he is terminated without cause or resigns for good reason (as defined in each agreement) within three years of a change of control (as defined in each agreement), Mr. Smith will be entitled to a lump sum severance payment of three times the sum of (i) his current annual salary under the agreement, and (ii) the higher of his current annual bonus under the agreement and the highest variable pay and bonus received by him in the previous five fiscal years. If Mr. Smith is terminated without cause or resigns for good reason after three years of a change of control, he will be entitled to the same payments in equal instalments over 12 months.

      In addition, all unvested rights in any stock options or other equity awards made to Mr. Smith will vest in full in the event of a change of control. Mr. Smith will also be entitled, for a period of 365 days following the earlier of the date of his termination and the date of the change of control, to require us to purchase all or any part of our common shares held by Mr. Smith on the date of termination or date of change of control, at a price equal to the average closing market price of our common shares on the Nasdaq National Market (the “Nasdaq”) for the ten preceding trading days.

Compensation

      During the fiscal year ended December 31, 2002, we paid an aggregate of approximately $2.1 million in cash compensation to our directors and officers. This amount does not take into account incentive stock options granted to or exercised by such directors and officers or other non-cash compensation, as more particularly described below. No other funds were set aside or accrued by MFC during the fiscal year ended December 31, 2002 to provide pension, retirement or similar benefits for our directors or officers pursuant to any existing plan provided or contributed to by MFC.

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Executive Compensation

      The following table provides a summary of compensation paid by us during the fiscal year ended December 31, 2002 to our Chief Executive Officer and to our next four most highly paid executive officers who received a combined salary and bonus during such period in excess of $100,000 (collectively, with the Chief Executive Officer, the “Named Executives”):

SUMMARY COMPENSATION TABLE

							Long-Term
	Annual Compensation(1)						Compensation
					Other Annual		Securities Under		All Other
Name and	Salary		Bonus		Compensation		Options Granted		Compensation
Principal Position	($)		($)		($)		(#)		($)
Michael J. Smith		340,649		330,624		20,234		—		—
President, Chief
Executive Officer and
Director
Dr. Stefan Feuerstein		356,112		66,771		17,805		—		9,160
Vice-President and
Director
Claudio Morandi		228,705		205,215		7,687		—		761,000(2)
Managing Director
MFC Bank
Roy Zanatta		239,429		—		—		—		—
Secretary
John Musacchio		301,842		—		—		—		—
Vice-President

(1)	On a cash basis, unless otherwise stated.
(2)	As at December 31, 2002, Mr. Morandi had an outstanding loan of approximately $761,000 which is expected to be paid in the near term. The loan is payable on demand and bears interest at the rate of 4.25% per annum.

Directors’ Compensation

      Our non-management directors receive U.S.$20,000 annually for their services and U.S.$500 for each meeting of directors that they attend. We also reimburse our directors and officers for expenses incurred in connection with their services as our directors and officers.

Options to Purchase Securities

      We have an incentive stock option plan that provides for the grant of incentive stock options to purchase our common shares to our directors, officers and key employees and other persons providing ongoing services to us. Our stock option plan is administered by our board of directors. The maximum number of our common shares which may be reserved and set aside for issuance under our stock option plan is 2,762,000. Each option upon its exercise entitles the grantee to one common share. The exercise price of an option may not be less than the closing market price of our common shares on the Nasdaq on the day prior to the date of grant of the option. In the event our common shares are not traded on such day, the exercise price may not be less than the average of the closing bid and ask prices of our common shares on the Nasdaq for the ten trading days immediately prior to the date the option is granted. Options may be granted under our stock option plan for an exercise period of up to ten years from the date of grant of the option. We did not grant any options in 2002.

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Employees

      We currently employ approximately 206 people. As at December 31, 2002, 2001 and 2000 we employed approximately 168, 144 and 36 people, respectively. We are not party to any collective agreements with any labour unions.

Share Ownership

      The following table sets forth information as of April 16, 2003 concerning the beneficial ownership of our common shares by each of our Named Executives and directors:

	Number of			Percentage
Name of Beneficial Owner	Common Shares			of Class
Michael J. Smith		612,000			4.8	%
Claudio Morandi		—	(1)		—
Roy Zanatta		—	(2)		—
John Musacchio		1,000	(3)		*
Sok Chu Kim		—			—
Oq-Hyun Chin		—			—
Dr. Stefan Feuerstein		—	(4)		—
Silke Brossmann		—			—

*  Less than 1%.

(1)	Mr. Morandi has incentive stock options entitling him to acquire up to 75,000 of our common shares at an exercise price of U.S.$6.00 per share expiring October 28, 2003.
(2)	Mr. Zanatta has incentive stock options entitling him to acquire up to 60,000 of our common shares at an exercise price of U.S.$6.00 per share expiring October 28, 2003.
(3)	Mr. Musacchio has incentive stock options entitling him to acquire up to 50,000 of our common shares at an exercise price of U.S.$6.00 per share expiring October 28, 2003.
(4)	Dr. Feuerstein has incentive stock options entitling him to acquire up to 50,000 of our common shares at an exercise price of U.S.$7.00 per share expiring March 29, 2005.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

      The following table sets forth certain information as at April 16, 2003 concerning the ownership of our common shares by each person known to us, based solely upon public records and filings, to be the direct and/or indirect owner of five percent or more of our common shares:

Identity of Person or Group	Amount Owned			Percent of Class
Peter Kellogg		3,141,550	(1)		24.4	%
FMR Corp.		763,800			5.9	%

(1)  In his public filings, Mr. Kellogg disclaims beneficial ownership of 2,821,550 of the shares, or approximately 22.0% of our issued and outstanding common shares.

     Our officers and directors, as a group, own or control, directly or indirectly, an aggregate of 613,000 common shares and have options to purchase an additional 235,000 common shares, representing approximately 6.5% of our common shares on a fully diluted basis.

      All common shareholders have identical voting rights.

Shareholder Distribution

      As at April 16, 2003, there were approximately 629 holders of record of our common shares and a total of 12,849,854 common shares were outstanding. Approximately 10,675,792 or 83.1% of our common shares are held of record by 549 U.S. holders, including depositories and clearing agencies.

Related Party Transactions

      Other than as disclosed herein, to the best of our knowledge, there have been no material transactions since January 1, 2002 to which we were or are a party and in which a director or officer of MFC, any relative or spouse of any director or officer, or any individual owning, directly or indirectly, an interest in our voting power that gives it significant influence over us, has or will have a direct or indirect material interest nor were any of our directors or officers, any relatives or spouses of such directors or officers, or any individuals owning, directly or indirectly, an interest in our voting power that gives them significant influence over us, indebted to us during this period.

      As at December 31, 2002, we reorganized our interest in two European commodity producers with a carrying value of approximately $7.3 million by exchanging them for a 49% interest in Equitable Industries Limited Partnership. No gain or loss was recorded as a result of the exchange and it was treated as a related party non-monetary transaction.

      During 2002, we earned fees in the normal course from our merchant banking affiliates amounting to approximately $9.2 million of which approximately $4.1 million was with a merchant banking client the president of which is also our president. In 2001 and 2000, such fees amounted to $0.3 million and $1.1 million, respectively.

      In 2002, we also sold real estate for gross cash proceeds of approximately $4.2 million to an affiliate. No gain or loss was recognized on this transaction. At April 16, 2003, we had a note payable of approximately $0.8 million to this affiliate. At the beginning of 2002, the amount outstanding under this note payable was approximately $4.6 million which was also the largest amount outstanding during the year. The note bears interest at the rate of 3.5% per annum and is payable on demand. The note is unsecured and non-recourse.

      In 2002, we also sold commodities amounting to approximately $3.5 million in the normal course to an affiliate, approximately $2.9 million of which is included in receivables from commodity transactions as at December 31, 2002.

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      We had a receivable from an officer of $0.8 million at April 16, 2003, which will be paid in the normal course. No amounts were paid on this loan in 2002 and the loan is payable on demand and bears interest at the rate of 4.25% per annum.

      We receive dividends pursuant to a royalty interest from an affiliate at a rate of 10% annually. Dividends earned amounted to $4.9 million in 2002.

ITEM 8.      FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

      See “Item 18. Financial Statements” for financial statements filed as part of this annual report.

Significant Changes

      No significant changes have occurred since the date of the financial statements provided in Item 18 below.

Legal Proceedings

      We are subject to routine litigation incidental to our business and are named from time to time as a defendant in various legal actions arising in connection with our activities, certain of which include large claims for punitive damages. We are also involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies. Some of these legal actions, investigations and proceedings may result in adverse judgments, penalties or fines.

      In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which substantial damages are sought, we cannot state what the eventual outcome of pending matters will be. We are contesting the allegations made in each pending matter and believe, based on current knowledge and after consultation with counsel, that the outcome of such matters will not have a material adverse effect on our consolidated financial condition, but may be material to our operating results for any particular period, depending on the level of our income for such period.

Dividend Information

      The actual timing, payment and amount of dividends paid on our common shares is determined by our board of directors, based upon things such as our cash flow, results of operations and financial condition, the need for funds to finance ongoing operations and such other business considerations as our board of directors considers relevant.

      In August 2002, we paid a stock dividend of 0.95 common shares of Mymetics for each common share of MFC held by our shareholders of record as of August 13, 2002. Approximately 12,206,957 Mymetics shares were distributed to MFC shareholders under the dividend. For more information, see “Item 4. Information on the Company — Overview”.

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ITEM 9. THE OFFER AND LISTING

Markets and Price History

      Our common shares are quoted on the Nasdaq National Market under the symbol “MXBIF” and on the Frankfurt Stock Exchange under the symbol “MFC GR”. The following table sets forth the high and low sales prices of our common shares on the Nasdaq for the periods indicated. In August 2002, we paid a stock dividend of 0.95 common shares of Mymetics for each common share of MFC held by shareholders of record as of August 13, 2002. As a result, the sales prices set out below for periods prior to the payment of the stock dividend did not reflect the payment of the stock dividend to MFC shareholders.

	Nasdaq
	High		Low
Annual Highs and Lows
1998	U.S.$	14.38	U.S.$	4.69
1999		12.25		5.81
2000		10.00		6.75
2001		11.60		7.13
2002		11.51		6.45
Quarterly Highs and Lows
2001
First Quarter	U.S.$	8.50	U.S.$	7.13
Second Quarter		11.00		7.63
Third Quarter		10.00		7.40
Fourth Quarter		11.60		7.90
2002
First Quarter		11.51		9.20
Second Quarter		10.49		8.60
Third Quarter		9.19		7.01
Fourth Quarter		7.81		6.45
2003
First Quarter		8.35		6.74
Monthly Highs and Lows
2002
October	U.S.$	7.81	U.S.$	6.60
November		7.30		6.59
December		7.30		6.45
2003
January		7.85		6.80
February		7.30		6.74
March		8.35		6.75
April 1 to April 16		8.65		7.51

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ITEM 10.      ADDITIONAL INFORMATION

Articles and Bylaws

      We are incorporated under the laws of the Yukon Territory, Canada and have been assigned corporate access number 29216.

      Our Articles and Bylaws do not contain a description of our objects and purposes, except insofar as to restrict us from carrying on the business of a railway, steamship, air transport, canal, telegraph, telephone or irrigation company. We may perform any and all corporate activities permissible under the laws of the Yukon Territory.

      Our Articles and Bylaws do not restrict a director’s power to vote on a proposal, arrangement or contract in which the director is materially interested, vote compensation to themselves or any other members of their body in the absence of an independent quorum or exercise borrowing powers. There is no mandatory retirement age for our directors and our directors are not required to own securities of MFC in order to serve as directors.

      Our authorized capital consists of common shares and class A preferred shares. Our class A preferred shares may be issued in one or more series and our directors may fix the number of shares which is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series. Currently, we have authorized 140,000 class A preferred shares, series 1 (the “Series 1 Shares”), 140,000 class A preferred shares, series A (the “Series A Shares”), 100,000 class A preferred shares, series 2 (the “Series 2 Shares”) and 20,000 class A preferred shares, series 3 (the “Series 3 Shares”).

      Holders of our common shares are entitled to vote at all meetings of shareholders, except meetings at which only holders of a specified class of shares are entitled to vote, receive any dividend declared by MFC and, subject to the rights, privileges, restrictions and conditions attaching to any other class of shares, receive the remaining property of MFC upon dissolution.

      Our class A preferred shares of each series rank on a parity with our class A preferred shares of any other series and are entitled to a preference over our common shares with respect to the payment of dividends and the distribution of assets or return of capital in the event of liquidation, dissolution or winding-up of MFC.

      Holders of our Series 1 Shares and Series A Shares are entitled to dividends of $5.00 per share per annum. Our Series 1 Shares and Series A Shares are redeemable at our option at a price of $100.00 and carry retraction rights entitling a holder to require us to redeem their Series 1 Shares or Series A Shares, respectively, at any time after five years from the date of issuance for a price of $100.00. Our Series 1 Shares and Series A Shares are also convertible into such number of our common shares as is specified in our Articles at any time after five years from the date of issuance or in the event the Series 1 Shares or Series A Shares, respectively, are called for redemption.

      Holders of our Series 2 Shares and Series 3 Shares are entitled to dividends of $3.00 per share per annum. Our Series 2 Shares and Series 3 Shares are redeemable at our option at a price of $100.00.

      The provisions in our Articles attaching to our common shares and class A preferred shares may be altered, amended, repealed, suspended or changed by the affirmative vote of the holders of not less than two-thirds of the common shares and two-thirds of the class A preferred shares, respectively.

      Our Articles provide for three classes of directors with staggered terms. Each director holds office until the expiry of his term or until his successor is elected or appointed, unless his office is earlier vacated in accordance with our Bylaws or with the provisions of the Business Corporations Act (Yukon). At each annual meeting of MFC, a class of directors is elected to hold office for a three year term. Successors to the class of directors whose terms expire are identified as being of the same class as the directors they succeed and are elected to hold office for a term expiring at the third succeeding annual meeting of shareholders. A director appointed or elected to fill a vacancy on the board of directors holds office for the unexpired term of his predecessor.

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      An annual meeting of shareholders must be held at such time in each year not later than 15 months after the last preceding annual meeting and at such place as our board of directors, or failing it, our Chairman, Managing Director or President, may from time to time determine. The holders of not less than five percent of our issued shares that carry the right to vote at a meeting may requisition our directors to call a meeting of shareholders for the purposes stated in the requisition. The quorum for the transaction of business at any meeting of shareholders is two persons present in person or by proxy who together hold or represent by proxy, in aggregate, not less than one-third of our outstanding shares entitled to vote at the meeting. Only persons entitled to vote, our directors and auditors and others who, although not entitled to vote, are otherwise entitled or required to be present, are entitled to be present at a meeting of shareholders.

      Except as provided in the ICA, there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or the Yukon Territory, or in our charter documents. See “Exchange Controls” below for a discussion of the principal features of the ICA for non-Canadian residents proposing to acquire our common shares.

      As set forth above, our Articles and Bylaws contain certain provisions that would have an effect of delaying, deferring or preventing a change in control of MFC, including authorizing the issuance by our board of directors of preferred stock in series, providing for a classified board of directors with staggered, three-year terms and limiting the persons who may call special meetings of shareholders. Our Articles and Bylaws do not contain any provisions that would operate only with respect to a merger, acquisition or corporate restructuring of MFC.

      In 1993, we adopted a shareholder protection rights plan to protect us and our shareholders from unfair, abusive or coercive acquisition tactics. Generally, the plan provides for the issuance to the holders of each of our outstanding common shares of a right to purchase one of our common shares at an exercise price determined in accordance with the plan upon the commencement of a take-over bid. We have waived the application of the plan to an existing shareholder to permit such shareholder to acquire up to 25% of our common shares. Our plan currently expires in 2003, and we plan to renew the same.

      Our Bylaws do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.

Material Contracts

      The following summary of certain material provisions of the agreements referenced below is not complete and these provisions are qualified in their entirety by reference to the full text of such agreements which are filed with this annual report or are on file with the SEC.

      In October 2001, we acquired approximately 96% of MFC Commodities pursuant to an investment and restructuring agreement made among us, certain wholly-owned subsidiaries, Hovis Commodity Trading GmbH (“HCT”), MFC Commodities and its then shareholders (the “investees”) dated for reference October 1, 2001 (the “Investment Agreement”). MFC Commodities was established in 1993 and is, directly and indirectly through subsidiaries, primarily engaged in trading commodities and natural resources in Eastern Europe. Pursuant to the terms of the Investment Agreement, our wholly-owned subsidiary invested approximately $11.4 million in HCT, the holding company of MFC Commodities, in exchange for approximately 96% of its issued share capital. Two prior shareholders of MFC Commodities subscribed for approximately 4.5% in aggregate of the issued share capital of the holding company in consideration of the payment of an aggregate of approximately $0.3 million and have the right to acquire up to an additional 44.5% of the holding company of MFC Commodities in the event that its consolidated net worth reaches prescribed targets on or before a specified date or they pay the difference between the actual net worth and target amount in cash. Further, the investees also have the right to require us to purchase their shares during a prescribed period pursuant to a stipulated price calculation. We have the right to acquire their holding company shares for an aggregate of approximately $0.3 million if they do not acquire shares in the capital of HCT prior to December 31, 2006 or this right is terminated prior to that date.

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      The Investment Agreement contains representations, warranties and covenants customary for this type of agreement. The Investment Agreement also provided for, among other things, a restructuring of MFC Commodities’ bank and other credit facilities, a reorganization of its corporate structure and the shareholders entering into an owners’ agreement (the “Owners’ Agreement”). The Owners’ Agreement sets out the respective rights and obligations of the shareholders, as well as its and MFC Commodities’ management and operations. It contains terms and conditions customary for such agreements including those relating to the constitution and election of a board of directors, the appointment of managing directors and their respective rights and duties, restrictions on share transfers other than to permitted transferees, rights of first refusal and default provisions and remedies.

      In conjunction with the acquisition of MFC Commodities, we implemented certain operating and strategic changes. These included reaffirming and establishing various credit lines of MFC Commodities and its subsidiaries in the aggregate amount of approximately $64.1 million. Further, we streamlined the operations of MFC Commodities to focus on its core trading activities and divested certain of its non-core industrial assets.

      In October 2001, we acquired approximately 53% of the outstanding common shares of Trimble for approximately $1.0 million. In July 2002, we acquired the outstanding minority interest in Trimble pursuant to a plan of arrangement dated May 17, 2002 between Trimble and MFC whereby shareholders of Trimble elected to receive either $0.22 or 0.0139 of our common shares in exchange for each Trimble share held. As a result, we issued 25,071 of our common shares and will pay approximately $205,000 in cash to those shareholders of Trimble who elected, or were deemed to elect, to receive cash.

      In August 2002, we acquired approximately 85% of the issued shares and U.S.$11.4 million of indebtedness of Banff for nominal consideration and the provision of a contingent royalty interest to the vendor pursuant to a Share Sale Agreement among Newmont Australia Limited (“Newmont”), Newmont LaSource S.A.S. (“NLS”) and MFC dated August 7, 2002 and a Royalty Deed among MFC, Newmont and NLS dated August 7, 2002. Under the Royalty Deed, we granted to the vendor a royalty in an amount equal to 10% of the net cash flow resulting from any processing operations of Kasese up to an aggregate maximum of U.S.$10.0 million. If there is no cash flow, no royalty will be payable for such period. These documents also contain terms and conditions customary for agreements of this type. We also subsequently acquired approximately $77.2 million of indebtedness of Kasese. For more information on the cobalt processing plant, see “Item 4. Information on the Company — Property, Plants and Equipment” and Note 2 to our consolidated financial statements included in this annual report.

      In July 2002, we disposed of an indirect interest in an oil venture royalty stream pursuant to a Stock Purchase Agreement among Occidental (East Shabwa), LLC (“Occidental”), Intercap Yemen, Inc. (“Intercap”), an indirect wholly-owned subsidiary of MFC, and MFC dated July 23, 2003. Pursuant to such agreement, all of the outstanding common shares of Comeco Petroleum, Inc. (“Comeco”) held by Intercap were transferred to Occidental as consideration for the purchase price. Intercap held 500 shares of common stock of Comeco which represented a 41.25% interest in Comeco. Comeco, in turn, holds a 28.57% interest in the East Shabwa Development Area, an oil field in Yemen. The agreement contains terms and conditions customary for agreements of this type.

Exchange Controls

      There are presently no governmental laws, decrees or regulations in Canada which restrict the export or import of capital, or which impose foreign exchange controls or affect the remittance of interest, dividends or other payments to non-resident holders of MFC’s common shares. However, any remittances of dividends to United States residents are subject to a 15% withholding tax (5% if the beneficial owner of the dividends is a corporation owning at least 10% of our voting shares) pursuant to the Canada-U.S. Tax Convention (1980), as amended (the “Treaty”). See “Item 10. Additional Information — Taxation”.

      Except as provided in the ICA, there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or the Yukon Territory, or in our charter documents. The following summarizes the principal features of the ICA for non-Canadian residents proposing to acquire our

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common shares. This summary is of a general nature only and is not intended to be, and should not be construed to be, legal advice to any holder or prospective holder of our common shares, and no opinion or representation to any holder or prospective holder of our common shares is hereby made. Accordingly, holders and prospective holders of our common shares should consult with their own legal advisors with respect to the consequences of purchasing and owning our common shares.

      The ICA governs the acquisition of Canadian businesses by non-Canadians. Under the ICA, non-Canadian persons or entities acquiring “control” (as defined in the ICA) of a corporation carrying on business in Canada are required to either notify, or file an application for review with, Industry Canada. Industry Canada may review any transaction which results in the direct or indirect acquisition of control of a Canadian business, where the gross value of corporate assets exceeds certain threshold levels (which are higher for investors from members of the World Trade Organization (“WTO”), including Americans, or WTO member-controlled companies) or where the activity of the business is related to Canada’s cultural heritage or national identity. No change of voting control will be deemed to have occurred, for purposes of the ICA, if less than one-third of the voting control of a Canadian corporation is acquired by an investor.

      If an investment is reviewable under the ICA, an application for review in the form prescribed is normally required to be filed with Industry Canada prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister responsible for the ICA is satisfied that the investment is likely to be of net benefit to Canada. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian applicant must not implement the investment, or if the investment has been implemented, may be required to divest itself of control of the Canadian business that is the subject of the investment.

      Certain transactions relating to our common shares would be exempt from the ICA, including:

•  the acquisition of our common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;

•  the acquisition of control of MFC in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the ICA; and

•  the acquisition of control of MFC by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of MFC, through ownership of our common shares, remains unchanged.

Taxation

Certain Canadian Federal Income Tax Consequences

      We consider that the following general summary fairly describes the principal Canadian federal income tax consequences applicable to a holder of our common shares who is a resident of the United States, who is not, will not be and will not be deemed to be a resident of Canada for purposes of the Income Tax Act (Canada) (the “ITA”) and any applicable tax treaty and who does not use or hold, and is not deemed to use or hold, his common shares in the capital of MFC in connection with carrying on a business in Canada (a “non-resident holder”).

      This summary is based upon the current provisions of the ITA, the regulations thereunder (the “Regulations”), the current publicly announced administrative and assessing policies of the Canada Customs and Revenue Agency and the Treaty. This summary also takes into account the amendments to the ITA and the Regulations publicly announced by the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes that all such Tax Proposals will be enacted in their present form. However, no assurances can be given that the Tax Proposals will be enacted in the form proposed, or at all. This summary is not exhaustive of all possible Canadian federal income tax consequences applicable to a holder of our common shares and, except for the foregoing, this summary does not take into account or anticipate any changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial,

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territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax consequences described herein.

      This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular holder or prospective holder of our common shares, and no opinion or representation with respect to the tax consequences to any holder or prospective holder of our common shares is made. Accordingly, holders and prospective holders of our common shares should consult their own tax advisors with respect to the income tax consequences of purchasing, owning and disposing of our common shares in their particular circumstances.

Dividends

      Dividends paid on our common shares to a non-resident holder will be subject under the ITA to withholding tax at a rate of 25% subject to a reduction under the provisions of an applicable tax treaty, which tax is deducted at source by MFC. The Treaty provides that the ITA’s standard 25% withholding tax rate is reduced to 15% on dividends paid on shares of a corporation resident in Canada (such as MFC) to residents of the United States, and also provides for a further reduction of this rate to 5% where the beneficial owner of the dividends is a corporation resident in the United States that owns at least 10% of the voting shares of the corporation paying the dividend.

Capital Gains

      A non-resident holder is not subject to tax under the ITA in respect of a capital gain realized upon the disposition of a common share of MFC unless such share represents “taxable Canadian property” (as defined in the ITA) to the holder thereof. Our common shares generally will be considered taxable Canadian property to a nonresident holder if:

•  the non-resident holder;

•  persons with whom the non-resident holder did not deal at arm’s length; or

•  the non-resident holder and persons with whom such non-resident holder did not deal at arm’s length,

owned, or had an interest in an option in respect of, not less than 25% of the issued shares of any class of our capital stock at any time during the 60 month period immediately preceding the disposition of such shares. In the case of a non-resident holder to whom shares of MFC represent taxable Canadian property and who is resident in the United States, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty unless the value of such shares is derived principally from real property situated in Canada.

Certain United States Federal Income Tax Consequences

      The following is a general discussion of certain possible United States Federal foreign income tax matters under current law, generally applicable to a U.S. Holder (as defined below) of our common shares who holds such shares as capital assets. This discussion does not address all aspects of United States Federal income tax matters and does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. See “Certain Canadian Federal Income Tax Consequences” above.

      The following discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. No assurance can be given that the IRS will agree with

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such statements and conclusions, or will not take, or a court will not adopt, a position contrary to any position taken herein.

      The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal, business or tax advice to any holder or prospective holder of our common shares, and no opinion or representation with respect to the United States Federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares should consult their own tax advisors with respect to Federal, state, local, and foreign tax consequences of purchasing, owning and disposing of our common shares.

U.S. Holders

      As used herein, a “U.S. Holder” includes a holder of less than 10% of our common shares who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any entity which is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of our common shares is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.

Foreign Tax Credit

      A U.S. Holder who pays (or has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the tax credit, among which is an ownership period requirement and the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In determining the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. There are further limitations on the foreign tax credit for certain types of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income. The availability of the foreign tax credit and the application of these complex limitations on the tax credit are fact specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual circumstances.

Passive Foreign Investment Corporation

      We do not believe that we are a passive foreign investment corporation (a “PFIC”). If a U.S. Holder disposes of shares in a PFIC, any resultant gain will be subject to a tax that is determined by apportioning the gain pro rata over the entire holding period of the shares. The amount of gain that is apportioned to the current year, and to any pre-1987 holding period, is included in the U.S. Holder’s current income.

      The tax on the amount apportioned to any prior years beginning with 1987 is calculated using the highest tax rate in each applicable year. In addition, interest compounded daily is charged on the tax due for each prior year from the due date of the return for the respective year to the due date for the current year. The interest rate is set quarterly. The U.S. Holder’s current year tax is increased by the special tax and interest on amounts apportioned to prior years.

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      A U.S. Holder can avoid this special tax and interest charge by making a permanent election to treat a PFIC as a “qualified electing fund” and to report in each year thereafter such shareholder’s pro rata share of the ordinary earnings and net capital gains of a PFIC. If the election is not made in the first year that the U.S. Holder owns the shares, a special election would have to be made to cleanse the effect of the prior year’s holding periods.

      These rules apply similarly to distributions from a PFIC that would be considered excess distributions. Complex rules govern the determination of applicable gains and excess distributions, the calculation of the amounts allocated pro rata to prior years, the resultant tax and applicable interest, and the qualified electing fund elections whether as pedigreed or non-pedigreed. Holders and prospective holders of common shares of a PFIC should consult their own tax advisors regarding their individual circumstances.

Documents on Display

      We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the SEC. These materials, including this annual report and the exhibits hereto, may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC’s regional offices at 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604 and 233 Broadway, New York, New York 10279. Copies of the materials may be obtained from the principal office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The public may obtain information on the operation of the SEC’s public reference facilities by calling the SEC in the United States at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to market risks from changes in interest rates, foreign currency exchange rates and equity prices which may affect our results of operations and financial condition and, consequently, our fair value. We manage these risks through internal risk management policies as well as the use of derivative instruments. We use derivative instruments to manage our exposure and our clients’ exposure to currency exchange rate risks. The use of derivative instruments depends on our management’s perception of future economic events and developments. These types of derivative instruments are generally highly speculative in nature. They are also very volatile as they are highly leveraged given that margin requirements are relatively low in proportion to notional amounts.

      Many of our strategies, including the use of derivative instruments and the types of derivative instruments selected by us, are based on historical trading patterns and correlations and our management’s expectations of future events. However, these strategies may not be fully effective in all market environments or against all types of risks. Unexpected market developments may affect our risk management strategies during this time, and unanticipated developments could impact our risk management strategies in the future. If any of the variety of instruments and strategies we utilize are not effective, we may incur losses.

Derivative Instruments

      At December 31, 2002, we did not hold any forward foreign exchange contracts. We have provided a loan, in the principal amount of €30.0 million, which has an embedded derivative feature which fixes the exchange rate at €1.00 = U.S.$0.9731 in the event the Euro falls below this exchange rate. No gain or loss was recognized on this embedded derivative as at December 31, 2002. At December 31, 2001, we held four forward foreign exchange contracts in the aggregate notional amount of $24.7 million which covered the period through March 31, 2002. We entered into these contracts for our own account to manage our exposure to foreign currency exchange risks.

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Interest Rate Risk

      Fluctuations in interest rates may affect the fair value of fixed interest rate financial instruments sensitive to interest rates. An increase in market interest rates may decrease the fair value of our financial instrument assets and increase the fair value of our financial instrument liabilities. A decrease in market interest rates may increase the fair value of our financial instrument assets and decrease the fair value of our financial instrument liabilities. An increase in interest rates may also increase the risk of defaults on loans. However, since our loans are collateralized, we do not consider that the loans are subject to interest rate risk. Our financial instruments which may be sensitive to interest rate fluctuations are investments and debt obligations. The following tables provide information about our exposure to interest rate fluctuations for the carrying amount of financial instruments that may be sensitive to such fluctuations as at December 31, 2002 and 2001, respectively, and expected cash flows from these instruments.

As at December 31, 2002

(in thousands)

					Expected Future Cash Flow*
	Carrying		Fair
	Value		Value		2003		2004		2005		2006		2007		Thereafter
Investments(1)	$	68,163	$	68,261	$	35,282	$	5,716	$	4,900	$	4,900	$	4,900	$	37,046
Debt obligations(2)		25,790		20,413		2,784		1,721		1,721		6,074		1,721		22,369

*  Including interest and dividends where applicable.

(1)	Investments consist of debt securities and preferred stock.
(2)	Debt obligations consist of the bonds which mature on April 1, 2008 and bear interest at 8% per annum.

As at December 31, 2001

(in thousands)

					Expected Future Cash Flow*
	Carrying		Fair
	Value		Value		2002		2003		2004		2005		2006		Thereafter
Investments(1)	$	60,530	$	60,503	$	27,246	$	4,955	$	5,688	$	4,900	$	4,900	$	37,451
Debt obligations(2)		63,381		46,954		7,759		18,351		1,735		1,735		33,718		23,856

*  Including interest and dividends where applicable.

(1)	Investments consist of debt securities and preferred stock.
(2)	Debt obligations consist of the bonds which mature on April 1, 2008 and bear interest at 8% per annum.

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Foreign Currency Exchange Rate Risk

      Our reporting currency is the Canadian dollar. We hold financial instruments primarily denominated in U.S. dollars, Euro and Swiss francs. A depreciation of such currencies against the Canadian dollar will decrease the fair value of our financial instrument assets and liabilities. An appreciation of such currencies against the Canadian dollar will increase the fair value of our financial instrument assets and liabilities. Our financial instruments which may be sensitive to foreign currency exchange rate fluctuations are investments, loans, deposits and debt obligations. The following tables provide information about our exposure to foreign currency exchange rate fluctuations for the carrying amount of financial instruments that may be sensitive to such fluctuations as at December 31, 2002 and 2001, respectively, and expected cash flows from these instruments:

As at December 31, 2002

(in thousands)

					Expected Future Cash Flow*
	Carrying		Fair
	Value		Value		2003		2004		2005		2006		2007		Thereafter
Investments(1)	$	54,115	$	54,821	$	43,370	$	816	$	—	$	—	$	—	$	10,010
Loans(2)		75,366		75,366		33,393		52,613		—		—		—		—
Deposits(3)		39,198		39,198		39,198		—		—		—		—		—
Debt obligations(4)		68,798		63,421		33,941		6,720		6,526		10,684		1,721		22,369

*  Including interest and dividends where applicable.

(1)	Investments consist of debt securities and equity securities, both of which are denominated in U.S. dollars, Euros or Swiss francs.
(2)	Loans are denominated in U.S. dollars, Euros or Swiss francs.
(3)	Deposits consist of cash deposits with MFC Bank.
(4)	Debt obligations consist of the bonds and other debt, which are denominated in U.S. dollars or Euros.

As at December 31, 2001

(in thousands)

					Expected Future Cash Flow*
	Carrying		Fair
	Value		Value		2002		2003		2004		2005		2006		Thereafter
Investments(1)	$	67,989	$	66,867	$	59,893	$	55	$	822	$	—	$	—	$	7,356
Loans(2)		45,460		45,460		37,687		9,913		—		—		—		—
Deposits(3)		524		524		524		—		—		—		—		—
Debt obligations(4)		82,394		64,941		18,544		14,309		6,057		5,888		37,702		23,856

*  Including interest and dividends where applicable.

(1)	Investments consist of debt securities and equity securities, both of which are primarily denominated in U.S. dollars or Swiss francs.
(2)	Loans are denominated in U.S. dollars, Euros or Swiss francs.
(3)	Deposits consist of cash deposits with MFC Bank.
(4)	Debt obligations consist of the bonds and other debt, all of which are denominated in U.S. dollars or Euro.

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Equity Price Risk

      Changes in trading prices of equity securities may affect the fair value of equity securities or the fair value of other securities convertible into equity securities. An increase in trading prices will increase the fair value and a decrease in trading prices will decrease the fair value of equity securities or instruments convertible into equity securities. Our financial instruments which may be sensitive to fluctuations in equity prices are investments and debt obligations. The following tables provide information about our exposure to fluctuations in equity prices for the carrying amount of financial instruments sensitive to such fluctuations as at December 31, 2002 and 2001, respectively, and expected cash flows from these instruments:

As at December 31, 2002

(in thousands)

					Expected Future Cash Flow*
	Carrying		Fair
	Value		Value		2003		2004		2005		2006		2007		Thereafter
Investments(1)	$	70,157	$	70,354	$	22,691	$	4,900	$	4,900	$	4,900	$	4,900	$	52,563
Debt obligations(2)		21,509		16,132		1,721		1,721		1,721		1,721		1,721		21,939

*  Including interest and dividends where applicable.

(1)	Investments consist of equity securities.
(2)	Debt obligations consist of bonds which are convertible into common shares of MFC at a fixed price.

As at December 31, 2001

(in thousands)

					Expected Future Cash Flow*
	Carrying		Fair
	Value		Value		2002		2003		2004		2005		2006		Thereafter
Investments(1)	$	72,703	$	71,110	$	28,027	$	4,900	$	4,900	$	4,900	$	4,900	$	49,596
Debt obligations(2)		21,687		20,385		1,735		1,735		1,735		1,735		1,735		23,856

*  Including interest and dividends where applicable.

(1)	Investments consist of equity securities.
(2)	Debt obligations consist of bonds which are convertible into common shares of MFC at a fixed price.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

      Not applicable.

43

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

      None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

      None.

ITEM 15. CONTROLS AND PROCEDURES

      Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic reports on file with the SEC. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of certain events, and there can be no assurance that any design will succeed in achieving its stated goals under all future conditions, regardless of how remote. In addition, we reviewed our internal controls, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

      [Reserved]

ITEM 16B. CODE OF ETHICS

      [Reserved]

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      [Reserved]

44

PART III

ITEM 17.     FINANCIAL STATEMENTS

      Not applicable.

ITEM 18.     FINANCIAL STATEMENTS

Index to Financial Statements and Schedules

1.	Independent Auditors’ Report on the Consolidated Financial Statements of MFC as at December 31, 2002, 2001 and 2000.
2.	Consolidated Balance Sheets at December 31, 2002 and 2001 (audited).
3.	Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000 (audited).
4.	Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2002, 2001 and 2000 (audited).
5.	Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000 (audited).
6.	Notes to Consolidated Financial Statements.
7.	Independent Auditors’ Report on Financial Statement Schedules.
8.	Financial Statement Schedules:

      I     Condensed Financial Information of Registrant.

      III   Supplementary Insurance Information.

      IV   Reinsurance.

      VI   Supplemental Information Concerning Property — Casualty Insurance Operations.

45

INDEPENDENT AUDITORS’ REPORT

To the Shareholders

MFC Bancorp Ltd.

      We have audited the consolidated balance sheets of MFC Bancorp Ltd. and Subsidiaries as at December 31, 2002 and 2001, and the consolidated statements of income, changes in shareholders’ equity and cash flows for the years ended December 31, 2002, 2001 and 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing standards in the United States and Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

      In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2002 and 2001, and the results of its operations and its cash flows for the years ended December 31, 2002, 2001 and 2000, in accordance with generally accepted accounting principles in Canada, which differ from United States generally accepted accounting principles as described in Note 18 to the consolidated financial statements.

/s/ PETERSON SULLIVAN P.L.L.C.

April 7, 2003

Seattle, Washington

46

MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001

(In Thousands)

			U.S. Dollars
			(Information		Canadian Dollars
			Only)
			2002		2002		2001
ASSETS
Cash and cash equivalents			$	64,835	$	102,413	$	77,166
Securities				39,661		62,649		75,805
Loans				49,303		77,879		69,737
Receivables				34,157		53,955		44,864
Commodity investments				8,338		13,172		5,447
Properties held for sale				46,188		72,959		22,480
Resource property				23,263		36,747		37,451
Goodwill				10,390		16,412		28,066
Equity method investments				5,012		7,917		30,898
Prepaid and other				1,565		2,471		2,725
			$	282,712	$	446,574	$	394,639
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
	Accounts payable and accrued expenses		$	29,931	$	47,279	$	41,649
	Debt			43,554		68,798		98,000
	Future income tax liability			163		258		5,348
	Deposits			24,815		39,198		524
		Total liabilities		98,463		155,533		145,521
Minority interests				3,641		5,751		3,121
Shareholders’ Equity
	Common stock, without par value; authorized unlimited number			44,485		70,269		76,673
	Cumulative translation adjustment			11,859		18,733		4,452
	Retained earnings			124,264		196,288		164,872
				180,608		285,290		245,997
			$	282,712	$	446,574	$	394,639

      The accompanying notes are an integral part of these consolidated financial statements.

47

MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2002, 2001 and 2000

(In Thousands, Except Earnings Per Share)

			U.S. Dollars
			(Information		Canadian Dollars
			Only)
			2002		2002		2001		2000
Financial services revenue			$	180,006	$	284,339	$	214,246	$	156,220
Expenses
	Financial services			111,290		175,792		143,071		88,742
	General and administrative			22,637		35,758		21,793		21,394
	Goodwill impairment			10,203		16,116		—		—
	Interest expense			6,010		9,493		5,369		4,218
				150,140		237,159		170,233		114,354
Income before income taxes and minority interests				29,866		47,180		44,013		41,866
Recovery of (provision for) income taxes				2,214		3,497		772		(1,689	)
Income before minority interests				32,080		50,677		44,785		40,177
Minority interests				49		78		503		(1,014	)
		Net income	$	32,129	$	50,755	$	45,288	$	39,163
Earnings per share
	Basic		$	2.48	$	3.93	$	3.59	$	3.24
	Diluted		$	2.35	$	3.70	$	3.35	$	3.03

      The accompanying notes are an integral part of these consolidated financial statements.

48

MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Years Ended December 31, 2002, 2001 and 2000

(Canadian Dollars, In Thousands)

	Common Stock
										Cumulative
	Number of						Retained			Translation
	Shares			Amount			Earnings			Adjustment			Total
Balance at December 31, 1999		12,041,156		$	65,498		$	109,604		$	(4,291	)	$	170,811
Net income		—			—			39,163			—			39,163
Shares issued for exercise of stock options		47,000			436			—			—			436
Shares issued for cash		500,000			5,230			—			—			5,230
Repurchase of shares		(500,000	)		(6,026	)		—			—			(6,026	)
Translation adjustment		—			—			—			3,520			3,520
Balance at December 31, 2000		12,088,156			65,138			148,767			(771	)		213,134
Net income		—			—			45,288			—			45,288
Shares issued for exercise of stock options		1,089,000			11,535			—			—			11,535
Translation adjustment		—			—			—			5,223			5,223
Dividend in equity securities, at carrying value		—			—			(29,183	)		—			(29,183	)
Balance at December 31, 2001		13,177,156			76,673			164,872			4,452			245,997
Net income		—			—			50,755			—			50,755
Shares issued for exercise of stock options		157,500			1,635			—			—			1,635
Shares issued for purchase of minority interest in consolidated subsidiary		25,071			397			—			—			397
Repurchase of shares		(546,100	)		(8,660	)		—			—			(8,660	)
Shares issued for compensation		18,227			224			—			—			224
Translation adjustment		—			—			—			14,281			14,281
Dividend in equity securities, at carrying value		—			—			(19,339	)		—			(19,339	)
Balance at December 31, 2002		12,831,854		$	70,269		$	196,288		$	18,733		$	285,290

      The accompanying notes are an integral part of these consolidated financial statements.

49

MFC BANCORP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2002, 2001 and 2000

(Canadian Dollars, In Thousands)

				2002			2001			2000
Cash flows from operating activities
	Net income			$	50,755		$	45,288		$	39,163
	Adjustments for:
		Goodwill impairment			16,116			—			—
		Gain on debt reduction			(19,746	)		(22,409	)		—
		Amortization and depreciation			1,528			2,049			2,041
		Minority interests			(78	)		(503	)		1,014
		Dividend from equity method investee			—			1,021			—
		Debt extinguishment			(49,122	)		—			—
		Changes in operating assets and liabilities, net of effects of acquisitions
			Securities		12,179			1,836			(17,760	)
			Receivables		1,621			48,315			187
			Commodity investments		(6,026	)		—			—
			Properties held for sale		13,487			(406	)		(1,232	)
			Accounts payable and accrued expenses		3,767			(8,466	)		2,064
			Future income tax liability		(4,604	)		(1,417	)		—
			Other		970			(777	)		(275	)
Cash flows from operating activities					20,847			64,531			25,202
Cash flows from investing activities
	Net decrease (increase) in loans				(4,778	)		25,099			(31,661	)
	Purchases of long-term securities, net				(5,441	)		(4,816	)		5,551
	Sale of equity method investment				25,915			—			—
	Purchases of subsidiaries, net of cash acquired				(34,978	)		(1,018	)		—
	Other				204			(425	)		430
Cash flows from investing activities					(19,078	)		18,840			(25,680	)
Cash flows from financing activities
	Net increase (decrease) in deposits				33,894			(62,385	)		13,282
	Borrowings				38,660			12,310			8,135
	Debt repayments				(52,005	)		(37,562	)		(4,089	)
	Issuance (repurchase) of common stock, net				(7,025	)		11,535			(360	)
	Other				—			—			(111	)
Cash flows from financing activities					13,524			(76,102	)		16,857
Exchange rate effect on cash and cash equivalents					9,954			1,373			2,578
Increase in cash and cash equivalents					25,247			8,642			18,957
Cash and cash equivalents, beginning of year					77,166			68,524			49,567
Cash and cash equivalents, end of year				$	102,413		$	77,166		$	68,524

      The accompanying notes are an integral part of these consolidated financial statements.

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.     The Company and Summary of Significant Accounting Policies

      The consolidated financial statements and accompanying notes have been prepared in conformity with generally accepted accounting principles applicable in Canada. The notes are stated in Canadian dollars, as rounded to the nearest thousand (except per share amounts).

Nature of Operations

      The Company is in the business of merchant banking. This includes financial advisory services, proprietary investing and trading activities on an international basis which are facilitated by the Company’s banking and trading subsidiaries. The Company seeks investments in many industries while emphasizing those business opportunities where the perceived intrinsic value is not properly recognized. The Company uses its financial and management expertise to add value within a relatively short time period. The Company also trades in various basic materials primarily on its own account. Revenues from these activities are recognized as agreed upon activities are performed or as assets are disposed of with no substantial further involvement by the Company and collectibility is reasonably assured. The Company is managed as a unit and is treated as a single segment.

Principles of Consolidation

      The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in entities where the Company owns at least a 20% voting interest, but does not have control, are accounted for under the equity method. The amount of earnings from equity investees was not material. All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

      Cash and cash equivalents include highly liquid investments with original maturities of three months or less and are generally interest bearing. The Company regularly maintains cash balances in other financial institutions in excess of insured limits. Interest paid on a cash basis was $7,188, $4,667 and $4,990 for the years ended December 31, 2002, 2001 and 2000, respectively. Income tax amounts paid were $8, none and $81 during 2002, 2001 and 2000, respectively.

      Nonmonetary transactions include the exchange transaction discussed in Note 15 in 2002; the receipt of securities totaling $5,506 in repayment of a loan in 2001; an exchange of 402,500 shares of an affiliate for $1,779 in cash and 2,597,060 common shares of that affiliate in 2000.

Securities

      Trading account securities, held by the Company’s banking subsidiary, are stated at current market value with the unrealized gain or loss included in the results of operations. Short-term securities held by the other subsidiaries are carried at the lower of aggregate cost or current market value.

      Long-term investment securities are purchased with the original intention to hold the securities to maturity or until market conditions render alternative investments more attractive. Equity securities are stated at cost and debt securities at amortized cost unless there has been an other than temporary decline in value, at which time the security is written down and the unrealized loss is included in the results of operations.

      Realized gains or losses on sales of securities are determined based on the specific cost basis.

Loans

      Loans are stated net of allowances for credit losses, accrued interest, reimbursable expenses and unamortized loan fees.

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Loans are classified as impaired when there is no longer reasonable assurance of the timely collection of principal and interest. Whenever a contractual payment is 90 days past due, loans are automatically classified as impaired unless they are fully secured and in the process of collection. When a loan is deemed impaired, its carrying amount is reduced to its estimated realizable amount, measured by discounting the expected future cash flows at the effective interest rate in the loan or, as a practical expedient, based on a loan’s observable market price or the fair value of collateral if the loan is collateral dependent. In subsequent periods, any increase in the carrying value of the loan is credited to the provision for credit losses. Impaired loans are returned to performing status when there is no longer reasonable doubt regarding timely collection of principal and interest, all amounts in arrears including interest have been collected, and all charges for loan impairment have been reversed. Where a portion of a loan is written off and the remaining balance is restructured, the new loan is carried on the accrual basis when there is no longer any reasonable doubt regarding collectibility of principal and interest, and payments are not 90 days past due. Collateral is obtained for loans (and other receivables) if, based on an evaluation of credit-worthiness, it is considered necessary for the overall borrowing facility.

      Assets acquired in satisfaction of loans are recorded at the lesser of their fair value at the date of transfer or the carrying value of the loan. Any excess of the carrying value of the loan over the fair value of the assets acquired is written off. Operating results and gains and losses on disposal of such assets are treated as write-offs and recoveries.

      Interest income from loans is recognized when earned using the interest method unless the loan is classified as impaired at which time recognition of interest income ceases. Interest on impaired loans is credited to the carrying value of the loan when received. Loan origination fees are considered to be adjustments to loan yield and are deferred and amortized to interest income over the term of the loan. Commitment fees are amortized to income over the commitment period when it is unlikely that the commitment will be called upon; otherwise, they are deferred and amortized to interest income over the term of the resulting loan. Loan syndication fees are recognized in income unless the yield on any loans retained by the Company is less than that of other comparable lenders involved in the financing. In such cases an appropriate portion of the fee is deferred and amortized to interest income over the term of the loan.

Allowance for Credit Losses

      The Company’s allowance for credit losses is to be maintained at an amount considered adequate to absorb estimated credit-related losses. Such allowance reflects management’s best estimate of the losses in the Company’s credit portfolio and judgments about economic conditions. Estimates and judgments could change in the near-term, and could result in a significant change to a recognized allowance. Credit losses arise primarily from loans or receivables but may also relate to other credit instruments such as guarantees and letters of credit. An allowance for credit losses may be increased by provisions which are charged to income and reduced by write-offs net of any recoveries.

      Specific provisions are established on a loan-by-loan or receivable basis. A general provision may be established to absorb potential credit losses attributable to the deterioration of credit quality on aggregate exposures for which specific provisions cannot yet be determined. A country risk provision may be made based on exposures in less developed countries and on management’s overall assessment of the underlying economic conditions in those countries. Write-offs are generally recorded after all reasonable restructuring or collection activities have taken place and there is no realistic prospect of recovery.

      No loans were considered impaired at December 31, 2002 and 2001, and the Company did not consider it necessary to reserve for any specific loans or receivables, country risks or general risks.

Derivative Financial Instruments

      Derivative financial instruments are financial contracts whose value is derived from interest rates, foreign exchange rates or other financial or commodity indices. These instruments are either exchange-traded or

52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

negotiated. Derivatives may be designated as hedges, provided certain criteria are met. The Company has no derivative financial instruments which have been designated as hedges.

      The Company enters into derivative contracts usually to meet the needs of its customers and to take trading positions. These derivatives are marked to market with any unrealized gains or losses recognized immediately in income. Also, in 2002, the Company entered into an embedded derivative transaction within a client loan of $49,691. This derivative was designed to reduce a foreign currency risk. Due to the terms of this derivative, a loss may not be incurred and at December 31, 2002, there was no unrealized gain. The Company held no other significant derivative financial instruments at December 31, 2002.

      At December 31, 2001, the Company held foreign currency exchange contracts amounting to $24,655 in notional amount which were settled in 2002 for a realized gain of $129. During 2001, the Company recorded a loss from a change in the fair value of these contracts amounting to $1,070.

Commodity Investments

      Commodity investments consist of basic materials held for sale. These investments are stated at the lower of cost (specific identification) or market.

Properties Held for Sale

      Properties held for sale are stated at cost unless the estimated future undiscounted cash flows expected to result from disposition is less than carrying value in which case a loss is recognized based on the fair value of similar property in the same geographic region. No such losses have been recorded in these consolidated financial statements.

Resource Property

      Resource property is stated at cost. Amortization is provided on the straight-line basis over the period revenue is to be received which will end in 2055. However, if expected future undiscounted cash flows are less than carrying value, a loss will be recognized. No such losses have been recorded in these consolidated financial statements.

Goodwill and Other Intangible Assets

      The Canadian Institute of Chartered Accountants (“CICA”) adopted a new accounting standard on goodwill and other intangible assets in 2001, which the Company adopted for periods beginning January 1, 2002. Goodwill represents the difference between the acquisition cost of a business and the fair value of its net tangible assets after an allocation has been made for assets with indefinite and finite lives. Under this new standard, goodwill and other intangible assets with indefinite useful lives are not amortized but are subject to fair value impairment tests, on at least an annual basis. Goodwill is allocated to reporting units and any potential goodwill impairment is identified by comparing the carrying value of the reporting unit with its fair value.

      If any potential impairment is identified, then the amount of the impairment is quantified by comparing the carrying value of goodwill to its fair value, based on the fair value of the assets and liabilities of the reporting unit. Intangibles with a finite life are amortized over their estimated useful life and also are tested for impairment whenever circumstances indicate that the carrying value may not be recoverable. Other intangible assets are considered impaired and written down to their net recoverable amount when their net carrying value exceeds their estimated future net cash flows. Any impairment of goodwill or other intangible assets is charged to income in the period in which the impairment is determined.

53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Translation

      The Company translates foreign assets and liabilities of its self-sustaining foreign subsidiaries at the rate of exchange at the balance sheet date. Revenues and expenses have been translated at the average rate of exchange throughout the year. Unrealized gains or losses from these conversions are included in the equity section of the consolidated balance sheet. Transaction gains that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency amounting to $453, $2,342 and $291 in 2002, 2001 and 2000, respectively, have been included in general and administrative expenses in the consolidated statements of income. The translation adjustments did not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely.

Taxes on Income

      The Company uses the asset and liability method to provide for income taxes on all transactions recorded in these consolidated financial statements. Under this method, future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses to be carried forward to future years for tax purposes that are likely to be realized using expected tax rates in which the temporary differences are expected to be recovered or settled.

Stock Based Compensation

      The Company follows the intrinsic value based method of accounting for compensation resulting from the granting of stock options to employees. No compensation expense has been recognized in these consolidated financial statements for the granting of options to employees because the exercise price of the options approximated the market price for the common shares at the grant date. Shares of stock issued to employees are expensed as compensation in the year the shares are issued based on fair value at the date of issuance. Stock based payments to non-employees are to be expensed based on the fair value of shares or options issued. There have been no stock based payments to non-employees.

      The following table illustrates the effect on net income and earnings per share if compensation expense had been recognized on the basis of fair value of employee stock options granted.

	2002		2001		2000
Net Income
As reported	$	50,755	$	45,288	$	39,163
Deduct: Total stock option compensation expense determined under fair value based methods, net of any related tax effects		—		217		217
Proforma net income — basic		50,755		45,071		38,946
Dilution adjustment from Note 11		1,735		1,634		1,520
Proforma net income — diluted	$	52,490	$	46,705	$	40,466
Basic Earnings Per Share
As reported	$	3.93	$	3.59	$	3.24
Proforma	$	3.93	$	3.57	$	3.22
Diluted Earnings Per Share
As reported	$	3.70	$	3.35	$	3.03
Proforma	$	3.70	$	3.34	$	3.01

Earnings Per Share

      In 2000, the Company adopted the new CICA accounting standard on earnings per share which requires the use of the treasury stock method to calculate diluted earnings per share. The treasury stock method

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

determines the number of additional common shares by assuming that outstanding stock warrants and options whose exercise price is less than the average market price of the Company’s common stock during the period, are exercised and then reduced by the number of common shares assumed to be repurchased with the exercise proceeds.

      Basic earnings per share is determined by dividing net income applicable to common shares by the average number of common shares outstanding for the period. Diluted earnings per share is determined using the same method as basic earnings per share except that the weighted average number of common shares outstanding includes the potential dilutive effect of stock options and warrants granted as well as convertible debt computed under the treasury stock method. Such potential dilution is not recognized in a loss period.

Estimates

      The preparation of financial statements in conformity with Canadian and United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Standards

      The CICA has also issued the following new accounting standards:

•  A standard which will require the Company to document hedging relationships and explicitly demonstrate that they are sufficiently effective in order to use accrual accounting for positions hedged with derivatives. Otherwise, the derivative instrument will be marked-to-market through the current year’s statement of income. This standard is applicable for years beginning on or before July 1, 2003. The effect on the Company’s consolidated financial statements is not yet determinable.

•  Related standards with respect to impairment or disposal of long-lived assets (effective for years beginning on or after April 1, 2003) and disposal of long-lived assets and discontinued operations (effective for years beginning May 1, 2003), and impaired loans (effective for years beginning May 1, 2003). Generally, these standards give guidance on write-downs and disposals of long-lived assets. Further, the definition of discontinued operations is broadened. The effect on the Company’s consolidated financial statements is not yet determinable.

Reclassifications

      Certain reclassifications have been made to prior year balances to conform with current year presentation.

Note 2. Acquisitions

      In August 2002, the Company acquired 85.3% of the outstanding common shares of Banff Resources Ltd. (“Banff”), a Canadian corporation. The results of Banff’s operations have been included in these consolidated financial statements since the acquisition date. Banff’s primary assets are a cobalt stockpile and related processing facility, and a hydro-electric plant located in Uganda. This acquisition is consistent with the Company’s business of proprietary investing.

      Because of low market prices for cobalt, the Company has not processed any significant amounts of stockpile since acquisition. Incidental revenue has been earned from the sale of excess power generated by the hydro-electric plant. The Company intends to sell the assets acquired when the market price for cobalt recovers sufficiently, although this is beyond the Company’s control and there is no assurance of such recovery near-term. Further, since the assets are located in Uganda, there are uncertainties with respect to the political, legal and regulatory environment in that country which may have an effect on ultimate disposal value. The

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company has classified the acquired assets as properties held for sale in these consolidated financial statements.

      The aggregate purchase price was primarily an assumption of non-recourse debt. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

Current assets		$	6,996
Stockpile and processing facility			36,273
Hydro-electric plant			34,696
	Total assets acquired		77,965
Current liabilities			6,996
Debt			70,969
	Total liabilities assumed		77,965
	Net assets acquired	$	—

      The purchase agreement provides for royalties to be paid to the seller. The royalty is equal to 10% of the net cash flow resulting from any processing operations up to an aggregate maximum of $15,796. The Company will charge to expense the royalty amounts as incurred; none were incurred in 2002.

      Also, in August 2002, the Company acquired 93.4% of the outstanding common shares of Euro Trade & Forfaiting, Inc. (“Euro Trade”), a U.S. corporation. The results of Euro Trade’s operations have been included in these consolidated financial statements since the acquisition date. Euro Trade is engaged primarily in merchant banking in Europe which is consistent with the Company’s business activities.

      The aggregate purchase price of $42,806 was paid in cash. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

Current assets		$	43,925
Long-term securities			1,373
Goodwill			3,708
	Total assets acquired		49,006
Current liabilities			3,437
Minority interest			2,763
	Total liabilities assumed		6,200
	Net assets acquired	$	42,806

      Goodwill is not expected to be deductible for income tax purposes.

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      The following unaudited proforma information presents the results of operations of the Company as if the acquisitions had taken place on January 1, 2002 and 2001, respectively. The proforma information is not necessarily indicative of the results that would have occurred had the acquisitions taken place at the beginning of the periods presented. Further, the proforma information is not necessarily indicative of future results.

		Year Ended December 31,
		2002		2001
Revenues		$	296,277	$	215,848
Net income (loss)		$	29,268	$	(73,378	)
Earnings (loss) per share
	Basic	$	2.26	$	(5.81	)
	Diluted	$	2.19	$	(5.12	)

Note 3. Goodwill

      The changes in the carrying amount of goodwill are as follows:

	2002			2001
Balance at beginning of year	$	28,066		$	17,032
Acquisitions		3,708			12,796
Reductions due to purchase price adjustments		(695	)		—
Exchange rate effect		1,449			(812	)
Amortization		—			(950	)
		32,528			28,066
Impairment		(16,116	)		—
Balance at end of year	$	16,412		$	28,066

      Consistent with current CICA standards, there was no amortization of goodwill in 2002. Goodwill amortization expense amounted to $950 and $942 during the years ended December 31, 2001 and 2000, respectively. Had goodwill not been amortized, net income would have been $46,238 and $40,105, respectively; basic earnings per share would have increased by $.08 each year; and diluted earnings per share would have increased by $.07 each year.

      Based on a review of the fair value of the Company’s reporting units, management has determined that an impairment of $16,116 was necessary at December 31, 2002. No writedown was necessary at December 31, 2001. The Company has no other intangible assets.

Note 4. Securities

      At December 31, 2002 and 2001, bank trading account securities consisted of debt securities of $26,544 and $21,925 and common shares of $5,585 and $28,025, respectively. The change in market value of bank trading account securities amounted to $1,245, $12,567 and $(4,311) for the years ended December 31, 2002, 2001 and 2000, respectively, and has been included in results of operations.

      Short-term securities consisted of debt securities of $1,906 and $358, preferred shares of $1,878 and $1,788 and common shares of $10,328 and $10,789 at December 31, 2002 and 2001, respectively. Holding gains (losses) of $415, $(3,868) and none were included in the results of operations for years ended December 31, 2002, 2001 and 2000, respectively.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Long-term securities consist of the following at December 31:

	Unrealized Gains and Losses
	2002								2001
			Gross		Gross		Estimated				Gross		Gross		Estimated
	Carrying		Unrealized		Unrealized		Market		Carrying		Unrealized		Unrealized		Market
	Value		Gains		Losses		Value		Value		Gains		Losses		Value
Debt	$	789	$	98	$	—	$	887	$	795	$	—	$	34	$	761
Preferred shares		299		—		—		299		601		—		—		601
Common shares		15,320		197		—		15,517		11,524		—		1,593		9,931
	$	16,408	$	295	$	—	$	16,703	$	12,920	$	—	$	1,627	$	11,293

      At December 31, 2002 and 2001, bank trading account and short-term securities included common shares in an affiliate with a carrying value of $7,048 and $2,935, respectively. Also, at December 31, 2002, the Company had long-term investments in the common shares of two affiliates with a carrying value of $11,565.

      The maturity of securities is as follows at December 31:

				Remaining Terms
												No
				Within		1 to 3		3 to 5		5 to 10		specific		2002		2001
				1 year		years		years		years		Maturity		Total		Total
Bank trading account securities:
	Debt:
		Governments		$	—	$	6,324	$	—	$	—	$	—	$	6,324	$	6,050
		Other issuers			3,822		11,080		5,318		—		—		20,220		15,875
					3,822		17,404		5,318		—		—		26,544		21,925
	Common shares				—		—		—		—		5,585		5,585		28,025
			Total		3,822		17,404		5,318		—		5,585		32,129		49,950
Short-term securities
	Debt (other issuers)				1,906		—		—		—		—		1,906		358
	Equities:
		Preferred shares			—		—		—		—		1,878		1,878		1,788
		Common shares			—		—		—		—		10,328		10,328		10,789
					—		—		—		—		12,206		12,206		12,577
			Total		1,906		—		—		—		12,206		14,112		12,935
Long-term securities
	Debt (other issuers)				—		789		—		—		—		789		795
	Equities:
		Preferred shares			—		—		—		—		299		299		601
		Common shares			—		—		—		—		15,320		15,320		11,524
					—		—		—		—		15,619		15,619		12,125
			Total		—		789		—		—		15,619		16,408		12,920
Total securities				$	5,728	$	18,193	$	5,318	$	—	$	33,410	$	62,649	$	75,805

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5.     Loans

	2002		2001
Bank loans, collateralized by traded securities and other assets, due from one company $3,303 at December 31, 2002, and one company $7,700 at December 31, 2001	$	9,845	$	11,606
Other loans, collateralized by traded securities, receivables, inventories and other tangible assets, due from one company $63,907 at December 31, 2002, and four companies $55,026 at December 31, 2001		68,034		58,131
	$	77,879	$	69,737

      Loan maturities:

	Within 1 Year		1 – 5 Years		2002 Total
Bank loans	$	9,845	$	—	$	9,845
Other loans		18,343		49,691		68,034
	$	28,188	$	49,691	$	77,879

      Bank loans generally earn interest ranging from 3.5% to 7.0% and other loans generally earn interest ranging from 5.0% to 9.75% as of December 31, 2002.

Note 6.     Receivables

	2002		2001
Commodity transactions	$	38,210	$	31,488
Short-term advances		5,548		2,979
Investment income		3,496		5,035
Pension plan recovery		1,587		1,587
Government taxes		3,294		381
Other		1,820		3,394
	$	53,955	$	44,864

      Receivables are stated at their outstanding principal balances.

Note 7.     Accounts Payable and Accrued Expenses

	2002		2001
Accounts payable	$	38,657	$	26,064
Affiliates		1,485		301
Interest		708		8,557
Property and other taxes		2,605		2,177
Commissions and severance		752		1,293
Other		3,072		3,257
	$	47,279	$	41,649

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8.     Deposits

	2002		2001
Clients	$	39,190	$	164
Banks		8		360
	$	39,198	$	524

      All deposits at December 31, 2002, were payable on demand and bear interest at not more than .25%. At December 31, 2002, deposits from affiliates where the Company’s president is also the affiliate’s president and the Company has minority voting rights amounted to $36,370.

Note 9.     Debt

	2002		2001
Bonds payable, US$13,617 as at December 31, 2002 and 2001, interest at 8% due semi-annually in October and April, principal due April 2008, unsecured, non-recourse. Convertible into common stock of the Company at $20.88 (1,030,038 common shares reserved at December 31, 2002)	$	21,509	$	21,687
Bonds payable, US$2,088 and US$13,190 at December 31, 2002 and 2001, interest at 8%, principal and interest due December 2006, unsecured		3,298		21,007
Notes payable under lines of credit due to banks, interest from 3.7% to 4.4%, secured by commodity transaction receivables		24,953		11,114
Note payable to a bank, interest at six month Euribor plus 1.5% (resulting in a rate of 4.3% at December 31, 2002), interest and principal payments of $2,257 due semiannually beginning in June 2003, due in full December 2006, secured by commodity transactions receivables		18,055		15,599
Bonds payable, interest at 15% paid semiannually, unsecured, non-recourse, paid in 2002		—		7,906
Note payable, interest at 8.25%, interest payable quarterly, principal due January 2003, unsecured, paid in 2002		—		8,377
Note payable, interest at 7%, principal and interest due December 2003, unsecured, non-recourse, paid in 2002		—		7,700
Note payable, interest at 3.5%, payable on demand, unsecured, non-recourse		983		4,610
	$	68,798	$	98,000

      As of December 31, 2002, the principal maturities of debt are as follows:

Maturity	Amount
2003	$	30,450
2004		4,514
2005		4,514
2006		7,811
2007		—
Thereafter		21,509
	$	68,798

      Notes payable of $983 and $4,610 at December 31, 2002 and 2001, respectively, are to an affiliate where the Company has an equity interest and the Company’s president is also the president and director of the creditor.

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10.     Income Taxes

      Income before income taxes and minority interests consists of:

	2002		2001		2000
Canadian	$	36,427	$	28,623	$	5,739
Foreign		10,753		15,390		36,127
	$	47,180	$	44,013	$	41,866

      The recovery of (provision for) income taxes consists of the following:

		2002			2001			2000
Current
	Canadian	$	(1,004	)	$	(220	)	$	40
	Foreign		(589	)		(427	)		(401	)
Future
	Canadian		301			525			4
	Foreign		4,789			894			(1,332	)
		$	3,497		$	772		$	(1,689	)

      A reconciliation of the provision for income taxes calculated at applicable statutory rates in Canada to the provision in the consolidated statements of income is as follows:

		2002			2001			2000
Income before income taxes and minority interests		$	47,180		$	44,013		$	41,866
Computed provision for income taxes at statutory rates		$	(17,041	)	$	(16,777	)	$	(18,756	)
(Increase) decrease in taxes resulting from:
	Nontaxable dividend income		1,770			2,018			2,421
	Foreign source income		3,884			5,850			16,193
	Permanent differences		23,347			—			—
	Valuation allowance		(8,231	)		7,404			—
	Other, net		(232	)		2,277			(1,547	)
Recovery of (provision for) income taxes		$	3,497		$	772		$	(1,689	)

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      The tax effect of temporary differences that give rise to significant components of future tax liabilities and assets are as follows:

			2002			2001
Future income tax liability, difference in tax basis of assets acquired in the United States			$	(258	)	$	(5,348	)
Future income tax asset, non-capital tax loss carryforwards:
	Canada			1,066			10,254
	Switzerland			—			1,020
	United States			6,997			5,440
	Austria			3,520			3,100
				11,583			19,814
	Valuation allowance			(11,583	)		(19,814	)
		Net future income tax asset		—			—
		Net future income tax liability	$	(258	)	$	(5,348	)

      Management believes that, due to the nature of its operations, the Company’s available tax loss carryforwards may not be utilized prior to their expiration dates. Therefore, the resulting tax benefit has been fully reserved at December 31, 2002 and 2001.

      At December 31, 2002, the Company had estimated accumulated non-capital losses which expire in the following countries as follows:

Year	Canada		United States		Austria
2003	$	807	$	—	$	—
2004		—		—		—
2005		—		—		—
2006		4		—		—
2007		2,136		—		—
2010-2020		5		20,580		—
Indefinite		—		—		10,352
	$	2,952	$	20,580	$	10,352

      Any accumulated tax losses at December 31, 2002, in Uganda have not been agreed with that country’s revenue authority. There were no remaining tax losses available in Switzerland at December 31, 2002.

Note 11.     Earnings Per Share

      Earnings per share data for years ended December 31 from operations is summarized as follows:

		2002		2001		2000
Net income		$	50,755	$	45,288	$	39,163
Less dividend paid on preferred shares held by subsidiary’s minority shareholders			—		—		(79	)
Basic earnings from operations available to common shareholders			50,755		45,288		39,084
Effect of dilutive securities
	Interest on convertible bonds		1,735		1,634		1,599
Diluted earnings from operations		$	52,490	$	46,922	$	40,683

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

		Shares
		2002		2001		2000
Basic earnings per share, weighted average number of common shares outstanding			12,931,117		12,621,633		12,054,898
Effect of dilutive securities:
	Convertible bonds		1,030,038		1,030,038		1,047,542
	Options		209,006		350,764		335,240
Weighted average number of common shares outstanding — diluted			14,170,161		14,002,435		13,437,680

Note 12.     Stock Based Compensation

1996 Stock Option Plan

      During 1996, the Company issued options to employees and directors to acquire 900,000 common shares of stock at $9.41 which vested upon grant and have a five-year term. All of these options were exercised in 2001. No additional options to acquire shares will be offered under this plan.

1997 Amended Stock Option Plan

      The Company has a 1997 stock option plan which enables certain employees and directors to acquire common shares. Under the plan, options vest on grant and have a five-year term. The Company is authorized to issue up to 2,762,000 shares under this plan.

      During 2000, options to acquire 30,000 shares at $13.31 and 100,000 shares at $10.50 were granted to officers and employees of the Company. At December 31, 2002, 80,000 of these options were outstanding and exercisable and have a remaining contractual life of 2.25 years. At grant date, the weighted fair value of these options was $3.34.

      During 1998, options to acquire 750,000 shares at $9.26 were granted to officers and employees of the Company. At December 31, 2002, 415,000 of these options were outstanding and exercisable and have a remaining contractual life of 0.75 years. At grant date, the weighted fair value of these options was $2.11.

      During 1997, options to acquire 742,500 shares at $11.10 were granted to officers and employees of the Company. At December 31, 2002, none of these options were outstanding and exercisable as the exercise period expired in 2002. At grant date, the weighted fair value of these options was $2.59.

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Following is a summary of the status of the plan:

					Weighted
					Average
		Number			Exercise
		of Shares			Price
Outstanding at December 31, 1999			1,131,000		$	9.98
	Granted		130,000			11.15
	Exercised		(47,000	)		(9.38	)
Outstanding at December 31, 2000			1,214,000			10.12
	Exercised		(189,000	)		(11.17	)
Outstanding at December 31, 2001			1,025,000			10.77
	Exercised		(157,500	)		(10.49	)
	Forfeited		(372,500	)		(11.43	)
Outstanding at December 31, 2002			495,000		$	10.05

      The fair value of each option granted was estimated for proforma purposes on the grant date using the Black-Scholes Model. The assumptions used in calculating fair value in Note 1 in those years when options were granted were as follows:

	2000
Risk-free interest rate		7.0%
Expected life of the options		2  years
Expected volatility		42.65%
Expected dividend yield		0.0%

Note 13.     Commitments and Contingencies

Leases

      Future minimum commitments under long-term non-cancelable leases are as follows for the next five years:

Year	Amount
2003	$	1,024
2004		976
2005		511
2006		510
2007		512
	$	3,533

      Rent expense was $1,166, $439 and $548 for the years ended December 31, 2002, 2001 and 2000, respectively.

Litigation

      The Company and its subsidiaries are subject to litigation in the normal course of business. Management considers the aggregate liability which may result from such litigation not material at December 31, 2002.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantees

      The Company has guaranteed to one of its client’s account the value of an investment in common shares to a maximum amount of $1,012. The Company has provided a five-year guarantee expiring August 2007 to an affiliate with respect to a $1,656 asset sale transaction. This affiliate has agreed to deposit the same amount against this guarantee.

Regulations

      The Company’s wholly-owned banking subsidiary is located in Switzerland. The subsidiary is subject to the rules and regulations of the Swiss Federal Banking Commission which require equity capital amounting to $9,344 to be maintained as of December 31, 2002.

Note 14.     Interest Rate Sensitivity Position

      Management has analyzed the bank subsidiary’s interest rate sensitivity position at December 31, 2002. Because of the current nature (over 90% of assets and liabilities and off-balance sheet positions are due within three months) of the bank subsidiary’s position, the total interest rate gap is not significant at December 31, 2002, assuming no interest rate hedging is undertaken over the next twelve months.

Note 15.     Segmented Information

      The following table presents revenues attributed to Canada, the Company’s country of domicile, and other geographic areas based upon the customer’s location:

	2002		2001		2000
Canada	$	26,006	$	17,183	$	10,459
Europe		254,564		192,714		136,671
United States		3,559		4,349		9,090
Other		210		—		—
	$	284,339	$	214,246	$	156,220

      The following table presents total assets by geographic area based upon the location of the assets.

	2002		2001
Canada	$	119,763	$	143,201
Europe		200,206		220,561
United States		52,308		30,877
Africa		74,297		—
	$	446,574	$	394,639

      During 2001 and 2000, one client represented approximately 13% and 11%, respectively, of financial services revenues and there was no client concentration in 2002. At December 30, 2002, the Company exchanged assets located in Europe with a carrying value of $7,292 for a 49% interest in Equitable Industries Limited Partnership. No gain or loss was recorded as a result of the exchange. It was treated as a nonmonetary transaction with an affiliate in 2002.

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16. Fair Value of Financial Instruments

      The fair value of financial instruments at December 31 is summarized as follows:

	2002				2001
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	102,413	$	102,413	$	77,166	$	77,166
Loans		77,879		77,879		69,737		69,737
Deposits		39,198		39,198		524		524
Debt		68,798		63,421		98,000		80,547
Foreign currency exchange contracts		—		—		1,070		1,070

      The fair value of cash and cash equivalents is based on reported market value. The fair value of loans is based on the value of similar loans. The fair value of deposits approximates their carrying value as they are all due on demand. The fair value of debt was determined using discounted cash flows at prevailing market rates or based on reported market value for the Company’s publicly traded debt. The fair values of the foreign exchange derivative contracts are obtained from dealer quotes. These values represent the estimated amount the Company would receive or pay to terminate agreements taking into consideration current interest rates, the credit-worthiness of the counterparties and current foreign currency exchange rates. The Company does not anticipate nonperformance with respect to any of its derivative financial instruments.

Note 17. Transactions with Affiliates

      During 2002, 2001 and 2000, the Company earned fees in the normal course from affiliated entities amounting to $9,164 (of which $4,115 was a merchant bank client where the Company’s president is also the president of the affiliate), $323 and $1,111, respectively. In 2002, the Company sold real estate to an affiliate for $4,202 on which no gain or loss has been recognized. The Company sold commodities amounting to $3,490 in the normal course to an affiliate during 2002, $2,856 of which is included in receivables from commodity transactions at December 31, 2002. The Company received dividends of $4,900 on preferred shares of stock in an affiliate in 2002. Generally, the Company has representation on the board of an affiliate and/or an equity interest.

      The Company has a receivable from an officer of a subsidiary amounting to $761 at December 31, 2002, which is expected to be paid in the near-term.

Note 18. United States Generally Accepted Accounting Principles

      The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada, which conform in all material respects with those in the United States (U.S.), except as set forth below:

	December 31
Reconciliation of Net Income	2002		2001			2000
Net income in accordance with Canadian GAAP	$	50,755	$	45,288		$	39,163
Equity accounting for an investee		—		—			(440	)
Adjustment of gain on sale of shares in investee		—		169			—
Change in unrealized gain (loss) on trading securities, net		—		(2,246	)		6,914
Net income in accordance with U.S. GAAP	$	50,755	$	43,211		$	45,637

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	2002		2001		2000
Basic earnings per common share U.S. GAAP	$	3.93	$	3.42	$	3.78
Diluted earnings per common share U.S. GAAP	$	3.70	$	3.20	$	3.51

	2002		2001		2000
Retained earnings in accordance with U.S. GAAP	$	194,758	$	163,342	$	153,478

Comprehensive Income			2002			2001			2000
Net income in accordance with U.S. GAAP			$	50,755		$	43,211		$	45,637
Other comprehensive income, net of tax
	Foreign currency translation adjustment			14,281			5,223			3,520
	Unrealized gains (losses) on securities:
		Unrealized holding gains (losses) arising during period		2,151			(594	)		2,071
		Less: reclassification adjustment for (gains) losses realized in net income		(233	)		(775	)		364
		Net unrealized gains (losses)		1,918			(1,369	)		2,435
Other comprehensive income				16,199			3,854			5,955
Comprehensive income			$	66,954		$	47,065		$	51,592

      The change in accumulated other comprehensive income is as follows:

	Accumulated Other Comprehensive Income
	Foreign Currency			Unrealized
	Translation			Loss on
	Adjustment			Securities			Total
Balance at December 31, 1999	$	(4,291	)	$	(2,686	)	$	(6,977	)
Change in other comprehensive income		3,520			2,435			5,955
Balance at December 31, 2000		(771	)		(251	)		(1,022	)
Change in other comprehensive income		5,223			(1,369	)		3,854
Balance at December 31, 2001		4,452			(1,620	)		2,832
Change in other comprehensive income		14,281			1,918			16,199
Balance at December 31, 2002	$	18,733		$	298		$	19,031

Securities

      U.S. GAAP requires that certain investments be classified into available-for-sale or trading securities categories and be stated at their fair values. At December 31, 2002, approximately 15% of trading securities represents an investment in the common shares of an affiliate and approximately 27% represents debt securities from two entities. At December 31, 2001, approximately 27% of trading securities represented an investment in one company. Any unrealized holding gains or losses are to be reported as a component of comprehensive income until realized for available-for-sale securities, and included in earnings for trading securities.

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Other than bank securities included trading securities at fair value and are summarized as follows:

	December 31
	2002		2001
Debt securities	$	1,906	$	358
Preferred shares		1,878		1,788
Common shares		10,328		10,789
	$	14,112	$	12,935

      Available-for-sale securities consist of common shares, preferred shares and debt securities at December 31, 2002, 2001 and 2000. At December 31, 2002 and 2001, securities in two companies represented 80% and securities in four companies represented 76%, respectively, of the total available-for-sale securities. The proceeds from the sale of these securities amounted to $1,330, $5,703 and $6,603, which resulted in realized gains (losses) of $233, $775 and $(364) during 2002, 2001 and 2000, respectively. The cost of these securities was $11,588, $6,908 and $8,700, which resulted in unrealized losses in accumulated other comprehensive income of $298, $(1,620) and $(251) at December 31, 2002, 2001 and 2000, respectively.

New United States Accounting Standards

      Statement of Financial Accounting Standards (“SFAS”) No. 145 and No. 146 are generally modifications to previously adopted standards. A part of SFAS No. 145 is effective for years beginning after May 15, 2002; however, early application is encouraged of the portion relating to no longer classifying gain or loss on extinguishments of debt as an extraordinary item. In order to be consistent with Canadian GAAP, the Company has elected early application of this portion of SFAS No. 145. Therefore, the gain on debt reduction amount of $22,409 in 2001 is no longer classified as extraordinary in the reconciliation table above. SFAS No. 146 is effective for years beginning after December 31, 2002. These new standards, other than that portion dealing with gain or loss on extinguishments of debt, do not have an effect on the Company’s consolidated financial statements.

68

INDEPENDENT AUDITORS’ REPORT

To the Shareholders

MFC Bancorp Ltd.

      Our report on the consolidated financial statements of MFC Bancorp Ltd. is included on page 46 of this Form 20-F. In connection with our audits of such financial statements, we have also audited the related financial statement schedules I, III, IV and VI of this Form 20-F.

      In our opinion, the financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ PETERSON SULLIVAN P.L.L.C.

Seattle, Washington

April 7, 2003

69

MFC BANCORP LTD.

SCHEDULE I:     CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(Dollars in thousands)

BALANCE SHEETS

	As at December 31,
	2002		2001
ASSETS
Cash and securities	$	165,062	$	152,971
Receivables		53,955		44,864
Loans		77,879		69,737
Commodity investments		13,172		5,447
Properties held for sale		72,959		22,480
Resource property		36,747		37,451
Goodwill		16,412		28,066
Equity method investments		7,917		30,898
Other		2,471		2,725
	$	446,574	$	394,639
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	39,198	$	524
Accounts payable and accrued expenses		47,279		41,649
Deferred tax liability		258		5,348
Debt		68,798		98,000
Minority interests		5,751		3,121
Shareholders’ equity		285,290		245,997
	$	446,574	$	394,639

STATEMENTS OF OPERATIONS

		Year Ended December 31,
		2002			2001			2000
Financial services revenue		$	284,339		$	214,246		$	156,220
Expenses
	Financial services		175,792			143,071			88,742
	General and administrative		35,758			21,793			21,394
	Interest		9,493			5,369			4,218
	Goodwill impairment		16,116			—			—
	Income taxes (recovery)		(3,497	)		(772	)		1,689
	Minority interest		(78	)		(503	)		1,014
			233,584			168,958			117,057
Net income		$	50,755		$	45,288		$	39,163

70

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2002			2001			2000
Net cash provided by operating activities	$	20,847		$	64,531		$	25,202
Net cash (used) provided by financing activities		13,524			(76,102	)		16,857
Net cash (used) provided by investing activities		(19,078	)		18,840			(25,680	)
Exchange rate effect on cash and cash equivalents		9,954			1,373			2,578
Net change in cash		25,247			8,642			18,957
Cash and cash equivalents, beginning of year		77,166			68,524			49,567
Cash and cash equivalents, end of year	$	102,413		$	77,166		$	68,524

71

MFC BANCORP LTD.

SCHEDULE III:     SUPPLEMENTARY INSURANCE INFORMATION

							Other
			Future policy				policy							Benefits,		Amortization
	Deferred		benefits,				claims							claims loss		of deferred
	policy		losses, claims				and				Net			and		policy		Other
	acquisition		and loss		Unearned		benefits		Premium		Investment			settlement		acquisition		operating		Premiums
Segment	cost		expenses		premiums		payable		Revenue		income			expenses		cost		expenses		written
Property and casualty:
December 31, 2002.		—	$	880,000		—		—		—	$	142,000			—		—	$	134,000		—
December 31, 2001.		—	$	1,106,000		—		—		—	$	(38,000	)		—		—	$	69,000		—
December 31, 2000.		—	$	1,307,000		—		—		—	$	288,000			—		—	$	143,000		—

72

MFC BANCORP LTD.

SCHEDULE IV: REINSURANCE

									Percentage
			Ceded to		Assumed				of amount
	Gross		Other		from other		Net		assumed
	amount		companies		companies		Amount		to net
Property and casualty:
December 31, 2002	$	—	$	—	$	—	$	—		N/A
December 31, 2001	$	—	$	—	$	—	$	—		N/A
December 31, 2000	$	—	$	—	$	—	$	—		N/A

73

MFC BANCORP LTD.

SCHEDULE VI:     SUPPLEMENTAL INFORMATION CONCERNING PROPERTY — CASUALTY

INSURANCE OPERATIONS AS AT DECEMBER 31, 2001

      This schedule is omitted because the relevant information was either shown on Schedule III or Schedule IV.

74

ITEM 19.     EXHIBITS

Exhibit No.		Description of Exhibit
	1.1	Articles of Amalgamation.(1)
	1.2	Bylaws.(1)
	2.1	Master Trust Indenture between MFC and Norwest Bank Minnesota, National Association, as trustee, dated March 31, 1998.(1)
	4.1	Memorandum of Agreement between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated November 24, 1987.(2)
	4.2	Amendment to Mining Lease between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated January 1, 1987.(2)
	4.3	First Amendment to Memorandum of Agreement between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco Inc.(2)
	4.4	Assignment Agreement between MFC and Prada Holdings Ltd. dated as of January 1, 1992.(1)
	4.5	Separation Agreement between Mercer International Inc. and MFC dated for reference March 29, 1996.(1)
	4.6	Purchase Agreement between MFC and Volendam Securities C.V. dated for reference May 16, 1996.(1)
	4.7	Purchase Agreement between MFC and Volendam Securities C.V. dated for reference May 27, 1996.(1)
	4.8	Share Purchase Agreement between MFC and Frederick Wong dated June 6, 1996.(1)
	4.9	Subscription Agreement between MFC and Drummond Financial Corporation dated June 20, 1996. Incorporated by reference to Drummond Financial Corporation’s Form 8-K dated June 27, 1996.
	4.10	Share Purchase Agreement between MFC and Med Net International Ltd. dated June 20, 1996.(3)
	4.11	Share Purchase Agreement among MFC and various shareholders of Logan International Corp. dated June 20, 1996.(3)
	4.12	Subscription Agreement between Drummond Financial Corporation and Logan International Corp. dated June 20, 1996. Incorporated by reference to Logan International Corp.’s Form 8-K dated June 27, 1996.
	4.13	Share Purchase Agreement between Lehman Brothers Bankhaus AG and MFC dated October 3, 1996.(1)
	4.14	Purchase Agreement between MFC and Robabond Holding AG dated June 27, 1997.(1)
	4.15	Share Purchase Agreement between MFC and Procom Holding AG dated September 22, 1997.(1)
	4.16	Supplementary Agreement to Share Purchase Agreement between MFC and Procom Holding AG dated September 22, 1997.(1)
	4.17	Agreement between MFC and the holders of MFC’s Class A Preferred Shares dated December 1, 1996.(1)
	4.18	Subscription Agreement between MFC and Logan International Corp. dated December 2, 1996. Incorporated by reference to MFC’s Schedule 13D/ A (Amendment No. 1) dated December 16, 1996 with respect to Logan International Corp.
	4.19	Shareholder Protection Rights Plan Agreement between MFC and Montreal Trust Company of Canada dated as of May 18, 1993. (1)
	4.20	Amended 1997 Stock Option Plan of MFC.(1)
	4.21	Amended and Restated Employment Agreement between MFC and Michael J. Smith made effective as of November 20, 2000. (1)
	4.22	Director’s Indemnity Agreement between MFC and Michael J. Smith dated for reference November 20, 2000.(1)

75

Exhibit No.		Description of Exhibit
	4.23	Indemnity Agreement between MFC and Roy Zanatta dated for reference November 20, 2000.(1)
	4.24	Investment and Restructuring Agreement among Sutton Park International Limited, Garda Investments Corp., MFC, Glamiox Beteiligungsverwaltungs GmbH, Hovis GmbH, Jurriaan J. Hovis, Johannes Hovis and Ferdinand Steinbauer dated for reference October 1, 2001.(1)
	4.25	Owners’ Agreement among Garda Investments Corp., Glamiox Beteiligungsverwaltungs GmbH, Jurriaan J. Hovis and Ferdinand Steinbauer dated for reference October 1, 2002. (1)
	4.26	Dividend Trust Settlement Agreement between MFC and The Dividend Trust Committee of the Board of Directors of MFC Bancorp Ltd. dated for reference December 21, 2001.(1)
	4.27	Share Sale Agreement among Newmont Australia Limited, Newmont LaSource S.A.S., and MFC dated August 7, 2002.
	4.28	Royalty Deed among MFC, Newmont Australia Limited and Newmont LaSource S.A.S. dated August 7, 2002.
	4.29	Arrangement Agreement between Trimble Resources Corporation and MFC dated May 17, 2002.
	4.30	Stock Purchase Agreement among Occidental (East Shabwa) LLC, Intercap Yemen, Inc. and MFC dated July 23, 2002.
	8.1	Subsidiaries of MFC.
	10.1	Certification of Periodic Report.

(1)	Incorporated by reference to MFC’s Form 20-Fs filed in prior years.
(2)	Incorporated by reference to MFC’s Form 10-K for the year ended December 31, 1989.
(3)	Incorporated by reference to MFC’s Schedule 13D dated June 27, 1996 with respect to Logan International Corp.

76

SIGNATURES

      Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

MFC BANCORP LTD.

By:  /s/ MICHAEL J. SMITH

Michael J. Smith

Chief Executive Officer

Dated this 16th day of April, 2003.

77

CERTIFICATION

      I, Michael J. Smith, Chief Executive Officer and Principal Financial Officer of MFC Bancorp Ltd., certify that:

      1. I have reviewed this annual report on Form 20-F of MFC Bancorp Ltd.;

      2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

      3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

      4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

      (b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

      (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

      5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

      (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

      (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

      6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

April 16, 2003

/s/ MICHAEL J. SMITH

Michael J. Smith

Chief Executive Officer and

Principal Financial Officer

78

EXHIBIT INDEX

Exhibit No.		Description of Exhibit
	1.1	Articles of Amalgamation.(1)
	1.2	Bylaws.(1)
	2.1	Master Trust Indenture between MFC and Norwest Bank Minnesota, National Association, as trustee, dated March 31, 1998.(1)
	4.1	Memorandum of Agreement between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated November 24, 1987.(2)
	4.2	Amendment to Mining Lease between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco Inc. dated January 1, 1987.(2)
	4.3	First Amendment to Memorandum of Agreement between MFC and Wabush Iron Co. Limited, Stelco Inc. and Dofasco Inc.(2)
	4.4	Assignment Agreement between MFC and Prada Holdings Ltd. dated as of January 1, 1992.(1)
	4.5	Separation Agreement between Mercer International Inc. and MFC dated for reference March 29, 1996.(1)
	4.6	Purchase Agreement between MFC and Volendam Securities C.V. dated for reference May 16, 1996.(1)
	4.7	Purchase Agreement between MFC and Volendam Securities C.V. dated for reference May 27, 1996.(1)
	4.8	Share Purchase Agreement between MFC and Frederick Wong dated June 6, 1996.(1)
	4.9	Subscription Agreement between MFC and Drummond Financial Corporation dated June 20, 1996. Incorporated by reference to Drummond Financial Corporation’s Form 8-K dated June 27, 1996.
	4.10	Share Purchase Agreement between MFC and Med Net International Ltd. dated June 20, 1996.(3)
	4.11	Share Purchase Agreement among MFC and various shareholders of Logan International Corp. dated June 20, 1996.(3)
	4.12	Subscription Agreement between Drummond Financial Corporation and Logan International Corp. dated June 20, 1996. Incorporated by reference to Logan International Corp.’s Form 8-K dated June 27, 1996.
	4.13	Share Purchase Agreement between Lehman Brothers Bankhaus AG and MFC dated October 3, 1996.(1)
	4.14	Purchase Agreement between MFC and Robabond Holding AG dated June 27, 1997.(1)
	4.15	Share Purchase Agreement between MFC and Procom Holding AG dated September 22, 1997.(1)
	4.16	Supplementary Agreement to Share Purchase Agreement between MFC and Procom Holding AG dated September 22, 1997.(1)
	4.17	Agreement between MFC and the holders of MFC’s Class A Preferred Shares dated December 1, 1996.(1)
	4.18	Subscription Agreement between MFC and Logan International Corp. dated December 2, 1996. Incorporated by reference to MFC’s Schedule 13D/ A (Amendment No. 1) dated December 16, 1996 with respect to Logan International Corp.
	4.19	Shareholder Protection Rights Plan Agreement between MFC and Montreal Trust Company of Canada dated as of May 18, 1993. (1)
	4.20	Amended 1997 Stock Option Plan of MFC.(1)
	4.21	Amended and Restated Employment Agreement between MFC and Michael J. Smith made effective as of November 20, 2000. (1)
	4.22	Director’s Indemnity Agreement between MFC and Michael J. Smith dated for reference November 20, 2000.(1)

Exhibit No.		Description of Exhibit
	4.23	Indemnity Agreement between MFC and Roy Zanatta dated for reference November 20, 2000.(1)
	4.24	Investment and Restructuring Agreement among Sutton Park International Limited, Garda Investments Corp., MFC, Glamiox Beteiligungsverwaltungs GmbH, Hovis GmbH, Jurriaan J. Hovis, Johannes Hovis and Ferdinand Steinbauer dated for reference October 1, 2001.(1)
	4.25	Owners’ Agreement among Garda Investments Corp., Glamiox Beteiligungsverwaltungs GmbH, Jurriaan J. Hovis and Ferdinand Steinbauer dated for reference October 1, 2002. (1)
	4.26	Dividend Trust Settlement Agreement between MFC and The Dividend Trust Committee of the Board of Directors of MFC Bancorp Ltd. dated for reference December 21, 2001.(1)
	4.27	Share Sale Agreement among Newmont Australia Limited, Newmont LaSource S.A.S., and MFC dated August 7, 2002.
	4.28	Royalty Deed among MFC, Newmont Australia Limited and Newmont LaSource S.A.S. dated August 7, 2002.
	4.29	Arrangement Agreement between Trimble Resources Corporation and MFC dated May 17, 2002.
	4.30	Stock Purchase Agreement among Occidental (East Shabwa) LLC, Intercap Yemen, Inc. and MFC dated July 23, 2002.
	8.1	Subsidiaries of MFC.
	10.1	Certification of Periodic Report.

(1)	Incorporated by reference to MFC’s Form 20-Fs filed in prior years.
(2)	Incorporated by reference to MFC’s Form 10-K for the year ended December 31, 1989.
(3)	Incorporated by reference to MFC’s Schedule 13D dated June 27, 1996 with respect to Logan International Corp.

EX-4.27

                                                                    EXHIBIT 4.27



                                 MFC BANCORP LTD
                                ("THE PURCHASER")

                                       AND

                            NEWMONT AUSTRALIA LIMITED
                                   ("NEWMONT")

                                       AND

                             NEWMONT LASOURCE S.A.S
                                     ("NLS")



- --------------------------------------------------------------------------------

                              SHARE SALE AGREEMENT

                              BANFF RESOURCES LTD.

- --------------------------------------------------------------------------------







                                   KELLY & CO
                                     LAWYERS
                             91 King William Street
                                ADELAIDE SA 5000
                               Tel: (08) 8205 0800
                               Fax: (08) 8205 0805
                                 DX 301 Adelaide
                                 Ref: AGC/203631







THIS AGREEMENT IS made the 7th day of August, 2002

PARTIES:

NEWMONT AUSTRALIA LIMITED (ABN 80 009 295 765) of 100 Hutt Street ADELAIDE SA
5000 (NEWMONT)

NEWMONT LASOURCE S.A.S a company incorporated in accordance with the laws of
France of 42 Avenue de la Grande Armee, Paris, France (NLS),

MFC BANCORP LTD a company organized under the laws of the Yukon Territory,
Canada (MFCB) of Millenium Tower, Handelskai 92-94, CHA-1200 Vienna, Austria,
(PURCHASER)


RECITALS

A.   Banff Resources Ltd. is a company organised under the laws of the Yukon
     Territory, Canada and listed on the TSX Venture Exchange as a Tier 1
     Company;

B.   NLS is a wholly owned subsidiary of Newmont and is the registered holder of
     the Banff Shares which represent 85.3% of the issued shares of Banff;

C.   Banff's principal asset is a 63% interest in Kasese Cobalt Company Limited
     (KCCL) a company incorporated under the laws of Uganda;

D.   NLS is owed money by Banff;

E.   KCCL is the owner and operator of the Kasese Cobalt Mine located at Kasese,
     Uganda;

F.   The Purchaser, NLS and Newmont acknowledge that Banff purports to have an
     option to acquire a 65% interest in the Kilembe Tailings Project from
     Kilembe Mines Limited the validity and enforceability of which is disputed
     by Kilembe Mines Limited; and

G.   Newmont and NLS have agreed to sell, and the Purchaser agreed to purchase,
     the Banff Shares and the Shareholder Loans, on the terms and conditions
     specified in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and subject to and on the terms and conditions herein set
forth, the parties hereto covenant and agree as follows:

1.   INTERPRETATION

1.1  DEFINITIONS

     In this Agreement, including the recitals hereto, unless the context
     otherwise requires:

                                       2


     AFFILIATE with respect to any person means any other person directly or
     indirectly controlling, controlled by or under common control with that
     person. The term "control" as used in the preceding sentence means, with
     respect to a corporation, the right to exercise, directly or indirectly,
     50% or more of the voting rights attributable to the shares of the
     controlled corporation and, with respect to any person other than a
     corporation, the possession, directly or indirectly, of the power to direct
     or cause the direction of the management or policies of such person;

     AGREED ADJUSTMENTS means the adjustments to the balance sheet of KCCL
     agreed upon by the Purchaser and Newmont as set forth in the "Agreed
     Adjustments" column in the Indicated Balance Sheet;

     ANGLETON means Angleton Enterprises Corp. a company organized under the
     laws of the British Virgin Islands;

     BANFF means Banff Resources Ltd.;

     BANFF SHARES means 55,210,984 shares in Banff;

     BUSINESS DAY means any day other than a Saturday, a Sunday or a day on
     which banks in Vancouver, British Columbia are authorized or obligated by
     law to close;

     CLOSING BALANCE SHEET means a balance sheet of KCCL prepared as at 31 July
     2002 in accordance with GAAP;

     COMPLETION means completion of the transactions contemplated by this
     Agreement;

     COMPLETION DATE means the later of:

     (i)  the day after written notice by the Parties to each other of the
          satisfaction or waiver of the conditions in clause 2.1(a), (b) and
          (c); or

     (ii) 7 August 2002,

     or such other date as may be mutually agreed upon by the Parties hereto;

     EFFECTIVE DATE means 1 July 2002;

     ENCUMBRANCE includes any and all encumbrances including options, mortgages,
     pledges, charges, debentures, liens, assignments, hypothecations, security
     interests, title retentions, preferential rights, court orders, trust
     arrangements and any other legal or equitable interests or claims;

     GAAP means generally accepted accounting principles of the United States of
     America consistently applied;

     INDICATED BALANCE SHEET means the balance sheet of KCCL prepared in
     accordance with GAAP as at June 30, 2002 attached as Appendix "A" hereto;

     KASESE COBALT MINE means the cobalt processing plant located at Kasese,
     Uganda

                                       3


     owned and operated by KCCL for processing tailings from the former Kilembe
     mine;

     KCCL DEBT PURCHASE AGREEMENT means the agreement executed at or about the
     time of this Agreement between Newmont, NLS, and Angleton relating to the
     sale and purchase of certain debts of, and securities granted by, KCCL
     therein called Senior Debt, Shareholders Loans and Senior Debt Security;

     LITIGATION means the actual and potential claims and disputes (whether or
     not legal proceedings have been commenced or demands have been made)
     between:

     (a)  KCCL and its contractors, suppliers and consultants (including Le
          Bureau de Recherches Geologiques et Minieres ("BRGM")) engaged in the
          development, design and construction of the Kasese Cobalt Mine
          processing facilities and associated infrastructure because of which
          KCCL has claims against such contractors, suppliers and consultants
          including claims for breach of contract and breach of duty of care and
          in certain cases such contractors, suppliers and consultants have
          notified KCCL of claims and counterclaims arising from the
          development, design and construction of the Kasese Cobalt Mine
          processing facilities and associated infrastructure; and

     (b)  between KCCL and any insurer of KCCL or insurance broker used in
          arranging insurance of KCCL in respect of business interruption
          arising from machinery breakdown or damage occurring prior to the
          Effective Date because of which KCCL has claims against such insurers
          or brokers; and

     (c)  between KCCL and insurers of such contractors, suppliers and
          consultants in respect of professional negligence of such contractors,
          suppliers or consultants because of which KCCL has claims against such
          insurers,

     but excluding any claim or dispute arising from acts or omissions of any
     person occurring after Completion;

     MINE CLOSURE COSTS means the cost of closing down and rehabilitating the
     Kasese Cobalt Mine site following closure of that mine in accordance with
     its current mine plan;

     MINING OPERATIONS means the Kasese Cobalt Mine and/or Kilembe Tailings
     Project;

     NET WORKING CAPITAL means the current assets of KCCL less current
     liabilities of KCCL as set forth in a balance sheet prepared in accordance
     with GAAP;

     PARTIES means the parties to this Agreement;

     ROYALTY AGREEMENT means an agreement between Newmont, NLS and the Purchaser
     pursuant to which the Purchaser will grant to NLS a royalty in the form
     attached hereto as Appendix B;

     SHAREHOLDER LOANS means any and all amounts due, owing or accruing from
     Banff to NLS or its Affiliates as at the date of Completion, which totalled
     $11,430,667 as at 30 June 2002;

                                       4


     SPECIFIED LIABILITIES means all amounts due or payable by or liabilities of
     KCCL and its Affiliates as at the date of Completion for cobalt and
     limestone royalties and to the Ugandan Electricity Board for electrical
     supply;

     TAILINGS PIPELINE PROJECT means the current project of KCCL to build and
     bring into operation an approximately 8 km tailings outflow pipeline
     replacement;

     TRADE LIABILITIES means all staff and external creditor liabilities of KCCL
     as at the Effective Date other than liabilities: (i) arising out of the
     Litigation (but not being legal or consultants fees for past services in
     connection with any of the Litigation); and (ii) to Newmont, NLS and their
     Affiliates, officers and directors;

     VENDOR means either Newmont and/or NLS as the case may be and "VENDORS"
     means either or both of them; and

     WARRANTY means each of the warranties and representations made by Newmont
     and NLS contained in schedule 2 to this Agreement;

1.2  INTERPRETATION

     In this Agreement, unless the context otherwise requires:

     (a)  a reference to any document is a reference to that document as varied,
          novated or replaced from time to time;

     (b)  the singular includes the plural and vice versa;

     (c)  a reference to a gender includes all other genders;

     (d)  the use of the word "including" shall not imply any limitation;

     (e)  a reference to a thing includes all or any part of it;

     (f)  where a word or phrase is defined, its other grammatical forms have a
          corresponding meaning;

     (g)  a reference to a person or entity includes a natural person, a
          partnership, corporation, trust, association, an unincorporated body,
          authority or other entity;

     (h)  a reference to a person includes that person's legal personal
          representative, successors and permitted assigns;

     (i)  a term which purports to bind or benefit two or more persons binds or
          benefits them jointly and severally;

     (j)  a reference to a statute, ordinance, code or other law includes
          regulations and other instruments issued under it and consolidations,
          amendments, re-enactments or replacements of any of them;

     (k)  a reference to DOLLARS or $ is to an amount in United States of
          America currency.

                                       5


     (l)  a reference to time is to local time in Vancouver, Canada;

     (m)  a reference to a clause, schedule or annexure is a reference to a
          clause of, or schedule or annexure to this Agreement; and

     (n)  headings have been inserted for convenience only and shall not affect
          the interpretation of this Agreement.

2.   CONDITIONS PRECEDENT

2.1  CONDITIONS

     Completion of this Agreement is subject to satisfaction of each of the
     following conditions:

     (a)  Banff obtaining any regulatory or shareholder approvals necessary
          under the laws of Canada in respect of the transactions contemplated
          by this Agreement;

     (b)  KCCL obtaining any regulatory board or shareholder approvals necessary
          under the laws of Uganda or its constituent documents in respect of
          the transactions contemplated by this Agreement;

     (c)  Newmont and the Purchaser obtaining an expression of support by the
          Ugandan Government for the transactions contemplated by this
          Agreement;

     (d)  Newmont, NLS and Angleton entering into the KCCL Debt Purchase
          Agreement;

     (e)  International Finance Corporation ("IFC") and Societe De Promotion Et
          De Participation pour la Cooperation Economique SA ("Proparco") each
          entering into an agreement with the Purchaser to sell all of their
          shares in KCCL to the Purchaser for the sum of US$1.00 each at
          Completion; and

     (f)  Completion occurring under the KCCL Debt Purchase Agreement.

2.2  REASONABLE ENDEAVOURS

     The Parties agree to use their respective reasonable endeavours to ensure
     that the conditions precedent in clause 2.1 are satisfied prior to 7 August
     2002.

2.3  BENEFIT OF CONDITIONS

     The conditions precedent in clause 2.1(a) and (b) are for the benefit of
     Newmont and NLS and may only be waived by Newmont and NLS. The condition
     precedent in clause 2.1(e) is for the benefit of the Purchaser and may only
     be waived by the Purchaser and the conditions precedent in clauses 2.1(c),
     (d) and (f) are for the mutual benefit of both Newmont and the Purchaser
     and may only be waived by both of them. Each Party hereto shall promptly
     give written notice to the other Party upon satisfaction or waiver of any
     of the conditions in clause 2.1 which are for its benefit.

2.4  FAILURE TO MEET CONDITIONS

                                       6


     If the conditions precedent are not satisfied by 30 September 2002, then,
     except for clauses 14, 15.10, 15.11 and 15.13 and any rights or liabilities
     a party may have for prior breach of this clause 2 of this Agreement shall
     terminate and have no further effect.

3.   SALE OF SHARES

3.1  SALE AND PURCHASE OF SHARES

     On Completion, with effect from the Effective Date, Newmont shall procure
     that NLS, and NLS shall, as the legal and beneficial owner sell and
     transfer to the Purchaser and the Purchaser agrees to buy from NLS, the
     Banff Shares free from any Encumbrance or third party interest and with all
     benefits, rights and entitlements (including dividend rights) attached or
     accruing to them on and from the Effective Date, for the Sale Price as set
     forth in clause 3.3 and otherwise on the terms and conditions of this
     Agreement.

3.2  TITLE AND RISK

     Title to and property and risk in the Banff Shares:

     (a)  remains with NLS until Completion; and

     (b)  passes to the Purchaser on and from Completion.

3.3  SALE PRICE

     The Sale Price for the Banff Shares shall be $1.00 payable to NLS.

4.   COMPLETION

4.1  TIME AND PLACE OF COMPLETION

     Completion will occur on the Completion Date at the offices of Sangra,
     Moller, 1000-925 West Georgia Street, Vancouver, British Columbia, Canada,
     V6C 3L2 at 4:00 pm (Pacific Standard Time), or on such other date and time
     as agreed to in writing by the Parties.

4.2  DELIVERIES

     At Completion:

     (a)  the Purchaser shall pay to NLS or as NLS directs the Sale Price in
          clear funds;

     (b)  the Purchaser, Newmont and NLS will enter into the Royalty Agreement;

     (c)  the Vendors will procure that its nominees on the board of Banff and
          on the board of KCCL resign and are replaced with nominees of the
          Purchaser;

     (d)  the Vendors will:

                                       7


          (i)   subject to clause 4.2(e)(ii), deliver to the Purchaser
                possession or control of the following: (1) files, documents,
                papers, contracts, agreements, legal descriptions, open books
                of account or ledgers and documentation in support thereof used
                or useful in the operation of the Mining Operations, and (2) all
                other information, whether in writing, on computer diskette or
                other form or medium, that pertains to the use or ownership
                of the assets utilized in the Mining Operations, Banff or
                the Banff Shares;

          (ii)  as soon as is reasonably practicable after the Completion Date,
                deliver to the Purchaser possession or control of all items in
                the immediately above subclause that Newmont and NLS were unable
                to deliver at Completion; and

          (iii) deliver to the Purchaser possession of all share registers,
                minute books and corporate books and records for Banff in the
                possession or control of Newmont or NLS or any of their
                Affiliate.

     (e)  Newmont will, in form and substance satisfactory to the Purchaser
          acting reasonably, provide sufficient documentation to:

          (i)   evidence that those matters specified in this Agreement as being
                required to occur prior to or at Completion have occurred; and

          (ii)  enable the Banff Shares and the Shareholder Loans to be duly
                assigned, transferred to and registered in the Purchaser's name
                in accordance with applicable laws; and

     (f)  concurrently with the sale and transfer of the Banff Shares pursuant
          to clause 3.1 hereof, and as a condition thereof, IFC and Proparco
          shall assign and transfer all of their shares of KCCL to the Purchaser
          or its order for the sum of $1.00 each.

4.3  INTERDEPENDENCY

     The obligations of the Parties in respect of Completion under this
     Agreement and completion under the KCCL Debt Purchase Agreement are
     interdependent. All things or actions required to be done at Completion
     under this Agreement and at completion under the KCCL Debt Purchase
     Agreement will be treated as having taken place simultaneously and (unless
     all of the Parties agree in writing to the contrary) no delivery or payment
     will be treated as having been made until all deliveries and payments due
     to be made at Completion under this Agreement and completion under the KCCL
     Debt Purchase Agreement have been made. Completion under this Agreement and
     completion under the KCCL Debt Purchase Agreement will be taken for all
     purposes not to have occurred unless and until all those deliveries and
     payments have been made unless all of the Parties agree in writing to the
     contrary.

4.4  RESCISSION RIGHTS

     If Completion does not occur on the Completion Date as the result of a
     default by one of the Parties hereto, then, subject to clause 4.5 hereof,
     the non-defaulting Party or Parties

                                       8


     may, by not less than twenty one days written notice to the defaulting
     Party setting forth such default and requesting such defaulting Party to
     remedy the default, rescind this Agreement without prejudice to any other
     rights, powers or remedies at law, equity or otherwise the Parties may
     have. If the KCCL Debt Purchase Agreement is rescinded, this Agreement
     shall be taken to have automatically been rescinded also in accordance with
     this clause.

4.5  NOTICE OF RESCISSION

     If a notice is duly given under clause 4.4 and:

     (a)  the defaulting Party or Parties do not rectify the breach specified in
          such notice before the expiry of the twenty-one day period in such
          notice; and

     (b)  Completion does not occur before the expiry of the period of notice
          given then at the expiry of that period of notice,

     then at the expiry of that period of notice this Agreement will be at an
     end and of no further force or effect save that the rights of the Party or
     Parties not in default and the liability of the Party or Parties in default
     for breach of this Agreement and loss of the benefit of this Agreement will
     continue unaffected.


4.6  NEWMONT'S AND NLS' OBLIGATIONS UNTIL REGISTRATION

     After Completion and until the Banff Shares are registered in the name of
     the Purchaser or its nominee, Newmont shall procure NLS and NLS must
     convene and attend general meetings of Banff, vote at those meetings and
     take all other action in the capacity of registered holder of the Banff
     Shares as the Purchaser may lawfully require from time to time by written
     notice.

5.   LIABILITIES OF BANFF

5.1  SHAREHOLDER LOANS

     At Completion and concurrently with the sale and transfer of the Banff
     Shares pursuant to clause 3.1 hereof, NLS shall and Newmont shall procure
     that NLS shall assign to the Purchaser, or its order, and the Purchaser
     agrees to the assignment of:

     (a)  all of the Shareholder Loans free from any Encumbrance or third party
          interest and with all benefits, rights and entitlements attached or
          accruing thereto as at the Effective Date; and

     (b)  any and all Encumbrances held by Newmont or NLS or any of their
          respective Affiliates over the assets of Banff;

     For the avoidance of doubt, except as set forth in this Agreement, nothing
     in this clause shall be taken to entitle the Purchaser, or Banff to seek
     contribution or payment from Newmont or NLS or their respective Affiliates
     under any guarantee, indemnity, agreement or covenant given either alone or
     jointly with Banff or any other person.

                                       9


5.2  EXCLUSION OF LIABILITIES

     For the avoidance of doubt, the following liabilities will remain with KCCL
     following Completion:

     (a)  all Trade Liabilities;

     (b)  all liabilities which have arisen or arise out of the Litigation; and

     (c)  all Mine Closure Costs.

5.3  SPECIFIED LIABILITIES

     Newmont shall be solely liable for the Specified Liabilities and, unless
     agreed otherwise between the Purchaser and Newmont, at, before, or as soon
     as reasonably practicable after Completion, shall pay to the relevant
     creditors in cash the amount of the Specified Liabilities due to them or as
     accepted by the relevant creditors in full satisfaction, provided that, if
     the amounts are not determinable, the amounts to be paid on, before, or as
     soon as reasonably practicable after Completion shall be equal to the
     amounts shown on KCCL's financial statements as at 30 June 2002 and
     adjusted to the actual amount of the relevant Specified Liability within 30
     days of Completion.

6.   LITIGATION

     (a)  Newmont and the Purchaser agree that Newmont shall have the right to
          prosecute, institute, settle or compromise the Litigation in the name
          of KCCL and the right and obligation to defend, settle or compromise,
          in good faith, any and all claims or counterclaims that may be brought
          by contractors, suppliers, consultants, and insurers against KCCL, the
          Purchaser, their Affiliates and their respective directors and
          officers arising out of the Litigation provided that Newmont shall use
          all commercially reasonable efforts to at all times keep the Purchaser
          and KCCL reasonably informed on all matters relating to the
          Litigation.

     (b)  Newmont shall be solely entitled to and shall retain the proceeds and
          benefit of KCCL's claims arising out of the Litigation and shall be
          responsible for any indebtedness or liability of KCCL, the Purchaser,
          their Affiliates and their respective officers and directors in
          respect of any successful claims or counterclaims brought by such
          contractors, suppliers, consultants and insurers arising out of the
          Litigation and for all of the costs of the prosecution, settlement,
          compromise or defence of any Litigation.


     (c)  Newmont agrees to indemnify and to hold the Purchaser and KCCL
          harmless against all and any claims and counterclaims that may be
          brought against KCCL, Banff, the Purchaser, their Affiliates and their
          respective officers and directors in connection with or arising,
          directly or indirectly, out of the Litigation, the costs of that
          Litigation and the actions, deeds or inactions of the Seconded
          Personnel (as hereinafter defined).

                                       10


     (d)  The Purchaser agrees to do all things necessary and commercially
          reasonable to procure KCCL to enable Newmont to prosecute, institute
          defend, settle or compromise the Litigation in the name of KCCL and
          have the benefit and burden of the Litigation as contemplated in this
          clause 6 including but not limited to, as may be necessary and legally
          permissible:

          (i)   the secondment of up to two Newmont personnel (the "Seconded
                Personnel") to the employ of KCCL (at Newmont's expense) or the
                appointment of a Newmont nominee as a director without voting
                rights or other officer of KCCL for the sole purpose of
                prosecuting, instituting, defending, settling or compromising
                the Litigation;

          (ii)  giving access to or making available all books and records of
                KCCL including the copying of such books and records as Newmont
                may reasonably request; and

          (iii) granting access to the Kasese Cobalt Mine to such persons as
                Newmont may reasonably request for the purposes of inspection,
                gathering evidence and conducting tests at reasonable times and
                in a reasonable manner without any interference with the
                operation of the Kasese Cobalt Mine.

     (e)  The Purchaser must use all commercially reasonable efforts to procure
          that KCCL acts in accordance with the lawful directions of Newmont
          given from time to time in connection with the Litigation and does not
          settle, compromise, abandon or make any admission in connection with
          any of the Litigation without Newmont's written consent or direction.

     (f)  Subject to paragraph (g) below, any performance or security bonds or
          guarantees provided to or in favour of KCCL by or on behalf of
          contractors, suppliers, consultants or insurers of KCCL that are in
          dispute with KCCL shall be for the benefit of Newmont and may only be
          dealt with as Newmont directs in writing and if any proceeds of any
          such bonds or guarantees are received whether before or after
          Completion, such proceeds must be paid to Newmont as soon as possible
          after receipt of same by KCCL, Banff or the Purchaser or applied as
          Newmont directs in writing.

     (g)  The Parties acknowledge that KCCL has called on a performance bond
          provided by Fritz Werner and that an amount of approximately Euro
          370,665 is in a Euro denominated bank account in Kampala in the name
          of KCCL in respect of such performance bond. To the extent that KCCL
          is entitled to the proceeds from the performance bond provided by
          Fritz Werner, KCCL may apply up to $260,000 of such proceeds to
          rectification works at the Kasese Cobalt Mine. The application of the
          said $260,000 by KCCL prior to it being finally determined or agreed
          with Fritz Werner that KCCL is entitled to such proceeds shall be
          entirely at the risk of the Purchaser, Banff and KCCL. Newmont shall
          not be liable to KCCL, Banff or the Purchaser in any respect including
          but not limited to the indemnity provided by Newmont pursuant to
          clause 6(c), arising from the application of the said

                                       11


          $260,000 by KCCL, Banff or the Purchaser prior to it being finally
          determined or agreed that KCCL is entitled to such proceeds.

7.   CLOSING BALANCE SHEET ADJUSTMENTS

     (a)  Forthwith after Completion, the Purchaser shall cause KCCL to prepare
          and deliver the Closing Balance Sheet to each of the Purchaser and
          NLS. If the Net Working Capital disclosed by the Closing Balance Sheet
          after giving effect to the Agreed Adjustments to the extent not
          already taken into account is less than the Net Working Capital on the
          Indicated Balance Sheet after giving effect to the Agreed Adjustments,
          NLS shall pay an amount equal to the difference to KCCL as an addition
          to the Shareholder Loans forthwith upon delivery of the Closing
          Balance Sheet to it by KCCL. If the Net Working Capital disclosed by
          the Closing Balance Sheet after giving effect to the Agreed
          Adjustments to the extent not already taken into account is higher
          than the Net Working Capital on the Indicated Balance Sheet after
          giving effect to the Agreed Adjustments, the Purchaser shall cause
          KCCL to pay the difference in clear funds to NLS forthwith upon
          receipt of the Closing Balance Sheet.


     (b)  For the avoidance of doubt, the Purchaser acknowledges that if
          Completion occurs after 31 July 2002 and the Net Working Capital of
          KCCL deteriorates or improves by comparison to the Net Working Capital
          disclosed in the Closing Balance Sheet, no further adjustment is to be
          made and none of NLS, Newmont or their respective Affiliates are under
          no obligation to fund KCCL after 31 July 2002 other than by payment of
          the difference (if any) pursuant to clause 7(a).

8.   KCCL AGREEMENTS WITH NEWMONT

     At the request of the Purchaser from time to time, at Completion and
     thereafter, Newmont shall and shall procure the discharge and termination
     (without cost or expense to KCCL, Banff or their Affiliates) by Newmont and
     its Affiliates of such agreements, contracts and obligations among Newmont
     and/or its Affiliates (on the one hand) and KCCL, Banff and/or their
     Affiliates (on the other hand) provided that in respect of a shareholder's
     agreement between KCCL and NLS made the 17th day of July, 1997, Newmont
     may, at its election, instead of terminating it as aforesaid indemnify and
     save harmless KCCL and its Affiliates from any and all costs, fees,
     expenses, claims or damages in respect thereof. The Purchaser agrees to
     procure KCCL's cooperation in any arrangements contemplated by this clause.

9.   ROYALTY

9.1  ROYALTY CONSIDERATION

     At Completion, in consideration of NLS assigning the Shareholder Loans and
     Encumbrances therefor to the Purchaser pursuant to clause 5.1 hereof, the
     Purchaser will grant a royalty to NLS on the terms of the Royalty
     Agreement.

                                       12


10.  TRANSITION

10.1 MANAGEMENT ASSISTANCE

     (a)  For the period from Completion until the earlier of three (3) months
          after Completion or until the Purchaser or KCCL has engaged
          satisfactory replacement employees or contractors as may be required
          to manage the Mining Operations in the ordinary course and consistent
          with its operation prior to the Effective Date, Newmont must:

          (i)   make available to KCCL such Newmont employees as are working at
                the Mining Operations on Completion Date;

          (ii)  supply any necessary staff required by the Purchaser or KCCL due
                to the resignation of existing personnel at the Mining
                Operations;

          (iii) during any period that the Mining Operations is on a care and
                maintenance basis, assist in the recruitment of any necessary
                expatriate replacement employees or contractors involved in the
                care and maintenance program of the Mining Operations which the
                Parties estimate will be three people.

     (b)  Newmont must cooperate with KCCL in the recruiting and management of
          staff of KCCL and must assist KCCL in the recruitment of a start up
          crew of expatriate employees or contractors when operations recommence
          at the Mining Operations, such assistance being in the form of:

          (i)   general advice and recommendations;

          (ii)  referrals of possible candidates; and

          (iii) review and comment on KCCL selections and provide comments on
                capabilities of candidates if the candidate is known to Newmont.

     (c)  The Purchaser must procure KCCL to pay the actual costs of Newmont,
          incurred in the ordinary course and consistent with past practice, in
          providing the services referred to in clauses 10.1(a) and (b),
          including actual salary, wages and associated amounts such as annual
          leave, workers insurance and travel and accommodation of those Newmont
          employees seconded to KCCL and any other out of pocket costs and
          expenses actually incurred by Newmont plus a margin of 15% to cover
          overheads. Newmont may invoice monthly for such amounts and such
          amounts must be paid within 14 days of receipt of the invoice.

     (d)  The Purchaser shall indemnify and keep indemnified Newmont in respect
          of any claims, costs and expenses of third parties including KCCL
          incurred by Newmont in providing the services referred to in this
          clause 10.1, other than those resulting from the wilful misconduct or
          bad faith of Newmont and/or its personnel providing the services
          referred to in this clause 10.1;

                                       13


     (e)  Newmont shall not be liable to the Purchaser, KCCL or any other person
          for any loss, claim, action or demand arising from any act or omission
          of any person provided by Newmont to provide the services under this
          clause 10.1, and the Purchaser hereby releases and shall procure KCCL
          releases Newmont in respect of any such action, liability, claim or
          demand.

10.2 SECURITY

     The Purchaser will use all commercially reasonable efforts to procure KCCL
     to continue to retain Gray's Security to provide security at the Kasese
     Cobalt Mine in the manner and on the terms it is currently providing
     security, until completion of the Purchaser's program to place the Kasese
     Cobalt Mine in care and maintenance.

11   CONTINUED OPERATIONS

11.1 CARE AND MAINTENANCE

     If, during the period of time after Completion and the first anniversary
     thereof, operations cease at the Kasese Cobalt Mine and it is put on a care
     and maintenance footing:

     (a)  the Purchaser shall use all commercially reasonable efforts to cause
          KCCL to procure that as many as possible Ugandan nationals employed at
          Kasese Cobalt Mine remain employed for the maximum possible time at no
          less than 3 days per week;

     (b)  the Purchaser shall use all commercially reasonable efforts to procure
          KCCL's working capital is applied towards funding the care and
          maintenance of the Kasese Cobalt Mine; and

     (c)  if the trailing average cobalt price for 60 days exceeds US$12 per
          pound then the Purchaser shall use all commercially reasonable efforts
          to procure that processing operations recommence at Kasese Cobalt
          Mine.

11.2 CONTINUING OBLIGATION

     The Purchaser acknowledges and agrees that no action or omission by
     Angleton whether in compliance with or in breach of the KCCL Debt Purchase
     Agreement shall relieve the Purchaser of its obligations pursuant to clause
     11.1 and the Purchaser shall indemnify the Vendors against any claim, loss,
     action, costs or demand suffered by the Vendors arising from the Purchaser
     not complying with its obligations pursuant to clause 11.1 hereof as a
     result of a breach by Angleton of its obligations under the KCCL Debt
     Purchase Agreement.

11.3 TAILINGS PIPELINE PROJECT

     Newmont shall indemnify and save harmless KCCL and its Affiliates from all
     costs, expenses and claims in excess of US$55,000 in respect of completing
     the Tailings Pipeline Project in a good, workmanlike and professional
     manner and having it operational in a manner satisfactory to KCCL, acting
     reasonably. The Parties hereto agree that KCCL shall be considered to be a
     party in interest for the purposes of this clause 11.3, and in connection
     therewith KCCL shall

                                       14


     and shall be deemed to have been conferred all of the rights and remedies
     available under this clause, and that following Completion, either KCCL in
     its own name or the Purchaser (but without duplication) in its own name or
     in the name of KCCL, may enforce any and all claims, rights and benefits
     set forth in this clause 11.3 against Newmont. Newmont shall not be obliged
     by this clause to pay any amount that is the obligation of KCCL to pay,
     which amount arises due to any material variation, delay, extension of time
     or amendment under or of the contract for the Tailings Pipeline Project
     arising or agreed to after Completion.

12.  WARRANTIES

12.1 WARRANTIES BY NEWMONT AND NLS

     Newmont and NLS hereby jointly and severally represent, warrant and
     undertake to the Purchaser that each of the Warranties is complete and
     accurate on the date of this Agreement and will be complete and accurate at
     the Completion Date as if made on each of those dates and in the same
     terms.

12.2 PURCHASER WARRANTIES

     The Purchaser warrants and represents to Newmont and NLS that at the date
     of this Agreement:

     (a)  the execution and delivery of this Agreement has been properly
          authorised by all necessary corporate action by the Purchaser;

     (b)  the Purchaser has full corporate power and lawful authority to execute
          and deliver this Agreement and to consummate and perform or cause to
          be performed its obligations under this Agreement;

     (c)  this Agreement constitutes a legal, valid and binding obligation of
          the Purchaser enforceable in accordance with its terms (subject to the
          discretion of Courts as to equitable remedies and laws relating to
          creditors rights generally);

     (d)  it is able to pay its debts as and when they fall due; and

     (e)  the Purchaser had net assets of at least CDN $5,000,000 as shown in
          its most recently prepared financial statements.

12.3 CONSTRUCTION OF WARRANTIES

     Each Warranty is independent of the other Warranties and any other
     representation made under or in respect of this Agreement and accordingly
     is not affected by any of them.

12.4 LIMITATION OF LIABILITY

     The Purchaser is only entitled to a claim against the Vendors in respect of
     any breach of this Agreement by the Vendors if the amount of all claims, in
     the aggregate, exceed $US100,000, in which event the Vendors shall be
     liable for all claims,

                                       15


     including those counted to arrive at such $US100,000, provided that such
     limitation will not apply to claims by the Purchaser as a result of: (a)
     any breach of the Warranty set forth in clause 5(b) of Schedule 2 to this
     Agreement; (b) any breach of the Vendors' covenants and obligations set
     forth in clause 4.2(c) of this Agreement; and (c) any breach resulting from
     the willfull misconduct, bad faith or gross negligence of the Vendors or
     any of them, for which in each case of (a), (b) or (c) above recovery by
     the Purchaser shall be on a dollar for a dollar basis.

13.  PURCHASER ACKNOWLEDGMENTS

     The Purchaser hereby expressly acknowledges and agrees with Newmont and NLS
     as follows:

     (a)  no warranties, representations, assurances or conditions (other than
          are herein contained) are given by Newmont or NLS or their respective
          Affiliates and all other warranties, representations, assurances and
          conditions are excluded and negatived to the extent permissible at
          law;

     (b)  the Purchaser has agreed to purchase the Banff Shares as a result of
          the Purchaser's own investigations and enquiries and in so doing has
          not relied upon any warranty, representation or assurance given by or
          on behalf of Newmont or NLS or any of their respective Affiliates
          other than those herein contained; and

     (c)  the Purchaser has been informed that Banff is not presently in
          compliance with Tier 1 Tier Maintenance Requirements of the TSX
          Venture Exchange and that failure to meet such requirements may lead
          to the downgrading of Banff to Tier 2 status or suspension from
          trading on the TSX Venture Exchange.

14.  CONFIDENTIALITY

     The Parties must maintain absolute confidentiality concerning the existence
     and terms of this Agreement and no public announcement or communication
     relating to the negotiations of the Parties or the existence, subject
     matter or terms of this Agreement may be made or authorised by or on behalf
     of a Party without the prior written approval of the other Parties except
     that a Party may make such disclosures in relation to this Agreement as it
     may in its absolute discretion think necessary:

     (a)  to its shareholders, staff (including contract staff), professional
          advisers and financiers upon those persons undertaking to keep
          confidential any information so disclosed; or

     (b)  to comply with any applicable law or the requirement of any regulatory
          body (including any relevant stock exchange or NASDAQ) providing that
          it shall use reasonable efforts to permit the other Party to review
          and comment on any proposed releases; or

     (c)  for inclusion in any document inviting capital to be invested in that
          Party or a related body corporate; or

                                       16


     (d)  as may reasonably be required in order to satisfy any of the
          conditions precedent in clause 2.1.

15   GENERAL

15.1 AMENDMENT

     This Agreement may only be amended or supplemented in writing, signed by
     the Parties.

15.2 WAIVER

     The non-exercise of or delay in exercising any power or right of a Party
     does not operate as a waiver of that power or right, nor does any single
     exercise of a power or right preclude any other or further exercise of it
     or the exercise of any other power or right. A power or right may only be
     waived in writing, signed by the Party to be bound by the waiver.

15.3 ENTIRE AGREEMENT

     This Agreement including the exhibits and schedules hereto contains the
     entire agreement between the Parties with respect to the subject matter
     hereof and supercedes all prior agreements and understandings, oral or
     written, with respect to such matters.

15.4 SEVERABILITY

     Any provision in this Agreement which is invalid or unenforceable in any
     jurisdiction is to be read down for the purposes of that jurisdiction, if
     possible, so as to be valid and enforceable, and is otherwise capable of
     being severed to the extent of the invalidity or unenforceability, without
     affecting the remaining provisions of this Agreement or affecting the
     validity or enforceability of that provision in any other jurisdiction,
     unless it materially alters the nature or any material term of this
     Agreement.

15.5 NO ASSIGNMENT

     No Party may assign or transfer any of its rights or obligations under this
     Agreement without the prior consent in writing of all the other Parties.

15.6 NO MERGER

     No provision of this Agreement:

     (a)  merges on or by virtue of Completion; or

     (b)  is in any way modified, discharged or prejudiced by reason of any
          investigations made or information acquired by or on behalf of the
          Purchaser.

                                       17


15.7  FURTHER ASSURANCE

      Each Party must do, sign, execute and deliver and must procure that each
      of its employees and agents does, signs, executes and delivers, all deeds,
      documents, instruments and acts reasonably required of it or them by
      notice from another Party to effectively carry out and give full effect to
      this Agreement and the rights and obligations of the Parties under it,
      both before and after Completion.

15.8  COUNTERPARTS

      This Agreement may be executed in any number of counterparts and all of
      those counterparts taken together constitute one and the same instrument.

15.9  ATTORNEYS

      Each attorney who executes this Agreement on behalf of a Party declares
      that the attorney has no notice of the revocation or suspension of the
      power of attorney under the authority of which the attorney executes this
      Agreement.

15.10 GOVERNING LAW

      This Agreement shall be governed exclusively by the laws of the Province
      of British Columbia, and the federal laws of Canada applicable therein
      without giving effect to any choice or conflict of law provision or rule
      (whether of the Province of British Columbia or any other jurisdiction)
      that would cause the application of the laws of any jurisdiction other
      than the laws of the Province of British Columbia, and the federal laws of
      Canada applicable therein, and the Parties irrevocably submit to the
      non-exclusive jurisdiction of the Supreme Court of British Columbia,
      situate in Vancouver.

15.11 COSTS GENERALLY

      Each Party must bear and is responsible for its own costs in connection
      with the preparation, execution, Completion and carrying into effect of
      this Agreement.

15.12 TAXES AND STAMP DUTY

      The Purchaser must bear and is responsible for all transaction taxes,
      stamp duty or other government impost imposed on or in respect of:

      (a)  this Agreement;

      (b)  the sale, purchase, assignment or transfer of any property under this
           Agreement; and

      (c)  any instrument or transaction contemplated by this Agreement.

15.13 NOTICES

      The provisions of schedule 1 apply to Notices.

                                       18


15.14 SERVICE OF PROCESS

      A Party may by Notice to all other Parties specify an address for the
      service of process. Otherwise each Party agrees that any process to be
      served on it in respect of any matter arising out of this Agreement may be
      served by delivery to its registered office or at its address specified in
      schedule 1 and for that purpose the requirements of paragraph 2(a) of
      schedule 1 apply.

                                       19


                                   SCHEDULE 1

                                     NOTICES

1.   DELIVERY

     A Notice must be in writing and delivered on a Business Day, sent by
     prepaid mail (airmail if overseas) or by facsimile to the address or
     facsimile number of the recipient Party set out in paragraph 3 or to such
     other address or facsimile number as that Party may from time to time
     notify the other Parties for the purposes of this schedule.

2.   RECEIPT

     A Notice given in accordance with paragraph 1 will be treated as having
     been received:

     (a)  if it is delivered before 5.00 pm on a Business Day, at the time of
          delivery otherwise at 9.00 am on the next following Business Day;

     (b)  on the third Business Day (or seventh Business Day if sent overseas)
          after posting; and

     (c)  if sent by facsimile, upon production of a correct and complete
          transmission report by the machine from which the facsimile was sent
          which indicates that the facsimile was sent in its entirety to the
          facsimile number of the recipient notified for the purposes of this
          paragraph (but if the communication is not completed by 5.00 pm on a
          Business Day, at 9.00 am on the next following Business Day).

3.   ADDRESSES FOR NOTICES

     For the purposes of this schedule, the address and facsimile details of
     each Party are as follows:

     NEWMONT

     Attention:     Company Secretary

     Address:       100 Hutt Street Adelaide South Australia 5000

     Facsimile:     +618 8303 1900

     NLS

     Attention:     Managing Director

     Address:       42 Avenue de Le Grande Armee, 75017, Paris, France

     Facsimile:     +331 56 68 06 66

                                       20


     PURCHASER

     Attention:     President:

     Address:       c/o 1000 Cathedral Place, 925 West Georgia Street,
                    Vancouver, B.C. V6C 3L2

     Facsimile:     +604-669-8803

                                       21


                                   SCHEDULE 2

                                   WARRANTIES

1.   NEWMONT AND NLS

     In respect of each of Newmont and NLS:

     (a)  Newmont and NLS are duly incorporated and validly exist under the laws
          of their respective places of incorporation;

     (b)  no meeting has been convened or resolution proposed, or petition
          presented, and no order has been made, for winding up of either
          Newmont or NLS;

     (c)  no distress, execution or other similar order or process has been
          levied on any of the property or assets of either Newmont or NLS;

     (d)  no voluntary arrangement has been proposed or reached with any
          creditors of either Newmont or NLS;

     (e)  no receiver, receiver and manager, provisional liquidator, officer of
          the court, controller or other external administrator has been
          appointed in relation to either Newmont or NLS; and

     (f)  each of Newmont and NLS are able to pay their respective debts as and
          when they fall due.

2.   DUE AUTHORISATION

     (a)  The execution and delivery of this Agreement has been properly
          authorised by all necessary corporate action of each of Newmont and
          NLS and each of Newmont and NLS have full power and lawful authority
          to execute and deliver this Agreement and to consummate and perform or
          cause to be performed their respective obligations under this
          Agreement.

     (b)  This Agreement constitutes a legal, valid and binding obligation of
          each of Newmont and NLS enforceable in accordance with its terms by
          appropriate legal remedy (subject to the discretion of the Courts as
          to equitable remedies and laws relating to creditors rights
          generally).

     (c)  This Agreement and Completion do not conflict with or result in a
          breach of or default or give any third Party the right to modify,
          terminate or accelerate any obligation under any provision of either
          of Newmont's or NLS' constitution, or any material term or provision
          of any agreement, deed or any writ, order or injunction, judgment,
          law, rule or regulation to which either of them is a Party or is
          subject or by which they are respectively bound.

                                       22


3.   THE SHARES

     The Banff Shares:

     (a)  have been duly and validly authorized and issued and are fully paid
          and non-assessable; and

     (b)  are free and clear of any Encumbrance; and

     (c)  together with the other common shares in Banff are the only securities
          in the capital of Banff or convertible into capital of Banff.

     (d)  There are no agreements, arrangements or understandings in force or
          securities issued which call for the present or future issue of, or
          grant to any person the right to require the issue of any shares or
          other securities in Banff.

4.   NLS

     (a)  NLS is a wholly owned subsidiary of Newmont;

     (b)  NLS holds full legal and beneficial title to the Banff Shares and such
          shares constitute 85.3% of the issued shares of Banff;

     (c)  NLS and/or Newmont hold full legal and beneficial title to the
          Shareholder Loans; and

     (d)  NLS possesses all authority, ability and consents necessary to and
          shall upon Completion transfer the Banff Shares and the Shareholder
          Loans to the Purchaser free and clear from all Encumbrances subject
          only to receipt of the approvals referred to in clause 2.1 of this
          Agreement;

5.   THE COMPANY

     (a)  Banff is the sole legal and beneficial owner of record of 1,411 class
          B shares of KCCL (the "KCCL B Shares"), the KCCL B shares rank pari
          passu in all respects, including without limitation voting, dividends
          and liquidation, with all other classes of shares of KCCL, the KCCL B
          Shares represent 63% of all of the issued shares of all classes of
          KCCL, the KCCL B Shares are validly and legally issued and are fully
          paid and non-assessable and at Completion will not be subject to any
          Encumbrance.

     (b)  Neither Banff nor KCCL have any obligation or liability to pay any
          person a commission, agent's fee, finder's fee or spotter's fee as a
          result of the sale of the Banff Shares and Shareholder Loans
          contemplated in this Agreement.

6.   COMPLETION

                                       23


(a)  On Completion, NLS shall have complied with and satisfied all of its
     obligations to duly and validly repay, discharge, release and/or assign and
     transfer the Shareholder Loans and the security therefor pursuant to clause
     5.1 hereof.

(b)  Immediately prior to Completion there shall be no loans or amounts payable
     by Banff to any shareholder of Banff other than the Shareholders Loans due
     to NLS and no person has any ownership interest in the Shareholder Loans
     other than NLS.

                                   APPENDIX A
                             INDICATED BALANCE SHEET

KASESE COBALT COMPANY LIMITED       INDICATED BALANCE SHEET



                                                                  INDICATED
                                        KCCL         AGREED        BALANCE
GROUP ACCOUNT                        @30/06/2002   ADJUSTMENTS      SHEET                      ADJUSTMENT COMMENTS
- -------------                        -----------   ------------  ------------     -------------------------------------------------
                                                                      
ASSETS:

CURRENT ASSETS

Cash                                   2,111,335       (500,000)    1,611,335     500k returned to Newmont in July, wrongly sent to
                                                                                  Kasese in June for contractor settlement payment.
Inventory                              3,886,953                    3,886,953
Accounts Receivable                                                         -
  VAT Receivable - Uganda                793,142                      793,142
  Other                                  675,381              -       675,381
Prepaid Expenses                         578,885                      578,885
                                    ------------   ------------  ------------
                                       8,045,696       (500,000)    7,545,696
                                    ------------   ------------  ------------
LONG TERM ASSETS:
Due from related parties               1,224,000                    1,224,000
Fixed Assets                             350,000                      350,000
Other Assets
                                    ------------   ------------  ------------
                                       1,574,000              -     1,574,000
                                    ------------   ------------  ------------

                                    ------------   ------------  ------------
TOTAL ASSETS:                          9,619,696       (500,000)    9,119,696
                                    ------------   ------------  ------------

LIABILITIES:

CURRENT LIABILITIES:
Accounts Payable & Accruals
  Trade Payables & Accruals - Plant      341,589              -       341,589     Payables relate to construction works litigation.
Construction
Less indemnity from Newmont                            (341,589)     (341,589)    Offset by Newmont indemnity.
  Trade Payables & Accruals -            160,992              -       160,992     Payables relate to non-construction works.
Construction
  Trade Payables & Accruals -
Uganda
    Accruals - UEB Consumption           562,183       (562,183)            -     Assume UEB paid out prior to settlement
    Accruals - General
      Royalties (Limestone &           1,110,104     (1,110,104)            -     Assume Royalty paid out prior to settlement.
Cobalt)
      Other                              372,452                      372,452
    Other                              1,523,616       (610,048)      913,568     Reversal of Newmont charge backs.
  Retention Control Account                7,830                        7,830
                                    ------------   ------------  ------------
    TOTAL                              4,078,766     (2,623,924)    1,454,842
                                    ------------   ------------  ------------
Loans Payable - EIB                      408,000              -       408,000
Less Indemnity from Newmont                            (408,000)     (408,000)    Offset by Newmont indemnity
Loans Payable - Other                 11,268,832    (11,268,832)            -     Senior debt paid out.
Accruals Finance                         712,880       (712,880)            -     Senior debt paid out.
Due to KML
Due to Related Party                  17,705,362    (17,705,362)            -     Move to long term for ease of showing $6.1m WC
                                    ------------   ------------  ------------
                                      34,173,840    (32,718,998)    1,454,842
                                    ------------   ------------  ------------

                                    ------------   ------------  ------------
NET WORKING CAPITAL                  (26,128,144)   (32,218,998)    6,090,854
                                    ------------   ------------  ------------
NON CURRENT LIABILITIES:
Provision for Rehabilitation             409,336                      409,336
Due to related company                85,273,258     54,012,270   139,285,528
Long Term Debt                        22,542,861    (22,542,861)            -     Senior debt paid out
                                    ------------   ------------  ------------
                                     108,225,455     31,469,409   139,694,864
                                    ------------   ------------  ------------
EQUITY:
Share Capital                         44,000,040                   44,000,040
Contributed Surplus



                                       25




                                                                  INDICATED
                                        KCCL         AGREED        BALANCE
GROUP ACCOUNT                        @30/06/2002   ADJUSTMENTS      SHEET                      ADJUSTMENT COMMENTS
- -------------                        -----------   ------------  ------------     -------------------------------------------------
                                                                      
Current Years - Profit/(Loss)        (15,269,244)       749,589   (14,519,655)    Newmont indemnities (341,589+408,000)
Deficit                             (161,510,395)                (161,510,395)
                                    ------------   ------------  ------------
                                    (132,779,599)       749,589  (132,030,010)
                                    ------------   ------------  ------------
TOTAL LIABILITIES AND SHAREHOLDERS     9,619,696       (500,000)    9,119,696
EQUITY
                                    ------------   ------------  ------------


                                   APPENDIX B

                                ROYALTY AGREEMENT

                              DATED: AUGUST 7, 2002







                                 MFC BANCORP LTD



                                       and


                            NEWMONT AUSTRALIA LIMITED
                               ABN 80 009 295 765

                                       and

                             NEWMONT LASOURCE S.A.S




- -------------------------------------------------------------------------------
                                  ROYALTY DEED
- -------------------------------------------------------------------------------





                           (KELLY & CO. LAWYERS LOGO)

THIS DEED is made on August 7, 2002


BETWEEN:

MFC BANCORP LTD a company organized under the laws of the Yukon Territory,
Canada of Millennium Tower, Handelskai 92-94, CHA-1200 Vienna, Austria ("MFCB")


NEWMONT AUSTRALIA LIMITED (ABN 80 009 295 765) of 100 Hutt Street Adelaide SA
5000 ("NEWMONT")

AND:

NEWMONT LASOURCE S.A.S incorporated in accordance with the laws of France 42
Avenue de Le Grande Armee, 75017, Paris, France ("NLS'")

RECITALS:

In accordance with the terms and conditions of the Share Sale Agreement MFCB has
agreed to pay the Royalty and Interest to NLS on the terms of the Royalty
Agreement (as defined therein). This Deed sets out the terms and conditions in
respect thereto.


TERMS OF DEED:

1.   DEFINITIONS AND INTERPRETATION

1.1  DEFINITIONS

     In this Deed, unless the context otherwise requires:

     AFFILIATE with respect to any person means any other person directly or
     indirectly controlling, controlled by or under common control with that
     person. The term "control" as used in the preceding sentence means, with
     respect to a corporation, the right to exercise, directly or indirectly,
     50% or more of the voting rights attributable to the shares of the
     controlled corporation and, with respect to any person other than a
     corporation, the possession, directly or indirectly, of the power to direct
     or cause the direction of the management or policies of such person;

     BANFF means Banff Resources Ltd.;

     CAPITALIZED MAINTENANCE EXPENSES means all capital costs and expenses
     actually expended from Completion on or for operations, plant, equipment
     and maintenance at or directly related to the Kasese Cobalt Mine that are
     properly categorized as capital as determined by KCCL in accordance with
     GAAP;

     CASH COSTS means costs incurred in the mining, processing, transportation,
     storage and sale of minerals produced and/or processed at or from the
     Mining Operations comprised of:

     (i)  operating costs and expenses of the Mining Operations; and

                                      -2-                           ROYALTY DEED

- --------------------------------------------------------------------------------

     (ii)    interest and other fees and expenses on loans and other financial
             facilities directly and solely related to financing the Mining
             Operations other than on the loans and other financial facilities
             comprising the Shareholder Loans and the Senior Debt; and

     (iii)   marketing expenses directly related thereto; and

     (iv)    administrative expenses directly related thereto; and

     (v)     taxes, dues, duties, excises, tariffs and other levies imposed by
             the Government of Uganda in respect of the production, transport or
             export of the minerals from the Mining Operations; and

     (vi)    taxes, dues, duties, tariffs and other levies imposed in the
             country of the port of discharge on the import of the minerals to
             the extent only to which the same have been paid by KCCL; and

     (vii)   Capitalized Maintenance Expenses (to the extent that they are not
             already counted in one of the other paragraphs of this subclause);
             and

     (viii)  all transport, freight charges, insurance, port and handling
             charges; and

     (ix)    weighing, sampling, assaying, inspection, surveying, representation
             and selling agency costs and charges and storage costs and
             commissions associated with the sale of cobalt or other minerals
             and incurred after such cobalt or other minerals have left the
             production facilities at the Mining Operations; and

     (x)     Transition Fees means such fees pursuant to the terms of clause
             10.1 of the Share Sale Agreement.

     COMPLETION means completion of the transactions contemplated by the Share
     Sale Agreement;

     DEED means this Deed;

     DISPOSE means in respect of an ownership interest in the Mining Operations,
     to sell, assign, transfer, surrender or otherwise dispose (other than
     through an Encumbrance) of any interest in the Mining Operations with the
     result that the Percentage Interest of MFCB and its Affiliates is or will
     be reduced;

     ENCUMBRANCE includes any and all encumbrances including options, mortgages,
     pledges, charges, debentures, liens, assignments, hypothecations, security
     interests, title retentions, preferential rights, court orders, trust
     arrangements and any other legal or equitable interests or claims;

     EFFECTIVE DATE means 1 July 2002;

     FREE CASH FLOW has the meaning set out in clause 2.2(b);

     FISCAL YEAR means the period commencing on the Effective Date and ending on
     the next following 31 December and each period of 12 consecutive months
     thereafter;

                                      -3-                           ROYALTY DEED

- --------------------------------------------------------------------------------

     GAAP means generally accepted accounting principles of the United States of
     America consistently applied;

     INTEREST means the interest payable in accordance with clause 3.1 hereof;

     INTEREST THRESHOLD means in any Fiscal Year of KCCL, a positive gross
     profit margin of KCCL (calculated according to GAAP) for such year equal to
     or greater than 20%;

     KCCL means Kasese Cobalt Company Limited, a company incorporated under the
     laws of Uganda;

     KASESE COBALT MINE means the cobalt processing plant located at Kasese,
     Uganda owned and operated by KCCL for processing tailings from the former
     Kilembe mine;

     KILEMBE TAILINGS PROJECT means the tailings project owned directly or
     indirectly by Kilembe Mines Limited and in which Banff purports to have an
     option to acquire a 65% interest;

     MINING OPERATIONS means the Kasese Cobalt Mine and/or Kilembe Tailings
     Project;

     PARTY means a party to this Deed;

     PERCENTAGE INTEREST means the total percentage ownership interest of MFCB
     and its Affiliates in the Mining Operations (whether held directly or
     indirectly or alone or jointly with any other person);

     PRESCRIBED RATE means LIBOR plus 2 percentage points;

     ROYALTY means the royalty to be paid to Newmont and NLS pursuant to the
     terms and conditions set forth in this Deed;

     ROYALTY PERIOD means each of:

     (a)  the period commencing upon the Effective Date and ending on 30
          September, 2002; and

     (b)  every subsequent calendar quarter ending upon 31 December 31 March, 30
          June and 30 September

     ROYALTY STATEMENT means a statement prepared by MFCB in accordance with
     GAAP, setting out in reasonable detail all information and data necessary
     for the calculation of the Royalty payable in respect of a particular
     Royalty Period.

     SENIOR DEBT means any and all amounts, which as at Completion were due and
     owing by KCCL to the Senior Lenders including, without limitation, fees and
     expenses, which as at 30 June 2002 was comprised of those amounts set out
     in Appendix A;

     SENIOR LENDERS means International Finance Corporation, The Standard Bank
     of South Africa Limited acting through its Standard Corporate and Merchant
     Bank division, Societe De Promotion Et De Participation pour la Cooperation
     Economique ("Proparco") SA and European Investment Bank and Royal Bank of
     Scotland;

                                      -4-                           ROYALTY DEED

- --------------------------------------------------------------------------------

     SHAREHOLDER LOANS means any and all amounts due, owing or accruing from
     KCCL or their Affiliates to Newmont, NLS or their Affiliates as at
     Completion, which such amounts totalled $114,409,287 as at 30 June 2002,
     and were comprised of those amounts set out in Appendix A hereto; and

     SHARE SALE AGREEMENT means the agreement inter alia for the sale of
     55,210,984 shares in Banff entered into by NLS, MFCB and Newmont executed
     at or about the time of this Deed,

1.2  INTERPRETATION

     In this Deed, unless the context otherwise requires:

     (a)  a reference to any document, agreement or deed is a reference to that
          document, agreement or deed as varied, novated or replaced from time
          to time;

     (b)  the singular includes the plural and vice versa;

     (c)  a reference to a gender includes all other genders;

     (d)  the use of the word "including" or any similar terms does not limit
          what else might be included;

     (e)  a reference to a thing includes all or any part of it;

     (f)  where a word or phrase is defined, its other grammatical forms have a
          corresponding meaning;

     (g)  a reference to a person or entity includes a natural person, a
          partnership, corporation, trust, association, unincorporated body,
          authority or other entity;

     (h)  a term which purports to bind or benefit two or more persons binds or
          benefits them jointly and severally;

     (i)  a reference to a party includes that party's legal personal
          representatives, successors and permitted assigns;

     (j)  headings are inserted in this Deed for convenience only and are not
          intended to affect the interpretation of this Deed;

     (k)  a reference to a statute, ordinance, code or other law includes
          regulations and other instruments issued under it and consolidations,
          amendments, re-enactments or replacements of any of them;

     (l)  a reference to a clause, schedule, appendix or annexure is, except
          where otherwise indicated, a reference to a clause of, or schedule,
          appendix or annexure to this Deed;

     (m)  a reference to time is to local time in Vancouver, Canada;

     (n)  capitalized terms not defined herein shall have the meaning ascribed
          thereto in the Share Sale Agreement; and

                                      -5-                           ROYALTY DEED

- --------------------------------------------------------------------------------

     (o)  all monies payable by MFCB to Newmont and NLS under this document
          shall be payable in US dollars.

1.3  CAPACITY

     (a)  MFCB warrants and represents to Newmont and NLS that, as at the date
          of this document, MFCB has obtained all consents and approvals
          necessary to enter into this Deed.

     (b)  MFCB shall be responsible and liable for the actions and omissions of
          each of its Affiliates in relation to this Deed. MFCB enters into this
          Deed both in its own right and as agent of and trustee for all of its
          Affiliates.

2.   ROYALTY

2.1  GRANT OF ROYALTY

     For the consideration set out in the Share Sale Agreement and subject to
     clause 1.4, MFCB agrees, subject to the terms and conditions in this Deed,
     to pay the Royalty to NLS provided that nothing herein shall obligate or be
     deemed to obligate MFCB or any of its Affiliates (including after
     Completion Banff and/or KCCL) to conduct or maintain any level of operation
     at the Mining Operations.

2.2  CALCULATION OF ROYALTY

     (a)  The Royalty to be paid by MFCB shall be an amount equal to 10% of the
          Free Cash Flow up to an aggregate maximum of US$10,000.000 (the
          "Royalty Cap"), payable in accordance with clause 2.3. For greater
          certainty, if for any Royalty Period, there is no Free Cash Flow or
          the same is a negative amount, no Royalty shall be paid or payable by
          MFCB hereunder for such period.

     (b)  For the purposes of calculating the amount of the Royalty, "FREE CASH
          FLOW" means the actual proceeds of sale from all cobalt and other
          minerals produced from the Mining Operations received by KCCL or Banff
          during each Royalty Period less the Cash Costs incurred during that
          Royalty Period. For the purposes of this definition, in the case of
          any disposal of cobalt or other minerals by KCCL which is not at a
          sale on arms length commercial terms, KCCL will be taken to have
          received at the time at which that disposal took place proceeds of
          sale equal to the proceeds of sale which it would be reasonable to
          expect that KCCL would have received had that disposal been a sale at
          arms length commercial terms.

                                      -6-                           ROYALTY DEED

- --------------------------------------------------------------------------------

3.   PAYMENT OF INTEREST

3.1  CALCULATION OF INTEREST

     In addition to the payment of the Royalty, MFCB agrees, subject to clause
     1.4, to pay to NLS, in any Fiscal Year during which the Interest Threshold
     is met, Interest at the rate of 5% per annum (based upon a 365 day year)
     compounding semi-annually on so much of the amount of the Royalty Cap
     outstanding from time to time during such Fiscal Year. For greater clarity,
     if the Interest Threshold is not met, no Interest shall accrue or be paid
     or payable in respect of such Fiscal Year

3.2  PAYMENT OF INTEREST

     Interest shall be calculated and paid in clear funds and without deduction
     of any kind within 30 days after the end of each Fiscal Year.

4.   PAYMENT OF ROYALTY

4.1  DUE DATE FOR PAYMENT

     MFCB must pay the Royalty due to NLS for a particular Royalty Period within
     14 days after the end of that Royalty Period in clear funds and without
     deduction of any kind.

4.2  ROYALTY STATEMENT

     MFCB must submit a Royalty Statement to NLS at the same time as payment of
     the Royalty for each Royalty Period and, in any event, within 14 days after
     the end of the relevant Royalty Period.

4.3  FAILURE TO PAY ROYALTY

     If MFCB fails to pay a Royalty payment due to NLS by the date on which such
     payment is due and payable then, without prejudice to any other rights of
     NLS, MFCB shall pay to NLS (as the case may be) immediately upon receipt of
     written demand:

     (a)  interest at the Prescribed Rate on the unpaid Royalty payment
          calculated daily from such due date until such Royalty payment has
          been made in full; and

     (b)  all reasonable out of pocket costs and expenses (including reasonable
          legal costs and disbursements) attributable to MFCB's failure to pay
          the Royalty by its due date for payment.

5.   ACCOUNTS AND AUDIT

5.1  RECORDS

     MFCB must use all reasonable commercial efforts to cause KCCL to keep and
     maintain or ensure that there are kept and maintained accurate books of
     account, records, reports, invoices, statements, and other documents as are
     reasonably necessary to verify and substantiate the amount of the Royalty
     payable for each Royalty Period and the payment of Interest.

                                      -7-                           ROYALTY DEED

- --------------------------------------------------------------------------------

5.2  ACCESS TO RECORDS

     MFCB shall exercise its rights as a direct or indirect shareholder of KCCL
     and cause its nominees on the board of KCCL to vote to procure that one of
     Newmont or NLS and its representatives (including its auditors) have full
     access during regular business hours upon reasonable prior notice (but no
     more than twice in any 12 month period) to all of the books of account,
     records, reports, invoices, statements and other documents kept and
     maintained in accordance with Clause 5.1.

5.3  AUDIT

     NLS (but only once in any 12 month period) shall have the right at their
     own expense upon 30 days written notice to MFCB to audit at its own cost
     the calculation of the Royalty as referred to in each Royalty Statement. If
     an audit is undertaken and reveals any underpayment of the Royalty for any
     Royalty Period, then MFCB must pay the amount of the Royalty outstanding
     and interest on the amount outstanding at the Prescribed Rate upon written
     demand by NLS. If the amount of the Royalty outstanding is at least
     $100,000 in aggregate over four consecutive Royalty Periods then MFCB must
     also pay the reasonable out-of-pocket costs and expenses of NLS's audit. In
     the event that the audit determines the Royalty was correctly calculated,
     NLS shall pay to MFCB the reasonable out-of-pocket costs and expenses
     incurred by MFCB and KCCL in respect thereto.

5.4  DISPUTES

     If there is a dispute as to the amount of the Royalty due which cannot be
     resolved by the Parties within 20 days after delivery of written notice of
     such dispute, then each of the Parties shall prepare and submit a written
     statement setting forth the specific matters in dispute to the Vancouver,
     British Columbia office of PriceWaterhouse Coopers (the "CA Firm") along
     with any information, supporting documentation and other materials in
     respect of each Party's determination of such calculation and the specific
     matters in dispute, which firm shall render its opinion as to such matters
     in accordance with the terms of this Deed. Based on that opinion, the CA
     Firm shall then send to the Parties a written determination of the matters
     in dispute and a written determination of the Royalty due (the "Royalty
     Calculation") based upon such opinion, whereupon the Royalty Calculation
     shall be final and binding upon the Parties. If the CA Firm determines that
     the Royalty due for the relevant Royalty Period was underpaid by MFCB, then
     MFCB shall pay any costs incurred by the CA Firm and forthwith pay to NLS
     the amount of the underpayment. If the CA Firm determines that the Royalty
     due for the relevant Royalty Period was paid accurately or overpaid by
     MFCB, then Newmont or NLS shall pay any costs incurred by the CA Firm. In
     the event of any overpayment, the requisite adjustment between the Parties
     shall be made during the next Royalty Period to the Royalty payable in
     respect thereof and, in the event MFCB is unable to fully recover such
     overpayment during such Royalty Period, during the next succeeding Royalty
     Periods until such overpayment is fully recovered.

6.   ASSIGNMENT BY MFCB

6.1  RESTRICTION ON DISPOSAL OF INTEREST IN MINING OPERATIONS

     MFCB covenants and agrees that it will not Dispose and will procure each of
     its Affiliates to not Dispose of any interest in the Mining Operations
     except: (i) to an Affiliate of MFCB; or (ii) with the prior written consent
     of Newmont and NLS, which consent Newmont and NLS

                                      -8-                           ROYALTY DEED

- --------------------------------------------------------------------------------

     agree will not be unreasonably withheld or refused in the case of a
     Disposal of an interest in a Mining Operations to another person
     ("ASSIGNEE"), where the Assignee would be reasonably expected to be able to
     meet the obligations of MFCB under this Deed in respect of the Mining
     Operations.

6.2  ROYALTY DEED

     A Disposal by MFCB or any Affiliate of any interest in a Mining Operations
     will not be effective unless the Assignee or relevant Affiliate
     respectively enters into a royalty deed with Newmont and NLS in identical
     terms, mutatis mutandis, to this Deed in respect of the interest in the
     Mining Operations concerned or the Mining Operations which is Disposed of
     to the Assignee.

6.3  RELEASE

     Upon the due execution by MFCB and the Assignee or relevant Affiliate, and
     the delivery to Newmont and NLS of the duly executed royalty deed referred
     to in clause 6.2, MFCB shall be released and discharged from all
     obligations arising out of this Deed attributable to the interest in the
     Mining Operations so Disposed of or attributable to the Affiliate concerned
     and arising after the execution and delivery of that royalty deed. Unless
     and until the release in this clause becomes effective MFCB shall continue
     to be liable to pay the Royalty pursuant to the terms hereof as if the
     relevant Disposal had not occurred and this Deed shall be read and
     construed accordingly.

6.4  RESTRICTION ON ASSIGNING OTHER INTERESTS IN THIS DEED

     Except as provided in Clause 6, MFCB must not assign, transfer or otherwise
     dispose of its rights or obligations under this Deed.

7.   ASSIGNMENT BY NEWMONT OR NLS

     Newmont or NLS may assign their rights and obligations under this Deed by
     giving 14 days prior written notice to MFCB.

8.   CONFIDENTIALITY

     The Parties agree that the contents of this Deed and documents and
     information disclosed pursuant to this Deed shall be kept confidential and
     shall not be disclosed by the Parties otherwise than to each other or with
     the consent of all Parties in an agreed format or:

     (a)  to its shareholders, staff (including contract staff), professional
          advisers and financiers upon those persons undertaking to keep
          confidential any information so disclosed;

     (b)  to comply with any applicable law or the requirement of any regulatory
          body (including any relevant stock exchange or NASDAQ);

     (c)  for inclusion in any document inviting capital to be invested in that
          disclosing Party or a related body corporate;

     (d)  to the financial institutions to which the disclosing Party or any of
          its Affiliates owe

                                      -9-                           ROYALTY DEED

- --------------------------------------------------------------------------------

          continuing disclosure obligations as at the date of execution of this
          Deed;

     (e)  to a financial institution in connection with any loan sought to be
          arranged by the disclosing Party or any of its Affiliates;

     (f)  to a prospective purchaser of or subscriber for shares in the
          disclosing party or an Affiliate; and

     (g)  to a potential assignee of the disclosing Party or an Affiliate of the
          disclosing Party,

     provided that any disclosures pursuant to paragraphs (f) or (g) above shall
     only be made subject to the person to whom the disclosure is made
     covenanting and agreeing with the disclosing party in a form enforceable by
     the disclosing Party and the other Parties that the relevant information
     shall not be disclosed to any other person for any purposes whatsoever.

9.   NO INTEREST IN MINING OPERATIONS

     This Deed does not confer upon Newmont or NLS, and Newmont and NLS will not
     claim, any legal or equitable interest in any Mining Operations.

10.  WAIVER

10.1 EFFECTIVENESS

     No waiver by any Party or any provision of this Deed is effective unless it
     is in writing executed by that Party and any waiver is effective only in
     the specific instance and for the specific purpose for which it was given.

10.2 FAILURE OR DELAY

     No failure or delay by any Party to exercise any right, power or remedy
     under this Deed or to insist on strict compliance by the other Party with
     any obligation under this Deed, and no custom or practice of the Parties at
     variance with the terms of this Deed, constitutes a waiver of any Party's
     right to demand exact compliance with this Deed.

11.  NOTICE

     The provisions of Appendix A apply to notices given under this document.

12.  FURTHER ASSURANCES

     Each party must do, sign, execute and deliver and must procure that each of
     its employees and agents does, signs, executes and delivers all deeds,
     documents, instruments and acts reasonably required of it or them by notice
     from another party effectively to carry out and give full effect to this
     Deed and the rights and obligations of the parties under it, both before
     and after Completion.

13.  RELATIONSHIP

     This Deed does not create any partnership, joint venture or agency
     relationship between the Parties. The Parties shall be treated as
     independent contractors.

                                      -10-                          ROYALTY DEED

- --------------------------------------------------------------------------------

14.  COSTS

     Each Party shall each bear its own costs and expenses in relation to the
     preparation and execution of this Deed.

15.  TERMINATION

     This Deed shall automatically terminate, and the grant of the Royalty and
     other obligations hereunder shall be cancelled upon the earlier of: (i) the
     date which is seven calendar months after payment by MFCB of Royalties in
     the aggregate amount of the Royalty Cap; (ii) the date of the permanent
     closure of the Kasese Cobalt Mine and (iii) December 31, 2025. Upon
     termination of this Deed, MFCB shall have no further obligations or
     liabilities under this Deed.

16.  SEVERANCE

     If any provision of this Deed is prohibited, invalid or unenforceable in
     any jurisdiction, that provision will, as to that jurisdiction be
     ineffective to the extent of the prohibition, invalidity or
     unenforceability without invalidating the remaining provisions of this Deed
     or affecting the validity or enforceability of that provision in any other
     jurisdiction.

17.  AMENDMENT

     This Deed may only be amended in writing signed by all the Parties and may
     not be amended in any other manner.

18.  COUNTERPARTS

     This Deed may be executed in any number of counterparts. All counterparts
     together will be taken to constitute one document and this Deed will come
     into effect on the last exchange of either original or facsimile
     counterparts.

19.  ENTIRE AGREEMENT

     While certain other agreements (including the Share Sale Agreement) contain
     provisions that relate to this Deed, this Deed contains the entire
     agreement of the Parties in relation to the Royalty. The terms of this Deed
     shall prevail over the provisions of any other agreement to the extent of
     any inconsistency in relation to the Royalty.

20.  GOVERNING LAW

     This Deed shall be governed exclusively by the laws of the Province of
     British Columbia, and the federal laws of Canada applicable therein without
     giving effect to any choice or conflict of law provision or rule (whether
     of the Province of British Columbia or any other jurisdiction) that would
     cause the application of the laws of any jurisdiction other than the laws
     of the Province of British Columbia, and the federal laws of Canada
     applicable therein, and the parties irrevocably submit to the non-exclusive
     jurisdiction of the Supreme Court of British Columbia, situate in
     Vancouver.

                                      -11-                          ROYALTY DEED

- --------------------------------------------------------------------------------


EXECUTED as a deed.

EXECUTED for and on behalf of MFC  )
BANCORP LIMITED by:                )
                                   )

                                 Signature
- ----------------------------                        ---------------------------

                                 Print Name
- ----------------------------                        ---------------------------

                                 Director/Secretary
- ----------------------------                        ---------------------------

EXECUTED for and on behalf of     )
NEWMONT AUSTRALIA LIMITED         )
by:                               )

                                 Signature
- ----------------------------                        ---------------------------

                                 Print Name
- ----------------------------                        ---------------------------

                                 Director/Secretary
- ----------------------------                        ---------------------------

                                       OR

Signed by Charles Main as Attorney for      )  NEWMONT AUSTRALIA LIMITED by its
NEWMONT AUSTRALIA LIMITED who               )  Attorney
certifies that he has not had notice of
revocation of his appointment as Attorney in
the presence of                                --------------------------------
                                               Power of Attorney


- -----------------------------
Witness


- -----------------------------
Full Name of Witness

                                      -12-                          ROYALTY DEED

- --------------------------------------------------------------------------------


EXECUTED for and on behalf of   )
NEWMONT LASOURCE S.A.S. by:     )
                                )

                                 Signature
- ----------------------------                        ---------------------------

                                 Print Name
- ----------------------------                        ---------------------------

                                 Director/Secretary
- ----------------------------                        ---------------------------

                                       OR


Signed by Charles Main as Attorney for     )    NEWMONT LASOURCE S.A.S. by its
NEWMONT LASOURCE S.A.S. who                )    Attorney
certifies that he has not had notice of
revocation of his appointment as Attorney
in the presence of                              -------------------------------
                                                Power of Attorney

- ---------------------------------
Witness


- ---------------------------------
Full Name of Witness

                                   APPENDIX A

                                     NOTICES

1.   DELIVERY

     A Notice must be in writing and delivered on a Business Day, sent by
     prepaid mail (airmail if overseas) or by facsimile to the address or
     facsimile number of the recipient party set out in paragraph 3 or to such
     other address or facsimile number as that party may from time to time
     notify the other parties for the purposes of this schedule.

2.   RECEIPT

     A Notice given in accordance with paragraph 1 will be treated as having
     been received:

     (a)  if it is delivered before 5.00pm on a Business Day, at the time of
          delivery otherwise at 9.00 am on the next following Business Day;

     (b)  on the third Business Day (or seventh Business Day if sent overseas)
          after posting; and

     (c)  if sent by facsimile, upon production of a correct and complete
          transmission report by the machine from which the facsimile was sent
          which indicates that the facsimile was sent in its entirety to the
          facsimile number of the recipient notified for the purposes of this
          paragraph (but if the communication is not completed by 5.00pm on a
          Business Day, at 9.00 am on the next following Business Day).

3.   ADDRESSES FOR NOTICES

     For the purposes of this schedule, the address and facsimile details of
     each party are as follows:

     NEWMONT

     Attention:     Company Secretary

     Address:       100 Hut Street Adelaide South Australia 5000

     Facsimile:     +618 8303 1900

     NLS

     Attention:     Managing Director

     Address:       42 Avenue de Le Grande Armee, 75017, Paris, France

     Facsimile:     +331 56 68 06 66

     MFCB

     Attention:     President:

     Address:       c/o 1000 Cathedral Place, 925 West Georgia Street,
                    Vancouver, B.C. V6C 3L2

     Facsimile:     +604-669-8803

                                   APPENDIX A

                        SENIOR DEBT AND SHAREHOLDER LOANS


SUMMARY OF KASESE SENIOR DEBT AND SHAREHOLDER LOANS
AS AT 30 JUNE 2002



BORROWED BY                    BORROWED FROM       CURRENCY        AMOUNT
- -----------                  ----------------      --------     -----------
                                                       
SENIOR DEBT - GUARANTEED
- ------------------------

KCCL                                      IFC         US$         8,000,000
KCCL                                 Proparco         US$         8,400,000
KCCL                                      EIB         US$         6,502,600
KCCL                                     SCMB         US$        10,909,091
Interest & Finance Charges                            US$           712,880
                                                    -----       -----------
Total                                                 US$        34,524,571
                                                    -----       -----------
SENIOR DEBT - OTHER
- -------------------

KCCL                                      EIB       Euros           480,000
                                                    -----       -----------
SHAREHOLDER LOANS
- -----------------

KCCL                         Newmont LaSource         US$       102,978,620
                                                    -----       -----------
Total Shareholder Loans                               US$       102,978,620
                                                    -----       -----------



SUMMARY OF BANFF SHAREHOLDER LOANS
AS AT 30 JUNE 2002



BORROWED BY                BORROWED FROM       CURRENCY      AMOUNT
- -----------               ----------------     --------    ----------
                                                  
Banff                     Newmont LaSource        US$      11,430,667
                                                  ---      ----------
Total Shareholder Loans                           US$      11,430,667
                                                  ---      ----------


                                       24


THIS SHARE SALE AGREEMENT

EXECUTED AS AN AGREEMENT

Signed by CHARLES MAIN as Attorney for         NEWMONT AUSTRALIA LIMITED by its
NEWMONT AUSTRALIA LIMITED who                  Attorney
certifies that he has not had notice of
revocation of his appointment as Attorney in   /s/ Charles B. Main
the presence of                                --------------------------------
                                               Power of Attorney
/s/ Joseph P. Giuffre
- ---------------------------------
Witness

Joseph P. Giuffre
- ---------------------------------
Full Name of Witness



Signed by CHARLES MAIN as Attorney for          NEWMONT LA SOURCE SAS by its
NEWMONT LA SOURCE SAS who certifies             Attorney
that he has not had notice of revocation of
his appointment as Attorney in the presence     /s/ Charles B. Main
of                                              -------------------------------
                                                Power of Attorney

/s/ Joseph P. Giuffre
- ---------------------------------
Witness

Joseph P. Giuffre
- ---------------------------------
Full Name of Witness


Executed for and on behalf of MFC
Bancorp Ltd. by:
- --------------------------------------------------------------------------------


/s/ James M. Carter
- ---------------------------------  Signature             -----------------------


James M. Carter
- ---------------------------------  Print Name            -----------------------


Vice-President
- ---------------------------------  Director or Secretary -----------------------

EX-4.28

                                                                   EXHIBIT 4.28





                              DATED: AUGUST 7, 2002








                                 MFC BANCORP LTD



                                       and


                            NEWMONT AUSTRALIA LIMITED
                               ABN 80 009 295 765

                                       and

                             NEWMONT LASOURCE S.A.S
- -------------------------------------------------------------------------------
                                  ROYALTY DEED
- -------------------------------------------------------------------------------






                           [KELLY & CO. LAWYERS LOGO]










THIS DEED is made on August 7, 2002


BETWEEN:

MFC BANCORP LTD a company organized under the laws of the Yukon Territory,
Canada of Millennium Tower, Handelskai 92-94, CHA-1200 Vienna, Austria ("MFCB")


NEWMONT AUSTRALIA LIMITED (ABN 80 009 295 765) of 100 Hutt Street Adelaide SA
5000 ("NEWMONT")

AND:

NEWMONT LASOURCE S.A.S incorporated in accordance with the laws of France 42
Avenue de Le Grande Armee, 75017, Paris, France ("NLS'")

RECITALS:

In accordance with the terms and conditions of the Share Sale Agreement MFCB has
agreed to pay the Royalty and Interest to NLS on the terms of the Royalty
Agreement (as defined therein). This Deed sets out the terms and conditions in
respect thereto.


TERMS OF DEED:

1.       DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS

         In this Deed, unless the context otherwise requires:

         AFFILIATE with respect to any person means any other person directly or
         indirectly controlling, controlled by or under common control with that
         person. The term "control" as used in the preceding sentence means,
         with respect to a corporation, the right to exercise, directly or
         indirectly, 50% or more of the voting rights attributable to the shares
         of the controlled corporation and, with respect to any person other
         than a corporation, the possession, directly or indirectly, of the
         power to direct or cause the direction of the management or policies of
         such person;

         BANFF means Banff Resources Ltd.;

         CAPITALIZED MAINTENANCE EXPENSES means all capital costs and expenses
         actually expended from Completion on or for operations, plant,
         equipment and maintenance at or directly related to the Kasese Cobalt
         Mine that are properly categorized as capital as determined by KCCL in
         accordance with GAAP;

         CASH COSTS means costs incurred in the mining, processing,
         transportation, storage and sale of minerals produced and/or processed
         at or from the Mining Operations comprised of:

         (i)    operating costs and expenses of the Mining Operations; and

         (ii)   interest and other fees and expenses on loans and other
                financial facilities directly and solely related to financing
                the Mining Operations other than on the loans and other
                financial facilities comprising the Shareholder Loans and the
                Senior Debt; and

         (iii)  marketing expenses directly related thereto; and




                                      -2-                          ROYALTY DEED
- -------------------------------------------------------------------------------

         (iv)   administrative expenses directly related thereto; and

         (v)    taxes, dues, duties, excises, tariffs and other levies imposed
                by the Government of Uganda in respect of the production,
                transport or export of the minerals from the Mining Operations;
                and

         (vi)   taxes, dues, duties, tariffs and other levies imposed in the
                country of the port of discharge on the import of the minerals
                to the extent only to which the same have been paid by KCCL; and

         (vii)  Capitalized Maintenance Expenses (to the extent that they are
                not already counted in one of the other paragraphs of this
                subclause); and

         (viii) all transport, freight charges, insurance, port and handling
                charges; and

         (ix)   weighing, sampling, assaying, inspection, surveying,
                representation and selling agency costs and charges and storage
                costs and commissions associated with the sale of cobalt or
                other minerals and incurred after such cobalt or other minerals
                have left the production facilities at the Mining Operations;
                and

         (x)    Transition Fees means such fees pursuant to the terms of clause
                10.1 of the Share Sale Agreement.

         COMPLETION means completion of the transactions contemplated by the
         Share Sale Agreement;

         DEED means this Deed;

         DISPOSE means in respect of an ownership interest in the Mining
         Operations, to sell, assign, transfer, surrender or otherwise dispose
         (other than through an Encumbrance) of any interest in the Mining
         Operations with the result that the Percentage Interest of MFCB and its
         Affiliates is or will be reduced;

         ENCUMBRANCE includes any and all encumbrances including options,
         mortgages, pledges, charges, debentures, liens, assignments,
         hypothecations, security interests, title retentions, preferential
         rights, court orders, trust arrangements and any other legal or
         equitable interests or claims;

         EFFECTIVE DATE means 1 July 2002;

         FREE CASH FLOW has the meaning set out in clause 2.2(b);

         FISCAL YEAR means the period commencing on the Effective Date and
         ending on the next following 31 December and each period of 12
         consecutive months thereafter;

         GAAP means generally accepted accounting principles of the United
         States of America consistently applied;

         INTEREST means the interest payable in accordance with clause 3.1
         hereof;

         INTEREST THRESHOLD means in any Fiscal Year of KCCL, a positive gross
         profit margin of KCCL (calculated according to GAAP) for such year
         equal to or greater than 20%;


                                      -3-                          ROYALTY DEED
- -------------------------------------------------------------------------------

         KCCL means Kasese Cobalt Company Limited, a company incorporated under
         the laws of Uganda;

         KASESE COBALT MINE means the cobalt processing plant located at Kasese,
         Uganda owned and operated by KCCL for processing tailings from the
         former Kilembe mine;

         KILEMBE TAILINGS PROJECT means the tailings project owned directly or
         indirectly by Kilembe Mines Limited and in which Banff purports to have
         an option to acquire a 65% interest;

         MINING OPERATIONS means the Kasese Cobalt Mine and/or Kilembe Tailings
         Project;

         PARTY means a party to this Deed;

         PERCENTAGE INTEREST means the total percentage ownership interest of
         MFCB and its Affiliates in the Mining Operations (whether held directly
         or indirectly or alone or jointly with any other person);

         PRESCRIBED RATE means LIBOR plus 2 percentage points;

         ROYALTY means the royalty to be paid to Newmont and NLS pursuant to the
         terms and conditions set forth in this Deed;

         ROYALTY PERIOD means each of:


         (a)    the period commencing upon the Effective Date and ending on 30
                September, 2002; and

         (b)    every subsequent calendar quarter ending upon 31 December 31
                March, 30 June and 30 September

         ROYALTY STATEMENT means a statement prepared by MFCB in accordance with
         GAAP, setting out in reasonable detail all information and data
         necessary for the calculation of the Royalty payable in respect of a
         particular Royalty Period.

         SENIOR DEBT means any and all amounts, which as at Completion were due
         and owing by KCCL to the Senior Lenders including, without limitation,
         fees and expenses, which as at 30 June 2002 was comprised of those
         amounts set out in Appendix A;

         SENIOR LENDERS means International Finance Corporation, The Standard
         Bank of South Africa Limited acting through its Standard Corporate and
         Merchant Bank division, Societe De Promotion Et De Participation pour
         la Cooperation Economique ("Proparco") SA and European Investment Bank
         and Royal Bank of Scotland;

         SHAREHOLDER LOANS means any and all amounts due, owing or accruing from
         KCCL or their Affiliates to Newmont, NLS or their Affiliates as at
         Completion, which such amounts totalled $114,409,287 as at 30 June
         2002, and were comprised of those amounts set out in Appendix A hereto;
         and

         SHARE SALE AGREEMENT means the agreement inter alia for the sale of
         55,210,984 shares in Banff entered into by NLS, MFCB and Newmont
         executed at or about the time of this Deed,


                                      -4-                          ROYALTY DEED
- -------------------------------------------------------------------------------

1.2      INTERPRETATION

         In this Deed, unless the context otherwise requires:

         (a)    a reference to any document, agreement or deed is a reference to
                that document, agreement or deed as varied, novated or replaced
                from time to time;

         (b)    the singular includes the plural and vice versa;

         (c)    a reference to a gender includes all other genders;

         (d)    the use of the word "including" or any similar terms does not
                limit what else might be included;

         (e)    a reference to a thing includes all or any part of it;

         (f)    where a word or phrase is defined, its other grammatical forms
                have a corresponding meaning;

         (g)    a reference to a person or entity includes a natural person, a
                partnership, corporation, trust, association, unincorporated
                body, authority or other entity;

         (h)    a term which purports to bind or benefit two or more persons
                binds or benefits them jointly and severally;

         (i)    a reference to a party includes that party's legal personal
                representatives, successors and permitted assigns;

         (j)    headings are inserted in this Deed for convenience only and are
                not intended to affect the interpretation of this Deed;

         (k)    a reference to a statute, ordinance, code or other law includes
                regulations and other instruments issued under it and
                consolidations, amendments, re-enactments or replacements of any
                of them;

         (l)    a reference to a clause, schedule, appendix or annexure is,
                except where otherwise indicated, a reference to a clause of, or
                schedule, appendix or annexure to this Deed;

         (m)    a reference to time is to local time in Vancouver, Canada;

         (n)    capitalized terms not defined herein shall have the meaning
                ascribed thereto in the Share Sale Agreement; and

         (o)    all monies payable by MFCB to Newmont and NLS under this
                document shall be payable in US dollars.


                                      -5-                          ROYALTY DEED
- -------------------------------------------------------------------------------

1.3      CAPACITY

         (a)    MFCB warrants and represents to Newmont and NLS that, as at the
                date of this document, MFCB has obtained all consents and
                approvals necessary to enter into this Deed.

         (b)    MFCB shall be responsible and liable for the actions and
                omissions of each of its Affiliates in relation to this Deed.
                MFCB enters into this Deed both in its own right and as agent of
                and trustee for all of its Affiliates.

2.       ROYALTY

2.1      GRANT OF ROYALTY

         For the consideration set out in the Share Sale Agreement and subject
         to clause 1.4, MFCB agrees, subject to the terms and conditions in this
         Deed, to pay the Royalty to NLS provided that nothing herein shall
         obligate or be deemed to obligate MFCB or any of its Affiliates
         (including after Completion Banff and/or KCCL) to conduct or maintain
         any level of operation at the Mining Operations.

2.2      CALCULATION OF ROYALTY

         (a)    The Royalty to be paid by MFCB shall be an amount equal to 10%
                of the Free Cash Flow up to an aggregate maximum of
                US$10,000.000 (the "Royalty Cap"), payable in accordance with
                clause 2.3. For greater certainty, if for any Royalty Period,
                there is no Free Cash Flow or the same is a negative amount, no
                Royalty shall be paid or payable by MFCB hereunder for such
                period.

         (b)    For the purposes of calculating the amount of the Royalty, "FREE
                CASH FLOW" means the actual proceeds of sale from all cobalt and
                other minerals produced from the Mining Operations received by
                KCCL or Banff during each Royalty Period less the Cash Costs
                incurred during that Royalty Period. For the purposes of this
                definition, in the case of any disposal of cobalt or other
                minerals by KCCL which is not at a sale on arms length
                commercial terms, KCCL will be taken to have received at the
                time at which that disposal took place proceeds of sale equal to
                the proceeds of sale which it would be reasonable to expect that
                KCCL would have received had that disposal been a sale at arms
                length commercial terms.

3.       PAYMENT OF INTEREST

3.1      CALCULATION OF INTEREST

         In addition to the payment of the Royalty, MFCB agrees, subject to
         clause 1.4, to pay to NLS, in any Fiscal Year during which the Interest
         Threshold is met, Interest at the rate of 5% per annum (based upon a
         365 day year) compounding semi-annually on so much of the amount of the
         Royalty Cap outstanding from time to time during such Fiscal Year. For
         greater clarity, if the Interest Threshold is not met, no Interest
         shall accrue or be paid or payable in respect of such Fiscal Year

3.2      PAYMENT OF INTEREST

         Interest shall be calculated and paid in clear funds and without
         deduction of any kind within 30 days after the end of each Fiscal Year.


                                      -6-                          ROYALTY DEED
- -------------------------------------------------------------------------------

4.       PAYMENT OF ROYALTY

4.1      DUE DATE FOR PAYMENT

         MFCB must pay the Royalty due to NLS for a particular Royalty Period
         within 14 days after the end of that Royalty Period in clear funds and
         without deduction of any kind.

4.2      ROYALTY STATEMENT

         MFCB must submit a Royalty Statement to NLS at the same time as payment
         of the Royalty for each Royalty Period and, in any event, within 14
         days after the end of the relevant Royalty Period.

4.3      FAILURE TO PAY ROYALTY

         If MFCB fails to pay a Royalty payment due to NLS by the date on which
         such payment is due and payable then, without prejudice to any other
         rights of NLS, MFCB shall pay to NLS (as the case may be) immediately
         upon receipt of written demand:

         (a)    interest at the Prescribed Rate on the unpaid Royalty payment
                calculated daily from such due date until such Royalty payment
                has been made in full; and

         (b)    all reasonable out of pocket costs and expenses (including
                reasonable legal costs and disbursements) attributable to MFCB's
                failure to pay the Royalty by its due date for payment.

5.       ACCOUNTS AND AUDIT

5.1      RECORDS

         MFCB must use all reasonable commercial efforts to cause KCCL to keep
         and maintain or ensure that there are kept and maintained accurate
         books of account, records, reports, invoices, statements, and other
         documents as are reasonably necessary to verify and substantiate the
         amount of the Royalty payable for each Royalty Period and the payment
         of Interest.

5.2      ACCESS TO RECORDS

         MFCB shall exercise its rights as a direct or indirect shareholder of
         KCCL and cause its nominees on the board of KCCL to vote to procure
         that one of Newmont or NLS and its representatives (including its
         auditors) have full access during regular business hours upon
         reasonable prior notice (but no more than twice in any 12 month period)
         to all of the books of account, records, reports, invoices, statements
         and other documents kept and maintained in accordance with Clause 5.1.

5.3      AUDIT

         NLS (but only once in any 12 month period) shall have the right at
         their own expense upon 30 days written notice to MFCB to audit at its
         own cost the calculation of the Royalty as referred to in each Royalty
         Statement. If an audit is undertaken and reveals any underpayment of
         the Royalty for any Royalty Period, then MFCB must pay the amount of
         the Royalty outstanding and interest on the amount outstanding at the
         Prescribed Rate upon written demand by NLS. If the amount of the
         Royalty outstanding is at least $100,000 in aggregate over four
         consecutive Royalty Periods then MFCB must also pay the


                                      -7-                          ROYALTY DEED
- -------------------------------------------------------------------------------

         reasonable out-of-pocket costs and expenses of NLS's audit. In
         the event that the audit determines the Royalty was correctly
         calculated, NLS shall pay to MFCB the reasonable out-of-pocket
         costs and expenses incurred by MFCB and KCCL in respect thereto.

5.4      DISPUTES

         If there is a dispute as to the amount of the Royalty due which cannot
         be resolved by the Parties within 20 days after delivery of written
         notice of such dispute, then each of the Parties shall prepare and
         submit a written statement setting forth the specific matters in
         dispute to the Vancouver, British Columbia office of PriceWaterhouse
         Coopers (the "CA Firm") along with any information, supporting
         documentation and other materials in respect of each Party's
         determination of such calculation and the specific matters in dispute,
         which firm shall render its opinion as to such matters in accordance
         with the terms of this Deed. Based on that opinion, the CA Firm shall
         then send to the Parties a written determination of the matters in
         dispute and a written determination of the Royalty due (the "Royalty
         Calculation") based upon such opinion, whereupon the Royalty
         Calculation shall be final and binding upon the Parties. If the CA Firm
         determines that the Royalty due for the relevant Royalty Period was
         underpaid by MFCB, then MFCB shall pay any costs incurred by the CA
         Firm and forthwith pay to NLS the amount of the underpayment. If the CA
         Firm determines that the Royalty due for the relevant Royalty Period
         was paid accurately or overpaid by MFCB, then Newmont or NLS shall pay
         any costs incurred by the CA Firm. In the event of any overpayment, the
         requisite adjustment between the Parties shall be made during the next
         Royalty Period to the Royalty payable in respect thereof and, in the
         event MFCB is unable to fully recover such overpayment during such
         Royalty Period, during the next succeeding Royalty Periods until such
         overpayment is fully recovered.

6.       ASSIGNMENT BY MFCB

6.1      RESTRICTION ON DISPOSAL OF INTEREST IN MINING OPERATIONS

         MFCB covenants and agrees that it will not Dispose and will procure
         each of its Affiliates to not Dispose of any interest in the Mining
         Operations except: (i) to an Affiliate of MFCB; or (ii) with the prior
         written consent of Newmont and NLS, which consent Newmont and NLS agree
         will not be unreasonably withheld or refused in the case of a Disposal
         of an interest in a Mining Operations to another person ("ASSIGNEE"),
         where the Assignee would be reasonably expected to be able to meet the
         obligations of MFCB under this Deed in respect of the Mining
         Operations.

6.2      ROYALTY DEED

         A Disposal by MFCB or any Affiliate of any interest in a Mining
         Operations will not be effective unless the Assignee or relevant
         Affiliate respectively enters into a royalty deed with Newmont and NLS
         in identical terms, mutatis mutandis, to this Deed in respect of the
         interest in the Mining Operations concerned or the Mining Operations
         which is Disposed of to the Assignee.

6.3      RELEASE

         Upon the due execution by MFCB and the Assignee or relevant Affiliate,
         and the delivery to Newmont and NLS of the duly executed royalty deed
         referred to in clause 6.2, MFCB shall be released and discharged from
         all obligations arising out of this Deed attributable to the interest
         in the Mining Operations so Disposed of or attributable to the
         Affiliate concerned and arising after the execution and delivery of
         that royalty deed. Unless and until the release in this clause becomes
         effective MFCB shall continue to be liable to pay the


                                      -8-                          ROYALTY DEED
- -------------------------------------------------------------------------------

         Royalty pursuant to the terms hereof as if the relevant Disposal had
         not occurred and this Deed shall be read and construed accordingly.

6.4      RESTRICTION ON ASSIGNING OTHER INTERESTS IN THIS DEED

         Except as provided in Clause 6, MFCB must not assign, transfer or
         otherwise dispose of its rights or obligations under this Deed.

7.       ASSIGNMENT BY NEWMONT OR NLS

         Newmont or NLS may assign their rights and obligations under this Deed
         by giving 14 days prior written notice to MFCB.

8.       CONFIDENTIALITY

         The Parties agree that the contents of this Deed and documents and
         information disclosed pursuant to this Deed shall be kept confidential
         and shall not be disclosed by the Parties otherwise than to each other
         or with the consent of all Parties in an agreed format or:

         (a)    to its shareholders, staff (including contract staff),
                professional advisers and financiers upon those persons
                undertaking to keep confidential any information so disclosed;

         (b)    to comply with any applicable law or the requirement of any
                regulatory body (including any relevant stock exchange or
                NASDAQ);

         (c)    for inclusion in any document inviting capital to be invested in
                that disclosing Party or a related body corporate;

         (d)    to the financial institutions to which the disclosing Party or
                any of its Affiliates owe continuing disclosure obligations as
                at the date of execution of this Deed;

         (e)    to a financial institution in connection with any loan sought to
                be arranged by the disclosing Party or any of its Affiliates;

         (f)    to a prospective purchaser of or subscriber for shares in the
                disclosing party or an Affiliate; and

         (g)    to a potential assignee of the disclosing Party or an Affiliate
                of the disclosing Party,

         provided that any disclosures pursuant to paragraphs (f) or (g) above
         shall only be made subject to the person to whom the disclosure is made
         covenanting and agreeing with the disclosing party in a form
         enforceable by the disclosing Party and the other Parties that the
         relevant information shall not be disclosed to any other person for any
         purposes whatsoever.

9.       NO INTEREST IN MINING OPERATIONS

         This Deed does not confer upon Newmont or NLS, and Newmont and NLS will
         not claim, any legal or equitable interest in any Mining Operations.


                                      -9-                          ROYALTY DEED
- -------------------------------------------------------------------------------

10.      WAIVER

10.1     EFFECTIVENESS

         No waiver by any Party or any provision of this Deed is effective
         unless it is in writing executed by that Party and any waiver is
         effective only in the specific instance and for the specific purpose
         for which it was given.

10.2     FAILURE OR DELAY

         No failure or delay by any Party to exercise any right, power or remedy
         under this Deed or to insist on strict compliance by the other Party
         with any obligation under this Deed, and no custom or practice of the
         Parties at variance with the terms of this Deed, constitutes a waiver
         of any Party's right to demand exact compliance with this Deed.

11.      NOTICE

         The provisions of Appendix A apply to notices given under this
         document.

12.      FURTHER ASSURANCES

         Each party must do, sign, execute and deliver and must procure that
         each of its employees and agents does, signs, executes and delivers all
         deeds, documents, instruments and acts reasonably required of it or
         them by notice from another party effectively to carry out and give
         full effect to this Deed and the rights and obligations of the parties
         under it, both before and after Completion.

13.      RELATIONSHIP

         This Deed does not create any partnership, joint venture or agency
         relationship between the Parties. The Parties shall be treated as
         independent contractors.

14.      COSTS

         Each Party shall each bear its own costs and expenses in relation to
         the preparation and execution of this Deed.

15.      TERMINATION

         This Deed shall automatically terminate, and the grant of the Royalty
         and other obligations hereunder shall be cancelled upon the earlier of:
         (i) the date which is seven calendar months after payment by MFCB of
         Royalties in the aggregate amount of the Royalty Cap; (ii) the date of
         the permanent closure of the Kasese Cobalt Mine and (iii) December 31,
         2025. Upon termination of this Deed, MFCB shall have no further
         obligations or liabilities under this Deed.

16.      SEVERANCE

         If any provision of this Deed is prohibited, invalid or unenforceable
         in any jurisdiction, that provision will, as to that jurisdiction be
         ineffective to the extent of the prohibition, invalidity or
         unenforceability without invalidating the remaining provisions of this
         Deed or affecting the validity or enforceability of that provision in
         any other jurisdiction.


                                     -10-                          ROYALTY DEED
- -------------------------------------------------------------------------------

17.      AMENDMENT

         This Deed may only be amended in writing signed by all the Parties and
         may not be amended in any other manner.

18.      COUNTERPARTS

         This Deed may be executed in any number of counterparts. All
         counterparts together will be taken to constitute one document and this
         Deed will come into effect on the last exchange of either original or
         facsimile counterparts.

19.      ENTIRE AGREEMENT

         While certain other agreements (including the Share Sale Agreement)
         contain provisions that relate to this Deed, this Deed contains the
         entire agreement of the Parties in relation to the Royalty. The terms
         of this Deed shall prevail over the provisions of any other agreement
         to the extent of any inconsistency in relation to the Royalty.

20.      GOVERNING LAW

         This Deed shall be governed exclusively by the laws of the Province of
         British Columbia, and the federal laws of Canada applicable therein
         without giving effect to any choice or conflict of law provision or
         rule (whether of the Province of British Columbia or any other
         jurisdiction) that would cause the application of the laws of any
         jurisdiction other than the laws of the Province of British Columbia,
         and the federal laws of Canada applicable therein, and the parties
         irrevocably submit to the non-exclusive jurisdiction of the Supreme
         Court of British Columbia, situate in Vancouver.





                                     -11-                          ROYALTY DEED
- -------------------------------------------------------------------------------



EXECUTED as a deed.

EXECUTED for and on behalf    )
OF MFC BANCORP LIMITED by:    )
                              )


                                Signature           /s/ James M. Carter
- ------------------------------                      ----------------------------

                                Print Name          James M. Carter
- ------------------------------                      ----------------------------

                                Director/Secretary  Vice-President
- ------------------------------                      --------------------------

EXECUTED for and on behalf of  )
NEWMONT AUSTRALIA LIMITED by:  )
                               )


                                Signature
- ------------------------------                      ----------------------------

                                Print Name
- ------------------------------                      ----------------------------

                                Director/Secretary
- ------------------------------                      --------------------------

                                      OR

Signed by Charles Main as Attorney )  NEWMONT AUSTRALIA LIMITED by its
for NEWMONT AUSTRALIA LIMITED who  )  Attorney
certifies that he has not had
notice of revocation of his           /s/ Charles B. Main
appointment as Attorney in the        ---------------------------------------
presence of                           Power of Attorney

/s/ Joseph P. Guiffre
- ---------------------------------
Witness

Joseph P. Guiffre
- ---------------------------------
Full Name of Witness



EXECUTED for and on behalf of )
NEWMONT LASOURCE S.A.S. by:   )
                              )

                                Signature
- ------------------------------                      ----------------------------

                                Print Name
- ------------------------------                      ----------------------------

                                Director/Secretary
- ------------------------------                      --------------------------


                                     -12-                          ROYALTY DEED
- -------------------------------------------------------------------------------
                                       OR

Signed by Charles Main as Attorney )    NEWMONT LASOURCE S.A.S. by its
for NEWMONT LASOURCE S.A.S. who    )    Attorney
certifies that he has not had
notice of revocation of his
appointment as Attorney in the          /s/ Charles B. Main
presence of                             -----------------------------------
                                        Power of Attorney

/s/ Joseph P. Guiffre
- ---------------------------------
Witness

Joseph P. Guiffre
- ---------------------------------
Full Name of Witness





                                   APPENDIX A

                                     NOTICES

1.       DELIVERY

         A Notice must be in writing and delivered on a Business Day, sent by
         prepaid mail (airmail if overseas) or by facsimile to the address or
         facsimile number of the recipient party set out in paragraph 3 or to
         such other address or facsimile number as that party may from time to
         time notify the other parties for the purposes of this schedule.

2.       RECEIPT

         A Notice given in accordance with paragraph 1 will be treated as having
         been received:

         (a)    if it is delivered before 5.00pm on a Business Day, at the time
                of delivery otherwise at 9.00 am on the next following Business
                Day;

         (b)    on the third Business Day (or seventh Business Day if sent
                overseas) after posting; and

         (c)    if sent by facsimile, upon production of a correct and complete
                transmission report by the machine from which the facsimile was
                sent which indicates that the facsimile was sent in its entirety
                to the facsimile number of the recipient notified for the
                purposes of this paragraph (but if the communication is not
                completed by 5.00pm on a Business Day, at 9.00 am on the next
                following Business Day).

3.       ADDRESSES FOR NOTICES

         For the purposes of this schedule, the address and facsimile details of
         each party are as follows:

         NEWMONT

         Attention:   Company Secretary

         Address:     100 Hut Street Adelaide South Australia 5000

         Facsimile:   +618 8303 1900

         NLS

         Attention:   Managing Director

         Address:     42 Avenue de Le Grande Armee, 75017, Paris, France

         Facsimile:   +331 56 68 06 66

         MFCB

         Attention:   President:

         Address:     c/o 1000 Cathedral Place, 925 West Georgia Street,
                      Vancouver, B.C.  V6C 3L2

         Facsimile:   +604-669-8803





                                   APPENDIX A

                        SENIOR DEBT AND SHAREHOLDER LOANS


SUMMARY OF KASESE SENIOR DEBT AND SHAREHOLDER LOANS
AS AT 30 JUNE 2002




BORROWED BY                       BORROWED FROM         CURRENCY     AMOUNT
- -----------                       -------------         --------   ----------
                                                          
SENIOR DEBT - GUARANTEED
- ------------------------

KCCL                               IFC                   US$        8,000,000
KCCL                               Proparco              US$        8,400,000
KCCL                               EIB                   US$        6,502,600
KCCL                               SCMB                  US$       10,909,091
Interest & Finance Charges                               US$          712,880
                                                                   ----------
Total                                                    US$       34,524,571
                                                                   ----------
SENIOR DEBT - OTHER
- -------------------

KCCL                               EIB                  Euros         480,000
                                                                   ----------

SHAREHOLDER LOANS
- -----------------

KCCL                               Newmont LaSource      US$      102,978,620
                                                                   ----------
Total Shareholder Loans                                  US$      102,978,620
                                                                   ----------


SUMMARY OF BANFF SHAREHOLDER LOANS
AS AT 30 JUNE 2002




BORROWED BY                       BORROWED FROM         CURRENCY     AMOUNT
- -----------                       -------------         --------   ----------
                                                          
Banff                              Newmont LaSource      US$       11,430,667
                                                                   ----------
Total Shareholder Loans                                  US$       11,430,667
                                                                   ----------

EX-4.29

                                                                    EXHIBIT 4.29


           THIS ARRANGEMENT AGREEMENT dated the 17th day of May, 2002,

BETWEEN:

                  TRIMBLE RESOURCES CORPORATION, a corporation
                  -----------------------------
                  organized under the laws of Canada

                  (the "Corporation")

AND:

                  MFC BANCORP LTD., a corporation organized under the laws
                  ----------------
                  of the Yukon Territory, Canada

                  ("MFC")

WHEREAS the Corporation and MFC intend to carry out certain transactions
contemplated in this Agreement by way of an arrangement between the Corporation
and its shareholders under the provisions of the Canada Business Corporations
Act pursuant to the terms of this Agreement.

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the respective covenants and agreements herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties hereto, the parties hereto covenant and
agree as follows:


                                    ARTICLE 1
                         DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS
         -----------

         In this Arrangement Agreement, including the recitals and the schedules
hereto, unless there is something in the subject matter or context inconsistent
therewith, the following words and terms shall have the following meanings:

(a)  "ARRANGEMENT" means the arrangement pursuant to the provisions of Section
     192 of the CBCA to be undertaken on the terms and conditions set forth in
     the Plan of Arrangement and any amendment or variation thereto made in
     accordance with Section 6 thereof;

(b)  "ARRANGEMENT AGREEMENT" or "AGREEMENT" means this agreement, including the
     schedules hereto, between the Corporation and MFC, as the same may be
     supplemented or amended from time to time;

(c)  "ARRANGEMENT RESOLUTION" means the special resolution approving the
     Arrangement and the transactions contemplated thereunder, to be approved at
     the Meeting by Trimble Shareholders;


                                       1



(d)  "BUSINESS DAY" means any day other than a Saturday, Sunday, a federal
     holiday in Canada or a day on which banks are not open for business in
     Vancouver, British Columbia;

(e)  "CAPITAL REDUCTION" means the reduction of the capital stock, equity
     component of convertible debentures and deficit accounts as maintained by
     the Corporation;

(f)  "CAPITAL REDUCTION RESOLUTION" means the special resolution to be presented
     to the Trimble Shareholders at the Meeting to approve the Capital
     Reduction;

(g)  "CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44,
     and the regulations made under that enactment, as amended;

(h)  "CHARTER DOCUMENTS" means the articles and by-laws or other constating
     documents of a corporation;

(i)  "CIRCULAR" means the management proxy circular of the Corporation to be
     sent to Trimble Shareholders in connection with the Meeting on or before
     May 28, 2002, which shall include the Valuation and Fairness Opinion and be
     substantially in the form as provided for in the Interim Order;

(j)  "CORPORATION" means Trimble Resources Corporation, a corporation continued
     pursuant to the laws of Canada;

(k)  "COURT" means the Supreme Court of British Columbia;

(l)  "DIRECTOR" means the Director appointed pursuant to section 260 of the
     CBCA;

(m)  "EFFECTIVE DATE" means the date on which the Final Order together with the
     Plan of Arrangement, and such other documents as are required to be filed
     under the CBCA to give effect to the Arrangement, have been accepted for
     filing by the Director under the CBCA giving effect to the Arrangement;

(n)  "FINAL ORDER" means the order of the Court approving the Arrangement;

(o)  "GAAP" means generally accepted accounting principles in effect in Canada,
     including the accounting recommendations published in the Handbook of the
     Canadian Institute of Chartered Accountants;

(p)  "INTERIM ORDER" means an order of the Court providing for, among other
     things, the calling and holding of the Meeting, as the same may be amended,
     supplemented or varied by the Court;

(q)  "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when used in
     connection with the Corporation or MFC, any change (including a decision to
     implement a change



                                       2



     made by the directors or senior management of the Corporation or MFC or any
     of their respective subsidiaries), effect, event, occurrence or change in
     state of facts that is, or would reasonably be expected to be, material and
     adverse to the business, operations, financial condition or results,
     assets, rights, liabilities or prospects of the Corporation or MFC and
     their respective subsidiaries taken as a whole, on a consolidated basis,
     other than any change, effect, event, occurrence or change in state of
     facts arising from the Arrangement and all transactions related to the
     Arrangement or contemplated by the Arrangement Agreement or relating to:
     (1) the economies of British Columbia, Canada or the United States or
     securities markets in general; (2) the oil and gas or financial services
     industries in general, and not specifically relating to MFC and its
     subsidiaries or the Corporation and its subsidiaries, respectively; or (3)
     GAAP;

(r)  "MEETING" means the special meeting of Trimble Shareholders, and any
     adjournment thereof, to be held to consider and, if deemed advisable,
     approve the Arrangement;

(s)  "MFC" means MFC Bancorp Ltd., a corporation organized under the laws of the
     Yukon Territory, Canada;

(t)  "MFC DISCLOSURE DOCUMENTS" means MFC's annual report on Form 20-F for the
     year ended December 31, 2001 including MFC's audited consolidated financial
     statements for the year ended December 31, 2001, MFC's management
     information circular dated May 10, 2001;

(u)  "MFC SHARES" means the outstanding common shares without par value in the
     capital of MFC to be issued pursuant to the Plan of Arrangement;

(v)  "NASDAQ" means the National Association of Securities Dealers Automated
     Quotation System;

(w)  "NOTICE OF DISSENT" means a notice given in respect of the dissent rights
     of Trimble Shareholders as contemplated in the Interim Order and as
     described in the Plan;

(x)  "PERSON" means an individual, a body corporate (wherever incorporated), an
     unincorporated association, syndicate or organization, partnership, trust,
     trustee, executor, administrator or other legal representative;

(y)  "PLAN OF ARRANGEMENT" or "PLAN" means the Plan of Arrangement attached as
     Schedule "A" hereto;

(z)  "TERMINATION DATE" has the meaning ascribed to such term in Section 6.5
     hereof;

(aa) "TRIMBLE DISCLOSURE DOCUMENTS" means the Corporation's audited consolidated
     financial statements for the year ended April 30, 2001 and unaudited
     consolidated financial statements for the nine months ended January 31,
     2002;

(bb) "TRIMBLE SHAREHOLDERS" means the registered holders at the relevant time of
     the Trimble Shares;


                                       3


(cc) "TRIMBLE SHARES" means the common shares without par value in the capital
     of the Corporation;

(dd) "TSX VENTURE EXCHANGE" means the TSX Venture Exchange; and

(ee) "VALUATION AND FAIRNESS OPINION" means the valuation and fairness opinion
     relating to the Arrangement prepared by Stephen W. Semeniuk, CFA.

1.2      CURRENCY
         --------

         Except as expressly indicated otherwise, all sums of money referred to
in this Agreement are expressed and shall be payable in lawful money of Canada.

1.3      INTERPRETATION NOT AFFECTED BY HEADINGS
         ---------------------------------------

         The division of this Arrangement Agreement into articles, sections,
subsections, paragraphs and sub-paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of the provisions of this Arrangement Agreement. The terms "this
Agreement", "hereof", "herein", "hereunder" and similar expressions refer to
this Arrangement Agreement and the schedules hereto as a whole and not to any
particular article, section, subsection, paragraph or sub-paragraph hereof and
include any agreement or instrument supplementary or ancillary hereto.

1.4      NUMBER AND GENDER
         -----------------

         Unless the context otherwise requires, words importing the singular
number only shall include the plural and vice versa and words importing the use
of either gender shall include both genders and neuter.

1.5      DATE FOR ANY ACTION
         -------------------

         In the event that any day on which any action is required to be taken
hereunder by any person is not a business day in the place where the action is
required to be taken, such action shall be required to be taken on the next
succeeding day which is a business day in such place.

1.6      TIME
         ----

         Time shall be of the essence in each matter or thing herein provided.
Unless otherwise indicated, all times expressed herein are local time,
Vancouver, British Columbia.

                                       4



1.7      SCHEDULES
         ---------

         The following is the Schedule to this Agreement, which forms an
integral part hereof:

         Schedule "A" -- Plan of Arrangement.


                                    ARTICLE 2
                                   ARRANGEMENT

2.1      ARRANGEMENT
         -----------

         Subject to the terms and conditions of this Agreement:

         (a)  As soon as reasonably practicable after the execution of this
              Agreement, and in any event, before May 28, 2002, the Corporation
              shall: (i) prepare jointly with MFC an application to the Court
              pursuant to Section 192 of the CBCA for an Interim Order on terms
              acceptable to both the Corporation and MFC, each acting
              reasonably, providing for, among other things, the calling and
              holding of the Meeting; and (ii) apply to the Court pursuant to
              Section 192 of the CBCA for the Interim Order;

         (b)  The Corporation shall call and hold the Meeting as soon as
              practicable after obtaining the Interim Order and, in any event,
              by no later than June 28, 2002;

         (c)  In connection with the Meeting, the Corporation shall: (i) in
              consultation with MFC, prepare the Circular and such other
              documents as may be necessary or desirable to permit the Trimble
              Shareholders to vote on whether to approve the Arrangement
              Resolution; (ii) jointly prepare with MFC such other documents as
              may be necessary or desirable to give effect to the Arrangement;
              and (iii) cause the Circular, including the Valuation and Fairness
              Opinion (which shall be included in the Circular), and such other
              documents as may be necessary or desirable to give effect to the
              Arrangement to be sent to each Trimble Shareholder as soon as
              reasonably practicable following receipt of the Interim Order and
              filed as required by the Interim Order and applicable law;

         (d)  If the Arrangement Resolution is approved at the Meeting as set
              out in the Interim Order (or any variation thereof), as soon as
              reasonably practicable thereafter, the Corporation shall take the
              necessary steps to submit the Arrangement to the Court and apply
              for the Final Order in such manner as the Court may direct and MFC
              and the Corporation may agree; and

                                       5


         (e)  If the Final Order is obtained, as soon as reasonably practicable
              thereafter and subject to the fulfillment or the waiver of each of
              the conditions set out herein, and completion of all steps
              required by the Plan of Arrangement to be completed prior to the
              Effective Date, the Corporation shall file a certified copy of the
              Final Order with the Plan of Arrangement, and such other documents
              as are required to be filed under the CBCA, with the Director to
              give effect to the Arrangement pursuant to Section 192 of the
              CBCA.

         As part of its application for the Interim Order and the Final Order,
the Corporation shall, prior to the hearing in relation to the Final Order,
advise the Court that MFC intends to rely on the exemption from the registration
requirements of the United States Securities Act of 1933 provided by Section
3(a)(10) of that enactment based on the Court's approval of the Arrangement.

2.2      CIRCULAR
         --------

         Each of the parties hereto shall, in a timely and expeditious manner,
furnish to the Corporation all such information regarding itself as may be
reasonably required to be included in the Circular. Each party shall ensure that
the information relating to it contained in the Circular does not contain any
material misrepresentation.

2.3      PUBLIC ANNOUNCEMENT
         -------------------

         (a)  Each party shall consult with the other party before issuing any
              news releases or otherwise making public statements with respect
              to this Agreement or the Arrangement and before making any filing
              with any governmental or regulatory agency or with any stock
              exchange relating to this Agreement or the Arrangement.

         (b)  Before releasing a news release, making any other public
              statement, making a public filing or making a filing with any
              governmental entity, stock exchange or securities quotation system
              with respect to this Agreement or the Arrangement, each party
              shall use all reasonable commercial efforts to allow the other
              party to review and comment on, and shall adopt the other party's
              reasonable comments on, the news release, other public statement
              or filing.


2.4      EFFECTIVE DATE OF ARRANGEMENT
         -----------------------------

         Subject to the terms and conditions of this Agreement and the Plan, the
Arrangement shall become effective on the Effective Date.


                                       6


                                    ARTICLE 3
                         REPRESENTATIONS AND WARRANTIES

3.1      REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
         -------------------------------------------------

         The Corporation hereby represents and warrants to and in favour of MFC
that:

         (a)  The Corporation was duly continued and is a valid and subsisting
              corporation under the provisions of the CBCA. The Corporation has
              all requisite corporate power and authority to carry on its
              business as now being carried on by it and to own or lease and
              operate its properties and assets and is duly licensed or
              otherwise qualified to carry on business in each jurisdiction in
              which a material amount of its business is conducted or wherein
              the character of the properties and assets now owned by it makes
              such qualification necessary;

         (b)  As of the date hereof, the authorized capital of the Corporation
              consists of 500,000,000 Trimble Shares of which, as at the date
              hereof, approximately 8,926,487 Trimble Shares are validly issued
              and outstanding as fully paid and non-assessable and 1,693,300
              Trimble Shares are reserved for issuance under the Corporation's
              stock option plan. As of the date hereof, no options to acquire
              Trimble Shares are outstanding. Except as set out herein and in
              the Trimble Disclosure Documents, there are no other options,
              warrants, conversions, privileges, calls or other rights,
              agreements, arrangements, commitments or obligations of the
              Corporation to issue or sell any shares of any capital stock of
              the Corporation or securities or obligations of any kind
              convertible into or exchangeable for any shares of capital stock
              of the Corporation or any other person, nor are there outstanding
              any stock appreciation rights, phantom equity or similar rights,
              agreements, arrangements, or commitments based upon the book
              value, income or any other attribute of the Corporation;

         (c)  Each of the Corporation's subsidiaries is a corporation or other
              business entity duly organized, validly existing and in good
              standing under the laws of its jurisdiction of incorporation or
              organization, except for such failure to be in good standing which
              would not, individually or in the aggregate, be materially
              adverse, and has all requisite corporate power and authority to
              carry on its business as now carried on by it and to own or lease
              and to operate its properties and assets and is duly licensed or
              otherwise qualified in each jurisdiction in which a material
              amount of its business is conducted or wherein the character of
              the properties and assets now owned by it make such qualification
              necessary;

         (d)  The Corporation has no outstanding agreements, subscriptions,
              warrants, options or commitments, nor has it granted any rights or
              privileges capable of becoming an agreement, subscription,
              warrant, option or commitment,


                                       7


              obligating it to issue any additional securities convertible into
              debt securities or evidence of indebtedness whatsoever except as
              otherwise disclosed in the Trimble Disclosure Documents;

         (e)  The Corporation has the requisite corporate power and authority to
              enter into this Agreement and to perform its obligations
              hereunder. The execution, delivery and performance of this
              Arrangement Agreement and the agreements, documents and
              transactions contemplated herein are within the corporate power
              and authority of the Corporation and have been duly authorized by
              all necessary corporate action by the Corporation and this
              Arrangement Agreement constitutes a valid and binding obligation
              of the Corporation, enforceable in accordance with its terms,
              subject to applicable bankruptcy, insolvency, fraudulent
              conveyance, reorganization or similar laws affecting the rights of
              creditors generally and subject to the general principles of
              equity;

         (f)  The audited consolidated financial statements of the Corporation
              for the financial year ended April 30, 2001 and the unaudited
              interim consolidated financial statements for the nine months
              ended January 31, 2002 present fairly the consolidated financial
              condition and results of operations of the Corporation for the
              respective periods indicated in such consolidated financial
              statements and have been prepared in accordance with GAAP;

         (g)  Since January 31, 2002, there has been no material adverse change
              in the business, operations, properties, assets or condition,
              financial or otherwise, of the Corporation, on a consolidated
              basis, from that shown in the unaudited interim consolidated
              financial statements of the Corporation for the nine month period
              ended January 31, 2002;

         (h)  The Trimble Disclosure Documents were, as of their respective
              dates, in compliance in all material respects with all applicable
              legislation and did not, when filed, contain any material
              misrepresentation;

         (i)  The Corporation is the beneficial owner of its properties and
              assets, with good and marketable title thereto free and clear of
              material encumbrances, except as otherwise disclosed in the
              Trimble Disclosure Documents;

         (j)  The Corporation does not have any liability or obligation
              including, without limitation, tax liabilities, whether accrued,
              absolute, contingent or otherwise, not reflected in the
              Corporation's audited consolidated financial statements for the
              financial year ended April 30, 2001 or the unaudited interim
              consolidated financial statements for the nine months ended
              January 31, 2002, except for liabilities and obligations incurred
              in the ordinary course of business since January 31, 2002, which
              liabilities and obligations are not materially adverse in the
              aggregate;

                                       8


         (k)  Except as otherwise disclosed in the Trimble Disclosure Documents
              or to MFC, there are no actions, suits, proceedings,
              investigations or outstanding claims or demands, whether or not
              purportedly on behalf of the Corporation or its subsidiaries,
              instituted, pending, or to the knowledge of the Corporation,
              threatened against or affecting the Corporation or its
              subsidiaries at law or in equity or before or by any governmental
              department, commission, board, bureau, agency or institution,
              domestic or foreign, or before any arbitrator, nor is there any
              judgment, order, decree or award of any court or other
              governmental authority having jurisdiction, obtained, pending, or
              to the knowledge of the Corporation, threatened against the
              Corporation or its subsidiaries, which could prevent or materially
              hinder the consummation of the Arrangement or the other
              transactions contemplated by this Agreement or which could result
              in a material adverse change in respect of the Corporation;

         (l)  The business of the Corporation is being conducted in all material
              respects in compliance with all applicable laws, regulations and
              ordinances of all authorities having jurisdiction; and

         (m)  The execution and delivery of this Arrangement Agreement, the
              consummation of the transactions contemplated hereby and the
              fulfilment of or compliance with the terms and provisions hereof
              do not or will not, nor will they with the giving of notice or the
              lapse of time or both: (i) violate any provision of any law or
              provisions of the Charter Documents of the Corporation; (ii)
              conflict with, result in a breach of, constitute default under, or
              accelerate or permit the acceleration of the performance required
              by any material agreement, covenant, undertaking, commitment,
              instrument, judgment, order, decree or award to which the
              Corporation or any subsidiaries of the Corporation is a party or
              by which any of them is bound or to which the property of any of
              them is subject, all as of the Effective Date; or (iii) result in
              the cancellation, suspension or material alteration in the terms
              of any material licence, permit or authority held by the
              Corporation or any subsidiaries of the Corporation or in the
              creation of any lien, charge, security interest or encumbrance
              upon any of the material assets of the Corporation or any
              subsidiaries of the Corporation under such material agreement,
              covenant, undertaking, commitment, instrument, judgment, order,
              decree or award or give to any other person any material interest
              or rights, including rights of purchase, termination, cancellation
              or acceleration under any such material agreement, covenant,
              undertaking, commitment, instrument, judgment, order, decree or
              award.

3.2     REPRESENTATIONS AND WARRANTIES OF MFC
        -------------------------------------

        MFC hereby represents and warrants to and in favour of the Corporation
that:

                                       9


         (a)  MFC is a valid and subsisting corporation under the laws of the
              jurisdiction of its organization and has all the requisite
              corporate power and authority to carry on its business as now
              being carried on by it and to own or lease and operate its
              properties and assets and to issue MFC Shares pursuant to the
              terms of the Plan of Arrangement, and is duly licensed or
              otherwise qualified to carry on business in each jurisdiction in
              which a material amount of its business is conducted or wherein
              the character of the properties and assets now owned by it makes
              such qualification necessary;

         (b)  Other than pursuant to the terms of this Agreement or as set out
              in the MFC Disclosure Documents, MFC has no outstanding
              agreements, subscriptions, warrants, options or commitments, nor
              has it granted any rights or privileges capable of becoming an
              agreement, subscription, warrant, option or commitment obligating
              MFC to issue MFC Shares;

         (c)  As of the date hereof, the authorized share capital of MFC
              consists of an unlimited number of common shares of which
              12,859,756 common shares are issued and outstanding and an
              unlimited number of class A preferred shares which may be issued
              in one or more series in respect of which the directors of MFC may
              fix the number of class A preferred shares which comprise each
              series and designation, and fix the rights, privileges,
              restrictions and conditions attached to each series. As of the
              date hereof, MFC has authorized 140,000 class A preferred shares,
              series 1, 140,000 class A preferred shares, series A, 100,000
              class A preferred shares, series 2 and 20,000 class A preferred
              shares, series 3 none of which are issued and outstanding;

         (d)  As of the date hereof, 2,762,000 MFC Shares are reserved for
              issuance under MFC's stock option plan and, as at the date hereof,
              888,000 options to acquire MFC Shares pursuant to MFC's stock
              option plan are outstanding;

         (e)  MFC has the requisite corporate power and authority to enter into
              this Agreement and perform its obligations hereunder. The
              execution, delivery and performance of this Agreement and the
              agreements, documents and transactions contemplated herein are
              within the corporate power and authority of MFC and have been duly
              authorized by all necessary corporate action, and this Agreement
              constitutes a valid and binding obligation of MFC, enforceable in
              accordance with its terms, subject to applicable bankruptcy,
              insolvency, fraudulent conveyance, reorganization or similar laws
              affecting the rights of creditors generally and subject to the
              general principles of equity;

         (f)  The audited consolidated financial statements of MFC for the
              financial year ended December 31, 2001 present fairly the
              consolidated financial condition and results of operations of MFC
              for the period indicated in such

                                       10


              consolidated financial statements and have been prepared in
              accordance with GAAP;

         (g)  Since December 31, 2001, there has been no material adverse change
              in the business, operations, properties, assets or condition,
              financial or otherwise, of MFC, on a consolidated basis, from that
              shown in the audited consolidated financial statements of MFC for
              the year ended December 31, 2001;

         (h)  The MFC Disclosure Documents were, as of their respective dates,
              in compliance in all material respects with all applicable
              legislation and did not, when filed, contain any material
              misrepresentations;

         (i)  MFC is the beneficial owner of its properties and assets, with
              good and marketable title thereto free and clear of material
              encumbrances, except as otherwise disclosed in the MFC Disclosure
              Documents;

         (j)  The MFC Shares issued pursuant to the terms of the Plan of
              Arrangement shall be duly and validly issued and constitute fully
              paid and non-assessable shares of MFC;

         (k)  Except as otherwise disclosed in the MFC Disclosure Documents or
              to the Corporation, there are no actions, suits, proceedings,
              investigations or outstanding claims or demands, whether or not
              purportedly on behalf of MFC or its subsidiaries, instituted,
              pending, or to the knowledge of MFC, threatened against or
              affecting MFC or its subsidiaries at law or in equity or before or
              by any governmental department, commission, board, bureau, agency
              or institution, domestic or foreign, or before any arbitrator, nor
              is there any judgment, order, decree or award of any court or
              other governmental authority having jurisdiction, obtained,
              pending, or to the knowledge of MFC, threatened against MFC or its
              subsidiaries which could prevent or materially hinder the
              consummation of the Arrangement or the other transactions
              contemplated by this Agreement or which could result in a material
              adverse change in respect of MFC;

         (l)  Each of the subsidiaries of MFC that carries on a material portion
              of the business of MFC or which owns a material portion of the
              assets of MFC on a consolidated basis is duly incorporated and is
              a valid and subsisting corporation under the laws of its
              jurisdiction of incorporation and has all requisite corporate
              power and authority to carry on its business as now carried on by
              it and to own or lease and to operate its properties and assets
              and is duly licensed or otherwise qualified in each jurisdiction
              in which a material amount of its business is conducted or wherein
              the character of the properties and assets now owned by it makes
              such qualification necessary;

                                       11


         (m)  The business of MFC and its subsidiaries is being conducted in all
              material respects in compliance with all applicable laws,
              regulations and ordinances of all authorities having jurisdiction;
              and

         (n)  The execution and delivery of this Arrangement Agreement, the
              consummation of the transactions contemplated hereby and the
              fulfillment of or compliance with the terms and provisions hereof
              do not or will not, nor will they with the giving of notice or the
              lapse of time or both: (i) violate any provision of any law or
              provisions of the Charter Documents of MFC; (ii) conflict with,
              result in a breach of, constitute default under, or accelerate or
              permit the acceleration of the performance required by any
              material agreement, covenant, undertaking, commitment, instrument,
              judgment, order, decree or award to which MFC or any subsidiaries
              of MFC is a party or by which any of them is bound or to which the
              property of any of them is subject, all as of the Effective Date;
              or (iii) result in the cancellation, suspension or material
              alteration in the terms of any material licence, permit or
              authority held by MFC or any subsidiaries of MFC or in the
              creation of any lien, charge, security interest or encumbrance
              upon any of the material assets of MFC or any subsidiaries of MFC
              under such material agreement, covenant, undertaking, commitment,
              instrument, judgment, order, decree or award or give to any other
              person any material interest or rights, including rights of
              purchase, termination, cancellation or acceleration under any such
              material agreement, covenant, undertaking, commitment, instrument,
              judgment, order, decree or award.


                                    ARTICLE 4
                                    COVENANTS

4.1     COVENANTS OF THE CORPORATION
        ----------------------------

        The Corporation hereby covenants and agrees with MFC as follows:

         (a)  Prior to the Effective Date, the Corporation and its subsidiaries
              will carry on business in the ordinary course and will not enter
              into any transaction or incur any obligation or liability out of
              the ordinary course of business prior to the Effective Date,
              except as contemplated herein or otherwise approved by MFC;

         (b)  The Corporation will not, and will not permit any of its
              subsidiaries to, merge into or with or amalgamate or consolidate
              with or enter into any other corporate reorganization with any
              other person or perform any act or enter into any transaction or
              negotiation which interferes or is inconsistent with the
              completion of the transactions contemplated hereby or would render
              inaccurate in any material way any of the representations and
              warranties set forth in Section 3.1 hereof if such representations
              and warranties were made


                                       12


              at a date subsequent to such act, negotiation or transaction and
              all references to the date of this Agreement were deemed to be
              such later date, except as contemplated in this Agreement or as
              otherwise approved by MFC;

         (c)  Prior to the Effective Date, the Corporation will not split,
              combine or reclassify any of the outstanding Trimble Shares nor
              declare, set aside or pay any dividends on or make any other
              distributions on or in respect of the outstanding Trimble Shares,
              without the prior approval of MFC;

         (d)  Prior to the Effective Date, the Corporation will not sell,
              pledge, encumber, allot, reserve, set aside or issue, authorize or
              propose the sale, pledge, encumbrance, allotment, reservation,
              setting aside or issuance of, or purchase or redeem or propose the
              purchase or redemption of, any Trimble Shares or any shares in its
              capital stock or of any of its subsidiaries or any class of
              securities convertible or exchangeable into, or rights, warrants
              or options to acquire, any shares or other convertible or
              exchangeable securities, without the prior approval of MFC;

         (e)  Prior to the Effective Date, the Corporation will not, whether
              through its board of directors or otherwise, amend, vary or modify
              the Corporation's stock option plan, without the prior approval of
              MFC;

         (f)  Prior to the Effective Date, the Corporation will not sell,
              pledge, encumber, lease or otherwise dispose of any material
              assets, without the prior approval of MFC;

         (g)  Prior to the Effective Date, the Corporation will not guarantee
              the payment of any material indebtedness or incur any material
              indebtedness for money borrowed or issue or sell any debt
              securities, without the prior approval of MFC;

         (h)  Prior to the Effective Date, the Corporation will not, and will
              not permit any of its subsidiaries to, engage in any business,
              enterprise or activity materially different from that carried on
              by it at the date of this Agreement or enter into any transaction
              or incur any obligation if the same would have a material adverse
              effect on the Corporation or the Arrangement, other than in the
              ordinary course of business, without the prior approval of MFC;

         (i)  Prior to the Effective Date, the Corporation will not engage in
              any business, enterprise or activity materially different from
              that carried on by it at the date of this Arrangement Agreement or
              enter into any transaction or incur any obligation if the same
              would have a material adverse effect on the Corporation or the
              Arrangement, other than in the ordinary course of business,
              without the prior approval of MFC;

                                       13


         (j)  The Corporation will convene the Meeting for the approval of the
              Arrangement and other matters incidental to the Arrangement;

         (k)  The Corporation will perform all such other acts and do such
              things as may be necessary or desirable in order to give effect to
              the Arrangement and, without limiting the generality of the
              foregoing, the Corporation will use its best efforts to apply for
              and obtain:

              (i)    the Interim Order;

              (ii)   the Final Order; and

              (iii)  such other consents, orders and approvals, including,
                     without limitation, the approval of the TSX Venture
                     Exchange, as counsel may advise are necessary or desirable
                     for the implementation of the Arrangement;

         (l)  The Corporation will use all reasonable efforts to cause each of
              the conditions precedent set forth in Article 5 hereof to be
              complied with, on or before the Effective Date; and

         (m)  The Circular will not contain an untrue statement of a material
              fact concerning the Corporation and will not omit to state a
              material fact concerning the Corporation that is required to be
              stated or that is necessary in order to render a statement
              contained therein not misleading in the light of the circumstances
              in which it was made.

4.2      COVENANTS OF MFC
         ----------------

         MFC hereby covenants and agrees with the Corporation as follows:

         (a)  MFC will not, and will not permit any of its subsidiaries to,
              perform any act or enter into any transaction or negotiation which
              interferes or is inconsistent with the completion of the
              transactions contemplated hereby or would render inaccurate in any
              material way any of the representations and warranties set forth
              in Section 3.2 hereof if such representations and warranties were
              made at a date subsequent to such act, negotiation or transaction
              and all references to the date of this Agreement were deemed to be
              such later date, except as contemplated in this Agreement or
              otherwise approved by the Corporation;

         (b)  Prior to the Effective Date, MFC will not alter or amend its
              Charter Documents as the same exist at the date of this Agreement,
              except as contemplated in this Agreement or as otherwise approved
              by the Corporation;

                                       14


         (c)  Prior to the Effective Date, MFC will not engage in any business,
              enterprise or activity materially different from that carried on
              by it at the date of this Agreement or enter into any transaction
              or incur any obligation if the same would have a material adverse
              effect on MFC or the Arrangement, other than in the ordinary
              course of business, without the prior approval of the Corporation;

         (d)  MFC will, in a timely manner, use reasonable efforts to have the
              MFC Shares approved for quotation on the NASDAQ National Market,
              if applicable;

         (e)  MFC will perform all such other acts and things as may be
              necessary or desirable in order to give effect to the Arrangement;

         (f)  Prior to the Effective Date, MFC will not subdivide, combine or
              reclassify any of the outstanding MFC Shares nor declare, set
              aside or pay any dividends or make any other distributions on or
              in respect of the outstanding MFC Shares, without the prior
              approval of the Corporation;

         (g)  MFC will use all reasonable efforts to cause each of the
              conditions precedent set forth in Article 5 hereof to be complied
              with, on or before the Effective Date; and

         (h)  Subject to the possible occurrence of a material adverse change in
              respect of MFC occurring prior to the Effective Date, the Circular
              will not contain an untrue statement of a material fact concerning
              MFC and will not omit to state a material fact concerning MFC that
              is required to be stated or that is necessary in order to render a
              statement contained therein not misleading in the light of the
              circumstances in which it is made.


                                    ARTICLE 5
                                   CONDITIONS

5.1      MUTUAL CONDITIONS PRECEDENT
         ---------------------------

         The respective obligations of the Corporation and MFC to complete the
transactions contemplated by this Agreement pursuant to Section 192 of the CBCA
to give effect to the Arrangement shall be subject to the satisfaction of the
following conditions:

         (a)  At the Meeting the Capital Reduction Resolution and the
              Arrangement Resolution, with or without amendment, shall have been
              approved by the Trimble Shareholders entitled to vote thereon, in
              accordance with the Interim Order and in accordance with the CBCA;

                                       15


         (b)  The Interim Order and the Final Order shall have been obtained in
              form and substance satisfactory to the Corporation and MFC, acting
              reasonably, and shall not have been set aside or modified in a
              manner unacceptable to such parties, acting reasonably, on appeal
              or otherwise;

         (c)  All consents, orders, regulations and approvals, including
              regulatory and judicial approvals and orders required, necessary
              or desirable for the completion of the transactions provided for
              in this Agreement and contemplated by the Arrangement shall have
              been obtained or received from the persons, authorities or bodies
              having jurisdiction in the circumstances;

         (d)  The Corporation shall have received any necessary approval of the
              TSX Venture Exchange in respect of the Arrangement subject only to
              such conditions, including filing of documentation, as are
              acceptable to MFC and the Corporation, acting reasonably;

         (e)  The MFC Shares to be issued pursuant to the Arrangement have been,
              if applicable, conditionally approved for quotation on the NASDAQ
              National Market subject only to such conditions, including the
              filing of documentation, as are acceptable to MFC and the
              Corporation, acting reasonably;

         (f)  The distribution of the MFC Shares in the United States pursuant
              to the Arrangement is exempt from registration requirements under
              the United States Securities Act of 1933 and except with respect
              to persons deemed "affiliates" under such enactment, the MFC
              Shares to be distributed in the United States pursuant to the
              Arrangement are not subject to resale restrictions in the United
              States under such enactment;

         (g)  The distribution of the MFC Shares in Canada pursuant to the
              Arrangement is exempt from registration and prospectus
              requirements of applicable Canadian securities legislation and
              except with respect to persons deemed to be "control persons" or
              the equivalent under applicable Canadian securities legislation
              the MFC Shares to be distributed in Canada pursuant to the
              Arrangement are not subject to any resale restrictions under
              applicable Canadian securities legislation;

         (h)  There shall not be in force any law, ruling, order or decree that
              makes it illegal or restrains, or enjoins or prohibits the
              consummation of the transactions contemplated by this Agreement
              and the Arrangement;

         (i)  None of the consents, orders, regulations or approvals
              contemplated herein shall contain terms or conditions or require
              undertakings or security deemed unsatisfactory or unacceptable by
              any of the parties hereto, acting reasonably;

                                       16


         (j)  There shall not have occurred, developed or come into effect or
              existence any event, action, state, condition or financial
              occurrence of national or international consequence or any law,
              regulation, action, government regulation, inquiry or other
              occurrence of any nature whatsoever that has had or could
              reasonably be expected to have a material adverse effect in
              connection with any of the parties hereto;

         (k)  No judgment or order shall have been issued by any agency, no
              actions, suits or proceedings shall have been threatened or taken
              by any agency, and no law, regulation or policy shall have been
              proposed, enacted, or promulgated or applied: (i) to cease trade,
              enjoin, prohibit or impose material limitations or conditions on
              the completion of the Arrangement or the right of MFC to own or
              exercise full rights of ownership of the Trimble Shares; or (ii)
              that, if the Arrangement were completed, could reasonably be
              expected to have a material adverse effect on any of the parties
              to this Agreement; and

         (l)  This Agreement shall not have been terminated under Article 6.

5.2      CONDITIONS IN FAVOUR OF MFC
         ---------------------------

         The obligations of MFC to complete the transactions contemplated by
this Agreement pursuant to Section 192 of the CBCA to give effect to the
Arrangement shall be subject to the satisfaction of the following conditions,
unless otherwise waived by MFC:

         (a)  the representations and warranties of the Corporation contained in
              this Agreement are true as of the Effective Date (except to the
              extent that the representations and warranties speak as of an
              earlier date, in which event they shall be true as of such earlier
              date) as if made on and as of that date except for any failures or
              breaches of representations and warranties that have not had, or
              would not have, individually or in the aggregate, a material
              adverse effect on the Corporation or prevent or delay the
              completion of the Arrangement or the transactions contemplated by
              this Agreement to be completed on the Effective Date;

         (b)  the Corporation has complied with its obligations under this
              Agreement, except to the extent the failure to comply with those
              obligations has not had, or would not have, individually or in the
              aggregate, a material adverse effect on the Corporation or prevent
              or delay the completion of the Arrangement or the transactions
              contemplated by this Agreement to be completed on the Effective
              Date; and

         (c)  the aggregate number of Trimble Shares in respect of which Trimble
              Shareholders shall have exercised, and not withdrawn the exercise
              of, rights of dissent provided pursuant to the terms of the Plan
              of Arrangement and the Interim Order shall not be in excess of
              892,648 Trimble Shares.

                                       17



5.3      CONDITIONS IN FAVOUR OF THE CORPORATION
         ---------------------------------------

         The obligations of the Corporation to complete the transactions
contemplated by this Agreement pursuant to Section 192 of the CBCA to give
effect to the Arrangement shall be subject to the satisfaction of the following
conditions:

         (a)  the representations and warranties of MFC contained in this
              Agreement are true as of the Effective Date (except to the extent
              that the representations and warranties speak as of an earlier
              date, in which event they shall be true as of such earlier date)
              as if made on and as of that date except for any failures or
              breaches of representations and warranties that have not had, or
              would not have, individually or in the aggregate, a material
              adverse effect on MFC or prevent or delay the completion of the
              Arrangement or the transactions contemplated by this Agreement to
              be completed on the Effective Date;

         (b)  MFC has complied with its obligations under this Agreement, except
              to the extent the failure to comply with those obligations has not
              had, or would not have, individually or in the aggregate, a
              material adverse effect on MFC or prevent or delay the completion
              of the Arrangement or the transactions contemplated by this
              Agreement to be completed on the Effective Date; and

         (c)  The Corporation shall have received the Valuation and Fairness
              Opinion in form and substance satisfactory to the Corporation.

5.4      MERGER OF CONDITIONS
         --------------------

         The conditions set out in Sections 5.1, 5.2 and 5.3 shall be
conclusively deemed to have been satisfied, waived or released on the acceptance
of the Final Order for filing by the Director.


                                    ARTICLE 6
                            AMENDMENT AND TERMINATION

6.1      AMENDMENT AND VARIATION
         -----------------------

         Subject to Sections 6.2 and 6.5 hereof, this Agreement may, at any
time and from time to time, before and after the holding of the Meeting, but
not later than the Effective Date, be amended or varied by written agreement of
the Corporation and MFC, subject to applicable law, without further notice to or
authorization on the part of the Trimble Shareholders. Without limiting the
generality of the foregoing, any such amendment may: (i) change the time for the
performance of any of the obligations or acts of the parties hereto; (ii) waive
any inaccuracies or modify any representation or warranty contained herein or in
any document to be delivered pursuant hereto; or


                                       18


(iii) waive compliance with or modify any of the covenants contained herein or
waive or modify the performance of any of the obligations of the parties hereto
contained herein.

6.2      AMENDMENT OF PLAN
         -----------------

         The Plan of Arrangement may be amended, modified or supplemented in
accordance with Section 6 of the Plan of Arrangement.

6.3      RIGHTS OF TERMINATION
         ---------------------

         If any of the conditions contained in Sections 5.1, 5.2 or 5.3 shall
not be fulfilled or performed on or before the Effective Date, the party
hereto not responsible hereunder to fulfill or perform any such condition may
terminate this Agreement by notice to the other party hereto, as the case may
be, in writing, and in such event, the Corporation or MFC, as the case may be,
shall be released from all obligations under this Agreement, all rights of
specific performance by the parties shall terminate and the other party hereto
shall also be released from all obligations hereunder.

6.4      NOTICE OF UNFULFILLED CONDITIONS
         --------------------------------

         If any party hereto shall determine at any time prior to the Effective
Date that it intends to refuse to consummate the Arrangement or any of the
transactions contemplated thereby because of any unfulfilled or unperformed
condition precedent contained in this Arrangement Agreement on the part of
another party hereto to be fulfilled or performed, such party, as the case may
be, shall so notify the other party forthwith upon making such determination in
order that the other party shall have the right and opportunity to take such
steps, at its own expense, as may be necessary for the purpose of fulfilling or
performing such condition precedent within a reasonable period of time.

6.5      MUTUAL TERMINATION
         ------------------

         This Agreement may, at any time before or after the holding of the
Meeting, but no later than the Effective Date, be terminated by agreement in
writing executed by the Corporation and MFC without further action on the part
of the Trimble Shareholders, and if the Effective Date does not occur on or
before July 5, 2002 (the "Termination Date"), each party may unilaterally
terminate this Agreement without further action on the part of the Trimble
Shareholders, which termination shall be effective upon notice thereof being
given to the other party to this Agreement.


                                    ARTICLE 7
                                 INDEMNIFICATION

7.1      INDEMNIFICATION
         ---------------

         Each of the parties hereto (the "Indemnifying Party") hereby undertakes
with the other party to this Arrangement Agreement (the "Indemnified Party") to
indemnify and hold harmless the Indemnified Party from and against all losses,
claims, damages, liabilities, actions or

                                       19


demands including, without limiting the generality of the foregoing, amounts
paid in any settlement approved by the Indemnifying Party of any action, suit,
proceeding or claim but excluding lost profits and consequential damages of the
Indemnified Party, to which the Indemnified Party may become subject insofar as
such losses, claims, damages, liabilities, actions or demands arise out of or
are based upon any breach of a representation, warranty, covenant or obligation
of the Indemnifying Party contained in this Agreement or any certificate or
notice delivered by it in connection herewith, and will reimburse the
Indemnified Party for any legal or other expenses reasonably incurred by the
Indemnified Party in connection with investigating or defending any such loss,
claim, damage, liability, action or demand.

7.2      DEFENCE
         -------

         Promptly after receipt by the Indemnified Party of notice of a possible
action, suit, proceeding or claim referred to in Section 7.1 hereof, the
Indemnified Party, if a claim in respect thereof is to be made against the
Indemnifying Party under such section, shall provide the Indemnifying Party with
written particulars thereof; provided that the failure to so provide the
Indemnifying Party with such particulars shall not relieve such Indemnifying
Party from any liability which it might have on account of the indemnity
provided for in this Article 7, except insofar as such failure shall prejudice
such Indemnifying Party. The Indemnified Party shall also provide the
Indemnifying Party with copies of all relevant documentation, and unless the
Indemnifying Party assumes the defence thereof, shall keep such Indemnifying
Party advised of the progress thereof and shall keep such Indemnifying Party
advised of all significant actions proposed. An Indemnifying Party shall be
entitled, at its own expense, to participate in and, to the extent that it may
wish, to assume the defence of any such action, suit, proceeding or claim but
such defence shall be conducted by counsel of good standing approved by the
Indemnified Party, such approval not to be unreasonably withheld. Upon the
Indemnifying Party notifying the Indemnified Party of its election so to assume
the defence and retaining such counsel, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal or other expenses subsequently
incurred by it in connection with such defence other than for reasonable costs
of investigation. If such defence is assumed by the Indemnifying Party, it
shall, throughout the course thereof, provide copies of all relevant
documentation to the Indemnified Party, keep such Indemnified Party advised of
the progress thereof and shall discuss with the Indemnified Party all
significant actions proposed. No Indemnifying Party shall enter into any
settlement without the consent of the Indemnified Party, but such consent shall
not be unreasonably withheld. Notwithstanding the foregoing, the Indemnified
Party shall have the right, at the Indemnifying Party's expense, to employ
counsel of their own choice in respect of the defence of any such action, suit,
proceeding or claim if: (i) the employment of such counsel has been authorized
by the Indemnifying Party in connection with such defence; (ii) counsel retained
by the Indemnifying Party or the Indemnified Party shall have advised the
Indemnified Party that there may be legal defences available to it which are
different from or in addition to those available to the Indemnifying Party (in
which event, and to that extent, the Indemnifying Party shall not have the right
to assume or direct the defence on behalf of the Indemnified Party) or that
there may be a conflict of interest between the Indemnifying Party and the
Indemnified Party; or (iii) the Indemnifying Party shall not have assumed such
defence and employed counsel therefor within a reasonable time after receiving
notice of such action, suit, proceeding or claim.

                                       20


7.3      TERM
         ----

         The obligations of the parties under this Article 7 shall terminate
when the Arrangement is consummated, failing which they shall survive and
continue with respect to all losses, claims, damages, liabilities, actions or
demands, notice of which is given to the Indemnifying Party by the Indemnified
Party, on or before 24 months from the date hereof in compliance with Section
7.2 hereof.


                                    ARTICLE 8
                                     GENERAL

8.1      FURTHER ASSURANCES
         ------------------

         Each party hereto shall, at the request of the other party hereto, do
all such further acts and execute and deliver all such further documents and
instruments as the other party may reasonably require in order to fully
implement the terms and intent of this Agreement and the Arrangement.

8.2      NOTICES
         -------

         All notices which may or are required to be given pursuant to any
provision of this Arrangement Agreement shall be given or made in writing and
shall be served personally or by facsimile, in each case addressed to the
attention of the President, at the administrative offices of the Corporation and
MFC as follows:

         To the Corporation:

                     Suite 1620
                     400 Burrard Street
                     Vancouver, British Columbia  V6C 3A6
                     Attention:  The President

                     Facsimile No. (604) 683-3205

         To MFC:

                     Floor 21, Millenium Tower
                     Handelskai 94-96
                     A-1200
                     Vienna, Austria
                     Attention:  The President

                     Facsimile No. (43) 124 025 310

                                       21


8.3      BINDING EFFECT
         --------------

         This Agreement shall be binding upon and shall enure to the benefit of
each of the Corporation and MFC and their respective successors and assigns.

8.4      WAIVER
         ------

         Any waiver or release of any of the provisions of this Arrangement
Agreement, to be effective, must be in writing and executed by the party
granting such waiver or release.

8.5      GOVERNING LAW
         -------------

         This Agreement shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada applicable
therein (excluding any conflict of laws, rule or principle which might refer
such construction to the laws of another jurisdiction) and shall be treated in
all respects as a British Columbia contract. The parties hereto irrevocably
attorn to the non-exclusive jurisdiction of the Courts of British Columbia with
respect to any matter arising hereunder or related thereto.

8.6      ENTIRE AGREEMENT
         ----------------

         This Agreement, together with the agreements and other documents herein
or therein referred to, constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, between the parties hereto.

8.7      EXPENSES
         --------

         Unless otherwise provided herein, all expenses incurred in connection
with this Arrangement Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses.

8.8      SEVERABILITY
         ------------

         If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable, then:

         (a)  That provision shall (to the extent of the invalidity, illegality
              or unenforceability) be given no effect and shall be deemed not to
              be part of this Agreement; and

         (b)  The parties hereto shall use all reasonable commercial efforts to
              replace each invalid, illegal or unenforceable provision with a
              valid, legal and enforceable substitute provision, the effect of
              which is as close as possible to the intended effect of the
              invalid, illegal or unenforceable provision.

                                       22


8.9      PARTIES IN INTEREST
         -------------------

         This Agreement will be binding upon and inure solely to the benefit of
each party hereto, and, other than pursuant to Article 7 hereof, nothing in this
Agreement, express or implied, is intended to or will confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.

8.10     COUNTERPARTS
         ------------

         This Agreement may be executed in counterparts and by facsimile and
each counterpart shall be deemed to be an original and all of which shall be
deemed to be one instrument.

IN WITNESS WHEREOF the parties hereto have executed this Arrangement Agreement,
as of the day, month and year first above written.


TRIMBLE RESOURCES CORPORATION


By:      "Michael J. Smith"
         ------------------------------
         Authorized Signatory

Name:    Michael J. Smith
         ------------------------------

Title:   President
         ------------------------------


MFC BANCORP LTD.


By:      "Roy Zanatta"
         ------------------------------
         Authorized Signatory

Name:    Roy Zanatta
         ------------------------------

Title:   Secretary
         ------------------------------


                                       23




                                   SCHEDULE A
                               Plan of Arrangement












                          TRIMBLE RESOURCES CORPORATION


                               PLAN OF ARRANGEMENT
                            UNDER SECTION 192 OF THE
                        CANADA BUSINESS CORPORATIONS ACT




1.       SECTION 1 - DEFINITIONS AND INTERPRETATION

1.1      DEFINITIONS. In this Plan of Arrangement, including the Schedules
         hereto, unless there is something in the subject matter or context
         inconsistent therewith, the following words and terms shall have the
         following meanings:

         "ARRANGEMENT" means the arrangement to be undertaken in accordance with
         this Plan of Arrangement, subject to any amendment or variation made in
         accordance with this Plan of Arrangement;

         "ARRANGEMENT AGREEMENT" means the arrangement agreement dated May 17,
         2002, between MFC and Trimble;

         "BUSINESS DAY" means any day other than a Saturday, Sunday, a federal
         holiday in Canada or a day on which banks are not open for business in
         Vancouver, British Columbia;

         "CASH ELECTION" has the meaning set forth in Section 3.1;

         "CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c.
         C-44, and the regulations issued thereunder, as amended;

         "COURT" means the Supreme Court of British Columbia;

         "DISSENTING SHAREHOLDER" means a Trimble Shareholder who dissents in
         respect of the Arrangement in strict compliance with the dissent
         procedures set out in Section 4 hereof;

         "EFFECTIVE DATE" means the date on which the Arrangement becomes
         effective in accordance with the CBCA and the Final Order;

         "EFFECTIVE TIME" means the time on the Effective Date that the
         Arrangement becomes effective in accordance with its terms;

         "ELECTION AND TRANSMITTAL FORM" has the meaning set out in Section 3.2;

         "FINAL ORDER" means the order of the Court, as the same may be amended,
         approving the Arrangement in respect of Trimble under the CBCA;

         "INTERIM ORDER" means the order of the Court, as the same may be
         amended, providing for, among other things, the calling and holding of
         the Meeting under the CBCA;

         "MEETING" means the meeting of Trimble Shareholders, and any
         adjournment thereof, to be held to consider and, if deemed advisable,
         approve the Arrangement;




         "MFC" means MFC Bancorp Ltd., a corporation organized under the laws of
         the Yukon Territory, Canada;

         "MFC SHARES" means the outstanding common shares without par value in
         the capital of MFC to be issued pursuant to Section 2.1;

         "NOTICE OF DISSENT" means a notice given in respect of the dissent
         rights of Trimble Shareholders as contemplated in the Interim Order and
         as described in Section 4 hereof;

         "PERSON" means an individual, a body corporate (wherever incorporated),
         an unincorporated association, syndicate or organization, partnership,
         trust, trustee, executor, administrator or other legal representative;

         "PLAN OF ARRANGEMENT" means this plan of arrangement;

         "SHARE ELECTION" has the meaning set out in Section 3.1;

         "TRANSFER AGENT" means CIBC Mellon Trust Company;

         "TRIMBLE" means Trimble Resources Corporation, a corporation organized
         under the CBCA;

         "TRIMBLE SHAREHOLDERS" means the registered holders at the relevant
         time of the Trimble Shares; and

         "TRIMBLE SHARES" means the common shares without par value in the
         capital of Trimble.

1.2      HEADINGS AND REFERENCES. The headings in this Plan of Arrangement are
         for convenience of reference only and shall not affect the construction
         of this Plan of Arrangement. Unless otherwise specified, references to
         an article, section, subsection, paragraph, subparagraph or schedule by
         any number or letter, or both, refer to the article, section,
         subsection, paragraph, subparagraph or schedule bearing a designation
         in this Plan of Arrangement.


1.3      CURRENCY. Except as expressly indicated otherwise, all sums of money
         referred to in this Plan of Arrangement are expressed and shall be
         payable in lawful money of Canada.


1.4      GENDER AND NUMBER. This Plan of Arrangement shall be read with all
         changes in gender and number required by the context.

1.5      TIME AND DATE FOR ACTION. Time shall be of the essence in each matter
         or thing herein provided. Unless otherwise indicated, all times
         expressed herein are local time, Vancouver, British Columbia. In the
         event that the date on or by which any action is required to be taken
         hereunder is not a business day in the place where the action is
         required to be taken, such action shall be required to be taken on or
         by the next succeeding day which is a business day in such place.





1.6      GOVERNING LAW. This Plan of Arrangement shall be governed by and
         construed in accordance with the laws of the Province of British
         Columbia and the laws of Canada applicable therein (excluding any
         conflict of laws, rules or principles which might refer such
         construction to the laws of another jurisdiction). All questions as to
         the interpretation, or application, of this Plan of Arrangement and all
         proceedings taken in connection with this Plan of Arrangement and its
         provisions shall be subject to the exclusive jurisdiction of the Court.

1.7      DEEMED. In this Plan of Arrangement, the deeming provisions are not
         rebutable and are conclusive and irrevocable.

1.8      SUCCESSORS, ASSIGNS, ETC. On the Effective Date, this Plan of
         Arrangement will be implemented by the parties to the Arrangement
         Agreement and will be binding upon each of them and the Trimble
         Shareholders (and their respective heirs, executors, administrators,
         legal representatives, successors and assigns).

1.9      LEGISLATION. References in this Plan of Arrangement to any statute or
         sections thereof shall include any statute as amended or substituted,
         and any regulations promulgated thereunder, from time to time in
         effect.

1.10     SCHEDULES. The following is the Schedule to this Plan of Arrangement,
         which forms an integral part hereof:

                  Schedule 1 - Election and Transmittal Form


2.       SECTION 2 - THE ARRANGEMENT

2.1      THE ARRANGEMENT. Commencing at the Effective Time on the Effective
         Date, subject to the provisions of Section 2.2 and Section 5, the
         following shall occur and shall be deemed to occur in the following
         order without any further act or formality, except as otherwise
         provided:

         (a)  each issued and outstanding Trimble Share, not including Trimble
              Shares held by Dissenting Shareholders, shall be acquired by MFC
              and:

              (i)   each Trimble Shareholder who has made the Share Election in
                    respect of an issued and outstanding Trimble Share held by
                    that Trimble Shareholder shall be issued by MFC in exchange
                    for such Trimble Share 0.0139 fully paid MFC Shares or cash
                    in respect of fractional MFC Shares as contemplated by
                    Section 5.1(c); and

              (ii)  each Trimble Shareholder who has made, or pursuant to
                    Section 3.3 is deemed to have made, the Cash Election in
                    respect of an issued and outstanding Trimble Share held by
                    the Trimble Shareholder, or is deemed to have made the Cash
                    Election in respect of an issued and outstanding Trimble
                    Share held by the Trimble Shareholder in accordance with
                    Section 3.3, shall receive from MFC $0.22 in exchange for
                    such Trimble Share;



         (b)  each Trimble Shareholder who has made or is deemed to have made
              the Cash Election and/or the Share Election shall be deemed to
              have executed and delivered all consents, releases, assignments
              and waivers, statutory or otherwise, required to transfer its
              Trimble Shares in respect thereof in accordance with Sections 2.1
              and 3; and

         (c)  each Trimble Shareholder who has made or is deemed to have made
              the Cash Election and/or the Share Election shall have agreed and
              been deemed to agree that if there is any conflict between the
              provisions, express or implied, of any agreement or other
              arrangement, as at the Effective Date and pursuant to the
              provisions of this Plan of Arrangement, then the provisions of
              this Plan of Arrangement take precedence and priority and the
              provisions of such agreement or other arrangement are amended
              accordingly.


2.2      SHARE REGISTERS. Any person from whom Trimble Shares are acquired
         pursuant to the Arrangement will be removed from the Trimble register
         of shareholders and each Trimble Shareholder who made the Share
         Election will be added to the registers of allotments and members
         shareholders of MFC at the Effective Time in respect of the MFC Shares
         that it received pursuant to the Arrangement.

3.       SECTION 3 - ELECTION BY TRIMBLE SHAREHOLDERS

3.1      ELECTION.  Each Trimble Shareholder shall elect in respect of each
         Trimble Share it holds whether to receive:

         (a)  0.0139 fully paid MFC Shares or cash in respect of fractional MFC
              Shares as contemplated by Section 5.1(c) (a "SHARE ELECTION"); or

         (b)  $0.22 (a "CASH ELECTION").

3.2      ELECTION PROCEDURES.

         (a)  Each Trimble Shareholder must, in respect of Trimble Shares it
              holds, deliver not later than 48 hours before the Effective Date
              written notice substantially in the form specified in Schedule 1
              hereto (the "ELECTION AND TRANSMITTAL FORM") setting forth the
              number of Trimble Shares in respect of which it elects to receive
              either the Share Election and/or the Cash Election.

         (b)  A Trimble Shareholder may, in respect of Trimble Shares it holds,
              make the Cash Election with respect to a portion of its Trimble
              Shares and the Share Election with respect to the balance of its
              Trimble Shares. Such Trimble Shareholder must complete a separate
              Election and Transmittal Form in respect of (i) the Trimble Shares
              in respect of which such Trimble Shareholder is making the Share
              Election and (ii) the Trimble Shares in respect of which such
              Trimble Shareholder is making the Cash Election.

         (c)  To be effective, an Election and Transmittal Form must specify
              whether the Trimble Shareholder is electing to receive the Cash
              Election or the Share Election and the number of Trimble Shares
              with respect to which such election is made.



         (d)  The Election and Transmittal Form must be accompanied by the
              certificates representing the Trimble Shareholder's Trimble Shares
              in respect of which the election specified in the Election and
              Transmittal Form is made.

         (e)  The Election and Transmittal Form along with the certificates
              representing the Trimble Shareholder's Trimble Shares referred to
              in (d) must be deposited with the Transfer Agent by delivery or
              mail to:

                             CIBC Mellon
                             2001 University St.
                             16th Floor
                             Montreal, Quebec
                             H3A 2A6

3.3      FAILURE TO DELIVER OR PROPERLY COMPLETE AN ELECTION AND TRANSMITTAL
         FORM. A Trimble Shareholder who fails to timely deliver its Election
         and Transmittal Form as provided in Section 3.2 above shall be deemed
         to have irrevocably chosen the Cash Election in respect of all of its
         Trimble Shares. A Trimble Shareholder whose Election and Transmittal
         Form is incomplete or improperly completed shall be deemed to have
         irrevocably chosen the Cash Election in respect of those Trimble Shares
         referred to in the Election and Transmittal Form in respect of which no
         election is properly made.

3.4      FORFEITURE OF ENTITLEMENT. A Trimble Shareholder who has failed to
         provide an Election and Transmittal Form and the certificates
         representing the Trimble Shareholders' Trimble Shares within two years
         of the Effective Date will, subject to the requirements of the
         applicable law with respect to unclaimed property, forfeit all rights
         such Trimble Shareholder has with respect to the cash payment pursuant
         to the Cash Election and all such funds so forfeited will be returned
         to MFC.

3.5      DETERMINATIONS FINAL. All decisions regarding the compliance or
         non-compliance by a Trimble Shareholder with the election procedures
         set forth in this Section 3, including, without limitation, the
         interpretation of Election and Transmittal Forms, shall be made by MFC
         and all such decisions shall be final and binding on Trimble
         Shareholders.

4.       SECTION 4 - TRIMBLE DISSENT RIGHTS


4.1      RIGHTS OF DISSENT. A Trimble Shareholder may, in respect of Trimble
         Shares it holds, exercise rights of dissent conferred by the Interim
         Order in connection with the Arrangement in the manner set out in
         Section 190 of the CBCA, as modified by the Interim Order. Without
         limiting the generality of the foregoing or Section 190(11) of the
         CBCA, any Trimble Shareholder who has given a Notice of Dissent shall
         cease to be entitled to the rights of a Dissenting Shareholder for
         Trimble Shares in respect of which the Notice of Dissent was given if
         such Trimble Shareholder completes and delivers to the Transfer Agent
         an Election and Transmittal Form in respect of such Trimble Shares,
         notwithstanding any deficiency referred to in Section 3.3 above in the
         manner such Election and Transmittal Form was completed.



4.2      RIGHTS OF DISSENTING SHAREHOLDERS. In the event a Trimble Shareholder
         gives a Notice of Dissent but is not entitled, for any reason, to be
         paid the fair value of the Trimble Shares in respect of which the
         Notice of Dissent was given pursuant to Section 190 of the CBCA and the
         terms of the Interim Order, such Trimble Shareholder shall be entitled
         to receive only the consideration contemplated by Section 2.1(a)(ii)
         hereof which such Trimble Shareholder would have received pursuant to
         the Arrangement if such Trimble Shareholder had not given a Notice of
         Dissent.

5.       SECTION 5 - CASH AND CERTIFICATES


5.1      RIGHTS TO PAYMENT AND SHARE CERTIFICATES.

         (a)  On the Effective Date:

              (i)   the registers of Trimble for the Trimble Shares shall be
                    closed;

              (ii)  each Trimble Shareholder, other than a Dissenting
                    Shareholder, whose name is entered in the registers of
                    Trimble Shareholders on the Effective Date shall cease to be
                    a Trimble Shareholder and each Trimble Shareholder who
                    made the Share Election shall become concurrently the holder
                    of the MFC Shares required to be delivered to it pursuant to
                    the provisions hereof Arrangement;

              (iii) MFC shall cause the Transfer Agent to enter the name of each
                    Trimble Shareholder who made the Share Election, other than
                    a Dissenting Shareholder, on the MFC share register as the
                    holder of the MFC Shares required to be delivered to it
                    pursuant to the provisions of the Arrangement; and

              (iv)  MFC shall be entered on the Trimble register of Trimble
                    shareholders as the holder of all of the issued and
                    outstanding Trimble Shares.

         (b)  As soon as practicable following the Effective Date, but in no
              event later than the end of the third business day thereafter, MFC
              shall cause the Transfer Agent to forward, or cause to be
              forwarded, by mail to each Trimble Shareholder whose name has been
              entered on the MFC share register pursuant to Section 5.1(a)(iii)
              at the address specified in the register of Trimble, or to such
              other person, at such other address, as such Trimble Shareholder
              may direct, or make available for pick-up, a certificate
              registered in the name of that Trimble Shareholder representing
              the MFC Shares and a cheque representing any cash payment required
              to be delivered to such Trimble Shareholder pursuant to the
              provisions hereof.

         (c)  No certificates representing fractional MFC Shares shall be
              issued. In lieu of any such fractional securities, each person
              that otherwise would be entitled to a fractional interest in an
              MFC Share will receive a cash payment in accordance with Section
              5.3 mutatis mutandis. For greater certainty all fractional MFC
              Shares which a Trimble Shareholder is entitled to receive shall be
              aggregated and



              only any fraction remaining thereafter shall be the subject of a
              cash payment under this Section 5.1(c). No payments will be made
              to persons that otherwise would receive less than $1.00.

         (d)  Any Dissenting Shareholder who, after the Effective Date, fails to
              strictly comply with the procedures set forth in Section 4 shall
              be deemed to have irrevocably chosen the Cash Election and shall
              thereupon be entitled to the cash payment to which it would have
              been entitled on the Effective Date if it was not a Dissenting
              Shareholder at that time in respect of Trimble Shares it held. The
              Dissenting Shareholder shall receive payment in respect of Trimble
              Shares pursuant to the Arrangement.

5.2      ILLEGALITY OF DELIVERY OF MFC SHARES. Notwithstanding the foregoing, if
         it appears to MFC, acting reasonably, that it would be contrary to
         applicable law to issue MFC Shares pursuant to the Arrangement to a
         person that is not a resident of Canada or the United States, the MFC
         Shares that otherwise would be issued to that person shall be issued
         and delivered to the Transfer Agent for sale by the Transfer Agent on
         behalf of that person.

5.3      SALES BY TRANSFER AGENT. All MFC Shares to be sold pursuant to Section
         5.2 shall be pooled and sold as soon as practicable after the Effective
         Date, on such dates and at such prices as the Transfer Agent determines
         in its sole discretion. The Transfer Agent shall not be obligated to
         seek or obtain a minimum price for any of the MFC Shares sold by it.
         Each person that otherwise would have received an MFC Share pursuant to
         this Arrangement shall receive a pro rata share of the cash proceeds
         from the sale of the MFC Shares sold by the Transfer Agent, less any
         amount withheld in respect of Canadian taxes, in lieu thereof in
         consideration for the Trimble Shares. No payments will be made to
         persons that otherwise would receive less than $1.00. Any monies
         remaining as a result of the preceding sentence shall be applied to any
         expenses incurred in connection with sales pursuant to this Section
         5.3. Neither MFC nor the Transfer Agent shall be liable for any
         shortfall or loss resulting from any such sales.

5.4      LOST OR DESTROYED CERTIFICATES. In the event any certificate which
         immediately prior to the Effective Time represented one or more
         outstanding Trimble Shares that were exchanged pursuant to Section 2.1
         shall have been lost, stolen or destroyed, upon the making of an
         affidavit of that fact by the person claiming such certificate to be
         lost, stolen or destroyed, the Transfer Agent will issue in exchange
         for such lost, stolen or destroyed certificate, a certificate
         representing the MFC Shares and/or the cash payment to which such
         person claims to be entitled in the Election and Transmittal Form. When
         requesting such delivery of such certificate representing MFC Shares
         and/or payment in exchange for such lost, stolen or destroyed
         certificate, the person to whom such certificate and/or cash is to be
         delivered shall as a condition precedent to the delivery of such
         certificate and/or cash, give a bond satisfactory to MFC and the
         Transfer Agent in such sum as MFC may direct, or otherwise indemnify
         MFC in a manner satisfactory to MFC, against any claim that may be made
         against MFC with respect to the certificate alleged to have been lost,
         stolen or destroyed.



6        SECTION 6 - AMENDMENT


6.1      PLAN OF ARRANGEMENT AMENDMENT.

         (a)  MFC and Trimble reserve the right to amend, modify and/or
              supplement this Plan of Arrangement at any time and from time to
              time, provided that any such amendment, modification or supplement
              is to be contained in a written document which is filed with the
              Court and approved by the Court and communicated to the Trimble
              Shareholders in the manner required by the Court, if so required.

         (b)  Any amendment, modification or supplement to this Plan of
              Arrangement may be proposed by MFC and Trimble at any time prior
              to or at the Meeting with or without any other prior notice or
              communication and, if so proposed and accepted by the persons
              voting at the Meeting, shall become part of this Plan of
              Arrangement for all purposes.


         (c)  Any amendment, modification or supplement to this Plan of
              Arrangement that is approved or directed by the Court following
              the Meeting shall be effective only if it is consented to by MFC
              and Trimble.

EX-4.30

                                                                    EXHIBIT 4.30

================================================================================



                            STOCK PURCHASE AGREEMENT

                                      among

                    OCCIDENTAL (EAST SHABWA), LLC ("Buyer"),


                        INTERCAP YEMEN, INC. ("Seller"),


                                       and

                         MFC BANCORP LTD. ("Guarantor")


                            Dated as of July 23, 2002



================================================================================



                                TABLE OF CONTENTS
                                -----------------

                                                                            Page
                                                                            ----
                                    ARTICLE I
                                    ---------
                                   DEFINITIONS
                                   -----------

Section 1.1   Specific Definitions.............................................1
              --------------------
Section 1.2   Other Definitional Provisions....................................5
              -----------------------------

                                   ARTICLE II
                                   ----------
                 PURCHASE AND SALE OF COMPANY SHARES; GUARANTEE
                 ----------------------------------------------

Section 2.1   Purchase and Sale of Company Shares..............................5
              -----------------------------------
Section 2.2   Closing; Delivery and Payment; Guarantee; Indemnity..............6
              ---------------------------------------------------
Section 2.3   Calculation of Adjustment Amount; Post-Closing Adjustment........8
              ---------------------------------------------------------

                                   ARTICLE III
                                   -----------
             REPRESENTATIONS AND WARRANTIES OF SELLER AND GUARANTOR
             ------------------------------------------------------

Section 3.1   Organization of Seller and Guarantor............................10
              ------------------------------------
Section 3.2   Authority; No Conflicts.........................................10
              -----------------------
Section 3.3   Capitalization of the Company; Organization and
              -----------------------------------------------
                 Qualification; Subsidiaries..................................10
                 ---------------------------
Section 3.4   Consents and Approvals..........................................12
              ----------------------
Section 3.5   Financial Statements............................................12
              --------------------
Section 3.6   Brokers' Fees...................................................12
              -------------
Section 3.7   Taxes...........................................................13
              -----
Section 3.8   Litigation and Claims...........................................13
              ---------------------
Section 3.9   Employees.......................................................13
              ---------
Section 3.10  Contracts.......................................................13
              ---------
Section 3.11  Title to Assets.................................................14
              ---------------
Section 3.12  Corporate Documents.............................................15
              -------------------
Section 3.13  Compliance with Law and Permits.................................15
              -------------------------------

                                     -ii-

Section 3.14  Absence of Subsequent Actions or Events.........................16
              ---------------------------------------
Section 3.15  Capital Commitments.............................................17
              -------------------
Section 3.16  Related Party Transactions......................................17
              --------------------------
Section 3.17  Insurance Policies..............................................17
              ------------------
Section 3.18  Directors and Representatives...................................17
              -----------------------------
Section 3.19  Environmental Matters...........................................17
              ---------------------

                                   ARTICLE IV
                                   ----------
                     REPRESENTATIONS AND WARRANTIES OF BUYER
                     ---------------------------------------

Section 4.1   Organization of Buyer...........................................18
              ---------------------
Section 4.2   Authority; No Conflicts.........................................18
              -----------------------
Section 4.3   Consents and Approvals..........................................18
              ----------------------
Section 4.4   Securities Act..................................................19
              --------------
Section 4.5   Brokers' Fees...................................................19
              -------------

                                    ARTICLE V
                                    ---------
                              CERTAIN COVENANTS AND
                              ---------------------
                         AGREEMENTS OF SELLER AND BUYER
                         ------------------------------

Section 5.1   Tax Matters.....................................................19
              -----------
Section 5.2   Registrations, Filings and Consents.............................20
              -----------------------------------
Section 5.3   Confidentiality.................................................20
              ---------------
Section 5.4   Employee Matters; PYC Assignment, etc...........................21
              -------------------------------------
Section 5.5   Further Assurances..............................................21
              ------------------

                               ARTICLE VI
                               ----------
                          CONDITIONS TO CLOSING
                          ---------------------

Section 6.1   Conditions to Obligations of Buyer..............................22
              ----------------------------------
Section 6.2   Conditions to Obligations of Seller.............................23
              -----------------------------------


                                      -iii-


                                   ARTICLE VII
                                   -----------
                                   TERMINATION
                                   -----------

Section 7.1   Termination.....................................................24
              -----------
Section 7.2   Effect of Termination...........................................25
              ---------------------

                                  ARTICLE VIII
                                  ------------
                          SURVIVAL AND INDEMNIFICATION
                          ----------------------------

Section 8.1   Survival of Representations, Warranties, Covenants and
              ------------------------------------------------------
                 Agreements...................................................25
                 ----------
Section 8.2   Indemnification.................................................25
              ---------------
Section 8.3   Method of Asserting Claims, etc.................................26
              -------------------------------
Section 8.4   Subrogation Rights..............................................27
              ------------------
Section 8.5   Investigation and Due Diligence.................................28
              -------------------------------
Section 8.6   Deductible; Insurance; Tax Effect; Maximum Liability............28
              ----------------------------------------------------
Section 8.7   Sole Remedy.....................................................29
              -----------

                                   ARTICLE IX
                                   ----------
                                  MISCELLANEOUS
                                  -------------

Section 9.1   Amendment and Modification; Waiver..............................30
              ----------------------------------
Section 9.2   Expenses........................................................30
              --------
Section 9.3   Assignment......................................................30
              ----------
Section 9.4   Entire Agreement; Assumption Agreement..........................30
              --------------------------------------
Section 9.5   Parties in Interest; No Third Party Beneficiaries...............30
              -------------------------------------------------
Section 9.6   Counterparts....................................................30
              ------------
Section 9.7   Interpretation..................................................30
              --------------
Section 9.8   Notices.........................................................31
              -------
Section 9.9   Governing Law; Submission To Jurisdiction; Selection Of Forum...32
              -------------------------------------------------------------
Section 9.10  Severability....................................................32
              ------------
Section 9.11  Attorney's Fees.................................................33
              ---------------
Section 9.12  Time of Essence.................................................33
              ---------------
Section 9.13  Publicity.......................................................33
              ---------


                                      -iv-

Schedules:
      Schedule 3.4          Consents and Approvals
      Schedule 3.5          Financial Statements
      Schedule 3.7          Taxes
      Schedule 3.8          Litigation and Claims
      Schedule 3.10         Contracts
      Schedule 3.14         Subsequent Actions
      Schedule 3.15         Capital Commitments
      Schedule 3.16         Related Party Transactions
      Schedule 3.17         Insurance Policies
      Schedule 3.18         Directors and Representatives
      Schedule 4.3          Contends and Approvals

Exhibits:
     Exhibit I         PSC
     Exhibit II        Form of Waiver Letter
     Exhibit III       Form of Stockholders' Agreement Amendment


                                      -v-






         STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of July 23, 2002,
by and among Occidental (East Shabwa), LLC, a limited liability company
organized under the laws of Nevis ("Buyer"), Intercap Yemen, Inc., a company
organized under the laws of the State of Texas ("Seller"), and MFC Bancorp Ltd.,
a company organized under the laws of the Yukon Territory, Canada ("Guarantor").

                              W I T N E S S E T H:

         WHEREAS, Seller owns 500 shares (the "Company Shares") of the issued
and outstanding Class A Common Stock, par value $.001 per share, of Comeco
Petroleum, Inc., a Delaware corporation (the "Company");

         WHEREAS, (i) Seller desires to sell to Buyer the Company Shares, (ii)
Buyer desires to purchase the Company Shares from Seller and (iii) Guarantor
desires to guarantee the obligations of Seller hereunder;

         NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:


                                    ARTICLE I
                                   DEFINITIONS
                                   -----------

         Section 1.1    Specific Definitions. As used in this Agreement, the
                        ---------------------
following terms shall have the meanings set forth or as referenced below:

         "Actions" shall have the meaning set forth in Section 3.8 hereof.
         ---------
         "Adjustment Amount" shall have the meaning set forth in Section 2.3(d)
         -------------------
hereof.

         "Affiliate," with respect to any Person, means any other Person
         ------------
directly or indirectly controlling, controlled by or under common control with
that Person. The term "control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, 50% or
more of the voting rights attributable to the shares of the controlled
corporation, and, with respect to any Person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.



         "Agreement" shall mean this Agreement (including the exhibits and
         -----------
schedules hereto).

         "Assets" means all of the assets (whether real, personal, tangible or
         --------
intangible) used or held for use by the Company in connection with the Yemen
Business including, without limitation, all of the assets reflected on the
Balance Sheet.

         "Balance Sheet" shall have the meaning set forth in Section 3.5 hereof.
         ---------------
         "Balance Sheet Date" shall have the meaning set forth in Section 3.5.
         --------------------
         "Business Day" means any day other than a Saturday, a Sunday or a day
         --------------
on which banks in California are authorized or obligated by law or executive
order to close.

         "Buyer" shall have the meaning set forth in the Preamble hereto.
         -------
         "Claims" means any and all fines, liabilities, judgments, losses,
         --------
costs, expenses, or damages, including in each case, interest, penalties,
reasonable attorneys' fees and reasonable costs of investigations and
litigation.

         "Closing" shall have the meaning set forth in Section 2.2(a) hereof.
         ---------
         "Closing Date" shall have the meaning set forth in Section 2.2(a)
         --------------
hereof.

         "Code" means the Internal Revenue Code of 1986, as amended, and the
         ------
regulations promulgated thereunder.

         "Comeco Shares" shall have the meaning set forth in Section 3.3 hereof.
         ---------------
         "Company" shall have the meaning set forth in the Preamble hereto.
         ---------
         "Company Debt" means any debt, obligation or other arrangement of the
         --------------
Company evidencing or relating to any borrowing or loaning or available
borrowing or loaning of money to the Company (or to any other Person for which
the Company has liability), whether secured or unsecured, or which is intended
to provide any guarantee or credit support by the Company with respect to the
obligations of any Person.

         "Company Interests" shall have the meaning set forth in Section 3.11(a)
         -------------------
hereof.


                                     - 2 -


         "Company Shares" shall have the meaning set forth in the Preamble
         ----------------
hereto.

         "CPA Firm" shall have the meaning set forth in Section 2.3(c) hereof.
         ----------
         "Effective Time" shall mean January 1, 2002.
         ----------------
         "Encumbrances" means any liens, charges, pledges, security interests,
         --------------
options, warrants, purchase rights, preemptive rights, adverse claims, levies,
orders of execution, orders of expropriation or written notifications of intent
to expropriate, easements, equitable interests or other encumbrances.

         "Environmental Law" means all Laws that are designed to regulate,
         -------------------
prevent, punish or remedy the consequences of actions (including omissions,
discharges, spills, releases of pollutants, contaminants, hazardous materials or
wastes) that damage, injure or threaten to damage or injure public health or
safety or the environment.

         "Financial Statements" shall have the meaning set forth in Section 3.5
         ----------------------
hereof.

         "Final Adjustment Amount Calculation" shall have the meaning set forth
         -------------------------------------
in Section 2.3(b) hereof.

         "GAAP" means U.S. generally accepted accounting principles as in effect
         ------
from time to time and as consistently applied.

         "Governmental Authority" means any court, government, legislature,
         ------------------------
council, government department, commission, board, bureau, agency,
instrumentality, arbitrator or other authority of a central government or any
jurisdiction therein, together with any company directly or indirectly owned by
any of the foregoing.

         "Indemnified Party" shall have the meaning set forth in Section 8.2
         -------------------
hereof.

         "Indemnifying Party" shall have the meaning set forth in Section 8.2
         --------------------
hereof.

         "Law" means any applicable law, statute, ordinance, rule or regulation
         -----
or any ruling, writ, injunction, restriction, order, judgment, decree or other
official written act of any Governmental Authority.


                                     - 3 -


         "Notice Period" shall have the meaning set forth in Section 8.3(b)
         ---------------
hereof.

         "PSC" means the Agreement For Petroleum Exploration and Production for
         -----
the East Shabwa Area, made and entered into on April 22, 1989, as amended on
July 22nd, 1993 (with respect to Exploration Period Extension) and July 2, 1996
(with respect to maximum cost recovery), and attached hereto as Exhibit I.

         "Permits" means all licenses, certificates, registrations, approvals,
         ---------
authorizations or permits required of or with the applicable Governmental
Authority.

         "Person" means any individual, corporation, partnership, limited
         --------
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body or other entity.

         "Preliminary Adjustment Amount Calculation" shall have the meaning set
         -------------------------------------------
forth in Section 2.3(a) hereof.

         "Purchase Price" means $16,500,000 plus or minus, as the case may be,
         ----------------
the Adjustment Amount.

         "Securities Act" means the Securities Act of 1933, as amended.
         ----------------
         "Seller" shall have the meaning set forth in the Preamble hereto.
         --------
         "Stockholders' Agreement" means the Amended and Restated Stockholders'
         -------------------------
Agreement by and among the Company, Command Petroleum (Overseas) Pty Limited and
Nomeco Oil & Gas Co., dated as of October 1, 1994, and as amended pursuant to
Amendments to the Amended and Restated Stockholders' Agreement by and among SOCO
Yemen Pty Limited (formerly known as Command Petroleum (Overseas) Pty Limited),
the Seller (which succeeded to the interests of Nomeco Oil & Gas Co. in the
Company), and the Company, effective as of July 1, 1999.

         "Tax Returns" means any return, declaration, report, form, claim for
         -------------
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.

         "Taxes" means any federal, state, local, or foreign income, gross
         -------
receipts, license, payroll, business assets, luxury, goods and services,
employment, excise, severance, stamp, occupation, premium, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock,
franchise, profits, gains, withholding, social security, unemployment,
disability, real property, personal property, sales, use,


                                     - 4 -


wholesale sales, municipal, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever of any
Governmental Authority, including any interest, penalty, or addition thereto,
whether disputed or not.

         "Third Party Claim Notice" shall have the meaning set forth in Section
         --------------------------
8.3(b) hereof.

         "Yemen Business" means the business and operations of the Company which
         ----------------
arise under or out of or relate to the PSC, any hydrocarbons attributable
thereto, or any activities or operations in connection with the PSC or any
hydrocarbons attributable thereto.

         "Voting Debt" shall have the meaning set forth in Section 3.3(a).
         -------------
         Section 1.2    Other Definitional Provisions.
                        ------------------------------
         (a)    The words "hereof," "herein" and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. All references in
this Agreement to an "Article", "Section", "subsection", "Exhibit" or "Schedule"
shall be to an Article, Section, subsection, Exhibit or Schedule of or to this
Agreement, unless the context requires otherwise.

         (b)    The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.

         (c)    The terms "dollars" and "$" shall mean United States dollars.


                                   ARTICLE II
                 PURCHASE AND SALE OF COMPANY SHARES; GUARANTEE
                 ----------------------------------------------

         Section 2.1    Purchase and Sale of Company Shares.
                        -----------------------------------
         (a)    In reliance on the representations, warranties and other terms
hereof and subject to the conditions contained herein, Buyer agrees to purchase
from Seller, and Seller agrees to sell to Buyer, the Company Shares in exchange
for payment of the Purchase Price by Buyer. Seller shall transfer or cause to be
transferred all of the Company Shares to Buyer at Closing. Effective at the
Closing, Seller also hereby assigns to Buyer any rights Seller or its Affiliates
may have to receive moneys from the Company in respect of indebtedness or
otherwise.


                                     - 5 -


         (b)    As consideration for the sale by Seller of the Company Shares to
Buyer on the terms and conditions contained herein, Buyer agrees to pay to
Seller the Purchase Price pursuant to Sections 2.2 and 2.3 hereof.

         Section 2.2    Closing; Delivery and Payment; Guarantee; Indemnity.
                        ----------------------------------------------------
         (a)    Subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing ("Closing") shall be held at the offices of
Buyer, 10889 Wilshire Boulevard, Los Angeles, California 90024, at 7:00 a.m. on
the date hereof. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date."

         (b)    At the Closing, (1) Seller shall deliver, or cause to be
delivered, to Buyer an affidavit duly executed by Seller and in a form
reasonably satisfactory to Buyer certifying, inter alia, that the Seller has
lost the certificate representing the Company Shares and instructing the Company
to issue a replacement certificate in the name of Buyer; (2) Buyer shall pay to
Seller for the Company Shares in immediately available funds by wire transfer to
an account designated by Seller an amount equal to the estimated Purchase Price
calculated in accordance with Section 2.3(a).

         (c)    In addition to the documents and transfers of funds described in
this Section 2.2,

         (1)    Seller will:

                (i) at the Closing deliver to Buyer possession or control of the
         following (other than any such materials or information that are
         subject to a confidentiality agreement, relate to a valuation prepared
         with respect to a previous proposed sale of the Company Shares, or are
         protected by solicitor/client privilege and in each case which are
         identified in reasonable detail on a written list provided to Buyer
         prior to the execution hereof): (A) files, documents, papers,
         contracts, agreements, legal descriptions, open books of account or
         ledgers and documentation in support thereof used or useful in the
         operation of the Yemen Business, and (B) all other information, whether
         in writing, on computer diskette or other form or medium, that pertains
         to the use or ownership of the Assets, the Company or the Company
         Shares, and subject to the right of the Seller and the Guarantor to
         retain copies of any of the foregoing solely for the purposes of
         complying with or satisfying any filing or disclosure requirements
         under any Law or mandated by any Governmental Authority, including, but
         not limited to, any securities disclosure or tax filings (and the
         Seller and Guarantor hereby covenant that any copies so retained shall


                                     - 6 -


         be used only for the foregoing purposes, which covenant shall survive
         the Closing hereunder indefinitely);

                (ii) as soon as is reasonably practicable after the Closing
         Date, deliver to Buyer possession or control of all items referred to
         under Section 2.2(c)(1)(i) hereof that Seller was unable to deliver at
         the Closing;

                (iii) deliver to Buyer possession of all stock registers, minute
         books and corporate books and records for the Company in the possession
         of the Seller or any Affiliate of Seller;

                (iv) deliver to Buyer all documents required to be furnished by
         Seller and its Affiliates to Buyer as conditions precedent under
         Section 6.1 hereof; and

                (v) deliver to Buyer good standing certificates issued by the
         relevant Governmental Authorities, dated as of a recent date and
         evidencing the good standing of the Seller and the Company in their
         respective jurisdictions of incorporation;

         (2)    Buyer will deliver to Seller all documents required to be
     furnished by Buyer and its Affiliates to Seller as conditions precedent
     under Section 6.2 hereof.

         (d)    Guarantor hereby unconditionally and irrevocably guarantees to
Buyer the performance of all obligations of Seller arising out of or in
connection with this Agreement provided that the maximum aggregate liability of
Guarantor to Buyer hereunder shall be limited to an amount equal to the maximum
aggregate liability of Seller to Buyer hereunder less any amounts recovered or
received by the Buyer from the Seller with respect to a breach of the Seller's
obligations hereunder.

         (e)    Guarantor and Seller shall be liable for, and agree to defend,
hold harmless and indemnify Buyer and its Affiliates from and against any and
all Claims arising with respect to the lost stock certificate of Seller referred
to in Section 2.2(b)(1) above and representing the 500 Company Shares held by
Seller prior to the Closing. The indemnification obligations in this Section
2.2(e) are not subject to the minimum threshold limitations in Section 8.6(a)
and shall survive for a period of ten years but are otherwise subject to the
provisions of Article VIII.


                                     - 7 -

         Section 2.3    Calculation of Adjustment Amount; Post-Closing
                        ----------------------------------------------
Adjustment.
- -----------

         (a)    Prior to the date hereof Seller prepared and delivered to Buyer,
using and based upon the best available information to Seller, a statement
setting forth a preliminary calculation of the Adjustment Amount for a Closing
on the date hereof (the "Preliminary Adjustment Amount Calculation"). Such
preliminary calculation shall be used in the calculation of the Purchase Price
payable at Closing (unless the Closing Date is changed by a mutual written
agreement of the parties that contains a revised Preliminary Adjustment Amount
Calculation to reflect the revised Closing Date).

         (b)    Within 90 calendar days following the Closing Date, Buyer shall
cause the Company to prepare a statement setting forth the Final Calculation of
the Adjustment Amount and showing the calculation of each adjustment, based to
the extent possible, on actual Intragroup Contributions and Intragroup Receipts
(each as defined below) after the Effective Time (the "Final Adjustment Amount
Calculation"). Buyer shall give Seller and its representatives reasonable access
to the books, records and personnel of the Yemen Business, and to all work
papers and other relevant documents and analysis, for the purpose of reviewing
and auditing the Final Adjustment Amount Calculation. Seller shall have a period
of 30 calendar days after the delivery to it of the Final Adjustment Amount
Calculation, to review such calculation and to make any objections to the Final
Adjustment Amount Calculation in writing to Buyer. If no written objections to
the Final Adjustment Amount Calculation are delivered to Buyer within the 30-day
period, the Final Adjustment Amount Calculation shall be deemed to be accepted
and approved by all parties, and the difference between the Preliminary
Adjustment Amount Calculation and the Final Adjustment Amount Calculation, if
any, shall be paid by Seller to Buyer (if the estimated Purchase Price paid at
Closing exceeded the final Purchase Price calculated in accordance herewith) or
by Buyer to Seller (if the estimated Purchase Price paid at Closing was less
than the final Purchase Price calculated in accordance herewith), in either case
not later than five Business Days following the expiration of such 30-day
period, or at such other time and date as may be mutually agreed upon in writing
by Buyer and Seller. If written objections of Seller to the Final Adjustment
Amount Calculation are delivered to Buyer within the 30-day period, then Buyer
and Seller shall attempt to resolve the matter or matters in dispute and, if
such disputes are resolved by Buyer and Seller, the difference between the
Preliminary Adjustment Amount Calculation and the Final Adjustment Amount
Calculation, if any, shall be paid by Seller to Buyer (if the estimated Purchase
Price paid at Closing exceeded the final Purchase Price calculated in accordance
herewith) or by Buyer to Seller (if the estimated Purchase Price paid at Closing
was less than the final Purchase Price calculated in accordance herewith), in
either case not later than five Business Days following the resolution of all
disputes or at such other time and date as may be mutually agreed upon


                                     - 8 -


in writing by Buyer and Seller. Seller shall quantify its objections to the
extent reasonably practicable in all written objections delivered to Buyer with
respect to the Final Adjustment Amount Calculation. Notwithstanding anything to
the contrary in Section 2.3, nothing in Section 2.3 nor any agreement regarding
the Final Adjustment Amount Calculation shall release, limit or impair any
representations or warranties by the parties in Articles III and IV or the
parties' agreements in Section 5.1.

         (c)    If such disputes cannot be resolved by Buyer and Seller within
20 calendar days after the delivery of the objections to the Final Adjustment
Amount Calculation, then each of the Buyer and Seller shall prepare and submit a
written statement setting forth the specific matters in dispute to
PriceWaterhouse Coopers (the "CPA Firm") along with any information, supporting
documentation and other materials in respect of each party's determination of
such calculation and the specific matters in dispute, which firm shall render
its opinion as to such matters in accordance with the terms hereof. Based on
that opinion, the CPA Firm shall then send to Buyer and to Seller a written
determination of the matters in dispute and a written determination of the
Adjustment Amount based upon such opinion, whereupon the confirmed or revised
Final Adjustment Amount Calculation shall be final and binding upon Buyer and
Seller. The difference between the Preliminary Adjustment Amount Calculation and
the Final Adjustment Amount Calculation, if any, shall be paid by Seller to
Buyer (if the estimated Purchase Price paid at Closing exceeded the final
Purchase Price calculated in accordance herewith) or by Buyer to Seller (if the
estimated Purchase Price paid at Closing was less than the final Purchase Price
calculated in accordance herewith), in either case not later than five Business
Days following the receipt by Buyer and Seller of those documents prepared by
the CPA Firm and evidencing that opinion or at such other time and date as may
be mutually agreed upon in writing by Buyer and Seller. All costs, fees and
expenses charged or incurred by the CPA Firm, if any, shall be borne equally by
Seller and Buyer.

         (d)    The "Adjustment Amount" shall equal (i) the amount of any
                     -----------------
Intragroup Contributions from and including the Effective Time to the Closing
(as used herein, "Intragroup Contributions" shall mean any capital contributions
paid by Seller to the Company), minus (ii) any Intragroup Receipts from and
including the Effective Time to the Closing (as used herein, the "Intragroup
Receipts" shall mean any dividends, share redemptions, share purchases or
repurchases, debt repayments or other distributions made by the Company to
Seller or any of its Affiliates, and any other amounts payable to the Company
but received and retained by Seller or any of its Affiliates). For purposes of
clarity in interpreting the definition "Purchase Price", if the Adjustment
Amount is a positive number it shall be added to $16,500,000. If the Adjustment
Amount is a negative number it shall be subtracted from $16,500,000. By way of
example, the Seller has advised the Buyer that the Preliminary Adjustment Amount
will be negative $753,121 with respect to a Closing on July 23, 2002. Therefore,
the estimated Purchase


                                     - 9 -


Price payable at Closing on July 23, 2002 would be $15,746,879 ($16,500,000 -
$753,121).


                                   ARTICLE III
             REPRESENTATIONS AND WARRANTIES OF SELLER AND GUARANTOR
             ------------------------------------------------------

         Seller and Guarantor represent and warrant to Buyer as at the Closing
Date as follows with respect to Seller, Guarantor and the Company:

         Section 3.1    Organization of Seller and Guarantor. Seller is a
                        -------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and is duly qualified as a foreign corporation and in good
standing in each other jurisdiction, if any, in which such qualification is
required. Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the Yukon Territory, Canada and is duly
qualified as a foreign corporation and in good standing in each other
jurisdiction, if any, in which such qualification is required.

         Section 3.2    Authority; No Conflicts. Seller and Guarantor have full
                        ------------------------
power and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder. This Agreement has been duly authorized,
executed and delivered by Seller and constitutes a legal, valid and binding
obligation of Seller and Guarantor, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights (other than
fraudulent transfer) and to general equity principles. Neither the execution and
delivery of this Agreement by Seller and Guarantor nor the consummation of the
transactions contemplated herein by Seller and Guarantor nor the compliance by
Seller and Guarantor with its terms and provisions will (a) violate or conflict
with any provision of the respective charter documents of Seller, Guarantor or
the Company; (b) conflict with or result in the breach of any of the terms,
conditions or provisions of, or constitute a default under (or give rise to any
right of termination, cancellation or acceleration) (whether after the giving of
notice or the lapse of time or both) of any indenture, mortgage, lease or other
material agreement, contract or instrument (including the PSC) to which Seller,
Guarantor or the Company is a party or by which Seller, Guarantor or any of
their respective or the Company's properties or assets may be bound; (c) violate
any existing provision of Law of Yemen or the United States; or (d) result in
the creation of, or give any Person the right to create, any Encumbrance upon
the Company Shares or the Assets.

         Section 3.3    Capitalization of the Company; Organization and
                        -----------------------------------------------
Qualification; Subsidiaries. (a) The entire authorized capital stock of the
- ----------------------------
Company


                                     - 10 -


consists of 1,212 shares of Class A Common Stock, par value $.001 per share, of
which only the 500 Company Shares and 712 shares held by Soco Yemen PTY Limited,
a company organized and existing under the laws of the State of New South Wales,
Australia (together with the Company Shares, the "Comeco Shares"), are issued
and outstanding. The Company Shares have been duly authorized and are validly
issued, fully paid, nonassessable and free of preemptive rights, and were not
issued in violation of the preemptive rights of any Person. Except for the
Comeco Shares, there are outstanding (i) no shares of capital stock, Voting Debt
or other voting securities of the Company; (ii) no securities of the Company
convertible into or exchangeable for shares of capital stock, Voting Debt or
other voting securities of the Company; and (iii) no preemptive or other
outstanding rights, subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatsoever under which the Company or the Seller or any
Affiliate of the Seller is or may become obligated to issue, assign, transfer,
deliver, sell, purchase, redeem or acquire, or cause to be issued, assigned,
transferred, delivered, sold, purchased, redeemed or acquired, any shares of
capital stock or any Voting Debt or other voting securities of the Company, or
obligating the Company, Seller or any Affiliate of Seller to issue, grant,
extend or enter into any such subscription, option, warrant, call, right,
commitment, agreement or other arrangement. The term "Voting Debt" means any
bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into or exchangeable for securities having the right to vote) for
the election of Directors of the Company.

         (b)    Seller, is, and as of the Closing will be, the sole record and
beneficial owner of the Company Shares. Seller has, and as of the Closing will
have, good and valid title to the Company Shares free and clear of all
Encumbrances other than the security interest of the Company set forth in
Section 7.3(h) of the Stockholders' Agreement. Upon the purchase of the Company
Shares as contemplated by this Agreement, Buyer will obtain good and valid title
to the Company Shares free and clear of all Encumbrances other than the security
interest of the Company set forth in Section 7.3(h) of the Stockholders'
Agreement. Neither Seller nor any Affiliate of Seller is a party to any option,
warrant, purchase right, contract, commitment or other agreement or arrangement
of any character or nature whatsoever (other than this Agreement and the
Stockholders' Agreement) that could require Seller or any such Affiliate of
Seller to sell, transfer, or otherwise dispose of any Company Shares. Except as
created by this Agreement and the Stockholders' Agreement, Seller is not a party
to any voting trust, proxy or other agreement or understanding with respect to
the voting, holding or disposition of any Company Shares. There are no currently
outstanding proxies granted by Seller under or pursuant to the terms of the
Stockholders' Agreement.


                                     - 11 -


         (c)    The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own or lease its properties and carry
on its business as currently owned or conducted. The Company does not do
business in any jurisdiction in which the nature of the properties owned or
leased by it or the business transacted by it requires it to be so registered,
qualified or licensed, other than any such jurisdiction in which the Company is
so registered, qualified or licensed.

         (d)    The Company does not have any direct or indirect subsidiaries.
The Company does not own any shares, equity interests or other equity securities
in any Person.

         (e)    The Company does not own or lease (nor has it ever owned or
leased during the period when Seller was a stockholder of the Company) any
assets or properties having a value in excess of $10,000 in the aggregate and
does not conduct (nor has it ever conducted during the period when Seller was a
stockholder of the Company) any business or operations other than assets,
properties, business and operations which are related to or arise out of the
Yemen Business and the PSC. The Company does not have any liabilities with
respect to any business or operations that are unrelated to the Yemen Business
or the PSC.

         (f)    The Company has, and as of the Closing will have, good and valid
title to its interest in the PSC free and clear of all Encumbrances.

         Section 3.4    Consents and Approvals. Except as set forth in Schedule
                        -----------------------
3.4, the execution, delivery and performance of this Agreement by Seller and
Guarantor and the consummation of the transactions contemplated herein by Seller
and Guarantor will not require Seller, Guarantor or the Company or any of their
respective Affiliates to obtain any consent, waiver, authorization or approval
of, or make any filing with or give notice to, any Person.

         Section 3.5    Financial Statements. Attached hereto as Schedule 3.5 is
                        ---------------------
the balance sheet (the "Balance Sheet") of the Company as of December 31, 2001
(the "Balance Sheet Date") and the statement of income of the Company for the
year ended on the Balance Sheet Date (collectively, the "Financial Statements").
The Financial Statements present fairly, in accordance with GAAP, the financial
condition of the Company as of such date and the results of operations of the
Company for such period.

         Section 3.6    Brokers' Fees. No action has been taken by Seller,
                        --------------
Guarantor or any Affiliate of Seller or Guarantor or, to the best of the
knowledge of Seller, the Company that would give rise to any valid claim against
the Company or the


                                     - 12 -

Buyer or any Affiliate of Buyer for a brokerage commission, finder's fee or
other like payment with respect to the transactions contemplated hereby.

         Section 3.7    Taxes. (a) All Tax Returns that are required to be filed
                        ------
on or before the Closing Date (taking into account applicable extensions) by or
with respect to the Company have been duly filed and each such Tax Return is or
will be complete and accurate; (b) all Taxes shown to be due on the Tax Returns
referred to in clause (a), all Taxes for periods ending on or before the Closing
Date, whether or not shown as being due on any Tax Return, and all Taxes for
which a demand for payment or assessment has been received by the Company or any
Affiliate of the Company have been timely paid; (c) except as set forth in
Schedule 3.7, the Company has no dual consolidated losses as defined by Code
Regulation Section 1.1503-2(c)(5) and has not prior to Closing experienced a
triggering event as defined by Code Regulation Section 1.1503-2(g)(2); (d)
except as set forth in Schedule 3.7, the Company has no overall foreign loss or
net operating loss carrybacks or carryovers that includes an overall foreign
loss; (e) there are no pending or threatened actions or proceedings for the
assessment or collection of Taxes against or in respect of the Company; (f) as
of the Closing Date, there will be no outstanding waivers or agreements
extending the applicable statute of limitations for any period with respect to
any Taxes of the Company; and (g) as of the date hereof, no taxing authorities
are presently conducting any audits or other examinations of the Company or of
any Tax Returns referred to in clause (a). The Company has no outstanding
liability under the Tax Indemnity Agreement referred to in Schedule 3.10.

         Section 3.8    Litigation and Claims. Except as set forth in Schedule
                        ----------------------
3.8 hereto, there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, proceedings, condemnations, expropriations,
arbitrations, audits or investigations (collectively, "Actions") formally
commenced, pending or, to the best of the best of the knowledge of Seller,
threatened by or against the Company or against any of its properties or assets.
The Company, the Yemen Business and the Assets are not subject to any order,
writ, judgment, award, injunction, decree of any Governmental Authority of
competent jurisdiction or any arbitrator or arbitrators.

         Section 3.9    Employees. The Company has not had, and as of the
                        ----------
Closing will not have, any employees. The Company has not adopted any employee
plans and has no employee related liabilities, whether contingent or otherwise.

         Section 3.10    Contracts. (a) Schedule 3.10 hereto sets forth a list
                         ----------
of every document, contract or agreement (whether written or oral) currently in
effect to which the Company is a party, including all amendments thereto.
Without limiting the generality of the foregoing, other than as included on
Schedule 3.10 there are no such contracts or agreements to which the Company is
a party (i) to or with individual directors or officers of the Company, any
shareholder of the Company, any Affiliate of


                                     - 13 -


any such shareholder or any director or officer of any of the foregoing, (ii)
that contain any covenant not to compete or an area of mutual interest agreement
or that purport to restrict the right of the Company to engage in any line of
business in any geographical location or that conditions such right on the
participation or approval of any third party, (iii) that constitute any unified
extraction, pooling or unitization agreements, including any production
balancing and over/under lift agreements relating thereto, or (iv) relating to
currently existing intercompany payables or receivables between the Company and
any of its shareholders or with their Affiliates which are in effect or will be
in effect following the Closing.

         (b)    There are no defaults by the Company under any obligation of any
such contracts. Neither the Seller nor the Guarantor nor any Affiliate of the
Seller or Guarantor nor, to the best of the knowledge of Seller, the Company has
received any written notice from any Governmental Authority or any third Person
(i) that the Company or any other party to a contract is (or upon further notice
or the passage of time, or both, with or without cure will be) in a violation,
default or breach of any contract, or (ii) that terminates, rescinds, revokes,
amends or modifies or seeks to terminate, rescind, revoke, amend or modify any
contract.

         (c)    Except as set forth in Schedule 3.10, as of the date hereof and
as of the Closing (if different), there are and will be no payments owing to
Pecten International Company under the PYC Assignment, made the 8th day of
November 1993, between Pecten Yemen Company and Pecten International Company.
There are no amounts (whether indebtedness for money borrowed or otherwise)
outstanding or otherwise owing now or in the future to Seller or its Affiliates
from the Company. All amounts payable under the Settlement Agreement identified
in Schedule 3.10 have been paid.

         (d)    To the best of the knowledge of Seller, true, correct and
complete originals or copies of all written contracts (containing all
amendments, corrections or modifications thereof) listed on Schedule 3.10 have
been made available to Buyer.

         Section 3.11    Title to Assets. (a) All rights, benefits and interests
                         ----------------
granted to or inuring to the benefit of the Company (or purported to be granted
to or inuring to the benefit of the Company) in or under the PSC (the "Company
Interests"), are owned legally and beneficially by the Company free and clear of
any Encumbrances. No act or omission of the Company or, to the best of the
knowledge of Seller, any other Person has occurred which would allow any party
to the PSC to rescind, revoke, terminate or modify the PSC. The Company is not a
party to or bound by any assignment, contract, agreement or commitment (i) to
assign or transfer any interest in, or to grant or create any


                                     - 14 -


Encumbrance with respect to, the Company Interests or (ii) that could require
the Company to sell, transfer, or otherwise dispose of the Company Interests.

         (b)    The Company has good and valid title to all the assets reflected
on the Balance Sheet or acquired by the Company after the Balance Sheet Date, in
each case free and clear of any Encumbrances, except as set forth in the
Financial Statements.

         Section 3.12    Corporate Documents. True and correct originals or
                         --------------------
copies of the Company's charter and organizational documents, bylaws, minute
books, stock register books and other corporate books and records (containing
all amendments, corrections or modifications thereto) have been made available
to Buyer.

         Section 3.13    Compliance with Law and Permits. (a) Except where such
                         --------------------------------
compliance would have been penalized by the Code, the Company has complied in
all material respects with all Laws and Permits applicable to the Company, the
Yemen Business or the Assets.

         (b)    Neither the Company, Seller nor any Affiliate of Seller has
received written notice of any violation of or non-compliance with any Law or
Permit applicable to the Company, the Yemen Business or the Assets.

         (c)    With respect to any activities undertaken in connection with the
Company, the Yemen Business or the PSC, neither the Seller, nor any of its
Affiliates, nor the Company, nor any of the shareholders, directors, officers
and employees of Seller or any of its Affiliates nor any officers or employees
of the Company nor any other person or entity acting on behalf of any of them
has made an offer or promise to pay, loan or give a payment, a loan or a gift of
money or anything of value; or (ii) has authorized any such offer, promise,
payment, loan or gift, in any event directly or indirectly to or for the use or
benefit of any Official, or any other person while knowing that all or a portion
of such money or thing of value will be offered, given, paid, loaned or
promised, directly or indirectly, to or for the use or benefit of any Official,
for any of the following purposes: (A) influencing any act or decision of such
Official, in his or its official capacity; (B) inducing such Official to do or
omit to do any act in violation of the lawful duty of such Official; (C)
inducing such Official to use his or its influence with any Governmental
Authority, Public International Organization or political party, to affect or
influence any act or decision of such entity, organization or party; or (D)
securing any improper advantage, in any case, in order to assist the Company in
connection with any of its activities. For purposes hereof, "Official" shall
mean (a) any officer or employee of, or any other person acting in an official
capacity for or on behalf of, any Governmental Authority or Public International
Organization; (b) any political party; (c) any candidate for political office;
or (d) any officer or employee of, or any person acting


                                     - 15 -


in an official capacity for or on behalf of, any political party or any
candidate for political office. "Public International Organization" shall mean
an organization designated as such by Executive Order under the laws of the
United States of America.

         Section 3.14    Absence of Subsequent Actions or Events. Except as set
                         ----------------------------------------
forth in Schedule 3.14, since the Balance Sheet Date the Company has not:

         (a)    purchased or redeemed any shares of capital stock or other
     equity interests or other securities or declared, paid or set aside for
     payment any dividend (or other distribution) in cash or of securities or
     property other than cash;

         (b)    changed its fiscal year end from December 31;

         (c)    mortgaged or pledged any portion of its Assets;

         (d)    made any additions to or written down, sold, assigned,
     transferred or otherwise disposed of any of its assets other than sales of
     inventory in the ordinary course of business or written off or canceled any
     debts or claims or receivables, in whole or in part;

         (e)    made any capital commitment in excess of $50,000, individually,
     and not provided for in the Approved Annual Budget under the Stockholders'
     Agreement;

         (f)    suffered any damage, destruction or loss in excess of $100,000
     in the aggregate with respect to any assets of the Company;

         (g)    made any payment or other compensation of any amount to a
     director or officer of the Company or any shareholder of the Company;

         (h)    made or agreed to make any charitable contributions or pledges
     therefor or incurred any other non-business expense;

         (i)    entered into any joint venture, partnership or similar
     arrangement;

         (j)    made any change in its method of accounting or accounting
     policies or practices;

         (k)    leased any properties or assets to any Person, whether by lease,
     leveraged lease, lease intended as security, vendor arrangement,
     conditional sales agreement or otherwise;


                                     - 16 -


         (l)    entered into any settlement or made or granted any consent to
     any order, decree or judgment relating to or arising out of any Action
     relating to the Company; or

         (m)    paid or incurred any Company Debt.

Since the Balance Sheet Date, there has not been any material adverse change in
or affecting the general affairs, management, financial position or results of
operations of the Company other than changes in commodity prices generally or
global or national economic changes.

         Section 3.15    Capital Commitments. Except as shown on Schedule 3.15
                         --------------------
or as set forth in the most recent Approved Annual Budget (as defined in the
Stockholders' Agreement), as of the date of this Agreement there are no
outstanding Authorizations for Expenditures or other commitments to make capital
expenditures which are binding on the Company.

         Section 3.16    Related Party Transactions. Other than the Amended
                         ---------------------------
Technical and Administrative Services Agreement entered into by the Company and
SOCO Yemen Pty. Limited, dated October 1, 1994, and except as set forth on
Schedule 3.16, the Company has not entered into any contracts or other
agreements or transactions (whether written or oral) with either of its
shareholders or their respective Affiliates that create any right or obligation
for the benefit of or binding on the Company that involves $10,000 or more.

         Section 3.17    Insurance Policies. To the best of the knowledge of
                         -------------------
Seller, Schedule 3.17 sets forth a list of all policies of fire, casualty,
liability, burglary, fidelity, worker's compensation, business interruption,
umbrella and other forms of insurance held as of the Balance Sheet Date, by the
Company or any Affiliate of the Company. Except as otherwise set forth on
Schedule 3.17, all premiums due and payable for the insurance in Schedule 3.17
have been duly paid.

         Section 3.18    Directors and Representatives. Schedule 3.18 contains a
                         ------------------------------
true and complete list of the names of all of the Company's directors (together
with appointing stockholder) and officers and all Persons holding powers of
attorney.

         Section 3.19    Environmental Matters. There are no violations of
                         ----------------------
Environmental Law in effect on the Closing Date relating to activities under the
PSC or


                                     - 17 -


otherwise relating to the Company, the operation of the Yemen Business or the
Company's interest in the PSC which could have a material adverse effect on the
Company, the Assets or the Yemen Business. Neither Seller nor the Company has
received any notice of any pending or threatened investigation with respect to
any Environmental Law relating to the activities under the PSC or otherwise
relating to the Company, the operation of the Yemen Business or the Company's
interest in the PSC. There has been no contamination of groundwater, surface
water or soil resulting from activities under the PSC or otherwise relating to
the Company, the operation of the Yemen Business or the Company's interest in
the PSC that could require remediation under Environmental Law in effect on the
Closing Date.


                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER
                     ---------------------------------------

         Buyer represents and warrants to Seller as at the Closing Date as
follows:

         Section 4.1    Organization of Buyer. Buyer is a corporation duly
                        ----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.

         Section 4.2    Authority; No Conflicts. Buyer has full power and
                        ------------------------
authority to execute and deliver this Agreement and perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights (other than fraudulent transfer) and to general
equity principles. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein by Buyer nor the compliance
by Buyer with its terms and provisions will (a) violate any provision of the
certificate of incorporation or by-laws of Buyer; (b) conflict with or result in
the breach of any of the terms, conditions or provisions of, or constitute a
default under (or give rise to any right of termination, cancellation or
acceleration) (whether after the giving of notice or the lapse of time or both)
of any indenture, mortgage, lease, or other material agreement, contract or
instrument to which Buyer is a party or by which Buyer or any of its properties
or assets may be bound; or (c) violate any existing provision of Law.

Section 4.3    Consents and Approvals. Except as set forth in Schedule
               -----------------------
4.3 the execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated herein by Buyer will not require
Buyer to obtain any consent, waiver,


                                     - 18 -


authorization or approval of, or make any filing with or give notice to, any
Person.

         Section 4.4    Securities Act. Buyer is acquiring the Company Shares
                        ---------------
solely for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Securities Act.
Buyer acknowledges that the Company Shares are not registered under the
Securities Act or any applicable state securities law, and that such Company
Shares may not be transferred or sold except pursuant to the registration
provisions of such Securities Act or pursuant to an applicable exemption
therefrom and pursuant to state securities laws and regulations as applicable.

         Section 4.5    Brokers' Fees. No action has been taken by the Buyer
                        --------------
that would give rise to any valid claim against Seller, Guarantor or any
Affiliate of Seller for a brokerage commission, finder's fee or other like
payment with respect to the transactions contemplated by this Agreement.


                                    ARTICLE V
                              CERTAIN COVENANTS AND
                              ---------------------
                         AGREEMENTS OF SELLER AND BUYER
                         ------------------------------

         Section 5.1    Tax Matters.

         (a)    Payments. Except as provided for in Section 5.1(b) herein, all
                ---------
Taxes of or with respect to the Company or incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by and paid to
the appropriate Tax authority by the party that is responsible therefor under
the applicable Tax law.

         (b)    Sales, Use, VAT and other Transfer Taxes. All sales, use, value
                -----------------------------------------
added or other similar transfer taxes, if any, incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by Seller.
Seller shall at its expense file all necessary Tax Returns and other
documentation in respect to any such transfer taxes. All stock transfer taxes,
if any, recording or similar taxes or fees incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by Seller.

         (c)    Cooperation. Seller and Buyer shall (i) each provide the other,
                ------------
and Buyer shall cause the Company to provide to Seller, with such assistance as
may reasonably be requested by any of them in connection with the preparation of
any Tax Return, audit or other examination by any taxing authority or judicial
or administrative proceedings relating to liability for Taxes, and (ii) each
provide the other with any


                                     - 19 -


amount required to be shown on any Tax Return of the other for any period.
Without limiting the generality of the foregoing, Buyer shall cause the Company
to retain until the applicable statutes of limitations (including any
extensions) have expired, copies of all Tax Returns, supporting work schedules
and other records or information in its possession which may be relevant to such
returns for all taxable periods from January 1, 1994 to the Closing Date,
inclusive, and shall not destroy or otherwise dispose of any such records
without first providing Seller with an opportunity to review and copy the same.
Following the Closing Date, Seller shall forward to Buyer all Tax statements
received by Seller with respect to the Assets for any period that begins before
and ends after the Closing Date within thirty (30) days after its receipt
thereof.

         Any information obtained by a party or its Affiliates from another
party or its Affiliates in connection with any Tax matters to which this
Agreement applies shall be kept confidential, except as may be otherwise
necessary in connection with the filing of Tax Returns or claims for refund or
in conducting an audit or other proceeding.

         (d)    Survival of Agreements. All covenants and agreements set forth
                -----------------------
in this Section 5.1 shall survive the Closing Date until 30 calendar days after
the expiration of all applicable statutes of limitation (including any and all
extensions thereof).

         (e)    Indemnity. Seller shall be liable for, and agrees to defend,
                ----------
hold harmless and indemnify Buyer and its Affiliates (including, after the
Closing Date, the Company) from and against any and all Claims with respect to
any Taxes of any corporation or other Person, other than the Company, that is or
was a member or parent of any affiliated group of corporations or other Persons
that included Seller, including any Taxes for which the Company is or may be or
become liable for under any successor or transferee liability law or other
similar law.

         The indemnification obligations of Seller contained in this Section
5.1(e) are not subject to the minimum threshold contained in Section 8.6(a) but
are otherwise subject to Article VIII.

         Section 5.2    Registrations, Filings and Consents. Seller and Buyer
                        ------------------------------------
shall cooperate and use their respective reasonable best efforts to fulfill the
conditions precedent to the other party's obligations hereunder, including but
not limited to, securing as promptly as practicable all consents, approvals,
waivers and authorizations required, necessary or desirable in connection with
the transactions contemplated hereby.

         Section 5.3    Confidentiality. Neither party hereto shall disclose to
                        ----------------
any Person any information relating to this Agreement, the negotiations leading
to this Agreement or the transactions contemplated hereby or any information
obtained from the other party hereto in connection with this Agreement, the
negotiations leading to this Agreement or the transactions contemplated hereby,
unless such information at the time


                                     - 20 -


of disclosure (i) is or was in the public domain, (ii) was known to either party
prior to its disclosure by the other party, (iii) is disclosed to either party
by a third Person who did not receive such information on a confidential basis
or (iv) is required to be disclosed by either party or by its Affiliates,
directors, officers, employees or other agents in connection with legal or
governmental proceedings or filing or disclosure requirements arising under Law
or rules of the New York Stock Exchange, the NASDAQ National Market System or
other public securities exchange on which the securities of the parties or their
Affiliates are listed. Each party hereto may disclose such information to its
Affiliates, directors, officers, employees, counsel, insurance brokers,
accountants or other agents or representatives provided such party causes such
persons to keep such information confidential. Notwithstanding the foregoing, in
the event that (i) Buyer sells, transfers or otherwise disposes of Comeco Shares
or (ii) causes the Company to sell, transfer or otherwise dispose of all or
substantially all of the assets of the Company or the Yemen Business or sells,
assigns or allows other Persons to participate in its rights and obligations
under the PSC, Buyer shall have the right to disclose such information as it
reasonably considers appropriate and necessary without Seller's consent;
provided, however, that in such event prior to disclosing such information Buyer
shall cause the proposed recipient of such information to enter into a
confidentiality agreement with respect to such information.

         Section 5.4    Employee Matters; PYC Assignment, etc. Seller shall
                        --------------------------------------
indemnify the Buyer, its Affiliates and the Company against and in respect of
all Claims sustained or incurred arising out of any breaches of the Seller's
representations, warranties and covenants set forth in Section 3.9 and Section
3.10(c) of this Agreement. The indemnification obligations of Buyer contained in
this Section 5.4 are not subject to the minimum threshold contained in Section
8.6(a) but are otherwise subject to Article VIII.

         Section 5.5    Further Assurances. At any time after the Closing Date,
                        -------------------
each of Seller and Buyer shall promptly execute, acknowledge and deliver any
other assurances or documents reasonably requested by Seller or Buyer, as the
case may be, and necessary for each of Seller and Buyer, as the case may be, to
satisfy its obligations hereunder or obtain the benefits contemplated hereby.



                                     - 21 -


                                   ARTICLE VI
                              CONDITIONS TO CLOSING
                              ---------------------

         Section 6.1    Conditions to Obligations of Buyer. The obligation of
                        -----------------------------------
Buyer to consummate the transactions contemplated hereby shall be subject to the
satisfaction or waiver by Buyer in writing on or prior to the Closing Date of
each of the following conditions:

         (a)    Each of the representations and warranties of Seller and
     Guarantor contained in this Agreement shall be true in all material
     respects when made and as of the Closing Date, with the same effect as
     though such representations and warranties had been made on and as of the
     Closing Date (except representations and warranties that are made as of a
     specific date need be true in all material respects only as of such date);
     each of the covenants and agreements of Seller and Guarantor to be
     performed on or prior to the Closing Date shall have been duly performed in
     all material respects; and Buyer shall have received at Closing a
     certificate to that effect dated as of the Closing Date and executed on
     behalf of Seller by its President or any of its Vice Presidents and its
     Secretary or any of its Assistant Secretaries.

         (b)    All approvals, authorizations and consents of any Governmental
     Authority or any other Person necessary for the consummation by Seller and
     its Affiliates or, as contemplated by Section 4.3 hereof, by Buyer and its
     Affiliates of the transactions contemplated herein shall have been obtained
     in form and substance reasonably satisfactory to Buyer.

         (c)    No action, suit, proceeding or investigation (excluding any such
     matter initiated by Buyer or any of its Affiliates) by or before any court
     or other Governmental Authority shall have been taken, instituted or, to
     the knowledge of Seller, Buyer or any of their respective Affiliates,
     threatened against Seller, Buyer or any of their respective Affiliates, to
     restrain, prohibit, invalidate or delay any of the transactions
     contemplated hereby.

         (d)    There shall not be any injunction, judgment, order, decree or
     ruling in effect preventing consummation of any of the transactions
     contemplated by this Agreement.

         (e)    Buyer shall have received from Seller resignations of all
     directors of the Company appointed and elected by Seller.

         (f)    Buyer shall have received from Seller (i) a release of all
     contracts or agreements between the Company and the Seller or any Affiliate
     of the Seller and (ii) an Affidavit of Non-Foreign Status in form necessary
     to avoid any withholding requirement under Section 1445 of the Code.


                                     - 22 -


         (g)    Buyer shall have received a copy of the resolutions of the Board
     of Directors of Seller and Guarantor, certified by appropriate officers of
     Seller and Guarantor, authorizing the execution and delivery of this
     Agreement and the consummation of the transactions contemplated hereby.

         (h)    Since the Balance Sheet Date, there shall not have been any
     material adverse change, or any development involving a prospective
     material adverse change, in or affecting the general affairs, management,
     financial position or results of operations of the Company.

         (i)    Buyer shall have received a duly executed written waiver from
     SOCO Yemen Pty. Limited in respect of its rights of first refusal under
     Article XII of the Stockholders' Agreement relating to the Company Shares
     to be sold pursuant to the terms of this Agreement, in the form attached
     hereto as Exhibit II.

         (j)    Seller shall have entered into an Assumption Agreement pursuant
     to the Stockholders' Agreement.

         (k)    SOCO Yemen Pty Limited shall have executed and delivered to
     Buyer contemporaneously with the Closing, an amendment to the Stockholders'
     Agreement in the form attached hereto as Exhibit III.

         Section 6.2    Conditions to Obligations of Seller. The obligation of
                        ------------------------------------
Seller to consummate the transactions contemplated hereby shall be subject to
the satisfaction or waiver by Seller in writing on or prior to the Closing Date
of each of the following conditions:

         (a)    Each of the representations and warranties of Buyer contained in
     this Agreement shall be true in all material respects when made and as of
     the Closing Date, with the same effect as though such representations and
     warranties had been made on and as of the Closing Date (except
     representations and warranties that are made as of a specific date need be
     true in all material respects only as of such date); each of the covenants
     and agreements of Buyer to be performed on or prior to the Closing Date
     shall have been duly performed in all material respects; and Seller shall
     have received at the Closing a certificate to that effect dated as of the
     Closing Date and executed on behalf of Buyer by its President or any of its
     Vice Presidents and its Secretary or any of its Assistant Secretaries.


                                     - 23 -


         (b)    All approvals, authorizations and consents of any Governmental
     Authority or any other Person necessary for the consummation by Buyer and
     its Affiliates, or as contemplated by Section 3.4 hereof, by Seller and its
     Affiliates of the transactions contemplated herein shall have been
     obtained.

         (c)    No action, suit, proceeding or investigation (excluding any such
     matter initiated by Seller or any of its Affiliates) by or before any court
     or other Governmental Authority shall have been taken, instituted or, to
     the knowledge of Seller, Buyer or any of their respective Affiliates,
     threatened against Seller, Buyer or any of their respective Affiliates, to
     restrain, prohibit or invalidate or delay any of the transactions
     contemplated hereby.

         (d)    There shall not be any injunction, judgment, order, decree or
     ruling in effect preventing consummation of any of the transactions
     contemplated by this Agreement.

         (e)    Seller shall have received a copy of the resolutions of the
     Board of Directors of Buyer, certified by an appropriate officer of Buyer,
     authorizing the execution and delivery of this Agreement and the
     consummation of the transactions contemplated hereby.

         (f)    Seller shall have received a duly executed written waiver from
     SOCO Yemen Pty. Limited in respect of its rights of first refusal under
     Article XII of the Stockholders' Agreement relating to the Company Shares
     to be sold pursuant to the terms of this Agreement, in the form attached
     hereto as Exhibit II.

         (g)    Buyer shall have entered into an Assumption Agreement pursuant
     to the Stockholders' Agreement.


                                   ARTICLE VII
                                   TERMINATION
                                   -----------

         Section 7.1    Termination. This Agreement may be terminated at any
                        ------------
time prior to Closing:

         (a)    by the mutual written agreement of Seller and Buyer;

         (b)    by Seller or Buyer, by giving written notice of such termination
     to the other party hereto, if the Closing shall not have occurred on the
     date hereof;


                                     - 24 -


     provided that the terminating party is not in material breach of its
     obligations under this Agreement;

         (c)    by Buyer or Seller if there has been a material breach of any
     representation, warranty, covenant or agreement made to or for the benefit
     of the terminating party in this Agreement, which breach cannot be or has
     not been cured within 15 days after the giving of written notice to the
     breaching party of such breach (assuming that, by mutual agreement of the
     parties, the Closing has not yet occurred).

         Section 7.2    Effect of Termination. In the event of the termination
of this Agreement in accordance with Section 7.1 hereof, this Agreement shall
thereafter become void and have no effect, and no party hereto (or any of their
respective Affiliates, representatives, directors, officers or employees) shall
have any liability to the other party hereto, provided that nothing herein will
                                              --------
relieve any party from liability for any breach of this Agreement prior to such
termination.


                                  ARTICLE VIII
                          SURVIVAL AND INDEMNIFICATION
                          ----------------------------

         Section 8.1    Survival of Representations, Warranties, Covenants and
                        ------------------------------------------------------
Agreements. Notwithstanding any otherwise applicable statute of limitations, the
- -----------
representations, warranties, covenants and agreements included or provided for
herein shall survive Closing until three years after the Closing Date; provided,
however, that any covenant or agreement that by its express terms cannot be
performed within such time period shall survive Closing until the date or time
specified therein; provided, further that any representation or warranty
                   --------  -------
contained in Section 3.7 shall survive Closing until the expiration of the
applicable statute of limitations (including any waivers or extensions thereof)
with respect to such matters.

         Section 8.2    Indemnification.
                        ----------------
         For a period commencing on the Closing Date and ending, as the case may
be, upon the expiration of the periods specified in Section 8.1 hereof, Seller,
on the one hand, or Buyer, on the other hand (the "Indemnifying Party"), shall,
subject to the limitations set forth in Section 8.6 hereof, indemnify
respectively Buyer and each of its Affiliates and their respective officers,
directors, employees and agents, on the one hand, or Seller and each of its
Affiliates, officers, directors, employees and agents, on the other hand, as the
case may be (each of such persons and entities, an "Indemnified Party"), against
and in respect of all Claims sustained or incurred arising out of any breaches
of


                                     - 25 -


the Indemnifying Party's representations, warranties, covenants and agreements
set forth in this Agreement; provided, however, that the foregoing indemnity not
be limited to the period specified in Section 8.1 if the Claim involves the
willful misconduct of the Indemnifying Party. For purposes of clarity, any
Claims of Buyer that relate to the breach of representations and warranties
respecting the Company, the Yemen Business or the Assets and the resulting
incurrence of Claims relating to the Company, the Yemen Business or the Assets
shall only be recoverable in an amount that reflects the 41.25% economic
interest that Buyer is acquiring in the Company as at the Closing Date.

         Section 8.3    Method of Asserting Claims, etc.
                        --------------------------------
         (a)    All claims for indemnification by any Indemnified Party
hereunder shall be asserted and resolved as set forth in this Section 8.3.

         (b)    In the event that any written claim or demand for which an
Indemnifying Party would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a third
party, such Indemnified Party shall promptly, but in no event later than the
30th day after receipt by the Indemnified Party of such claim or demand, notify
the Indemnifying Party of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not in any
manner prejudice the right of the Indemnified Party to indemnification to the
fullest extent provided hereunder) (the "Third Party Claim Notice") and in the
event that an Indemnified Party shall assert a claim for indemnity under this
Article VIII, not including a third party claim, the Indemnified Party shall,
within 30 days of the discovery of the facts or circumstances giving rise
thereto, notify the Indemnifying Party following its discovery of such facts or
circumstances; provided that the failure to notify on the part of the
Indemnified Party in the manner set forth herein shall not foreclose any rights
otherwise available to such Indemnified Party hereunder, except to the extent
that the Indemnifying Party is prejudiced by such failure to notify in the
manner set forth herein. The Indemnifying Party shall have thirty (30) days from
the personal delivery or mailing of the Third Party Claim Notice or the notice
relating to a claim for indemnity under this Article VIII other than a third
party claim (the "Notice Period") to notify the Indemnified Party (i) whether or
not the Indemnifying Party disputes the liability of the Indemnifying Party to
the Indemnified Party hereunder with respect to such claim or demand and (ii)
whether or not it desires to defend the Indemnified Party against such claim or
demand. In the event that the Indemnifying Party notifies the Indemnified Party
that it does not desire to defend the Indemnified Party against such claim or
demand, the Indemnified Party shall have all rights and remedies at law or in
equity against the Indemnifying Party for any breach of the


                                     - 26 -


Indemnifying Party's indemnification obligations hereunder. In the event that
the Indemnifying Party notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such claim or demand,
the Indemnifying Party shall have the right to defend the Indemnified Party by
appropriate proceedings. If any Indemnified Party desires to participate in, but
not control, any such defense or settlement it may do so at its sole cost and
expense. The Indemnified Party shall not settle a claim or demand without the
consent of the Indemnifying Party. The Indemnifying Party shall not, without the
prior written consent of the Indemnified Party, settle, compromise or offer to
settle or compromise any such claim or demand on a basis which provide for a
finding or acknowledgment of responsibility or liability on the part of the
Indemnified Party or which provides for or would result in any sanction or
restriction or in the imposition of a consent order, injunction or decree which
would restrict the future activity or conduct of, or which would otherwise have
a material adverse effect on the financial condition or results of operations
of, the Indemnified Party or any Affiliate thereof. To the extent the
Indemnifying Party shall control or participate in the defense or settlement of
any third party claim or demand, the Indemnified Party will give to the
Indemnifying Party and its counsel reasonable access to all business records and
other documents relevant to such defense or settlement, and shall permit them to
consult with the employees and counsel of the Indemnified Party. The Indemnified
Party shall use its commercially reasonable efforts as may be requested by the
Indemnifying Party in the defense of all such claims, and in connection
therewith shall be entitled to reimbursement by the Indemnifying Party of
expenses related to such efforts undertaken.

         (c)    Payments of all amounts owing by an Indemnifying Party as a
result of a third party claim shall be made within five Business Days after the
earlier of (i) the settlement of the third party claim and (ii) the expiration
of the period of appeal of a final adjudication of the third party claim.
Payments of all amounts owing by an Indemnifying Party other than as a result of
a third party claim shall be made within five Business Days after the later of
(i) the expiration of the Notice Period or (ii) if contested through dispute
resolution proceedings, the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. Notwithstanding the above, if the Indemnifying Party has
not contested its indemnity obligations hereunder and has not elected to assume
the defense of a third party claim, the Indemnifying Party shall reimburse
(promptly after the receipt of each invoice therefor together with reasonable
support for such expenditures) the Indemnified Party for the reasonable costs
and expenses incurred by the Indemnified Party in contesting the third party
claim.

         Section 8.4    Subrogation Rights. If the Indemnified Party is one of
                        -------------------
the parties to be Indemnified by the Buyer and the Indemnified Party has a right
against a Person (other than one of the other parties to be Indemnified by the
Buyer) with respect to any damages or other amounts paid to the Indemnified
Party by the Buyer, then the


                                     - 27 -


Buyer shall, to the extent of such payment, be subrogated to the right of such
Indemnified Party. If the Indemnified Party has a right against a Person (other
than one of the other parties to be Indemnified by the Seller) with respect to
any damages or other amounts paid to such Indemnified Party by the Seller, then
the Seller shall, to the extent of such payment, be subrogated to the right of
such Indemnified Party. Notwithstanding anything herein to the contrary, no
Indemnifying Party shall be subrogated to any insurance rights of any
Indemnified Party.

         Section 8.5    Investigation and Due Diligence. No investigation,
                        --------------------------------
examination, audit, inspection or other due diligence prior to the Closing shall
affect the parties' respective rights to indemnity pursuant to this Agreement.

         Section 8.6    Threshold; Insurance; Tax Effect; Maximum Liability
                        ---------------------------------------------------
         (a)    No claim for indemnification shall be brought under this Article
VIII against an Indemnifying Party unless and until the aggregate amount of all
claims for indemnification under this Article VIII against such Indemnifying
Party exceeds an amount equal to 10% of the Purchase Price, and then for all
such claims (including, without limitation, such initial claims that aggregate
to the 10% threshold referred to above in this Section 8.6(a)).

         (b)    Any payment required to be made to an Indemnified Party under
this Agreement in respect of a Claim shall be made by the Indemnifying Party net
of or giving effect to any insurance proceeds received by the Indemnified Party
or the Company in respect of such Claim.

         (c)    In the event that, as a result of a Claim, an Indemnified Party
or the Company claims on a Tax Return a currently realizable Tax Benefit, the
indemnity payment shall be reduced by: (i) the amount of the currently
realizable Tax Benefit available to the Indemnified Party; or (ii) 41.25% of the
currently realizable Tax Benefit available to Company. For purposes of this
paragraph, a "Tax Benefit" means an amount by which the Tax liability of the
party (or consolidated group of corporations including the party) is reduced or
becomes entitled to a Tax refund. Where the party (or consolidated group of
corporations including the party) has other losses, deduction, credits or items
available to it, the Tax Benefit from any losses, deductions, credits or items
relating to the Claims shall be deemed to be realized only after the utilization
of such other losses, deductions, credits or items. For purposes of this
paragraph (c), a Tax Benefit is "currently realizable" to the extent it can be
reasonably anticipated that such Tax Benefit will be realized in the current
taxable period or year or in any tax return with respect thereto (including
through a carryback to a prior taxable period) or in any taxable period or year
prior to the date of the Claim. In the event that there should be a


                                     - 28 -


determination disallowing the Tax Benefit, the Indemnifying Party shall be
liable to the Indemnified Party for the amount of any related reduction
previously allowed or made to the Indemnifying Party in the calculation of
indemnifiable Claims pursuant to this Section 8.6(c).

         (d)    Any indemnification payments made (and/or any payments or
adjustments) made pursuant to this Agreement shall be treated for all Tax
purposes as an adjustment to the Purchase Price, unless otherwise required by
applicable law, in which event such payments shall be made in an amount
sufficient to indemnify the party on a net after-Tax basis.

         (e)    Any Claim for indemnification hereunder arising out a breach of
a representation or warranty contained in Section 3.19 (Environmental Matters)
and involving remediation shall be the result of (i) a requirement of any
Environmental Law in effect as at the Closing Date; or (ii) the resolution of a
third party claim which has not been stayed and which has not been initiated by
the Buyer, the Company or any of their Affiliates, officers, directors,
employees or agents after the Closing; provided, that any such Claim shall not
exceed, in either case, the amount that a reasonable person in the conduct of
its own business would spend to remediate such condition in order to meet but
not exceed the requirements of applicable Environmental Law in effect on the
Closing Date; provided, further, that if the Buyer or the Company or any of
their Affiliates, officers, directors, employees or agents shall have performed
any act after the Closing that is contrary to any Environmental Law to worsen
such Claim the Seller shall have no indemnification obligation for such
increased Claims resulting from such actions of the Buyer or the Company or any
of their Affiliates, officers, directors, employees or agents. Buyer will use
its reasonable efforts to keep the Seller informed with respect to work plans
regarding any remediation efforts for which indemnification is being sought
hereunder.

         (f)    Unless otherwise expressly stated in this Agreement and except
with respect to any Claim that arises out of the willful misconduct of the
Indemnifying Party, the indemnification obligations of either party under this
Article VIII shall be limited to a maximum aggregate liability equal to the
amount of the Purchase Price.

         Section 8.7    Sole Remedy. Following the Closing, the indemnification
                        ------------
obligations provided in this Agreement shall be the sole remedy of the parties
for a breach of this Agreement.


                                     - 29 -


                                   ARTICLE IX
                                  MISCELLANEOUS
                                  -------------

         Section 9.1    Amendment and Modification; Waiver. This Agreement may
                        ----------------------------------
be amended or modified only in writing, signed by Seller and Buyer.

         Section 9.2    Expenses. Except as otherwise expressly provided herein,
                        --------
whether or not the transactions contemplated hereby are consummated, the parties
shall bear their own respective expenses (including, but not limited to, all
compensation and expenses of counsel, financial advisors, consultants, actuaries
and independent accountants) incurred in connection with this Agreement and the
transactions contemplated hereby.

         Section 9.3    Assignment. No party to this Agreement may assign any of
                        ----------
its rights or obligations under this Agreement without the prior written consent
of the other party hereto.

         Section 9.4    Entire Agreement; Assumption Agreement. This Agreement
                        --------------------------------------
including the exhibits and schedules hereto contains the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect to such matters. For purposes of clarity, no provision of the Assumption
Agreement referred to in Section 6.2(g) shall in any way limit the ability of
the Buyer to make claims for breach of representations, warranties, covenants or
agreements contained in this Agreement.

         Section 9.5    Parties in Interest; No Third Party Beneficiaries. This
                        -------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Except with respect to
the beneficiaries of the indemnification obligations contained in this
Agreement, nothing in this Agreement is intended to confer upon any Person other
than Seller or Buyer or their successors or permitted assigns any rights or
remedies under or by reason of this Agreement.

         Section 9.6    Counterparts. This Agreement and any amendments hereto
                        ------------
may be executed in one or more counterparts, each of which shall be deemed to be
an original by the parties executing such counterpart, but all of which shall be
considered one and the same instrument.

         Section 9.7    Interpretation. It is expressly agreed that this
                        --------------
Agreement shall not be construed against any party, and no consideration shall
be given or presumption made, on the basis of who drafted this Agreement or any
particular provision hereof or who supplied the form of Agreement. Each party
agrees that it has been purposefully drawn and correctly reflects their
understanding of the transaction that it contemplates. In construing this
Agreement:


                                     - 30 -


         (a)    examples shall not be construed to limit, expressly or by
     implication, the matter they illustrate;

         (b)    the word "includes" and its derivatives means "includes, but is
     not limited to" and corresponding derivative expressions;

         (c)    a defined term has its defined meaning throughout this Agreement
     and each Appendix, Exhibit and Schedule to this Agreement, regardless of
     whether it appears before or after the place where it is defined;

         (d)    each Exhibit and Schedule to this Agreement is a part of this
     Agreement, but if there is any conflict or inconsistency between the main
     body of this Agreement and any Exhibit or Schedule, the provisions of the
     main body of this Agreement shall prevail; and

         (e)    the section and paragraph headings and table of contents
     contained in this Agreement are for reference purposes only and shall not
     in any way affect the meaning or interpretation of this Agreement.

         Section 9.8    Notices. All notices hereunder shall be deemed given if
                        -------
in writing and delivered personally or sent by telecopy or by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses as shall be specified by like notice):

                (a)  if to Seller, to:

                     Intercap Yemen, Inc.
                     c/o 1000-925 West Georgia Street
                     Vancouver, British Columbia V6C 3L2
                     Facsimile:  (604) 669-8803
                     Attention:  H.S. Sangra


                (b)  if to Guarantor, to:

                     MFC Bancorp Ltd.
                     c/o 1000-925 West Georgia Street
                     Vancouver, British Columbia V6C 3L2
                     Facsimile:  (604) 669-8803
                     Attention:  H.S. Sangra


                                     - 31 -


                (c)  if to Buyer, to:

                     Occidental (East Shabwa), LLC
                     10889 Wilshire Boulevard
                     Los Angeles, California 90024
                     Facsimile:  (310) 443-6192
                     Attention:  General Counsel

         Any notice given by mail or facsimile shall be effective when received.

         SECTION 9.9    GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
                        -------------------------------------------------------
FORUM. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
- -----
THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT IT SHALL BRING ANY ACTION OR
PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTAINED HEREIN OR CONTEMPLATED HEREBY, WHETHER IN TORT OR
CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA OR THE SUPERIOR COURT OF THE STATE OF
CALIFORNIA FOR THE COUNTY OF LOS ANGELES (THE "CHOSEN COURTS") AND (I)
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (II)
WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE
CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN
INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY HERETO AND (IV)
AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING
SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH SECTION 9.8 OF THIS
AGREEMENT.

         Section 9.10    Severability. The provisions of this Agreement shall be
                         ------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or


                                     - 32 -


circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.

         Section 9.11    Attorney's Fees. The prevailing party in any legal
                         ---------------
proceeding brought under or to enforce this Agreement shall be additionally
entitled to recover court costs, reasonable costs of arbitration and reasonable
attorneys' fees from the nonprevailing party.

         Section 9.12    Time of Essence. Time is of the essence in this
                         ---------------
Agreement. If the date specified in this Agreement for giving any notice or
taking any action is not a Business Day (or if the period during which any
notice is required to be given or any action taken expires on a date which is
not a Business Day), then the date for giving such notice or taking such action
(and the expiration date of such period during which notice is required to be
given or action taken) shall be the next day which is a Business Day.

         Section 9.13    Publicity. All media releases and public announcements
                         ---------
or disclosures by any Party relating to this Agreement and the transactions
contemplated hereby shall be coordinated with and approved by the other Parties
in writing prior to the release thereof.

                                      * * *


                                     - 33 -


         IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of
the parties hereto as of the date first written above.

                                       OCCIDENTAL (EAST SHABWA), LLC

                                          By /s/ Todd A. Stevens
                                             -----------------------------------
                                          Name:  Todd A. Stevens
                                                 -------------------------------
                                          Title: Vice President
                                                 -------------------------------



                                       INTERCAP YEMEN, INC.


                                          By /s/ R. Zanatta
                                             -----------------------------------
                                          Name:  R. Zanatta
                                                 -------------------------------
                                          Title: Secretary
                                                 -------------------------------



                                       MFC BANCORP LTD.


                                          By /s/ R. Zanatta
                                             -----------------------------------
                                          Name:  R. Zanatta
                                                 -------------------------------
                                          Title: Secretary
                                                 -------------------------------

EX-8.1

                                                                               .
                                                                               .
                                                                               .
                                                                     EXHIBIT 8.1


                        SUBSIDIARIES OF MFC BANCORP LTD.




                                        JURISDICTION OF         SHAREHOLDERS
NAME                                     INCORPORATION            YEAR END
- ----                                    ---------------         ------------

                                                          
MFC Merchant Bank S.A.                    Switzerland               100%

Constitution Insurance Company
  of Canada                                 Canada                  100%

MFC Commodities GmbH                        Austria                  95%

TriMaine Holdings, Inc.                      U.S.A.                  83%

Trimble Resources Corporation           Turks & Caicos
                                            Islands                 100%

Drummond Financial Corporation               U.S.A.                  96%

Eurotrade & Forfaiting Inc.                  U.S.A.                  93%

Banff Resources Ltd.                         Yukon                   85%

MFC Aluminiumfolie Merseburg GmbH           Germany                 100%

EX-10.1

                                                                    EXHIBIT 10.1


                            CERTIFICATION PURSUANT TO
                            18 U. S. C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Smith, Chief Executive Officer and Principal Financial Officer of
MFC Bancorp Ltd. (the "Company") do hereby certify in connection with the
Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2002
(the "Report"), (i) that the Report fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and (ii) that the
information contained in the Report fairly represents, in all material respects,
the financial condition and results of operations of the Company.

April 16, 2003




/s/ MICHAEL J. SMITH
- -----------------------------------
Michael J. Smith
Chief Executive Officer and
Principal Financial Officer